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 March 31, 1997
[ ] 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 May 6, 1997, 4,393,970 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
March 31, 1997 (Unaudited)
and June 30, 1996 1-2
Consolidated Statement of Earnings (Unaudited)
Three and nine months ended March 31, 1997 and 1996 3
Consolidated Statement of Cash Flows (Unaudited)
Nine months ended March 31, 1997 and 1996 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
March 31, June 30,
1997 1996
----------- -----------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 68,901 $ 1,643,416
Restricted cash 1,185,917 1,096,709
Marketable securities 12,066,124 8,630,649
Accounts receivable, net 7,297,208 9,933,366
Inventories 6,663,776 6,351,279
Deferred tax assets 815,600 815,600
Other current assets 877,874 1,047,776
----------- -----------
Total current assets 28,975,400 29,518,795
Property and equipment, net 7,271,364 6,906,446
Restricted cash and marketable securities 575,519 777,919
Other assets, net 877,110 761,021
Intangibles, net 2,319,508 2,355,424
----------- -----------
Total assets $40,018,901 $40,319,605
=========== ===========
The accompanying notes are an integral part
of these financial statements.
<TABLE>
<CAPTION>
LUND INTERNATIONAL HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS, CONTINUED
March 31, June 30,
1997 1996
------------ ------------
(unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable, trade $ 1,684,562 $ 2,289,763
Accrued expenses 1,411,121 1,723,902
Income taxes payable -- 416,446
Long-term debt, current portion 460,000 440,000
------------ ------------
Total current liabilities 3,555,683 4,870,111
Long-term debt, less current portion 4,130,000 4,590,000
Other liabilities 324,537 352,225
------------ ------------
Total liabilities 8,010,220 9,812,336
------------ ------------
Stockholders' equity:
Preferred stock, $.01 par value; -- --
authorized 2,000,000 shares;
none issued
Common stock, $.10 par value; 439,397 439,197
authorized 25,000,000 shares;
issued and outstanding 4,393,970
at March 31, 1997 and 4,391,970
at June 30, 1996, respectively
Class B common stock, $.01 par value; -- --
authorized 3,000,000 shares;
none issued
Additional paid-in capital 986,675 975,875
Unrealized holding losses on marketable securities (13,003) (60,442)
Unearned deferred compensation (108,481) (159,872)
Retained earnings 30,704,093 29,312,511
------------ ------------
Total stockholders' equity 32,008,681 30,507,269
------------ ------------
Total liabilities and stockholders' equity $ 40,018,901 $ 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 Nine Months Ended
March 31, March 31,
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $ 10,440,761 $ 11,524,922 $ 31,192,835 $ 32,229,221
Cost of goods sold 6,911,037 7,287,005 20,633,477 20,181,988
------------ ------------ ------------ ------------
Gross profit 3,529,724 4,237,917 10,559,358 12,047,233
Operating expenses
General and administrative 1,162,538 865,665 3,279,721 2,887,428
Selling and marketing 1,477,171 1,295,611 4,541,984 3,882,976
Research and development 326,260 311,380 957,297 833,326
------------ ------------ ------------ ------------
Total operating expenses 2,965,969 2,472,656 8,779,002 7,603,730
------------ ------------ ------------ ------------
Income from operations 563,755 1,765,261 1,780,356 4,443,503
Other income (expense)
Interest expense (71,842) (77,517) (221,741) (247,310)
Interest income 168,338 191,801 507,971 507,399
Other, net (32,236) (20,077) (27,031) (71,848)
------------ ------------ ------------ ------------
Other income, net 64,260 94,207 259,199 188,241
------------ ------------ ------------ ------------
Income before income taxes 628,015 1,859,468 2,039,555 4,631,744
Provision for income taxes 160,992 641,516 647,973 1,597,949
------------ ------------ ------------ ------------
Net income $ 467,023 $ 1,217,952 $ 1,391,582 $ 3,033,795
============ ============ ============ ============
Net income per share $ 0.11 $ 0.28 $ 0.32 $ 0.69
============ ============ ============ ============
Common and common
equivalent shares 4,393,700 4,393,437 4,393,478 4,398,074
============ ============ ============ ============
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
LUND INTERNATIONAL HOLDINGS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Nine Months Ended
March 31,
1997 1996
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,391,582 $ 3,033,795
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 982,418 654,131
Gain on disposal of property and equipment (38,000) (10,758)
Provision for (reduction in) doubtful accounts (13,075) 170,657
Provision for inventory reserves 143,337 88,895
Changes in operating assets and liabilities:
Accounts receivable 2,649,233 210,030
Inventories (455,834) (1,582,122)
Other current and other assets 184,432 (144,364)
Accounts payable, trade (605,201) (1,217,142)
Accrued expenses (312,781) (780,213)
Income taxes payable (416,446) (145,495)
----------- -----------
Net cash provided by operating activities 3,509,665 277,414
----------- -----------
Cash flows from investing activities:
Purchases of property and equipment (1,168,646) (635,906)
Proceeds from sales of property and equipment 81,634 26,822
Purchase of marketable securities (8,140,348) (5,182,454)
Proceeds from sales and redemptions of marketable securities 4,752,312 8,644,196
Change in restricted cash and marketable securities 113,192 456,093
Increase in note receivable from Innovative Accessories, Inc. -- (2,230,089)
Increase in cash surrender value of life insurance (142,387) (131,490)
Other investing activities, net (123,249) --
----------- -----------
Net cash (used in) provided by investing activities (4,627,492) 947,172
----------- -----------
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 (27,688) --
Proceeds from issuance of common stock 11,000 208,865
----------- -----------
Net cash used in financing activities (456,688) (1,121,015)
----------- -----------
Net (decrease) increase in cash and
cash equivalents (1,574,515) 103,571
Cash and cash equivalents:
Beginning of period 1,643,416 269,168
----------- -----------
End of period $ 68,901 $ 372,739
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid for income taxes $ 1,102,228 $ 1,721,000
=========== ===========
Cash paid for interest $ 301,189 $ 333,843
=========== ===========
Supplemental disclosures of significant non-cash
investing and financing activities:
Change in unrealized holding losses on marketable securities $ 47,439 $ (3,176)
=========== ===========
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 March 31, 1997, and the related consolidated
statement of earnings for the three and nine months ended March 31, 1997 and
1996 and consolidated statement of cash flows for the nine months ended March
31, 1997 and 1996 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 results
of operations for any interim period are not necessarily indicative of results
for the full year.
The June 30, 1996 consolidated balance sheet data was derived from audited
financial statements, but does not include all disclosure 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:
March 31, June 30,
1997 1996
------------- ------------
Raw materials $ 5,643,925 $ 3,329,323
Finished goods and work in process 1,019,851 3,021,956
------------- ------------
Total $ 6,663,776 $ 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.
In February 1997, Statement of Financial Accounting Standards No. 128 (SFAS No.
128), Earnings per Share (EPS) was issued by the Financial Accounting Standards
Board. This standard, which the Company must adopt effective with its second
quarter of fiscal 1998, required dual presentation of basic and diluted EPS on
the face of the statement of operations. Net income per common share currently
presented by the Company is comparable to the diluted EPS required under SFAS
128. Basic EPS for the Company would be calculated based on only common shares
outstanding without considering the dilutive effects of common stock
equivalents.
D - Reclassifications.
Certain reclassifications have been made to the March 31, 1996 amounts to
conform to the March 31, 1997 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 NINE MONTH PERIODS ENDED
MARCH 31, 1997
AS COMPARED TO THREE AND NINE MONTH PERIODS ENDED
MARCH 31, 1996
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
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 materials. In addition, promotional activity was focused
on reaching the potential consumer.
For the quarter ended March 31, 1997, the Company did not realize its
traditional upward trend in third quarter net sales compared to the previous two
quarters. Weaker sales for this quarter were primarily attributed to shipment
delays in the Company's Solar(TM) and Lunar(TM) visor line. Further refinements
in development and testing are currently in process and the Company expects to
begin shipping the new visors during the first quarter of fiscal 1998.
Results of Operations
Net sales for the three-month period ended March 31, 1997 decreased 9.4% to
$10,440,761 from $11,524,922 for the same period in fiscal 1996. Net sales for
the nine-month period ended March 31, 1997 decreased 3.2% to $31,192,835 from
$32,229,221 for the same period ended March 31, 1996. For both the three- and
nine-month periods, the sales decreases were due to lower unit sales in the
Visors and Hood Shields/Bug Protectors categories, partially offset by higher
sales in the Running Boards and Tonneau Covers categories.
Gross profit margins for the three-month period ended March 31, 1997 were 33.8%
compared to 36.8% for the same period ended March 31, 1996. Gross profit margins
for the nine-month period ended March 31, 1997 were 33.9% compared to 37.4% for
the same period in fiscal 1996. The decrease in gross profit margins in both the
three- and nine-month periods primarily resulted from higher warranty, sales
rebate, and production expenses due to lower than expected production volumes in
the fiberglass, plastics, and tonneau areas; higher material and labor costs in
the fiberglass area associated with the new quality program; higher sales of
lower gross margin products and higher product return costs. These gross margins
were partially offset by lower warehouse operating expenses and higher average
unit sales prices. Gross profit margins for the three-month period ended March
31, 1997 compared to 1996 were also impacted by higher freight expenses.
General and administrative expenses for the three-month period ended March 31,
1997 increased 34.3% to $1,162,538 from $865,665 for the same period in fiscal
1996. General and administrative expenses for the nine-month period ended March
31, 1997 increased 13.6% to $3,279,721 from $2,887,428 for the same period ended
March 31, 1996. The increases in general and administrative expenses for the
three- and nine-month periods ended March 31, 1997 were primarily due to
administrative expenses for the tonneau cover subsidiary acquired in June 1996,
as these costs were not incurred in the comparable prior periods, higher lease
expense for the Company's new information technology systems, and costs
associated with the Company's strategic planning process. The increase for the
nine-month period was partially offset by lower bad debt expense.
Selling and marketing expenses for the three-month period ended March 31, 1997
increased 14.0% to $1,477,171 from $1,295,611 for the same period in fiscal
1996. Selling and marketing expenses for the nine-month period ended March 31,
1997 increased 17.0% to $4,541,984 from $3,882,976 for the same period in fiscal
1996. The increases in selling and marketing expenses for both periods were
primarily due to higher customer promotional expenses, sponsorships, general
promotional expenses generated partially by the Company's new promotion policies
geared at the retail automotive chains, and higher personnel and benefits
expenses.
Research and development expenses for the three-month period ended March 31,
1997 increased 4.8% to $326,260 from $311,380 for the same period in fiscal
1996. Research and development expenses for the nine-month period ended March
31, 1997 increased 14.9% to $957,297 from $833,326 for the same period ended
March 31, 1996. The increases in research and development expenses for both
periods were primarily related to higher personnel and benefit expenses due to
expansion of computer aided design capabilities and higher fixed operating and
lease expenses.
Other income for the three-month period ended March 31, 1997 decreased 31.8% to
$64,260 from $94,207 for the same period in fiscal 1996. Other income for the
nine-month period ended March 31, 1997 increased 37.7% to $259,199 from $188,241
for the same period ended March 31, 1996. The decrease in other income for the
three-month period was primarily related to losses on the sale of investments in
fiscal 1997 compared to gains on sales of investments in fiscal 1996. The
Company is in the process of repositioning its investment portfolio to achieve
an average maturity of approximately three years. In prior periods, the average
maturity was as high as eight years. The increase in other income for the
nine-month period was related to higher investment interest income due to a
larger investment base and higher gains on the sales of property and equipment.
The provisions for income taxes, as a percent of pre-tax income, for the three-
and nine month periods ended March 31, 1997 were 25.6% and 31.8%, respectively,
compared to 34.5% for both the three- and nine-month periods ended March 31,
1996. The reduction in the tax provision percentage resulted from a larger
portion of income attributed to tax exempt investment income. The tax provision
percent is expected to be approximately 30% for the 1997 fiscal year.
Liquidity and Capital Resources
The Company has generally funded its operations to date from operating cash
flows. The Company had working capital of $25,419,717, including cash and
marketable securities of $13,320,942, as of March 31, 1997, 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
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
The traditional multi-step distribution channel utilized by the Company is
continuing to undergo consolidation, with an increasing market share going to
channels such as large retail automotive chain stores, mail-order houses, mass
merchants and original equipment manufacturers such as Ford, General Motors and
Chrysler. The Company intends to devote increasing resources to enter the
automotive retail chain store and the original equipment manufacturer channels.
As a result, selling and marketing expenses, as a percent of sales, are expected
to continue at current rates.
During fiscal 1996, the Company acquired the assets of Innovative Accessories,
Inc., manufacturer of the Luxxus(R) soft tonneau cover lines. The Company is
currently developing point-of-sale material for this product line and
anticipates the Tonneau Cover category will become a significant contributor to
the growth of the Company. However, 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 introduced the Solar(TM) and Lunar(TM) visor
product line. The completed line was expected to begin shipping during the third
quarter of fiscal 1997. As a result of certain design changes, the Company
delayed shipping until further refinements and testing are complete. The Company
expects to begin shipping the new visor line in the first quarter of fiscal
1998.
The Company expects net sales for the quarter ending June 30, 1997 will exceed
the levels of the first three quarters of this fiscal year, but that the
increase will be at a lower rate than has historically been the case. This
increase is expected to be driven by normal seasonality, a strong market for
automotive accessories and new accounts, specifically retail automotive chains.
In February 1997, Statement of Financial Accounting Standards No. 128 (SFAS No.
128), Earnings per Share (EPS) was issued by the Financial Accounting Standards
Board. This standard, which the Company must adopt effective with its second
quarter of fiscal 1998, required dual presentation of basic and diluted EPS on
the face of the statement of operations. Net income per common share currently
presented by the Company is comparable to the diluted EPS required under SFAS
128. Basic EPS for the Company would be calculated based on only common shares
outstanding without considering the dilutive effects of common stock
equivalents.
STATEMENTS IN THIS MANAGEMENT'S DISCUSSION AND ANALYSIS RELATING TO FUTURE
FINANCIAL RESULTS, NEW PRODUCT DEVELOPMENT, COMPANY OPERATIONS, TRENDS AND
MARKET ANALYSIS, AMONG OTHERS, ARE FORWARD-LOOKING STATEMENTS UNDER THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995. THESE STATEMENTS INVOLVE RISKS AND
UNCERTAINTIES WHICH COULD CAUSE RESULTS TO DIFFER MATERIALLY FROM THOSE
ANTICIPATED. AMONG THE FACTORS THAT COULD CAUSE RESULTS TO DIFFER MATERIALLY ARE
THE FOLLOWING: CONSUMER PREFERENCE CHANGES, EXPANSION INTO NEW DISTRIBUTION
CHANNELS, ADDITIONAL DELAYS IN DEVELOPMENT, TESTING OR SHIPPING OF PRODUCTS,
INCREASED COMPETITION, GENERAL ECONOMIC DEVELOPMENTS AND TRENDS, DEVELOPMENTS
AND TRENDS IN THE LIGHT TRUCK AND AUTOMOTIVE ACCESSORY MARKET AND INCREASED
COSTS. THIS IS NOT AN EXHAUSTIVE LIST AND THE COMPANY MAY SUPPLEMENT THIS LIST
IN FUTURE FILINGS OR RELEASES OR IN CONNECTION WITH THE MAKING OF
FORWARD-LOOKING STATEMENTS.
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 March 31,
1997.
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> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 1,254,818
<SECURITIES> 12,066,124
<RECEIVABLES> 8,290,544
<ALLOWANCES> 993,357
<INVENTORY> 6,663,776
<CURRENT-ASSETS> 28,975,400
<PP&E> 7,271,364
<DEPRECIATION> 2,929,461
<TOTAL-ASSETS> 40,018,901
<CURRENT-LIABILITIES> 4,870,111
<BONDS> 4,130,000
0
0
<COMMON> 439,397
<OTHER-SE> 31,569,284
<TOTAL-LIABILITY-AND-EQUITY> 40,018,901
<SALES> 31,192,835
<TOTAL-REVENUES> 31,192,835
<CGS> 20,633,477
<TOTAL-COSTS> 29,412,479
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (13,075)
<INTEREST-EXPENSE> 221,741
<INCOME-PRETAX> 2,039,555
<INCOME-TAX> 647,973
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,391,582
<EPS-PRIMARY> 0.32
<EPS-DILUTED> 0.32
</TABLE>
