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 December 31, 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 February 3, 1997, 4,391,970, 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
December 31, 1996 (Unaudited)
and June 30, 1996 1-2
Consolidated Statement of Earnings (Unaudited)
Three and six months ended December 31, 1996 and 1995 3
Consolidated Statement of Cash Flows (Unaudited)
Three and six months ended December 31, 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
December 31, June 30,
1996 1996
------------ -----------
(unaudited)
ASSETS
Current assets:
Cash and temporary cash investments $ 677,640 $ 1,643,416
Restricted cash 1,112,849 1,096,709
Marketable securities 10,661,537 8,630,649
Accounts receivable, net 7,917,280 9,933,366
Inventories 7,061,718 6,351,279
Deferred tax assets 815,600 815,600
Other current assets 896,793 1,047,776
----------- -----------
Total current assets 29,143,417 29,518,795
Property and equipment, net 7,310,511 6,906,446
Restricted cash and marketable securities 575,599 777,919
Other assets, net 835,563 761,021
Intangibles, net 2,294,425 2,355,424
----------- -----------
Total assets $40,159,515 $40,319,605
=========== ===========
The accompanying notes are an integral part
of these financial statements.
<TABLE>
<CAPTION>
LUND INTERNATIONAL HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS, CONTINUED
December 31, June 30,
1996 1996
------------ ------------
(unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable, trade $ 1,934,447 $ 2,289,763
Accrued expenses 1,789,073 1,723,902
Income taxes payable -- 416,446
Long-term debt, current portion 460,000 440,000
------------ ------------
Total current liabilities 4,183,520 4,870,111
Long-term debt, less current portion 4,130,000 4,590,000
Other liabilities 334,390 352,225
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 December 31, 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 (14,925) (60,442)
Unearned deferred compensation (125,612) (159,872)
Retained earnings 30,237,070 29,312,511
------------ ------------
Total stockholders' equity 31,511,605 30,507,269
------------ ------------
Total liabilities and stockholders' equity $ 40,159,515 $ 40,319,605
============ ============
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
LUND INTERNATIONAL HOLDINGS, INC.
CONSOLIDATED STATEMENT OF EARNINGS
(Unaudited)
Three Months Ended Six Months Ended
December 31, December 31,
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $ 10,345,653 $ 10,267,716 $ 20,752,074 $ 20,704,299
Cost of goods sold 6,661,836 6,368,798 13,722,440 12,894,983
------------ ------------ ------------ ------------
Gross profit 3,683,817 3,898,918 7,029,634 7,809,316
Operating expenses
General and administrative 1,177,785 1,067,241 2,117,183 2,021,763
Selling and marketing 1,556,130 1,319,783 3,064,813 2,587,365
Research and development 319,033 275,519 631,037 521,946
------------ ------------ ------------ ------------
Total operating expenses 3,052,948 2,662,543 5,813,033 5,131,074
------------ ------------ ------------ ------------
Income from operations 630,869 1,236,375 1,216,601 2,678,242
Other income (expense)
Interest expense (74,383) (77,944) (149,899) (169,793)
Interest income 170,558 153,184 339,633 315,598
Other net (20,880) (57,604) 5,205 (51,771)
------------ ------------ ------------ ------------
Other income, net 75,295 17,636 194,939 94,034
------------ ------------ ------------ ------------
Income before income taxes 706,164 1,254,011 1,411,540 2,772,276
Provision for income taxes 243,627 432,631 486,981 956,433
------------ ------------ ------------ ------------
Net income $ 462,537 $ 821,380 $ 924,559 $ 1,815,843
============ ============ ============ ============
Net income per share $ 0.11 $ 0.19 $ 0.21 $ 0.41
============ ============ ============ ============
Common and common
equivalent shares 4,393,251 4,394,122 4,393,357 4,421,642
============ ============ ============ ============
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
LUND INTERNATIONAL HOLDINGS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Six Months Ended
December 31,
1996 1995
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 924,559 $ 1,815,843
Adjustments to reconcile net income to
net cash provided by (used in) operating activities:
Depreciation and amortization 657,054 422,588
Gain on disposal of property and equipment (39,437) (10,758)
Provision for doubtful accounts -- 170,657
Provision for inventory reserves 81,246 49,895
Increase in cash surrender value of life insurance (97,387) (87,660)
Changes in operating assets and liabilities:
Accounts receivable 2,016,086 (1,028,074)
Inventories (791,685) (312,250)
Other current and other assets 165,984 72,849
Accounts payable, trade (355,316) (1,663,618)
Accrued expenses 65,171 172,922
Income taxes payable (416,446) (285,036)
----------- -----------
Net cash provided by (used in) operating activities 2,209,829 (682,642)
----------- -----------
Cash flows from investing activities:
Purchases of property and equipment (915,333) (294,476)
Proceeds from sales of property and equipment 54,634 26,822
Purchase of marketable securities (5,488,595) (2,993,882)
Proceeds from sales and redemptions of marketable securities 3,503,224 6,346,309
Change in restricted cash and marketable securities 186,180 496,969
Increase in note receivable from Innovative Accessories, Inc. -- (1,955,939)
Other (57,880) --
----------- -----------
Net cash provided by (used in) investing activities (2,717,770) 1,625,803
----------- -----------
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 (17,835) --
Proceeds from issuance of common stock -- 208,865
----------- -----------
Net cash used in financing activities (457,835) (1,121,015)
----------- -----------
Net decrease in cash and
temporary cash investments (965,776) (177,854)
Cash and temporary cash investments:
Beginning of period 1,643,416 269,168
----------- -----------
End of period $ 677,640 $ 91,314
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid for income taxes $ 1,041,706 $ 1,219,000
=========== ===========
Cash paid for interest $ 157,819 $ 176,233
=========== ===========
Supplemental disclosures of significant non-cash investing and financing
activities:
Change in unrealized holding losses on marketable securities $ 45,517 $ 67,602
=========== ===========
The accompanying notes are an integral part of these financial statements.
</TABLE>
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 December 31, 1996, and the related consolidated
statements of earnings and cash flows for the three and six month periods ended
December 31, 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
June 30, 1996 consolidated balance sheet data was derived from audited financial
statements, but does not include all disclosures required by generally accepted
accounting principles.
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:
December 31, June 30,
1996 1996
---------------- ----------------
Raw materials $ 3,835,741 $ 3,329,323
Finished goods and work in process 3,225,977 3,021,956
---------------- ----------------
Total $ 7,061,718 $ 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 December 31, 1995 amounts to conform
to the December 31, 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 AND SIX MONTH PERIODS ENDED
DECEMBER 31, 1996
AS COMPARED TO THREE AND SIX MONTH PERIODS ENDED
DECEMBER 31, 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 34 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 December 31, 1996 increased .8% to
$10,345,653 from $10,267,716 for the same period in fiscal 1996. Net sales for
the six-month period ended December 31, 1996 increased .2% to $20,752,074 from
$20,704,299 for the same period ended December 31, 1995. For both the three and
six month periods, the sales increases were due to higher unit sales in the
Running Board and Tonneau Cover categories which were offset by lower unit sales
in the Visors and Bug Shield/ Hood Protector categories.
Gross profit margins for the three-month period ended December 31, 1996 were
35.6% compared to 38.0% for the same period ended December 31, 1995. Gross
profit margins for the six-month period ended December 31, 1996 were 33.9%
compared to 37.7% for the same period in fiscal 1996. The decrease in gross
profit margins in both the three and six-month periods primarily resulted from
higher sales of lower gross margins products, higher product returns, higher
sales rebate expenses, and higher costs for the tonneau covers due to lower than
expected production volumes. These gross margin decreases were partially offset
by lower warehouse operating expenses. The gross margins for the three-month
period ended December 31, 1996 compared to 1995 were impacted by higher freight
costs. The gross margins for the six-month period ended December 31, 1996
compared to 1995 were impacted by higher production expenses due to lower
through-put in the fiberglass area, higher materials costs due to the new
quality program implemented in fiscal 1997 and higher warranty expenses.
General and administrative expenses for the three-month period ended December
31, 1996 increased 10.4% to $1,177,785 from $1,067,241 for the same period in
fiscal 1996. General and administrative expenses for the six-month period ended
December 31, 1996 increased 4.7% to $2,117,183 from $2,021,763 for the same
period ended December 31, 1995. The increase in general and administrative
expenses for the three and six-month periods ended December 31, 1996 was
primarily due to administrative expenses for the tonneau cover subsidiary
acquired in June 1996 as these costs were not incurred in the comparable
periods. For both the three and six-month periods ended December 31, 1996
compared to 1995, general and administrative expense were impacted by higher
lease expenses for the Company's new computer and software systems which were
offset by lower bad debt expenses.
Selling and marketing expenses for the three-month period ended December 31,
1996 increased 17.9% to $1,556,130 from $1,319,783 for the same period in fiscal
1996. Selling and marketing expenses for the six-month period ended December 31,
1996 increased 18.5% to $3,064,813 from $2,587,365 for the same period in fiscal
1996. The increase in selling and marketing expenses for both periods was
primarily due to higher customer promotional and advertising expenses, customer
conferences, general promotional expenses, sponsorships, and higher personnel
and benefit expenses.
Research and development expenses for the three-month period ended December 31,
1996 increased 15.8% to $319,033 from $275,519 for the same period in fiscal
1996. Research and development expenses for the six-month period ended December
31, 1996 increased 20.9% to $631,037 from $521,946 for the same period ended
December 31, 1995. The increase in research and development expenses for both
periods were primarily related to higher personnel and benefit expenses due to
the expansion of computer aided design capabilities.
Other income for the three-month period ended December 31, 1996 increased
10.9% to $75,295 from $17,636 for the same period in fiscal 1996. Other
income for the six-month period ended December 31, 1996 increased 107.3% to
$194,939 from $94,034 for the same period December 31, 1995. The increase in
other income for both periods were primarily related to a higher investment
interest income due to a larger investment base and more favorable interest
rates and gain on the sale of capitalized assets.
Liquidity and Capital Resources
The Company has generally funded its operations to date from operating cash
flow. The Company had working capital of $24,959,897, including cash and
marketable securities of $12,452,026 as of December 31, 1996, compared to
$24,648,684, including cash and marketable securities of $11,370,774, as of June
30, 1996.
The Company believes that its existing cash and internally generated funds will
be sufficient to meet the Company's working capital and capital expenditure
requirement 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
The traditional multi-step distribution channel is continuing to undergo
consolidation, with an increasing market share going to 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, selling and marketing
expenses are expected to continue at fiscal 1996 rates as a percent of sales.
During fiscal 1996, the Company acquired the assets of Innovative Accessories,
Inc., a manufacturer of the Luxxus(R) tonneau cover lines. The Company is
currently developing point-of-sale material for this product line and
anticipates the Tonneau Cover category in general to become a significant
contributor to the growth of the Company. The soft tonneau covers have a lower
than average gross margin, which will impact overall margins as this product
line increases as a percent of sales.
During fiscal 1996, the Company changed the material used to manufacture its
hood protector line. As a result, the Company has begun to see a decrease in
warranty claims in this product line and anticipates reduced warranty claims as
a percent of sales for the foreseeable future.
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 materially from those
anticipated by some statements made herein. You are cautioned that all
forward-looking statements involve risks and uncertainties. Among other factors
that could cause results 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 8-K were filed for the quarter ended December 31,
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
<CIK> 0000820526
<NAME> LUND INTERNATIONAL HOLDINGS, INC.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,750,044
<SECURITIES> 10,661,537
<RECEIVABLES> 8,873,608
<ALLOWANCES> 956,327
<INVENTORY> 7,061,718
<CURRENT-ASSETS> 29,143,417
<PP&E> 7,310,511
<DEPRECIATION> 2,670,002
<TOTAL-ASSETS> 40,159,515
<CURRENT-LIABILITIES> 4,183,520
<BONDS> 4,130,000
0
0
<COMMON> 439,197
<OTHER-SE> 31,072,408
<TOTAL-LIABILITY-AND-EQUITY> 40,159,515
<SALES> 20,752,074
<TOTAL-REVENUES> 20,752,074
<CGS> 13,722,440
<TOTAL-COSTS> 19,535,473
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 149,899
<INCOME-PRETAX> 1,411,540
<INCOME-TAX> 486,981
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 924,559
<EPS-PRIMARY> 0.21
<EPS-DILUTED> 0.21
</TABLE>
