<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter period ended APRIL 1, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
ACT OF 1934
For the transition period from to
------ ------
Commission file number 0-16482
ROADMASTER INDUSTRIES, INC.
(Exact name of Registrant as specified in its charter)
Delaware 84-1065239
-------- ----------
(State of other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
250 Spring Street NW, Atlanta, Georgia 30303
--------------------------------------------
(Address of principal executive offices, including zip code)
(404)586-9000
---------------------------------------------------
(Registrants telephone number, including area code)
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 the
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, net of treasury stock, as of the latest practicable date.
Class Outstanding at April 30, 1995
- --------------------------- -----------------------------
Common Stock $.01 par value 49,749,529 shares
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ROADMASTER INDUSTRIES, INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
April 1, December 31,
1995 1994
---------- ------------
(unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 2,589 $ 6,378
Accounts and notes receivable, net 170,632 187,161
Inventories 171,267 150,856
Prepaid expenses and other assets 16,491 8,786
Prepaid and refundable income taxes 3,284 2,319
Deferred income taxes 2,685 2,669
--------- ---------
Total current assets 366,948 358,169
Property, plant and equipment: 100,314 96,411
Less-Accumulated depreciation and amortization 28,199 25,204
--------- ---------
Net property, plant and equipment 72,115 71,207
Deferred income taxes 1,353 1,335
Investments in equity securities, at market 1,433 1,431
Deferred financing and acquisition charges 23,862 22,467
Goodwill 59,159 56,916
Other assets 6,446 5,102
--------- ---------
Total assets $ 531,316 $ 516,647
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving lines of credit $ 78,326 $ 61,230
Current portion of long-term debt 2,345 2,429
Accounts payable 74,435 79,501
Accrued expenses 38,196 38,618
--------- ---------
Total current liabilities 193,302 181,778
Revolving lines of credit 85,500 82,000
Long-term debt 144,779 145,279
Other long-term liabilities 4,493 4,493
Stockholders' equity:
Preferred stock -- --
Common stock 540 536
Additional paid-in capital 103,630 102,121
Retained earnings 13,859 15,416
Deferred compensation (3,289) (3,479)
Net unrealized loss on equity securities (644) (643)
--------- ---------
114,096 113,951
Treasury stock, at cost (10,854) (10,854)
--------- ---------
Total stockholders' equity 103,242 103,097
--------- ---------
Total liabilities and stockholders' equity $ 531,316 $ 516,647
========= =========
</TABLE>
See accompanying notes.
2
<PAGE> 3
ROADMASTER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
APRIL 1, 1995 APRIL 2, 1994
--------------- ---------------
(unaudited) (unaudited)
<S> <C> <C>
Net sales $ 175,546 $ 98,288
Cost of sales 151,589 85,135
------------ ------------
Gross profit 23,957 13,153
Selling, general and
administrative expenses 17,318 6,965
------------ ------------
Operating income 6,639 6,188
------------ ------------
Other expense, net:
Interest expense 7,918 4,810
Other, net 1,113 116
------------ ------------
9,031 4,926
------------ ------------
Earnings before income tax expense (2,392) 1,262
Income tax expense (915) 480
------------ ------------
Net earnings $ (1,477) $ 782
============ ============
Earnings per common share:
Primary and fully diluted $ (0.03) $ 0.03
============ ============
Weighted average common shares
outstanding and common stock
equivalents:
Primary and fully diluted 48,649 29,982
============ ============
</TABLE>
See accompanying notes.
3
<PAGE> 4
ROADMASTER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
APRIL 1, APRIL 2,
1995 1994
----- -----
<S> <C> <C>
Cash flows from operating activities:
Net earnings $(1,477) $ 782
Adjustments to reconcile net earnings to net cash
used in operating activities:
Depreciation and amortization 3,106 1,425
Amortization of deferred compensation 190 50
Other non-cash transactions -- (367)
Change in assets and liabilities:
Accounts receivable 16,529 5,522
Inventories (18,485) 1,789
Prepaid expenses and other assets (7,705) (1,444)
Cash in escrow -- (31)
Other assets (2,509) (765)
Accounts payable (5,067) (22,834)
Accrued expenses (424) 588
Income taxes (966) (427)
Deferred income taxes (14) 9
------- --------
Net cash used in operating activities (16,822) (15,703)
------- --------
Cash flows from investing activities:
Additions to property, plant and equipment (3,203) (2,933)
Acquisitions -- (8,042)
------- --------
Net cash used in investing activities (3,203) (10,975)
------- --------
Cash flows from financing activities:
Net change in revolving lines of credit 17,097 12,438
Principal payments of long term debt (738) (2,252)
Payments related to the issuance of long term debt -- (7,000)
Debt refinancing cost incurred (59) (355)
Additions to borrowings -- --
Cumulative translation adjustments (77) (162)
Purchase of treasury stock -- --
Proceeds from exercise of stock warrants 13 916
------- --------
Net cash provided by financing activities 16,236 3,585
------- --------
Net decrease in cash and cash equivalents (3,789) (23,093)
Cash and cash equivalents, beginning of period 6,378 37,435
------- --------
Cash and cash equivalents, end of period $ 2,589 $ 14,342
======= ========
</TABLE>
See accompanying notes.
4
<PAGE> 5
ROADMASTER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)
1. INTERIM FINANCIAL STATEMENTS
The accompanying unaudited consolidated financial statements have been
prepared by the Company pursuant to the rules and regulations of the Securities
and Exchange Commission regarding interim financial reporting. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements and should be
read in conjunction with the most recent annual audited financial statements of
the Company. In the opinion of management, these unaudited consolidated
financial statements include all adjustments necessary for a fair presentation
of its financial position as of April 1, 1995, and the results of operations
and its cash flows for the three months then ended. Such adjustments were of a
normal recurring nature.
The Company's business is seasonal in nature and subject to general
economic conditions and other factors. Accordingly, the results of operations
for the three months ended April 1, 1995 and April 2, 1994 are not necessarily
indicative of the results which may be expected for the full year.
2. SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
Three months ended
April 1, 1995 April 2, 1994
------------- -------------
<S> <C> <C>
Supplemental disclosures of cash flow information:
(in thousands)
Cash paid for:
Interest $ 11,788 $ 2,955
============= =============
Income taxes $ 21 $ 811
============= =============
Supplemental schedule of non-cash investing
and financing activities:
Common stock contributed to ESOP $ -- $ 776
Shares leveraged to purchase common stock for ESOP -- 478
Treasury stock retired -- 3,064
Exchange of common stock for interest of MZH 1,500 --
Acquisitions of businesses:
Fair value of assets acquired $ -- $ 11,687
Issuance of common stock -- 2,500
Cash paid -- 8,042
------------- -------------
Liabilities assumed $ -- $ 1,145
============= =============
</TABLE>
5
<PAGE> 6
ROADMASTER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
3. INVENTORIES
At April 1, 1995 and December 31, 1994, inventories consisted of:
(in thousands)
<TABLE>
<CAPTION>
April 1, 1995 December 31, 1994
------------- -----------------
<S> <C> <C>
Raw materials $ 51,796 $ 57,902
Work in process 6,309 8,604
Finished goods 113,162 84,350
------- ---------
Total inventory $171,267 $ 150,856
======= =========
</TABLE>
4. FINANCIAL REPORTING PERIOD
For comparative purposes the quarter ending April 1, 1995 is
consistent with the same period ending April 2, 1994. The Company prepares its
financial statements on thirteen (13) week quarters comprised of two four-week
periods and one five-week period.
5. ACQUISITIONS
On February 28, 1994, the Company acquired the assets and business of
American Playworld Inc. ("American"), a manufacturer of trampolines distributed
mainly to mass merchants. American had revenues of approximately $17 million
in 1993. The purchase price included $7.0 million in cash, 606,061 shares of
the Company's common stock valued at $2.5 million, and the assumption of
certain trade payables.
6. SUBSEQUENT EVENTS
In April 1995, Nelson/Weather-Rite, Inc. finalized the acquisition of
certain assets and the business of MZH, Inc. ("MZH"), a manufacturer and
marketer of sleeping bags with revenues of approximately $28 million in 1994.
The purchase price included $22.0 million in cash, 400,000 shares of the
Company's Common Stock valued at $1.5 million, and the assumption of certain
liabilities.
6
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net sales ("sales") increased $77.3 million or 79%, in the first
quarter of 1995 compared to the first quarter of 1994. This increase
was due primarily to the acquisition of Diversified Products
Corporation ("DP"), Hutch Sports USA, Inc. ("Hutch"),
Nelson/Weather-Rite, Inc. ("Nelson/Weather-Rite"), and Willow Hosiery
Company, Inc. ("Willow"), (defined collectively as the "Sports
Subsidiaries"), from The Actava Group Inc. in December 1994. The Sports
Subsidiaries were responsible for sales of approximately $62 million in
the first quarter of 1995. In addition, toy sales were up $5.3 million
or 28% from the first quarter of 1994 to the first quarter of 1995.
Approximately $3 million of the increase was due to the acquisition of
American Playworld, Inc. in March 1994 and approximately $1.4 million
was due to an increase in swingset sales.
Gross profit increased $10.8 million or 82%, in the first
quarter 1995 compared to the same period of 1994 primarily resulting
from higher sales volume. Gross profit, expressed as a percent of
sales, was 13.6% in the first quarter of 1995 versus 13.4% in 1994.
Selling, general and administrative expenses, expressed as a
percent of sales, were 9.9% for the first quarter of 1995. Selling,
general and administrative expenses for the first quarter of 1994 were
approximately 7.1% of sales.This increase was due to higher selling,
general and administrative expenses associated with sales by the
Company's new Sports Subsidiaries. Prior to the acquisition, selling,
general and administrative expenses of the Sports Subsidiaries as a
percentage of their sales had been approximately 13%. Total selling,
general and administrative expenses increased $10.4 million in the
first quarter of 1995, versus the same period in 1994, primarily as a
result of volume related expenses such as commissions and product
warranty expense.
Interest expense for the three months ended April 1, 1995 was
$7.9 million, an increase of $3.1 million from the same period in 1994
due to an increase in the prime rate of interest on which the Company's
revolving line of credit is based, higher working capital necessary to
support the 79% increase in sales, and the debt assumed in connection
with the acquisition of the Sports Subsidiaries. Expressed as a
percentage of sales, interest was 4.9% in the first three months of
1994 versus 4.5% in 1995.
The Company has recorded a tax benefit of $915,000 in the first
quarter of 1995, representing an effective tax rate of 38%. The
effective rate recognized in the first three months of 1994 was also
38%. This represents the Company's best estimate of the 1995 effective
rate.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS(CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company's working capital has been obtained
primarily from internally generated funds and revolving lines of credit
from banks. On a consolidated basis, during the first three months of
1995, the Company's operations utilized cash flow of approximately
$16.8 million, primarily due to the build up of inventories and
reductions in accounts payable. The seasonal nature of the Company's
sales imposes fluctuating demands on its cash flow, due to the
temporary buildup of inventories in anticipation of, and receivables
subsequent to, the peak seasonal period, which historically has
occurred around November of each year. Cash of $3.2 million was used in
capital expenditures.
The Company entered into a revolving credit facility in January
1994 providing $100 million, $50 million of which was subject to
restrictions on borrowings pursuant to the Company's $100 million
11.75% Senior Subordinated Notes due 2002 (the "Notes"). This facility
had a four-year term and provided for interest at the prime rate, as
defined, plus 1.25%. Such rate was later reduced to prime plus 0.75%.
In December 1994, the Company restructured its revolving credit
line (the "Revolver") to include as borrowers, the companies acquired
from The Actava Group, Inc. The Revolver provides for borrowings of up
to $200 million at the prime rate plus 0.75%, as defined, and includes
a LIBOR rate option which equals LIBOR plus 2.75%. Borrowings are
supported by eligible inventory, certain raw materials and finished
goods and accounts receivable.
The Revolver has a termination date of January 31, 1997. While
no assurance can be given, the Company plans to restructure the New
Loan Agreement in the second quarter of 1995 to allow for the sale of
accounts receivable to a third party (the "Structured Financing").
Upon completion of the Structured Financing, the Company's outstanding
indebtedness and accounts receivable each would be reduced. The
primary advantages of pursuing the Structured Financing are to reduce
the effective cost of the Company's short-term borrowings by taking
advantage of the credit ratings and diversity of the Company's customer
base and to increase the availability of credit under its revolver.
The Company has two long-term debt issues, the $51,745,000
Convertible Subordinated Debentures due 2003 (the "Debentures") and the
Notes. The Debentures are redeemable at the option of the Company
beginning September 15, 1996 at a price of 105.875% of the principal
face amount. The redemption price declines to par on or after December
15, 2000. The Notes may be converted at any time prior to redemption
to Common Stock at a conversion price of $4.00. Before the Company's
Debentures can be called for redemption, the Company's Common Stock
also must meet or exceed a minimum closing price of $5.0625 per share
for the thirty day period prior to such notice of redemption.
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS(CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES(CONTINUED)
The Notes and Debentures are obligations of the Company and are,
to a large extent, dependent on the Company's operating subsidiaries
for the payment of interest. Such interest payments are permitted
under the Revolver with certain restrictions. The Company does not
anticipate any restrictions on its ability to make such interest
payments pursuant to the Revolver.
At April 1, 1995, the Company, on a consolidated basis, had
stockholders' equity of $103.2 million versus $103.1 million at
December 31, 1994. Management believes that the Company's financing
arrangements and anticipated cash flow during 1995 are adequate to
provide the funds necessary to support operations and to permit the
Company to meet its obligations.
9
<PAGE> 10
Part II. OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K.
a) Exhibits:
11 - Computation of Per Share Earnings
27 - Financial Data Schedule (for SEC use only)
b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter ended
April 1, 1995.
10
<PAGE> 11
SIGNATURE
Pursuant to the requirements of the Securities Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
ROADMASTER INDUSTRIES, INC.
Dated: May 15, 1995 By: /s/ Jeff L. Hinton
--------------------- -----------------------------
Jeff L. Hinton, Chief Financial
Officer, Principal Accounting
Officer and Principal Financial
Officer
11
<PAGE> 12
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Page
Number Description Number
------ ----------- ------
<S> <C> <C> <C>
11 - Computation of Per Share Earnings, Three Months
Ended April 1, 1995 and April 2, 1994 13
27 - Financial Data Schedule (for SEC use only)
</TABLE>
<PAGE> 1
EXHIBIT 11
ROADMASTER INDUSTRIES, INC. AND SUBSIDIARIES
STATEMENT OF COMPUTATION OF PER SHARE EARNINGS
FOR THE THREE MONTHS ENDED APRIL 1, 1995 AND APRIL 2, 1994
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
APRIL 1, APRIL 2,
1995 1994
---- ----
<S> <C> <C>
Primary:
Weighted average common shares outstanding during period 48,649 27,259
Common shares issuable if all warrants had been converted
at the date of issuance - 2,723
------ ------
Average common shares outstanding for primary calculation 48,649 29,982
====== ======
Fully Diluted:
Weighted average common shares outstanding during period 48,649 27,259
Net common shares issuable on exercise of warrants - 2,723
------ ------
Average common shares outstanding for fully diluted calculation 48,649 29,982
====== ======
Net earnings $(1,477) $782
====== ======
Primary earnings per share:
Net earnings $(0.03) $0.03
====== ======
Fully diluted earnings per share:
Net earnings $(0.03) $0.03
====== ======
</TABLE>
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF ROADMASTER INDUSTRIES FOR THE PERIOD ENDED APRIL 1,
1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> APR-01-1995
<CASH> 2,589
<SECURITIES> 1,433
<RECEIVABLES> 172,863
<ALLOWANCES> (2,231)
<INVENTORY> 171,267
<CURRENT-ASSETS> 366,948
<PP&E> 100,314
<DEPRECIATION> 28,199
<TOTAL-ASSETS> 531,316
<CURRENT-LIABILITIES> 193,302
<BONDS> 0
<COMMON> 540
0
0
<OTHER-SE> 102,702
<TOTAL-LIABILITY-AND-EQUITY> 531,316
<SALES> 175,546
<TOTAL-REVENUES> 175,546
<CGS> 151,589
<TOTAL-COSTS> 151,589
<OTHER-EXPENSES> 26,349
<LOSS-PROVISION> 299
<INTEREST-EXPENSE> 7,918
<INCOME-PRETAX> (2,392)
<INCOME-TAX> (915)
<INCOME-CONTINUING> (1,477)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,477)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
