SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Third Quarter Ended January 31, 1997
Commission File No. 1-9471
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CRUISE AMERICA, INC.
State of Florida I.R.S. No. 59-1403609
11 West Hampton Avenue
Mesa, Arizona 85210-5258
Telephone: (602) 464-7300
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 and Exchange Act of 1934
during the preceding twelve (12) months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past ninety (90) days.
YES X No
--------- ---------
Common Stock, $.01 Par Value
As of January 31, 1997, 5,753,468 shares of the registrant's common stock were
outstanding of which 4,289,556 were held by non-affiliates of the registrant.
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TABLE OF CONTENTS
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CRUISE AMERICA, INC. AND SUBSIDIARIES
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ITEM PAGE
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PART I
FINANCIAL INFORMATION
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1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets............................................................................1
Condensed Consolidated Statements of Operations..................................................................3
Condensed Consolidated Statements of Cash Flows..................................................................4
Notes to Condensed Consolidated Financial Statements.............................................................5
2. Management's Discussion and Analysis of Consolidated Financial Condition
and Results of Operations........................................................................................6
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PART I. FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
CRUISE AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
A S S E T S
(In thousands)
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Unaudited
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01/31/97 4/30/96
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Current Assets:
Cash and Cash Equivalents..................................................... $ 2,663 2,341
Accounts Receivable, Net...................................................... 2,695 4,056
Inventories................................................................... 12,219 11,752
Prepaid Expenses and Other Current Assets..................................... 1,430 889
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Total Current Assets................................................. 19,007 19,038
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Rental Vehicles............................................................... 100,708 79,094
Less Accumulated Depreciation................................................. 20,332 15,576
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Net Rental Vehicles.................................................. 80,376 63,518
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Property and Equipment........................................................ 17,745 17,426
Less Accumulated Depreciation................................................. 7,414 6,916
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Net Property and Equipment........................................... 10,331 10,510
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Deposits and Other Assets..................................................... 2,707 2,629
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$112,421 95,695
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See accompanying notes to condensed consolidated financial statements.
1
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CRUISE AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
(In thousands except share data)
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Unaudited
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01/31/97 4/30/96
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Current Liabilities:
Floor Plan Contracts.......................................................... $ 3,577 2,245
Current Installments of Rental Vehicle Financing.............................. 14,664 10,723
Current Installments of Long-Term Debt........................................ 4,523 3,023
Accounts Payable and Accrued Expenses......................................... 2,926 1,980
Customer Deposits............................................................. 645 4,605
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Total Current Liabilities............................................ 26,335 22,576
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Rental Vehicle Financing, Excluding Current Installments...................... 35,568 29,561
Long-Term Debt, Excluding Current Installments................................ 17,793 19,412
Deferred Income Taxes......................................................... 3,316 684
Stockholders' Equity:
Preferred Stock $1.00 par value; 1,000,000 shares authorized, none
issued or outstanding......................................................... -- --
Common Stock $.01 par value, 15,000,000 shares authorized,
5,753,000 and 5,740,000 issued and outstanding at January 31, 1997
and April 30, 1996 respectively............................................... 58 57
Additional Paid-in Capital.................................................... 24,989 24,953
Retained Earnings (Deficit)................................................... 4,956 (902)
Translation Adjustment........................................................ (594) (646)
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Total Net Stockholders' Equity....................................... 29,409 23,462
Contingencies.................................................................
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$112,421 95,695
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See accompanying notes to condensed consolidated financial statements.
2
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CRUISE AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands except per share data)
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Three Months Ended Nine Months Ended
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01/31/97 01/31/96 01/31/97 01/31/96
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Rental Revenue.......................................... $ 3,606 3,234 49,877 41,291
Sales................................................... 10,392 10,613 28,710 34,779
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Total Revenue.................................. 13,998 13,847 78,587 76,070
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Cost of Rentals......................................... 3,446 2,885 20,043 16,568
Cost of Sales........................................... 9,898 9,891 26,682 31,486
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Total Costs.................................... 13,344 12,776 46,725 48,054
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Gross Profit from Operations............................ 654 1,071 31,862 28,016
Interest Expense........................................ 1,944 1,830 5,911 5,608
Selling, General and Administrative Expenses............ 4,605 4,464 17,461 16,717
------------- -------------- -------------- ---------------
Earnings (Loss) Before Income Taxes..................... (5,895) (5,223) 8,490 5,691
Income Tax Expense (Benefit) ........................... (1,836) (1,219) 2,632 1,327
------------- -------------- -------------- ---------------
Net Earnings (Loss)..................................... $ (4,059) (4,004) 5,858 4,364
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Earnings (Loss) per Share
(Primary and Fully Diluted)............................. $ (.69) (.70) .99 .76
------------- -------------- -------------- ---------------
Shares Used in Calculation.............................. 5,882 5,719 5,889 5,709
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</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
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CRUISE AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
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Nine Months Ended
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01/31/97 01/31/96
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Cash Flows from Operating Activities:
Net Earnings......................................................... $ 5,858 4,364
Depreciation and Amortization........................................ 11,140 10,385
Increase in Deferred Income Taxes.................................... 2,632 1,327
Gain on Sale of Rental Vehicles...................................... (690) (1,014)
Decrease (Increase) in Accounts Receivable, Net...................... 1,361 (611)
Decrease (Increase) in Inventories................................... (467) 1,539
Increase in Accounts Payable and Accrued Expenses.................... 946 1,340
Increase in Floor Plan Contracts..................................... 1,332 2,827
Decrease in Customer Deposits........................................ (3,960) (5,877)
Other, Net........................................................... (732) (679)
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Net Cash Provided by Operating Activities............................ 17,420 13,601
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Cash Flows from Financing Activities:
Proceeds from Rental Vehicle Borrowing............................... 53,414 41,934
Repayment of Rental Vehicle Borrowing................................ (43,466) (36,401)
Repayment of Long-Term Borrowing..................................... (119) (174)
Exercise of Stock Options............................................ 37 99
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Net Cash Provided by Financing Activities............................ 9,866 5,458
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Cash Flows from Investing Activities:
Purchase of Rental Vehicles.......................................... (48,428) (41,275)
Proceeds from Rental Vehicle Sales................................... 21,783 22,107
Purchase of Property and Equipment................................... (319) (552)
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Net Cash Used in Investing Activities................................ (26,964) (19,720)
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Increase in Cash and Cash Equivalents...................................... 322 (661)
Cash and Cash Equivalents at April 30...................................... 2,341 3,091
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Cash and Cash Equivalents at January 31.................................... $ 2,663 2,430
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</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
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CRUISE AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED JANUARY 31, 1997
NOTE 1.
In the opinion of management, the accompanying unaudited condensed consolidated
financial statements contain all the adjustments (principally consisting of
normal recurring accruals) necessary to present fairly the financial position of
Cruise America, Inc. and Subsidiaries (the Company) as of January 31, 1997, and
the results of operations for the nine month periods ended January 31, 1996 and
1997.
Certain items in the prior year financial statements have been reclassified to
conform with the current period presentations.
NOTE 2.
Supplemental Disclosures of Cash Flow Information (in thousands):
Nine Months Ended
--------------------------------
01/31/97 01/31/96
-------------- --------------
Cash paid during the period for:
Interest on Borrowings $ 5,284 4,755
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NOTE 3.
On May 14, 1987, a concession operator of American Land Cruisers of California,
Incorporated (ALCCAL, a subsidiary of the Company) commenced a lawsuit entitled
Altman's America, et al. v. American Land Cruisers of California, Incorporated,
et al. in the Superior Court of the State of California for the County of Los
Angeles. The action rose out of a claim for an alleged wrongful termination by
ALCCAL of a sublease agreement. This case has been tried twice. The first trial
resulted in a judgement in the amount of approximately $3.5 million. That
judgement was reversed on appeal and remanded for retrial. The second trial
resulted in judgements for the plaintiffs in the amount of $235,000 and a
judgement for ALCCAL of $634,000, which equaled a net judgement for ALCCAL of
$399,000. On July 18, 1996 the Appellate Court reduced the total amount due to
ALCCAL by approximately $400,000 and remanded the case for retrial. ALCCAL
intends to pursue all means to defeat the case.
The Company is a party to various claims, legal actions and complaints arising
in the ordinary course of business. In the opinion of management, the
disposition of these matters will not have a material adverse effect on the
financial condition of the Company.
5
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PART 1. FINANCIAL INFORMATION
ITEM 2
CRUISE AMERICA, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Consolidated
Financial Condition and Results of Operations
Nine Months Ended January 31, 1997
This Quarterly Report on Form 10-Q contains forward-looking statements.
Additional written or oral forward- looking statements may be made by the
Company from time to time in filings with the Securities and Exchange Commission
or otherwise. Such forward looking statements are within the meaning of that
term in Section 27A of the Securities Act of 1933, as amended, and Section 21F
of the Securities Exchange Act of 1934, as amended. Such statements may include,
but are not limited to, projections of revenues, income, or loss, capital
expenditures, plans for future operations, financing needs or plans, and plans
relating to products or services of the Company, as well as assumptions relating
to the foregoing.
Forward-looking statements are inherently subject to risks and uncertainties,
some of which cannot be predicted or quantified. Future events and actual
results could differ materially from those set forth in, contemplated by, or
underlying the forward-looking statements. Statements in the Quarterly Report,
including the Notes to the Condensed Consolidated Financial Statements and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," describe factors, among others, that could contribute to or cause
such differences. Additional factors that could cause actual results to differ
materially from those expressed in such forward looking statements are set forth
in Exhibit 99 to the Company's July 31, 1996 Quarterly Report on Form 10-Q.
SEASONALITY
The Company's business is seasonal. In the first and second fiscal quarters, the
Company historically records profits. In the third and fourth quarters, the
Company historically records losses. The Company's purchases of motorhomes for
the rental fleet are also seasonal, with the majority of purchases being made in
the first and fourth fiscal quarters. Due to the seasonality of rental and sales
operations, certain accounts fluctuate from quarter to quarter.
LIQUIDITY AND CAPITAL RESOURCES
As of January 31, 1997, the Company had current liabilities in excess of current
assets in the amount of $7,328,000. The Company's working capital, as presented,
includes a significant portion of Rental Vehicle Financing. The Company's
working capital does not, however, include any portion of the related
assets--Rental Vehicles, even though a significant portion of these vehicles are
expected to be sold during the next 12 months through the Company's normal fleet
rotation. If these assets were classified as current assets, the Company would
not have a working capital deficit.
The Company believes that, during the next year, cash generated from operations
and financing available from banks and other financial institutions will be
sufficient for its capital and operating needs. At January 31, 1997, the Company
believes it is in compliance with all debt covenants associated with its various
financing agreements.
NINE MONTHS ENDED JANUARY 31, 1997 AS COMPARED WITH
NINE MONTHS ENDED JANUARY 31, 1996
Rental Revenue for the nine months ended January 31, 1997 was $49,877,000
compared to $41,291,000 for the nine months ended January 31, 1996. This 21%
increase was due primarily to a 24% increase in revenue days offset in part by a
3% decline in average revenue per day. The increase in revenue days was due to a
20% increase in average fleet size as well as an increase in utilization to 55%
in 1997 from 53% in 1996 due to strong summer demand.
6
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Sales for the nine months ended January 31, 1997, were $28,710,000, compared to
$34,779,000 for the same period a year ago. Wholesale sales declined in part due
to the Company's conversion to a modular motorhome fleet, which has the effect
of extending the service life of the rental vehicle by replacing the chassis.
Sales at retail were affected by a continuing industry-wide slow down in sales
as well as inventory constraints due to the Company's high peak season rental
fleet utilization.
Cost of Rentals as a percentage of Rental Revenue was 40% in 1997 and 1996. A
slight reduction in rental rates offset economies achieved through higher
utilization.
Cost of Sales as a percentage of Sales was 93% for the nine months ended January
31, 1997, compared to 91% for the same period a year earlier. A shift in mix was
primarily responsible for the increase, as lower margin Rental Vehicle Sales
increased to 72% of total sales in 1997 compared to 64% in 1996.
Interest Expense for the nine months ended January 31, 1997, was $5,911,000
compared to $5,608,000 in 1996. Higher Rental Vehicle Financing was offset in
part by lower average interest rates.
Selling, General and Administrative Expenses as a percentage of Total Revenue
was 22% in both 1997 and 1996.
THREE MONTHS ENDED JANUARY 31, 1997 AS COMPARED WITH
THREE MONTHS ENDED JANUARY 31, 1996
Rental Revenue for the quarter ended January 31, 1997 was $3,606,000 compared to
$3,234,000 for the quarter ended January 31, 1996. This increase was due
primarily to a 19% increase in revenue days offset in part by a 6% decline in
revenue per day. Revenue days increased due to an increase in average fleet size
offset in part by a slight decrease in utilization.
Sales for the quarter ended January 31, 1997 were $10,392,000 compared to
$10,613,000 in 1996. An increase in Rental Vehicle Sales in the quarter was
offset by a decline in sales of new vehicles.
Cost of Rentals as a percentage of Rental Revenue was 96% in 1997 compared to
89% in 1996. Although Rental Revenue increased compared to the prior year,
holding costs also increased as a result of a larger fleet being carried over
from the summer peak.
Cost of Sales as a percentage of Sales was 95% in 1997 compared to 93% in 1996.
An increase in lower margin Rental Vehicle Sales as a percentage of total Sales
impacted the Cost of Sales percentage.
Interest Expense for the quarter ended January 31, 1997 was $1,944,000 compared
to $1,830,000 in 1996. Lower interest rates were offset by higher Rental Vehicle
Financing during the period.
Selling, General and Administrative Expenses as a percentage of Total Revenue
was 33% in 1997 compared to 32% in 1996. A slight increase in Rental Revenue as
a percentage of Total Revenue from 23% in 1996 to 26% in 1997 was the primary
cause of this increase. Rentals are more overhead intensive than sales.
7
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CRUISE AMERICA, INC.
March 3, 1997 Eric R. Bensen
-----------------------------
Eric R. Bensen
Vice President
Chief Financial Officer
March 3, 1997 Randall Smalley
-----------------------------
Randall Smalley
President
Chief Executive Officer
8
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<ARTICLE> 5
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-END> JAN-31-1997
<EXCHANGE-RATE> 1
<CASH> 2,663
<SECURITIES> 0
<RECEIVABLES> 2,695
<ALLOWANCES> 0
<INVENTORY> 12,219
<CURRENT-ASSETS> 19,007
<PP&E> 118,453
<DEPRECIATION> 27,746
<TOTAL-ASSETS> 112,421
<CURRENT-LIABILITIES> 26,335
<BONDS> 53,361
0
0
<COMMON> 58
<OTHER-SE> 29,351
<TOTAL-LIABILITY-AND-EQUITY> 112,421
<SALES> 28,710
<TOTAL-REVENUES> 78,587
<CGS> 26,682
<TOTAL-COSTS> 46,725
<OTHER-EXPENSES> 17,461
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,911
<INCOME-PRETAX> 8,490
<INCOME-TAX> 2,632
<INCOME-CONTINUING> 5,858
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,858
<EPS-PRIMARY> .99
<EPS-DILUTED> .99
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