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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, 1998
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 4, 1998, Holiday RV Superstores, Incorporated had
outstanding 7,280,200 shares of Common Stock, par value $.01 per share.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Item Page
<S> <C>
Part I
Financial Information
1. Financial Statements................................................................. 3
Consolidated Condensed Balance Sheets ............................................... 3
Consolidated Condensed Statements of Income ......................................... 5
Consolidated Condensed 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 .................................................... 12
</TABLE>
2
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PART I.
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
HOLIDAY RV SUPERSTORES, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
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<TABLE>
<CAPTION>
ASSETS
01/31/98
(Unaudited) 10/31/97
------------ ------------
<S> <C> <C>
CURRENT:
Cash and cash equivalents $ 6,421,814 $ 7,431,318
Accounts receivable:
Trade and contracts in transit 972,976 841,212
Other 344,428 307,530
Inventories 26,275,469 20,712,744
Deferred income taxes 149,000 149,000
------------ ------------
TOTAL CURRENT ASSETS 34,163,687 29,441,804
PROPERTY AND EQUIPMENT,
less accumulated depreciation 4,210,135 4,209,371
OTHER ASSETS,
principally covenant not to compete 241,846 261,090
NONCURRENT DEFERRED INCOME TAXES 67,000 67,000
------------ ------------
TOTAL ASSETS $ 38,682,668 $ 33,979,265
============ ============
</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
--------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
01/31/98
(Unaudited) 10/31/97
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<S> <C> <C>
CURRENT LIABILITIES:
Floor plan contracts $ 20,184,906 $ 15,805,446
Accounts payable 1,039,458 511,323
Customer deposits 268,941 141,586
Accrued expenses 594,333 898,639
Current portion of capital lease
obligations 57,060 55,514
Income tax payable 104,200 97,693
------------ -----------
TOTAL CURRENT LIABILITIES 22,248,898 17,510,201
LONG-TERM CAPITAL LEASE OBLIGATIONS,
less current portion 271,071 286,051
STOCKHOLDERS' EQUITY:
Common stock $.01 par - shares authorized
10,000,000; issued 7,465,000 74,650 74,650
Additional paid-in capital 5,112,271 5,112,271
Retained earnings 11,221,732 11,058,706
Treasury stock, at cost, 157,300 and 31,300
respectively (235,315) (50,193)
Deferred compensation (10,639) (12,421)
------------ -----------
TOTAL STOCKHOLDERS' EQUITY 16,162,699 16,183,013
------------ -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 38,682,668 $ 33,979,265
============ ============
</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
01/31/98 01/31/97
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<S> <C> <C>
SALES AND SERVICE REVENUE $ 15,519,000 $ 15,402,414
COST OF SALES AND SERVICE 12,737,695 12,649,675
------------ ------------
Gross Profit 2,781,305 2,752,739
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 2,280,005 2,235,870
------------ ------------
Income from operations 501,300 516,869
INTEREST INCOME 126,402 104,324
INTEREST EXPENSE (360,476) (375,382)
------------ ------------
Income before income taxes 267,226 245,811
INCOME TAXES 104,200 95,400
------------ ------------
NET INCOME $ 163,026 $ 150,411
============ ============
BASIC AND DILUTED EARNINGS PER SHARE $ 0.02 $ 0.02
============ ============
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
7,407,900 7,435,700
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
AND COMMON STOCK EQUIVALENTS
OUTSTANDING 7,421,300 7,450,600
============ ============
</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
1/31/98 1/31/97
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 15,350,338 $ 14,106,498
Cash paid to suppliers and employees (15,786,123) (14,854,232)
Interest received 126,402 104,324
Interest paid (337,658) (366,619)
Income taxes paid (91,186) (142,869)
-------------- --------------
Net cash used for operating activities (738,227) (1,152,898)
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (148,222) (138,387)
Proceeds from the sale of equipment 75,501 ---
-------------- --------------
Net cash used for investing activities (72,721) (138,387)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repurchase of common stock (185,122) ---
Repayment of capital lease obligations (13,434) (13,312)
-------------- -------------
Net cash used for financing activities (198,556) (13,312)
Net cash used for operating, investing
and financing activities (1,009,504) (1,304,597)
Cash and cash equivalents, beginning of period 7,431,318 5,617,707
-------------- -------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 6,421,814 $ 4,313,110
============== =============
</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
1/31/98 1/31/97
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RECONCILIATION OF NET INCOME TO NET CASH
USED FOR OPERATING ACTIVITIES:
Net income $ 163,026 $ 150,411
Adjustments to reconcile net income to net cash
used for operating activities:
Depreciation and amortization 89,177 101,618
Amortization of deferred compensation 1,782 9,246
Changes in assets and liabilities:
(Increases) decreases in:
Accounts receivable (168,662) (1,295,916)
Inventories (5,562,725) (968,158)
Other assets 2,024 ---
(Increases) decreases in:
Floor plan contracts 4,379,460 950,970
Accounts payable 528,135 381,696
Customer deposits 127,355 61,658
Accrued expenses and income taxes payable (297,799) (544,423)
------------- -------------
NET CASH USED FOR OPERATING ACTIVITIES $ (738,227) $ (1,152,898)
============== =============
</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 fiscal
year ended October 31, 1997. The accompanying financial statements have not
been audited 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, 1998 are not necessarily indicative of results to be expected for
the Fiscal year.
Certain prior year amounts have been reclassified from previous presentations
to conform to 1998 presentation.
NOTE 2. INVENTORIES
Inventories are summarized as follows:
<TABLE>
<CAPTION>
January 31, 1998 October 31, 1997
---------------- ----------------
<S> <C> <C>
New Vehicles $19,001,712 $15,276,085
New Marine 1,007,628 617,067
Used Vehicles 4,587,025 3,214,149
Used Marine 144,268 135,377
Parts and Accessories 1,534,836 1,470,066
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$26,275,469 $20,712,744
=========== ===========
</TABLE>
NOTE 3. EARNINGS PER SHARE
The Company adopted Statement of Financial Accounting Standard No. 128,
earnings per share, in the Quarter ended January 31, 1998. The overall
objective of SFAS No. 128 is to simplify the calculation of earnings per share
(EPS) and achieve comparability with the International Accounting Standards.
The adoption of SFAS No. 128 did not change earnings per share as previously
presented for the Quarter ended January 31, 1997.
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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, 1998 COMPARED TO JANUARY 31, 1997.
The Company continued to maintain a strong financial position with high
liquidity. A net of $738,000 cash was used for operating activities primarily
to finance the increase of used inventory in preparation of the winter selling
season. New inventory increases typical for the first quarter, were financed
by floor plan contracts with financial institutions. In the prior year cash
was used primarily to finance short term receivables due from finance companies
providing retail financing for the Company's customer purchases. Less
customers financed in the current quarter, decreasing the Company's use of cash
to finance these receivables.
Cash used for investing activities decreased $66,000 from prior year due
primarily to proceeds from the sale of equipment offsetting equipment
purchases.
Cash used for financing activities increased $180,000 primarily as a
result of the Company's common stock repurchase program. Since the
announcement of the repurchase program in January, 1998, the Company used a
total of $185,000 cash to repurchase it's shares.
The net results on the Company's cash position from all activities was a
use of $1.0 million as in the current quarter compared to a use of $1.3 million
in the same quarter last year. The net result was a cash position of $6.4
million as of January 31, 1998 as compared to $4.3 million as of January 31,
1997.
Net working capital increased to $11.9 million as of the end of the
quarter compared to $10.6 million for the same period last year.
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
9
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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 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 $34 million maximum borrowing available under floor plan
contracts of which $14 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.
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JANUARY 31, 1998, COMPARED
TO THE THREE MONTHS ENDED JANUARY 31, 1997.
Sales and service revenue increased slightly to $15.5 million from $15.4
million. Unit sales of new vehicles were down 7%, but increased average new
vehicle sale prices resulted in a 1% increase in the new vehicle dollar sales.
The average sales price increase is a result of the Company's focus on the
sale of higher priced Class A motorhomes with greater potential for higher
gross profits.
A decrease in used vehicle unit sales of 14% was offset by an increase in
the average used vehicle sale price resulting in a 3% decrease in used sales
revenue. The increased average used sales price also resulted from the
company's focus on the sale of higher price used Class A motorhomes.
The company's management believes the "El Nino" effect on weather
conditions in both of it's primary market areas, the Southeastern states and
California, had a negative effect on sales in Fiscal
10
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98. However, management also feels that pent-up demand will have a positive
effect on the company's sales later this year when the "El Nino" effect
decreases.
Parts and Service revenue increased 7% reflecting the results of the
Company's continued focus on increasing service facilities to attract more
Parts and Service revenue.
Cost of sales, as a percent of revenue, remained the same, 17.9%.
Gross profit increased 1% to $2.78 million from $2.75 million. Decreased
gross profits from less used vehicle unit sales were offset by increased gross
profits from new vehicle sales, parts and service.
Selling, general and administrative (SG&A) expenses increased slightly to
$2.28 million from $2.24 million primarily due to increased marketing and
promotional expenses. As a result, income from operations decreased 3% to
$501,000 from $517,000.
Interest income increased 21% to $126,000 from $104,000 due to the company
having more cash to invest. Interest expense decreased 4% to $360,000 from
$375,000.
Income before income taxes increased 9% to $267,000 from $246,000.
The combined Federal and State income tax rate was 39.0% in the current
quarter compared to 38.9% in the same quarter last year. Income taxes for both
periods varied from the Federal rates due to state income taxes.
Net income increased 8% to $163,026 from $150,411. Net income as a
percent of revenue increased to 1.1% from 1.0%.
Earnings per share remained the same, 2 cents, despite the adoption of
SFAS No. 128, earnings per share.
11
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PART II
OTHER INFORMATION
There is no information to report under Items 1, 2, 3, and 4 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
12
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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, 1998 /s/ Newton C. Kindlund
-----------------------------------
Newton C. Kindlund, President,
Chief Executive Officer
Principal Executive Officer
March 12, 1998 /s/ Joanne M. Kindlund
-----------------------------------
Joanne M. Kindlund, Executive
Vice President-Administration,
Secretary/Treasurer
Principal Administrative Officer
March 12, 1998 /s/ W. Hardee McAlhaney
-----------------------------------
W. Hardee McAlhaney, Vice President
Chief Financial Officer
Principal Financial and Accounting Officer
13
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> JAN-31-1998
<CASH> 6,422
<SECURITIES> 0
<RECEIVABLES> 1,317
<ALLOWANCES> 0
<INVENTORY> 26,275
<CURRENT-ASSETS> 34,164
<PP&E> 5,561
<DEPRECIATION> 1,351
<TOTAL-ASSETS> 38,683
<CURRENT-LIABILITIES> 22,249
<BONDS> 0
0
0
<COMMON> 75
<OTHER-SE> 16,088
<TOTAL-LIABILITY-AND-EQUITY> 38,682
<SALES> 15,519
<TOTAL-REVENUES> 15,519
<CGS> 12,737
<TOTAL-COSTS> 12,737
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 360
<INCOME-PRETAX> 267
<INCOME-TAX> 104
<INCOME-CONTINUING> 163
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 163
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
