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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED OCTOBER 31, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-16448
HOLIDAY RV SUPERSTORES, INCORPORATED
IRS Employer Id No. Sand Lake West Executive Park State of Incorporation:
59-1834763 7851 Greenbriar Parkway Florida
Orlando, Florida 32819
(407) 363-9211
Securities registered pursuant to Section 12(b) of the Act:
- None -
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK
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. X Yes No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]
The aggregate market value of voting stock held by non-affiliates as of January
16, 1997, was approximately $5,025,000.
As of January 16, 1997, Holiday RV Superstores, Incorporated had outstanding
7,435,700 shares of Common Stock.
(See page 35 for index of exhibits)
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Item Page
- ---- ----
<S> <C>
PART I
1. Business ............................................................... 3
2. Properties ............................................................. 9
3. Legal Proceedings ...................................................... 11
4. Submission of Matters to a Vote of
Security Holders ....................................................... 11
PART II
5. Market for Registrant's Common Equity and
Related Stockholder Matters ............................................ 12
6. Selected Financial Data ................................................ 13
7. Management's Discussion and Analysis of Financial
Condition and Results of Operation ..................................... 15
8. Financial Statements and Supplementary Data ............................ 22
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure .................................... 22
PART III
10. Directors and Executive Officers of the Registrant .................... 23
11. Executive Compensation ................................................ 26
12. Security Ownership of Certain Beneficial Owners and Management ........ 32
13. Certain Relationships and Related Party Transactions .................. 34
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K ...... 35
</TABLE>
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PART I
ITEM 1. BUSINESS
GENERAL
The Registrant ("Company") is a multi-store retail chain engaged in
the retail sales and service of recreation vehicles ("RVs) and recreation
boats. The Company currently operates eight sales and service dealerships, one
in the heart of the Walt Disney World tourist area in Orlando, Florida, two in
the Gulf Coast tourist areas of Tampa and Ft. Myers, Florida, one in Atlanta,
Georgia adjacent to Interstate 75, one in Greer, South Carolina adjacent to
Interstate 85, two in California's central valley cities of Sacramento and
Bakersfield and one adjacent to Interstate 10 in Las Cruces, New Mexico.
All dealerships offer a full line of both new and used recreation
vehicles and maintain full parts and service facilities, body repair shops and
are equipped to repair virtually any type of recreational vehicle. The Greer
and Las Cruces dealerships sell and service boats and related marine products.
RECREATIONAL VEHICLE INDUSTRY
The recreation vehicle industry is approximately a $14.5 billion
dollar a year industry in the United States, (Recreational Vehicle Industry
Association, "RVIA", Reston, Virginia), catering to the travel and leisure-time
needs of the general public through the sale and service of recreation
vehicles. According to the RVIA, (RV NEWS, November 1996) 475,200 new RVs were
shipped by manufacturers to dealers in 1995 compared to 518,800 RVs in 1994 and
420,200 in 1993. Industry shipment peaked in 1976 through 1978 with 526,000 to
534,000 units.
One in ten American families own a recreation vehicle in the United
States, and over 20,000 public and privately owned campgrounds operate
nationwide, according to the RVIA, (RV TRADE DIGEST, October, 1992). There are
over 9 million RVs on the road and an estimated 25 million Americans travel in
RVs (RVIA). According to the US Census Bureau, there were 2,648 RV dealers in
the U.S. in 1992 (RVDA News, September 1995).
The types of recreation vehicles sold by the company consist primarily
of travel trailers and fifth wheels, designed to be towed by another vehicle,
and motorized self-propelled units, built on automotive chassis (motorized
vehicles).
Towable recreation vehicles consist of travel trailers, including
fifth wheel travel trailers, folding camping trailers and truck campers (a
recreation camping unit designed to be loaded on to, or affixed to, the bed or
chassis of a truck). Motorized recreation vehicles consist of conventional
motor homes (Class "A"), van campers (Class "B"), mini motor homes, low profile
motor homes and compact motor homes (all referred to as Class "C") and van
conversions.
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Class "A" motor homes are constructed by the recreation vehicle manufacturer on
chassis that already have the engine and drive components. Van campers (Class
"B") are panel type vans to which the recreation vehicle manufacturer adds
sleeping facilities, kitchen and toilet facilities, fresh water storage, 110
volt hook up and other items. Class "C" units are built on an automotive
manufactured van frame with an attached cab section, or on an automotive
manufactured cab and chassis. The recreation vehicle manufacturer completes the
body section containing the living area and attaches it to the cab section. For
the van conversion, the recreation vehicle manufacturer modifies a completed
van chassis aesthetically or decoratively in appearance for transportation and
recreational purposes.
Currently, there are many manufacturers of both towable and motorized
recreation vehicles. Although there are several sources for manufactured
conventional vans including Ford, GMC, and Chrysler, Japanese imports and other
foreign manufacturers, there are only four major manufacturers in the United
States supplying chassis with engine and drive components to the recreational
vehicle manufacturers: General Motors Company, Ford Motor Company, Oshkosh
Truck Corporation and Spartan Motors Corporation. General Motors Company is the
largest supplier of chassis to RV manufacturers.
Fuel consumption for motorized recreation vehicles has improved
substantially over the last several years. Diesel engines are growing in
popularity over gasoline engines, primarily in the larger vehicles.
INDUSTRY OUTLOOK
The long term prospects for the recreation vehicle industry appear to
be bright, according to the Second Annual Recreation Vehicle Outlook,
(September, 1996), published by the CIT Group/Sales Financing, Inc. Based on
the projected demographics of the U.S. population, the 45-54 year old group is
now the fastest growing segment of the population. By 1999 this group will
exceed 35 million people, and the second fastest growing segment is the 55-64
year old group which will exceed 23 million by 1999. According to the Outlook,
assuming a constant ownership rate, population trends alone will add over one
million households annually to the RV lifestyle, as the baby boomers (born
1946-1964) turn 50. The CIT Outlook concludes this generation represents an
enormous opportunity if their lifestyles tend to follow the lifestyles of their
parents. To some degree, the Company's growth is dependent upon the baby
boomers turning 50 and adopting the lifestyles of their parents. If this trend
does not develop, the Company's potential growth may be curtailed.
The RV industry has recognized the baby boomers opportunity and has
plans to embark, in the spring of 1997, on a highly publicized market expansion
program aimed at showing the lifestyle appeal of RVing to the baby boomers.
MARKETING
ADVERTISING AND PROMOTIONS. The Company has a year around advertising
campaign utilizing newspaper, direct mail, billboards, yellow pages, and
consumer magazine advertising.
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The advertising program is supplemented by on-lot promotions and off-lot
consumer shows, organized by trade groups and private companies, primarily
during the peak selling season. The Company participates in 25 to 30 consumer
RV shows annually, attended by up to 40,000 consumers each. Smaller product
shows are also promoted by the company at RV parks where by existing RV owners
are targeted for "trade-ups" selling opportunities. The Company utilizes the
services of a professional marketing firm to assist in implementing their
advertising and promotion campaign.
The Company's management believes that the Company was the first
recreation vehicle retailer to promote sales through a national tele-marketing
sales program. The Company promotes several recreation vehicle clubs and
rallies for owners and prospective owners of recreation vehicles.
PRICING. The Company's management believes that pricing is an
important element of its marketing strategy and occasionally makes volume
purchases at reduced prices from some manufacturers. These purchases enable the
Company to advertise and achieve a competitive pricing position over many of
its competitors.
CUSTOMER BASE. The Company's customer base demographic characteristics
vary from dealership to dealership but primarily are represented as the
following. The age group of 35 years and older represent 82% of the customers,
with ages 45 and older representing 58%. Eighty six percent (86%) are married,
49% are retired, 21% have "blue collar" occupations, and 30% are "white collar"
and professionals. The primary income group is $20,000 to $40,000 comprising
53%. Twenty six percent (26%) earn $40,000 to $60,000, and 10% earn over
$60,000. Sixty two percent (62%) of the customers are prior owners of RVs, and
63% need to trade their RV, automobile or boat to make a purchase.
In summary, the Company's primary customer base is 45 years old or
older, retired, earns between $20,000 and $40,000 annually, is a previous owner
of an RV needing to trade to make a purchase.
RETAIL OPERATIONS
The Company, previously Holiday of Orlando, Inc., was incorporated in
July 1978, in the State of Florida. In 1984, a second retail center was opened
in Tampa, Florida, to sell and service new and used RVs. In 1988, the Company
opened three new sales and service retail centers, one in Ft. Myers, Florida,
one in Jacksonville, Florida and the third in Atlanta, Georgia. The Atlanta
retail center operates as Holiday RV Superstores of South Atlanta, Inc.
In February 1990, the Company formed Holiday RV Superstores of South
Carolina, Inc. which acquired an existing retail center in Greer, South
Carolina formally, operating as Ledford's RV and Marine World.
From October, 1992 through January 1993 the Company operated a
temporary sales location in Homestead, Florida, marketing travel trailers to
the victims of Hurricane Andrew needing temporary housing. In December of 1992,
the Jacksonville, Florida dealership was closed.
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In January 1994, the Company formed Holiday RV Superstores West, Inc.
which acquired two existing retail centers located in Bakersfield and Roseville
(Sacramento), California, formerly operating as Venture Out, and an office
location in Campbell, California. The Campbell office closed in November, 1995.
In September 1995, the Company formed Holiday RV Superstores of New
Mexico, Inc. which acquired a vacant RV retail facility in Las Cruces, New
Mexico. The retail center began operations in November of 1995.
The Company currently markets approximately 40 brands of recreational
vehicles and 10 brands of recreational boats. The Company purchases 76% or more
of its new recreational vehicles from Fleetwood Enterprises Inc., and Thor
Industries, Inc. In addition, the Company sells new recreational vehicles and
recreational boats purchased from a number of other manufacturers including
Winnebago Industries, Forest River, Inc., and Bayliner Marine Corporation. In
the opinion of management, the loss of any one brand of new recreational
vehicle would not materially affect the Company. However, the loss of all the
brands sold by either of the two largest manufacturers, i.e. Fleetwood
Enterprises, Inc., or Thor Industries, Inc., would have a material effect on
the Company's sales. The Company's management feels the loss of all brands from
either of these two manufacturers to be highly unlikely. Dealer representation
decisions for Fleetwood Enterprises, Inc. and Thor Industries, Inc.
manufactured brands are made at the manufacturer's plants on a brand-by-brand
basis, rather than centrally at each respective company's corporate
headquarters.
Detailed information on all vehicles, boats and parts inventory at
each retail center, is maintained in the Company's computerized database.
Management at each retail center has "real time" access to this information at
anytime for any dealership owned by the Company.
MANUFACTURERS REPURCHASE AGREEMENTS TO COMPANY'S FLOOR PLAN CREDITORS
Substantially all new vehicles and boats held in inventory for sale
are pledged as security under floor plan contracts with financial institutions.
Under such contracts, the sale of a pledged vehicle to a consumer requires
payment to the lender of the amount attributable to such vehicle under the
floor plan contract. Manufacturers have their respective repurchase agreements
in force with the financial institutions with limited repurchase
indemnification to the lenders against any Company default under the floor plan
contracts.
SERVICE AND PARTS
The Company maintains fully equipped service facilities equipped to
handle virtually any type of recreation vehicle. The Company is a factory
designated chassis warranty service center for Gillig, Chevrolet Division of
General Motors, and Oshkosh, who reimburse the Company for such warranty
services. The Greer and Las Cruces facilities are fully equipped to repair all
brands of boats and motors it sells.
The Company's service facilities are equipped to make engine and drive
train repairs, as well as repairs to refrigerators, ovens and ranges, air
conditioning systems, plumbing and electrical
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systems of each recreational vehicle it sells. In addition, the Company is an
authorized service center for most manufacturers of recreational vehicle
components, including generators, roof air conditioners, refrigerators,
heaters, ovens and ranges (including microwave ovens), hot water heaters,
toilets, furnaces, furniture, ice makers, awnings, TV antennas, metal framing,
water pumps, hitches, suspension systems, brakes, windows and axles used in
recreational vehicles. The Company's service and repair facilities are also
used by commercial customers, including Sea World, Walt Disney World, and
Universal Studios.
The Company maintains service agreements with those companies whose
new recreational vehicles and marine products it sells. These service
agreements allow the Company to purchase parts and obtain technical assistance
needed to repair and service vehicles, boats and equipment manufactured by
these companies. The Company also has a supply of propane gas for resale at all
locations.
The parts departments of each retail center supports the Company's
sales and service functions. In addition, each retail center stocks accessory
items, usually sold to recreation vehicle owners, and maintains a computerized
point-of-purchase inventory control and customer tracking system. The Greer and
Las Cruces centers maintain inventories of marine parts and accessories for
marine products sold.
PRINCIPAL PRODUCTS AND SERVICES
The Company's principal products and services for the last three years
are listed below, by major revenue source, as a percentage of total revenue.
Principal Products or Services as a Percentage of Total Revenue
<TABLE>
<CAPTION>
Fiscal Year
Principal Product or Service 1996 1995 1994
---------------------------- ---- ---- ----
<S> <C> <C> <C>
New Recreation Vehicles and Marine 61.2% 61.8% 61.8%
Used Recreation Vehicles and Marine 25.7 24.6 25.7
Service, Parts and Accessories 9.3 9.5 8.6
Other, Net 3.8 4.1 3.9
----- ----- -----
Total Revenue 100.0% 100.0% 100.0%
===== ===== =====
</TABLE>
EMPLOYEE RELATIONS
As of October 31, 1996 and 1995, the Company had 202 and 182 full time
employees, respectively. The Company has no contracts or collective bargaining
agreements with labor unions and has never experienced work stoppages. The
Company's management considers its
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relations with employees to be good. The Company maintains internal training
programs at every level and has a well developed internal quality control
program and customer satisfaction feedback system for all its dealerships. The
Company maintains a nation-wide recruitment program for sales, service and
management personnel. Support personnel are usually hired from the local labor
force. Factory training programs are available to the employees of the Company
and the Company generally takes full advantage of these programs by sending its
employees to manufacturer supervised schools. Most full time employees are
provided with paid annual vacations, medical and hospitalization insurance
premium reimbursement, sick leave, paid holidays and other fringe benefits.
After one year of employment, employees are eligible to participate in the
profit sharing and 401(k) investment plan.
BUSINESS EXPANSION AND DIVERSIFICATION
The Company intends to continue its primary expansion by acquisition
of existing compatible businesses. Existing RV retail centers with a minimum
annual revenue of $5.0 million will be considered for acquisition. The
Company's primarily focus is the Sunbelt areas of the U.S. and the western
states. Availability of key product lines and dealership locations on major
interstate highways are two of the primary criteria for screening potential
acquisitions.
The Company's expansion plan also includes diversification into a
compatible business that would enhance the margins of the Company. The
diversified "targeted business" would be an acquisition or merger candidate
with an existing business, whereby the Company could capitalize on its existing
multi-store management structure and utilize its existing financial resources.
COMPETITION AND BUSINESS RISK
Based upon statistics supplied by the Recreation Vehicle Dealers
Association, the recreation vehicle industry in North America includes
approximately 2,650 retail dealerships nationally. Competition in the sale of
new and used recreational vehicles is intense. The Company competes with a
large number of firms, some of which operate in more than one location,
although most of the Company's competitors operate from a single location. The
Company believes it is one of the most competitive RV dealers in the nation
offering approximately 50 brands of new recreational vehicles and new boats,
supported by extensive service facilities.
Significant competitive factors in the recreation vehicle sales and
service industry include: vehicle availability, price, service, reliability,
quality of service and convenience. The Company's management is of the opinion
that it is competitive in all factors listed above. Nevertheless, the Company's
management anticipates it will continue to face strong competition in the
future.
The recreation vehicle business is heavily dependent upon the
availability and terms of financing for the retail purchase of its products.
Consequently, changes in interest rates and the tightening or loosening of
credit by government agencies and financial institutions have dramatically
affected the Company's business in the past and are likely to do so in the
future.
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INSURANCE
The Company has had little difficulty in obtaining insurance coverage
for its dealership operations. Such insurance has been obtained by the Company
annually on a competitive bid basis, at what it believes to be reasonable
premium rates. The applicable premium rates have been increasing slightly,
however, Management does not believe that such increases will have a material
adverse effect on the business of the Company for the foreseeable future.
GOVERNMENT REGULATIONS
The Company's service facilities are subject to federal, state and
local laws and regulations concerning environmental matters. These laws and
regulations affect the storing, dispensing and discharge of petroleum based
products and other waste, and affect the Company in the securing of permits for
its full service dealership operations and in the ongoing conduct of such
operations. The securing of permits and compliance with all laws and
regulations can be costly, and could affect the Company's earnings. Further,
each dealership of the Company must comply with the requirements of local
governmental bodies concerning zoning, land use, and environmental factors.
State and local laws and regulations also require each dealership to obtain
licenses to operate as a dealer in recreational vehicles. The Company has
obtained all necessary licenses and permits and Management believes the Company
is in full compliance with all federal, state and local laws and regulations.
Furthermore, Management is not aware of any material capital expenditures
necessary for compliance with any federal, state or local laws and regulations.
ITEM 2. PROPERTIES
The Company leases the Orlando, Florida center from its principal
stockholders, officers, and directors, Newton C. Kindlund and Joanne M.
Kindlund. The dealership is located one half mile from Interstate 4, on Sand
Lake Road and is approximately 2.5 miles from the Interstate 4 entrance to Walt
Disney World. These facilities include 30,000 square feet of buildings on
approximately 4 acres of land.
The Tampa, Florida center is owned by the Company and is approximately
3.5 miles from the intersection of Interstate 4 and Interstate 75, on Highway
301. These facilities include 5.2 acres of land with a 13,000 square foot
building.
The Ft. Myers, Florida center is leased from a non-affiliated party.
The facility is located six tenths of a mile west of Interstate 75, on the
north side of the city and includes 9,700 square feet of buildings on
approximately 2.7 acres of land.
The Atlanta, Georgia center is owned by the Company and is located
adjacent to Interstate 75, south of Interstate 285 in Forest Park, Georgia. The
facility includes 13,600 square feet of buildings and was expanded in 1995 from
2.2 acres to 5 acres.
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The Greer, South Carolina center is leased from a non-affiliated
party. The facility is located adjacent to Interstate 85 between Greenville and
Spartanburg, South Carolina. The facility includes a 31,000 square foot
building on 9 acres of land.
The Roseville, California center is subleased from a non-affiliated
party. The facility is located adjacent to Interstate 5 and includes 24,000
square feet of buildings on 3.6 acres of land.
The Bakersfield, California center is owned by the Company and is
located adjacent to State Road 99 and includes 17,400 square feet of building
on 5.9 acres of land. The dealership was expanded in December, 1996 by one acre.
The Las Cruces, New Mexico center is owned by the Company and is
located adjacent to Interstate 10. The facility includes 14,000 square feet of
building on 7 acres of land.
The corporate office is leased from a non-affiliated party and is
located approximately one quarter of a mile from the Orlando center on Sand
Lake Road. The facilities include 3,750 square feet of office and conference
room accommodations.
<TABLE>
<CAPTION>
FACILITY AND LOCATION
- ---------------------
Approximate Approximate
Building Premise Size
Retail Operations Square Feet Acres
- ----------------- ----------- ------------
<S> <C> <C>
Owned by Company
Tampa, Florida 13,000 5.2
Atlanta, Georgia 13,600 5.0
Bakersfield, California 17,400 5.9
Las Cruces, New Mexico 14,000 7.0
Leased
Orlando, Florida 30,000 4.0
Ft. Myers, Florida 9,700 2.7
Greer, South Carolina 31,000 9.0
Roseville, California 24,000 3.6
Executive Offices
- -----------------
Leased
Orlando, Florida 3,750 ---
</TABLE>
The Company believes that its facilities are adequate for the
foreseeable future for the business carried on at these locations. Properties
at Orlando, Tampa, Fort Myers, and Roseville are being
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fully utilized. Properties at Greer, Bakersfield and Las Cruces are not being
fully utilized and have area for limited expansion
ITEM 3. LEGAL PROCEEDINGS
The Company is party to various legal proceedings arising from its
ordinary course of operations. The Company's management believes, based upon
the opinion of the Company's legal counsel, none of these proceedings,
individually or in the aggregate, will result in a material adverse effect on
the Company's consolidated financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted during the fourth quarter of the fiscal year
covered by this report to a vote of security holders, through the solicitation
of proxies or otherwise.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION ON COMMON STOCK
The Company's common stock trades on The NASDAQ National Market tier
of the NASDAQ Stock Market, under the symbol RVEE.
The table below gives the market high and low sales prices of the
Company's common stock for the quarters in the fiscal years ended October 31,
1996 and 1995. The prices were furnished by the NASDAQ Stock Market.
<TABLE>
<CAPTION>
MARKET PRICE
1996 1995
-------------- ---------------
Quarter High Low High Low
Ended ---- ----- ---- ------
-------
<S> <C> <C> <C> <C>
January 31...................... 3 3/4 2 2 1 5/16
April 30 ....................... 2 3/8 1 3/4 1 3/4 1 5/16
July 31 ........................ 2 3/16 1 3/4 2 1/8 1 3/8
October 31 ..................... 2 1/8 1 1/2 4 3/4 1 5/8
</TABLE>
DIVIDENDS
No cash dividends have been paid by the Company nor does the Company
anticipate paying cash dividends in the near future.
HOLDERS OF RECORD
As of January 16, 1997, there were 592 holders of record and approximately
3,400 beneficial shareholders of the Company's Common Stock.
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ITEM 6. SELECTED FINANCIAL DATA:
<TABLE>
<CAPTION>
Fiscal Year Ended October, 31(1)
(in thousands, except earnings per share)
SELECTED STATEMENT ----------------------------------------------------------
OF INCOME DATA 1996(4) 1995(3) 1994 1993 1992(2)
------- ------- ---- ---- -------
<S> <C> <C> <C> <C> <C>
Revenue ............................................ $74,764 $70,029 $53,205 $45,767 $40,927
Cost of sales ...................................... 61,562 56,872 44,650 38,152 34,709
------- ------- ------- ------- -------
Gross profit ....................................... 13,202 13,157 8,555 7,615 6,218
Selling, general and administrative expenses ....... 9,929 9,758 6,866 5,744 5,533
------- ------- ------- ------- -------
Income from operations ............................. 3,273 3,399 1,689 1,871 685
Interest income .................................... 393 376 265 247 88
Interest expense ................................... (1,505) (1,336) (717) (548) (594)
------- ------- ------- ------- -------
Income before income taxes ......................... 2,161 2,439 1,237 1,570 179
Income taxes ....................................... 829 980 480 600 51
------- ------- ------- ------- -------
Income before cumulative effect(5) ................. 1,332 1,459 757 970 128
Cumulative effect(5) ............................... -- -- -- 77 --
------- ------- ------- ------- -------
Net income ......................................... $ 1,332 $ 1,459 $ 757 $ 1,047 $ 128
======= ======= ======= ======= =======
Earnings per share of common
stock before cumulative effect (5) ................ .18 .20 .10 .13 .02
Cumulative effect(5) ............................... -- -- -- .01 --
------- ------- ------- ------- -------
Earnings per share of common stock ................. $ .18 $ .20 $ .10 $ .14 $ .02
======= ======= ======= ======= =======
Weighted average number of common
shares outstanding ................................ 7,524 7,437 7,325 7,280 7,248
Cash dividends paid per common share ............... $ -- $ -- $ -- $ -- $ --
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
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<TABLE>
<CAPTION>
As of October, 31(1)
(in thousands, except per share and operating data)
SELECTED BALANCE -----------------------------------------------------------
SHEET DATA: 1996(4) 1995 1994 1993 1992(2)
------- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C>
Working capital ............................... $ 10,449 $ 9,408 $ 9,322 $ 8,718 $ 7,156
Inventories ................................... 23,196 19,396 17,194 11,351 13,953
Total assets ................................. 34,411 29,717 26,925 19,568 26,248
Floor Plan Contracts ......................... 17,504 13,967 13,170 7,193 10,624
Long term debt (capital leases) ............... 346 343 -- 11 20
Total liabilities ............................. 19,639 16,301 14,975 8,570 16,258
Tangible net worth ........................... 14,446 13,020 11,467 10,928 9,809
Book value per common share ................... 1.99 1.80 1.62 1.51 1.37
OPERATING DATA:
Number of dealerships ......................... 8 8 7 5 7
Number of RVs and Boats sold ................. 2,954 2,714 2,002 1,836 1,991(2)
-------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) See Management's Discussion and Analysis of Financial Condition and Results
of Operations.
(2) Includes 400 RVs sold to the Federal Emergency Management Agency for $4.34
million.
(3) Includes first full year of operating results from two dealerships acquired
in August, 1994 in California.
(4) Includes first full year of operating results from new dealership acquired
in October, 1995 in New Mexico.
(5) Cumulative effect of change in accounting for income taxes.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Company continued to maintain a strong financial position and high
liquidity throughout Fiscal 1996. Two million three hundred thousand dollars
($2.3 million) of cash was generated from net income, non cash expenses, and a
decrease in accounts receivables. Six hundred and seventy thousand dollars
($670,000) cash was used to finance the completion of the construction of the
Bakersfield, California center, and to purchase equipment for the new Las
Cruces, New Mexico center.
The net result of all operating, investing and financing activities
was an increase in the Company's cash position by $1.6 million, to $5.6 million
as of October 31, 1996.
Net working capital increased to $10.4 million as of the end of Fiscal
1996 compared to $9.4 million as of the end of Fiscal 1995.
The Company's liquidity ratios continue to compare favorably to the
recreational vehicle dealers industry averages, as reported by 1996 Annual
Statement Studies, Robert Morris Associates, Philadelphia, Pa. ("RMA"). The
Company's current ratio, as of the end of Fiscal 1996 and Fiscal 1995, was 1.54
and 1.59 with the industry average of 1.2 and 1.3 respectively.
The Company's quick ratio, as of the end of Fiscal 1996, and Fiscal
1995, was 0.34 and 0.37. The Company's quick ratio at the end of Fiscal 1996, a
measure of the ability to pay off current liabilities without relying on the
sale of inventories, was approximately 4 times greater than the industry
average (RMA) of 0.1 both years.
The Company's debt to worth ratio, a measure of the financing provided
by the Company's creditors as compared to the contribution by shareholders, as
of the end of Fiscal 1996 was 1.3. The industry average (RMA) was 4.1 for 1996.
The Company's principal long term commitments, as of the end of Fiscal
1996, consist of obligations under operating leases. The Company also has a
contingent liability to repay a portion of agency commission (referral fees)
received principally from some lending institutions whereby the Company
referred customers to one or more third party financing sources and earned
referral fees (agency commissions) if the lender consummated a loan contract
with the customer. In some cases, the Company could be required to pay back
(chargeback) the referral fee to the lender if the loan is paid off or
foreclosed in a specific period of time, usually limited to the first six
months of the term, if the charge back amount exceeds reserves retained by the
lender. The Company records commission income based upon the amount earned less
allowances for chargebacks. In determining the allowance, the Company takes
into consideration the total customer loans outstanding and estimates the
exposure for potential chargebacks associated with these loans. The Company
estimates the probability for loan payoffs and the potential chargebacks to the
Company related thereto. The Company also considers the current and predicted
future economic conditions, the effects of changes in
15
<PAGE> 16
consumer interest rates and the aging of all it's customer loans outstanding
representing potential chargebacks to the Company.
The Company's chargeback allowance was $135,000, $152,000, and
$193,000 as of the end of Fiscal 1996, Fiscal 1995 and Fiscal 1994
respectively. Chargebacks were $58,000, $40,000, and $588,000, for Fiscal 1996,
Fiscal 1995 and Fiscal 1994, respectively. The $588,000 chargebacks in Fiscal
1994 was primarily the result of negotiated settlements with third party
financing sources reducing future chargeback potential. Management expects the
current allowance for chargebacks to be sufficient to repay this contingency
and does not expect the ultimate liability to have a significant impact on the
liquidity of the Company.
The Company's Board of Directors, in Fiscal 1993, set specific
strategic targets for the expansion and/or diversification of the Company's
operations, primarily through acquisition, with the ultimate goal of increasing
the Company's value to its shareholders. These targets, if obtained, will
mostly likely require the Company to seek additional capital. Since its initial
public offering in 1987 the Company has funded it's expansion plan with
internally generated cash, debt from financial institutions for purchasing RVs,
and a limited amount of common stock.
The Company's management is currently evaluating alternative sources
of capital, its cost and its ultimate effect on the capitalization of the
Company. The Company had $75.5 million maximum borrowing under floor plan
contracts of which $58 million was not used as of the end of Fiscal 1996.
Currently the Company has $57 million maximum borrowing available under floor
plan contracts of which $39 million was not used. The reduction in maximum
borrowing available from Fiscal 1996 year end is the result of a change in the
Company's primary floor plan source to obtain more favorable terms and
conditions for the Company, resulting in the elimination of one flooring source.
The Company's management feels it can obtain additional debt financing
at reasonable interest rates for expansion and/or diversification of its
operations. Currently Management has no expansion or diversification prospects
requiring a secondary stock offering or a conversion of the financing debt to
common stock. Management does intend to continue to issue common stock and/or
options on common stock as a partial payment for acquisitions when cost
effective. However, management expects the dilutive effect on the common
stockholders of the Company resulting from issuing such common stock or options
to be minimal.
Management believes that during the next twelve months cash generated
by operating activities, cash and cash equivalents on deposit with financial
institutions and financing currently available from floor plan financing
companies will be sufficient for its capital and operating needs for its
existing operations.
ENGAGEMENT OF FINANCIAL ADVISOR TO EXPLORE STRATEGIC ALTERNATIVES TO ENHANCE
SHAREHOLDER VALUE
In December, 1996, the Company engaged Prudential Securities
Incorporated to act as the Company's exclusive financial advisor to explore
strategic alternatives to enhance shareholder value, including possible
acquisitions, mergers or the sale of the Company. The Company's
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<PAGE> 17
Board of Directors believes the market value reflected in the current price of
the Company's stock does not reflect the intrinsic value of the Company in
light of the Company's continued strong financial results and position.
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR FISCAL 1996 COMPARED TO FISCAL 1995.
Sales and service revenue increased 6.8 % to $74.8 million in Fiscal
1996 from $70.0 million in Fiscal 1995 due to revenue from the Las Cruces, New
Mexico center acquired in October, 1995. On a same store basis, revenue
decreased 6% reflecting the national trend. According to the Recreation Vehicle
Industry Association (RV Trade Digest, December, 1996) recreation vehicle
deliveries to retailers were down 0.5% for the nine months ended August, 1996,
as compared to the same period last year. Even though this data is not totally
comparable, it does indicate the Company's change in RV sales reflected the
national trend.
Management expects the Company's revenue to increase in fiscal 1997,
and follow the forecast for the recreation vehicle industry. According to the
CIT Group's Second Annual Recreation Vehicle Outlook (September 1996), "the
closing months of 1996 will be somewhat soft, representing a bottom of a cycle
that started in 1995. " The Outlook expects unit sales growth to increase 8% in
1997.
Cost of sales and service, as a percentage of revenue, increased to
82.3% in Fiscal 1996 from 81.2% in Fiscal 1995.
Gross profit remained the same at $13.2 million. On a same store
basis, gross profit decreased 13%. As a percentage of revenue, gross profit
decreased to 17.7% in Fiscal 96 compared to 18.8% in Fiscal 1995. This decrease
resulted in decreases in every major revenue category due to increased pressure
on gross margins from competitors resulting from an oversupply of product
generally found throughout the industry.
Selling, general and administrative expenses (SG&A) increased slightly
to $9.9 million in Fiscal 1996 from $9.8 million in Fiscal 1995. As a
percentage of revenue, SG&A decreased to 13.3% in Fiscal 1996 from 13.9% in
Fiscal 1995. On a same store basis, SG&A decreased 13% in Fiscal 1996. These
decreases are primarily due to decreased sales and personnel expense resulting
from decreased revenue.
Income from operations decreased 3.7% to $3.27 million in Fiscal 1996
from $3.40 million in Fiscal 1995. As a percentage of revenue, income from
operations decreased to 4.4% in Fiscal 1995 from 4.9% in Fiscal 1995.
Interest income increased slightly to $393,000 in Fiscal 1996 from
$376,000 in Fiscal 1995 due to a higher average balance of invested cash.
Interest expense increased 13% to $1.50 million in Fiscal 1996 from $1.34
million in Fiscal 1995 primarily due to higher floor plan balances resulting
from new vehicle inventories at the new Las Cruces center.
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<PAGE> 18
Income before income taxes decreased 11.4% to $2.16 million in Fiscal
1996, compared to $2.44 million in Fiscal 1995. As a percentage of revenue,
income before income taxes decreased to 2.9% in Fiscal 1996 compared to 3.4% in
Fiscal 1995.
The combined Federal and State income tax rate was 38.4 % in Fiscal
1996 compared to 40.2% in Fiscal 1995. Income tax rates varied from Federal
statutory rates due to state income taxes. See Note 9 of the notes to the
consolidated financial statements for components of the income taxes and the
reconciliation of the provision for income taxes to the federal statutory rates.
Net income decreased 8.7% to $1,331,932 in Fiscal 1996 from $1,458,993
in Fiscal 1995. As a percentage of revenue, net income decreased to 1.8% in
Fiscal 1996 from 2.1% in Fiscal 1995.
Earnings per share were 18 cents in Fiscal 1996 compared to 20 cents
in Fiscal 1995.
RESULTS OF OPERATIONS FOR FISCAL 1995 COMPARED TO FISCAL 1994.
Sales and service revenue increased 31.6 % to $70.0 million in Fiscal 1995 from
$53.2 in Fiscal 1994 primarily due to revenue from two RV centers acquired on
August 1, 1994 (Sacramento and Bakersfield, California). Revenue increased
2.3%, on a same store basis. This increase, on a same store basis, compares
favorably to the national RV shipment data, according to the Recreation Vehicle
Industry Association (RV Business, January, 1996) reporting total RV unit
shipments to dealers for the ten months ended October 1995 decreased 8.3%. Even
though this data is not totally comparable, it does indicate the Company's
change in RV sales were significantly better than the industries national
average.
However, the Company's total revenue decreased (on a same store basis)
6.2% in the fourth quarter of Fiscal 1995, as compared to the same quarter of
Fiscal 1994.
Cost of sales and service, as a percentage of revenue, decreased to
81.2% in Fiscal 1995 from 83.9% in Fiscal 1994.
Gross profit increased 53.8% in Fiscal 1995 to $13.2 million from $8.6
million in Fiscal 1994. On a same store basis gross profit increased 9%.
As a percentage of revenue, gross profit increased to 18.8% in Fiscal
95 from 16.1% in Fiscal 94. This increase resulted from increases from every
major revenue categories due to two factors; significantly higher gross profit
percentages from the two new California centers and slightly higher gross
profits from the eastern centers. The California higher percentages were
primarily due to a greater mix of towable RVs sold verses motorized RVs sold.
Towables historically are sold at a higher gross profit percentage than
motorized. The higher eastern centers gross profits resulted from a managerial
effort to increase gross profits in all revenue categories. The eastern centers
gross profits increased to 16.1 % from 15.1%.
Selling, general and administrative expenses (SG&A) increased 42.1 %
to $9.76 million in Fiscal 1995 from $6.87 million in Fiscal 1994. As a
percentage of revenue, SG&A increased to 13.9% from 12.9%. These increases were
primarily due to two factors; increased expenses from the
18
<PAGE> 19
two new California dealerships, and increased selling and personnel expenses
resulting from increased revenue.
Income from operations increased 101% to $3.40 million in Fiscal 1995
from $1.69 million in Fiscal 1994. As a percentage of revenue, income from
operations increased to 4.9% from 3.2%.
Interest income increased 41.9% to $376,000 in Fiscal 1995 from
$265,000 in Fiscal 1994 due to higher yields on invested cash. Interest expense
increased 86.3% to $1.34 million in Fiscal 1995 from $717,000 in Fiscal 1994.
This increase resulted from higher floor plan balances due to increased new RV
inventories at the two newly acquired California centers, and to increased
interest rates resulting from increases in the prime lending rate.
Income before income taxes increased 97.2% to $2.44 million in Fiscal
1995 from $1.24 million in Fiscal 1994. As a percentage of revenue, income
before income taxes increased to 3.4% from 2.3% .
The combined Federal and State income tax rate was 40.2 % in Fiscal
1995 compared to 38.8% in Fiscal 1994. Income tax rates varied from Federal
statutory rates due to state income taxes. See Note 9 of the notes to the
consolidated financial statements for components of the income taxes and the
reconciliation of the provision for income taxes to the federal statutory rates.
Net income increased 92.7% to $1,458,993 in Fiscal 1995 from $757,054
in Fiscal 1994. As a percentage of revenue, net income increased to 2.1% in
Fiscal 1995 from 1.4% in Fiscal 1994.
Earnings per share was 20 cents in Fiscal 1995 compared to 10 cents in
Fiscal 1994.
INFLATION
The Company's management believes that increases in the cost of new
vehicles and boats that may result from increases in cost of products purchased
from manufacturers can be offset by higher resale prices for used retail
vehicles and boats as well as higher retail prices for new vehicles and boats
although there may be a lag in the ability of the Company to pass such
increases on to its customers.
Historically, increases in operating costs are passed on to the
consumer when the market allows. The Company's management believes that its
business has not been significantly affected by inflation despite increased
chassis and manufacture conversion costs experienced.
RECENT ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of," issued by the Financial Accounting Standards Board (FASB), is effective
for financial statements for fiscal years beginning after December 15, 1995.
The new standard establishes new guidelines regarding when impairment losses on
long-lived assets, which include plant and equipment and certain identifiable
intangible assets and goodwill, should be recognized how impairment losses
should
19
<PAGE> 20
be measured. The Company does not expect adoption to have a material effect on
its financial position or results of operations.
The Company is required to adopt the provisions of Statement of
Financial Accounting Standards No. 123, ("SFAS No. 123"), Accounting for Stock
Based Compensation, for or before its fiscal year ending October 31, 1997. SFAS
No. 123, among other things, requires certain added disclosures regarding the
fair value of equity instruments, such as stock options, issued by the Company.
In addition, SFAS No. 123 encourages the recognition of expense for the fair
value of equity instruments issued by the Company.
The Company will not adopt the optional expense recognition provisions
of SFAS No. 123, and therefore, the effects of adopting SFAS No. 123 should not
be material.
SEASONALITY
Although the recreation vehicle business is a year round business in
the Southeastern United States and California, the recreation vehicle industry
is seasonal. The Company has significantly higher sales in the second quarter
of its fiscal year, and significantly lower sales in its first and fourth
quarters. During slack seasons at a particular retail center, the Company
reduces inventory of both new and used RVs and introduces other cutbacks in
operations minimizing the impact of the seasonality on the results of
operations. Because a substantial portion of the Company's expenses are fixed,
operating income tends to be lower in the first quarter and fourth quarter of
the Company's Fiscal Year and higher in the second and third quarters.
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS
The Company wishes to take advantage of the new "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995 and is
filing this cautionary statement in connection with such safe harbor
legislation. The Company's Form 10-Q, this Form 10-K, any Form 8-K, or any
other written or oral statements made by or on behalf of the Company may
include forward looking statements which reflect the Company's current views
with respect to future events and financial performance. The words "believe",
"project", "anticipates", "estimates", "expects", "most likely", "intends" and
similar expressions identify forward looking statements.
The Company wishes to caution investors that any forward looking
statements made by or on behalf of the Company are subject to uncertainties and
other factors that could cause actual results to differ materially from such
statements. The uncertainties and other factors include, but are not limited
to, the factors listed below (many of which have been discussed in prior SEC
filings by the Company.) Though the Company has attempted to list the factors
it believes to be important to its business, the Company wishes to caution
investors that other factors may prove to be important in affecting the
Company's results of operations. New factors emerge from time to time and it is
not possible for management to predict all of such factors, nor can it assess
the impact of each such factor on the business or the extent to which any
factor, or combination of factors, may cause actual results to differ
materially from forward looking statements.
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<PAGE> 21
Investors are further cautioned not to place undue reliance on any
forward looking statements as they speak only of the Company's view as of the
date the statement was made. The Company undertakes no obligation to publicly
update or revise any forward looking statements, whether as a result of new
information, future events, or otherwise.
FACTORS
GENERAL ECONOMIC CONDITIONS
The Company's sales are affected by general economic conditions,
including employment rates, prevailing interest rates, inflation, and other
economic conditions affecting disposable consumer income generally. Weakness in
the economy could still have an adverse effect on the Company's business. The
majority of the Company's customers purchasing vehicles and boats finance their
purchase. Increases in consumer interest rates could have an adverse effect on
the Company's ability to sell vehicles and boats. Furthermore, a general
increase in commercial interest rates would increase the rates paid by the
Company on its floor plan contracts, therefore could adversly effect the
Company's operating income.
COMPETITION
The Company competes with a large number of dealers, some of which
operate in more than one location, although most of the competitions operate
from a single location. Significant competitive factors include price, service,
reliability, quality of service and convenience. Among other things, increased
competition could cause downwind pressure on sales prices and lower margins.
DEPENDENCE UPON MANUFACTURERS FOR SUPPLY OF PRODUCT
The Company markets approximately 40 brands of vehicles and 10 brands
of boats. The Company maintains "dealer agreements" with most of the
manufacturers of the vehicles and boats specifying certain terms and conditions
necessary for the Company to continue representation of the specific brand in a
specified geographic market area. The loss of any one brand would not
materially affect the Company, however, the loss of all brands of the two
largest manufacturers, i.e. Fleetwood Enterprises, Inc. or Thor Industries,
Inc. would have a material effect on the Company's sales.
FUEL PRICING AND AVAILABILITY
The Company's business is automotive in nature and as such is
dependent upon the availability of fuel. A decrease in the availability of
gasoline and the inability of the Company to convert its vehicles to
alternative fuels could have a material adverse effect on the Company's
business. Historically, increases in the price of gasoline have not had a
material impact on the Company's business, as long as there was no concurrent
decline in availability. However, future significant increases in the price of
gasoline or decreased in availability would have a material effect on the
Company's business.
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<PAGE> 22
REGULATION, SUPERVISION, AND LICENSING
The Company's operations are subject to ongoing regulation,
supervision and licensing under various federal, state, and local statutes,
ordinances and regulations. The adoption of more stringent statutes and
regulations, changes in the interpretation of existing statutes and
regulations, or the Company's entrance into jurisdictions with more stringent
regulatory requirements could curtail some of the Company's operations, deny
the Company the opportunity to operate in certain locations, or restrict
products or services offered by the Company.
The Company's customers and potential customers are subject to
federal, state and local statutes, ordinances and regulations regarding the
ownership of recreation vehicles and boats. The adoption of more stringent
statutes, ordinances and regulations effecting the consumer ownership of
recreation vehicles or boats, could have an adverse effect on the Company's
ability to sell its products.
ENVIRONMENTAL RISKS
The nature of any automotive business involves the handling of
hazardous wastes such as motor oil, fuel, paint and other chemicals.
Noncompliance with or changes to environmental regulations could adversely
affect the Company's business.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to Part II, Item 8, is submitted as a separate section of
this Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There has been no change of accountants or reported disagreement on any matter
of accounting principles or procedures or financial statement disclosure in
Fiscal 1996.
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<PAGE> 23
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The directors and executive officers of the Company as of January 8,
1997 were as follows:
<TABLE>
<CAPTION>
Officer
and/or
Name Age Position Director since
- -------------- --- --------------------- --------------
<S> <C> <C> <C>
Newton C. Kindlund 56 President, Chairman of the Board, 1978
Chief Executive Officer
Joanne M. Kindlund 47 Executive Vice President- 1978
Administration, Secretary/
Treasurer and Director
W. Hardee McAlhaney 49 Vice President, 1988
Chief Financial Officer
and Director
James P. Williams 57 Director 1987
Paul G. Clubbe 54 Director 1987
Roy W. Parker 52 Director 1993
Harvey M. Alper 50 Director 1996
</TABLE>
All Directors hold office until the next annual meeting of the
Company's shareholders and until their successors are elected and qualified.
Executive officers serve at the discretion of the Board of Directors.
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<PAGE> 24
DIRECTORS AND EXECUTIVE OFFICERS' BUSINESS EXPERIENCE
The following is a brief account of the educational and business experience of
each Director and Officer of the Company:
NEWTON C. KINDLUND
Mr. Kindlund and his wife, Joanne M. Kindlund, are co-founders of the
Company. He has served as President and Chairman since its inception in July
1978, and is a graduate of Michigan State University having received his BA in
1963. He has done postgraduate studies at the Wharton School of the University
of Pennsylvania, Boston College and Indiana University. From 1975 to 1977 he
was a regional Vice President of Recreation Vehicle Industry Association,
Elkhart, Indiana. He was a founder of the Florida RV Trade Association and
served on the Board of Directors of the National Recreation Vehicle Rental
Dealers Association and the Central Florida World Trade Council. Recently Mr.
Kindlund has served a four year term as an Executive Board member and on the
Executive Committee of the Greater Orlando Florida Chamber of Commerce.
Currently Mr. Kindlund is a member of the National Dealer Advisory Council for
Airstream, Inc., Spartan Motors, Inc., and is a past Chairman of the Board of
Directors of the Recreation Vehicle Rental Dealers Association. Mr. Kindlund
was recognized as the RV News RV Executive of the Year for 1995.
JOANNE M. KINDLUND
Mrs. Kindlund, a co-founder of the Company, has served as Executive
Vice President, Secretary and Treasurer and as a Director since its inception
in July, 1978. She graduated from the University of Florida in 1971 with a B.S.
Degree in Advertising and has done postgraduate work at the University of
Florida in accounting and finance. From 1984 to 1985, she assisted Gorman
Planning and Associates, Virginia Beach, Virginia with the creation of software
managerial systems including accounting systems and inventory control systems
for retail recreational vehicle sales dealerships.
W. HARDEE MCALHANEY
Mr. McAlhaney joined the Company as Corporate Comptroller in 1988 and
is currently a Vice President and Chief Financial Officer of the Company. He
graduated from the University of Tennessee in 1970 with a B.S.B.A. Degree, and
from the University of Florida in 1972 with an M.B.A. Mr. McAlhaney served as
Chief Financial Officer for two national retail chains; The Athletic Attic and
The Athlete's Foot, prior to joining Drexel, Burnham, Lambert as an investment
consultant.
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<PAGE> 25
JAMES P. WILLIAMS
Mr. Williams has served on the Board of Directors of the Company since
August of 1987. He received his Bachelor of Science Degree in Business in 1961
from Stetson University. Mr. Williams, since graduation from college has been a
practicing accountant having become a Certified Public Accountant in 1967. He
is the senior partner of Williams, Gryzich and Company, CPAs.
PAUL G. CLUBBE
Mr. Clubbe attended St. Dunstans College, England, Lisgar Collegiate,
Ottawa, Ontario Canada and Pickering College, Toronto, Ontario Canada. From
1982 to 1995 Mr. Clubbe served as Executive Officer of Rotex Canada, Inc., of
Scarborough, Canada. From 1963 to 1964 Mr. Clubbe was a sales representative
for Morgan Paper Co., Ltd., Toronto, Canada. He is President of Paul Clubbe
(Marketing) Limited and a member of the Board of Directors of Flesherton
Concrete Products, Inc., and Paulaurier Sales, Inc.
ROY W. PARKER
Mr. Parker is Chief Executive Officer and Owner of Parker Boat
Company, Incorporated, the Sea Ray boat dealer for Orlando, Florida. Parker
Boats was founded in 1927. Mr. Parker joined the business in 1964, and became
the sole owner in 1980. Parker Boats has ranked consistently as a top 25 dealer
in sales nationally for Sea Ray. Mr. Parker received the Hall of Fame Award in
1993, presented by the Marine Retailers Association of America. Mr. Parker also
is past President of the Central Florida Marine Trade Association, and is on
the Lakes and Advisory Board for the City of Maitland, Florida.
HARVEY M. ALPER
Mr. Alper is a partner of the law firm, Massey, Alper and Walden,
P.A., Altamonte Springs, Florida. He earned his B.S.J.M. degree (1968) and his
JD (1971) from the University of Florida and has continued his professional
education with several certifications including a certificate in "Comparative
Law" from Oxford University in 1979. Mr. Alper has been engaged in the private
practice of law since 1971, after serving as Assistant General Counsel for the
City of Jacksonville, Florida. Mr. Alper serves as general counsel to the
Company as a partner of the law firm, Massey, Alper and Walden, P.A.
25
<PAGE> 26
ITEM 11. EXECUTIVE COMPENSATION
The table below sets forth the cash compensation including salaries,
bonuses, contributions to retirement plans, premium paid on health and dental
insurance plans and disability insurance plans, paid by the Company for the
years ended October 31, 1996, 1995, and 1994, to, or for the benefit of, each
executive officer whose total annual salary and bonus exceeded $100,000, and
the CEO regardless of compensation level.
<TABLE>
<CAPTION>
Summary Compensation Table
- -----------------------------------------------------------------------------------------------------------------
Long-Term
Annual Compensation
Compensation ---------------------------------
Awards Awards
----------------------------------------- ----------------------
Name and Restricted Stock
Principal Position Year Salary(1) Bonus(2) Other Stock Options(3) Other(4)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Newton C. Kindlund 1996 $107,564 --- --- --- --- ---
Chairman, President 1995 $108,364 --- --- --- --- ---
and Chief Executive 1994 $107,146 --- --- --- --- ---
Officer
W. Hardee McAlhaney 1996 $ 80,850 $53,785 --- 5,000 --- $ 587
Vice President and 1995 $ 83,204 $63,617 --- --- --- $ 587
Chief Financial Officer 1994 $ 79,341 $17,354 --- --- 25,000 $ 832
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes contributions by the Company pursuant to an employee benefit
plan established under Section 401 (k) of the Internal Revenue Code in
the amounts of $3,167, $3,964, and $2,746 for Mr. Kindlund for 1996,
1995 and 1994 respectively, and $3,450, $5,803, and $2,780 for Mr.
McAlhaney for 1996, 1995 and 1994 respectively.
(2) Mr. McAlhaney's bonus is based on the Company's net income before
taxes.
(3) One (1) option for 25,000 shares of common each.
(4) The Company pays the premiums on two (2) term life insurance policies
for Mr. McAlhaney whose sole beneficiary is designated by the insured.
The policies have no cash surrender value provisions.
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<PAGE> 27
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning stock option
grants made in the fiscal year ended October 31, 1996, to the individuals named
in the Summary Compensation Table. There were no grants of options or SARs to
said individuals during the year.
<TABLE>
<CAPTION>
Individual Grants Potential Realizable Value at
------------------------------------------------------- Assume Annual Rates of Stock
Number of % of Total Price Appreciation for Option
Securities Options Exercise
Underlying Granted to or Base Term
Options Employee Price Expiration -----------------------------
Name Granted (#) In FY ($/sh) Date 5% ($) 10%
- ---- ----------- ---------- -------- ---------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Newton C. Kindlund --- --- --- --- --- ---
W. Hardee McAlhaney --- --- --- --- --- ---
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
The following table sets forth information concerning the number and value
realized as to options exercised during Fiscal 1996 and options held at October
31, 1996, by the individuals named in the Summary Compensation Table and the
value of those options held at such date. There were no options exercised
during Fiscal 1996 and no SARs were held at year end.
<TABLE>
<CAPTION>
Number of Securities Value of unexercised
Underlying Unexercised In-The-Money Options
Shares Value Options at FY-End (#) FY-End ($) (1)
Acquired on Realized -------------------------- --------------------------
Name Exercise (#) $ Exercisable Unexercisable Exercisable Unexercisable
- ------ ------------ -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Newton C. Kindlund -- -- -- -- -- --
W. Hardee McAlhaney -- -- 125,000 -- 15,625 --
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Based on a price of $1.8125 per share, being the closing price of Common
Stock on October 31, 1996.
27
<PAGE> 28
DISCRETIONARY AND INCENTIVE BONUSES
The Board of Directors awards discretionary cash bonuses to executive
officers and other employees each year. Bonuses have been paid under various
informal arrangements that have provided for the payment of stipulated amounts
to certain executive officers ratably during the fiscal year, fiscal year end
bonuses to certain executive officers and to marketing and sales support
personnel.
The Company has established an incentive bonus program for its
employees with bonuses generally paid monthly or annually. Bonuses are
primarily based upon net pre-tax profits from the various profit centers within
each retail center and is contingent upon continued employment with the
company.
DIRECTORS FEES
Directors, who are not salaried employees of the Company, receive $500
for their attendance at each meeting of the Board of Directors, Annual
Shareholders Meeting and $175 for each committee meeting . The Directors are
reimbursed for their travel, lodging and food expense incurred when attending
such meetings, if such meetings are held in a location in excess of twenty five
(25) miles from the principal place of business of the Company in Orlando,
Florida. Directors are also reimbursed for their travel, lodging and food
expenses incurred when traveling on behalf of the Company when requested to do
so by an officer of the Company or by the Board of Directors.
DIRECTORS OPTIONS
Each outside Director, serving on the board as of February 20, 1993,
was granted an option for 10,000 shares of common stock of the Company,
exercisable after February 20, 1995. The exercise price is $1.81 per share, the
price of the Company's common stock at the time of the grant. A total of five
options were granted, one to each of the then serving outside Directors (total
of 50,000 shares).
EMPLOYEE BENEFIT PLANS
The Company maintains a tax qualified, Profit Sharing and 401(k)
Employee Investment Plan ("Plan"). All employees who have attained 21 years of
age and complete one year of service are eligible to participate in the Plan.
Plan participants must complete at least two (2) years of service to begin
partial vesting with total vesting occurring when a Plan participant has
completed six (6) years of service to the Company. Normal retirement age under
the retirement Plan is 65 years. The Plan fiscal year ends October 31st.
In Fiscal 1996 $94,719 was contributed to the Plan for the benefit of
163 Plan participants. In Fiscal 1995 $94,204 was contributed to the Plan for
the benefit of 113 Plan participants.
Prudential Bank and Trust Company (One Ravinia Drive, Ste. 1000,
Atlanta, GA 30346, 770-551-6700), is the trustee. The Company is the plan
administrator.
28
<PAGE> 29
The Plan document provide for contributions at the discretion of the
Board of Directors, to be allocated to each Plan participant in an amount not
greater than 10% of each participant's compensation subject to the annual
contribution limitation of the top heavy rules. Under the Plan, compensation is
broadly defined to include wages, salaries, bonuses, overtime and commissions.
Amounts contributed to the Plan by the Company for the 1996, 1995 and 1994 Plan
years on behalf of the named individuals are included in the Executive
Compensation Table, of this report are included in said table.
1987 INCENTIVE STOCK OPTION PLAN
In August 1987, the Board of Directors of the Company adopted the 1987
Incentive Stock Option Plan (the " ISO Plan") which provides that the Company
may grant to officers and managerial employees of the Company and its
subsidiaries incentive stock options. The purpose of the ISO Plan is to provide
the Company with a means of attracting, retaining and increasing the incentive
of officers and managerial employees by offering them the opportunity to invest
in, or increase their investment in, the Company. Options under the ISO Plan
are designed to qualify under Section 422A of the Internal Revenue Code of 1986.
The ISO Plan is administered by the Compensation Advisory Committee of
the Board of Directors (the "Committee") which may grant options to purchase up
to an aggregate of 280,000 shares of Common Stock. The option exercise price
must be at least 100% of the fair market value per share of Common Stock on the
date of grant, except that such price must be at least 110% of the fair market
value per share for employees who own more than 10% of the outstanding Shares
of the Company. The options are exercisable, as determined by the Committee,
over a period of time, but not more than ten years from the date of grant and
will be subject to such other terms and conditions as the Committee may
determine. Any option granted to an employee shall lapse following his
termination of employment; provided, however, that in the discretion of the
Committee, the employee shall have up to three (3) months following his
termination of employment to exercise his options and provided, further, that
upon the employee's permanent and total disability, any option granted to him
may be exercised within twelve months following his termination of employment
because of such disability. The ISO Plan provides for certain anti-dilution
adjustments upon the occurrence of certain events.
Five separate options for 25,000 shares each have been granted to an
Officer of the Company, the Vice President and Chief Financial Officer, Mr.
McAlhaney. The options were approved by the Board of Directors on the following
dates and at the following option exercise prices:
<TABLE>
<CAPTION>
Date Shares Exercise Price
-------------- ------ --------------
<S> <C> <C>
May 23, 1994 25,000 $1.819
February 20, 1993 25,000 $1.813
March 24, 1992 25,000 $1.375
November 17, 1990 25,000 $1.625
May 14, 1990 25,000 $2.500
-------
125,000
=======
</TABLE>
29
<PAGE> 30
BONUS STOCK
In September 1987, the Company issued 250,000 Shares of Common Stock
to various individuals including officers, directors and employees of the
Company for services rendered. These shares have certain restrictions and
forfeiture provisions attached to them. Since September 1987, a number of
recipients of such shares have terminated their employment with the Company
resulting in their bonus shares of Common Stock being forfeited to the Company.
After September 1987, the Company made additional awards of bonus shares to
employees; however, no shares in excess of the initial 250,000 shares have been
issued since forfeited shares equaled or exceeded the number of bonus shares
issued by the Company to employees subsequent to such date. Beginning with the
year ended October 31, 1987, and over a period of two to five years the value
of these shares have been changed against the earnings of the Company. The
Company valued the shares initially issued at 50% of the initial public
offering price of its shares of common stock or $1.25. Shares issued subsequent
to September 1987 were valued at 100% of the market value on the day of issue.
The amount of shares awarded and fair market value assigned to the
shares for the last three Fiscal years are as follows:
<TABLE>
<CAPTION>
Bonus Stock
---------------------------------------------------------
Number Shares Fair Market Value
Fiscal Year Awarded at time of Award
---------------------------------------------------------
<S> <C> <C>
1996 7,500 $14,063
1995 54,000 $91,125
1994 - 0 - - - -
---------------------------------------------------------
</TABLE>
The bonus stock awards listed above require a two (2) year vesting and
employment period. As of October 31, 1996, 220,700 shares had been granted
pursuant to the plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Board of Directors Compensation Advisory Committee
membership for Fiscal 1996 included Messrs. W. Hardee McAlhaney, James P.
Williams and Roy W. Parker. Mr. McAlhaney is the Vice President and Chief
Financial Officer of the Company.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent (10%) of the registered class of
30
<PAGE> 31
the Company's equity securities, to file reports of ownership on Form 3 and
changes in ownership on Form 4 or 5 with the Securities and Exchange Commission
(Section 16(a)) and the exchange on which the Company's securities trade. Such
officers and directors and ten percent (10%) shareholders are also required by
SEC rules to furnish the Company with copies of all Section 16(a) forms they
file.
Based solely on its review of copies of such reports received from
certain reporting persons, the Company believes that it's directors, executive
officers and ten percent (10%) stockholders complied with all Section 16(a)
filing requirements during the fiscal year ended October 31, 1996.
BOARD COMPENSATION ADVISORY COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Advisory Committee of the Board of Directors of
Holiday RV Superstores, Inc. consists of two outside Directors and the Chief
Financial Officer of the Company. The Committee has the responsibility to
recommend to the Board how to administer the Company's Incentive Stock Option
Plan, awarding the Company's bonus shares of Common Stock and determining the
compensation of the Company's three executive officers. This report focuses
primarily on the Company's philosophy with respect to the executive officers
compensation and approach the Committee has taken thus far and intends to take
in the future with respect to relating compensation to performance of the
Company.
From the inception of the Company, its corporate philosophy concerning
compensation has been to minimize guaranteed fixed compensation in favor of
incentive compensation which increases when the Company's performance is strong
and declines when it is poor. Incentive compensation, or bonuses tied to
prescribed formulas, is pervasive throughout the Company's managerial
structure. Such bonuses can be as much as 100% or more of any employee's base
salary. Dealership general managers and departmental managers receive an
incentive bonus based on the profitability of their respective dealerships or
departments. In addition, dealership general managers are paid a year end bonus
based on their respective stores achieving a pre determined agreed upon annual
income target, usually the budgeted net pretax income for their dealership.
The corporate officers receive a base salary which is expected to be
sufficient to support a reasonable minimal managerial lifestyle. The President
has a guarantee base annual salary of $102,000. The other two executive
officers being the Secretary, and the Vice President and CFO, each receive a
base guaranteed annual salary of $75,000. There is also an incentive quarterly
bonus for the Vice President and CFO, based on the Company's net pretax income.
The President and Secretary elected not to accept any incentive compensation
offered by the Committee being the two principal shareholders of the Company's
common stock and their desire to minimize the Company's executive officers
compensation expense.
The Board of Directors has viewed its incentive stock option program
as providing its executive officers, who have the greatest degree of control
over the Company's marketing cost control and long range planning, with the
opportunity to received additional compensation if the price of the Company's
common stock appreciates significantly over the long term.
31
<PAGE> 32
To date, the Board of Directors has awarded only the Vice President
and CFO of the Company five (5) incentive stock options under the Company's
Incentive Stock Option Plan. Each option exercise price was at 100% of the fair
market value per share of the common stock on the date of grant. These awards
are at the discretion of the Board of Directors based upon the recommendation
of the Committee and are determined on an annual basis.
The Board of Directors has viewed its awarding of the Company's bonus
stock as a means to help recipients of the stock to focus on the performance of
its common stock and afford it's bonus stock recipients the opportunity for
financial rewards as the stock appreciates. To date, the Committee has awarded
in excess of 250,000 shares of bonus stock to more than ninety recipients.
The Committee's role will be to continue to recommend to the Board how
to administer both the Incentive Stock Option Plan and the Bonus Stock Plan, to
determined participants and recommend to the Board of Directors awards, in all
cases based on recommendations from the executive management of the Company.
The Committee will periodically review the various compensation plans to insure
the plans are consistent with the Company's overall philosophy and to continue
to make recommendations to the Board of Directors on such plans. The Committee
will focus primarily on the Company's executive officers compensation plans,
leaving the compensation of the store managerial personnel to the executive
officers of the company.
James P. Williams November 16, 1996
Roy W. Parker
W. Hardee McAlhaney
CUMULATIVE TOTAL SHAREHOLDER RETURN
The cumulative total shareholder return performance graph as of
October 31, 1992, 1993, 1994, 1995, and 1996, for the Company, the S&P 500
Index, and for the Company's peer group, is submitted as a separate section at
the end of this Form. 10-K
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of January 16, 1997, the number of
shares, of Common Stock of the Company, owned and the percent so owned (i) each
person known to the Company to be the beneficial owner of more than 5% of the
outstanding Common Stock, (ii) each director and/or officer of the Company, and
(iii) all directors and officers of the Company as a group. The number of
shares owned are those "beneficially owned" as determined under the rules of
the Securities and Exchange Commission, including any shares of Common Stock as
to which a person has sole or shared voting power or investment power and any
shares of Common Stock which the person has the right to acquire within 60 days
through the exercise of any option, warrant or right.
32
<PAGE> 33
<TABLE>
<CAPTION>
Amount and
Name and Address Nature of Beneficial Percentage
of Beneficial Owner Ownership of Class
- ------------------- --------- --------
<S> <C> <C>
Newton C. Kindlund (1) 2,242,968 29.6%
7851 Greenbriar Parkway
Orlando, Florida 32819
Joanne M. Kindlund (1) 2,242,968 29.6%
7851 Greenbriar Parkway
Orlando, Florida 32819
W. Hardee McAlhaney 135,000 1.8%
3701 Sedgewick Place
Orlando, Florida 32806
James P. Williams 11,500(3) *
615 North Wymore Road
Winter Park, Florida 32789
Paul G. Clubbe 50,000(3) *
R.R. #4 Stouffville
Ontario, Canada L4A 7X5
Roy W. Parker - 0 - *
455 South Lake Destiny Road
Orlando, Florida 32810
Harvey M. Alper 1,500 *
112 W. Citrus Street
Altamonte Springs, Florida 32714
All Directors and Officers --------- ----
as a group (7 persons) (2) (3) 4,683,936 61.0%
</TABLE>
(1) Newton C. Kindlund and Joanne M. Kindlund, husband and wife, each
disclaims any right to control the others exercise of shareholders'
rights, with respect to the Shares, including voting the shares of the
Common Stock of the Company set out in the above Table.
(2) Includes options exercisable for 125,000 shares of Common Stock
granted pursuant to the 1987 Incentive Stock Option Plan.
(3) Includes an option exercisable for 10,000 shares of Common Stock,
granted February 20, 1993.
Less than 1% of Class
33
<PAGE> 34
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In November 1994, the Company renewed a five year lease agreement with
Newton C. Kindlund and Joanne M. Kindlund, husband and wife, whereby the
Company leases the real property upon which its retail center is located in
Orlando, Florida. The annual rent is currently $144,000 and, in addition
thereto, the Company pays the real estate taxes, insures the interest of Mr.
and Mrs. Kindlund against casualty loss, pays for all repairs to the property
and names Mr. and Mrs. Kindlund as co-insureds under its general liability
insurance policy. The lease provides for a cost of living increase for each
year of the lease beginning with the second lease year. The term of the lease
agreement expires on October 31, 1999. In fiscal year 1996, the Company paid to
or for the benefit of Mr. and Mrs. Kindlund $144,000 for the use of these
premises.
Based on current market rates for properties similar to those listed
above, transactions with Mr. and Mrs. Kindlund related to the lease for the
Orlando property were on terms comparable to those which would have been
reached with unaffiliated parties.
Harvey M. Alper, a director of the company serves as general counsel
of the Company as a partner of the law firm, Massey, Alper and Walden, P.A. In
1996 the Company paid $78,000 to Mr. Alper's firm for legal services.
34
<PAGE> 35
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8 K
INDEX TO EXHIBITS
Exhibit
Number Description of Exhibit
a(1) and The financial statements are filed as a separate
a(2) section of this Form 10-K.
a(3) Exhibits required to be filed by Item 601 of
Regulation S-K.
1(a) Form of Underwriting Agreement.
1(b) Form of Seller's Agreement.
3(a) Articles of Incorporation.
3(b) Amendment to Articles of Incorporation.
3(c) Amendment to Articles of Incorporation.
3(d) By-Laws.
3(e) Amendment in the Entirety of By-Laws.
3(f) Amendment to By-Laws.
4(a) Form of Common Stock Certificate of the Company.
4(b) Underwriter's Warrant of Thomas James Associates,
Inc. dated November 10, 1987.
10(a) Material contracts numbers 10(a) through 10(bbbbb),
were filed with Registrants' 10-K Annual Report for
the year October 31, 1995, and by this reference is
incorporated herein.
21 Holiday R.V. Rental/Leasing, Inc. is a subsidiary of
the Registrant. This subsidiary, which is wholly
owned by Registrant, was incorporated under the Laws
of the State of Florida and is in good standing. The
Subsidiary does business only under the name of
Holiday R.V. Rental/Leasing, Inc. Holiday RV
Superstores of South Atlanta, Inc. is a subsidiary of
the Registrant. This subsidiary, which is wholly
owned by Registrant, was incorporated under the Laws
of the State of Georgia and
35
<PAGE> 36
is in good standing. The subsidiary does business
under the name of Holiday RV Superstores and Holiday
RV Superstores of South Atlanta, Inc. Holiday RV
Superstores of South Carolina, Inc. is a subsidiary
of the Registrant. This subsidiary, which is wholly
owned by Registrant, was incorporated under the Laws
of the State of South Carolina and is in good
standing. The subsidiary does business under the name
of Holiday RV Superstores and Holiday RV Superstores
of South Carolina, Inc. Holiday RV Superstores West,
Inc. is a wholly-owned subsidiary of the Registrant,
incorporated in the State of California and is in
good standing. The Subsidiary does business under the
names of Holiday RV Superstores and Holiday RV
Superstores West, Inc. Holiday RV Superstores of New
Mexico, Inc., is a wholly owned subsidiary of the
Registrant. This subsidiary was incorporated under
the laws of the State of New Mexico and is in good
standing. This subsidiary does business under the
name of Holiday RV Superstores and Holiday RV
Superstores of New Mexico, Inc. Holiday RV Assurance
Service, Inc., is a wholly owned subsidiary of the
Registrant and is incorporated under the laws of
Arizona as an insurance agency.
b The Company filed no reports on Form 8-K during the
fourth quarter of Fiscal 1996.
c(1) Exhibits Numbering a(3)1(a) through and including
a(3)10(llll), are contained in the Exhibits to the
Registration Statement on Form S-18 filed by the
Company on September 14, 1987, and which became
effective on October 27, 1987, (SEC Registration No.
33-17190-A) which Exhibits to said Registration
Statement are incorporated by reference herein.
Exhibits a(3)3(c) and a(3)3(f) are contained in the
Exhibits to Form 8-A Registration Statement pursuant
to Section 12(g) of the Securities Exchange Act filed
by the Company on December 22, 1987, and which became
effective December 28, 1987, which Exhibits to said
Registration Statement are incorporated by reference
herein.
c(2) Exhibit 27, Financial Data Schedule
(for SEC use only).
36
<PAGE> 37
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereto duly authorized.
HOLIDAY RV SUPERSTORES, INCORPORATED
Registrant
By: /s/NEWTON C. KINDLUND, PRESIDENT
------------------------------------
Newton C. Kindlund, President and
Chairman
DATED: JANUARY 27, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/Newton C. Kindlund President, Chairman of January 27, 1997
- --------------------- the Board of Directors
President and Chairman Chief Executive Officer
Principal Executive Officer
Newton C. Kindlund
/s/Joanne M. Kindlund Executive Vice President- January 27, 1997
- --------------------- Administration, Secretary/
Principal Administrative Officer Treasurer and Director
Joanne M. Kindlund
/s/W. Hardee McAlhaney Vice President, January 27, 1997
- ---------------------- Chief Financial Officer and
Principal Financial Director
and Accounting Officer
W. Hardee McAlhaney
</TABLE>
37
<PAGE> 38
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/James P. Williams Director January 27, 1997
- ----------------------------
James P. Williams
/s/ Roy W. Parker Director January 27, 1997
- ----------------------------
Roy W. Parker
/s/ Harvey M. Alper Director January 27, 1997
- ----------------------------
Harvey M. Alper
</TABLE>
38
<PAGE> 39
ANNUAL REPORT ON FORM 10-K
ITEM 8, ITEM 14(a)(1) and (2)
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
LIST OF FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
AS OF OCTOBER 31, 1996 AND 1995
AND FOR THE YEARS ENDED OCTOBER 31, 1996, 1995 AND 1994
HOLIDAY RV SUPERSTORES, INCORPORATED
AND SUBSIDIARIES
ORLANDO, FLORIDA
<PAGE> 40
HOLIDAY RV SUPERSTORES,
INCORPORATED
AND SUBSIDIARIES
CONTENTS
================================================================================
<TABLE>
<S> <C> <C>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS F-2
CONSOLIDATED FINANCIAL STATEMENTS
Balance sheets F-3 - F-4
Statements of income F-5
Statements of stockholders' equity F-6 - F-7
Statements of cash flows F-8 - F-9
Summary of significant accounting policies F-10 - F-12
Notes to consolidated financial statements F-13 - F-22
</TABLE>
F-1
<PAGE> 41
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders of
Holiday RV Superstores, Incorporated
Orlando, Florida
We have audited the consolidated balance sheets of Holiday RV Superstores,
Incorporated and subsidiaries as of October 31, 1996 and 1995, and the related
consolidated statements of income, stockholders' equity, and cash flows for
each of the three years in the period ended October 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Holiday RV
Superstores, Incorporated and subsidiaries at October 31, 1996 and 1995, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended October 31, 1996 in conformity with
generally accepted accounting principles.
/s/ BDO SEIDMAN, LLP
--------------------
BDO SEIDMAN, LLP
Orlando, Florida
December 20, 1996
F-2
<PAGE> 42
HOLIDAY RV SUPERSTORES,
INCORPORATED
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
================================================================================
<TABLE>
<CAPTION>
October 31, 1996 1995
- -------------------------------------------------------------------------------------------------------------
ASSETS
<S> <C> <C>
CURRENT:
Cash and cash equivalents $ 5,617,707 $ 4,012,860
Accounts receivable:
Trade and contracts in transit 506,804 1,434,936
Other 254,861 428,718
Inventories 23,196,007 19,396,069
Refundable income taxes 7,919 39,333
Deferred income taxes 147,000 49,000
- -------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 29,730,298 25,360,916
PROPERTY AND EQUIPMENT, less accumulated depreciation 4,350,649 3,947,401
OTHER ASSETS, principally covenant not to compete 330,200 408,480
- -------------------------------------------------------------------------------------------------------------
$ 34,411,147 $ 29,716,797
=============================================================================================================
</TABLE>
See accompanying summary of significant accounting policies and notes to
consolidated financial statements.
F-3
<PAGE> 43
HOLIDAY RV SUPERSTORES,
INCORPORATED
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
================================================================================
<TABLE>
<CAPTION>
October 31, 1996 1995
- -------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES:
Floor plan contracts $ 17,504,302 $ 13,966,923
Accounts payable 547,375 901,911
Customer deposits 76,405 101,661
Accrued expenses 1,103,729 946,886
Current portion of capital lease obligations 49,737 35,750
- -------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 19,281,548 15,953,131
LONG-TERM CAPITAL LEASE OBLIGATIONS,
less current portion 345,962 342,657
DEFERRED INCOME TAXES 11,000 5,000
STOCKHOLDERS' EQUITY:
Common stock $.01 par - shares authorized 10,000,000;
issued 7,465,000 74,650 74,650
Additional paid-in capital 5,109,071 5,103,052
Retained earnings 9,672,109 8,340,177
Treasury stock, at cost, 29,300 and 15,300 shares (46,430) (18,193)
Deferred compensation (36,763) (83,677)
- -------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 14,772,637 13,416,009
- -------------------------------------------------------------------------------------------------------------
$ 34,411,147 $ 29,716,797
=============================================================================================================
</TABLE>
See accompanying summary of significant accounting policies and notes to
consolidated financial statements.
F-4
<PAGE> 44
HOLIDAY RV SUPERSTORES,
INCORPORATED
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
================================================================================
<TABLE>
<CAPTION>
Year ended October 31, 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SALES AND SERVICE REVENUE $ 74,763,980 $ 70,029,358 $ 53,205,114
COST OF SALES AND SERVICE 61,561,670 56,871,801 44,650,237
- -------------------------------------------------------------------------------------------------------------
Gross profit 13,202,310 13,157,557 8,554,877
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 9,929,170 9,758,414 6,865,599
- -------------------------------------------------------------------------------------------------------------
Income from operations 3,273,140 3,399,143 1,689,278
INTEREST INCOME 392,652 375,847 264,914
INTEREST EXPENSE (1,504,860) (1,335,997) (717,138)
- -------------------------------------------------------------------------------------------------------------
Income before income taxes 2,160,932 2,438,993 1,237,054
INCOME TAXES 829,000 980,000 480,000
=============================================================================================================
NET INCOME $ 1,331,932 $ 1,458,993 $ 757,054
=============================================================================================================
EARNINGS PER SHARE OF COMMON STOCK $ .18 $ .20 $ .10
=============================================================================================================
WEIGHTED AVERAGE NUMBER OF COMMON STOCK
AND COMMON STOCK EQUIVALENTS OUTSTANDING 7,524,290 7,436,804 7,324,650
=============================================================================================================
</TABLE>
See accompanying summary of significant accounting policies and notes to
consolidated financial statements.
F-5
<PAGE> 45
HOLIDAY RV SUPERSTORES,
INCORPORATED
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
================================================================================
<TABLE>
<CAPTION>
Common Stock Additional
------------------------- Paid-in
Shares Amount Capital
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BALANCE, October 31, 1993 7,340,000 $ 73,400 $ 4,889,529
Issuance of common stock 125,000 1,250 180,313
Net income for the year - - -
Return of unvested restricted bonus stock - - -
Amortization of deferred compensation - - -
- -------------------------------------------------------------------------------------------------------------
BALANCE, October 31, 1994 7,465,000 74,650 5,069,842
Net income for the year - - -
Restricted stock issued from treasury - - 33,210
Amortization of deferred compensation - - -
- -------------------------------------------------------------------------------------------------------------
BALANCE, October 31, 1995 7,465,000 74,650 5,103,052
Net income for the year - - -
Restricted stock issued from treasury - - 6,019
Return of unvested restricted bonus stock - - -
Amortization of deferred compensation - - -
- -------------------------------------------------------------------------------------------------------------
BALANCE, October 31, 1996 7,465,000 $ 74,650 $ 5,109,071
=============================================================================================================
</TABLE>
See accompanying summary of significant accounting policies and notes to
consolidated financial statements.
F-6
<PAGE> 46
HOLIDAY RV SUPERSTORES,
INCORPORATED
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
================================================================================
<TABLE>
<CAPTION>
Treasury Stock
Retained ------------------------- Deferred
Earnings Shares Amount Compensation
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE, October 31, 1993 $ 6,124,130 68,300 $ (75,358) $ (13,734)
Issuance of common stock - - - -
Net income for the year 757,054 - - -
Return of unvested restricted bonus stock - 1,000 (750) -
Amortization of deferred compensation - - - 13,734
- -------------------------------------------------------------------------------------------------------------
BALANCE, October 31, 1994 6,881,184 69,300 (76,108) -
Net income for the year 1,458,993 - - -
Restricted stock issued from treasury - (54,000) 57,915 (91,127)
Amortization of deferred compensation - - - 7,450
- -------------------------------------------------------------------------------------------------------------
BALANCE, October 31, 1995 8,340,177 15,300 (18,193) (83,677)
Net income for the year 1,331,932 - - -
Restricted stock issued from treasury - (7,500) 8,044 (14,063)
Return of unvested restricted bonus stock - 21,500 (36,281) 36,281
Amortization of deferred compensation - - - 24,696
- -------------------------------------------------------------------------------------------------------------
BALANCE, October 31, 1996 $ 9,672,109 29,300 $ (46,430) $ (36,763)
=============================================================================================================
</TABLE>
See accompanying summary of significant accounting policies and notes to
consolidated financial statements.
F-7
<PAGE> 47
HOLIDAY RV SUPERSTORES,
INCORPORATED
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
================================================================================
<TABLE>
<CAPTION>
Year ended October 31, 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 75,888,882 $ 69,672,230 $ 52,378,540
Cash paid to suppliers and employees (71,513,828) (67,646,691) (50,365,228)
Interest received 392,652 375,847 264,914
Interest paid (1,493,695) (1,324,757) (658,476)
Income taxes paid (977,904) (960,269) (450,136)
- -------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 2,296,107 116,360 1,169,614
- -------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (668,133) (1,802,392) (37,240)
Proceeds from the sale of rental fleet
and equipment 16,230 472,364 330,530
Business acquisition - - (1,165,795)
- -------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (651,903) (1,330,028) (872,505)
- -------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of capital lease obligations (39,357) (13,173) (18,833)
- -------------------------------------------------------------------------------------------------------------
Net cash provided by (used for) operating,
investing and financing activities 1,604,847 (1,226,841) 278,276
CASH AND CASH EQUIVALENTS, beginning of year 4,012,860 5,239,701 4,961,425
- -------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 5,617,707 $ 4,012,860 $ 5,239,701
=============================================================================================================
</TABLE>
See accompanying summary of significant accounting policies and notes to
consolidated financial statements.
F-8
<PAGE> 48
HOLIDAY RV SUPERSTORES,
INCORPORATED
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
================================================================================
<TABLE>
<CAPTION>
Year ended October 31, 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Reconciliation of net income to net cash
provided by operating activities:
Net income $ 1,331,932 $ 1,458,993 $ 757,054
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 397,131 303,093 343,518
Return of unvested bonus stock (21,164) - (750)
Deferred income taxes (92,000) (78,000) 20,000
(Gain) loss on disposal of property
and equipment and rental fleet 22,913 (49,951) (31,351)
Cash provided by (used for):
Accounts receivable 1,101,989 (307,177) (795,223)
Refundable income taxes 31,414 (39,333) -
Inventories (3,799,938) (2,112,596) (2,082,279)
Prepaid expenses - 146,854 (43,439)
Other assets 9,400 (10,910) -
Floor plan contracts 3,537,379 797,302 2,684,884
Accounts payable (354,536) (14,912) (24,133)
Customer deposits (25,256) (109,532) 63,163
Accruals 156,843 132,529 278,170
- -------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities $ 2,296,107 $ 116,360 $ 1,169,614
=============================================================================================================
</TABLE>
See accompanying summary of significant accounting policies and notes to
consolidated financial statements.
F-9
<PAGE> 49
HOLIDAY RV SUPERSTORES,
INCORPORATED
AND SUBSIDIARIES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
================================================================================
<TABLE>
<S> <C>
PRINCIPLES OF The consolidated financial statements include the accounts of Holiday RV
CONSOLIDATION Superstores, Incorporated and its subsidiaries (the "Company"), which include
Holiday RV Rental/Leasing, Inc.; Holiday RV Superstores of South Atlanta, Inc.;
Holiday RV Superstores of South Carolina, Inc.; Holiday RV Superstores West,
Inc.; Holiday RV Superstores of New Mexico, Inc. and Holiday RV Assurance
Service, Inc. All material intercompany accounts and transactions are eliminated.
ACCOUNTS The Company evaluates the collectibility of all accounts receivable and
RECEIVABLE establishes an allowance for doubtful accounts as deemed necessary. At
October 31, 1996 and 1995, all accounts receivable were evaluated and deemed
collectible.
INVENTORIES Inventories are valued at the lower of cost or market. New and used vehicles are
accounted for using specific identification. Cost of parts and accessory
inventories is determined by the first-in, first-out (FIFO) method.
PROPERTY, Property and equipment are stated at cost. Depreciation is computed over the
EQUIPMENT estimated useful lives of the assets by the straight-line method for financial
AND reporting and by accelerated methods for income tax purposes. Amortization of
DEPRECIATION leasehold improvements is computed by the straight-line method over the estimated
useful lives of the assets.
COVENANT NOT The covenant not to compete is being amortized on a straight-line basis over
TO COMPETE seven years. Accumulated amortization totaled $155,000 and $86,000 as of
October 31, 1996 and 1995, respectively.
DEFERRED Deferred compensation consists of the unamortized portion of the value of shares
COMPENSATION of common stock which were awarded to various individuals, including certain
employees of the Company. The awards provide for vesting of the shares over
periods of two years. Amortization of the deferred compensation is computed by
the straight-line method over the vesting periods. Unvested shares forfeited to
the Company are recorded as treasury stock based on the value of the shares at
their original issuance date.
</TABLE>
F-10
<PAGE> 50
HOLIDAY RV SUPERSTORES,
INCORPORATED
AND SUBSIDIARIES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
================================================================================
<TABLE>
<S> <C>
REVENUE Retail sales and related costs of vehicles, parts and service are recognized in
RECOGNITION operations upon delivery of products or services to customers or, in the case of
recreational vehicles, when title passes to the customer. Factory incentives and
rebates are recorded as a reduction in the related product cost as earned.
EARNINGS PER SHARE Earnings per share is based upon the weighted average shares of common stock and
common stock equivalents outstanding during the respective period.
USE OF The preparation of financial statements in conformity with generally accepted
ESTIMATES accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the finan-
cial statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
FAIR VALUE OF Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
FINANCIAL Value of Financial Instruments," requires disclosure of fair value information
INSTRUMENTS about financial instruments. Fair value estimates discussed herein are based upon
certain market assumptions and pertinent information available to management as
of October 31, 1996.
The respective carrying value of certain on-balance-sheet financial instruments
approximated their fair values. These financial instruments include cash, trade
receivables, accounts payable and accrued expenses. Fair values were assumed to
approximate carrying values for these financial instruments since they are short
term in nature and their carrying amounts approximate fair values or they are
receivable or payable on demand. The fair value of the Company's long-term debt
is estimated based upon the quoted market prices for the same or similar issues
or on the current rates offered to the Company for debt of the same remaining
maturities.
RECENT Statement of Financial Accounting Standards No. 121, "Accounting for the
ACCOUNTING Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,"
PRONOUNCEMENTS issued by the Financial Accounting Standards Board (FASB), is effective for
financial statements for fiscal years beginning after December 15, 1995. The new
standard establishes new guidelines regarding when impairment losses on long-
lived assets, which include plant and equipment
</TABLE>
F-11
<PAGE> 51
HOLIDAY RV SUPERSTORES,
INCORPORATED
AND SUBSIDIARIES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
================================================================================
<TABLE>
<S> <C>
and certain identifiable intangible assets and goodwill, should be recognized and
how impairment losses should be measured. The Company does not expect adoption to
have a material effect on its financial position or results of operations.
The Company is required to adopt the provisions of Statement of Financial
Accounting Standards No. 123, ("SFAS No. 123"), Accounting for Stock Based
Compensation, for or before its fiscal year ending October 31, 1997. SFAS
No. 123, among other things, requires certain added disclosures regarding the
fair value of equity instruments, such as stock options, issued by the Company.
In addition, SFAS No. 123 encourages the recognition of expense for the fair
value of equity instruments issued by the Company.
The Company will not adopt the optional expense recognition provisions of SFAS
No. 123, and therefore, the effects of adopting SFAS No. 123 should not be
material.
</TABLE>
F-12
<PAGE> 52
HOLIDAY RV SUPERSTORES,
INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
<TABLE>
<S> <C> <C>
1. ORGANIZATION, The Company is a multi-state retail chain of dealerships engaged in the retail
BUSINESS AND sales and service of recreational vehicles and recreational boats in the
BUSINESS Southeastern United States, New Mexico and California. During 1995, the Company
ACQUISITION dissolved its rental operations and transferred all rental units to used vehicle
inventory to be sold in the ordinary course of business. Each dealership offers a
full line of new and used recreational vehicles, and each dealership maintains a
parts, service and body repair facility. Recreational boat sales are carried at
selected dealerships. The Company also has formed Holiday RV Assurance Service,
Inc., an insurance agency that will receive commissions on the sale of insurance
policies to recreational vehicle owners from a variety of insurance companies,
operations will commence during 1997.
Approximately 76% of the Company's new vehicle sales for the year ended
October 31, 1996 consist of vehicles purchased from two manufacturers.
In January 1994, the Company formed Holiday RV Superstores West, Inc., a
California corporation which acquired existing recreational vehicle sales
locations in Bakersfield and Roseville, California in August 1994 (the
"California acquisition"). The California acquisition has been accounted for by
the purchase method of accounting, and the purchase price of $4,731,000 ap-
proximates the fair value of the net assets acquired. The operating results of
this acquisition are included in the Company's consolidated results of operations
from the date of acquisition.
The following unaudited pro-forma summary presents the consolidated results of
operations of the Company as if the acquisition had occurred at November 1, 1993
and does not purport to be indicative of what would have occurred had the
acquisition been made as of that date or of results which may occur in the
future.
1994
--------------------------------------------------------------------------------
Revenue $ 69,031,000
================================================================================
Net income $ 1,093,000
================================================================================
Earnings per share of common stock $ 0.15
================================================================================
</TABLE>
F-13
<PAGE> 53
HOLIDAY RV SUPERSTORES,
INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
<TABLE>
<S> <C>
2. SUPPLEMENTAL For purposes of the statements of cash flows, the Company considers all highly
CASH FLOW liquid debt instruments purchased with a maturity of three months or less to be
INFORMATION cash equivalents. Cash and cash equivalents include checking accounts, money
market funds and repurchase agreements.
The following summarizes noncash investing and financing transactions:
1996 1995 1994
--------------------------------------------------------------------------------------
Capital lease incurred to
purchase equipment $ 56,649 $ 391,580 $ -
Increase in deferred compensation
from stock issuance 14,063 91,127 -
Decrease in deferred compensation
from return of unvested
restricted bonus stock 36,281 - -
Transfer of rental vehicles to inventory - 495,020 23,402
Accounts payable incurred to purchase
construction in progress - 233,754 -
Purchase of assets in California
acquisition through assumption of
liabilities and issuance of stock
(125,000 shares) - - 3,565,213
================================================================================
3. INVENTORIES Inventories are summarized as follows:
1996 1995
--------------------------------------------------------------------------------
New vehicles $ 17,581,630 $ 14,307,290
New marine 750,147 511,044
Used vehicles 3,320,401 3,273,885
Used marine 117,164 40,464
Parts and accessories 1,426,665 1,263,386
--------------------------------------------------------------------------------
$ 23,196,007 $ 19,396,069
================================================================================
</TABLE>
F-14
<PAGE> 54
HOLIDAY RV SUPERSTORES,
INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
<TABLE>
<S> <C>
4. PROPERTY AND Property and equipment are summarized as follows:
EQUIPMENT
Useful
Lives 1996 1995
---------------------------------------------------------------------------------
Land $ 1,856,981 $ 1,855,136
Buildings and leasehold
improvements 15-31 yrs. 2,234,497 1,176,623
Machinery and shop
equipment 5- 7 yrs. 191,614 179,809
Office equipment
and furniture 5-10 yrs. 974,129 897,313
Vehicles 3- 5 yrs. 154,132 157,325
Construction in progress - 551,875
--------------------------------------------------------------------------------
5,411,353 4,818,081
Less accumulated depreciation
and amortization (1,060,704) (870,680)
--------------------------------------------------------------------------------
$ 4,350,649 $ 3,947,401
================================================================================
Depreciation expense for the years ended October 31, 1996, 1995 and 1994 was
$282,391, $210,182 and $261,251, respectively.
</TABLE>
F-15
<PAGE> 55
HOLIDAY RV SUPERSTORES,
INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
<TABLE>
<S> <C>
5. FLOOR PLAN Substantially all inventories, accounts receivable and equipment are pledged as
CONTRACTS AND security under floor plan contracts. Floor plan contracts are due upon sale of
NOTE PAYABLE the related vehicle.
Interest rates and interest expense are as follows for the years ended
October 31:
Interest Interest
Rate Expense
--------------------------------------------------------------------------------
1996 8.25 - 9.00% $ 1,504,860
1995 7.75 - 10.00% $ 1,335,997
1994 6.00 - 9.25% $ 717,138
================================================================================
Maximum borrowings available under the contracts were $75,500,000 as of October
31, 1996. The following summarizes certain information about the borrowings under
the floor plan contracts:
1996 1995
--------------------------------------------------------------------------------
Maximum amount outstanding
at any month end $ 17,740,533 $ 15,257,815
Average amount outstanding
during the period $ 16,808,584 $ 13,800,043
Weighted average interest rate
during the period 8.5% 9.3%
===============================================================================
Subsequent to year end, the Company renegotiated its contracts, adjusting its
maximum borrowings available under contracts to $57,000,000.
6. STOCK OPTION The Company has an Incentive Stock Option Plan (the "Plan") which provides for
PLAN the issuance of up to 280,000 shares of common stock. The option exercise price
must be at least 100% of the fair market value per share of common stock on the
date of grant, except that such price must be at least 110% of the fair market
value per share for employees who own more than 10% of the outstanding shares of
the Company. The options are exercisable, as determined by the Compensation
Committee, over a period of time, but not more than ten years from the date of
grant and will be subject to such
</TABLE>
F-16
<PAGE> 56
HOLIDAY RV SUPERSTORES,
INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
<TABLE>
<CAPTION>
<S> <C>
other terms and conditions as the Committee may determine. Changes in options are
summarized as follows:
Exercise
Shares Price
--------------------------------------------------------------------------------
BALANCE, October 31, 1993 125,000 $1.38 - 3.38
Granted 25,000 1.82
Canceled (25,000) 3.38
--------------------------------------------------------------------------------
BALANCE, October 31, 1994,
1995 and 1996 125,000 $1.38 - 2.50
================================================================================
At October 31, 1996, all of the above options were exercisable.
Under a separate plan, the Company granted options during 1993 for 50,000 shares
to certain directors with an exercise price of $1.81 per share. All of these
options were exercisable at October 31, 1996. None were exercised during the
year.
7. RESTRICTED In August 1994, as part of the California acquisition, the Company granted
STOCK OPTIONS options for 125,000 shares at an exercise price equal to the average closing
price of the Company's common stock for the 30 days prior to the acquisition,
$1.70 per share. These options expire on September 30, 2004. Of these options,
75,000 are exercisable as of October 31, 1996. The remaining options become
exercisable 25,000 August 1, 1997 and 25,000 August 1, 1998.
In connection with the purchase of the Greer, South Carolina dealership, the
Company granted an option to the sellers to purchase 20,000 shares of the
Company's unregistered common stock. This option was granted on April 2, 1991 at
an exercise price of $3.44 per share. The option was exercisable, in whole or in
part, at anytime within five years from the date of the grant of the option. The
option expired in 1996 without being exercised.
</TABLE>
F-17
<PAGE> 57
HOLIDAY RV SUPERSTORES,
INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
<TABLE>
<S> <C>
8. SALES AND The following is a summary of sales and service and cost of sales and service:
SERVICE
1996 1995 1994
--------------------------------------------------------------------------------
Sales and service:
New vehicles and marine $ 45,769,569 $ 43,294,387 $ 32,887,359
Used vehicles and marine 19,179,699 17,201,027 13,695,022
Service, parts and accessories 6,964,895 6,678,911 4,555,283
Rental revenue - 86,184 302,788
Other, net 2,849,817 2,768,849 1,764,662
--------------------------------------------------------------------------------
$ 74,763,980 $ 70,029,358 $ 53,205,114
================================================================================
Cost of sales and service:
New vehicles and marine $ 41,441,349 $ 38,856,410 $ 30,193,033
Used vehicles and marine 16,335,169 14,508,723 11,755,293
Service, parts and accessories 3,785,152 3,467,932 2,509,682
Rentals - 38,736 192,229
--------------------------------------------------------------------------------
$ 61,561,670 $ 56,871,801 $ 44,650,237
================================================================================
9. INCOME TAXES The components of income taxes are as follows:
1996 1995 1994
--------------------------------------------------------------------------------
Current:
Federal $ 775,000 $ 883,000 $ 380,000
State 146,000 175,000 80,000
--------------------------------------------------------------------------------
921,000 1,058,000 460,000
--------------------------------------------------------------------------------
Deferred:
Federal (78,000) (73,000) 11,000
State (14,000) (5,000) 9,000
--------------------------------------------------------------------------------
(92,000) (78,000) 20,000
--------------------------------------------------------------------------------
Total income taxes $ 829,000 $ 980,000 $ 480,000
================================================================================
</TABLE>
F-18
<PAGE> 58
HOLIDAY RV SUPERSTORES,
INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
<TABLE>
<S> <C>
The components of deferred tax assets and liabilities consist of the following:
1996 1995
--------------------------------------------------------------------------------
Deferred tax assets:
Property and equipment $ - $ 10,000
Deferred compensation 12,000 3,000
Franchise fees 1,000 2,000
Noncompete agreement 31,000 17,000
Inventory 64,000 60,000
Deferred finance income 45,000 -
State net operating loss carryforwards 8,000 7,000
--------------------------------------------------------------------------------
Gross deferred income tax assets 161,000 99,000
Valuation allowance - -
--------------------------------------------------------------------------------
Total deferred tax assets 161,000 99,000
--------------------------------------------------------------------------------
Deferred tax liabilities:
Property and equipment (13,000) -
Deferred finance income - (18,000)
Rental fleet (12,000) (37,000)
--------------------------------------------------------------------------------
Total deferred tax liabilities (25,000) (55,000)
--------------------------------------------------------------------------------
Total net deferred tax assets 136,000 44,000
Less current deferred tax assets (147,000) (49,000)
--------------------------------------------------------------------------------
Long-term deferred tax liabilities $ (11,000) $ (5,000)
================================================================================
</TABLE>
F-19
<PAGE> 59
HOLIDAY RV SUPERSTORES,
INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
<TABLE>
<CAPTION>
<S> <C>
The following summary reconciles differences from taxes at the federal statutory
rate with the effective rate:
1996 1995 1994
------------------- ---------------- ---------------------
Amount Percent Amount Percent Amount Percent
----------------------------------------------------------------------------------
Income taxes at
statutory rates $735,000 34.0% $829,000 34.0% $420,000 34.0%
State income taxes,
net of federal
benefit 104,000 4.8% 112,000 4.6% 59,000 4.8%
Other (10,000) (0.5%) 39,000 1.6% 1,000 .1%
------------------------------------------------------------------------------------
Income taxes at
effective rates $ 829,000 38.3% $980,000 40.2% $480,000 38.9%
====================================================================================
At October 31, 1996, the Company has net operating loss carryforwards of
approximately $128,000 for state income tax purposes that expire beginning in
2004.
10. EMPLOYEE The Company has a Profit-Sharing and Employee Investment Plan which covers
BENEFIT substantially all employees meeting certain minimum age and service requirements.
PLANS Contributions to the plan, included in selling, general and administrative
expenses, were approximately $95,000, $94,000 and $47,000 for 1996, 1995 and
1994, respectively.
11. LEASES AND The Company paid legal fees of approximately $78,000 to a law firm owned in part
RELATED PARTY by a member of the Company's Board of Directors during the year ended October 31,
TRANSACTIONS 1996.
The Company conducts its operations from leased facilities including land and
buildings in Orlando and Fort Myers, Florida; Greer, South Carolina; and
Roseville, California. The Orlando (excluding the corporate offices) facility is
leased from the principal stockholders. The leases expire on various dates from
1998 through 2000, include renewal options and are classified as operating
leases.
The Company leases computer equipment which is included in property and equipment
in the amount of approximately $448,000 with related accumulated depreciation of
$130,000. The lease expires in 2002, at which time the
</TABLE>
F-20
<PAGE> 60
HOLIDAY RV SUPERSTORES,
INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
<TABLE>
<S> <C>
Company will have an option to purchase the computer equipment for a nominal amount.
As of October 31, 1996, future minimum rental payments required under the capital
lease and operating leases that have initial or remaining noncancelable lease
terms in excess of one year are as follows:
Capital Operating
Lease Leases
---------------------------------------------------------------------------
1997 $ 90,558 $ 459,983
1998 90,558 443,862
1999 90,558 372,000
2000 90,558 42,000
2001 90,558 -
Thereafter 86,608 -
---------------------------------------------------------------------------
Total minimum lease payments $539,398 $1,317,845
==========
Amount representing interest 143,699
--------
Present value of minimum lease payments $395,699
========
Rental expense under all operating leases was as follows:
Related
Total Parties
-----------------------------------------------------------------------------
1996 $570,470 $ 144,000
1995 $615,800 $ 144,000
1994 $401,775 $ 144,000
=============================================================================
</TABLE>
F-21
<PAGE> 61
HOLIDAY RV SUPERSTORES,
INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
<TABLE>
<S> <C>
12. COMMITMENTS Concentration of Risk
AND
CONTINGENCIES Due to the nature of its business and the volume of sales activity, the Company
often accumulates bank balances in excess of the insurance provided by Federal
and/or other insurance sources. At October 31, 1996, such excess balances totaled
approximately $5,888,000.
Third-Party Financing
The Company uses third-party banks and/or finance companies to assist its
customers in locating financing for vehicle purchases. The Company refers
customers to one or more of these third-party financing sources and earns a
referral fee if the third-party lender consummates a loan contract with the
customer. These contracts represent third-party financing, and the Company
provides no underwriting or credit approval services for the lender. The
Company's referral fees are in fact a commission and are typically based upon the
difference between the interest rate the customer pays under the contract with
the lender and an interest rate designated by the lender. The Company does not
service the collection of these loans or receivables either initially or in the
future. The Company could be charged back the commission by the lender if the
loan is paid off or foreclosed in a specified period of time, usually limited to
the first six months of the term, and if the chargeback exceeds reserves retained
by the lender.
The Company records this commission income based upon the amount earned less
allowances for chargebacks. In determining the allowance for chargebacks, the
Company takes into consideration the total customer loans outstanding and
estimates the exposure for potential chargebacks associated with these loans. The
Company estimates the probability for loan payoffs and estimates potential
chargebacks to the Company related thereto. The Company also considers the
current and future economic conditions, the effects of the change in consumer
interest rates and the aging of all loans outstanding. The chargeback allowance
was approximately $135,000 and $152,000 at October 31, 1996 and 1995,
respectively. Finance chargebacks were approximately $58,000, $40,000 and
$588,000 for 1996, 1995 and 1994, respectively.
</TABLE>
F-22
<PAGE> 62
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Holiday RV Superstores, Incorporated
Orlando, Florida
The audits referred to in our report dated December 20, 1996 relating
to the consolidated financial statements of Holiday RV Superstores,
Incorporated, which is contained in Item 8 of this Form 10-K, included the
audit of the financial statement Schedule II. This financial statement schedule
is the responsibility of the Company's management. Our responsibility is to
express an opinion on this financial statement based upon our audits.
In our opinion, such financial statement schedule presents fairly, in
all material respects, information set forth therein.
BDO Seidman, LLP
Orlando, Florida
December 20, 1996
<PAGE> 63
SCHEDULE II
HOLIDAY RV SUPERSTORES, INCORPORATED AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE FISCAL YEARS ENDED OCTOBER 31, 1996, 1995, 1994
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Charges Other
Balance at to cost Charges charges- Balance
Beginning and to other additions at end of
Year Description of Period expenses Accounts (deductions) period
(a)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1996 Finance Commissions
Chargeback Reserves $152,092 $ 58,425 $ - - - $ (75,257) $135,260
1995 Finance Commissions
Chargeback Reserves 193,374 39,858 - - - (81,140) 152,092
1994 Finance Commissions
Chargeback Reserves 603,244 339,476 - - - (748,346) 193,374
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Finance income chargebacks paid.
S-1
<PAGE> 64
ANNUAL REPORT ON FORM 10-K
ITEM 11
CUMULATIVE TOTAL SHAREHOLDER RETURN
PERFORMANCE GRAPH AS OF OCTOBER 31,
1991, 1992, 1993, 1994 AND 1995
FOR
HOLIDAY RV SUPERSTORES, INC., THE S&P 500 INDEX, AND
INDEX OF HOLIDAY RV SUPERSTORES, INC.'S PEER GROUP
<PAGE> 65
DISCLOSURE REQUIRED FOR
ITEM 402(L) FOR FORM 10-K (ANNUAL REPORT)
PERFORMANCE GRAPH
Here in displays a line graph plotting three (3) series of points,
whereby the Y axis is the total cumulative shareholder return, and the
X axis is the year, being 1991 thru 1996. The plotted points
(cumulative shareholder return by year) are listed in the table below.
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
RVEE 100.00 102.42 185.40 117.10 234.19 141.45
--------------------------------------------------------------------------
S&P 500 100.00 109.95 126.39 131.27 165.98 205.97
--------------------------------------------------------------------------
PEER GROUP 100.00 88.12 261.10 258.04 204.10 210.37
--------------------------------------------------------------------------
</TABLE>
The performance graph above illustrates the cumulative yearly
shareholder return for the past five years, assuming a $100 investment on
October 31, 1991, in (1) the Company; (RVEE) (2) The Standard and Poor's 500
composite index, assuming reinvestment of dividends; (3) a Company determined
Market Capitalization Peer Group composite index, assuming reinvestment of
dividends.
The Peer Group consist of twenty publicly owned retail companies with
similar market capitalization as Holiday RV Superstores, Inc., whose common
stocks are traded on exchanges. The market capitalization criteria in
determining a peer group was selected by the Company for shareholder return
comparative purposes, as there is no published industry or line-of-business
index comparable to the industry or line-of-business as that of the Company.
The peer group consist of the following companies:
Audio King Corp., Brendles Inc., Chariot Entertainment Inc. (No longer files as
of 9/18/95), Evans Inc., FFP Partners LP-CL, A., Foodarama Supermarkets,
Harold's Stores Inc., Hills Department Stores Inc., Holiday RV Superstores,
Inc., Huffman Koos Inc., Pubco Corp., Seaway Food Town Inc., Siebert Financial
Corp., Sound Advice Inc., Spec's Music Inc., Strober Organization Inc.,
Sunshine-Jr Stores, Uni-Marts Inc. CL A, Village Super Market CL A, Warehouse
Club Inc. (No longer files as of 3/18/96)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> OCT-31-1996
<CASH> 5,618
<SECURITIES> 0
<RECEIVABLES> 507
<ALLOWANCES> 0
<INVENTORY> 23,196
<CURRENT-ASSETS> 29,730
<PP&E> 5,411
<DEPRECIATION> 1,061
<TOTAL-ASSETS> 34,411
<CURRENT-LIABILITIES> 19,282
<BONDS> 0
0
0
<COMMON> 75
<OTHER-SE> 14,698
<TOTAL-LIABILITY-AND-EQUITY> 34,411
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<INCOME-TAX> 829
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<NET-INCOME> 1,331
<EPS-PRIMARY> .18
<EPS-DILUTED> .18
</TABLE>
