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 quarterly period ended September 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from _________ to ________
Commission File Number 0-16319
LUND INTERNATIONAL HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware 41-1568618
(State or other jurisdiction (I.R.S. Employer
of organization) Identification No.)
911 LUND BOULEVARD
ANOKA, MINNESOTA 55303
Registrant's telephone number, including area code: (612) 576-4200
- -----------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
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, as of the close of the latest practicable date.
At November 2, 1996, 4,391,970 shares of the registrant's common stock, $.10 par
value, were outstanding.
LUND INTERNATIONAL HOLDINGS, INC.
QUARTERLY REPORT ON FORM 10-Q
INDEX
Page
Number
------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet
September 30, 1996 (Unaudited)
and June 30, 1996 1-2
Consolidated Statement of Earnings (Unaudited)
Three months ended September 30, 1996 and 1995 3
Consolidated Statement of Cash Flows (Unaudited)
Three months ended September 30, 1996 and 1995 4
Notes to Consolidated Financial Statements (Unaudited) 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6-8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 9
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
LUND INTERNATIONAL HOLDINGS, INC.
CONSOLIDATED BALANCE SHEET
September 30, June 30,
1996 1996
----------- -----------
(unaudited)
ASSETS
Current assets:
Cash and temporary cash investments $ 838,308 $ 1,643,416
Restricted cash 911,736 1,096,709
Marketable securities 11,630,336 8,630,649
Accounts receivable, net 7,359,243 9,933,366
Inventories 6,191,498 6,351,279
Deferred tax assets 815,600 815,600
Other current assets 843,152 1,047,776
----------- -----------
Total current assets 28,589,873 29,518,795
Property and equipment, net 7,115,132 6,906,446
Restricted cash and marketable securities 564,069 777,919
Other assets, net 809,487 761,021
Intangibles, net 2,333,640 2,355,424
----------- -----------
Total assets $39,412,201 $40,319,605
=========== ===========
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
LUND INTERNATIONAL HOLDINGS, INC.
CONSOLIDATED BALANCE SHEET
September 30, June 30,
1996 1996
------------ ------------
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
<S> <C> <C>
Accounts payable, trade $ 1,426,617 $ 2,289,763
Accrued expenses 1,648,774 1,723,902
Income taxes payable 363,237 416,446
Long-term debt, current portion 460,000 440,000
------------ ------------
Total current liabilities 3,898,628 4,870,111
Long-term debt, less current portion 4,130,000 4,590,000
Other liabilities 348,603 352,225
Stockholders' equity:
Preferred stock, $.01 par value; -- --
authorized 2,000,000 shares;
none issued
Common stock, $.10 par value; 439,197 439,197
authorized 25,000,000 shares;
issued and outstanding 4,391,970
at September 30, 1996
and June 30, 1996
Class B common stock, $.01 par value; -- --
authorized 3,000,000 shares;
none issued
Additional paid-in capital 975,875 975,875
Unrealized holding losses on marketable securities (11,893) (60,442)
Unearned deferred compensation (142,742) (159,872)
Retained earnings 29,774,533 29,312,511
------------ ------------
Total stockholders' equity 31,034,970 30,507,269
------------ ------------
Total liabilities and stockholders' equity $ 39,412,201 $ 40,319,605
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
LUND INTERNATIONAL HOLDINGS, INC.
CONSOLIDATED STATEMENT OF EARNINGS
(Unaudited)
Three Months Ended
September 30,
1996 1995
------------ ------------
Net sales $ 10,406,421 $ 10,436,583
Cost of goods sold 7,060,604 6,526,185
------------ ------------
Gross profit 3,345,817 3,910,398
Operating expenses
General and administrative 939,398 954,522
Selling and marketing 1,508,683 1,267,582
Research and development 312,004 246,427
------------ ------------
Total operating expenses 2,760,085 2,468,531
------------ ------------
Income from operations 585,732 1,441,867
Other income (expense)
Interest expense (75,516) (91,849)
Interest income 169,075 162,414
Other , net 26,085 5,833
------------ ------------
Other income, net 119,644 76,398
------------ ------------
Income before income taxes 705,376 1,518,265
Provision for income taxes 243,354 523,802
------------ ------------
Net income $ 462,022 $ 994,463
============ ============
Net income per share $ 0.11 $ 0.22
============ ============
Weighted average number of
shares outstanding 4,393,437 4,455,893
============ ============
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
LUND INTERNATIONAL HOLDINGS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Three Months Ended
September 30,
1996 1995
----------- -----------
Cash flows from operating activities:
<S> <C> <C>
Net income $ 462,022 $ 994,463
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 306,230 206,673
Gain on disposal of property and equipment (38,590) (4,258)
Provision for (reduction in) doubtful accounts (16,839) 50,451
Provision for inventory reserves 24,000 25,305
Increase in cash surrender value of life insurance (52,387) (43,830)
Changes in operating assets and liabilities:
Accounts receivable 2,590,962 372,528
Inventories 135,781 (492,672)
Other current and other assets 204,624 271,396
Accounts payable, trade (863,146) (1,060,312)
Accrued expenses (75,128) (295,160)
Income taxes payable (53,209) 256,302
----------- -----------
Net cash provided by operating activities 2,624,320 280,886
----------- -----------
Cash flows from investing activities:
Purchases of property and equipment (451,125) (177,853)
Proceeds from sales of property and equipment 55,184 20,322
Purchase of marketable securities (4,291,950) (1,357,753)
Proceeds from sales and redemptions of marketable securities 1,340,812 3,052,998
Change in restricted cash and marketable securities 398,823 699,343
Acquisition costs (37,550) --
----------- -----------
Net cash used in investing activities (2,985,806) 2,237,057
----------- -----------
Cash flows from financing activities:
Checks issued in excess of cash balances -- (909,880)
Payment on long-term debt (440,000) (420,000)
Decrease in other liabilities (3,622) --
Proceeds from issuance of common stock -- 208,865
----------- -----------
Net cash provided by financing activities (443,622) (1,121,015)
----------- -----------
Net increase (decrease) in cash and
temporary cash investments (805,108) 1,396,928
Cash and temporary cash investments:
Beginning of period 1,643,416 269,168
----------- -----------
End of period $ 838,308 $ 1,666,096
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid for income taxes $ 296,600 $ 245,000
=========== ===========
Cash paid for interest $ 154,977 $ 91,849
=========== ===========
Supplemental disclosures on non-cash investing and financing activities:
Unrealized holding losses on marketable securities $ 48,549 $ 129,948
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
LUND INTERNATIONAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
A - Principles of Consolidation.
The accompanying consolidated financial statements include the accounts of Lund
International Holdings, Inc. and its wholly-owned subsidiaries, Lund Industries,
Incorporated, Lund Acquisition Corp., and Lund International FSC, Inc. The
consolidated balance sheet as of September 30, 1996, and the related
consolidated statements of earnings and cash flows for the three-month periods
ended September 30, 1996 and 1995 are unaudited. In the opinion of management,
all adjustments necessary for a fair presentation of such financial statements
have been included. Such adjustments consisted only of normal recurring items.
The financial statements and notes are presented as permitted by Form 10-Q, and
do not contain certain information included in the Company's annual financial
statements and notes.
B - Inventories.
Inventories consisted of the following:
September 30, June 30,
1996 1996
------------ ------------
Raw materials $ 3,560,054 $ 3,329,323
Finished goods and work in process 2,631,444 3,021,956
------------ ------------
Total $ 6,191,498 $ 6,351,279
============ ============
C - Earnings per Share.
Earnings per share are computed based on the weighted average number of common
and common equivalent shares outstanding during the period. Options and warrants
are considered common stock equivalents for the purposes of this computation.
D - Reclassifications.
Certain reclassifications have been made to September 30, 1995 amounts to
conform to the September 30, 1996 presentation with no effect on previously
reported net income and stockholders' equity.
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
RESULTS OF OPERATIONS FOR THREE MONTHS ENDED
SEPTEMBER 30, 1996
AS COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1995
Introduction
Lund International Holdings, Inc. designs, manufactures and markets appearance
automotive aftermarket accessories for light duty trucks, sport utility vehicles
and vans. The Company is the world's leading supplier of automotive sunvisors,
with an estimated 70% market share in this category. Beginning in fiscal 1989,
Lund instituted a product diversification plan and currently has 32 product
lines, classified in the following categories as: Visors, Bug Shields/ Hood
Protectors, Running Boards, Tonneau Covers, and Other Appearance Accessories.
During the latter part of fiscal 1996, the Company began its plan to enter into
the retail automotive chain stores by concentrating its focus on consumer brand
awareness. To that end, Lund upgraded its packaging and is in the process of
redesigning its display material. In addition, promotional activity was
concentrated on reaching the potential consumer.
Results of Operations
Net sales for the three-month period ended September 30, 1996 decreased 0.3% to
$10,406,421 from $10,436,583 for the same period ended September 30, 1995. The
net sales decrease was primarily due to lower sales in the Visor category, which
decreased 5.5% for the three-month period ended September 30, 1996 compared to
the same period in 1995. This decrease was offset by a 6% increase in the
Running Board category for the comparable periods, and initial shipments in the
Tonneau Cover category.
Gross profit margins for the three-month period ended September 30, 1996 were
32.2% compared to 37.5% for the same period ended September 30, 1995. The
decrease in gross profit margins primarily resulted from higher manufacturing
and labor expenses in the fiberglass production area due to the implementation
of a new quality program, higher warranty expenses, sales promotional discounts,
and a change in mix which favored lower gross margin lines.
General and administrative expenses were $939,398 for the three-month period
ended September 30, 1996 compared to $954,522 for the same period last year,
which represented a decrease of 1.6%. As a percentage of net sales, general and
administrative expenses were 9.0% for the three-month period ended September 30,
1996, compared to 9.5% for the same period of fiscal 1996. The decrease in
general and administrative expenses resulted primarily from lower bad debt
expense, lower employee benefit and general operating expenses. These decreases
were offset by higher operating lease expenses in connection with the Company's
new computer and software systems.
Selling and marketing expenses were $1,508,683 for the first quarter of fiscal
1997 compared to $1,267,582 for the first quarter of fiscal 1996. As a
percentage of net sales, selling and marketing expenses were 14.5% for the first
quarter of fiscal 1997 compared to 12.1% for the same period in fiscal 1996. The
increase in fiscal 1997 primarily resulted from higher customer advertising and
promotional expense, Company advertising and promotional expense, and salary and
benefits expense.
Research and development expenses were $312,004 for the three-month period ended
September 30, 1996 compared to $246,427 for the same period in fiscal 1996. As a
percentage of net sales, research and development expenses were 3.0% for the
first quarter of fiscal 1997 compared to 2.4% for the same period in fiscal
1996. The increase in expenses in fiscal 1997 was primarily a result of
increased personnel and higher product material expenses to support both new
product and application development in addition to higher operating lease
expenses for the new CAD/CAM computer system.
Liquidity and Capital Resources
The Company has generally funded its operations to date from operating cash
flow. The Company had working capital of $24,691,245 including cash and
marketable securities of $13,380,380 as of September 30, 1996 compared to
$24,648,684, including cash and marketable securities of $11,370,774, as of June
30, 1996. The increase of $2,009,606 in cash and marketable securities and
decrease of working capital was principally due to a decrease of $2,590,962 in
accounts receivable with increased collection efforts and seasonally expected
lower sales during the first quarter. This was offset by an $863,146 increase in
accounts payable resulting from lower first quarter inventory purchases due to
lower sales levels.
The Company believes that its existing cash and internally generated funds will
be sufficient to meet the Company's working capital and capital expenditure
requirements for the foreseeable future. If the Company makes significant future
acquisitions, however, it may be required to raise funds through bank financing
or the issuance of debt or equity securities.
Outlook
Fiscal 1996 was a transition year for the Company. The Company relocated to a
new facility in late fiscal 1995, which significantly increased its production
and shipping capabilities, thus reducing considerable order backlog. As a
result, customer ordering patterns significantly changed during fiscal 1996,
reducing sales visibility. The Company has improved both order turn around times
and fill rates which prompted customers to reduce stocking inventories and order
sizes.
During fiscal 1996, the Company introduced two new visor lines which were well
received by the Company's customers; however, the new visor lines did not ship
until late in the fiscal year due to design and production delays. The
introduction of the new visor lines and the changing styling lines on new
vehicles caused slower sales in the original visor lines. For fiscal 1997, the
market penetration of the new visor may be slower due to initial delays in the
design, production and shipment of this product line.
The Company anticipates its principal growth in fiscal 1997 coming from its new
tonneau cover line acquired with the acquisition of the assets of Innovative
Accessories, Inc., augmented by continued growth and acceptance of its running
board lines. The tonneau covers have a lower than average gross margin, which
will impact overall margins and sales as this product line increases.
The traditional multi-step distribution channel is continuing to undergo
consolidation, with an increasing market share going to competitive channels
such as large chain specialty stores, mail-order, mass merchants and original
equipment manufacturers such as Ford, General Motors and Chrysler. The Company
intends to devote increasing resources to enter the large chain specialty store
and the original equipment manufacturer channels. As a result, sales and
marketing expenses are expected to continue at fiscal 1996 rates as a percent of
sales.
Since late fiscal 1995, the market demand for raw material products, including
plastic resins, fiberglass and boxes has slowed. Accordingly, prices for these
products have stabilized and the Company does not anticipate any significant raw
material price increases.
Forward-looking statements herein are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. Certain
important factors could cause results to differ material from those anticipated
by some statements made herein. You are cautioned that all forward-looking
statement involve risks and uncertainties. Among the factors that could cause
results to differ materially are the following: consumer preference changes;
expansion into new distribution channels; increased competition; and raw
material price increases.
PART II. OTHER INFORMATION
ITEM 5. - None.
ITEM 6. - Exhibits and Reports on Form 8-K.
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form -K were filed for the quarter ended
September 30, 1996.
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.
LUND INTERNATIONAL HOLDINGS, INC.
(Registrant)
By /s/ William J. McMahon
William J. McMahon
President and Chief Executive Officer
By /s/ Jay M. Allsup
Jay M. Allsup
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> SEP-30-1996
<CASH> 1,750,044
<SECURITIES> 11,630,336
<RECEIVABLES> 8,398,987
<ALLOWANCES> 1,039,744
<INVENTORY> 6,191,498
<CURRENT-ASSETS> 28,589,873
<PP&E> 7,115,132
<DEPRECIATION> 2,405,641
<TOTAL-ASSETS> 39,412,201
<CURRENT-LIABILITIES> 3,898,628
<BONDS> 4,130,000
0
0
<COMMON> 439,197
<OTHER-SE> 30,595,773
<TOTAL-LIABILITY-AND-EQUITY> 39,412,201
<SALES> 10,406,421
<TOTAL-REVENUES> 10,406,421
<CGS> 7,060,604
<TOTAL-COSTS> 9,820,689
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 75,516
<INCOME-PRETAX> 705,376
<INCOME-TAX> 243,354
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 462,022
<EPS-PRIMARY> 0.11
<EPS-DILUTED> 0.11
</TABLE>
