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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON DC 20549
-----------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JANUARY 31, 1997
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
I.R.S. # 59-1834763
State of Incorporation: Florida
Sand Lake West Executive Park
7851 Greenbriar Parkway
Orlando, Florida 32819
(407) 363-9211
Indicate by check mark whether the registrant (1) has filed all
reports by Section 13 or 15(d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
----- -----
As of March 10, 1997, Holiday RV Superstores, Incorporated had
outstanding 7,435,700 shares of Common Stock, par value $.01 per share.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Item Page
<S> <C> <C>
Part I
Financial Information
1. Financial Statements ............................................................................ 3
Consolidated Condensed Balance Sheets ........................................................... 4
Consolidated Condensed Statements of Income ..................................................... 5
Consolidated Statement of Cash Flows ............................................................ 6
Notes to Consolidated Condensed Financial Statements ............................................ 8
2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ......................................................... 9
Part II
Other Information
6. Exhibits and Reports on Form 8-K .............................................................. 13
</TABLE>
2
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PART I.
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
HOLIDAY RV SUPERSTORES, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS
01/31/97 10/31/96
(Unaudited)
------------ ------------
<S> <C> <C>
CURRENT:
Cash and cash equivalents $ 4,313,110 $ 5,617,707
Accounts receivable:
Trade and contracts in transit 1,663,738 506,804
Other 393,843 254,961
Inventories 24,165,024 23,196,007
Refundable income taxes -- 7,919
Deferred income taxes 147,000 147,000
------------ ------------
TOTAL CURRENT ASSETS 30,682,715 29,730,298
PROPERTY AND EQUIPMENT,
less accumulated depreciation 4,404,634 4,350,649
OTHER ASSETS,
principally covenant not to compete 309,461 330,200
------------ ------------
TOTAL ASSETS $ 35,396,810 $ 34,411,147
============ ============
</TABLE>
See accompanying notes to the consolidated condensed financial statements.
3
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HOLIDAY RV SUPERSTORES, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
01/31/97 10/31/96
(Unaudited)
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<S> <C> <C>
CURRENT LIABILITIES:
Floor plan contracts $ 18,455,272 $ 17,504,302
Accounts payable 929,071 547,375
Customer deposits 138,063 76,405
Accrued expenses 551,387 1,103,729
Current portion of capital lease
obligations 57,054 49,737
------------ ------------
TOTAL CURRENT LIABILITIES 20,130,847 19,281,548
LONG TERM CAPITAL LEASE OBLIGATIONS,
less current portion 322,669 345,962
DEFERRED INCOME TAXES 11,000 11,000
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 5,109,071
Retained earnings 9,822,520 9,672,109
Less:
Treasury stock, at cost, 15,300 (46,430) (46,430)
Deferred compensation (27,517) (36,763)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 14,932,294 14,772,637
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 35,396,810 $ 34,411,147
============ ============
</TABLE>
See accompanying notes to the consolidated condensed financial statements.
4
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HOLIDAY RV SUPERSTORES, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
- -------------------------------------------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
01/31/97 01/31/96
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<S> <C> <C>
SALES & SERVICE REVENUE $ 15,402,414 $ 13,664,583
COST OF SALES AND SERVICE 12,649,675 11,125,220
------------- ------------
Gross Profit 2,752,739 2,539,363
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 2,235,870 2,225,851
------------- ------------
Income from operations 516,869 313,512
INTEREST INCOME 104,324 88,371
INTEREST EXPENSE (375,382) (388,289)
------------- ------------
Income before income taxes 245,811 13,594
INCOME TAXES 95,400 5,845
------------- ------------
NET INCOME $ 150,411 $ 7,749
============= ============
EARNINGS PER SHARE
OF COMMON STOCK $ 0.02 $ 0.00
============= ============
WEIGHTED AVERAGE NUMBER OF COMMON STOCK AND
COMMON STOCK EQUIVALENTS OUTSTANDING 7,450,600 7,512,000
============= ============
</TABLE>
See accompanying notes to the consolidated condensed financial statements.
5
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HOLIDAY RV SUPERSTORES, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
- ------------------------------------------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
1/31/97 1/31/96
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 14,106,498 $ 13,555,057
Cash paid to suppliers and employees (14,854,232) (14,547,390)
Interest received 104,324 88,371
Interest paid (366,619) (357,259)
Income taxes paid (142,869) (21,900)
------------- --------------
Net cash used for operating activities (1,152,898) (1,283,121)
------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (138,387) (511,204)
Proceeds from the sale of rental fleet --- 108,696
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Net cash used for
investing activities (138,387) (402,508)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of capital lease obligations (13,312) (7,156)
------------- --------------
Net cash used for financing activities (13,312) (7,156)
Net cash used for operating, investing
and financing activities (1,304,597) (1,692,785)
Cash and cash equivalents, beginning of period 5,617,707 4,012,860
------------- --------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 4,313,110 $ 2,320,075
============= ==============
</TABLE>
See accompanying notes to the consolidated financial statement
6
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HOLIDAY RV SUPERSTORES, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (CONCLUDED)
- -------------------------------------------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
1/31/97 1/31/96
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<S> <C> <C>
RECONCILIATION OF NET INCOME TO NET CASH
USED FOR OPERATING ACTIVITIES:
Net income $ 150,411 $ 7,749
Adjustments to reconcile net income to net cash
used for operating activities:
Depreciation and amortization 110,864 90,907
Gain on disposal of rental fleet --- (10,798)
Cash provided by(used for):
Accounts receivable (1,295,916) (98,728)
Inventories (968,158) (4,787,989)
Prepaid expenses 7,919 17,577
Floor plan contracts 950,970 3,708,538
Accounts payable 381,696 (213,191)
Customer deposits 61,658 208,103
Accruals (552,342) (205,289)
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NET CASH USED FOR OPERATING ACTIVITIES ($1,152,898) ($1,283,121)
============== ============
</TABLE>
See accompanying notes to the consolidated condensed financial statements.
7
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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTE 1.
The unaudited financial statements presented herein have been prepared
in accordance with the instructions to Form 10-Q, and do not include all of the
information and disclosures required by generally accepted accounting
principles. These statements should be read in conjunction with the financial
statements and notes thereto included in the Company's Form 10-K for the year
ended October 31, 1996. The accompanying financial statements have not been
examined by an independent accountant in accordance with generally accepted
auditing standards, but in the opinion of management, such financial statements
include all adjustments, consisting only of normal recurring adjustments and
accruals, and inter-company elimination's necessary to summarize fairly the
Company's financial position and results of operations. Due to the seasonality
of the Company's business, the results of operations for three months ended
January 31, 1997 are not necessarily indicative of results to be expected for
the Fiscal year.
NOTE 2. INVENTORIES
Inventories are summarized as follows:
<TABLE>
<CAPTION>
January 31, 1997 October 31, 1996
---------------- ----------------
<S> <C> <C>
New Vehicles $18,157,254 $17,581,630
New Marine 857,966 750,147
Used Vehicles 3,538,257 3,320,401
Used Marine 128,415 117,164
Parts and Accessories 1,483,132 1,426,665
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$24,165,024 $23,196,007
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</TABLE>
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
MATERIAL CHANGES IN FINANCIAL CONDITION
Certain current accounts, such as accounts receivable, inventories,
and floor plan contracts, materially changed during the period. These changes
are a result of normal seasonality of the business, except as discussed in the
financial condition section of this report.
FINANCIAL CONDITION AS OF JANUARY 31, 1997 COMPARED TO JANUARY 31, 1996.
The Company continued to maintain a strong financial position and high
liquidity throughout the quarter. A net of $1.1 million was used for
operating activities primarily to finance short term receivables due from
finance companies providing retail financing for the Company's customer
purchases of vehicles and boats.
Cash used for investing activities decreased from $402,000 primarily
used last year to fund the Bakersfield, California dealership construction, to
$138,000 this year. The $138,000 was used primarily for the acquisition of
additional undeveloped real property to expand the Bakersfield dealership,
allowing for growth, primarily service facilities.
The net results on the Company's cash position from all activities was
a decrease of $1.3 million as compared to a decrease of $1.7 million last
year, resulting in a cash position of $4.3 million as of January 31, 1997 as
compared to $2.3 million as of January 31, 1996. The primary reason cash was
$2 million higher in 1997, as compared to 1996, was $1.6 million more in cash
at the beginning of the 1997 year as compared to the 1996 year.
Net working capital increased to $10.6 million as of January 31, 1997
compared to $9.4 million as of January 31, 1996.
The Company's principal long term commitments 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 certain
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 is required to pay back (chargeback) the referral fee to the lender if
the loan is paid off or foreclosed in the first six (6) months of the term of
the loan, if the chargeback amount exceeds reserves retained by the lender. The
Company records agency 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 pay-offs and the potential chargebacks to
the Company related thereto. The Company also considers current and expected
future economic conditions, the effects of the change in customer interest
rates and the aging of all customer loans outstanding when estimating potential
chargebacks to the Company. Management expects the current allowance for
9
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chargebacks to be sufficient to repay this chargeback contingency and does not
expect the ultimate liability to have a significant impact on the liquidity of
the Company.
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 has $57 million maximum borrowing available under floor
plan contracts of which $38 million was not used.
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 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 THE THREE MONTHS ENDED JANUARY 31, 1997,
COMPARED TO THE THREE MONTHS ENDED JANUARY 31, 1996.
Sales and service revenue increased 12.7% to $15.4 million from $13.6
million primarily due to the increase in the sale of new and used recreation
vehicles (RVs) at the Las Cruces, New Mexico, dealership, opened in October,
1995. Used sales were particularly strong increasing 33%. The Company's
management feels these increases will continue, but to a lesser degree, and
follow the forecast for the industry according to the CIT Group's Second Annual
Recreation Vehicle Outlook (September, 1996), forecasting unit sales growth to
increase 8% in 1997.
Cost of sales, as a percent of revenue, increased to 82.1% from 81.4%.
10
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Gross profit increased 8.4% to $2.75 million from $2.54 million. As a
percent of revenue, gross profit decreased to 17.9% from 18.6%. The decrease
in gross profit as a percent of revenue, was due to deceased gross profits on
new RVs resulting from increased pressure on margins from competitors due to
oversupply of product, primarily in the Southeastern states.
Selling, general and administrative (SG&A) expense remained the same,
$2.2 million. The Company experienced some economics-of-scale, where by
revenues increased without a corresponding increase in expenses. As a
percent of revenue, SG&A decreased to 14.5% from 16.3%.
Income from operations increased 65% to $517,000 from $313,500. As a
percent of revenue, income from operations increased to 3.4% from 2.3%.
Interest income increased to $104,000 from $88,000 due to more cash to
invest on a short term basis. Interest expense decreased slightly to $375,000
from $388,000, while the average outstanding floor plan contracts for the
quarter in Fiscal 97 increased to $18 million as compared to an average
outstanding in quarter for Fiscal 96 of $15.8 million. The lower interest
cost, with increased average flooring, is the result of a change in the first
quarter of the Company's primary floor plan source to obtain more favorable
terms and conditions for financing the Company's new inventory.
Income before income taxes increased to $245,811 from $13,594. As a
percent of revenue, income before income taxes increased to 1.6% from 0.1%.
The combined Federal and State income tax rate was 39% in Fiscal 97
compared to 43% in Fiscal 96. Income taxes for both periods varied from the
Federal rates due to state income taxes.
Net income increased to $150,411 from $7,749. As a percent of
revenue, net income increased to 1.0% from 0.1%.
The Company's management does not expect the increase in net income
experienced in this quarter to continue at the same rate in the second quarter
due to a continuation of increased pressure on gross margins from competitors.
However, management does expect increases in the third and fourth quarters due
to increased revenue in it's Western dealerships where competition is not as
strong.
Earnings per share increased to 2 cents from 0 cents per share.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JANUARY 31, 1996 COMPARED TO
THE THREE MONTHS ENDED JANUARY 31, 1995.
Sales and service revenue decreased 12% to $13.7 million from $15.5
million primarily due to a decrease in new vehicle sales. New vehicle dollar
and unit sales decreased 17% and 15% respectively. The Company's management
believes these decreases are a continuation of a national downward sales trend
for new vehicles due to deceased consumer sentiment about the national economy.
Furthermore, severe weather conditions adversely affected sales for some of the
Company's dealerships, especially the California dealerships.
11
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Cost of sales, as a percentage of revenue, decreased to 81.4% from
83.0%.
Gross profit decreased 3.7% to $2.54 million from $2.64 million. As a
percent of revenue, gross profit increased to 18.6% from 17.0% primarily due to
an increase in the average gross profit per new vehicle sold, resulting from a
company wide management focus on increasing gross profit on the sale of new
vehicles.
Selling, general and administrative (SG&A) expenses increased 1.8% to
$2.23 million from $2.19 million. As a percent of revenue, SG&A expenses
increased to 16.3% from 14.1%. The increase in SGK&A expense was primarily due
to start up expense at the Company's new Las Cruces New Mexico dealership. On
a same store basis SG&A decreased 3.6%.
Income from operations decreased 30% to $313,500 from $450,300. As a
percent of revenue, income from operations increased to 2.3% from 2.9%.
Interest income decreased to $88,400 from $94,700 due to the Company
having less cash to invest. Interest expense increased 17.8% to $388,300 from
$329,500 due to increased floor plan balances for new vehicle inventories
resulting primarily from the addition of "highline" diesel powered, bus type
RVs.
Income before income taxes decreased 94% to $13,594 from $215,515. As
a percent of revenue, income before income taxes decreased to 0.1% from 1.4%.
The combined Federal and State income tax rate was 43% in Fiscal 96
compared to 38.9% in Fiscal 95. Income taxes for both periods varied from the
Federal statutory rates due to state income taxes.
Net income decreased 94% to $7,749 from $131,680. Net income, as a
percentage of revenue decreased to 0.1% from 0.8%.
Earnings per share decreased to 0 cents from 2 cents per share.
12
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PART II
OTHER INFORMATION
There is no information to report under Items 1, 2, 3 and 5 of
Part II of this report.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
EXHIBITS
27 Financial Data Schedule (for SEC use only).
REPORTS ON FORM 8-K
None.
13
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date HOLIDAY RV SUPERSTORES, INCORPORATED
March 12, 1997 /s/ Newton C. Kindlund
-----------------------------------------
Newton C. Kindlund, President,
Chief Executive Officer
Principal Executive Officer
March 12, 1997 /s/ Joanne M. Kindlund
-----------------------------------------
Joanne M. Kindlund, Executive
Vice President-Administration,
Secretary/Treasurer
Principal Administrative Officer
March 12, 1997 /s/ W. Hardee McAlhaney
-----------------------------------------
W. Hardee McAlhaney, Vice President
Chief Financial Officer
Principal Financial and Accounting Officer
14
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> JAN-31-1997
<CASH> 4,313
<SECURITIES> 0
<RECEIVABLES> 2,058
<ALLOWANCES> 0
<INVENTORY> 24,165
<CURRENT-ASSETS> 30,683
<PP&E> 5,550
<DEPRECIATION> 1,145
<TOTAL-ASSETS> 35,397
<CURRENT-LIABILITIES> 20,131
<BONDS> 0
0
0
<COMMON> 75
<OTHER-SE> 14,857
<TOTAL-LIABILITY-AND-EQUITY> 35,397
<SALES> 15,402
<TOTAL-REVENUES> 15,402
<CGS> 12,650
<TOTAL-COSTS> 12,650
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 375
<INCOME-PRETAX> 245
<INCOME-TAX> 95
<INCOME-CONTINUING> 150
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 150
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
