SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE
TRANSITION PERIOD OF ________ TO ________.
Commission File Number 0-20757
TRAVIS BOATS & MOTORS, INC.
(Exact name of registrant as specified in its charter)
TEXAS 74-2024798
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
5000 Plaza on the Lake, Suite 250, Austin, Texas 78746
(Address of principal executive offices)
Registrant's telephone number, including area code: (512) 347-8787
Securities registered pursuant to Section 12(b) of the
Act: None Securities registered pursuant to Section
12(g) of the Act:
Common Stock, $.01 Par Value
(Title of class)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes [ X ] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock as of the latest practicable date.
Common Stock $.01 par value - 4,412,027 shares as of February 10, 2000.
<PAGE>
Item 1. Financial Statements
Travis Boats & Motors, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
( in thousands, except share data )
<TABLE>
<CAPTION>
<S> <C> <C>
December 31, September 30,
1999 1999
------------- ----------------
(unaudited)
ASSETS:
Current assets:
Cash and cash equivalents $5,252 $4,125
Accounts receivable, net 9,327 12,421
Inventories, net 103,903 75,700
Deferred tax asset 136 136
Prepaid federal income taxes 0 0
Prepaid expenses and other 1,039 1,177
------------- ----------------
Total current assets 119,657 93,559
Property and equipment:
Land 5,819 5,819
Buildings and improvements 11,748 11,069
Furniture, fixtures and equipment 8,419 8,056
------------- ----------------
25,986 24,944
Less accumulated depreciation (5,074) (4,529)
------------- ----------------
20,912 20,415
Deferred tax asset 121 121
Intangibles and other assets :
Goodwill and non-compete agreements, net 11,435 11,637
Other assets 436 199
------------- ----------------
Total assets $152,561 $125,931
============= ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $3,539 $3,613
Accrued liabilities 2,601 3,179
Amounts due for purchase of business 1,004 2,134
Income taxes payable 1,015 2,820
Unearned revenue 934 149
Floor plan and revolving line of 94,042 68,558
credit
Current portion of notes payable and other short-term 3,655 989
obligations
------------- ----------------
Total current liabilities 106,790 81,442
Notes payable, less current portion 9,401 6,897
Stockholders' equity
Serial Preferred stock, $.01 par value,
1,000,000 shares
authorized, no shares outstanding
Common Stock, $.01 par value, 50,000,000 authorized,
4,412,027 and 4,326,022 issued and outstanding at
December 31, 1999 and September 30, 1999, respectively 44 43
Paid-in capital 15,501 13,816
Retained earnings 20,825 23,147
------------- ----------------
Total stockholders' equity 36,370 37,592
------------- ----------------
Total liabilities and stockholders' equity $152,561 $125,931
============= ================
See notes to unaudited condensed consolidated financial statements
</TABLE>
<PAGE>
Travis Boats & Motors, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations (Unaudited)
(in thousands, except share data and store count)
<TABLE>
<CAPTION>
<S> <C> <C>
Three months ended
December 31,
1999 1998
-------------------------------
Net Sales $23,627 $12,097
Cost of goods sold 17,646 9,156
------------- -------------
Gross profit 5,974 2,941
Selling, general and administrative 7,651 4,505
Depreciation and amortization 624 415
------------- -------------
8,275 4,920
Operating loss (2,301) (1,979)
Interest expense (1,374) (555)
Other income 9 8
------------- -------------
Loss before income taxes (3,666) (2,526)
Income tax benefit (1,344) (926)
------------- -------------
Net Loss ($2,322) ($1,600)
============= =============
Basic and Diluted Loss Per Shares ($0.53) ($0.37)
Weighted avg. basic and dilutive common shares outstanding. 4,376,503 4,285,579
Stores open at end of period 38 24
============= =============
</TABLE>
See notes to unaudited condensed consolidated financial statements
<PAGE>
Travis Boats & Motors, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Cash Flow
(in thousands)
<TABLE>
<CAPTION>
<S> <C> <C>
Three months ended
December 31,
1999 1998
----------------------------------
Operating activities:
Net Loss ($2,322) ($1,600)
Adjustments to reconcile net loss to net cash used in
Operating activities:
Depreciation 412 290
Amortization 212 125
Changes in operating assets and liabilities
Accounts receivable 3,094 (338)
Prepaid expenses 138 69
Inventories (28,203) (17,620)
Other assets (237) (68)
Accounts payable (74) (355)
Accrued liabilities (578) (1,048)
Income tax benefit (1,805) (831)
Unearned revenue 785 (138)
-------------- ---------------
Net Cash used in operating activities (28,578) (21,514)
Investing Activities:
Purchase of businesses (30) (2,185)
Purchase of property and equipment (919) (341)
-------------- ---------------
Net cash used in investing activities (949) (2,526)
Financing activities:
Net increase in notes payable and other short term obligations 30,654 22,353
Sale of common stock 0 24
-------------- ---------------
Net cash provided by financing activities 30,654 22,377
Change in cash and cash equivalents 1,127 (1,663)
Cash and cash equivalents, beginning of period 4,125 4,618
-------------- ---------------
Cash and cash equivalents, end of period $5,252 $2,955
============== ===============
See notes to unaudited condensed consolidated financial statements
</TABLE>
<PAGE>
DECEMBER 31, 1999
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared from the records of Travis Boats & Motors, Inc. and subsidiaries
(collectively, the Company) without audit. In the opinion of management, such
financial statements include all adjustments (consisting of only recurring
accruals) necessary to present fairly the financial position at December 31,
1999; and the interim results of operations and cash flows for the three month
periods ended December 31, 1999 and 1998. The condensed consolidated balance
sheet at September 30, 1999, presented herein, has been prepared from the
audited consolidated financial statements of the Company for the fiscal year
then ended.
Accounting policies followed by the Company are described in Note 1 to the
audited consolidated financial statements for the fiscal year ended September
30, 1999. Certain information and footnote disclosures normally included in
financial statements have been condensed or omitted for purposes of the
condensed consolidated interim financial statements. The condensed consolidated
financial statements should be read in conjunction with the audited consolidated
financial statements, including the notes thereto, for the fiscal year ended
September 30, 1999 included in the Company's annual Report on Form 10-K.
The results of operations for the three month period ended December 31, 1999 are
not necessarily indicative of the results to be expected for the full fiscal
year.
NOTE 2 - NET INCOME PER COMMON SHARE
In 1997, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 128, Earnings Per Share. Statement 128 replaced the
previously reported primary and fully diluted earnings per share with basic and
diluted earnings per share. Unlike primary earnings per share, basic earnings
per share excludes any dilutive effects of options, warrants, and convertible
securities. Diluted earnings per share is very similar to the previously
reported fully diluted earnings per share. All earnings per share amounts for
all periods have been presented, and where necessary, restated to conform to the
Statement 128 requirements.
Statement 128 requires the calculation of earnings per share to exclude common
stock equivalents when the inclusion of such would be anti-dilutive. In the
quarters ended December 31, 1999 and 1998, the inclusion of common stock
equivalents would have been anti-dilutive based upon the net loss posted by the
Company. As such, all common stock equivalents were excluded.
The following table sets forth the computation of basic and diluted net loss per
share:
Three Months Ended Three Months Ended
December 31, 1999 December 31, 1998
Numerator:
Net loss ($2,322,000) ($1,600,000)
--------------------------------------------
Denominator:
Denominator for basic
Earnings per share -
Weighted avg. shares 4,376,503 4,285,579
Effect of dilutive securities:
Employee stock options ------- -------
--------------------------------------------
<PAGE>
Dilutive potential common shares ------- -------
Denominator for diluted earnings
Per share - adjusted
Weighted average shares 4,376,503 4,285,579
And assumed conversions --------------------------------------------
Basic loss per share ($0.53) ($0.37)
--------------------------------------------
Diluted loss per share ($0.53) ($0.37)
--------------------------------------------
As of December 31, 1999, the Company had issued and outstanding incentive stock
options to certain officers and employees totaling 112,750 shares which had a
strike price exceeding the closing price of the Company's common stock on such
date. The 112,750 option shares have a weighted average strike price of $20.27
and a weighted average outstanding remaining life of 7.16 years.
The Company's unaudited consolidated results of operations assuming all
acquisitions accounted for under the purchase method of accounting had occurred
on October 1, 1998 are as follows for the three months ended December 31, 1998
and 1999, respectively:
3 Months 12/31/98 3 Months 12/31/99
Net Sales $19,678,000 $23,627,000
Net Loss ($2,263,000) ($2,322,000)
Diluted loss per share ($0.51) ($0.53)
The unaudited pro forma results of operations are presented for informational
purposes only and may not necessarily reflect the future results of operations
of the Company or what results of operations would have been had the Company
owned and operated the business as of October 1, 1998.
NOTE 3 - ACQUISITIONS
The chart below summarizes significant acquisitions made by the Company during
the fiscal years ended September 30, 1999, 1998 and 1997. Each acquisition was
completed through an asset purchase (except for Adventure Marine in fiscal 1997
and Shelby Marine in fiscal 1999, which were stock purchases) and has been
accounted for using the purchase method of accounting. The operating results of
the companies acquired have been included in the consolidated financial
statements from the respective date of acquisition. The assets acquired
generally include boat, motor and trailer inventory, parts and accessories
inventory and to a lesser extent, property, plant and equipment. A summary of
the Company's significant acquisitions follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Date of Purchase Tangible Non-compete Cash Liabilities Notes Stock
Name of Copany Acquisition Price Net Agreements Paid Assumed Issued Issued
Assets and Goodwill
(In Thousands)
Fiscal 1999
Amlin, Inc. dba Magic Marine 01/99 $1,639 $6,019 $1,090 $1 ,639 %5,470 $--- $ ---
Sportsman's Haven 01/99 1,748 2,624 514 1,098 1,390 650 ---
Pier 68 Marina 02/99 738 2,218 562 408 2,043 329 ---
DSA Marine Sales & 04/99 2,147 4,798 1,597 2,147 4,248 --- ---
Service dba The Boatworks
Shelby Marine, Inc. 06/99 1,334 3,426 1,050 809 3,142 --- 525
The New 3 Seas, Inc. 09/99 1,103 1,419 1,100 --- 1,416 3 1,100
Fiscal 1998
Southeastern Marine 11/97 1,730 $1,390 $ 280 $1,606 $ --- $ 124 $ ---
Worthen Marine 12/97 287 142 145 287 --- --- ---
HnR Marine 04/98 359 359 -0- 359 --- --- ---
Moore's Marine 05/98 777 376 401 777 --- --- ---
Rodgers Marine 09/98 677 2,093 350 327 1,766 --- 350
Fiscal 1997
North Alabama Watersports 10/96 892 687 $ 205 812 - 80 ---
Tri-Lakes Marine 11/96 1,243 1,892 644 643 1,937 600 ---
Bent's Marine 02/97 1,519 840 679 1,064 --- 455 ---
McLeod Marine 08/97 958 730 228 958 --- --- ---
Adventure Marine 09/97 3,023 5,536 2,690 1,430 5,203 115 1,478
</TABLE>
NOTE 4 - COMPREHENSIVE INCOMEFor the quarter ended December 31, 1999, the
Company recorded no comprehensive income items, therefore Comprehensive Net Loss
equaled Net Loss.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
General
Travis Boats & Motors, Inc. ("Travis Boats" or the "Company") is a leading
multi-state superstore retailer of recreational boats, motors, trailers and
related marine accessories in the southern United States. The Company, which
currently operates 37 stores under the name Travis Boating Center in Texas,
Arkansas, Louisiana, Alabama, Tennessee, Mississippi, Florida, Georgia and
Oklahoma seeks to differentiate itself from competitors by providing customers a
unique superstore shopping experience that showcases a broad selection of high
quality boats, motors, trailers and related marine accessories at firm, clearly
posted low prices. Each superstore also offers complete customer service and
support, including in-house financing programs and full-service repair
facilities staffed by factory-trained mechanics.
History
Travis Boats was incorporated as a Texas corporation in 1979. As used herein and
unless otherwise required by the context, the terms "Travis Boats" and the
"Company" shall mean Travis Boats & Motors, Inc. and its direct and indirect
subsidiaries.
Since its founding in 1979 as a single retail store in Austin, Texas, the
Company has grown both through acquisitions and the establishment of new store
locations. During the 1980's, the Company expanded into San Antonio, Texas with
the construction of a new store facility. The Company subsequently made
acquisitions of boat retailers operating within the Texas markets of Midland,
Dallas and Abilene. It was during this initial period of expansion that the
Company began developing the systems necessary to manage a multi-store operation
and leveraging the economies of scale associated with volume purchasing. The
Company's success in these areas led to the proprietary Travis Edition packaging
concept and the Company's pricing philosophy. Since 1990, Travis Boats has
opened or acquired 33 additional store locations in the following states: Texas
(3), Arkansas (4), Louisiana (4), Alabama (2), Tennessee (5), Mississippi (1),
Florida (11), Georgia (1) and Oklahoma (1). Effective January 1, 2000, the
Company consolidated its store facility in St. Petersburg, Florida into its
Clearwater, Florida operations. Accordingly, the Company's store count has been
adjusted to 37 store locations.
<PAGE>
The Company custom designs and pre-packages approximately 75 different models
and combinations of popular brand-name boats, such as Larson, Wellcraft, Carver,
Bayliner, Sprint, and Sea Ark boats with outboard motors generally manufactured
by Outboard Marine Corporation or Brunswick, along with trailers and numerous
accessories, under its proprietary Travis Edition product line. These signature
Travis Edition packages, which account for the vast majority of total new boat
sales, include boats ranging in size from 16 feet to over 30 feet in length
(with an emphasis on the 16 to 25 foot pleasure boat category). Each Travis
Edition package has typically been designed and developed in coordination with
the manufacturers and often include distinguishing features and accessories that
have historically been unavailable to, or listed as optional by, many
competitors. These factors enable the Company to provide the customer with an
exceptional product that is conveniently packaged for immediate enjoyment and
competitively priced.
The Company believes that it offers a selection of boat, motor and trailer
packages that fall within the price range of the majority of all boats, motors
and trailers sold in the United States. The Company's product line generally
consists of boat packages priced from $7,500 to $25,000 with approximate even
distribution within this price range. While the Company's sales have
historically been concentrated on boats with retail sales prices of $25,000 or
less, the Company in limited market areas and quantities does sell boats that
have retail sales prices in excess of $300,000. Additionally, as the Company
continues to operate in Florida and enters other markets along the Gulf of
Mexico or other new coastal areas, management believes that the distribution of
off shore fishing boats and cabin cruisers will continue to increase as a
percentage of net sales. Management believes that by combining flexible
financing arrangements with an even distribution of products through a broad
price range, the Company is able to offer boat packages to customers with
different purchasing budgets and varying income levels.
Results of Operations
Quarter Ended, December 31, 1999 Compared to the Quarter Ended, December
31, 1998
Net sales. Net sales increased by 95.3% to $23.6 million in the first quarter of
fiscal 2000 from $12.1 million in the first quarter of fiscal 1999. The primary
components of the increase in net sales have been the result of the newly opened
or acquired store locations in fiscal 1999 and positive comparable store sales.
Accordingly, of the increase in net sales, $9.9 million, or 86.2% was related to
the fourteen store locations that were newly opened or acquired in fiscal 1999.
The Company also benefited from growth in comparable store sales. During the
first quarter of fiscal year 2000, comparable store sales increased by 13.3%, or
$1.1 million, (18 stores in base) versus a 8.7% increase in comparable store
sales (14 stores in base) during the first quarter of fiscal 1999.
Gross profit. Gross profit increased by 103.1% to $6.0 million in the first
quarter of fiscal 2000 from $2.9 million in the same quarter of fiscal 1999,
while gross profit as a percent of net sales increased to 25.3% from 24.3%
during the same periods. The increase in total gross profit as a percent of net
sales was primarily related to an increase in the gross profit margins on new
boat sales. The Company's 2000 model year pricing strategy was designed to raise
retail price points and the related profit margins. Gross profit also benefited
from increases in net sales attributable to F&I products, parts/accessories and
service labor. Each of these sales categories typically have higher gross profit
margins than those related to boat sales and accordingly enhance the overall
gross profit margins reported by the Company.
Net sales attributable to F&I Products contributed $652,000, or 10.9%, of total
gross profit in the first quarter of fiscal 2000, compared to $322,000, or
10.9%, of total gross profit for the first quarter of the prior fiscal year. All
costs and expenses associated with the sale of F&I Products are included in
selling, general and administrative expenses.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased by 69.8% to $7.7 million in first quarter of
fiscal 2000 from $4.5 million for the first quarter of fiscal 1999. However,
selling, general and administrative expenses as a percent of net sales decreased
to 32.4% in the first quarter of fiscal 2000 from 37.2% for the first quarter of
fiscal 1999. The decrease, as a percent of net sales, was primarily attributable
to the positive leverage upon fixed expenses as a result of the Company's
substantial sales growth during the quarter ended December 31, 1999. See "Net
Sales".
<PAGE>
Depreciation and amortization expenses, as a percent of net sales, decreased in
the first quarter of fiscal 2000, to 2.6% from 3.4% in the same quarter of the
prior fiscal year. The decrease, as a percent of net sales, was primarily
attributable to the positive leverage upon depreciation and amortization
expenses as a result of the Company's substantial sales growth during the
quarter ended December 31, 1999. See "Net Sales".
Interest expense. Interest expense increased by 148% to $1,374,000 in the first
quarter of fiscal 2000 from $555,000 in the first quarter of fiscal 1999.
Interest expense, as a percent of net sales, increased to 5.8% from 4.6% in the
quarterly periods ended December 31, 2000 and 1999, respectively. The increased
interest expense, in actual dollars and as a percent of net sales, was primarily
the result of the additional debt incurred in the acquisitions completed during
fiscal 1999, as well as higher balances on the Company's floor plan and
revolving bank lines necessary to support inventory requirements for the larger
store network. Interest expense was also negatively impacted by a 50-75 basis
point rise in short term interest rates tied to the Prime and LIBOR lending
rates relative to the same period of the prior year. See "Liquidity and Capital
Resources", "Seasonality".
Net loss. The Company posted a net loss of $2.3 million for the first quarter of
fiscal 2000. This represents an increase of 45.2% from the net loss of $1.6
million in the first quarter of fiscal 1999. While the net loss increased in
actual dollars, the substantial increase in sales during the quarter ended
December 31, 1999, combined with improved gross profit margins and leveraged
selling, general and administrative expenses to allow the Company to reduce the
net loss as a percentage of net sales. As a percentage of net sales, the Company
posted a net loss of 9.8% and 13.2% for the first quarter of fiscal 2000 and
1999, respectively. The Company expects to continue to experience higher levels
of net losses in its first fiscal quarter ending December 31 as a result of
increases in the number of store locations and the seasonality of the
recreational boating industry in the states in which it operates. See "Liquidity
and Capital Resources", "Seasonality".
Liquidity and Capital Resources
The Company's short-term cash needs are primarily for working capital to support
operations, including inventory requirements, off-season liquidity and store
expansion. These short-term cash needs have historically been financed with cash
from operations and borrowings under the Company's credit facilities. At
December 31, 1999, the Company had working capital of $12.9 million, centered in
$103.9 million in inventories, offset by $94.0 million in short-term
revolving/floorplan credit lines outstanding. As of December 31, 1999, the
aggregate maximum borrowing limits under floor plan and revolving lines of
credit were approximately $102.0 million, of which the Company was eligible to
borrow approximately an aggregate of $97.0 million pursuant to the Company's
borrowing base formulas. "See Subsequent Event".
Operating activities used cash of $28.6 million for the first three months of
fiscal 2000 due primarily to the net increases of $28.2 million in inventories
and the reported seasonal net loss. The first quarter historically represents
the "off" or "slow" selling season for the Company (see "Seasonality").
Inventory growth traditionally builds during the first quarter in preparation
for the selling season which begins with boat and recreation shows occurring in
January and February in certain market areas in which the Company conducts
business. This inventory level generally falls to an annual low point during the
fourth fiscal quarter.
The Company used net cash in investing activities of approximately $0.9 million
in the first three months of fiscal 2000 as the Company continued to renovate
stores to superstore standards, update certain facilities with its standard
superstore trade dress awnings and neon, and started construction of a new
superstore facility in San Antonio (which will replace the existing San Antonio
location).
Financing activities for the three months ended, December 31, 1999 provided
$30.7 million of cash flows primarily from the net proceeds of borrowings under
the Company's credit facilities. The Company has a $55.0 million revolving line
of credit agented by Bank of America (formerly NationsBank of Texas, N.A.). The
line provides for borrowing pursuant to a borrowing formula based upon the
certain of the Company's inventory and accounts receivable. Collateral consists
of a security interest in specific inventories (and proceeds thereof), accounts
receivable and contracts in transit. The line has a maturity on January 31, 2000
and pricing is at the Company's election of the
<PAGE>
prime rate minus 1.00% or on a LIBOR based price structure. There is a fee
on the unused portion assessed quarterly. A comprehensive loan agreement governs
the line of credit. The agreement contains financial covenants regulating debt
service coverages, tangible net worth, operating leverage and restrictions on
dividends or distributions. As of December 31, 1999, $46.8 million was drawn on
the revolving line and the Company could borrow an additional $8.2 million, of
which approximately $3.0 million was immediately available for borrowing based
upon the revolving line's borrowing formula. As the Company purchases inventory,
the amount purchased increases the borrowing base availability and typically the
Company makes a determination to borrow depending upon anticipated working
capital requirements. "See Subsequent Event".
At December 31, 1999, the Company also maintained floor plan lines of credit
with various finance companies providing approximately $47.0 million in credit
limits. These floor plan lines generally have no stated maturity and utilize
subsidies from manufacturers to provide for certain interest free periods each
calendar year (usually August through May). Certain of these floor plan lines of
credit with finance companies are governed by loan agreements containing various
financial covenants concerning, among others, ratios governing tangible net
worth and leverage. As of December 31, 1999, approximately $44.5 million was
outstanding under these floor plan lines. "See Subsequent Event".
Merchandise inventories were $103.9 million and $75.7 million as of December 31,
1999 and September 30, 1999, respectively.
The Company's newly refinanced revolving credit facility (see below) and
internally generated working capital are expected by the Company's management to
be sufficient to meet the Company's cash requirements at least through the
remainder of fiscal 2000.
Liquidity and Capital Resources - Subsequent Event
Effective January 31, 2000 the Company terminated and paid-off its $55.0 million
line of credit with Bank of America as well as its $47.0 million in floor plan
lines of credit with various finance companies. Concurrently with such
pay-off's, the Company entered into new revolving line of credit agreements
aggregating $110.0 million, with Deutsche Financial Services providing $60.0
million and Transamerica Distribution Finance providing $50.0 million
(collectively, the "New Financing"). The New Financing has a three year term and
includes both (i) floor plan financing which utilizes subsidies from
manufacturers to provide for certain interest free periods each calendar year
(usually August through May) and (ii) a revolving credit sublimit that is
governed by borrowing bases applicable to the Company's assets. The New
Financing is governed by loan agreements containing various financial covenants
concerning, among others, ratios governing tangible net worth, liquidity and
leverage.
Management believes the Company to be in compliance with all terms and
conditions of the loan agreements governing the New Financing.
Seasonality
The Company's business, as well as the sales demand for various types of boats,
tends to be highly seasonal. Strong sales typically begin in January with the
onset of the public boat and recreation shows, and continue through July. Over
the previous three-year period, the average annual net sales for the quarterly
periods ended March 31 and June 30 represented approximately 27% and 41%,
respectively, of the Company's annual net sales. With regard to net income, the
Company historically generates profits in three of its fiscal quarters and
experiences operating losses in the quarter ended December 31 due to a broad
seasonal slowdown in sales. During the quarter ended September 30, inventory
typically reaches its lowest levels and accumulated cash reserves reach the
highest levels. During the quarter ended December 31, the Company generally
builds inventory levels in preparation for the upcoming selling season which
begins with boat and recreation shows occurring during January through March in
certain market areas in which the Company conducts business. Travis Boats'
operating results would be materially and adversely affected if net sales were
to fall significantly below historical levels during the months of January
through June.
<PAGE>
The Company's business is also significantly affected by weather patterns.
Weather conditions that are unseasonable or unusual may adversely affect the
Company's results of operations. For example, drought conditions or merely
reduced rainfall levels, as well as excessive rain, may affect the Company's
sale of boating packages and related products and accessories. While management
believes that the Company's quarterly net sales will continue to be impacted by
seasonality, quarterly results may become less susceptible to certain regional
weather conditions as expansion occurs throughout the southern United States.
Quarterly results may fluctuate as a result of the expenses associated with new
store openings or acquisitions, including the timing thereof. Prior to fiscal
1997, the Company had attempted to concentrate expansion during the seasonal
slowdown generally occurring in the quarter ending December 31. During fiscal
1997, the Company modified its acquisition strategy to acquire store locations
through-out the fiscal year. This was done to allow the Company the opportunity
to derive in-season sales from the acquisitions as well as to provide a longer
period in which to integrate the acquired store's operations. Alternatively, the
acquisition costs would typically include more inventory expense than if such
acquisition occurred in the slow, winter season since marine dealer's generally
maintain higher in-stock levels during the summer months. Such inventory
acquired may have prices greater than the Company would otherwise pay for such
product and accordingly, the Company may elect to dispose of the acquired
product at reduced prices. Accordingly, the results for any quarterly period may
not be indicative of the expected results for any other quarterly period.
Cautionary Statement for purposes of the Safe Harbor Provisions of the Private
Securities Litigation Reform Act of 1995.
Other than statements of historical fact, all statements contained in this
Report on Form 10-Q, including statements in "Item 1. Business", and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", are forward-looking statements as that term is defined in Section
21E of the Exchange Act that involve a number of uncertainties. The actual
results of the future events described in the forward-looking statements in this
Report on Form 10-Q could differ materially from those stated in such
forward-looking statements. Among the factors that could cause actual results to
differ materially are: general economic conditions, competition and government
regulations, as well as the risks and uncertainties discussed in this Report on
Form 10-Q, including without limitation, the matters discussed in "Risk Factors"
and the uncertainties set forth from time to time in the Company's other public
reports, filings and public statements. All forward-looking statements in this
Report on Form 10-Q are expressly qualified in their entirety by the cautionary
statements in this paragraph.
PART II. OTHER INFORMATION
Item 2.
(c) Securities Issues by Registrant
On September 1, 1999, the Company consummated the acquisition of certain assets
of The New 3 Seas, Inc., which operated a retail boating store location in Ft.
Myers, Florida. The total consideration for The New 3 Seas consisted of cash and
newly issued shares of Common Stock of the Company. The Company issued an
aggregate of 86,005 shares of its stock, with a value of $1,100,000 to
principals of The New 3 Seas, Inc. The common shares issued have since been
declared effective pursuant to the Securities Act of 1933 on November 8, 1999 by
the Securities and Exchange Commission.
The valuation of the shares of the common stock issued was determined in
conjunction with the requirements and methodology of EITF 95-19.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned
thereto duly authorized.
Date: February 11, 2000 Travis Boats & Motors, Inc.
By: /s/ Michael B. Perrine
------------------------------------------------
Michael B. Perrine
Chief Financial Officer, Treasurer and Secretary
(Principal Accounting and Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 12-MOS
<FISCAL-YEAR-END> SEP-30-2000 SEP-30-1999
<PERIOD-START> OCT-01-1999 OCT-01-1998
<PERIOD-END> DEC-31-1999 SEP-30-1999
<CASH> 5,252 4,125
<SECURITIES> 0 0
<RECEIVABLES> 9,574 12,668
<ALLOWANCES> (247) (247)
<INVENTORY> 103,903 75,700
<CURRENT-ASSETS> 119,657 93,559
<PP&E> 25,986 24,944
<DEPRECIATION> 5,074 4,529
<TOTAL-ASSETS> 152,561 125,931
<CURRENT-LIABILITIES> 116,191 88,339
<BONDS> 9,401 6,897
0 0
0 0
<COMMON> 44 43
<OTHER-SE> 36,326 37,549
<TOTAL-LIABILITY-AND-EQUITY> 152,561 125,931
<SALES> 23,627 182,259
<TOTAL-REVENUES> 23,627 182,259
<CGS> (17,653) (135,625)
<TOTAL-COSTS> (17,653) (135,625)
<OTHER-EXPENSES> (8,275) (32,945)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (1,374) (3,808)
<INCOME-PRETAX> (3,666) 10,419
<INCOME-TAX> 1,344 (3,846)
<INCOME-CONTINUING> (2,322) 6,573
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (2,322) 6,573
<EPS-BASIC> (0.53) 1.53
<EPS-DILUTED> (0.53) 1.49
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