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 JULY 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 August 25, 1998, Holiday RV Superstores, Incorporated had outstanding
7,265,300 shares of Common Stock, par value $.01 per share.
<PAGE>
TABLE OF CONTENTS
Item Page
Part I
Financial Information
1. Consolidated Condensed Balance Sheets ................................. 3
Consolidated Condensed Statements of Income ........................... 5
Consolidated Condensed Statements of Cash Flows........................ 6
Notes to Consolidated Condensed Financia
Statements....................................................... 8
2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............................. 9
Part II
Other Information
4. Submission of Matters to a Vote of Security Holders.................... 13
6. Exhibits and Reports on Form 8-K....................................... 13
2
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
HOLIDAY RV SUPERSTORES, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
------------------------------------------------------
ASSETS
07/31/98 10/31/97
(UNAUDITED)
----------- ---------
CURRENT:
Cash and cash equivalents $ 7,235,095 $ 7,431,318
Accounts receivable:
Trade and contracts in transit 1,083,555 841,212
Other 424,404 307,530
Inventories 21,955,186 20,712,744
Deferred income taxes 149,000 149,000
----------- -----------
TOTAL CURRENT ASSETS 30,847,240 29,441,804
PROPERTY AND EQUIPMENT
less accumulated depreciation 4,106,844 4,209,371
OTHER ASSETS
Principally covenant not to compete 206,151 261,090
NONCURRENT DEFERRED INCOME TAXES 67,000 67,000
----------- -----------
TOTAL ASSETS $35,227,235 $33,979,265
=========== ===========
See accompanying notes to the consolidated condensed financial statements.
3
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<TABLE>
<CAPTION>
HOLIDAY RV SUPERSTORES, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
-----------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
07/31/98 10/31/97
(UNAUDITED)
------------ ------------
<S> <C> <C>
CURRENT LIABILITIES:
Floor plan contracts $ 16,089,301 $ 15,805,446
Accounts payable 719,207 511,323
Customer deposits 190,865 141,586
Accrued expenses 666,820 898,639
Current portion of capital lease obligations 60,284 55,514
Income tax payable -- 97,693
------------ ------------
TOTAL CURRENT LIABILITIES 17,726,477 17,510,201
LONG -TERM CAPITAL LEASE OBLIGATIONS
less current portion 236,944 286,051
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 12,392,142 11,058,706
Less:
Treasury stock, at cost, 192,700 and 31,300
Shares respectively (308,176) (50,193)
Deferred compensation (7,073) (12,421)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 17,263,814 16,183,013
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 35,227,235 $ 33,979,265
============ ============
</TABLE>
See accompanying notes to the consolidated condensed financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
HOLIDAY RV SUPERSTORES, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
-----------------------------------------------------
(Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED
07/31/98 07/31/97 07/31/98 07/31/97
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
SALES & SERVICE REVENUE $ 18,111,580 $ 15,581,274 $ 57,777,521 $ 52,415,139
COST OF SALES AND SERVICE 14,828,164 12,426,627 47,463,693 42,623,612
------------ ------------ ------------ ------------
Gross Profit 3,283,416 3,154,647 10,313,828 9,791,527
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 2,459,725 2,503,103 7,479,893 7,423,863
------------ ------------ ------------ ------------
Income from operations 823,691 651,544 2,833,935 2,367,664
INTEREST INCOME 144,775 143,766 385,439 351,571
INTEREST EXPENSE (312,641) (352,742) (1,033,438) (1,047,729)
------------ ------------ ------------ ------------
Income before income
taxes 655,825 442,568 2,185,936 1,671,506
INCOME TAXES 255,800 171,000 852,500 648,000
------------ ------------ ------------ ------------
NET INCOME $ 400,025 $ 271,568 $ 1,333,436 $ 1,023,506
============ ============ ============ ============
EARNINGS PER SHARE
BASIC $ 0.06 $ 0.04 $ 0.18 $ 0.14
============ ============ ============ ============
DILUTED $ 0.05 $ 0.04 $ 0.18 $ 0.14
============ ============ ============ ============
WEIGHTED AVERAGE
SHARES OUTSTANDING
BASIC 7,272,300 7,449,700 7,321,000 7,449,700
============ ============ ============ ============
DILUTED 7,306,200 7,468,000 7,355,000 7,468,000
============ ============ ============ ============
</TABLE>
See accompanying notes to the consolidated condensed financial statements.
5
<PAGE>
HOLIDAY RV SUPERSTORES, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
-----------------------------------------------------
NINE MONTHS ENDED
JULY 31
1998 1997
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 57,418,304 $ 52,199,389
Cash paid to suppliers and employees (55,502,631) (48,796,951)
Interest received 385,439 351,571
Interest paid (1,036,092) (1,045,201)
Income taxes paid (1,047,886) (654,385)
------------ ------------
Net cash provided by operating activities 217,134 2,054,423
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (127,277) (191,472)
Proceeds from the sale of equipment 16,240 1,000
------------ ------------
Net cash used in investing activities (111,037) (190,472)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repurchase of common stock (257,983) --
Repayment of capital lease obligations (44,337) (41,063)
------------ ------------
Net cash used in financing activities (302,320) (41,063)
NET INCREASES (DECREASES) IN CASH AND CASH
EQUIVALENTS (196,223) 1,822,888
Cash and cash equivalents, beginning of period 7,431,318 5,617,707
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 7,235,095 $ 7,440,595
============ ============
See accompanying notes to the consolidated condensed financial statements.
6
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HOLIDAY RV SUPERSTORES, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
-------------------------------------------------------
NINE MONTHS ENDED
JULY 31
1998 1997
----------- -----------
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net income $ 1,333,436 $ 1,023,506
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 265,224 322,540
Amortization of deferred compensation 5,348 27,738
Loss on disposal of property and equipment -- 12,697
Changes in assets and liabilities:
(Increases) decreases in:
Accounts receivable (359,217) (220,528)
Inventories (1,242,442) 2,372,755
Other assets 3,279 (617)
Increases (decreases) in:
Floor plan contracts 283,855 (1,807,239)
Accounts payable 207,884 599,727
Customer deposits 49,279 175,599
Accrued expenses
and income tax payable (329,512) (451,755)
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 217,134 $ 2,054,423
=========== ===========
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, 1997. 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 eliminations 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 and nine months
ended July 31, 1998 are not necessarily indicative of results to be expected for
the fiscal year.
NOTE 2. INVENTORIES
Inventories are summarized as follows:
JULY 31, 1998 OCTOBER 31, 1997
------------- ----------------
New Vehicles $15,599,081 $15,276,085
New Marine 874,354 617,067
Used Vehicles 3,721,823 3,214,149
Used Marine 131,902 135,377
Parts and Accessories 1,628,026 1,470,066
---------- ----------
$21,955,186 $20,712,744
=========== ===========
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 and nine months ended July 31, 1997.
8
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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 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.
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains 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 in the Company's Form 10-K for the year ended October 31, 1997 (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.
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.
FINANCIAL CONDITION AS OF JULY 31, 1998 COMPARED TO JULY 31, 1997.
The Company continued to maintain a strong financial position and high
liquidity for the first nine months of fiscal 98. Inventories increased $1.2
million of which $284,000 was financed by floor plan contracts with financial
institutions and $958,000 cash was used to finance the balance. Inventory
increases were the result of the Company's management focus on stocking and
selling higher priced motorhomes.
The net result of all operating activities was an increase in cash of
$217,000 for the nine month period, compared to an increase of $2.1 million the
same period the prior year. In Fiscal 97 the Company was reducing overstocked
used inventory levels.
Net cash used in investing activities decreased to $111,037 from $190,472
due to purchasing less equipment.
Cash used in financing activities increased to $302,000 from $41,000 as a
result of the Company's stock repurchase program. The Company announced in
January, 1998 a program to repurchase up to
9
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$1 million of it's common stock. The Company's management expects to continue
the stock repurchase program through the balance of the current calendar year.
The net results on the Company's cash position from all activities was a
decrease of $196,000 for the current year compared to an increase of $1,823,000
for the prior year.
As of July 31, 1998 the Company had $7.2 million cash, compared to $7.4
million at the same time last year.
Net working capital increased 13% to $13.1 million as of the end of the
quarter compared to $11.6 million at the same time 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
recognizes agency commission income based upon the amount earned less an
allowance for chargebacks. In determining the allowance, the Company takes into
consideration the total customer loans outstanding and estimates the exposure
for 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.
As of July 31,1998, the Company had $29 million maximum borrowing available
under floor plan contracts of which $13 million was not used.
The Company's management feels it can obtain additional debt financing at
sub-prime interest rates for expansion and/or diversification of its operations.
Currently, management has no expansion or diversification prospects requiring a
secondary stock offering or 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.
10
<PAGE>
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THREE MONTHS ENDED JULY 31, 1998 COMPARED TO THE
THREE MONTHS ENDED JULY 31, 1997.
Sales and service revenue increased 16.2% to $18.1 million from $15.6
million due to a 28% increase in the average selling price of the Company's
primary source of revenue, new vehicle sales. This increase was the result of
management's continued focus on the sale of higher priced Class A motorhomes
targeting, the diesel motorhomes with greater potential for higher dollar gross
profits.
Used vehicle sales increased 14%, also due to an increase in the average
selling price.
The Company's management feels increases in the higher priced new and used
vehicles were primarily the result of pent-up demand resulting from the
depressed first quarter sales due to the "El Nino" effect on its markets. The
Company's management also predicts it will continue to see increased revenue for
the remaining quarter of fiscal 1998 due to the strong pent-up demand.
Cost of sales, as a percent of revenue increased to 81.9% from 79.8%.
Gross profit increased 4.1% to $3.28 million from $3.15 million. As a
percent of revenue, gross profit decreased to 18.1% from 20.2% primarily due to
lower gross profit percentage from the sale of higher priced motorhomes. This
inverse relationship between sale price and gross profit as a percent of sale
price is typical in the industry; i.e., the higher sale price, the lower the
gross profit as a percent of the sale price. However, as the sales price
increases, dollar gross profits increase.
Agency commissions represented 16.8% of the Company's total gross profit,
as compared to 17.6% in the prior year. Agency commissions and gross profit from
the sale of new and used vehicles and boats, in the aggregate, represented 72%
of the Company's total gross profit, as compared to 71% in the prior year.
Selling, general and administrative (SG&A) expenses decreased 2% to $2.46
million from $2.50 million. As a result, income from operations increased 26% to
$824,000 from $652,000.
Interest income remained the same, $144,000. Interest expense decreased 11%
to $313,000 from $353,000, due to lower rates on floor plan financing for new
inventory.
The combined Federal and State income tax rate was 39.0% in the current
quarter compared to 38.6% in the same quarter last year. Income taxes for both
periods varied from the Federal statutory rates due to State Income Taxes.
Net income increased 47% to $400,025 from $271,568. Net income as a percent
of revenue increased to 2.2% from 1.7%.
11
<PAGE>
RESULTS FROM OPERATIONS FOR THE NINE MONTHS ENDED JULY 31, 1998 COMPARED TO THE
NINE MONTHS ENDED JULY 31, 1997.
Sales and service revenue increased 10.2% to $57.8 million from $52.4
million due to a 22% increase in the average selling price of new vehicle sales.
This increase was the result of management's continued focus on the sale of
higher priced Class A motorhomes, targeting the diesel motorhome with greater
potential for higher gross profits.
Used vehicle sales increased 8% due to an increase in the average sales
price.
Cost of sales, as a percent of revenue, increased to 82.1% from 81.3%.
Gross profit increased 5.3% to $10.3 million compared to $9.8 million. As a
percent of revenue, gross profit decreased to 17.9% from 18.7% primarily due to
lower gross profit percentage from the sale of higher priced motorhomes.
Agency commissions represented 18.7% of the Company's total gross profit,
as compared to 17.9% in the prior year. Agency commissions and gross profit from
the sale of new and used vehicles and boats, in the aggregate, represented 75%
of the Company's total gross profit in both years.
Selling, general and administrative (SG&A) expenses increased 1% to $7.48
million from $7.42 million. Income from operations increased 19.7% to $2.8
million from $2.4 million.
Interest income increased 10% to $385,400 from $351,600. Interest expense
decreased slightly to $1.03 million from $1.05 million, due to lower rates on
floor plan financing of new inventory.
The combined Federal and State income tax rate was 39.0% in the current
period compared to 38.8% in the same period last year. Income taxes for both
periods varied from Federal taxes due to State income taxes.
Net income increased 30% to $1,333,436 from $1,023,506. Net income as a
percent of revenue increased to 2.3% from 2.0%.
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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Shareholders held May 18, 1998 the following
individuals were re-elected to the Board of Directors:
Paul G. Clubbe Joanne M. Kindlund
Roy W. Parker Newton C. Kindlund
Harvey M. Alper W. Hardee McAlhaney
James P. Williams
The company did not solicit proxies for the meeting. A total of 4,519,604
shares of Common Stock were represented and voted at the meeting.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
EXHIBITS
27 Financial Data Schedule (for SEC use only).
FORM 8-K
The Company filed no report on Form 8-K for the three months ended July 31,
1998.
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
- ----
September 3, 1998 /s/ NEWTON C. KINDLUND
----------------------
Newton C. Kindlund, President
Chief Executive Officer
Principal Executive Officer
September 3, 1998 /s/ W. HARDEE MCALHANEY
-----------------------
W. Hardee McAlhaney, Vice President
Chief Financial Officer
Principal Financial and Accounting Officer
September 3, 1998 /s/ JOANNE M. KINDLUND
----------------------
Joanne M. Kindlund, Secretary
Treasurer
Principal Secretary and Treasurer
14
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> JUL-31-1998
<CASH> 7,235
<SECURITIES> 0
<RECEIVABLES> 1,508
<ALLOWANCES> 0
<INVENTORY> 21,955
<CURRENT-ASSETS> 30,847
<PP&E> 5,596
<DEPRECIATION> 1,489
<TOTAL-ASSETS> 35,227
<CURRENT-LIABILITIES> 17,726
<BONDS> 0
0
0
<COMMON> 75
<OTHER-SE> 17,189
<TOTAL-LIABILITY-AND-EQUITY> 35,227
<SALES> 57,777
<TOTAL-REVENUES> 57,777
<CGS> 47,464
<TOTAL-COSTS> 47,464
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,033
<INCOME-PRETAX> 2,186
<INCOME-TAX> 853
<INCOME-CONTINUING> 1,333
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,333
<EPS-PRIMARY> .18
<EPS-DILUTED> .18
</TABLE>
