SECURITIES AND EXCHANGE COMMISSION
WASHINGTON DC 20549
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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, 2000
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, INC.
I.R.S. # 59-1834763
State of Incorporation: Delaware
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
required to be filed 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, 2000, Holiday RV Superstores, Inc. had outstanding
7,339,300 of Common Stock, par value $.01 per share.
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TABLE OF CONTENTS
Item Page
Part I
Financial Information
1. Consolidated Condensed Balance Sheets ........................... 3
Consolidated Condensed Statements of Operations.................. 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 ......................... 11
3. Quantitative and Qualitative Disclosures about Market Risk....... 16
Part II
Other Information
4. Submission of Matters to a Vote of Security Holders.............. 17
6. Exhibits and Reports on Form 8-K................................. 17
2
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HOLIDAY RV SUPERSTORES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
--------------------------------------------------------------------------------
ASSETS
04/30/00 10/31/99
(Unaudited)
----------- -----------
CURRENT:
Cash and cash equivalents $ 4,012,099 $ 9,119,264
Contracts in transit 4,685,159 1,889,721
Accounts receivable:
Trade 1,374,235 170,431
Other 1,045,006 568,106
Inventories 63,990,917 28,755,779
Prepaid expenses 360,315 60,587
Refundable income taxes 128,952 100,868
Deferred income taxes 177,000 177,000
----------- -----------
TOTAL CURRENT ASSETS 75,773,683 40,841,756
PROPERTY AND EQUIPMENT,
less accumulated depreciation 13,580,954 4,598,477
OTHER ASSETS,
Goodwill, less accumulated amortization 6,206,156 --
Other 311,385 177,272
NONCURRENT DEFERRED INCOME TAXES AND OTHER 729,837 117,000
----------- -----------
TOTAL ASSETS $96,602,015 $45,734,505
=========== ===========
See accompanying notes to the consolidated condensed financial statements.
3
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HOLIDAY RV SUPERSTORES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
--------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
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<CAPTION>
4/30/00 10/31/99
(Unaudited)
------------ ------------
<S> <C> <C>
CURRENT LIABILITIES:
Floor plan contracts $ 58,049,626 $ 23,673,241
Accounts payable 3,088,059 410,732
Customer deposits 258,087 111,519
Accrued expenses & other current liabilities 2,112,529 1,690,760
Current portion of capital lease obligations 72,767 69,161
Current portion of notes payable-real property 89,649 --
Notes payable 2,314,333 --
------------ ------------
TOTAL CURRENT LIABILITIES 65,985,050 25,955,413
LONG TERM OBLIGATIONS
Capital leases,
less current portion 221,611 155,730
Notes-real property,
less current portion 7,107,082 --
------------ ------------
TOTAL LONG TERM OBLIGATIONS 7,328,693 155,730
CONVERTIBLE SELLERS NOTES 3,231,919 --
STOCKHOLDERS' EQUITY:
Preferred stock $.01 par; shares
authorized 2,000,000; issued 0
Common stock $.01 par; shares authorized
23,000,000; issued 7,640,000 and 7,505,000 76,400 75,050
Additional paid-in capital 5,655,932 5,184,370
Retained earnings 14,865,676 14,905,597
Treasury stock, 300,700 shares at cost (541,655) (541,655)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 20,056,353 19,623,362
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 96,602,015 $ 45,734,505
============ ============
</TABLE>
See accompanying notes to the consolidated condensed financial statements.
4
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HOLIDAY RV SUPERSTORES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------
(Unaudited)
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<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
04/30/00 04/30/99 04/30/00 04/30/99
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
SALES AND SERVICE REVENUE $ 49,849,728 $ 26,258,070 $ 83,888,401 $ 44,441,064
COST OF SALES AND SERVICE 41,764,470 22,009,604 70,268,258 37,122,537
------------ ------------ ------------ ------------
Gross Profit 8,085,258 4,248,466 13,620,143 7,318,527
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 6,670,234 2,761,418 11,696,095 5,190,565
------------ ------------ ------------ ------------
Income from operations 1,415,024 1,487,048 1,924,048 2,127,962
INTEREST INCOME 75,278 136,094 135,868 250,732
INTEREST EXPENSE (1,204,911) (241,887) (2,042,637) (589,312)
GAIN ON THE SALE OF ASSET -- -- -- 316,747
------------ ------------ ------------ ------------
Income before income taxes 285,391 1,381,255 17,279 2,106,129
INCOME TAXES 132,300 538,700 57,200 821,400
------------ ------------ ------------ ------------
NET (LOSS) INCOME $ 153,091 $ 842,555 $ (39,921) $ 1,284,729
============ ============ ============ ============
BASIC AND DILUTED EARNINGS
(LOSS) PER COMMON SHARE $ 0.02 $ 0.12 $ (0.01) $ 0.18
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF SHARES-BASIC 7,267,100 7,166,500 7,240,400 7,180,600
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF SHARES-DILUTED 7,459,000 7,256,800 7,445,000 7,263,700
============ ============ ============ ============
</TABLE>
See accompanying notes to the consolidated condensed financial statements.
5
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HOLIDAY RV SUPERSTORES, INC. AND SUBSIDIARIES CONSOLIDATED
CONDENSED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------
(Unaudited)
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<CAPTION>
SIX MONTHS ENDED
APRIL 30
2000 1999
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 84,034,969 $ 44,201,435
Cash paid to suppliers and employees (81,389,528) (41,336,055)
Interest received 135,868 250,732
Interest paid (1,633,534) (588,677)
Income taxes paid (85,284) (571,598)
------------ ------------
Net cash provided by operating activities 1,062,491 1,925,837
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (2,310,845) (22,200)
Proceeds from the sale of property and equipment -- 1,199,935
Acquisition of County Line RV, net of cash acquired (4,054,775) --
Acquisition of Little Valley RV, net of cash acquired (1,740,873) --
Acquisition of Luke Potter Assets (666,951) --
------------ ------------
Net cash (used in) provided by investing activities (8,773,444) 1,177,735
CASH FLOWS FROM FINANCING ACTIVITIES:
Treasury stock purchases -- (108,876)
Repayment of capital lease obligations (33,630) (25,916)
Proceeds from notes on real property 2,200,000 --
Proceeds from notes payable 2,920,863 --
Repayment of notes to former County Line shareholders (1,629,845) --
Repayment of notes payable (1,100,000) --
Proceeds from the issuance of common stock from exercise
of options 246,400 --
------------ ------------
Net cash provided by (used in) financing activities 2,603,788 (134,792)
------------ ------------
Net (decreases) increases in cash and cash equivalents (5,107,165) 2,968,780
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 9,119,264 7,441,806
------------ ------------
CASH AND CASH EQUIVALENTS, END OF QUARTER $ 4,012,099 $ 10,410,586
============ ============
</TABLE>
See accompanying notes to the consolidated condensed financial statements.
6
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HOLIDAY RV SUPERSTORES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------
(Unaudited)
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<CAPTION>
SIX MONTHS ENDED
APRIL 30
2000 1999
------------ ------------
<S> <C> <C>
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net (loss) income $ (39,921) $ 1,284,729
Adjustments to reconcile net (loss) income to net cash
Provided by operating activities:
Depreciation and amortization 368,369 159,215
Amortization of deferred compensation -- 937
Gain on disposal of property and equipment -- (316,747)
Stock option compensation expense 160,990 --
Changes in assets and liabilities, net of effect of acquisitions
(Increases) decreases in:
Contracts in transit (2,795,438) (297,404)
Accounts receivable (168,704) (264,181)
Refundable income taxes (28,084) --
Inventories (9,948,520) (3,926,477)
Other assets 1,389,227 10,646
Increases (decreases) in:
Floor plan contracts 11,438,629 4,313,741
Accounts payable 748,970 504,898
Customer deposits 146,568 321,956
Accrued expenses and income taxes payable (209,595) 134,524
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 1,062,491 $ 1,925,837
============ ============
</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 Holiday's 10-K for the fiscal year
ended October 31, 1999. 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 Holiday's
financial position and results of operations. Due to the seasonality of the
Holiday's business and other economic factors, the results of operations for six
months ended April 30, 2000 are not necessarily indicative of results to be
expected for the fiscal year.
NOTE 2. INVENTORIES
Inventories are summarized as follows:
APRIL 30, 2000 OCTOBER 31, 1999
-------------- ----------------
New RV $44,770,275 $20,922,867
New Marine & Other 2,575,318 1,503,756
Used RV 13,339,585 4,543,606
Used Marine & Other 900,624 209,276
Parts and Accessories 2,405,115 1,576,274
----------- -----------
$63,990,917 $28,755,779
=========== ===========
NOTE 3. ACQUISITIONS
On November 11, 1999, Holiday acquired 100% of the issued and outstanding
stock of County Line Select Cars, Inc. The total purchase price paid to the
County Line shareholders was $6.5 million, consisting of $5.0 million cash and
$1.5 million in notes convertible into Holiday's common stock. In connection
with the County Line acquisition, the Company repaid $1.6 million of loans
outstanding to the former County Line shareholders. Holiday also granted options
on 38,000 shares of Holiday stock to each of the two County Line shareholders,
at then market price, for future employment services to Holiday. The acquisition
has been accounted for under the purchase method of accounting, which resulted
in the recognition of approximately $4.0 million in goodwill, to be amortized
over 20 years on a straight-line basis.
On March 1, 2000, Holiday acquired 100% of the issued and outstanding stock
of Little Valley Auto & RV Sales, Inc. The total purchase price paid to the
Little Valley shareholders was $3.4 million, consisting of $1.7 million cash and
$1.7 million in a note convertible into Holiday common stock. The acquisition
has been
8
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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - CONTINUED
accounted for under the purchase method of accounting which resulted in the
recognition of approximately $1.7 million in goodwill, to be amortized over 20
years on a straight-line basis
The following unaudited pro-forma summary presents the consolidated results
of operations of Holiday as if the acquisitions had occurred at the beginning of
periods presented herein. This presentation is for informational purposes only
and does not purport of being indicative of what would have occurred had the
acquisitions been made as of these dates or of results which may occur in the
future.
SIX MONTHS ENDED
04/30/00 04/30/99
----------- -----------
Revenue $89,172,000 $87,531,000
Net (Loss) Income (72,000) 1,575,000
Diluted (Loss) Earnings Per Share $ (0.01) $ 0.22
On January 11, 2000, Holiday acquired all of the land and buildings related
to the operations of County Line Select Cars, Inc. from County Line's former
shareholders. The total purchase price was $6.5 million, with the sellers
providing first mortgage financing for $5.0 million. The mortgage has a 10-year
term at an interest rate of 9.5% per annum, with principal and interest payable
monthly based on a 20-year amortization.
On March 17, 2000 Holiday entered into a lease with Luke Potter Winnebago,
Winter Garden, Florida, and acquired inventory and selected operating assets in
connection with the relocation of its Orlando, Florida dealership.
NOTE 4. ACQUISITION DEBT
In connection with the acquisition of County Line Select Cars, Inc.,
Holiday issued two $750,000 notes to the former shareholders of County Line. The
notes have a three-year term and were issued at an interest rate of 8.25% per
annum. Payments of interest only are due quarterly, with the full principal
balance due on or before three years from issuance. The notes are convertible,
at the option of the holder, into common stock of Holiday at a fixed conversion
price per share, after two years from the date of issuance.
In connection with the acquisition of Little Valley Auto & RV Sales, Inc.,
Holiday issued a note to the former shareholders of Little Valley in the amount
of $1.73 million. The note has a three-year term and was issued at an interest
rate of 7.5% per annum. Payments of interest only are due quarterly, with the
full principal balance due on or before three years from issuance. The note is
convertible, at the option of the holder, into common stock of Holiday at a
fixed conversion price per share, after two years from the date of issuance.
Holiday borrowed $1.6 million from Doerge Capital Management in connection
with the Little Valley acquisition. The interest rate was 15.0% per annum. In
connection with the loan, Holiday issued to the lender, 22,000 warrants to
purchase shares of Holiday at then market price. The warrants are for five years
and have a one- year vesting period. Approximately $29,000 has been ascribed to
the warrants under
9
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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - CONTINUED
the Black-Scholes valuation model and the value is being recognized as
consulting expense by Holiday over the life of the loan. Principal and interest
were due 90 days from funding. The loan has been repaid in full by Holiday.
David J. Doerge, a member of Holiday's Board of Directors, is president of
Doerge Capital Management.
NOTE 5. STOCK OPTIONS AND WARRANTS
Holiday granted stock options during the six months ended April 30,
2000 to seven of its executives for a total of 491,000 shares. The grants were
made pursuant to Holiday's 1999-Stock Option Plan and 1999 Stock Compensation
Program.
On April 13, 2000 Holiday entered into a financial consulting and
investment agreement with Schneider Securities, Inc. for a term of one year.
Compensation for these services consists of $20,000 payable upon execution of
the agreement and $60,000 in installments over the remaining term of the
agreement. In addition, Holiday issued to Schneider warrants to purchase up to
350,000 shares of Holiday stock as follows: 150,000 shares at $5,00 per share;
100,000 shares at $7.50 per share; and 100,000 shares at $10.00 per share. The
warrants have a one-year vesting period and a term of five years. Approximately
$360,000 has been ascribed to the warrants under the Black-Scholes valuation
model and this value is being recognized as consulting expense by Holiday over
the warrants vesting period.
The results of operations for the six months period ended April 30, 2000
includes approximately $161,000 compensation expense for stock options granted
and warrants issued.
NOTE 6. SUBSEQUENT EVENTS
On May 11, 2000, Holiday borrowed $1.0 million from Armando Alonso
principally to repay acquisition related debt. The interest rate was 6.75% per
annum. Holiday paid $36,000 in loan fees to the lender and issued to the lender
warrants to purchase 10,000 shares of common stock of Holiday at then market
price. The loan principal and interest are due and payable 90 days from funding.
Mr. Alonso is a Senior Vice President of Holiday and a former shareholder of
County Line Select Cars, Inc.
10
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements.
These forward-looking statements may generally be identified by introductions
such as "outlook" for an upcoming period of time, or words and phrases such as
"should," "expects," "hopes," "plans," "anticipates," "projected," "believes,"
"forward-looking" (or variants of those words and phrases) or similar language
indicating the expression of an opinion or view concerning the future. Holiday
cautions investors that any forward-looking statements made by or on behalf of
Holiday 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 Holiday's Form
10-K for the year ended October 31, 1999 (many of which have been discussed in
prior SEC filings by Holiday). Though Holiday has attempted to list the factors
it believes to be important to its business, Holiday wishes to caution investors
that other factors might prove to be important in affecting Holiday'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 management assess the impact
of each 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 Holiday's view as of the date
the statement was made. Holiday undertakes no obligation to publicly update or
revise any forward-looking statements, whether as a result of new information,
future events, or otherwise.
GENERAL
Holiday is a multi-store retail chain engaged in the retail sales and
service of recreation vehicles, or RVs, boats and other recreation vehicles.
Currently Holiday operates 13 full service retail centers, five in Central and
North Central Florida, two in the Gulf Coast areas of Tampa and Ft. Myers,
Florida, one in Spartanburg, South Carolina, two in California's central valley
cities of Roseville and Bakersfield, one in Las Cruces, New Mexico, one in
Prosperity, West Virginia, and one in Wytheville, Virginia.
Holiday intends to capitalize on the anticipated double-digit growth and
upon the significant consolidation opportunities available in the highly
fragmented recreation vehicle industry by acquiring additional dealers and
improving their performance and profitability through the implementation of
Holiday's operating strategies. The primary acquisition focus is on
well-established recreation vehicle dealers in geographic markets not currently
served by the operating subsidiaries, particularly geographic markets with
strong demographics. Holiday is also considering opportunities within its
existing markets when operating and marketing efficiencies can be obtained by
the addition of more dealerships. Holiday may expand its range of product lines
and its market penetration by acquiring dealers that distribute recreation
vehicle product lines different from those currently offered by Holiday.
As a result of the considerable industry experience and relationships of
Holiday's management team, Holiday believes it is well positioned to identify
and evaluate acquisition candidates and assess their growth prospects, the
quality of their management teams, their local reputation with customers, and
the suitability of their locations. Holiday believes it is regarded as an
attractive acquirer by dealers because of (1) Holiday's historical performance
and the experience and reputation of its management team within the industry;
(2) Holiday's decentralized operating strategy, which enables the managers of an
acquired dealer to continue
11
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their involvement in dealership operations; (3) the ability of management and
employees of an acquired dealer to participate in Holiday's growth and expansion
through potential stock ownership and career advancement opportunities; (4) the
ability to offer liquidity to the owners of acquired dealers through the receipt
of stock or cash.
On November 11, 1999 Holiday purchased 100% of the outstanding common stock
of County Line Select Cars, Inc., based in Ocala, Florida. County Line's annual
revenue was approximately $70 million prior to the acquisition. The County Line
purchase established a leadership position in Florida by expanding the number of
dealerships in Florida from three to eight. The acquisition also strengthened
Holiday's depth of management by establishing Holiday's first regional office.
On March 1, 2000 Holiday purchased 100% of the outstanding stock of Little
Valley Auto & RV Sales, Inc. Little Valley has two dealerships, one in
Prosperity, West Virginia and one in Wytheville, Virginia. Little Valley's
annual revenue was approximately $13 million prior to the acquisition. The
Little Valley purchase expands Holiday's platform in the Mid-Atlantic states.
The quality and experience of management and the historical profitability of its
operations fell well within Holiday's acquisition criteria.
Holiday has launched a marketing program to consolidate and rebrand the
various tradenames of its subsidiaries under a new national tradename
identity--Recreation USA. Currently, Holiday and its subsidiaries operate under
multiple tradenames, including the original tradename Holiday RV Superstores
along with County Line RV / Recreation USA and Little Valley RV. Holiday intends
to gradually phase in its new tradename during Fiscal 2000 as customer awareness
of the Recreation USA brand increases. This strategy capitalizes on the "brand
name equity" of the acquired stores while the new name--Recreation USA--becomes
more recognized. This is the strategy Holiday intends to use when acquiring
dealerships in the future.
MATERIAL CHANGES IN FINANCIAL CONDITION
Certain current accounts materially changed during the period. These
changes are a result of normal seasonality of the business and the impact of
recent acquisitions except as discussed in the liquidity and capital resources
section of this report.
LIQUIDITY AND CAPITAL RESOURCES
Holiday's cash needs are primarily for its strategic acquisitions, and to a
lesser degree to support operations including non-floored inventory for resale
and slower sales period liquidity. These cash needs have historically been
financed with cash from operations. Changes in Holiday's new inventory and
partial changes in used inventory are financed by floor plan credit facilities.
During the period ended April 30, 2000, Holiday's cash flows increased
significantly reflecting the activities of the County Line acquisition and the
Little Valley acquisition. Cash flows from operating activities nearly doubled
in all major categories. Net cash provided by operating activities decreased to
$1.1 million from $1.9 million the prior year primarily due to the increase in
interest expense of $963,000. Increases in inventories of $9.9 million and
increases in the receivable, contracts in transit of $2.8 million, were
primarily financed by increased floor plan. The receivable increases were
primarily from financing sources of Holiday's customers that increased due to
higher sales.
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Investing activities used $8.8 million cash, consisting of $4.1 million to
purchase County Line, $1.7 million to purchase Little Valley, $667,000 for
purchase of selected assets from Luke Potter and $2.3 million for purchase of
property, plant and equipment, primarily for building the relocated Spartanburg,
S.C. dealership.
Financing activities for the six months ended April 30, 2000 provided net
cash of $2.6 million. Financing sources were $2.2 million from a real property
mortgage on the new Spartanburg dealership and $2.9 million of notes payable.
Cash was used to retire $1.6 million in notes from the prior shareholders of
County Line, a condition of the County Line acquisition, and the repayment of
$1.1 million of notes payable to Doerge Capital Management. Doerge Capital
loaned Holiday a total of $2.1 million in the period. David Doerge, a member of
Holiday's Board of Directors, is President of Doerge Capital
Net use of cash from all activities was $5.1 million reducing cash and cash
equivalents to $4.0 million as of April 30, 2000, compared to $9.1 million as of
October 31, 1999.
Working capital decreased to $9.8 million from $15.5 million the prior
year, primarily due to a decrease in current assets resulting from cash used for
acquisitions and increased current liabilities resulting from additional floor
plan financing of vehicle inventory.
Holiday's principal long-term commitments, as of April 30, 2000, consist of
obligations under operating leases and commitments, at the option of the note
holders, to convert notes into Holiday's common stock at a fixed conversion
price.
Holiday also has a contingent liability to repay a portion of agency
commission, or referral fees, received from lending institutions whereby Holiday
referred customers to one or more third-party financing sources and earned
agency commissions if the lender consummated a loan contract with the customer.
In some cases, Holiday could be required to pay back a portion of the agency
commission 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
chargeback amount exceeds reserves retained by the lender. Holiday records
commission income based upon the amount earned less allowances for chargebacks.
In determining the allowance, Holiday takes into consideration the current and
predicted future economic conditions, the effects of changes in consumer
interest rates, and the aging of referred customer loans to estimate potential
chargebacks.
Holiday's growth strategies are dependent upon obtaining adequate financing
for the purchase of recreation vehicle and marine dealerships. Holiday's
management is currently evaluating various sources of capital, its cost, and its
ultimate effect on Holiday's capitalization. Schneider Securities was recently
engaged by Holiday to assist in the evaluation of financing alternatives and to
advise Holiday on financial matters.
Holiday currently has approximately $18 million available under floor plan
lines of credit to finance new and used inventory.
Holiday's management believes it can obtain additional debt financing at
reasonable cost for its expansion. Three of the dealership properties owned by
Holiday are not mortgaged. Management is currently considering mortgage
financing, or the sale of its real property on a leaseback arrangement, from
which the proceeds could be used for expansion of operations.
Holiday intends to continue the use of its common stock, either by initial
payment or by issuing debt convertible to common stock, as one form of partial,
or complete payment for acquisitions. However,
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management does not expect a dilutive effect on the common stockholders of
Holiday as a result of issuing such common stock.
On January 7, 2000, a special shareholder meeting approved seven items
recommended by Holiday's board. Among the items, two could provide Holiday with
additional capital raising opportunities. Holiday's authorized common shares
were increased from 10 million to 23 million. Secondly, Holiday was authorized
to issue up to two million shares of preferred stock. Management feels both of
these items are necessary to initiate Holiday's expansion.
During the next 12 months it may be necessary to issue additional common
stock, additional debt convertible to common stock, or preferred stock that
could be converted to common stock, to fund Holiday's expansion. However,
management believes the issuance of additional common stock or preferred stock
convertible to common stock will be anti-dilutive to its shareholders.
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED APRIL 30, 2000, COMPARED
TO THE THREE MONTHS ENDED APRIL 30, 1999.
Sales and service revenue increased 90% to $49.9 million from $26.3
million, primarily due to revenue from the newly acquired dealerships in fiscal
2000. Of the increase, $20.3 million, or 86%, was from the newly acquired County
Line and Little Valley dealerships, and $3.3 million, or 14% was on a same store
basis. On a proforma comparable basis (all stores for the full three months),
sales and service revenue increased by $800,000 or 1.5%.
In spite of the negative impact of increased gas prices and interest rates
on customer traffic, Holiday was able to increase comparable store sales.
Management has responded to these market conditions with a new focus on
aggressive promotions, improved product mix and service.
Gross profit increased 90% to $8.1 million from $4.2 million. As a
percentage of revenue, gross margin remained the same, 16.2%. Management has
implemented a strategy to position Holiday to increase its overall gross margin
with increased revenues from sources other than new and used sales with higher
gross margins, primarily parts and service. Margins from parts and services have
shown increases from 47.2% for the same period in the prior year to 50.9% in the
current year.
Selling, general and administrative (S,G&A) expenses increased $3.9 million
or 142% to $6.7 million from $2.8 million, primarily due to $2.8 million for the
newly acquired dealerships. Approximately $1.1 million of the total S,G&A
increase was due to expenses associated with (1) building an infrastructure for
Holiday's current and future expansion, (2) acquisition related expenses, and
(3) improving shareholder relations. Increased expenses for promoting the new
trade name, "Recreation USA" and the relocation of two dealerships also impacted
the quarter's SG&A, but to a lesser degree. Management expects the
infrastructure building and the acquisition related expenses to continue to
increase at a lower rate and having a significantly lower impact on total S,G&A,
as revenue from acquisitions increase and the integration of new acquired
businesses are completed.
Operating income decreased 5% to $1.42 million from $1.49 million.
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Interest expense increased $963,000, or 400% to $1.2 million from $241,000.
Increases in floor plan balances to finance new and used inventory accounted for
38% of the increase, higher interest rates accounted for 50%, and interest on
acquisition related debt accounted for 12%.
Income before income taxes decreased $1.1 million, or 79% to $285,000 from
$1.38 million.
The combined federal and state tax rate is 46% compared to 39% in the prior
year. The combined rate increased due to increases in non-deductible expenses
for tax, primarily goodwill.
Net income decreased 82% to $153,091 from $842,555. Net income, as a
percent of revenue, decreased to 0.3% compared 3.2% last year.
Earnings per share were 2 cents compared to 12 cents the prior year.
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 2000, COMPARED TO THE
SIX MONTHS ENDED APRIL 30, 1999.
Sales and service revenue increased 89% to $83.9 million from $44.4 million
primarily due to revenue from the newly acquired dealerships in fiscal 2000. Of
the increase, $37.0 million, or 94% was from the newly acquired County Line and
Little Valley RV dealerships and $2.5 million of the increase or 6% was on a
same store basis. On a proforma comparable basis (all stores for the full six
months) sales and service increased $1.6 million or 1.9%.
In spite of the negative impact of increased gas prices and interest rates
on customer traffic, Holiday was able to increase comparable store sales.
Management has responded to these market conditions with a new focus on
aggressive promotions, improved product mix and service.
Gross profit increased 86% to $13.6 million from $7.3 million. As a
percentage of revenue, gross margin decreased to 16.2% from 16.5%. This decrease
is the result of two factors, (1) a strategy to establish more attractive
pricing, at lower margins to increase revenue and build a larger customer basis,
at the expense of lower margins, and (2) continuation of the prior quarter's
strategy to change inventory mix resulting in the sale of some products at lower
than normal gross margins. Management has implemented a strategy to position
Holiday to increase its overall gross margin with increased revenues from
sources other than new and used sales with higher gross margins, primarily parts
and service. Margins from parts and service have shown increases from 47.2% for
the same period in the prior year to 50.9% in the current year.
Selling, general and administrative (S,G&A) expense increased 125% to $11.7
million from $5.2 million. As a percent of revenue S,G&A expense increased, to
13.9% from 11.7%. These increases were primarily due to $4.8 million for the
newly acquired dealerships. Approximately $1.2 million of the total increase was
due to expenses associated with (1) building an infrastructure for Holiday's
current and future expansion, (2) acquisition related expenses and (3) improving
shareholder communications. Increased expenses for promoting the new tradename
"Recreation USA" and relocation of two dealerships also impacted the S,G&A, but
to a lesser degree. Management expects the infrastructure building and the
acquisition related types of expenses to continue to increase at a lower rate
having a significantly lower impact on total S,G&A, as revenue from,
acquisitions increases and the integration of acquired businesses are completed.
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Operating income decreased 10% to $1.9 million from $2.1 million. As a
percent of revenue, operating income decreased to 2.3% from 4.8%.
Interest expense increased 247% or $1.4 million to $2.0 million from
$589,000. Increases in floor plan balances to finance new and used inventory
accounted for 57% of the increase, higher interest rates accounted for 32% and
interest on acquisition related debt accounted for 11%.
Income before tax decreased to $17,279 compared to $2.1 million the prior
year. As a percent of revenue, income before income tax is negligible in the
current period, compared to 4.7 % the prior year.
The combined federal and state tax provision was $57,200 exceeding income
before tax due to non-deductible expenses for tax, primarily goodwill.
Net income decreased to a loss of $39,921 from an income of $1.3 million
the prior year. Net income, as a percent of revenue is negligible in the current
year compared 2.9 % last year.
Earnings per share was a loss of 1 cent compared to earnings of 18 cents in
the prior year.
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
FOREIGN EXCHANGE. To date, Holiday's revenue from operations has
exclusively been denominated in United States dollars. The recreation vehicle
and boat products that Holiday sold to date have been priced in United States
dollars and all our sales in the fiscal year 1998 and 1999 and the first six
months of fiscal 2000 have been denominated in United States dollars. In the
future, Holiday may acquire recreation vehicle or boat products that are priced
in currencies other than the United States dollar and Holiday may expand sales
operations outside the United States. If either of these events occur,
fluctuations in the values of the respective currencies in which Holiday
purchases or sells could adversely affect Holiday. Due to the constantly
changing currency exposures and the volatility of currency exchange rates, there
can be no assurance that Holiday would not experience currency losses in the
future, nor can Holiday predict the effect of exchange rate fluctuations upon
future operating results. In the event Holiday conducts transactions in
currencies other than the United States dollar, management intends to carefully
evaluate Holiday's currency management policies. If management deems it
appropriate, Holiday may consider hedging a portion of a currency exposure in
the future.
INTEREST RATES. Holiday invests its surplus cash in financial instruments
consisting principally of overnight bank repurchase agreements with fixed rates
of interest. Investments in both fixed rate and floating rate interest earning
instruments carry a degree of interest rate risk. Fixed rate securities may have
their fair market value adversely impacted due to a rise in interest rates,
while floating rate securities may produce less income than expected if interest
rates fall. Holiday's overnight repo investments have some of the
characteristics of floating rate securities, since the rates are subject to
change each business day. Due in part to these factors, our future investment
income may fall short of expectations due to changes in interest rates. If in
the future we invest in longer term fixed rate investments we may suffer losses
in principal if forced to sell securities which have seen a decline in market
value due to changes in interest rates. We may also face interest rate risk
exposure in connection with debt issued in connection with our acquisition
strategy.
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PART II
OTHER INFORMTION
There is no information to report under Items 1, 2, 3, or 5 of Part II of
this report.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Holiday's annual meeting of shareholders was held on May 19, 2000 at which
the following individuals were elected to the Board of Directors:
Directors to hold office until 2001
David J. Doerge
David A. Kamm
Directors to hold office until 2002
Lee Sanders
William E. Curtis
Directors to hold office until 2003
Michael S. Riley
Ronald G. Huneycutt
Votes cast for all directors were the same number being 4,807,916 votes
for, 8,700 votes against and no abstentions.
PricewaterhouseCoopers, LLP was also ratified by the shareholders as
Holiday's auditors for the 2000 fiscal year. Votes for the ratification were
4,970,080, votes against 2,400, and abstentions were 1,400.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
EXHIBITS
See the Exhibit Index on page 19.
REPORTS ON FORM 8-K
Holiday filed a report on Form 8-K dated March 1, 2000 reporting the
acquisition of 100% of the issued and then outstanding common stock of Little
Valley Auto & RV Sales, Inc. Holiday filed a Form 8 K/A dated May 15, 2000
including the audited historical financial statements of the business acquired
and proforma financial information required under Item 7 of the report filed on
Form 8-K dated March 1, 2000.
Holiday filed a report on Form 8-K dated March 17, 2000 reporting a press
release issued by Holiday announcing the acquisition of inventory and operating
assets from, and entering into a facility lease with Luke Potter Winnebago in
Winter Garden, Florida.
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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, INC.
----
/s/ RONALD G. HUNEYCUTT
-------------------------
June 14, 2000 Ronald G. Huneycutt, President
Chief Executive Officer
/s/ GARY RODNEY
--------------------------
June 14, 2000 Gary Rodney, Vice President
Chief Financial Officer
Principle Accounting Officer
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Exhibit Index
EXHIBIT NO. DESCRIPTION
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27.1 Financial Data Schedule - For EDGAR filed copy only
