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 APRIL 30, 1999
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 May 31, 1999, Holiday RV Superstores, Incorporated had
outstanding 7,186,500 shares of Common Stock, par value $.01 per share.
<PAGE>
TABLE OF CONTENTS
ITEM PAGE
- ---- ----
Part I
Financial Information
1. Financial Statements ................................................... 3
Consolidated Condensed Balance Sheets .................................. 4
Consolidated Condensed Statements of Income ............................ 5
Consolidated Condensed Statements 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
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
04/30/99 10/31/98
----------- -----------
(Unaudited)
CURRENT:
Cash and cash equivalents $10,410,586 $ 7,441,806
Accounts receivable:
Trade and contracts in transit 2,220,699 1,415,930
Other 130,516 373,700
Inventories 27,878,197 23,951,720
Refundable income taxes -- 27,363
Deferred income taxes 159,000 159,000
----------- -----------
TOTAL CURRENT ASSETS 40,798,998 33,369,519
PROPERTY AND EQUIPMENT:
less accumulated depreciation 3,104,961 4,038,377
OTHER ASSETS:
Principally covenant not to compete 155,098 200,184
NONCURRENT DEFERRED INCOME TAXES 109,000 109,000
----------- -----------
TOTAL ASSETS $44,168,057 $37,717,080
=========== ===========
See accompanying notes to the consolidated condensed financial statements.
3
<PAGE>
HOLIDAY RV SUPERSTORES, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
-----------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
04/30/99 10/31/98
------------ ------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Floor plan contracts $ 22,397,222 $ 18,083,481
Accounts payable 1,383,124 878,226
Customer deposits 507,326 185,370
Accrued expenses 716,725 779,656
Current portion of capital lease obligations 72,767 61,963
Income tax payable 222,439 --
------------ ------------
TOTAL CURRENT LIABILITIES 25,299,603 19,988,696
LONG-TERM CAPITAL LEASE OBLIGATION
Less current portion 183,956 220,676
------------ ------------
TOTAL LIABILITIES 25,483,559 20,209,372
------------ ------------
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 14,036,551 12,751,822
Treasury stock, at cost, 298,500 and 251,700
shares, respectively (538,974) (430,098)
Deferred compensation -- (937)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 18,684,498 17,507,708
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 44,168,057 $ 37,717,080
============ ============
</TABLE>
See accompanying notes to the consolidated condensed financial statements.
4
<PAGE>
HOLIDAY RV SUPERSTORES, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
------------------------------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
04/30/99 04/30/98 04/30/99 04/30/98
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
SALES & SERVICE REVENUE $ 26,258,070 $ 24,146,941 $ 44,441,064 $ 39,665,941
COST OF SALES AND SERVICE 22,009,604 19,897,834 37,122,537 32,635,529
------------ ------------ ------------ ------------
Gross Profit 4,248,466 4,249,107 7,318,527 7,030,412
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 2,761,418 2,740,163 5,190,565 5,020,168
------------ ------------ ------------ ------------
Income from operations 1,487,048 1,508,944 2,127,962 2,010,244
INTEREST INCOME 136,094 114,262 250,732 240,664
INTEREST EXPENSE (241,887) (360,321) (589,312) (720,797)
GAIN ON THE SALE OF ASSETS -- -- 316,747 --
------------ ------------ ------------ ------------
Income before income
taxes 1,381,255 1,262,885 2,106,129 1,530,111
INCOME TAXES 538,700 492,500 821,400 596,700
------------ ------------ ------------ ------------
NET INCOME $ 842,555 $ 770,385 $ 1,284,729 $ 933,411
============ ============ ============ ============
BASIC AND DILUTED EARNINGS
PER COMMON SHARE $ 0.12 $ 0.11 $ 0.18 $ 0.13
============ ============ ============ ============
BASIC SHARES 7,166,500 7,281,500 7,180,600 7,345,700
============ ============ ============ ============
DILUTED SHARES 7,256,800 7,302,000 7,263,700 7,366,500
============ ============ ============ ============
</TABLE>
See accompanying notes to the consolidated condensed financial statements.
5
<PAGE>
HOLIDAY RV SUPERSTORES, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
------------------------------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
APRIL 30
1999 1998
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 44,201,435 $ 39,194,434
Cash paid to suppliers and employees (41,366,055) (38,474,266)
Interest received 250,732 240,664
Interest paid (588,677) (717,383)
Income taxes paid (571,598) 35,770
------------ ------------
Net cash provided by operating activities 1,925,837 279,219
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (22,200) (171,849)
Proceeds from the sale of real property and
Equipment 1,199,935 75,501
------------ ------------
Net cash provided by (used for) investing activities 1,177,735 (96,348)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repurchase of common stock (108,876) (257,983)
Repayment of capital lease obligations (25,916) (27,285)
------------ ------------
Net cash used in financing activities (134,792) (285,268)
------------ ------------
Net Increases (Decreases) in Cash and Cash
Equivalents 2,968,780 (102,397)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 7,441,806 7,431,318
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 10,410,586 $ 7,328,921
============ ============
</TABLE>
See accompanying notes to the consolidated condensed financial statements.
6
<PAGE>
HOLIDAY RV SUPERSTORES, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
-----------------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
APRIL 30
1999 1998
----------- -----------
<S> <C> <C>
RECONCILIATION OF NET INCOME TO NET CASH
USED FOR OPERATING ACTIVITIES:
Net income $ 1,284,729 $ 933,411
Adjustments to reconcile net income to net cash
Provided by operating activities:
Depreciation and amortization 159,215 177,081
Amortization of deferred compensation 937 3,565
Gain on disposal of real property (316,747) --
----------- -----------
Changes in assets and liabilities:
(Increases) decreases in:
Accounts receivable (561,585) (471,507)
Inventories (3,926,477) (2,410,685)
Other assets 10,646
3,280
Increases in:
Floor plan contracts 4,313,741 1,409,590
Accounts payable 504,898 376,277
Customer deposits 321,956 102,457
Accrued expenses
and income taxes payable 134,524 155,750
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES: $ 1,925,837 $ 279,219
=========== ===========
</TABLE>
See accompanying notes to the consolidated condensed financial statements.
7
<PAGE>
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, 1998. 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 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 six months
ended April 30, 1999 are not necessarily indicative of results to be expected
for the fiscal year.
NOTE 2. INVENTORIES
Inventories are summarized as follows:
APRIL 30, 1999 OCTOBER 31, 1998
-------------- ----------------
New Vehicles $20,215,307 $16,952,586
New Marine 1,384,638 897,415
Used Vehicles 4,311,080 4,296,247
Used Marine 239,257 145,862
Parts and Accessories 1,727,915 1,659,610
----------- -----------
$27,878,197 $23,951,720
=========== ===========
8
<PAGE>
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, 1998 (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 cautioned the forward looking statement regarding the
Company's Board of Directors "industry consolidation" expansion strategy made in
the financial condition section of this report, is subject to uncertainties and
other factors that could cause the strategy not to be implemented.
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 APRIL 30, 1999 COMPARED TO APRIL 30, 1998.
The Company continued to maintain a strong financial position and high
liquidity for the first six months of fiscal 1999. Cash provided by operating
activities was $1.6 million greater than the prior year because the need to
finance higher used and parts inventories in the prior year used $1.1 million
cash, compared to $177,000 this year. This reduced need, and the increase in net
income of $351,000 were the primary sources of increased cash resulting in a net
increase of $1.9 million in from operating activities.
Cash from investing activities increased $1.2 million due to the sale of a
real property and equipment previously operating as a dealership in Atlanta,
Georgia.
Cash was used for financing activities to continue the Company's common
stock repurchase program of $109,000 compared to $258,000 in the prior year.
9
<PAGE>
The net results on the Company's cash position from all activities was an
increase of $2.97 million compared to a use of $102,000 in the prior year.
As of April 30, 1999 the Company had $10.4 million cash, compared to $7.3
million for the same period last year.
Net working capital increased 22% to $15.5 million from $12.7 million.
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 allowances
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 April 30, 1999, the Company has $25 million maximum borrowing
available under floor plan contracts of which $2.6 million was not used.
The Company's Board of Directors has under consideration an expansion
strategy commonly referred to as an "industry consolidation". The strategy
includes timely acquisitions of groups of recreation vehicle dealers and marine
dealers, requiring the issuance of the Company's common stock, and/or
derivatives of the Company's common stock as partial payment for the
acquisitions. In addition, the strategy may require cash, as partial payment, in
excess of the company's current available cash balances and current available
debt financing. If the expansion strategy is implemented the Company would
consider engaging the an investment banking firm or venture capital firm to
assist in a secondary stock offering, arrangement of debt financing which may be
converted into common stock, or both.
In the event this expansion strategy is not implemented, the Company's
management believes 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 APRIL 30, 1999 COMPARED TO
THE THREE MONTHS ENDED APRIL 30, 1998.
Sales and service revenue increased 9% to $26.3 million from $24.1 million
due to a 16% increase in the average selling price of new vehicle and boats.
This price increase is a continuation of the Company's management focus on
increasing the sales of higher priced motorhomes and boats, targeting diesel
motorhomes with greater potential for higher dollar gross profits. The increase
in the average selling price offset lost revenue due to a decrease of 10% in
total unit sales. The decrease in unit sales was primarily due to decreased
sales in the Florida dealership resulting from increased competition. However,
all the unit sales decreases were in the lower priced marine, tent-trailer and
used products. On a same store basis (without the Atlanta dealership sold in
December, 1998), total revenue increased 12% , total unit sales decreased 7%,
and new vehicle unit sales increased 7%.
Cost of sales, as a percent of revenue increased to 83.8% from 82.4%.
Gross profit remained the same. Decreased gross profits from used vehicle
and boat sales, agency commissions, and parts and service sales were offset by
the increased gross profits from new vehicle and boat sales. As a percent of
revenue, gross profit decreased to 16.2%, from 17.6% . This decline in gross
margin is due to a decrease in the amount of gross profit contributed by parts
and service to the Company's total gross profit, which typically has a gross
margin of 46% to 48%, and an increase in the gross profit contributed by agency
commission, new and used vehicle and boat sales, which typically has a gross
margin of 13% to 14%. Agency commissions and gross profit from the sale of new
and used vehicles and boats, in the aggregate, represented 77% of the Company's
total gross profit, as compared to 71% in the prior year. Agency commissions
represented 19% of the Company's total gross profit, as compared to 20% in the
prior year.
Selling, general and administrative (SG&A) expenses increased slightly to
$2.76 million from $2.74 million. On a same store basis, SG&A increased 9%.
Operating income decreased 1.5% to $1.49 million compared to $1.51 million.
As a percent of revenue, operating income decreased to 5.7% from 6.2%.
Interest income increased 19% to $136,000 from $114,000. Interest expense
decreased 33% to $242,000 from $360,000 due to a lower interest rate paid on the
Company's floor plan contracts..
The combined Federal and State income tax rate was 39.0%, the same as the
prior year. Income taxes for both periods varied from Federal statutory rates
due to State income taxes.
Net income was the highest for any quarter in the Company's history,
increasing 9.4% to $842,555 compared to $770,385 last year. Net income, as a
percent of revenue was 3.2% for both periods.
Earnings per share, both basic and diluted, was 12 cents compared to 11
cents last year.
11
<PAGE>
RESULTS FROM OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 1999 COMPARED TO THE
SIX MONTHS ENDED APRIL 30, 1998.
Sales and service revenue increased 12% to $44.4 million from $39.7 million
due to increased sales prices of new vehicles and boats. On a same store basis
(without the Atlanta dealership sold in December 1998) sales and service revenue
increased 15%. The Company experienced a continued trend, from fiscal 1998, of
increased average sale prices for both new and used vehicles, increasing 18% and
9% respectively. These price increases are a continuation of the Company's
management's focus on increasing the sales of higher priced motorhomes and
boats, targeting diesel motorhomes with greater potential for higher dollar
gross profits. These increases in the average prices offset lost revenue due to
a 3% decrease in total unit sales. However, all the unit sales decreases were in
the lower priced tent trailers and used products. New unit sales increased 3%.
On a same store basis, total unit sales were the same as last year with new unit
sales increasing 6% and used unit sales decreased 6%.
Cost of sales and service, as a percent of revenue, increased to 83.5% from
82.3%.
Gross profit increased 4% to $7.3 million compared to $7.0 million.
Decreased gross profits from parts and service were offset by increased gross
profits from vehicle and boat sales. As a percent of revenue, gross profit
decreased to 16.5% from 17.7%. This decline in gross margin is due to a decrease
in the amount of gross profit contributed by parts and service to the Company's
total gross profit, which typically has a gross margin of 46% to 48%, and an
increase in the gross profit contributed by agency commission, new and used
vehicle and boat sales, which typically has a gross margin of 13% to 14%. Agency
commissions and gross profit from the sale of new and used vehicles and boats,
in the aggregate, represented 77% of the Company's total gross profit compared
to 71% the prior year. Agency commissions represented 18% of the Company's total
gross profit, as compared to 19% in the prior year.
Selling, general and administrative (SG&A) expenses increased 3% to
$5.2 million from $5.0 million. On a same store basis, SG&A increased 10%
primarily due to increased selling expenses related to increased revenue. As a
percent of revenue, SG&A decreased to 11.7% from 12.7%.
Operating income increased 6% to $2.1 million from $2.0 million. As a
percent of revenue, operating income decreased to 4.8% from 5.1%.
Interest income increased 4% to $250,000 from $240,000. Interest expense
decreased 18% to $589,000 from $721,000 due to a lower rate paid on the
Company's floor plan contracts.
A gain of $317,000 resulted from the sale of the Company's Atlanta, Georgia
dealership property and equipment.
The combined Federal and State income tax rate was 39.0%, same as the prior
year. Income taxes for both periods varied from Federal taxes due to State
income taxes.
Net income was the highest for any six-month period in the Company's
history, increasing 38% to $1,284,729 from $933,411. As a percent of revenue,
net income increased to 2.9% from 2.4%.
Earnings per share, both basic and diluted, increased to 18 cents a share
from 13 cents a share.
12
<PAGE>
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 17, 1999 the following
individuals were 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 David M. Kamm
All directors were re-elected, except for Mr. Kamm who was elected to a
newly created board position.
The company did not solicit proxies for the meeting. A total of 4,441,336
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 April
30, 1999.
13
<PAGE>
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
- ----
June 8, 1999 /s/ NEWTON C. KINDLUND
--------------------------------------------
Newton C. Kindlund, President
Chief Executive Officer
Principal Executive Officer
June 8, 1999 /s/ W. HARDEE MCALHANEY
--------------------------------------------
W. Hardee McAlhaney, Vice President
Chief Financial Officer
Principal Financial and Accounting Officer
June 8, 1999 /s/ JOANNE M. KINDLUND
--------------------------------------------
Joanne M. Kindlund, Secretary
Treasurer
Principal Administrative Officer
14
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-START> NOV-01-1998
<PERIOD-END> APR-30-1999
<CASH> 10,411
<SECURITIES> 0
<RECEIVABLES> 2,351
<ALLOWANCES> 0
<INVENTORY> 27,878
<CURRENT-ASSETS> 40,799
<PP&E> 4,487
<DEPRECIATION> 1,382
<TOTAL-ASSETS> 44,168
<CURRENT-LIABILITIES> 25,300
<BONDS> 0
0
0
<COMMON> 75
<OTHER-SE> 18,610
<TOTAL-LIABILITY-AND-EQUITY> 44,168
<SALES> 44,441
<TOTAL-REVENUES> 44,441
<CGS> 37,123
<TOTAL-COSTS> 37,123
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 589
<INCOME-PRETAX> 2,106
<INCOME-TAX> 821
<INCOME-CONTINUING> 821
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,285
<EPS-BASIC> .18
<EPS-DILUTED> .18
</TABLE>
