<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 SEPTEMBER 28, 1996
[ ] 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
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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 November 8, 1996
--------------------------- -------------------------------
Common Stock $.01 par value 49,507,167 shares
1
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ROADMASTER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
September 28, December 31,
1996 1995
---------------- ------------
(unaudited)
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 5,305 $ 8,417
Accounts and notes receivable, net 48,680 188,573
Inventories 81,892 166,743
Prepaid expenses and other assets 7,112 6,441
Prepaid and refundable income taxes 21,406 30,180
Cash in escrow 37,258 --
Deferred income taxes 7,619 6,232
------------- -----------
Total current assets 209,272 406,586
Property, plant and equipment 58,089 101,773
Less: accumulated depreciation and amortization 18,323 25,300
------------- -----------
Net property, plant and equipment 39,766 76,473
Investments in equity securities, at market 221 1,809
Deferred financing and acquisition charges 19,671 23,847
Goodwill and other intangible assets, net 20,166 63,933
Long-term trade receivables 412 1,639
Other assets 2,421 2,820
------------- -----------
Total assets $ 291,929 $ 577,107
============= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving lines of credit $ 13,843 $ 85,402
Current portion of long-term debt 487 1,519
Accounts payable 46,091 97,369
Accrued expenses 65,723 48,212
------------- -----------
Total current liabilities 126,144 232,502
Deferred income taxes 2,848 3,145
Revolving lines of credit, long-term 34,142 132,200
Long-term debt 53,711 147,388
Other long-term liabilities 20,029 6,348
------------- -----------
Total long-term liabilities 110,730 289,081
Stockholders' equity:
Common stock 540 540
Additional paid-in capital 103,576 103,574
Retained loss (35,851) (35,412)
Deferred compensation (2,516) (2,896)
Net unrealized (loss) gain on equity securities (131) 281
------------- -----------
65,618 66,087
Treasury stock, at cost (10,563) (10,563)
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Total stockholders' equity 55,055 55,524
------------- -----------
Total liabilities and stockholders' equity $ 291,929 $ 577,107
============= ===========
</TABLE>
See accompanying notes.
2
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ROADMASTER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 28, SEPTEMBER 30, SEPTEMBER 28, SEPTEMBER 30,
------------- ------------- ------------- -------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 70,483 $ 175,221 $ 304,235 $ 523,480
Cost of sales 85,299 150,845 291,866 455,369
---------- ----------- ----------- -----------
Gross (loss) profit (14,816) 24,376 12,369 68,111
Selling, general and administrative expenses 40,208 18,651 68,630 54,890
Restructuring expense 4,262 -- 4,262 --
Other (income) expense, net:
Interest expense 5,362 8,972 19,920 26,075
Gain on sale of subsidiaries (78,324) -- (98,475) --
Other, net 7,068 293 8,473 2,263
---------- ----------- ----------- -----------
(65,894) 9,265 (70,082) 28,338
---------- ----------- ----------- -----------
Earnings (loss) before income tax
expense (benefit) and extraordinary item 6,608 (3,540) 9,559 (15,117)
Income tax expense (benefit) 1,962 (1,337) 5,416 (5,858)
---------- ----------- ----------- -----------
Income (loss) before extraordinary item 4,646 (2,203) 4,143 (9,259)
Extraordinary loss, net of tax 3,731 -- 3,731 --
---------- ----------- ----------- -----------
Net earnings (loss) $ 915 $ (2,203) $ 412 $ (9,259)
========== =========== =========== ===========
Earnings (loss) per common share, primary
and Fully diluted:
Income (loss) before extraordinary item $ 0.09 (0.04) 0.08 (0.19)
Extraordinary loss (0.07) -- (0.07) --
---------- ----------- ----------- -----------
Net earnings (loss) $ 0.02 $ (0.04) $ 0.01 $ (0.19)
========== =========== =========== ===========
Weighted average common shares
outstanding and common stock
equivalents:
Primary and fully diluted 49,653 49,107 49,870 48,946
========== =========== =========== ===========
</TABLE>
See accompanying notes.
3
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ROADMASTER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, IN THOUSANDS)
NINE MONTHS ENDED
<TABLE>
<CAPTION>
SEPTEMBER 28, SEPTEMBER 30,
1996 1995
------------- --------------
(unaudited) (unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ 412 $ (9,259)
Adjustments to reconcile net earnings to net cash
used in operating activities:
Depreciation and amortization 11,760 10,093
Amortization of deferred compensation 379 493
Loss on sale of marketable securities (568) --
Loss on sale of property, plant and equipment 213 --
Gain on sale of subsidiaries (98,475) --
Loss on extinguishment of debt 6,117 18
Loss on impairment 8,888
Change in assets and liabilities:
Accounts receivable 93,590 16,456
Inventories 2,931 (27,957)
Prepaid expenses and other assets (3,070) (7,750)
Cash in escrow (37,258) --
Other assets (1,644) (5,389)
Accounts payable (35,789) 3,588
Accrued expenses 640 (3,175)
Income taxes 11,207 (5,069)
Deferred income taxes (829) (245)
Other long-term liabilities (199) --
------------- ---------
Net cash used in operating activities (41,695) (28,196)
------------- ---------
Cash flows from investing activities:
Additions to property, plant and equipment (11,254) (11,805)
Acquisitions (3,983) (24,399)
Proceeds from sale of marketable securities 1,507 --
Proceeds from sale of property, plant and equipment 514 --
Proceeds from sale of subsidiaries 320,710 --
------------- ---------
Net cash provided by (used in) investing activities 307,494 (36,204)
------------- ---------
Cash flows from financing activities:
Net change in revolving lines of credit (101,735) 62,326
Proceeds from issuance of long term debt 21,846 2,552
Principal payments of long term debt (1,578) (1,498)
Retirement of debt (185,448) --
Debt refinancing cost incurred (1,700) (477)
Cumulative translation adjustments (296) 127
Proceeds from exercise of stock warrants -- 120
------------- ---------
Net cash (used) provided by financing activities (268,911) 63,150
------------- ---------
Net decrease in cash and cash equivalents (3,112) (1,250)
Cash and cash equivalents, beginning of period 8,417 6,378
------------- ---------
Cash and cash equivalents, end of period $ 5,305 $ 5,128
============= =========
</TABLE>
See accompanying notes.
4
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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 Roadmaster Industries, Inc., d/b/a RDM Sports Group, Inc., (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 September 28, 1996, and the results of
operations and its cash flows for the nine 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 and nine months ended September 28, 1996 and September 30, 1995
are not necessarily indicative of the results which may be expected for the
full year.
2. SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
Nine months ended
September 28, September 30,
1996 1995
---- ----
<S> <C> <C>
Supplemental disclosures of cash flow information:
(in thousands)
Cash paid for:
Interest $24,899 $26,560
======= =======
Income taxes $ 724 $ 737
======= =======
Supplemental schedule of non-cash investing
and financing activities:
Exchange of common stock for assets of MZH $ -- $ 1,500
Acquisitions of businesses:
Fair value of assets acquired $ -- $27,902
Issuance of common stock -- 1,500
Cash paid -- 21,478
------- -------
Liabilities assumed $ -- $ 4,924
======= =======
</TABLE>
5
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ROADMASTER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. INVENTORIES
At September 28, 1996 and December 31, 1995, inventories consisted of:
(in thousands)
<TABLE>
<CAPTION>
September 28, December 31,
1996 1995
------------- ----------
<S> <C> <C>
Raw Materials $ 29,750 $ 58,960
Work in process 7,141 9,570
Finished goods 45,001 98,213
------------ ------------
Total inventory $ 81,892 $ 166,743
</TABLE>
4. FINANCIAL REPORTING PERIOD
For comparative purposes the quarter ending September 28, 1996 is
consistent with the same period ending September 30, 1995. The Company
prepares its financial statements on thirteen (13) week quarters comprised of
two four-week periods and one five-week period.
5. DISPOSITIONS
On September 6, 1996, the Company completed the sale of the assets of
the Company's bicycle and snow products business (which also includes tricycles,
wagons and junior ride-ons) to Brunswick Corporation ("Brunswick"), for
approximately $200,710,000 in cash (the "Brunswick Transaction"). The Brunswick
Transaction resulted in: the assumption by Brunswick of trade payables
affiliated with the bicycle and snow products being conveyed at the time of the
closing, a long-term lease of the Olney, Illinois facility, estimated to have a
present value of approximately $2.6 million, the assumption by Brunswick of
certain long-term indebtedness consisting of Industrial Revenue Bonds, (with a
corresponding reduction to the purchase price), and the establishment by the
Company of an escrow account in the amount of $10,000,000 to secure the costs of
the environmental remediation of the property at the Olney, Illinois facility,
for which the Company has indemnified Brunswick. The purchase price is subject
to adjustment for changes in working capital between December 31, 1995 and the
Closing Date, September 6, 1996. The net pretax gain on the Brunswick
Transaction was approximately $78.3 million. The Company used the net proceeds
to reduce its indebtedness (see Note 6 "Extinguishment of Debt") and for other
corporate purposes. In the third quarter and year to date 1996, the businesses
sold to Brunswick contributed $21.7 million and $106.0 million of revenue,
respectively, and ($2.1) million and $3.6 million of operating profit,
respectively.
6
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ROADMASTER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. EXTINGUISHMENT OF DEBT
On August 2, 1996, the Company commenced an Offer to Purchase and Consent
Solicitation (the "Offer") to the holders of its 11.75% Senior Subordinated
Notes due 2002 (the "Notes"), whereby the Company offered to purchase up to all
of the outstanding Notes not held by the Company ($90.1 million) at a purchase
price equal to one hundred percent (100%) of such Notes' principal amount, plus
accrued but unpaid interest. Such Offer terminated on August 29, 1996. Consents
to the required Waivers under the Indenture were obtained from the holders of
$88.4 million principal amount of the Notes and the waivers to the relevant
indenture provisions were effected thereafter. Of such amount, $88.2 million
were purchased. In connection with the repurchase, the Company recorded an
extraordinary loss on the extinguishment of the notes in the amount of
$3,731,000, net of tax. Following the consumation of the Offer, $2.1 million
principal amount of the Notes were outstanding and not held by the Company.
On September 6, 1996, the Company terminated its then existing bank credit
agreement (as amended, the "Amended and Restated Revolver") and entered into a
new bank credit agreement (the "Bank Credit Agreement"). The Company paid
approximately $75,000,000 of its net proceeds received from the Brunswick
Transaction (see Note 5 "Dispositions") to relieve its indebtedness under the
Amended and Restated Revolver. The new Bank Credit Agreement has a three year
term and provides for borrowings of up to $130,000,000, based on eligible trade
receivables and inventory. Interest under the new Bank Credit Agreement is
calculated at the Agent's referenced rate (generally the "prime rate") plus
1.25% and includes a LIBOR Rate option which equals LIBOR plus 1.25%. The
monthly unused facility fee is .25% on the available unused portion of the
facility provided by the Bank Credit Agreement. Borrowings under the Bank
Credit Agreement are secured by security interests in substantially all of the
assets of the Company. The Bank Credit Agreement requires the maintenance of
various financial and other covenants, including minimum net worth, earnings to
interest expense coverage and prohibitions on various transactions without the
consent of the Lender.
7. RESTRUCTURING CHARGE
In December 1995, the Company recorded a restructuring charge of $7.5
million, primarily related to the closure of its Tyler, Texas manufacturing
facility and the downsizing of its European distribution operations. The
operations of the Tyler facility are being integrated with the Company's
Opelika, Alabama manufacturing operations enabling the Company to reduce fixed
costs and increase utilization and efficiency of existing manufacturing
facilities. The components of the restructuring charge include $1.4 million
for employee severance, $3.9 million to cover lease obligations for facilities
which will no longer be needed and $2.2 million for the maintenance, security
and other facility related carrying costs. Total cash expenditures of $7.5
million are included in this charge. All employees were notified of this
restructuring by December 31, 1995. In connection with the closure of the
Tyler, Texas manufacturing facility an additional $4.3 million has been
provided to the restructuring charge in the third quarter 1996. This charge
relates primarily to the non-cash write-off of tooling associated with the
production process at this facility. The Company plans to substantially
complete all related restructuring activities by December 31, 1996. Of the
total restructuring charge of $11.8 million, approximately $9.0 million has
been utilized by the end of the third quarter, 1996.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net sales ("sales") decreased $104.7 million or 60% and $219.2
million or 42% in the third quarter and first nine months of 1996,
respectively, compared to the third quarter and first nine months of
1995. Approximately 27% of this decrease was attributable to the sale
of the Company's camping unit ("Nelson/Weather-Rite") in the first
quarter of this year and approximately 44% of the decrease was
attributable to decreased shipments of fitness products. A portion of
the decrease also related to slow shipments of bicycle products in
August and the exclusion of sales of bicycles and snow products for the
period after September 6, 1996, to the end of the quarter as a result
of the sale of bicycles and snow products to Brunswick Corporation (the
"Brunswick Transaction"). The remainder of the decrease related to
shipments of swingsets and decreases across various other product
lines. The decrease in fitness product sales reflects the Company's
decision to eliminate distribution of certain treadmill categories
which have historically reduced operating profits. In addition, the
Company's business is seasonal and historically sales of fitness
products have been lower in the third quarter than other quarters.
Management believes the decrease in sales in various other product
lines reflected a relatively weak retail environment for certain
leisure time products.
Gross profit decreased $39.2 million or 161% and $55.7 million
or 82% in the third quarter and first nine months of 1996,
respectively, compared to the same period of 1995 primarily resulting
from lower sales volume, the write-off of certain fitness products
inventory with no future value of approximately $10.0 million, and the
write down to net realizable value of certain toy products inventory of
approximately $2.7 million. The Company recorded gross losses in an
amount equal to 21% of sales in the third quarter of 1996 and gross
profits, expressed as a percent of sales, of 4% in the first nine
months of 1996 versus gross profits, expressed as a percent of sales,
of 14% and 13%, respectively, for the same periods in 1995. Without
the write-offs and adjustments for inventory, the Company would have
recorded gross losses, expressed as a percent of sales, of 3% in the
third quarter of 1996 and gross profit, expressed as a percent of
sales, of 8% in the first nine months of 1996. The Company's fitness
manufacturing operations were impacted negatively during the third
quarter of 1996 due to the combined affect of higher production costs
associated with introducing new products and costs associated with the
consolidation in Opelika, Alabama of the production of fitness products
previously produced in both the Tyler, Texas and Olney, Illinois
facilities. The Company is completing the process of closing its
Tyler, Texas facility and consolidating all fitness operations into its
Opelika, Alabama facility. While no assurances can be given,
management believes the combinations of these actions will assist in
reducing costs, optimize the utilization of the Company's fitness
manufacturing facility and return gross profit margins for fitness
products to average historical levels. The full effect of such actions
are not expected to be fully realized until late 1997.
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Selling, general and administrative expenses, expressed as a
percent of sales, were 57% in the third quarter of 1996 and 23% in the
first nine months of 1996 versus 11% and 10%, respectively, for the
same periods in 1995. The increase was primarily attributable to
product warranty costs in the Company's fitness business. Such product
warranty costs related to continuing quality control problems at the
Company's Opelika, Alabama facility as well as to fitness products
formerly produced at the Company's former Tyler, Texas facility.
Product warranty costs increased to 30% of sales in the third quarter
of 1996 and 10% of sales in the first nine months of 1996 versus 2% and
2% for the same periods of 1995. Such increase was attributable to
increased reserves for potential product warranty claims associated
with sales of fitness products for current and prior quarters. The
Company is in the process of implementing additional measures to help
reduce its product warranty costs in the future, including: extensive
piloting and testing of new product introductions; reductions in the
number of products offered; the exiting of the opening price point
treadmill business, which traditionally has had a higher than normal
product warranty rate; and the implementation of stringent quality
assurance measures. Although no assurances can be given, the Company
anticipates warranty expenses, as a percentage of sales, will decline
in the future due to its efforts, however, the full effect of such
actions are not expected to be fully realized until late 1997.
The Company, in connection with the closure of the Tyler, Texas
manufacturing facility, provided for an additional $4.3 million in
restructuring charges in the third quarter 1996. This charge relates
primarily to the non-cash write-off of tooling associated with the
production process at this facility. The Company plans to
substantially complete all related restructuring activities by
December 31, 1996. Of the total restructuring charge of $11.8
million, approximately $9.0 million has been utilized by the end of
the third quarter, 1996.
Interest expense for the three and nine months ended September
28, 1996 was $5.4 million and $19.9 million, respectively, decreases of
$3.6 million and $6.1 million from the same periods in 1995. Expressed
as a percentage of sales, interest was 8% and 7% for the third quarter
and first nine months of 1996, respectively, compared to 5% and 5% for
the same periods in 1995.
The Company recorded a pretax gain of approximately $78.3
million in the third quarter of 1996 resulting from the sale of its
bicycle and snow products business to Brunswick Corporation on
September 6, 1996. In the first quarter of 1996, the Company recorded
a pretax gain of $20.2 million resulting from the sale of its
Nelson/Weather-Rite camping subsidiary to Brunswick Corporation on
March 8, 1996.
The Company recorded a $6.1 million pretax extraordinary loss on
the retiring of its $100 million 11.75% Senior Subordinated Notes due
2002. The after tax loss on this transaction was $3.7 million.
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
In the first nine months of 1996, the Company recorded tax
expense of $5.4 million before the extraordinary loss on extinguishment
of debt. The tax benefit on the debt extinguishment was $2.4 million.
The effective tax rate on earnings before the extraordinary loss was
57%. This compares to the 39% effective rate recognized in the first
nine months of 1995. The increase in the effective rate is
attributable to the Federal and State tax expense recorded as part of
the sales of the Nelson/Weather-Rite subsidiary and the bicycle and
snow products business at 50% and 38% respectively. Tax benefits from
losses from normal operations and the extraordinary loss were recorded
at 39%.
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 nine months of
1996, the Company's operations utilized cash flow of approximately
$41.7 million, primarily due to operating losses and the escrow of
$37.3 million pursuant to the sales of the Company's camping, bicycle
and snow products businesses. In addition, the Company used cash to
reduce its 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 and may
be expected to continue to occur around November of each year.
Management does not anticipate any material effect on the seasonality
of the Company's business as a result of the sale of the bicycle and
snow product business. Cash of $ 11.3 million was used in capital
expenditures during the first nine months of 1996.
On September 6, 1996, the Company terminated its existing bank
credit facility (as amended, the Amended and Restated Revolver) and
entered into a new bank credit agreement (the "Bank Credit
Agreement"). The new Bank Credit Agreement is for a three year term
maturing September 1999 and provides for borrowings of up to $130
million based on certain inventories and accounts receivable.
Interest is calculated at the Agent's referenced rate (generally
the "prime rate") plus 1.25% and includes a LIBOR option which equals
LIBOR plus 1.25%. The monthly unused facility fee is .25% on the
available unused portion of the facility provided by the Bank Credit
Agreement. At September 28, 1996, the Company had outstanding
borrowings of $48.0 million under the Bank Credit Agreement.
On August 2, 1996, the Company commenced an Offer to Purchase
and Consent Solicitation (the "Offer") to the holders of its 11.75%
Senior Subordinated Notes due 2002 (the "Notes"), whereby the Company
offered to purchase up to all of the outstanding Notes not held by the
Company ($90.1 million) at a purchase price equal to one hundred
percent (100%) of such Notes' principal amount, plus accrued but unpaid
interest. Such Offer terminated on August 29, 1996. Consents to the
required Waivers under the Indenture were obtained from the holders of
$88.4 million principal amount of the Notes and the Waivers to the
relevant Indenture provisions were effected thereafter. Of such amount,
$88.2 million also were purchased.
10
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Following the implementation of the Waivers and concurrent with
the execution of the new Bank Credit Agreement, the Brunswick
Transaction was consummated on September 6, 1996. The Company used the
net proceeds to reduce its outstanding indebtedness under the Amended
and Restated Revolver by approximately $75 million and to purchase
$88.2 million principal amounts of its Notes for one hundred percent of
their principal amount, plus accrued but unpaid interest to the date of
the repurchase.
The Company has two long-term debt issues, the $51,745,000
Convertible Subordinated Debentures due 2003 (the "Debentures") and the
remaining $2.1 million Notes outstanding and not held by the Company.
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 by the holders thereof, 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.
The Notes and Debentures are obligations of the Company and the
ability of the Company to meet its debt service obligations is
dependent on the ability of its subsidiaries to generate funds from
operations sufficient to meet their respective debt service and other
obligations and, second, to pay or distribute amounts to the Company
sufficient to enable it to meet its debt service and other
obligations. The Bank Credit Agreement restricts, with limited
exceptions, distributions, dividends and payments to the Company, but,
in each case, permit dividends and interest on intercompany loans to
be paid to the Company for the purpose of making interest payments on
the Notes and Debentures so long as the relevant subsidiary is not in
default under the Bank Credit Agreement.
At September 30, 1996, the Company, on a consolidated basis, had
stockholders' equity of $55.0 million versus $55.5 million at December
31, 1995. Management believes that the Company's financing
arrangements and anticipated cash flow during 1996 are adequate to
provide the funds necessary to support operations and to permit the
Company to meet its obligations.
RISK AND UNCERTAINTIES
Except for historical information contained herein, the matters set forth in
this report are forward-looking statements which are subject to certain risks
and uncertainties that could cause actual results to differ materially from
those in, or which could be expected based on, such forward-looking statements.
The Company's expectations regarding future sales and profits assume, among
other things, reasonable continued growth in the general economy, which affects
demand for the Company's products, improvement in the retail environment for
fitness products, and reasonable stability in raw materials pricing, changes in
which affect customer pricing decisions, as well as the Company's prices and
margins and which have, in the past, had a material adverse effect on such
prices and margins. The cost and benefits of the Company's discontinuance of
operations at its Tyler, Texas facility and the consolidation of all fitness
operations into its Opelika, Alabama facility may vary from the Company's
expectations due to various factors, such as the extent of management's
ability to eliminate or reduce duplication of costs, inefficiencies and
overhead, and, now that such consolidation is complete, the ability to avoid
quality control problems in the difficulties inherent in forecasting
operating results. For a further discussion of risks and uncertainties
associated with the Company's business, readers are referred to the discussion
in Item 1 of the Company's report on Form 10-K with respect to its business,
which information is incorporated by reference herein.
11
<PAGE> 12
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 (submitted in electronic form to
SEC only)
b) Reports on Form 8-K.
On July 19, 1996, the Company filed a Current report on Form
8-K announcing that the Company had entered into a definitive
agreement with Brunswick Corporation to sell its bicycle and
snow business for approximately $212 million in cash (the
"Brunswick Transaction").
On September 20, 1996, the Company filed a Current report on
Form 8-K/A-1 to report the closing of the Brunswick
Transaction and to report the termination of its then existing
bank credit agreement and announcing its new $130 million bank
credit agreement.
12
<PAGE> 13
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: November 15, 1996 By: /s/ Charles E. Sanders
------------------ ---------------------------------------
Vice President, Treasurer and Secretary
By /s/ Charles E. Sanders
---------------------------------------
Principal Accounting Officer
13
<PAGE> 14
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Page
Number Description Number
- ------- ----------- ------
<S> <C> <C>
11(a) - Computation of Per Share Earnings, Three Months
Ended September 28, 1996 and September 30, 1995 16
11(b) - Computation of Per Share Earnings, Nine Months
Ended September 28, 1996 and September 30, 1995 17
27 - Financial Data Schedule (submitted in electronic form to
SEC only) N/A N/A
</TABLE>
14
<PAGE> 1
EXHIBIT 11(A)
ROADMASTER INDUSTRIES, INC. AND SUBSIDIARIES
STATEMENT OF COMPUTATION OF PER SHARE EARNINGS
FOR THE THREE MONTHS ENDED SEPTEMBER 28, 1996 AND SEPTEMBER 30, 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 28, SEPTEMBER 30,
1996 1995
---- ----
<S> <C> <C>
Primary:
Weighted average common shares outstanding during period 49,177 49,107
Common shares issuable if all warrants had been converted
at the date of issuance 476 -
------------- ---------
Average common shares outstanding for primary calculation 49,653 49,107
============= =========
Fully Diluted:
Weighted average common shares outstanding during period 49,177 49,107
Net common shares issuable on exercise of warrants 476 -
------------- ---------
Average common shares outstanding for fully diluted calculation 49,653 49,107
============= =========
Earnings (loss) before extraordinary item $ 4,646 $ (2,203)
Extraordinary item - loss on extinguishment of debt 3,731 --
------------- ---------
Net earnings (loss) $ 915 $ (2,203)
============= =========
Earnings per share, primary and fully diluted:
Earnings (loss) before extraordinary item $ 0.09 $ (0.04)
Extraordinary item - loss on extinguishment of debt (0.07) --
------------- ---------
Net earnings (loss) $ 0.02 $ (0.04)
============= =========
</TABLE>
15
<PAGE> 1
EXHIBIT 11(B)
ROADMASTER INDUSTRIES, INC. AND SUBSIDIARIES
STATEMENT OF COMPUTATION OF PER SHARE EARNINGS
FOR THE NINE MONTHS ENDED SEPTEMBER 28, 1996 AND SEPTEMBER 30, 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 28, SEPTEMBER 30,
1996 1995
---- ----
<S> <C> <C>
Primary:
Weighted average common shares outstanding during period 49,177 48,946
Common shares issuable if all warrants had been converted
at the date of issuance 693
------------- ---------
Average common shares outstanding for primary calculation 49,870 48,946
============= =========
Fully Diluted:
Weighted average common shares outstanding during period 49,177 48,946
Net common shares issuable on exercise of warrants 693 -
------------- ---------
Average common shares outstanding for fully diluted calculation 49,870 48,946
============= =========
Earnings (loss) before extraordinary item $ 4,143 $ (9,259)
Extraordinary item - loss on extinguishment of debt 3,731 --
------------- ---------
Net earnings (loss) $ 412 $ (9,259)
============= =========
Earnings per share, primary and fully diluted:
Earnings (loss) before extraordinary item $ 0.08 $ (0.19)
Extraordinary item - loss on extinguishment of debt (0.07) --
------------- ---------
Net earnings (loss) $ 0.01 $ (0.19)
============= =========
</TABLE>
16
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF ROADMASTER INDUSTRIES, INC. FOR THE NINE MONTHS ENDED
SEPTEMBER 28, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-28-1996
<EXCHANGE-RATE> 1
<CASH> 5,305
<SECURITIES> 0
<RECEIVABLES> 48,680
<ALLOWANCES> 0
<INVENTORY> 81,892
<CURRENT-ASSETS> 209,272
<PP&E> 58,089
<DEPRECIATION> 18,323
<TOTAL-ASSETS> 291,929
<CURRENT-LIABILITIES> 126,144
<BONDS> 53,711
0
0
<COMMON> 540
<OTHER-SE> 54,515
<TOTAL-LIABILITY-AND-EQUITY> 291,929
<SALES> 304,235
<TOTAL-REVENUES> 304,235
<CGS> 291,866
<TOTAL-COSTS> 291,866
<OTHER-EXPENSES> (2,810)<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,920
<INCOME-PRETAX> 9,559
<INCOME-TAX> 5,416
<INCOME-CONTINUING> 4,143
<DISCONTINUED> 0
<EXTRAORDINARY> 3,731
<CHANGES> 0
<NET-INCOME> 412
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
<FN>
<F1>INCLUDED IN OTHER COSTS AND EXPENSES IS A $98,475,000 GAIN ON SALE OF
SUBSIDIARIES.
</FN>
</TABLE>
