UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
F O R M 10 - K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED OCTOBER 31, 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
IRS Employer ID No. Sand Lake West Executive Park State of Incorporation:
59-1834763 7851 Greenbriar Parkway Florida
Orlando, Florida 32819
(407) 363-9211
Securities registered pursuant to Section 12(b) of the Act:
- None -
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK
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 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. X Yes No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
The aggregate market value of voting stock held by non-affiliates as of January
15, 2000, was approximately $18,800,000. As of January 15, 2000, Holiday RV
Superstores, Incorporated had outstanding 7,216,500 shares of Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE.
Portions of the definitive proxy statement for the Company's 2000 Annual Meeting
of Shareholders are incorporated by reference in Part III of this Form 10-K.
<PAGE>
TABLE OF CONTENTS
ITEM PAGE
- ---- ----
PART I
1. Business.............................................................. 3
2. Properties............................................................ 10
3. Legal Proceedings..................................................... 11
4. Submission of Matters to a Vote of Security Holders................... 11
PART II
5. Market for Registrant's Common Equity and
Related Stockholder Matters......................................... 13
6. Selected Financial Data............................................... 14
7. Management's Discussion and Analysis of Financial Condition
and Results of Operation............................................ 16
7A. Quantitative and Qualitative Disclosure About Market Risk............. 26
8. Financial Statements and Supplementary Data........................... 27
9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure............................................ 27
PART III
10. Directors and Executive Officers of the Registrant.................... 27
11. Executive Compensation ............................................... 27
12. Security Ownership of Certain Beneficial Owners
and Management...................................................... 27
13. Certain Relationships and Related Party Transactions.................. 27
PART IV
14. Exhibits, Financial Statement Schedules, and Report on Form 8-K....... 28
2
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HOLIDAY RV SUPERSTORES, INC.
PART I
ITEM 1. BUSINESS
GENERAL
Holiday RV Superstores, Incorporated is a multi-store retail chain
engaged in the retail sales and service of recreation vehicles, or RVs, and
recreation boats. Holiday currently operates twelve retail centers, six in
Central and North Central Florida, two in the Gulf Coast areas of Tampa and Ft.
Myers, Florida, one in Greer, South Carolina adjacent to Interstate 85, two in
California's central valley cities of Sacramento and Bakersfield and one
adjacent to Interstate 10 in Las Cruces, New Mexico.
Ten centers offer a full line of both new and used recreation vehicles,
maintain full parts and service facilities, and body repair shops and are
equipped to repair virtually any type of recreational vehicle. Two centers
operate as satellite retail outlets selling both new and used vehicles. The
Greer and Las Cruces centers sell and service boats and related marine products.
RECREATIONAL VEHICLE INDUSTRY
The recreation vehicle industry is an approximate $16 billion dollar a
year industry in the United States, according to the RECREATIONAL VEHICLE
INDUSTRY ASSOCIATION, or the RVIA, based in Reston, Virginia. According to the
RVIA, the RV industry caters to the travel and leisure-time needs of an
estimated 25 million RV enthusiasts through the sale and service of recreation
vehicles. According to the RVIA, 292,700 new RVs were shipped by manufacturers
to dealers in 1998 compared to 254,500 RVs in 1997, 247,500 in 1996, and 247,000
in 1995. Industry shipment peaked in 1976 through 1978 with 526,000 to 534,000
units.
According to RVIA, one in ten American families in the United States
owns a recreation vehicle, amounting to nearly nine million owners, and an
estimated 25 million Americans travel in RVs. There are approximately 170
vehicle manufacturers, 295 suppliers and in excess of 3,000 RV dealers in the
United States.
The types of recreation vehicles sold by Holiday consist primarily of
travel trailers and towables, or fifth wheels, designed to be towed by another
vehicle, and motorized self-propelled units, built on automotive chassis, or
motorized vehicles, powered by gasoline or diesel motors.
Towable recreation vehicles consist of travel trailers, including
fifth-wheel travel trailers, folding camping trailers and truck campers--a
recreation camping unit designed to be loaded on to, or affixed to, the bed or
chassis of a truck. Motorized recreation vehicles consist of conventional motor
homes, or Class A, van campers, or Class B, mini-motor homes, low profile motor
homes and compact motor homes--all referred to as Class C--and van conversions.
Class A motor homes are constructed by the recreation vehicle manufacturer on a
chassis that already has the engine and drive components. Class B van campers
are panel type vans to which the recreation vehicle manufacturer adds sleeping
facilities, kitchen and toilet facilities, fresh water storage, 110-volt hook up
and other items. Class C units are built on an automotive manufactured van frame
with an attached cab section, or on an automotive manufactured cab and chassis.
The recreation vehicle manufacturer completes the body section containing the
living area and attaches it to the cab section. For the van conversion, the
recreation vehicle manufacturer modifies a completed van chassis aesthetically
or decoratively in appearance for transportation and recreational purposes.
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Currently, there are many manufacturers of both towable and motorized
recreation vehicles. Although there are several sources for manufactured
conventional vans, including Ford Motor Company, General Motors Corporation,
Chrysler Corporation, and other foreign manufacturers, there are only four major
manufacturers in the United States supplying chassis with engine and drive
components to the recreational vehicle manufacturers: Workhorse Custom Chassis,
Ford Motor Company, Freightliner Corporation and Spartan Motors Corporation.
Ford Motor Company is the largest supplier of chassis to RV manufacturers.
Fuel consumption for motorized recreation vehicles has improved
substantially over the last several years. Diesel engines are growing in
popularity over gasoline engines, primarily in the larger bus-type vehicles.
INDUSTRY OUTLOOK
The long-term prospects for the recreation vehicle industry appear to
be bright. According to the FOURTH ANNUAL RECREATION VEHICLE OUTLOOK (November,
1998), published by the CIT Group Economic Research Department, "In the years to
come, the recreation vehicle industry will benefit from the confluence of forces
including demographics and the industry's effort to promote the RV lifestyle."
THE CIT OUTLOOK concludes that the first group of baby boomers (persons born
between 1946 and 1964) will enter the 55-64 age bracket as early as 2001 and
that by 2010, the number of households in this age group will have reached eight
million. This represents a 65% increase from current levels.
The U.S. Census Bureau confirms the expected high growth of the baby
boomers segment of the U.S. population. According to the Bureau, between 1997
and 2010, approximately 78 million Americans will move into their peak earnings
(and likewise, vacation) years. This age group will drive the 45-64 segment of
the population up 42%. The Bureau also reports the population of 65 and older
(Holiday's second primary customer group) will increase 16% during this time
period, while the general population is expected to only grow just over 11%
during this period.
The RV industry has recognized the baby boomer opportunity and
embarked, in the spring of 1997, on a highly publicized national market
expansion program. This program is aimed at showing the lifestyle appeal of
RVing to the baby boomers. The campaign slogan "Go RVing" accurately portrays
the industry in a very favorable light, offering solitude, family time and the
opportunity to slow down and reconnect with the world around us.
MARKETING
NEW TRADENAME--RECREATION USA
Holiday currently operates under three tradenames:
o Holiday RV Superstores--the original name used by all
dealerships owned by Holiday until October 1999;
o County Line RV--the tradename of the five dealerships
acquired in November 1999 as part
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of the County Line RV acquisition; and
o Recreation USA--a new tradename and salesmark Holiday
introduced in December 1999 to be used by all of Holiday's
retail operations in the future.
Holiday intends to gradually phase in the new tradename--Recreation USA--in
Fiscal 2000 as customer awareness of the name increases and continue to use the
Holiday RV Superstores and County Line RV names until the new name is completely
phased in. This strategy capitalizes on the "brand name equity" of Holiday's
stores and the newly acquired stores, while the new name--Recreation
USA--becomes more recognized. This is the strategy Holiday intends to use when
acquiring RV and boat dealerships in the future.
ADVERTISING AND PROMOTIONS
Holiday has a year-round advertising campaign utilizing newspaper,
direct mail, billboards, yellow pages, an extensive Internet website and
consumer magazine advertising. On-lot promotions and off-lot consumer shows,
organized by trade groups and private companies, primarily during the
peak-selling season, supplement the advertising program. Holiday participates in
35 to 40 consumer RV shows and rallies annually, attended by up to 40,000
consumers each. Holiday also promotes smaller product shows at RV parks whereby
existing RV owners are targeted. Holiday also promotes off-site product shows in
connection with well-known mass merchandisers and RV campgrounds in most of its
markets. Holiday utilizes the services of professional marketing and public
relations firms to assist in implementing the advertising promotion and public
relations campaign.
E-COMMERCE
Holiday's management believes Holiday has one of the most comprehensive
e-commerce efforts in the industry, operating multiple websites under multiple
trade names. The HolidayRV.com site contains price quote access creating
prospective leads, all news releases, and all of Holiday's filings with the SEC,
among other information. A second website, RecUSA.com, launched in December
1999, allows users to choose financing, insurance, and schedule service for
their RV or boat. Purchases through Holiday's Internet sites can be delivered
anywhere and through Holiday's 12 nationwide locations. Holiday's management
expects Internet sales to increase significantly as a result of the RecUSA.com
website.
CUSTOMER BASE
Holiday's customer base demographic characteristics vary from
dealership to dealership, but primarily are represented as the following. The
age group of 35 years and older represents 82% of the customers, with ages 45
and older representing 58%. Eighty-six percent (86%) are married, 49% are
retired, 21% have "blue collar" occupations, and 30% are "white collar" and
professionals. The primary income group is $20,000 to $40,000, comprising 53%.
Twenty-six percent (26%) earn $40,000 to $60,000, and 10% earn over $60,000.
Sixty-two percent (62%) of the customers are prior owners of RVs, and 63% need
to trade their RV, automobile or boat to make a purchase.
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MANUFACTURERS
Holiday currently markets approximately 60 brands of recreational
vehicles and 10 brands of recreational boats. Holiday purchases approximately
46% or more of its new recreational vehicles from Fleetwood Enterprises Inc.,
and Thor Industries, Inc. In addition, Holiday sells new recreational vehicles
and recreational boats purchased from a number of other manufacturers including
Winnebago Industries, National RV Holdings, Inc., SMC Corporation, Western
Recreational Vehicles, Inc., Forest River, Inc., Rexall Industries, Inc.,
Gulfstream Coach, Inc., Bayliner Marine Corporation, Mariah Boats, Inc., and Sea
Ray Boats, Inc. In the opinion of management, the loss of any one brand of new
recreational vehicle would not materially affect Holiday. However, the loss of
all the brands sold by the three largest manufacturers, i.e., Fleetwood
Enterprises, Inc., Thor Industries, Inc., or SMC Corporation, would have a
material effect on Holiday's sales. Holiday's management feels the loss of all
brands from any of these three manufacturers to be highly unlikely. Dealer
representation decisions for manufactured brands are made at the manufacturer's
plants on a brand-by-brand basis, rather than centrally at each respective
company's corporate headquarters.
FLOOR PLAN FINANCING
Substantially all new vehicles and boats held in inventory are pledged
as security under floor plan contracts with financial institutions. Under these
contracts, the sale of a pledged vehicle to a consumer requires payment to the
lender in the amount, or release price, attributable to that vehicle under the
floor plan contract. Manufacturers have their respective repurchase agreements
in force with financial institutions with limited repurchase indemnification to
the lenders against any default by Holiday under the floor plan contracts.
Holiday believes its floor plan financing arrangement is standard in the
industry.
SERVICE AND PARTS
Holiday maintains service facilities fully equipped to handle virtually
any type of recreation vehicle. Holiday is a factory designated chassis warranty
service center for Gillig, Chevrolet Division of General Motors, Freightliner
Motors, Workhorse, and Spartan Motors, which reimburse Holiday for such warranty
services. The Greer and Las Cruces facilities are fully equipped to repair all
brands of boats and motors sold.
Holiday's service facilities are equipped to make engine and drive
train repairs, as well as repairs to refrigerators, ovens and ranges, air
conditioning systems, plumbing and electrical systems of each recreation vehicle
it sells. In addition, Holiday is an authorized service center for most
manufacturers of recreation vehicle components.
Holiday maintains service agreements with most companies whose new
recreational vehicles and marine products it sells. These service agreements
allow Holiday to purchase parts and obtain technical assistance needed to repair
and service vehicles, boats and equipment manufactured by these companies.
Holiday also has a supply of propane gas for resale at all locations, and
provides sewage dump stations for RV waste evacuation.
The parts department of each retail center supports Holiday's sales and
service functions. In addition, each retail center stocks accessory items,
usually sold to recreation vehicle owners, and maintains a computerized
point-of-purchase inventory control and customer tracking system. The Greer and
Las Cruces centers maintain inventories of marine parts and accessories for
marine products sold.
6
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PRINCIPAL PRODUCTS AND SERVICES
Holiday's principal products and services for the last three years are
listed below, by major revenue source, as a percentage of total revenue.
Principal Products or Services as a Percentage of Total Revenue
FISCAL YEAR
PRINCIPAL PRODUCT OR SERVICE 1999 1998 1997
---------------------------- ---- ---- ----
New and Used Vehicles and Boats 88.7% 87.0% 85.6%
Service, Parts and Accessories 7.7 9.3 10.5
Other, Net 3.6 3.7 3.9
----- ----- -----
Total Revenue 100.0% 100.0% 100.0%
===== ===== =====
EMPLOYEE RELATIONS
As of October 31, 1999 and 1998, Holiday had 195 and 193 full-time
employees, respectively. Holiday has no contracts or collective bargaining
agreements with labor unions and has never experienced work stoppages. Holiday's
management considers its relations with employees to be good. Holiday maintains
internal training programs at every level and has a well-developed internal
quality control program and customer satisfaction feedback system for all its
dealerships. Holiday maintains a nation-wide recruitment program for sales,
service and management personnel. Support personnel are usually hired from the
local labor force. Factory training programs are available to the employees of
Holiday and Holiday generally takes full advantage of these programs by sending
its employees to manufacturer supervised schools. Most full time employees are
provided with paid annual vacations, medical and hospitalization insurance
premium reimbursement, sick leave, paid holidays, stock grants and other fringe
benefits. After one year of employment, employees are eligible to participate in
the profit sharing and 401(k) investment plan.
GROWTH STRATEGIES
SAME-STORE REVENUE GROWTH
Holiday expects to grow its revenue via increases in same-store sales.
We expect double-digit same-store revenue to continue due to the demand for
products from high growth of the baby boomers segment of the U.S. population.
PURSUING STRATEGIC ACQUISITIONS
Holiday intends to capitalize on the doubled-digit growth and upon the
significant consolidation opportunities available in the highly fragmented
recreational 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
recreational vehicle dealers in geographic markets not currently served by the
operating subsidiaries, particularly geographic markets with strong
demographics. Holiday also may seek to acquire dealers that, while located in
attractive geographic markets, have not been able to realize
7
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favorable market share or profitability and that can benefit substantially from
Holiday's systems and operating strategies. Holiday is also considering
opportunities within the same markets it operates 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 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; and (4)
the ability to offer liquidity to the owners of acquired dealers through the
receipt of stock or cash.
RECENT ACQUISITION
The first acquisition was completed on November 11, 1999 when Holiday
purchased 100% of the outstanding common stock of County Line Select Cars, Inc.
from its shareholders, Armondo Alonso and Francisco Alonso. 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.
The total purchase price paid to the shareholders for the common stock
was $6.5 million, consisting of $5.0 million cash and $1.5 million in notes
convertible into Holiday common stock. In addition, Holiday advanced $1.6
million in cash to repay existing loans from the shareholders to County Line.
The notes are convertible after two years at a conversion price of $7.50 per
share of Holiday common stock. The purchase price was determined pursuant to an
arms-length negotiation between Holiday and the shareholders.
Prior to the acquisition, County Line operated five recreational
vehicle dealerships in the Florida locations of Clermont, Inverness, Leesburg
and Ocala (2). The produce mix for County Line is similar to Holiday's, both
companies selling popularly priced motorhomes and towable RVs. Holiday intends
to continue these operations as part of its national chain of recreational
vehicle sales and service centers.
The source of funds for this acquisition was $6.6 million from existing
cash on hand.
SEASONALITY
Although the recreation vehicle business is a year round business in
Holiday's markets, the recreation vehicle industry is seasonal. Holiday has
significantly higher sales in the second quarter of its fiscal year, and
significantly lower sales in its first and fourth quarters. During slack seasons
at a particular retail center, Holiday reduces inventory of both new and used
RVs and introduces other cutbacks in operations, reducing the impact of the
seasonality on the results of operations. Because a substantial portion of
Holiday's expenses are fixed, operating income tends to be lower in the first
and fourth quarters of Holiday's fiscal year
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and higher in the second quarter.
COMPETITION AND BUSINESS RISK
Based upon statistics supplied by the RVIA, the recreation vehicle
industry in North America includes approximately 3,000 RV dealers and 170
vehicle manufacturers. Competition in the sale of new and used recreational
vehicles is intense. Holiday competes with a large number of retailers, some of
which operate in more than one location, although most of Holiday's competitors
operate from a single location. Holiday believes it is one of the most
competitive RV dealers in the nation offering approximately 70 brands of new
recreation vehicles and new boats, supported by extensive coast to coast service
network of facilities that is unique in the industries it serves.
Significant competitive factors in the recreation vehicle sales and
service industry include vehicle availability, price, service, reliability,
quality of service, and convenience. Holiday's management is of the opinion that
it is competitive in all factors listed above. Nevertheless, Holiday's
management anticipates it will continue to face strong competition in the
future.
The recreation vehicle business is heavily dependent upon the
availability and terms of financing for the retail purchase of its products.
Consequently, changes in interest rates and the tightening or loosening of
credit by government agencies and financial institutions have dramatically
affected Holiday's business in the past and are likely to do so in the future.
INSURANCE COVERAGE
Holiday has historically had little difficulty in obtaining insurance
coverage for its dealership operations. That insurance has been obtained by
Holiday annually on a competitive bid basis, at what it believes to be
reasonable premium rates. The applicable premium rates have been increasing
slightly, however, Management does not believe that these increases will have a
material adverse effect on Holiday's business in the foreseeable future.
GOVERNMENT REGULATIONS
Holiday's service facilities are subject to federal, state and local
laws and regulations concerning environmental matters. These laws and
regulations affect the storing, dispensing and discharge of petroleum based
products and other waste, and affect Holiday in the securing of permits for its
full service dealership operations and in the ongoing conduct of such
operations. The securing of permits and compliance with all laws and regulations
can be costly, and could affect Holiday's earnings. Further, each dealership of
Holiday must comply with the requirements of local governmental bodies
concerning zoning, land use, and environmental factors. State and local laws and
regulations also require each dealership to obtain licenses to operate as a
dealer in recreational vehicles. Holiday has obtained all necessary licenses and
permits and management believes Holiday is in full compliance with all federal,
state and local laws and regulations. Furthermore, management is not aware of
any material capital expenditure necessary for compliance with any federal,
state or local laws and regulations.
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ITEM 2. PROPERTIES
As of October 31, 1999, Holiday owned and leased properties used in
operations were as follows:
Holiday leases the Orlando, Florida center from a minority shareholder
of Holiday. The Orlando dealership is located one half mile from Interstate 4,
on Sand Lake Road and is approximately 2.5 miles from the Interstate 4 entrance
to Walt Disney World. These facilities include 30,000 square feet of buildings
on approximately four acres of land.
The Tampa, Florida center is owned by Holiday and is approximately 3.5
miles from the intersection of Interstate 4 and Interstate 75, on Highway 301.
These facilities include 5.2 acres of land with a 13,000 square-foot building.
The Ft. Myers, Florida center is located on Highway 41, approximately
three miles North of the City, and includes 17,300 square feet of building on
3.6 acres of land. The property is leased from a third party.
The Greer, South Carolina center is leased from a non-affiliated party.
The facility is located adjacent to Interstate 85 between Greenville and
Spartanburg, South Carolina. The facility includes a 31,000 square-foot building
on nine acres of land.
The Roseville, California center is subleased from a non-affiliated
party. The facility is located adjacent to Interstate 80 and includes 24,000
square feet of buildings on 3.6 acres of land.
The Bakersfield, California center is owned by Holiday and is located
adjacent to State Road 99 and includes 17,400 square feet of buildings on 5.9
acres of land.
The Las Cruces, New Mexico center is owned by Holiday and is located
adjacent to Interstate 10. The facility includes 14,000 square feet of buildings
on seven acres of land.
Holiday's corporate office is leased from a non-affiliated party and is
located approximately one quarter of a mile from the Orlando center on Sand Lake
Road. The facilities include 3,750 square feet of office and conference room
accommodations.
FACILITY AND LOCATION
The following table sets forth he location, premise size and building
square footage for Holiday's properties as of October 31, 1999.
APPROXIMATE APPROXIMATE
BUILDING SIZE PREMISE SIZE
RETAIL OPERATIONS SQUARE FEET ACRES
- ----------------- ------------- ------------
Owned by Holiday
Tampa, Florida 13,000 5.2
Bakersfield, California 17,400 5.9
Las Cruces, New Mexico 14,000 7.0
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Leased
Orlando, Florida 30,000 4.0
Ft. Myers, Florida 17,300 3.6
Greer, South Carolina 31,000 9.0
Roseville, California 24,000 3.6
EXECUTIVE OFFICE
- ----------------
Leased
Orlando, Florida 3,750 ---
Holiday believes that its facilities are adequate for the foreseeable
future for the business carried on at most locations. A new facility, owned by
Holiday, is under construction on Interstate 26 in Spartanburg, S.C. and will
replace the Greer leased facility in March, 2000. The building is 34,000 square
feet on 19.5 acres of land, of which 9.5 acres will be used for dealership
operations. Holiday is studying the possible relocation of its Orlando
dealership to improve its sales and service potential. Properties in Bakersfield
and Las Cruces have room for limited expansion.
ITEM 3. LEGAL PROCEEDINGS
Holiday is a party to various legal proceedings arising from its
ordinary course of operations. Management believes, based upon the opinion of
Holiday's legal counsel, none of these proceedings, individually or in the
aggregate, will result in a material adverse effect on Holiday's consolidated
financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted, during the fourth quarter of the fiscal year
covered by this report, to a vote of security holders through the solicitation
of proxies or otherwise.
Subsequent to the fiscal year end, on January 7, 2000, the Company's
shareholders approved the following items at a special meeting:
(1) A change in Holiday's state of incorporation from
Florida to Delaware by means of a merger of Holiday
with and into a wholly-owned subsidiary;
(2) Increase the authorized number of shares of capital
stock in Holiday's Certificate of Incorporation to be filed
in Delaware in connection with the reincorporation from the
present 10,000,000 to 25,000,000;
(3) Authorize Holiday's Delaware Certificate of
Incorporation the issuance of up to 2,000,000 shares
of preferred stock;
(4) Adopt bylaws in connection with the reincorporation;
(5) Provide in Holiday's Delaware Certificate of
Incorporation and bylaws for a classified
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board of directors and advance notice of shareholder
proposals and nominations for the election of directors;
(6) Approve the Holiday RV Superstores, Inc. 1999 Stock
Compensation Program;
(7) Approve grants of stock options to Holiday's
directors who served as directors of and prior to May
1999.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION ON COMMON STOCK
Holiday's common stock trades on National Market System of the Nasdaq
Stock Market, under the symbol RVEE. The Nasdaq Stock Market, or Nasdaq, is a
highly-regulated electronic securities market composed of competing market
makers whose trading is supported by a communications network linking them to
quotation dissemination, trade reporting, and order execution systems. This
market also provides specialized automation services for screen-based
negotiations of transactions, on-line comparison of transactions, and a range of
informational services tailored to the needs of the securities industry,
investors and issuers. The Nasdaq Stock Market is presently operated by The
Nasdaq-AMEX Market Group, a newly formed subsidiary of the National Association
of Securities Dealers, Inc. The Nasdaq-AMEX Market Group is the parent of both
the Nasdaq Stock Market and the American Stock Exchange.
The table below gives the market high and low sales prices of Holiday's
common stock for the quarters in the fiscal years ended October 31, 1999 and
1998, as reported on the Nasdaq Stock Market.
<TABLE>
<CAPTION>
MARKET PRICE
------------
1998 1999
--------------------------- ------------------------
QUARTER ENDED HIGH LOW HIGH LOW
------------- ------------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
January 31 ............... 2-1/4 1-1/2 2-7/16 2-1/32
April 30 ................. 2-5/16 1-13/16 4 2-1/8
July 31 .................. 2-11/16 2 4-9/16 3-1/16
October 31 ............... 2-1/4 1-7/8 5-21/32 3-1/2
</TABLE>
DIVIDENDS
Holiday has paid no cash dividends nor does the Company anticipate
paying cash dividends in the near future.
HOLDERS OF RECORD
As of January 15, 2000, there were 470 holders of record and
approximately 2,600 beneficial shareholders of Holiday's common stock.
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ITEM 6. SELECTED FINANCIAL DATA:
<TABLE>
<CAPTION>
Fiscal Year Ended October 31 (1)
(in thousands , except earnings per share)
SELECTED STATEMENT --------------------------------------------------------------------
OF INCOME DATA: 1999 1998 1997 1996(3) 1995(2)
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenue ............................................... $ 81,396 $ 74,294 $ 68,007 $ 74,764 $ 70,029
Cost of sales ......................................... 67,369 61,099 55,260 61,562 56,872
-------- -------- -------- -------- --------
Gross profit .......................................... 14,027 13,195 12,747 13,202 13,157
Selling, general and Administrative expenses .......... 10,292 9,611 9,548 9,929 9,758
-------- -------- -------- -------- --------
Income from operations ................................ 3,735 3,584 3,199 3,273 3,399
Interest income ....................................... 555 517 480 393 376
Interest expense ...................................... (1,134) (1,363) (1,381) (1,505) (1,336)
Gain (loss) on sale of fixed assets ................... 319 (1) (19) -- --
-------- -------- -------- -------- --------
Income before income taxes ............................ 3,475 2,737 2,279 2,161 2,439
Income taxes .......................................... 1,321 1,044 892 829 980
-------- -------- -------- -------- --------
Net income ............................................ $ 2,154 $ 1,693 $ 1,387 $ 1,332 $ 1,459
======== ======== ======== ======== ========
Basic and diluted Earnings per
common share .......................................... $ .30 $ .23 $ .19 $ .18 $ .20
-------- -------- -------- -------- --------
Weighted average number of common shares outstanding
(basic) ............................................... 7,184 7,302 7,434 7,524 7,437
Cash dividends paid per common
share ................................................. $ -- $ -- $ -- $ -- $ --
</TABLE>
- --------------------------------------------------------------------------------
14
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<TABLE>
<CAPTION>
As of October 31 (1)
(in thousands,except per share and operating data)
----------------------------------------------------------
SELECTED BALANCE SHEET DATA:
1999 1998 1997 1996(3) 1995(2)
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Working capital............................. $14,886 $13,381 $11,932 $10,449 $ 9,408
Inventories ................................ 28,756 23,952 20,713 23,171 19,396
Total assets ............................... 45,735 37,740 33,979 34,411 29,717
Floor plan contracts ....................... 23,673 18,083 15,805 17,504 13,967
Long term debt (capital leases) ............ 156 221 286 346 343
Total liabilities .......................... 26,111 20,232 17,796 19,639 16,301
Total stockholders' equity ................. 19,623 17,508 16,183 14,773 13,416
Tangible net worth ....................... 19,503 17,319 15,925 14,446 13,020
Book value per common share ................ 2.72 2.40 2.17 1.99 1.80
OPERATING DATA:
Number of dealerships(4) ................... 7 8 8 8 8
Number of RVs and Boats sold ............... 2,404 2,380 2,565 2,954 2,714
</TABLE>
- --------------------------------------------------------------------------------
(1) See Management's Discussion and Analysis of Financial Condition and Results
of Operations.
(2) Includes first full year of operating results from two dealerships acquired
in August 1994 in California.
(3) Includes first full year of operating results from new dealership acquired
in October 1995 in New Mexico.
(4) Number of dealerships increased to 12 as of November 11, 1999 due to the
purchase of County Line Select Cars, Inc.
15
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR FISCAL 1999 COMPARED TO FISCAL 1998
Sales and service revenue increased 9.6% to a record level of $81.4
million for Fiscal 1999 from $74.3 million in Fiscal 1998, primarily due to a
12% increase in the average selling price of new vehicles. Holiday experienced a
continued trend from Fiscal 1998 as a result of which management focused on
increasing the sale of higher priced motorhomes and boats, targeting diesel
motorhomes having greater potential higher dollar gross profits. Management
believes the diesel market will continue to grow and offer opportunity to
increase revenue. On a same store basis, without the Atlanta dealership which
sold in December 1998, sales and service revenue increased 13.4%. Parts and
service revenue, without Atlanta, was the same.
Management expects Holiday's revenue to increase significantly in
Fiscal 2000, primarily due to its expansion. On November 11, 1999, Holiday
acquired County Line Select Cars, Inc., an Ocala, Florida based five-dealership
recreation vehicle sales and service company. Prior to the acquisition, County
Line's annual revenue was approximately $70 million. The product mix for County
Line is similar to Holiday, both selling popularly priced motorhomes and towable
RVs. Management expects marketing and promotion efficiencies as a result of
increasing Holiday's dealerships in Florida from three, prior to the
acquisition, to eight as a result of the acquisition.
Cost of sales and service, as a percentage of revenue, increased to
82.8% in Fiscal 1999 from 82.2% in Fiscal 1998.
Gross profit increased 6.3% to $14.0 million in Fiscal 1999 from $13.2
million in Fiscal 1998. As a percentage of revenue, gross profit decreased to
17.2% in Fiscal 1999 from 17.8% in Fiscal 1998. This decline was primarily due
to the amount of gross profit contributed by parts and service to Holiday's
total gross profit, which typically have a gross margin of 46% to 48%, and an
increase in the gross profit contributed by agency commissions, new and used
sales, which typically, in the aggregate have 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 Holiday's total gross profit,
compared to 72% in the prior year. Agency commission alone, represented 17% of
Holiday's total gross profit, compared to 18% in the prior year. In both years,
agency commissions and gross profit from the sale of new and used vehicles and
boats, in the aggregate, represent the majority of Holiday's net pretax income.
Holiday expects the gross margin decreasing trend to reverse in the
future as management places more focus on improving Holiday's parts and service
revenue and increasing the percentage of Holiday's total gross profit
contributed by parts and service.
Selling, general, and administrative expenses increased 7.1% to $10.3
million in Fiscal 1999 from $9.6 million in Fiscal 1998. On a same store basis,
selling, general, and administrative expenses increased 14.8%, primarily due to
increased selling expenses related to increased revenue and personnel expense
increase. As a percent of revenue, selling, general, and administrative
decreased to 12.6% from 12.9%.
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<PAGE>
Income from operations increased 4.2% to $3.74 million in Fiscal 1999
as compared to $3.58 million in Fiscal 1998.
Interest income increased 7% to $555,000 in Fiscal 1999 from $517,000
in Fiscal 1998. Interest expense decreased 17% in Fiscal 1999 to $1.14 million
from $1.36 million in Fiscal 1998, due to fees received in connection with the
floor plan arrangement in Fiscal 1999, not received in Fiscal 1998.
A gain of $319,000 resulted primarily from the sale of Holiday's
Atlanta, Georgia dealership property and equipment.
Income before income taxes increased 27% to $3.48 million in Fiscal
1999 from $2.74 million in Fiscal 1998.
As a percentage of revenue, income before income taxes increased to
4.3% in Fiscal 1999 from 3.7% in Fiscal 1998.
The combined Federal and State effective income tax rate was 38.0% in
Fiscal 1999 compared to 38.1% in Fiscal 1998. Income tax rates varied from
statutory rates due to state income taxes. See Note 9 of the notes to the
consolidated financial statements for components of the income taxes and the
reconciliation of the provision for income taxes to the federal statutory rates.
Net income increased 27.2% to $2,153,775 in Fiscal 1999 from $1,693,116
in Fiscal 1998. As a percentage of revenue, net income increased to 2.7% in
Fiscal 1999 compared to 2.3% in Fiscal 1998.
Earnings per share were 30 cents in Fiscal 1999, basic and diluted,
compared to 23 cents in Fiscal 1998, basic and diluted.
RESULTS OF OPERATIONS FOR FISCAL 1998 COMPARED TO FISCAL 1997
Sales and service revenue increased 9.2% to $74.3 million for Fiscal
1998 from $68.0 million in Fiscal 1997, primarily due to a 22% increase in the
average selling price of new vehicles. Management focused on increasing the
sales of higher priced motorhomes, and targeting diesel motorhomes with greater
potential for higher gross profits. This increase, in the new unit average
selling price, offset the lost revenue due to a 7% decrease in the number of new
units sold. The majority of the unit sale decrease was in the low-priced folding
tent trailers that management reduced its stocking level due to low gross
profits. Excluding tent trailer sales, new units sales were down 2%. New
motorized unit sales were up 10%; new towable units sales were down 16%.
Used sales increased 5% due to an increased average selling price.
Parts and service revenue decreased slightly.
Cost of sales and service, as a percentage of revenue, increased to
82.2% in Fiscal 1998 from 81.3% in Fiscal 1997.
Gross profit increased 3.5% to $13.2 million in Fiscal 1998 from $12.7
million in Fiscal 1997. As a percentage of revenue, gross profit decreased to
17.8% in Fiscal 1998 from 18.7% in Fiscal 1997, due to a
17
<PAGE>
decrease in the gross margins from the sale of higher priced new and used
vehicles. Although the dollar gross profits increased for new and used vehicle
sales, gross profits as a percentage of sales decreased. Typically, as vehicle
sales prices increase, gross margins decrease.
Agency commissions are paid to Holiday if financing or insurance is
provided for the customer's purchases from Holiday, as a result of referring the
customer to a financial institution or insurance agency. Agency commissions
represented 18% of Holiday's total gross profit in Fiscal 1998, as compared to
17% in Fiscal 1997. Agency commissions and gross profit result from the sale of
new and used vehicles and boats, and in the aggregate, represented 72% of
Holiday's total gross profit in Fiscal 1998, as compared to 71% in Fiscal 1997.
In both fiscal years, agency commissions and gross profit from the sale of new
and used vehicles and boats, in the aggregate, represented the majority of
Holiday's net pretax income.
Margins for the other major sources of revenue remained approximately
the same in Fiscal 1998 as in Fiscal 1997.
Selling, general and administrative expenses increased 1.0% to $9.6
million in Fiscal 1998 from $9.5 million in Fiscal 1997. Small increases in
expenses that vary with the change in revenue were offset by decreases in
personnel expenses. As a percentage of revenue, selling, general and
administrative expenses decreased to 12.9% in Fiscal 1998 from 14.0% in Fiscal
1997.
Income from operations increased 12.7% to $3.6 million in Fiscal 1998
from $3.2 million in Fiscal 1997. As a percentage of revenue, income from
operations increased to 4.8% in Fiscal 1998 from 4.7% in Fiscal 1997.
Interest income increased 8% to $517,000 in Fiscal 1998 from $480,000
in Fiscal 1997. Interest expense decreased slightly to $1.36 million in Fiscal
1998 from $1.38 million due to a slight reduction in the average outstanding
floor plan balance and a decrease in the average interest rate paid for floor
plan borrowing
Income before income taxes increased 20.1% to $2.74 million in Fiscal
1998, from $2.28 million in Fiscal 97. As a percentage of revenue, income before
income taxes increased to 3.7% in Fiscal 1998 from 3.4% in Fiscal 1997.
The combined Federal and State effective income tax rate was 38.1% in
Fiscal 1998 compared to 39.2% in Fiscal 1997. Income tax rates varied from
statutory rates due to state income taxes. See Note 9 of the notes to the
consolidated financial statements for components of the income taxes and the
reconciliation of the provision for income taxes to the federal statutory rates.
Net income increased 22.1% to $1,693,116 in Fiscal 1998 from $1,386,597
in Fiscal 1997. As a percentage of revenue, net income increased to 2.2% in
Fiscal 1998 compared to 2.0% in Fiscal 1997.
Earnings per share were 23 cents in Fiscal 1998, basic and diluted,
compared to 19 cents in Fiscal 1997, basic and diluted.
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<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Holiday maintained a strong financial position and high liquidity
throughout Fiscal 1999. Cash generated from operating activities of $2.2
million, primarily from net income, was partially reduced by net cash used for
investing activities of $440,000. Holiday sold its Atlanta dealership property
increasing cash by $1.2 million, and invested $1.6 million cash with the
purchase of property and equipment, primarily for real property and improvements
in Spartanburg, S.C. The Greer dealership will be relocated to Spartanburg in
the spring of 2000.
Financing activities used approximately $94,000 primarily for its stock
repurchase program, initiated in January 1998.
The results of all activities in Fiscal 1999 was a net increase of $1.7
million in Holiday's cash position, resulting in a cash position of $9.1 million
as of October 31, 1999, compared to $7.4 million as of October 31, 1998.
Working capital increased to $14.9 million as of the end of Fiscal 1999
compared to $13.4 million as of the end of Fiscal 1998.
Holiday's principal long-term commitments, as of the end of Fiscal
1999, consist of obligations under operating leases. Subsequent to October 31,
1999, and in connection with the County Line acquisition, Holiday also has a
commitment, at the option of the note holders, to convert notes into Holiday's
common stock at a fixed conversion price. The notes were issued November 11,
1999 as partial payment for the County Line Select Cars, Inc. purchase and can
be converted after two years from date of issue.
Holiday also has a contingent liability to repay a portion of agency
commission, or referral fees, received principally from some 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
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 total
customer loans outstanding and estimates the exposure for potential chargebacks
associated with these loans. Holiday estimates the probability for loan payoffs
and the potential chargebacks to Holiday related to those loans. Holiday also
considers the current and predicted future economic conditions, the effects of
changes in consumer interest rates, and the aging of all its customer loans
outstanding representing potential chargebacks to Holiday.
Holiday sets internal targets for the expansion of its operations,
primarily through acquisition, with the ultimate goal of increasing Holiday's
value to its shareholders. Holiday's management is currently evaluating various
sources of capital, its cost, and its ultimate effect on Holiday's
capitalization. Holiday had $25 million maximum borrowing under floor plan
contracts, of which $1.3 million was not used as of the end of Fiscal 1999.
Subsequent to Fiscal 1999 year end, Holiday arranged an additional $5 million in
floor plan financing, and is currently negotiating with several floor plan
sources, including its current principal financing source, for additional floor
plan financing, working capital, and acquisition capital to fund its expansion
plan.
19
<PAGE>
Holiday's management believes it can obtain additional debt financing
at reasonable cost for its expansion. The new dealership property under
construction in Spartanburg, S.C. is the only company-owned real property
mortgaged, funded in December 1999. Management is currently considering mortgage
financing, or the sale of its real property on a leaseback arrangement, for
which the proceeds could be used for expansion of operations.
Currently , management has no expansion prospects requiring a secondary
stock offering. Management is using seller's debt financing, convertible to
Holiday's common stock as partial payment for dealership acquisitions. 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, management does not expect a dilutive effect
on the common stockholders of Holiday as a result from issuing such common stock
to be material.
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 25 million. Secondly, Holiday was authorized
to issue up to two million shares of preferred stock. Management feels both of
these items were necessary to fund Holiday's expansion.
Management believes that during the next twelve months it will 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 its expansion. However, management believes the issuance of additional
common stock or preferred stock convertible to common stock will be
anti-dilutive to its shareholders.
INFLATION
Management believes that increases in the cost of new vehicles and
boats that may result from increases in cost of products purchased from
manufacturers can be offset by higher resale prices for used retail vehicles and
boats as well as higher retail prices for new vehicles and boats although there
may be a lag in the ability of Holiday to pass such increases on to its
customers.
Historically, increases in operating costs are passed on to the
consumer when the market allows. Management believes that its business has not
been significantly affected by inflation despite increased chassis and
manufacture conversion costs experienced. However, significant increases in
interest rates would materially and adversely affect purchases of RVs generally
and Holiday's results of operations and prospects.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 130, REPORTING COMPREHENSIVE INCOME ("SFAS
130"), and No. 131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED
INFORMATION ("SFAS 131). SFAS 130 establishes standards for reporting and
displaying comprehensive income, its components and accumulated balances. SFAS
131 establishes standards for the way that public companies report information
about operating segments in annual financial statements and requires reporting
of selected information about operating segments in interim financial statements
issued to the public. Both SFAS 130 and SFAS 131 are effective for periods
beginning after December 15, 1997. Holiday adopted these new accounting
standards in 1999, and their adoption had no effect on Holiday's
20
<PAGE>
financial statements and disclosures.
In June 1998, the Financial Accounting Standards Board issued SAFS No.
133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (SFAS 133").
This statement establishes a new model for accounting for derivatives and
hedging activities. Upon initial application, all derivatives are required to be
recognized in the balance sheet as either assets or liabilities and measured at
fair value. In June 1999, SFAS No. 137, ACCOUNTING FOR DERIVATIVE INSTRUMENTS
AND HEDGING ACTIVITIES-DEFERRAL OF THE EFFECTIVE DATES OF FASB STATEMENT NO. 133
("SFAS 137"), was issued. SFAS 137 will make SFAS 133 effective for all fiscal
quarters or fiscal years beginning after June 15, 2000.
Historically, Holiday has not entered into derivative contracts to
hedge existing risks or for speculative purposes. Accordingly, Holiday does not
expect adoption of the new standard during the fiscal year ended October 31,
2000 to affect its financial statements.
YEAR 2000 ISSUES
The Year 2000 issue is the result of computer programs being written
using two digits rather than four to define the applicable year. In recognition
of this potential problem, Holiday began in 1997 to assess and evaluate its
business systems and hardware, personal computers and software, equipment,
security systems, communication equipment and other software relied upon by
Holiday. Holiday completed its Year 2000 readiness program in late 1999 and its
information systems, including its principal management information system
software, the ERA2 Advantage, provided and maintained by Reynolds & Reynolds,
Dayton, OH, have operated properly through January 1, 2000 and no system failure
or miscalculations were found or occurred.
Holiday's total cost for Year 2000 readiness was not material. Holiday
continues to monitor Year 2000 related data, both within its own information
systems and with suppliers and other third parties. However, there is no
guarantee that Holiday's systems or those of Holiday's significant suppliers, on
which Holiday relies, will not have errors or malfunction in the future.
FORWARD LOOKING STATEMENTS AND RISK FACTORS
This Annual Report on Form 10-K includes forward looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
These forward looking statements which reflect Holiday's current views with
respect to future events and financial performance. The words "believe,"
"project," "anticipates," "estimates," "expects," "most likely," "intends" and
similar expressions identify forward looking statements.
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 below. Though Holiday has
attempted to list the factors it believes to be important to its business, other
factors may 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 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.
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<PAGE>
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.
WE ARE AFFECTED BY GENERAL ECONOMIC CONDITIONS AND OUR SALES ARE INTEREST RATE
SENSITIVE
Our sales are affected by general economic conditions, including
employment rates, prevailing interest rates, inflation, and other economic
conditions affecting disposable consumer income generally. Weakness in the
economy could have a material adverse effect on our business. The majority of
our customers purchasing vehicles and boats finance their purchase. Increases in
consumer interest rates could have an adverse effect on our ability to sell
vehicles and boats. Furthermore, a general increase in commercial interest rates
would increase the rates paid by us on our floor plan contracts, thereby
adversely effecting Holiday's operating income.
WE DEPEND ON STRONG SALES IN OUR SECOND FISCAL QUARTER
Our business, and the recreational vehicle industry in general, is very
seasonal. Our strongest sales period begins in January, because many recreation
vehicle shows are held in that month. Strong sales demand continues from
February through the summer months. Of our average annual net sales over the
last three years, over 32% occurred in the quarter ending April 30. With the
exception of our store locations in Florida, our sales are generally much lower
in the quarter ending January 31. Because of the difference in sales in the warm
spring and summer months versus the cold fall and winter months, if our sales in
the months of February through July are significantly lower than we expect, we
may not earn profits or we may lose money and have a net loss. This experience
may materially and adversely affected us.
OUR GROWTH DEPENDS PRIMARILY ON OUR ABILITY TO ACQUIRE NEW STORES
We intend to grow rapidly, primarily through the acquisition of
recreation vehicle dealerships. Our growth strategy involves significant risks.
We began our growth strategy in the first quarter of Fiscal Year 2000, closing
on the County Line acquisition in November, 1999. That single acquisition is
expected to increase our sales by approximately $70 million annually. By
comparison, our comparable store sales (which are sales in stores that are open
in the same location for two consecutive years) have increased 9.2% in Fiscal
1998 and 13.4% in Fiscal 1999. We expect our comparable store sales to fluctuate
from the impact of (i) changes in competition within each market we operate,
(ii) the movement in interest rates, (iii) the general market conditions in the
areas in which our stores are located, and (iv) when we acquire new dealerships
in the same general market of our existing dealerships. Although we expect our
existing stores to have sales growth and to remain profitable, we expect most of
our sales growth to come from newly added store locations and we may not be able
to continue to grow or purchase new store locations at a sufficiently rapid pace
or on terms and conditions favorable to us.
We intend to make acquisitions depending upon, among other things, the
availability of suitable acquisition opportunities and our ability to finance
these transactions. Our success in these acquisitions will depend on our
financial strength at the time of acquisition, our ability to hire and retain
qualified employees and our ability to identify markets in which we can
successfully sell our products. In addition, once we
22
<PAGE>
identify a store that meets our criteria, our success will depend on our ability
to sell the store's remaining inventory, to convert the store to a Recreation
USA store and to attract new customers to the store after the conversion. Our
inability to meet our planned growth potential will severely impact our
business, operating results and financial condition.
OUR SUCCESS WILL DEPEND ON HOW WELL WE MANAGE OUR GROWTH
We have very recently begun a period of rapid growth and, consequently,
we have spent much time and effort in acquiring new stores. Although we believe
that our systems, procedures and controls are adequate to support our growth, we
cannot assure that this is the case and we believe that as we integrate our
first acquisitions, we will need to make changes to theses systems, procedures
and controls. In addition, our growth will impose substantial added
responsibilities on our existing senior management including the need to
identify recruit and integrate new senior level managers. Management may not be
able to oversee the growth efficiently or to implement effectively our growth
and operating strategies. Our inability to manage our growth would result in a
significant and severe financial impact on our business, operating results and
financial condition.
WE RELY ON SEVERAL KEY MANUFACTURERS FOR ALMOST ALL OF OUR INVENTORY PURCHASES
Our success depends, to a significant extent, on continued
relationships with two major manufacturers from which we purchase approximately
46% of our new products. Cancellation or modification of the dealer agreements
with these two manufacturers could have material adverse effect on our revenue.
However, the loss of all the brands sold by these major manufacturers is highly
unlikely. Dealer representation decisions for manufacturer brands are made at
the manufacturer's plants on a brand-by-brand basis, rather than centrally at
each respective manufacturers corporate headquarters. We currently purchase over
70 brands of RVs and boats from over 15 manufacturers.
WE MAY NOT BE ABLE TO RESPOND EFFECTIVELY TO THE SIGNIFICANT COMPETITION WE FACE
We operate in very competitive conditions. We must compete generally
with other businesses trying to sell discretionary consumer products and also
face intense competition from other recreation vehicle dealers for customers,
quality products, store locations and RV show space. We rely heavily on RV shows
to generate sales. If we are limited in or prevented from participating in RV
shows in our markets or in markets we are targeting, this limited participation
could have a negative effect on us.
Within our industry, our main competitors are single-and-multiple
location RV dealers. We compete with other dealers based on the quality of
available products, the price and value of the products and customer service. To
a lesser extent, we also compete with national specialty RV stores, catalog
retailers, sporting good stores and mass merchants, especially with respect to
parts and accessories. We face significant competition in the markets where we
currently operate and in the markets we plan to enter. We believe that the trend
in the RV industry is for manufacturers to include more features as standard
equipment on RVs and for other dealers to offer packages comparable to our
packages. Some of our competitors, especially those that sell RV accessories,
are large national or regional chains that have substantially greater financial,
marketing and other resources than we do.
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<PAGE>
WE MAY ISSUE ADDITIONAL SECURITIES IN CONNECTION WITH ACQUISITIONS THAT MAY
DILUTE OUR CURRENT SHAREHOLDERS AND IMPACT OUR EARNINGS PER SHARE
If we choose to finance future acquisitions in whole or in part through
the issuance of common stock or debt instruments convertible into our common
stock, our existing shareholders could experience dilution and our earnings per
share could also be impacted by the issuance of additional shares of capital
stock in connection with those acquisitions.
ACHIEVING OUR GROWTH STRATEGY IS SUBJECT TO OBTAINING ADEQUATE FINANCING
Holiday's growth strategies are dependent upon obtaining adequate
financing for the purchase of recreation vehicle and marine dealerships.
Financing must be obtained for floor plan of new and used vehicles, purchase (or
purchase and lease-back) of real properties for dealerships operations,
acquisition of common stock from selling shareholders, working capital, and
other capital needs. Our inability to obtain adequate financing, at reasonable
cost, would prevent us from meeting our planned growth and potentially will
severely impact our business operating results and financial condition.
MUCH OF OUR INCOME IS FROM FINANCING, INSURANCE AND EXTENDED SERVICE CONTRACTS,
WHICH IS DEPENDENT ON THIRD-PARTY LENDERS AND INSURANCE COMPANIES
We receive a substantial part of our gross profit from the fees we
receive from banks and other lending companies. If our customers desire to
borrow money to finance the purchase of their RV, we help the customers obtain
the financing by referring them to certain banks that have offered to provide
financing for RV purchases. The bank or other lending company pays a fee to us
for each loan that they are able to provide as a result of our referral.
When we sell RVs we generally also offer our customers the
opportunity to purchase (i) service contract that provide additional warranty
coverage on their RV or some of its parts after the manufacturer's original
warranty expires, and (ii) various types of insurance policies that will provide
money to pay a customer's RV loan if the customer dies or is physically
disabled. We sell these products as a broker for unrelated companies that
specialize in these type of issues, and we are paid a fee for each product that
we sell.
Agency commission fees for Fiscal 1999 was 17% of our total gross
profit. In Fiscal 1998, these services accounted for 18% of our total gross
profit. This arrangement carries several potential risks. For example, the
lenders we arrange financing through may decide to lend to our customers
directly rather than to work through us. If the customer goes directly to the
bank to apply for a loan to purchase their RV we would not receive a fee for
referral. Second, the lenders we currently refer customers to may change the
criteria or terms they use to make loan decisions, which could reduce the number
of customers that we can refer. Also, our customers may use the Internet or
other electronic methods to find financing alternatives. If either of these
events occur, we would lose a significant portion of our income and profit.
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<PAGE>
IF OUR PRODUCTS ARE DEFECTIVE, WE COULD BE SUED
Because we sell, service and custom package RVs, motors and other RV
equipment, we may be exposed to lawsuits for personal injury and property damage
if any of our products are defective and cause personal injuries or property
damage. Manufacturers that we purchase product from generally maintain product
and general liability insurance and we carry third-party product liability
insurance. We have avoided any significant liability for these risks in the
past. However, if a situation arises in which a claim is not covered under our
insurance policy or is covered under our policy but exceeds the policy limits,
it could have a significant and material adverse effect on our financial
condition.
OUR STOCK PRICE MAY BE VOLATILE
The price of our common stock may be highly volatile for several
reasons. First, a limited number of shares of our stock are owned by the public.
This may affect trading patterns which generally occur when a greater number of
shares are traded. Second, the quarterly variations in our operating results, as
discussed above, may result in the increase or decrease of our stock price.
Third, independent parties may release information regarding pending
legislation, analysts' estimates or general economic or market conditions that
effect the price of our stock. Also, our stock price may be affected by the
demand and the market performance of small capitalization stocks. Any of these
situations may have a significant effect on the price of our common stock or our
ability to raise additional equity.
OUR OPERATIONS ARE WIDESPREAD AND OUR SERVICES WILL DEPEND ON EFFECTIVE AND
CENTRALIZED MANAGEMENT
We depend on all of our revenue and most of our income from satellite
retail sales and service centers. These centers are geographically widespread
throughout the continental U.S. making it difficult for our top management to
have a presence in all the centers on a regular basis. As a result, we are
highly dependent upon each center's management for the on-going operation of
each respective center. Turnover of managerial personnel at any center usually
has an adverse effect on the sales and profitability of the center. Turnover of
managerial personnel at several of our centers could have a material adverse
effect on our sales and profitability.
OUR SALES ARE DEPENDENT ON FUEL PRICING AND AVAILABILITY
Our business is automotive in nature and as such is dependent upon the
availability of fuel. A decrease in the availability of gasoline and our
inability to convert our vehicles to alternative fuels could have a material
adverse effect on our business. Historically, increases in the price of gasoline
have not had a material impact on our business, as long as there was no
concurrent decline in availability. However, future significant increases in the
price of gasoline or decreases in availability would have a material effect on
our business.
OUR OPERATIONS ARE SUBJECT TO EXTENSIVE REGULATION, SUPERVISION, AND LICENSING
UNDER VARIOUS FEDERAL, STATE, AND LOCAL STATUTES, ORDINANCES, AND REGULATIONS
While we believe that we maintain all requisite licenses and permits
and are in compliance with all applicable federal, state, and local regulations,
there can be no assurance that we will be able to maintain all requisite
licenses and permits. The failure to satisfy those and other regulatory
requirements could have a
25
<PAGE>
material adverse effect on our business, financial condition, and results of
operations. The adoption of more stringent statutes and regulations, changes in
the interpretation of existing statutes and regulations, or our entrance into
jurisdictions with more stringent regulatory requirements could curtail some of
our operations, deny us the opportunity to operate in certain locations, or
restrict products or services offered by us. Various federal, state, and local
regulatory agencies, including the Occupational Safety and Health
Administration, the United States Environmental Protection Agency, and similar
federal and local agencies, have jurisdiction over the operation of our
dealerships, repair facilities, and other operations with respect to matters
such as consumer protection, workers' safety, and laws regarding protection of
the environment, including air, water, and soil.
As with vehicle dealerships generally, and parts and service
operations in particular, our business involves the use, handling, storage, and
contracting for recycling or disposal of hazardous or toxic substances or
wastes, including environmentally sensitive materials, such as motor oil, waste
motor oil and filters, transmission fluid, antifreeze, freon, waste paint and
lacquer thinner, batteries, solvents, lubricants, degreasing agents, gasoline,
and diesel fuels, and other chemicals.
Accordingly, we are subject to regulation by federal, state, and local
authorities establishing requirements for the use, management, handling, and
disposal of these materials and health and environmental quality standards, and
related liability thereto, and providing penalties for violations of those
standards. We are also subject to laws, ordinances, and regulations governing
investigation and remediation of contamination at facilities we operate to which
we send hazardous or toxic substances or wastes for treatment, recycling, or
disposal. Noncompliance with or changes to these requirements could adversely
affect our business.
We do not believe we have any material environmental liabilities or
that compliance with environmental laws, ordinances, and regulations will,
individually or in the aggregate, have a material adverse effect on us. However,
soil contamination has been known to exist at certain properties owned or leased
by us. We have also been required and may in the future be required to remedy
soil contamination, or remove aboveground and underground storage tanks
containing hazardous substances or wastes. We monitor soil and groundwater as
required by applicable state and federal guidelines. In addition, it has been
our practice and will be our practice to have the shareholders of the acquired
dealers indemnify us for specific environmental issues identified on
environmental site assessments performed by us as part of the acquisitions.
Our customers and potential customers are subject to federal, state and
local statutes, ordinances and regulations regarding the ownership of recreation
vehicles and boats. The adoption of more stringent statutes, ordinances and
regulations effecting the consumer ownership of recreation vehicles or boats,
could have an adverse effect on our ability to sell our products
ITEM 7A. 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 recreational vehicle
and boat products that Holiday sold to date have been priced in United States
dollars and all of our sales in the fiscal years 1998 and 1999, have been
denominated in United States dollars. In the future, Holiday may acquire
recreational vehicle or boat products that are priced in currencies other than
the United States dollar and Holiday may expand sales operations outside the
United
26
<PAGE>
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
any currency exposure in the future.
INTEREST RATES. Interest rate market risk does not apply to Holiday's
operations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to Part II, Item 8, is submitted as a separate section of
this Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There has been no change of accountants or reported disagreement on any
matter of accounting principles or procedures or financial statement disclosure
in Fiscal 1999.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by Item 401 and 405 of Regulation S-K is set
forth in Holiday's definitive proxy statement which will be filed with the
Securities and Exchange Commission not later than 120 days after October 31,
1999, and by this reference is incorporated herein.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 402 of Regulation S-K is set forth in
Holiday's definitive proxy statement which will be filed with the Securities and
Exchange Commission not later that 120 days after October 31, 1999, and by this
reference is incorporated herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 403 of Regulation S-K is set forth in
Holiday's definitive proxy statement which will be filed with the Securities and
Exchange Commission not later than 120 days after October 31, 1999, and by this
reference is incorporated herein.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 404 of Regulation S-K is set forth in
Holiday's definitive proxy statement which will be filed with the Securities and
Exchange Commission not later than 120 days after October 31, 1999, and by this
reference is incorporated herein.
27
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8K
(a)(1) Financial Statements--The financial statements are filed as
a separate section of this Form 10-K.
(a)(2) Financial Statement Schedules--The financial schedules are
filed as a separate section of this Form 10-K following the
financial statements.
(a)(2) Exhibits--The Exhibits filed as a part of this Form 10-K are
listed on the Index to Exhibit appearing on page 30.
(b) Reports on Form 8-K--
The Company filed no reports on Form 8-K during the fourth
quarter of Fiscal 1999.
28
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereto duly authorized.
HOLIDAY RV SUPERSTORES, INCORPORATED
Registrant
By: /s/ RONALD G. HUNEYCUTT
--------------------------------
Ronald G. Huneycutt, President
Chief Executive Officer
DATED: January 25, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ MICHAEL S. RILEY Chairman of the January 25, 2000
- ---------------------------- Board of Directors
Michael S. Riley
/s/ RONALD G. HUNEYCUTT President, Chief Executive January 25, 2000
- ---------------------------- Officer, Director (Principal Executive
Ronald G. Huneycutt Officer)
/s/ GARY L. RODNEY Vice President, January 25, 2000
- ---------------------------- Chief Financial Officer
Gary L. Rodney (Principal Financial and Accounting Officer)
/s/ W. HARDEE MCALHANEY Director January 25, 2000
- ----------------------------
W. Hardee McAlhaney
- ---------------------------- Director January 25, 2000
David J. Doerge
/s/ WILLIAM CURTIS Director January 25, 2000
- ----------------------------
William Curtis
- ---------------------------- Director January 25, 2000
Paul G. Clubbe
- ---------------------------- Director January 25, 2000
David A. Kamm
</TABLE>
29
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
- -------------- ----------------------
<S> <C>
3.1 Articles of Incorporation[1]
3.2 Amendment to Articles of Incorporation[1]
3.3 Amendment to Articles of Incorporation[1][2]
3.4 By-Laws[1][2]
3.5 Amendment in the Entirety of By-Laws[1][2]
3.6 Amendment to By-Laws[1][2]
3.7 Agreement and Plan of Merger between Holiday RV Superstores, Incorporated, a Florida
corporation and Holiday RV Superstores, Inc., a Delaware corporation
3.8 Restated Certificate of Incorporation of Holiday RV Superstores, Inc., a Delaware
corporation
4.1 Form of Common Stock Certificate of the Company[1]
10.1 1987 Incentive Stock Option Plan [1]
10.2 Form of Restrictive Stock Bonus Agreement for Officers and Employees [1]
10.3 Form of Restrictive Stock Bonus Agreement for Directors[1]
10.4 Form of Restrictive Stock Bonus Agreement for Harvey M. Alper[1]
10.5 Underwriting Agreement between Thomas James Associates, Inc. and the Company dated
November 10, 1987[3]
10.6 Asset Purchase Agreement between Registrant and Ledford's RV and Marine World, Inc.,
James David Ledford and Mary Beth Ledford, Robert Lee Ledford and Joan Reeves Ledford,
dated January 12, 1990[4]
10.7 Lease agreement between James Ledford and Mary Beth Ledford, husband and wife, and
Registrant dated February 12, 1990[4]
10.8 Indemnification Agreement between Registrant and Newton C. Kindlund dated November 17,
1990[5]
10.9 Indemnification Agreement between Registrant and Joanne M. Kindlund dated November 17,
1990[5]
10.10 Indemnification Agreement between Registrant and W. Hardee McAlhaney dated November
17, 1990[5]
10.11 Indemnification Agreement between Registrant and Franklin J. Hitt dated November 17,
1990[5]
10.12 Indemnification Agreement between Registrant and Lawrence H. Katz dated November 17,
1990[5]
10.13 Indemnification Agreement between Registrant and James P. Williams dated November 17,
1990[5]
10.14 Indemnification Agreement between Registrant and Avie N. Abramowitz dated November 17,
1990[5]
10.15 Indemnification Agreement between Registrant and Paul G. Clubbe dated November 17,
1990[5]
10.16 Asset Purchase Agreement between Registrant and Venture Out Recreation Vehicles -
Roseville, Venture Out Recreation Vehicles - Bakersfield, G. Lee Fitzgerald and Bruce
M. Fitzgerald dated July 21, 1994[6]
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
- -------------- ----------------------
<S> <C>
10.17 Agreement of Sublease between Registrant and Venture Out, dated July 31, 1994[6]
10.18 Assignment of Lease between Registrant and Venture Out Properties, dated July 31,
1994[6]
10.19 Lease between Registrant, Newton C. Kindlund and Joanne Kindlund dated November 1,
1994[6]
10.20 Lease agreement between Newton c. Kindlund Revocable Property Trust and the
Registrant, dated May 1, 1997, for the lease of real property in Ft. Myers, Florida[7]
10.21 Lease agreement between Newton C. Kindlund Revocable Property Trust and the
Registrant, dated May 1, 1997, for the lease of real property in Ft. Myers, Florida[7]
10.22 Asset Purchase Agreement between Registrant and County Line Select Cars, Inc., and The
Persons Named Therein dated November 11, 1999[7]
21.1 Subsidiaries of Registrant
27.1 Financial Data Schedule
</TABLE>
- -------------
[1] Incorporated by reference to the Exhibits to the Registration Statement
on Form S-18 filed by the Registrant on September 14, 1987, and which
became effective on October 27, 1987 (File No. 33-17190-A).
[2] Incorporated by reference to the Exhibits to the Registration Statement
on Form 8-A filed by Registrant on December 22, 1987, and which became
effective December 28, 1987 (File No. 0-16448).
[3] Incorporated by reference to the Exhibits to the Annual Report on Form
10-K filed by the Registrant on January 28, 1988.
[4] Incorporated by reference to the Exhibits to the Annual Report on Form
8-K filed by the Registrant on February 27, 1990.
[5] Incorporated by reference to the Exhibits to the Annual Report on Form
10-K filed by the Registrant on January 27, 1992.
[6] Incorporated by reference to the Exhibits to the Annual Report on Form
10-K filed by the Registrant on January 26, 1995.
[7] Incorporated by reference to the Exhibits to the Annual Report on Form
10-K filed by the registrant on January 27, 1998.
[8] Incorporated by reference to the Exhibits to the Report on Form 8-K/A
filed by the registrant on January 25, 2000.
31
<PAGE>
ANNUAL REPORT ON FORM 10-K
ITEM 8, ITEM 14(a)(1) and (2)
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
LIST OF FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
AS OF OCTOBER 31, 1999 AND 1998
AND FOR THE YEARS ENDED OCTOBER 31, 1999, 1998 AND 1997
HOLIDAY RV SUPERSTORES, INCORPORATED
AND SUBSIDIARIES
ORLANDO, FLORIDA
32
<PAGE>
HOLIDAY RV SUPERSTORES, INCORPORATED
FINANCIAL STATEMENTS
YEARS ENDED OCTOBER 31, 1999 AND 1998
<PAGE>
HOLIDAY RV SUPERSTORES, INCORPORATED
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
PAGE
----
Report of Independent Certified Public Accountants F-2
Consolidated Financial Statements:
Balance Sheets F-3
Statements of Income F-4
Statements of Stockholders' Equity F-5
Statements of Cash Flows F-6
Notes to Consolidated Financial Statements F-8
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders of
Holiday RV Superstores, Incorporated
Orlando, Florida
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, of stockholders' equity and of cash flows
present fairly, in all material respects, the financial position of Holiday RV
Superstores, Incorporated and its subsidiaries at October 31, 1999 and 1998, and
the results of their operations and their cash flows for each of the three years
in the period ended October 31, 1999, in conformity with accounting principles
generally accepted in the United States. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with auditing standards generally
accepted in the United States, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
- ------------------------------
December 22, 1999, except for the second
paragraph of Note 15 as to which the
date is January 7, 2000
F-2
<PAGE>
HOLIDAY RV SUPERSTORES, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
OCTOBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS 1999 1998
------------ ------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 9,119,264 $ 7,441,806
Accounts receivable:
Trade and contracts in transit 2,234,980 1,415,930
Other 393,278 373,700
Inventories 28,755,779 23,951,720
Prepaid expenses 60,587 23,000
Refundable income taxes 100,868 27,363
Deferred income taxes 177,000 159,000
------------ ------------
Total current assets 40,841,756 33,392,519
Property and Equipment, less accumulated depreciation 4,598,477 4,038,377
Other Assets, prinicpally covenant not to compete 177,272 200,184
Noncurrent Deferred Income Taxes 117,000 109,000
------------ ------------
$ 45,734,505 $ 37,740,080
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Floor plan contracts $ 23,673,241 $ 18,083,481
Accounts payable 410,732 309,181
Customer deposits 111,519 185,370
Accrued expenses 1,690,760 1,371,701
Current portion of capital lease obligation 69,161 61,963
------------ ------------
Total current liabilities 25,955,413 20,011,696
Long-Term Capital Lease Obligation, less current portion 155,730 220,676
------------ ------------
Total liabilities 26,111,143 20,232,372
------------ ------------
Stockholders' Equity:
Common stock, $.01 par; shares authorized 10,000,000;
issued 7,505,000 and 7,465,000 shares 75,050 74,650
Additional paid-in capital 5,184,370 5,112,271
Retained earnings 14,905,597 12,751,822
Treasury stock, at cost, 300,700 and 251,700 shares (541,655) (430,098)
Deferred compensation -- (937)
------------ ------------
Total stockholders' equity 19,623,362 17,507,708
------------ ------------
$ 45,734,505 $ 37,740,080
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-3
<PAGE>
HOLIDAY RV SUPERSTORES, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED OCTOBER 31, 1999, 1998 AND 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Sales and Service Revenue:
Vehicle and marine $ 72,240,919 $ 64,605,771 $ 58,235,084
Service, parts and accessories 6,233,791 6,929,335 7,140,752
Other, net 2,921,580 2,758,486 2,631,655
------------ ------------ ------------
Total sales and service revenue 81,396,290 74,293,592 68,007,491
------------ ------------ ------------
Cost of Sales and Service:
Vehicle and marine 63,883,910 57,448,166 51,441,813
Service, parts and accessories 3,485,500 3,650,216 3,818,515
------------ ------------ ------------
Total cost of sales and service 67,369,410 61,098,382 55,260,328
------------ ------------ ------------
Gross profit 14,026,880 13,195,210 12,747,163
Selling, General and Administrative Expenses 10,291,795 9,611,398 9,547,758
------------ ------------ ------------
Income from Operations 3,735,085 3,583,812 3,199,405
Interest Income 554,557 517,200 479,644
Interest Expense (1,133,687) (1,362,946) (1,381,231)
Gain (Loss) on Sale of Fixed Assets 318,820 (950) (19,221)
------------ ------------ ------------
Income Before Income Taxes 3,474,775 2,737,116 2,278,597
Income Taxes 1,321,000 1,044,000 892,000
------------ ------------ ------------
Net Income $ 2,153,775 $ 1,693,116 $ 1,386,597
============ ============ ============
Basic and Diluted Earnings Per Common Share $ 0.30 $ 0.23 $ 0.19
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-4
<PAGE>
HOLIDAY RV SUPERSTORES, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED OCTOBER 31, 1999, 1998 AND 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TREASURY STOCK
------------------------- PAID-IN RETAINED -------------------------- DEFERRED
SHARES AMOUNT CAPITAL EARNINGS SHARES AMOUNT COMPENSATION
----------- ----------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, October 31, 1996 7,465,000 $ 74,650 $ 5,109,071 $ 9,672,109 29,300 $ (46,430) $ (36,763)
Net income for the year -- -- -- 1,386,597 -- -- --
Restricted bonus stock
issued from treasury -- -- 3,200 -- (5,000) 8,050 (11,250)
Return of unvested restricted
bonus stock -- -- -- -- 7,000 (11,813) 11,813
Amortization of deferred
compensation -- -- -- -- -- -- 23,779
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance, October 31, 1997 7,465,000 74,650 5,112,271 11,058,706 31,300 (50,193) (12,421)
Net income for the year -- -- -- 1,693,116 -- -- --
Treasury shares repurchased -- -- -- -- 220,400 (379,905) --
Amortization of deferred
compensation -- -- -- -- -- -- 11,484
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance, October 31, 1998 7,465,000 74,650 5,112,271 12,751,822 251,700 (430,098) (937)
Net income for the year -- -- -- 2,153,775 -- -- --
Exercise of common stock
options 40,000 400 72,100 -- -- -- --
Returns of unvested
restricted bonus stock -- -- -- -- 2,500 (2,681) --
Treasury shares repurchased -- -- -- -- 46,500 (108,876) --
Amortization of deferred
compensation -- -- -- -- -- -- 937
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance, October 31, 1999 7,505,000 $ 75,050 $ 5,184,371 $14,905,597 300,700 $ (541,655) $ --
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-5
<PAGE>
HOLIDAY RV SUPERSTORES, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED OCTOBER 31, 1999, 1998 AND 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Cash received from customers $ 80,483,810 $ 73,696,488 $ 70,333,325
Cash paid to suppliers and employees (76,283,283) (71,061,594) (66,430,978)
Interest received 554,557 517,200 479,644
Interest paid (1,123,323) (1,366,031) (1,392,926)
Income taxes paid (1,420,505) (1,221,056) (880,561)
------------ ------------ ------------
Net cash provided by operating activities 2,211,256 565,007 2,108,504
------------ ------------ ------------
Cash Flows from Investing Activities:
Purchase of property and equipment (1,613,022) (116,188) (252,569)
Proceeds from the sale of property and equipment 1,173,348 500 11,810
------------ ------------ ------------
Net cash used in investing activities (439,674) (115,688) (240,759)
------------ ------------ ------------
Cash Flows from Financing Activities:
Treasury stock purchases (108,876) (379,905) --
Repayment of capital lease obligations (57,748) (58,926) (54,134)
Proceeds from stock options exercised 72,500 -- --
------------ ------------ ------------
Net cash used in financing activites (94,124) (438,831) (54,134)
------------ ------------ ------------
Net Increase in Cash and Cash Equivalents 1,677,458 10,488 1,813,611
Cash and Cash Equivalents, beginning of year 7,441,806 7,431,318 5,617,707
------------ ------------ ------------
Cash and Cash Equivalents, end of year $ 9,119,264 $ 7,441,806 $ 7,431,318
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-6
<PAGE>
HOLIDAY RV SUPERSTORES, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
YEARS ENDED OCTOBER 31, 1999, 1998 AND 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Reconciliation of Net Income to Net Cash Provided by
Operating Activities:
Net income $ 2,153,775 $ 1,693,116 $ 1,386,597
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 317,840 354,612 431,696
Amortization of deferred compensation 937 11,484 23,779
Return of unvested deferred compensation (2,681) -- --
Deferred income taxes (24,000) (52,000) (84,000)
(Gain) loss on disposal of property and
equipment (318,820) 950 19,221
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable (838,628) (640,888) (362,092)
Refundable income taxes (75,505) (27,363) 7,919
Inventories (4,804,059) (3,238,976) 2,458,278
Prepaid expenses (37,587) (23,000) --
Other assets (45,968) (7,974) 230
Increase (decrease) in:
Floor plan contracts 5,589,760 2,278,035 (1,698,856)
Accounts payable 101,551 58,555 (36,051)
Customer deposits (73,851) 43,784 65,181
Accrued expenses 268,492 212,365 (186,918)
Income tax payable -- (97,693) 83,520
----------- ----------- -----------
Net Cash Provided by Operating Activities $ 2,211,256 $ 565,007 $ 2,108,504
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-7
<PAGE>
HOLIDAY RV SUPERSTORES, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED OCTOBER 31, 1999, 1998 AND 1997
- --------------------------------------------------------------------------------
1. ORGANIZATION AND NATURE OF BUSINESS:
The Company is a multi-state retail chain of dealerships engaged in the
retail sales and service of recreational vehicles and recreational boats
in the Southeastern United States, New Mexico and California. Each
dealership offers a full line of new and used recreational vehicles, and
each dealership maintains a parts, service and body repair facility.
Recreational boat sales are carried at selected dealerships. The Company
also has a subsidiary, Holiday RV Assurance Corporation, an insurance
agency that receives commissions on the sale of insurance policies to
recreational vehicle owners from a variety of insurance companies.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Holiday RV
Superstores, Incorporated and its Subsidiaries (the "Company"), which
include Holiday RV Rental/Leasing, Inc.; Holiday RV Superstores of
South Carolina, Inc.; Holiday RV Superstores West, Inc.; Holiday RV
Superstores of New Mexico, Inc.; and Holiday RV Assurance Corporation.
All material intercompany accounts and transactions have been
eliminated.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid debt instruments with a maturity
of three months or less at time of purchase to be cash equivalents. Cash
and cash equivalents consist of checking accounts, money market funds
and overnight repurchase agreements.
INVENTORIES
Inventories are valued at the lower of cost or market. New and used
vehicles are accounted for using specific identification. Cost of parts
and accessory inventories is determined by the first-in, first-out
(FIFO) method.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed over
the estimated useful lives of the assets by the straight-line method for
financial reporting purposes. Amortization of leasehold improvements is
computed by the straight-line method over the estimated useful lives of
the assets or the term of the lease, whichever is shorter. The estimated
useful lives of the property and equipment range from 3 to 31 years.
Maintenance and repairs are charged to expense as incurred. The carrying
amount and accumulated depreciation of assets which are sold or retired
are removed from the accounts in the year of disposal and any resulting
gain or loss is included in the results of operations.
ASSET IMPAIRMENT
Long-lived assets, including property and equipment and intangible
assets, are reviewed for impairment whenever events or changes in
business circumstances indicate the carrying value of the assets may not
be recoverable. Impairment losses are recognized if expected future cash
flows of the related assets are less than their carrying values.
F-8
<PAGE>
HOLIDAY RV SUPERSTORES, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED OCTOBER 31, 1999, 1998 AND 1997
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED:
COVENANT NOT TO COMPETE
The covenant not to compete is being amortized over its contractual life
using the straight-line method. Accumulated amortization totaled
$361,760 and $292,880 as of October 31, 1999 and 1998, respectively.
INCOME TAXES
Income taxes are provided for the tax effects of transactions reported
in the financial statements and consist of taxes currently due plus
deferred taxes resulting from temporary differences. Such temporary
differences result from differences in the carrying value of assets and
liabilities for tax and financial reporting purposes. The deferred tax
assets and liabilities represent the future tax consequences of those
differences, which will either be taxable or deductible when the assets
and liabilities are recovered or settled. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount
expected to be realized.
REVENUE RECOGNITION
Retail sales and related costs of vehicles, parts and service are
recognized in operations upon delivery of products or services to
customers or, in the case of recreational vehicles, when title passes to
the customer.
STOCK-BASED COMPENSATION
The Company accounts for stock option grants and other forms of employee
stock-based compensation plans in accordance with the requirements of
Accounting Principles Board Opinion No. 25, ACCOUNTING FOR STOCK ISSUED
TO EMPLOYEES ("APB 25"), and related interpretations. APB 25 requires
compensation cost for stock-based compensation plans to be recognized
based on the difference, if any, between the fair market value of the
stock on the date of grant and the option exercise price. In October
1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION ("SFAS 123"), which provides an alternative to APB 25 in
accounting for stock-based compensation issued to employees. However,
the Company continues to account for stock-based compensation in
accordance with APB 25.
EARNINGS PER COMMON SHARE
Basic earnings per common share is calculated by dividing net income by
the weighted average number of shares outstanding. Diluted earnings per
common share is based upon the weighted average number of shares
outstanding, plus the effects of potentially dilutive common shares
consisting of stock options (Note 7).
F-9
<PAGE>
HOLIDAY RV SUPERSTORES, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED OCTOBER 31, 1999, 1998 AND 1997
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED:
EARNINGS PER COMMON SHARE - CONTINUED
A reconciliation of the weighted average number of shares outstanding
used in the computation of basic and diluted earnings per share is as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Basic:
Weighted average number of common
shares outstanding 7,184,200 7,301,500 7,433,700
========= ========= =========
Diluted:
Weighted average number of common
shares outstanding 7,184,200 7,301,500 7,433,700
Dilutive stock options 120,500 46,200 5,616
--------- --------- ---------
7,304,700 7,347,700 7,439,316
========= ========= =========
</TABLE>
ADVERTISING
Advertising costs, included in selling, general and administrative
expenses, are expensed as incurred.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards (SFAS) No. 107, DISCLOSURES
ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS, requires disclosure of fair
value information about financial instruments. Fair value estimates
discussed herein are based upon certain market assumptions and pertinent
information available to management as of October 31, 1999.
The respective carrying value of certain on-balance-sheet financial
instruments approximated their fair values. These financial instruments
include cash, trade receivables, accounts payable, floor plan payables
and accrued expenses. Fair values were assumed to approximate carrying
values for these financial instruments since they are relatively short
term in nature and their carrying amounts approximate fair values or
they are receivable or payable on demand.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified from previous
presentations to conform to 1999 presentation.
F-10
<PAGE>
HOLIDAY RV SUPERSTORES, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED OCTOBER 31, 1999, 1998 AND 1997
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED:
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 130, REPORTING COMPREHENSIVE
INCOME ("SFAS 130"), and No. 131, DISCLOSURES ABOUT SEGMENTS OF AN
ENTERPRISE AND RELATED INFORMATION ("SFAS 131"). SFAS 130 establishes
standards for reporting and displaying comprehensive income, its
components and accumulated balances. SFAS 131 establishes standards for
the way that public companies report information about operating
segments in annual financial statements and requires reporting of
selected information about operating segments in interim financial
statements issued to the public. Both SFAS 130 and SFAS 131 are
effective for periods beginning after December 15, 1997. The Company
adopted these new accounting standards in 1999, and their adoption had
no effect on the Company's financial statements and disclosures.
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES ("SFAS
133"). This statement establishes a new model for accounting for
derivatives and hedging activities. Upon initial application, all
derivatives are required to be recognized in the balance sheet as either
assets or liabilities and measured at fair value. In June 1999, SFAS No.
137, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES -
DEFERRAL OF THE EFFECTIVE DATES OF FASB STATEMENT NO. 133 ("SFAS 137"),
was issued. SFAS 137 will make SFAS 133 effective for all fiscal
quarters or fiscal years beginning after June 15, 2000.
Historically, the Company has not entered into derivatives contracts to
hedge existing risks or for speculative purposes. Accordingly, the
Company does not expect adoption of the new standard during the fiscal
year ended October 31, 2000 to affect its financial statements.
3. SUPPLEMENTAL CASH FLOW INFORMATION:
The following table summarizes the Company's noncash investing and
financing transactions:
<TABLE>
<CAPTION>
OCTOBER 31,
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Increase in deferred compensation
from stock issuance $ -- $ -- $11,250
Decrease in deferred compensation
from return of unvested restricted
bonus stock 2,681 -- 11,813
Construction expenses included in
accrued expenses 50,566 -- --
</TABLE>
F-11
<PAGE>
HOLIDAY RV SUPERSTORES, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED OCTOBER 31, 1999, 1998 AND 1997
- --------------------------------------------------------------------------------
4. INVENTORIES:
Inventories are summarized as follows:
OCTOBER 31,
1999 1998
----------- -----------
New vehicles $20,922,867 $16,952,586
New marine 1,503,756 897,415
Used vehicles 4,543,606 4,296,247
Used marine 209,276 145,862
Parts and accessories 1,576,274 1,659,610
----------- -----------
$28,755,779 $23,951,720
=========== ===========
5. PROPERTY AND EQUIPMENT:
Property and equipment are summarized as follows:
OCTOBER 31,
1999 1998
----------- -----------
Land $ 2,058,451 $ 1,955,948
Buildings and leasehold improvements 1,921,124 2,367,743
Machinery and shop equipment 207,564 202,878
Office equipment and furniture 856,884 865,030
Vehicles 132,460 177,988
Construction in progress 875,799 --
----------- -----------
6,052,282 5,569,587
Less accumulated depreciation and
amortization (1,453,805) (1,531,210)
----------- -----------
$ 4,598,477 $ 4,038,377
=========== ===========
Depreciation expense for the years ended October 31, 1999, 1998 and 1997
was $248,960, $285,732 and $362,816, respectively.
6. FLOOR PLAN CONTRACTS:
The Company finances substantially all of its new inventory through
floor plan financing arrangements. Substantially all new vehicle
inventories are pledged as collateral under floor plan contracts. Floor
plan contracts are due upon sale of the related vehicle.
F-12
<PAGE>
HOLIDAY RV SUPERSTORES, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED OCTOBER 31, 1999, 1998 AND 1997
- --------------------------------------------------------------------------------
6. FLOOR PLAN CONTRACTS - CONTINUED:
During fiscal 1999, the Company received fees in connection with a
change in their floor plan arrangement. These fees are being amortized
to reduce interest expense over the term of the arrangement (3 years).
The amount amortized to interest expense during the fiscal year was
approximately $253,000.
Maximum borrowings available under the contracts were $25,000,000 as of
October 31, 1999. The following summarizes certain information about the
borrowings under the floor plan contracts:
<TABLE>
<CAPTION>
OCTOBER 31,
1999 1998
----------- -----------
<S> <C> <C>
Maximum amount outstanding at
any month end $23,673,241 $18,142,185
Average amount outstanding during the period $20,979,096 $16,654,957
Weighted average interest rate during the period 6.58% 7.59%
Weighted average interest rate at the
end of the period 6.80% 7.50%
</TABLE>
7. STOCK OPTION PLANS:
During fiscal year 1999, the Company's Incentive Stock Option Plan
expired and a new 1999 Stock Option Plan (the "Plan") was approved. The
Plan provides for the issuance of up to 500,000 shares of common stock
to directors and regular full-time employees. The Plan allows for the
issuance of either non-qualified or incentive stock options. The option
exercise price shall be no less than 100% of the fair market value per
share of common stock on the date of grant, except that such price must
be at least 110% of the fair market value for employees who own more
than 10% of the outstanding shares of the Company. In the case of
non-qualified options, the exercise price shall generally be fair market
value, although the Compensation Committee of the Board of Directors may
grant options with exercise prices of less than fair market value. The
options are exercisable, as determined by the Committee, over a period
of time, but not more than ten years from the date of grant, and will be
subject to such other terms and conditions as the Committee may
determine.
During 1993, under a separate plan, the Company made available and
granted 50,000 shares to certain directors to purchase shares of its
common stock at the market price on the date of the grant. These grants
expire on February 20, 2003.
Options outstanding at October 31, 1998 consist of options granted under
the prior Incentive Stock Option Plan, as well as options granted to
certain directors under a separate plan.
F-13
<PAGE>
HOLIDAY RV SUPERSTORES, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED OCTOBER 31, 1999, 1998 AND 1997
- --------------------------------------------------------------------------------
7. STOCK OPTION PLANS - CONTINUED:
The following table summarizes the combined stock option activity for
the years ended October 31, 1999, 1998 and 1997:
WEIGHTED
AVERAGE
NUMBER OF EXERCISE PRICE
OPTIONS PER SHARE
---------- --------------
Options Outstanding, October 31, 1996 300,000 $ 1.77
Granted -- --
Exercised -- --
Forfeited -- --
-------
Options Outstanding, October 31, 1997 300,000 1.77
Granted -- --
Exercised -- --
Forfeited -- --
-------
Options Outstanding, October 31, 1998 300,000 1.77
Granted 410,000 3.21
Exercised (40,000) 1.81
Forfeited -- --
-------
Options Outstanding, October 31, 1999 670,000 $ 2.11
=======
At October 31, 1999, the 670,000 options outstanding under all stock
option plans are summarized in the following table:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------------------------- ---------------------------
WEIGHTED WEIGHTED
WEIGHTED AVERAGE AVERAGE
RANGE OF AVERAGE EXERCISE EXERCISE
EXERCISE NUMBER REMAINING PRICE NUMBER PRICE
PRICES OUTSTANDING LIFE (1) PER SHARE EXERCISABLE PER SHARE
------------- ----------- --------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
$1.38 - $2.05 235,000 3.1 $1.69 235,000 $1.69
2.50 25,000 0.6 2.50 25,000 2.50
3.21 80,000 4.7 3.21 -- --
4.62 330,000 4.9 4.62 -- --
----------- -----------
670,000 260,000
=========== ===========
</TABLE>
(1) Average remaining contractual life in years
The weighted average fair value of the options granted in 1999 was $3.39
per share. Had compensation expense been determined based upon fair
value of options at their grant dates in accordance with SFAS 123, net
income would not have been reduced as no options vested in 1999.
F-14
<PAGE>
HOLIDAY RV SUPERSTORES, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED OCTOBER 31, 1999, 1998 AND 1997
- --------------------------------------------------------------------------------
7. STOCK OPTION PLANS - CONTINUED:
The fair value of each option grant is estimated on the date of the
grant using the Black-Scholes option pricing model with the following
assumptions:
Average discount rate 5.50%
Volatility 58%
Average expense option life 10 years
8. DEFERRED COMPENSATION:
The Company has a restrictive stock bonus plan in place, whereby, at the
Board of Directors discretion, shares of the Company's stock are awarded
to certain individuals, including employees of the Company. The stock
awards vest upon the meeting of all the restrictions of the agreement.
Deferred compensation consists of the unamortized portion of the value
of shares of common stock which have been awarded to various
individuals. The awards provide for vesting of the shares over the
two-year restriction period. Amortization of the deferred compensation
is computed by the straight-line method over the vesting periods.
Unvested shares forfeited to the Company are recorded as treasury stock
based on the value of the shares at their original issuance date.
Consistent with the Company's stock option plans, the Company applies
the disclosure-only provisions of SFAS No. 123, but applies APB No. 25
and related interpretations in accounting for its deferred compensation
plan. In connection with this plan, the Company recognized compensation
expense of $937, $11,484 and $23,779 for the fiscal years ended October
31, 1999, 1998 and 1997, respectively. If the Company had elected to
recognize compensation expense consistent with the methods prescribed by
SFAS No. 123, there would have been an immaterial effect on the reported
net income and earnings per share.
9. INCOME TAXES:
The components of income taxes are as follows:
<TABLE>
<CAPTION>
OCTOBER 31,
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Current:
Federal $ 1,106,000 $ 913,000 $ 790,000
State 241,000 183,000 186,000
----------- ----------- -----------
1,347,000 1,096,000 976,000
----------- ----------- -----------
Deferred:
Federal (35,000) (34,000) (70,000)
State 9,000 (18,000) (14,000)
----------- ----------- -----------
(26,000) (52,000) (84,000)
----------- ----------- -----------
Total income taxes $ 1,321,000 $ 1,044,000 $ 892,000
=========== =========== ===========
</TABLE>
F-15
<PAGE>
HOLIDAY RV SUPERSTORES, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED OCTOBER 31, 1999, 1998 AND 1997
- --------------------------------------------------------------------------------
9. INCOME TAXES - CONTINUED:
The components of deferred tax assets and liabilities consist of the
following:
<TABLE>
<CAPTION>
OCTOBER 31,
1999 1998
--------- ---------
<S> <C> <C>
Deferred tax assets:
Property and equipment $ 44,000 $ 50,000
Deferred compensation -- 9,000
Noncompete agreement 73,000 60,000
Inventory 136,000 98,000
Deferred finance income 22,000 36,000
Accrued vacation 17,000 19,000
Other 2,000 3,000
--------- ---------
Total deferred income tax assets 294,000 275,000
--------- ---------
Deferred tax liabilities:
Rental fleet -- (7,000)
--------- ---------
Total deferred tax liabilities -- (7,000)
--------- ---------
Total net deferred tax assets 294,000 268,000
Less current deferred tax assets (177,000) (159,000)
--------- ---------
Long-term deferred tax assets $ 117,000 $ 109,000
========= =========
</TABLE>
The following summary reconciles differences from taxes at the federal
statutory rate with the effective rate:
<TABLE>
<CAPTION>
1999 1998 1997
---------------------- ----------------------- -------------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
----------- ------- ----------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Income taxes at statutory rate $ 1,181,000 34.0% $ 931,000 34.0% $774,000 34.0%
State income taxes, net of
federal benefit 165,000 4.7% 109,000 3.8% 114,000 5.0%
Other (25,000) -0.7% 4,000 0.3% 4,000 0.2%
----------- ---- ---------- ---- -------- ----
Income taxes at effective
rates $ 1,321,000 38.0% $1,044,000 38.1% $892,000 39.2%
=========== ==== ========== ==== ======== ====
</TABLE>
F-16
<PAGE>
HOLIDAY RV SUPERSTORES, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED OCTOBER 31, 1999, 1998 AND 1997
- --------------------------------------------------------------------------------
10. EMPLOYEE BENEFIT PLANS:
The Company has a Profit-Sharing and Employee Investment Plan which
covers substantially all employees meeting certain minimum age and
service requirements. Employee contributions to the investment plan may,
at the Company's discretion, be matched 25% up to a maximum employee
contribution of 6% of the employee's compensation. Also, at the
Company's discretion, a profit-sharing contribution may be made. Company
contributions to the plan, included in selling, general and
administrative expenses, were approximately $113,000, $98,000 and
$86,000 for the years ended October 31, 1999, 1998 and 1997,
respectively.
11. CAPITAL AND OPERATING LEASE COMMITMENTS:
CAPITAL LEASE
The Company leases computer equipment under an agreement which is
classified as a capital lease. The lease expires in 2002, at which time
the Company will have an option to purchase the computer equipment for a
nominal amount. The equipment is included in property and equipment in
the amount of approximately $448,000 with related accumulated
amortization of $331,000 and $269,000 at October 31, 1999 and 1998,
respectively.
OPERATING LEASES
The Company conducts its operations from leased facilities including
land and buildings in Orlando and Fort Myers, Florida; Greer, South
Carolina; and Roseville, California. The Florida facilities (with the
exception of the corporate office) were leased from related parties (see
Note 12). The leases expire on various dates from 1999 through 2004,
with some including renewal options.
As of October 31, 1999, future minimum lease payments under
noncancellable capital and operating leases with initial or remaining
terms of one year or more are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASE LEASES
-------- ----------
<S> <C> <C>
Year Ending December 31,
2000 $ 90,558 $ 331,518
2001 90,558 284,910
2002 83,013 227,688
2003 -- 198,000
2004 -- 132,000
-------- ----------
Total minimum lease payments 264,129 $1,174,116
Less amount representing interest (39,238) ==========
--------
Present value of minimum lease payments 224,891
Less current portion (69,161)
--------
Long-term capital lease obligation $155,730
========
</TABLE>
The Company's rental expense under operating leases for the fiscal years
ended October 31, 1999, 1998 and 1997 was $531,468, $527,645 and
$529,307, respectively.
F-17
<PAGE>
HOLIDAY RV SUPERSTORES, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED OCTOBER 31, 1999, 1998 AND 1997
- --------------------------------------------------------------------------------
12. RELATED-PARTY TRANSACTIONS:
As noted in Note 11, the Company currently leases the Orlando, Florida
facility from the former principal stockholders and the Fort Myers,
Florida facility from a trust whose beneficiaries are the heirs of one
of the former principal stockholders. The Company paid $203,000,
$203,000 and $179,000 to these related parties for the years ended
October 31, 1999, 1998 and 1997, respectively.
The Company also paid legal fees of approximately $20,000, $62,000 and
$25,000 to a law firm owned in part by a former member of the Company's
Board of Directors during the years ended October 31, 1999, 1998 and
1997, respectively.
The Company also paid management consulting fees of approximately
$30,000 to the new principal stockholder during the year ended October
31, 1999.
13. ADVERTISING COSTS:
The Company promotes its product lines through various advertising
sources. Advertising expenses were approximately $1,046,000, $1,003,000
and $1,035,000 for the years ended October 31, 1999, 1998 and 1997,
respectively.
14. COMMITMENTS AND CONTINGENCIES:
CONCENTRATION OF RISK
The Company's financial instruments that are exposed to concentrations
of credit risk consist primarily of cash and cash equivalents and
accounts receivable. The Company places its funds with high credit
quality institutions. At times, such monies may be in excess of the FDIC
or other insurance limits. With regard to receivables, the Company
routinely assesses the financial strength and collectibility of its
customers and, as a consequence, believes that its accounts receivable
credit risk is limited.
The Company relies on several manufacturers as suppliers for its product
lines. Approximately 49%, 58% and 69% of the Company's new vehicle sales
for the years ended October 31, 1999, 1998 and 1997, respectively,
consists of vehicles purchased from the same two manufacturers. In the
opinion of management, the loss of any one brand of new recreational
vehicle would not materially affect the Company. However, the loss of
all the brands sold by either of the two largest manufacturers would
have a material effect on the Company's sales. The Company's management
feels the loss of all brands from either of these two manufacturers to
be highly unlikely.
F-18
<PAGE>
HOLIDAY RV SUPERSTORES, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED OCTOBER 31, 1999, 1998 AND 1997
- --------------------------------------------------------------------------------
14. COMMITMENTS AND CONTINGENCIES - CONTINUED:
CONSULTING AGREEMENTS
On June 30, 1999, the Company entered into two separate consulting
agreements with the former principal shareholders to assist the Company
in corporate administration activities. These consulting agreements are
for a two-year period. During the term of these agreements, the Company
shall pay each consultant a total of $130,000 in fees, payable in
monthly installments. In addition, each consultant was granted 40,000
shares of common stock (see Note 7). The consultants are also entitled
to certain benefits and the reimbursement of expenses incurred.
THIRD-PARTY FINANCING
The Company uses third-party banks and/or finance companies to assist
its customers in locating financing for vehicle purchases. The Company
refers customers to one or more of these third-party financing sources
and earns a referral fee if the third-party lender consummates a loan
contract with the customer. These contracts represent third-party
financing, and the Company provides no underwriting or credit approval
services for the lender. The Company's referral fees are in fact a
commission and are typically based upon the difference between the
interest rate the customer pays under the contract with the lender and
an interest rate designated by the lender. At no time does the Company
service or guarantee the collection of these loans or receivables. The
Company could be charged back the commission by the lender if the loan
is paid off or foreclosed in a specified period of time, usually limited
to the first six months of the term, and if the chargeback exceeds
reserves retained by the lender.
The Company records this commission income based upon the amount earned
less allowances for chargebacks. In determining the allowances for
chargebacks, the Company takes into consideration total customer loans
outstanding and estimates the exposure for potential chargebacks
associated with foreclosure and early payoffs of these loans. The
Company also considers current and future economic conditions, the
effects of the change in consumer interest rates and the aging of all
loans outstanding. The chargeback allowance was approximately $63,300,
$93,500 and $105,700 at October 31, 1999, 1998 and 1997, respectively.
Finance chargebacks were approximately $30,000, $42,000 and $57,000 for
1999, 1998 and 1997, respectively.
COMMON STOCK REPURCHASE
On November 15, 1997, the Company's Board of Directors approved a plan
to repurchase up to $1 million of common stock of the Company. On
December 9, 1998, the Company's Board of Directors approved an increase
in its common share repurchase program from the initial $1 million to $2
million and extended the repurchase period through the year 1999. The
timing of the stock purchases are made at the discretion of management.
At October 31, 1999, the Company has repurchased $541,655 of the total
authorized shares to be repurchased.
F-19
<PAGE>
HOLIDAY RV SUPERSTORES, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED OCTOBER 31, 1999, 1998 AND 1997
- --------------------------------------------------------------------------------
15. SUBSEQUENT EVENTS:
On November 11, 1999, the Company purchased 100% of the outstanding
common stock of County Line Select Cars, Inc. for $6.5 million in cash
and notes convertible into common stock.
On January 7, 2000, the Company' shareholders approved the following
items at a special meeting:
o The Company's state of incorporation move from Florida to
Delaware.
o The Company's authorized number of shares of common stock
increased from 10,000,000 to 25,000,000.
o The Company was authorized to issue up to 2,000,000 shares of
preferred stock.
o The Company adopted new by-laws in connection with the
reincorporation.
o The Company's 1999 Stock Compensation Program was approved.
o Stock options granted in May of 1999 to Company's directors who
served in and prior to May 1999.
F-20
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Holiday RV Superstores, Incorporated
Orland, Florida
Our report on the consolidated financial statements of Holiday RV Superstores,
Incorporated and Subsidiaries is included on page F-2 of this Form 10-K. In
connection with our audit of such financial statements, we have also audited the
related financial statement schedule for the fiscal years ended October 31, 1998
and 1999 included at page S-2 of the Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
/s/PricewaterhouseCoopers LLP
- -----------------------------
December 22, 1999
S-1
<PAGE>
SCHEDULE II
-----------
HOLIDAY RV SUPERSOTRES, INCORPORATED AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE FISCAL YEARS ENDED OCTOBER 31, 1999, 1998, 1997
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
CHARGES OTHER
BALANCE AT TO COST CHARGES CHARGES- BALANCE
BEGINNING AND TO OTHER ADDITIONS AT END OF
YEAR DESCRIPTION OF PERIOD EXPENSES ACCOUNTS (DEDUCTIONS) PERIOD
(a)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1999 Finance Commissions
Chargeback Reserves $ 93,498 $ 30,357 $--- $(60,546) $63,309
1998 Finance Commissions
Chargeback Reserves 105,849 42,365 --- (54,716) 93,498
1997 Finance Commissions
Chargeback Reserves 135,260 57,362 --- (86,773) 105,849
- --------------------------------------------------------------------------------------------------------
</TABLE>
(a) Finance income chargebacks paid.
S-2
EXHIBIT 3.7
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN MERGER (the "Agreement"), dated as of November
__, 1999, is entered into by and between Holiday RV Superstores, Incorporated, a
Florida corporation ("Holiday Florida") and Holiday RV Superstores, Inc., a
Delaware corporation ("Holiday-Delaware").
WITNESSETH:
WHEREAS, Holiday Florida is a corporation duly organized and existing
under the laws of the State of Florida;
WHEREAS, the respective Boards of Directors of Holiday Florida and
Holiday Delaware have determined that it is advisable and in the best interests
of each of such corporations that Holiday Florida merge with and into Holiday
Delaware (the "Merger") upon the terms and subject to the conditions set forth
in this Agreement for the purpose of effecting the change of the state of
incorporation of Holiday Florida from Florida to Delaware;
WHEREAS, the respective Boards of Directors of Holiday Florida and
Holiday Delaware have, by resolutions duly adopted, approved this Agreement,
subject to the approval of the shareholders of each of Holiday Delaware and
Holiday Florida; and
WHEREAS, this Agreement is intended as a tax free plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code.
NOW, THEREFORE, in consideration of the mutual agreements and covenants
set forth herein, Holiday Florida and Holiday Delaware hereby agree as follows:
1. MERGER. Holiday Florida shall be merged with and into Holiday
Delaware and Holiday Delaware shall be the surviving corporation (hereinafter
sometimes referred to as the "Surviving Corporation"). The Merger shall become
effective upon the date and time when this Agreement is made effective in
accordance with applicable law (the "Effective Time").
2. GOVERNING DOCUMENTS; EXECUTIVE OFFICERS AND DIRECTORS. The
Certificate of Incorporation of Holiday Delaware, from and after the Effective
Time, shall be the Certificate of Incorporation of the Surviving Corporation
without change or amendment until thereafter amended in accordance with the
provisions thereof and applicable laws. The Bylaws of Holiday Delaware from and
after the Effective Time, shall be the Bylaws of the Surviving Corporation
without change or amendment until thereafter amended in accordance with the
provisions thereof, or the Certificate of Incorporation of the Surviving
Corporation and applicable laws. The executive officers, directors and members
of committees of the Board of Directors of Holiday Florida, as of the Effective
Time, shall become the executive officers, directors and members of committees
of the Board of Directors of the Surviving Corporation, from and after the
Effective Time, until their respective successors have been duly elected and
qualify, unless they earlier die, resign or are removed.
3. SUCCESSION. At the Effective Time, the separate corporate
existence of Holiday Florida shall cease, and Holiday Delaware shall possess all
the rights, privileges, powers and franchises of a
<PAGE>
public and private nature of Holiday Florida; and all property, real, personal
and mixed, and all debts due to Holiday Florida on whatever account, as well as
for share subscriptions as all other things in action belonging to Holiday
Florida, shall be vested in the Surviving Corporation; and all property, rights,
privileges, powers and franchises, and all and every interest shall be
thereafter as effectually the property of the Surviving Corporation as they were
of Holiday Florida, and the title to any real estate vested by deed or otherwise
in Holiday Florida shall not revert or be in any way impaired by reason of the
Merger; but all rights of creditors and all liens upon any property of Holiday
Florida shall be preserved unimpaired, and all debts, liabilities and duties of
Holiday Florida shall thenceforth attach to the Surviving Corporation and may be
enforced against it to the same extent as if such debts, liabilities and duties
had been incurred or contracted by it. All corporate acts, plans, policies,
agreements, arrangements, approvals and authorizations of Holiday Florida its
shareholders, Board of Directors and committees thereof, officers and agents
which were valid and effective immediately prior to the Effective Time, shall be
taken for all purposes as the acts, plans, policies, agreements, approvals and
authorizations of the Surviving Corporation and shall be as effective and
binding thereon as the same were with respect to Holiday Florida. The employees
and agents of Holiday Florida shall become the employees and agents of the
Surviving Corporation and continue to be entitled to the same rights and
benefits which they enjoyed as employees and agents of Holiday Florida. The
requirements of any plans or agreements of Holiday Florida involving the
issuance or purchase by Holiday Florida of certain shares of its capital stock
shall be satisfied by the issuance or purchase of a like number of shares of the
Surviving Corporation.
4. FURTHER ASSURANCES. From time to time, as and when required by the
Surviving Corporation or by its successors or assigns, there shall be executed
and delivered on behalf of Holiday Florida such deeds and other instruments, and
there shall be taken or caused to be taken by it all such further and other
action, as shall be appropriate, advisable or necessary in order to vest,
perfect or confirm, of record or otherwise, in the Surviving Corporation the
title to and possession of all property, interests, assets, rights, privileges,
immunities, powers, franchises and authority of Holiday Florida, and otherwise
to carry out the purposes of this Agreement, and the officers and directors of
the Surviving Corporation are fully authorized in the name and on behalf of
Holiday Florida or otherwise, to take any and all such action and to execute and
deliver any and all such deeds and other instruments.
5. CONVERSION OF SHARES. At the Effective Time, by virtue of the Merger
and without any action on the part of the holder thereof:
(a) each share of the common stock, par value $.01 per share
(the "Holiday Florida Common Stock") of Holiday Florida outstanding
immediately prior to the Effective Time shall be changed and converted
into and shall be one fully paid and nonassessable share of common
stock, par value $.01 per share (the "Holiday Delaware Common Stock")
of Holiday Delaware and no fractional shares shall be issued and
fractions of half or more shall be rounded to a whole share and
fractions of less than half shall be disregarded, such that the issued
and outstanding capital stock of Holiday Delaware resulting from the
conversion of the capital stock of Holiday Florida upon the Effective
Time shall be equal to the number of shares of Common Stock at that
time; and
2
<PAGE>
(b) As of the Effective Time, Holiday Delaware hereby assumes
all obligations under any and all employee benefit plans of Holiday
Florida in effect as of the Effective Time or with respect to which
employee rights or accrued benefits are outstanding as of the Effective
Time and shall continue the stock option plans of Holiday Florida. Each
outstanding and unexercised option, warrant or other right to purchase,
or security convertible into Holiday Florida Common Stock shall become
an option, warrant or right to purchase, or a security convertible into
the Surviving Corporation's Common Stock on the basis of one share of
the Surviving Corporation's Common Stock for each share of Holiday
Florida Common Stock issuable pursuant to any such option, warrant or
stock purchase right or convertible security, on the same terms and
conditions and at an exercise or conversion price per share equal to
the exercise or conversion price per share applicable to any such
Holiday Florida option, warrant, stock purchase right or other
convertible security at the Effective Time. A number of shares of the
Surviving Corporation's Common Stock shall be reserved for issuance
upon the exercise of options, warrants, stock purchase rights and
convertible securities equal to the number of shares of Holiday Florida
Common Stock so reserved immediately prior to the Effective Time.
(c) The shares of Holiday Delaware Common Stock presently
issued and outstanding in the name of Holiday Florida shall be canceled
and retired and resume the status of authorized and unissued shares of
Holiday Delaware Common Stock, and no shares of Holiday Delaware Common
Stock or other securities of Holiday Florida shall be issued in respect
thereof.
6. STOCK CERTIFICATES. As of and after the Effective Time, all of the
outstanding certificates which, immediately prior to the Effective Time,
represented shares of Holiday Florida Common Stock shall be deemed for all
purposes to evidence ownership of, and to represent, shares of Holiday Delaware
Common Stock into which the shares of Holiday Florida Common Stock formerly
represented by such certificates, have been converted as herein provided. The
registered owner on the books and records of the Surviving Corporation or its
transfer agents of any such outstanding stock certificate shall, until such
certificate shall have been surrendered for transfer or otherwise accounted for
to the Surviving Corporation or its transfer agents, have and be entitled to
exercise any voting and other rights with respect to, and to receive any
dividends and other distributions upon, the shares of Holiday Delaware Common
Stock evidenced by such outstanding certificate as above provided.
7. SHAREHOLDER APPROVAL. This Agreement has been approved by Holiday
Florida under Section 607.1103 of the Florida Business Corporation Act by the
shareholders representing in excess of 50% of the issued and outstanding voting
securities of Holiday Florida entitled to vote on this Agreement. This Agreement
has been approved by Holiday Delaware under Section 253 of the General
Corporation Law of the State of Delaware. The signature of Holiday Florida on
this Agreement shall constitute its written consent as sole shareholder of
Holiday Delaware, to this Agreement and the Merger.
8. AMENDMENT. To the full extent permitted by applicable law, this
Agreement may be amended, modified or supplemented by written agreement of the
parties hereto, either before or after
3
<PAGE>
approval of the shareholders of the constituent corporations and at any time
prior to the Effective Time with respect to any of the terms contained herein.
9. ABANDONMENT. At any time prior to the Effective Time, this Agreement
may be terminated and the Merger may be abandoned by the Boards of Directors of
Holiday Florida or Holiday Delaware, notwithstanding approval of this Agreement
by the shareholders of Holiday Delaware or by the shareholders of Holiday
Florida, or both, if, in the opinion of either of the Boards of Directors of
Holiday Florida or Holiday Delaware, circumstances arise which in the opinion of
such Boards of Directors, make the Merger for any reason inadvisable.
10. COUNTERPARTS. In order to facilitate the filing and recording of
this Agreement, the same may be executed in two or more counterparts, each of
which shall be deemed to be an original and the same agreement.
11. FLORIDA APPOINTMENT. Holiday Delaware hereby agrees that it may be
served with process in the State of Florida in any action or special proceeding
for enforcement of any liability or obligation of Holiday Florida or Holiday
Delaware arising from the Merger. Holiday Delaware appoints the Secretary of
State of the State of Florida as its agent to accept service of process in any
such suit or other proceeding and a copy of such process shall be mailed by the
Secretary of State of Florida to Holiday Delaware at 7851 Greenbriar Parkway,
Orlando, Florida 32819.
12. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, Holiday Florida and Holiday Delaware have caused
this Agreement to be executed and delivered at Orlando, Florida by their
respective duly authorized officers as of the date first above written.
HOLIDAY RV SUPERSTORES, INCORPORATED
a Florida corporation
By: /s/ MICHAEL S. RILEY
------------------------------------
Michael S. Riley
Chairman
HOLIDAY RV SUPERSTORES, INC.,
a Delaware corporation
By: /s/ MICHAEL S. RILEY
------------------------------------
Michael S. Riley
Chairman
4
EXHIBIT 3.8
RESTATED CERTIFICATE OF INCORPORATION
OF
HOLIDAY RV SUPERSTORES, INC.
Sherrie Smith hereby certifies that:
1. The original name of this corporation is Holiday RV Superstores,
Inc. and that the date of filing the original Certificate of Incorporation of
this corporation with the Secretary of the State of Delaware is October 19,
1999.
2. She is the incorporator of Holiday RV Superstores, Inc., a Delaware
corporation.
3. The Certificate of Incorporation of this corporation is hereby
amended and restated to read as follows:
FIRST: The name of the Corporation is: Holiday RV Superstores, Inc.
SECOND: The address of the registered office of the Corporation in the
State of Delaware shall be at Corporation Service Company, 1013 Centre Road,
City of Wilmington, County of New Castle, Delaware 19805. The name and address
of the Corporation's registered agent in the State of Delaware is Corporation
Service Company, 1013 Centre Road, City of Wilmington, County of New Castle,
Delaware 19805.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may now or hereafter be organized under the
General Corporation Law of the State of Delaware.
FOURTH:
1. The total number of shares of stock which the Corporation
shall have authority to issue is Twenty-Five Million (25,000,000) shares,
consisting of Twenty-Three Million (23,000,000) shares of Common Stock, par
value $.01 per share (the "Common Stock"), and Two Million (2,000,000) shares of
Preferred Stock, par value $.01 per share (the "Preferred Stock").
2. Shares of Preferred Stock may be issued from time to time
in one or more series as may be established from time to time by resolution of
the Board of Directors of the Corporation (the "Board of Directors"), each of
which series shall consist of such number of shares and have such distinctive
designation or title as shall be fixed by resolution of the Board of Directors
prior to the issuance of any shares of such series. Each such class or series of
Preferred Stock shall have such voting powers, full or limited, or no voting
powers, and such preferences and relative, participating, optional or other
special rights and such qualifications, limitations or restrictions thereof, as
shall be
<PAGE>
stated in such resolution of the Board of Directors providing for the issuance
of such series of Preferred Stock. The Board of Directors is further authorized
to increase or decrease (but not below the number of shares of such class or
series then outstanding) the number of shares of any series subsequent to the
issuance of shares of that series.
FIFTH: In furtherance and not in limitation of the powers conferred by
statute and subject to Article Sixth hereof, the Board of Directors is expressly
authorized to adopt, repeal, rescind, alter or amend in any respect the Bylaws
of the Corporation (the "Bylaws").
SIXTH: Notwithstanding Article Fifth hereof, the Bylaws may be adopted,
rescinded, altered or amended in any respect by the stockholders of the
Corporation, but only by the affirmative vote of the holders of not less than a
majority of the voting power of all outstanding shares of voting stock
regardless of class and voting together as a single voting class.
SEVENTH: The business and affairs of the Corporation shall be managed
by and under the direction of the Board of Directors. Except as may otherwise be
provided pursuant to Section 2 of Article Fourth hereof in connection with
rights to elect additional directors under specified circumstances which may be
granted to the holders of any series of Preferred Stock, the exact number of
directors of the Corporation shall be determined from time to time by a Bylaw or
amendment thereto provided that the number of directors shall not be reduced to
less than three (3), except that there need be only as many directors as there
are stockholders in the event that the outstanding shares are held of record by
fewer than three (3) stockholders. Elections of directors need not be by written
ballot unless the Bylaws of the Corporation shall so provide.
EIGHTH:
1. The directors, other than those who may be elected pursuant
to Section 2 of Article Fourth hereof in connection with rights to elect such
additional directors under specified circumstances which may be granted to the
holders of any series of Preferred Stock, shall be classified with respect to
the time for which they severally hold office into three classes, as nearly
equal in number as possible, and designated as Class I, Class II and Class III,
commencing at the first annual meeting of stockholders after the effective date
of this Certificate of Incorporation under Section 103 of the Delaware General
Corporation Law (hereinafter, the "First Meeting"). The directors first
appointed to Class I at the First Meeting shall hold office for a term expiring
at the annual meeting of the stockholders immediately following the First
Meeting; the directors first appointed to Class II shall hold office for a term
expiring at the second annual meeting of the stockholders following the First
Meeting; and the directors first appointed to Class III shall hold office for a
term expiring at the third annual meeting of the stockholders following the
First Meeting. Members of each class shall hold office until their successors
are elected and qualified or until such member's death, resignation or removal.
Thereafter, at each succeeding annual meeting of the stockholders of the
Corporation, the successors of the class of directors whose term expires at that
meeting shall be elected to hold office for a term expiring at the annual
meeting of stockholders held in the third year following the year of their
election, and until their successors are elected and qualified or until their
death, resignation or removal. Notwithstanding the foregoing, if at the time of
any annual meeting of stockholders, the Corporation is prohibited by applicable
law from having a classified Board of Directors, all of the directors shall be
elected at such annual meeting for a one
2
<PAGE>
year term only. If at the time of any subsequent annual meeting of stockholders
the Corporation is no longer prohibited by applicable law from having a
classified Board of Directors, the Board of Directors shall again be classified
in accordance with the first sentence of this paragraph, and at such annual
meeting directors initially elected shall be elected to serve in either Class I,
Class II or Class III to hold office for a term expiring at the first, second or
third succeeding annual meeting of the stockholders, respectively; thereafter
successors to each Class shall be elected in the accordance with the fourth
sentence of this paragraph. No decrease in the authorized number of directors
shall shorten the term of any incumbent director; and additional directors,
elected pursuant to Section 2 of Article Fourth hereof in connection with rights
to elect such additional directors under specified circumstances which may be
granted to the holders of any series of Preferred Stock, shall not be included
in any class, but shall serve for such term or terms and pursuant to such other
provisions as are specified in the resolution of the Board of Directors
establishing such series.
2. Any stockholder proposals and nominations for the election
of a director by a stockholder shall be delivered to the Corporate Secretary of
the Corporation no less than ninety (90) days nor more than one hundred twenty
(120) days in advance of the first anniversary of the Corporation's annual
meeting held in the prior year, provided, however, in the event the Corporation
shall not have had an annual meeting in the prior year, such notice shall be
delivered no less than ninety (90) days nor more than one hundred twenty (120)
days in advance of March 15 of the current year. Such stockholder nominations
must contain (a) as to each person whom the stockholder proposes to nominate for
election or re-election as a director at the annual meeting: (w) the name, age,
business address and residence address of the proposed nominee, (x) the
principal occupation or employment or the proposed nominee, (y) the class and
number of shares of capital stock of the Corporation which are beneficially
owned by the proposed nominee, and (z) any other information relating to the
proposed nominee that is required to be disclosed in solicitations for proxies
for election of directors pursuant to Section 14(a) of the Securities Exchange
Act of 1934, as amended; and (b) as to the stockholder giving notice of nominees
for election at the annual meeting, (x) the name and record address of the
stockholder, and (y) the class and number of shares of capital stock of the
Corporation which are beneficially owned by the stockholder.
NINTH: Except as may otherwise be provided pursuant to Section 2 of
Article Fourth hereof in connection with rights to elect additional directors
under specified circumstances which may be granted to the holders of any series
of Preferred Stock, newly created directorships resulting from any increase in
the number of directors, or any vacancies on the Board of Directors resulting
from death, resignation, removal or other causes, shall be filled solely by the
affirmative vote of a majority of the remaining directors then in office, even
though less than a quorum of the Board of Directors. Any director elected in
accordance with the preceding sentence shall hold office for the remainder of
the full term of the class of directors in which the new directorship was
created or the vacancy occurred and until such director's successor shall have
been elected and qualified or until such director's death, resignation or
removal, whichever first occurs.
TENTH: Except for such additional directors as may be elected by the
holders of any series of Preferred Stock pursuant to the terms thereof
established by a resolution of the Board of Directors pursuant to Article Fourth
hereof, any director may be removed from office with or without cause and only
by the affirmative vote of the holders of not less than 50% of the voting power
of all
3
<PAGE>
outstanding shares of voting stock entitled to vote in connection with the
election of such director regardless of class and voting together as a single
voting class.
ELEVENTH: Meetings of stockholders of the Corporation may be held
within or without the State of Delaware, as the Bylaws may provide. The books of
the Corporation may be kept (subject to any provision of applicable law) outside
the State of Delaware at such place or places as may be designated from time to
time by the Board of Directors or in the Bylaws.
TWELFTH: For the purposes of this Certificate of Incorporation, the
terms "affiliate," "associate," "control," "interested stockholder," "owner,"
"person" and "voting stock" shall have the meanings set forth in Section 203(c)
of the Delaware General Corporation Law.
THIRTEENTH: The provisions set forth in this Article Thirteenth and in
Articles Fourth, Fifth, Sixth, Seventh, Eighth, Ninth, Tenth and Eleventh hereof
may not be repealed, rescinded, altered or amended in any respect, and no other
provision or provisions may be adopted which impair(s) in any respect the
operation or effect of any such provision, except by the affirmative vote of the
holders of a majority of the voting power of all outstanding shares of voting
stock regardless of class and voting together as a single voting class, and,
where such action is proposed by an interested stockholder or by any associate
or affiliate of an interested stockholder, the affirmative vote of the holders
of a majority of the voting power of all outstanding shares of voting stock,
regardless of class and voting together as a single class, other than shares
held by the interested stockholder which proposed (or the affiliate or associate
of which proposed) such action, or any affiliate or associate of such interested
stockholder.
FOURTEENTH: The Corporation reserves the right to adopt, repeal,
rescind, alter or amend in any respect any provision contained in this
Certificate in the manner now or hereafter prescribed by applicable law, and all
rights conferred on stockholders herein are granted subject to this reservation.
Notwithstanding the preceding sentence, the provisions set forth in Articles
Fourth, Fifth, Sixth, Seventh, Eighth, Ninth, Tenth, Eleventh and Thirteenth may
not be repealed, rescinded, altered or amended in any respect, and no other
provision or provisions may be adopted which impair(s) in any respect the
operation or effect of any such provision, unless such action is approved as
specified in Article Thirteenth hereof.
FIFTEENTH: No director of the Corporation shall be liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (a) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (b) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (c) under Section 174 of the Delaware General Corporation Law,
or (d) for any transaction from which the director derived an improper personal
benefit. If the Delaware General Corporation Law hereafter is amended to
authorize the further elimination or limitation of the liability of directors,
then the liability of a director of the Corporation, in addition to the
limitation on personal liability provided herein, shall be limited to the
fullest extent permitted by the amended Delaware General Corporation Law. Any
repeal or modification of this Section by the stockholders of the Corporation
shall be prospective only and shall not adversely affect any limitation on the
personal liability of a director of the Corporation existing at the time of such
repeal or modification.
4
<PAGE>
SIXTEENTH: No contract or other transaction of the Corporation with any
other person, firm or corporation, or in which this corporation is interested,
shall be affected or invalidated by: (a) the fact that any one or more of the
directors or officers of the Corporation is interested in or is a director or
officer of such other firm or corporation; or, (b) the fact that any director or
officer of the Corporation, individually or jointly with others, may be a party
to or may be interested in any such contract or transaction, so long as the
contract or transaction is authorized, approved or ratified at a meeting of the
Board of Directors by sufficient vote thereon by directors not interested
therein, to which such fact of relationship or interest has been disclosed, or
the contract or transaction has been approved or ratified by vote or written
consent of the stockholders entitled to vote, to whom such fact of relationship
or interest has been disclosed, or so long as the contract or transaction is
fair and reasonable to the Corporation. Each person who may become a director or
officer of the Corporation is hereby relieved from any liability that might
otherwise arise by reason of his contracting with the Corporation for the
benefit of himself or any firm or corporation in which he may in any way be
interested.
SEVENTEENTH: The name and mailing address of the incorporator is
Sherrie Smith, 800 Anacapa Street, Santa Barbara, California 93101.
4. This Restated Certificate of Incorporation has been duly approved by
the incorporator of this corporation.
5. The Corporation has not received any payment for any of its stock
and this Restated Certificate of Incorporation has been duly adopted in
accordance with the provisions of Sections 241 and 245 of the General
Corporation Law of the State of Delaware by the incorporator of this
Corporation.
IN WITNESS WHEREOF, Holiday RV Superstores, Inc. has caused this
Restated Certificate of Incorporation to be signed by the incorporator in Santa
Barbara, California on this 23rd day of November, 1999.
HOLIDAY RV SUPERSTORES, INC.
By: /s/ SHERRIE SMITH
-----------------------------
Sherrie Smith
Incorporator
5
EXHIBIT 21.1
Holiday R.V. Rental/Leasing, Inc. is a subsidiary of the Registrant. This
subsidiary, which is wholly owned by Registrant, was incorporated under the Laws
of the State of Florida and is in good standing. The Subsidiary does business
only under the name of Holiday R.V. Rental/Leasing, Inc.
Holiday RV Superstores of South Atlanta, Inc. is a subsidiary of the Registrant.
This subsidiary, which is wholly owned by Registrant, was incorporated under the
Laws of the State of Georgia and is in good standing. The subsidiary does
business under the name of Holiday RV Superstores and Holiday RV Superstores of
South Atlanta, Inc.
Holiday RV Superstores of South Carolina, Inc. is a subsidiary of the
Registrant. This subsidiary, which is wholly owned by Registrant, was
incorporated under the Laws of the State of South Carolina and is in good
standing. The subsidiary does business under the name of Holiday RV Superstores
and Holiday RV Superstores of South Carolina, Inc.
Holiday RV Superstores West, Inc. is a wholly-owned subsidiary of the
Registrant, incorporated in the State of California and is in good standing. The
Subsidiary does business under the names of Holiday RV Superstores and Holiday
RV Superstores West, Inc.
Holiday RV Superstores of New Mexico, Inc., is a wholly owned subsidiary of the
Registrant. This subsidiary was incorporated under the laws of the State of New
Mexico and is in good standing. This subsidiary does business under the name of
Holiday RV Superstores and Holiday RV Superstores of New Mexico, Inc.
Holiday RV Assurance Service, Inc., is a wholly owned subsidiary of the
Registrant and is incorporated under the laws of Arizona as an insurance agency.
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<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-START> NOV-01-1998
<PERIOD-END> OCT-31-1999
<CASH> 9,119
<SECURITIES> 0
<RECEIVABLES> 2,628
<ALLOWANCES> 0
<INVENTORY> 28,756
<CURRENT-ASSETS> 40,842
<PP&E> 6,052
<DEPRECIATION> 1,454
<TOTAL-ASSETS> 45,734
<CURRENT-LIABILITIES> 25,955
<BONDS> 0
0
0
<COMMON> 75
<OTHER-SE> 19,548
<TOTAL-LIABILITY-AND-EQUITY> 45,734
<SALES> 81,396
<TOTAL-REVENUES> 81,396
<CGS> 67,369
<TOTAL-COSTS> 67,369
<OTHER-EXPENSES> 0
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<INTEREST-EXPENSE> 1,134
<INCOME-PRETAX> 3,475
<INCOME-TAX> 1,321
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