SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarter ended December 29, 1996
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission file number: 0-22048
STARCRAFT CORPORATION
(Exact name of registrant as specified in its charter)
Indiana 35-1817634
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Post Office Box 1903
2703 College Avenue
Goshen, Indiana 46526
(Address of principal executive offices/zip code)
Registrant's telephone number, including area code: 219/533-1105
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.
Yes |X| No |_|
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: February 7, 1997 - 4,118,600
shares of Common Stock, without par value.
<PAGE>
STARCRAFT CORPORATION
Form 10-Q
- INDEX -
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Balance Sheets - December 29, 1996 (Unaudited) 1
and September 29, 1996 (Audited)
Statements of Operations (Unaudited) for the 3 months ended 2
December 29, 1996 and December 31, 1995
Statements of Cash Flows (Unaudited) for the 3 months ended 3
December 29, 1996 and December 31, 1995
Notes to Financial Statements 4-6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7-9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 11
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
STARCRAFT CORPORATION
BALANCE SHEETS
December 29, September 29,
1996 1996
------------ -------------
ASSETS (Dollars in Thousands)
Current Assets
Cash and cash equivalents ................... $ 819 $ 1,366
Trade receivables, less allowance for
doubtful accounts of $51,000 ................ 4,714 9,165
Manufacturers' rebates receivable ........... 1,254 1,079
Recoverable income tax ...................... 855 --
Inventories ................................. 10,783 11,508
Other ....................................... 472 330
------- -------
Total current assets .................... 18,897 23,448
Property and Equipment, at cost
Land, buildings, and improvements ........... 5,927 6,033
Machinery and equipment ..................... 4,529 4,430
------- -------
10,456 10,463
Less accumulated depreciation ............... 2,886 2,697
------- -------
7,570 7,766
Goodwill, at amortized cost ................. 5,084 5,140
Other assets ................................ 161 170
------- -------
$31,712 $36,524
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable, trade ..................... $ 3,727 $ 9,330
Accrued expenses:
Warranty ................................ 1,353 1,600
Compensation & related expenses ......... 332 882
Taxes ................................... 889 1,280
Other ................................... 1,738 1,557
Current maturities of long-term debt ........ 163 323
------- -------
Total current liabilities ................... 8,202 14,972
Long Term Debt, less current maturities .......... 3,300 --
Shareholders' Equity
Preferred stock, no par value;
authorized 2,000,000 shares,
-0- shares issued
Common Stock, no par value;
10,000,000 shares authorized
4,118,600 shares issued in fiscal 1997 and
4,171,600 issued in fiscal 1996 ......... 13,971 13,971
Additional paid-in capital .................. 1,008 1,008
Retained Earnings ........................... 5,231 6,573
------- -------
Total shareholders' equity .............. 20,210 21,552
------- -------
$31,712 $36,524
======= =======
- 1 -
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
STARCRAFT CORPORATION
STATEMENTS OF OPERATIONS
3 Months Ended
Dec. 29, 1996 Dec. 31, 1995
(Dollars in thousands, except share data)
Net Sales
Domestic ...................... $ 12,589 $ 13,981
Export ........................ 5,080 1,677
----------- -----------
17,669 15,658
Cost of Goods Sold ................. 15,641 14,120
----------- -----------
Gross profit .................. 2,028 1,538
Operating Expenses
Selling and promotion ......... 1,711 1,778
General and administrative .... 1,791 1,618
Restructure charges ........... 750 0
----------- -----------
4,252 3,396
----------- -----------
Operating Loss ............ (2,224) (1,858)
Nonoperating (Expense) Income
Interest, net ................. (60) (64)
Other income, net ............. 51 39
----------- -----------
(9) (25)
----------- -----------
Loss Before Income Taxes..... (2,233) (1,883)
Income Taxes ....................... (891) (741)
NET LOSS ...................... $ (1,342) $ (1,142)
=========== ===========
EARNINGS PER
COMMON SHARE ................ $ (0.33) $ (0.27)
=========== ===========
Common & Common Equivalent
Shares Outstanding .............. 4,118,600 4,168,800
=========== ===========
- 2 -
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
STARCRAFT CORPORATION
STATEMENTS OF CASH FLOWS
3 Months Ended
------------------------------
Dec. 29, 1996 Dec. 31, 1995
-------------- -------------
(Dollars in Thousands)
Cash Flows From (For) Operating Activities
Net income (loss) ..................... $ (1,342) $ (1,142)
Adjustments to reconcile net cash
provided by operating activities:
Depreciation & amortization ....... 291 285
Change in assets and liabilities:
Decrease (increase) in:
Receivables .............. 4,276 1,805
Inventories .............. 725 (1,756)
Other .................... (997) (865)
Increase (decrease) in:
Accounts payable ......... (5,603) (1,221)
Accrued expenses ......... (1,007) (1,438)
---------- ---------
Net Cash (used in)
operating activities ........... (3,657) (4,332)
Cash Flows for Investing Activities
Purchase of property and equipment (276) (295)
Other ................................. 246 (5)
---------- ----------
Net cash (used in)
investing activities ........... (30) (300)
Cash Flows From (For) Financing Activities
Borrowings on revolving
credit agreements .................. 6,400 4,400
Repayments on revolving
credit agreements .................. (3,100) --
Repurchase of Common Stock ............ -- (140)
Borrowings (payments)
on long-term debt .................. (160) (148)
---------- ----------
Net cash from financing
activities ..................... 3,140 4,112
Increase (decrease) in
cash and cash equivalents ............. (547) (520)
Cash and cash equivalents,
beginning of period................. 1,366 1,255
---------- ----------
Cash and cash equivalents,
end of period....................... $ 819 $ 735
========= ==========
- 3 -
<PAGE>
NOTES TO FINANCIAL STATEMENTS
STARCRAFT CORPORATION
December 29, 1996
- --------------------------------------------------------------------------------
Note 1. Basis of Presentation
The accompanying unaudited financial statements of Starcraft
Corporation (the "Company") have been prepared pursuant to the
rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures
normally included in annual financial statements prepared in
accordance with generally accepted accounting principles have
been condensed or omitted pursuant to those rules and
regulations. Reference is made to the Company's audited
financial statements set forth in its annual report on Form
10-K for its fiscal year ended September 29, 1996.
In the opinion of the management of the Company, the unaudited
financial statements contain all adjustments (which include
only normally recurring adjustments) necessary for a fair
statement of the results of operations for the 3 months ended
December 29, 1996, and the 3 months ended December 31, 1995.
The results of operations for the 3 months ended December 29,
1996 are not necessarily indicative of the results which may
be expected for the year ending September 28, 1997.
Note 2. Inventories
The composition of inventories is as follows (dollars in
thousands):
December 29, 1996 September 29, 1996
Raw Materials $6,144 $7,126
Work in Process 1,708 1,786
Finished Goods 2,931 2,596
------- -------
$10,783 $11,508
======= =======
- 4 -
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
STARCRAFT CORPORATION
- --------------------------------------------------------------------------------
Note 3. Pledges, Assets and Long-Term Debt
The Company has a bank line of credit, amended March 1, 1995,
totaling $15.0 million of which $3.3 million and $0 million
was outstanding at December 29, 1996 and September 29, 1996,
respectively. Borrowings under this line of credit bear
interest at the prime rate of the lending bank or, at the
Company's option, LIBOR plus 1.25%, and are unsecured. This
facility expires in January 1998 and is subject to various
covenants as defined in the agreement, all of which were
complied with at December 29, 1996.
Note 4. Consignment Arrangements
The Company obtains vehicle chassis for modification from
major vehicle manufacturers ("OEMs") under the consignment and
restricted sale agreements. These agreements generally provide
that (i) the Company may not obtain certificates of origin or
other evidence of ownership of chassis, (ii) modifications
must conform to standards specified by the OEMs, and (iii)
modifications typically are performed only after a sale has
been negotiated with an OEM approved dealer. The Company
generally ships converted chassis only after dealer acceptance
has been approved by the OEM. The OEMs bill the dealer and
provide warranty for the chassis.
The agreements are secured by various credit arrangements with
the OEMs. The OEMs may require the Company to purchase chassis
in the event that the restricted sales agreements are
terminated. The Company has not been required to purchase any
chassis during the periods covered by the accompanying
financial statements. The Company pays the OEMs a nominal
carrying charge for the first 90 days. After 90 days the
carrying charges accelerate to approximate market interest
rates. Throughout the consignment period, the Company is
subject to the risk of decline in value of the consigned
chassis.
Consistent with the practice in its industry, the Company
accounts for chassis as consignment inventory. Accordingly,
the Company records chassis inventory and related obligations
only in the event they are required to purchase chassis from
the OEM. Provisions for decline in chassis value are
recognized when, in management's estimation, such provisions
are necessary. Provisions for decline in chassis value,
chassis inventory, and chassis sales are not material in the
accompanying financial statements.
At December 29, 1996, the Company had possession of chassis in
the aggregate amount of $62.3 million of which $20.8 million
was over 90 days.
- 5 -
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
STARCRAFT CORPORATION
- --------------------------------------------------------------------------------
Note 5. Restructure Charges
In December 1996 the Company completed the consolidation of
its Imperial Automotive Group manufacturing operation into
Starcraft Automotive Group's manufacturing complex in Goshen,
Indiana. The Company recorded a $750,000 restructure charge in
the first quarter of fiscal year 1997 for employee termination
costs, leasehold asset write-offs and the recognition of
contractual lease obligations.
Note 6. Subsequent Event
The Company announced in January 1997 that it had reached an
agreement in principle to acquire National Mobility
Corporation of Elkhart, Indiana. National Mobility is one of
the nation's largest manufacturers of conversion vehicles for
the physically challenged with annual sales in excess of $5
million and assets of $2.7 million. National Mobility will
continue to operate out of its Elkhart facilities under its
current management.
- 6 -
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
STARCRAFT CORPORATION
- --------------------------------------------------------------------------------
RESULTS OF OPERATIONS
Comparison of the 3 months ended December 29, 1996
to the 3 months ended December 31, 1995
- --------------------------------------------------------------------------------
Net Sales Net sales increased 12.8% in the first quarter of 1997 to
$17.7 million compared to $15.7 million in the first quarter
of 1996. Export sales increased $3.4 million due to the
continued early build of 1997 model year product for the Japan
market. 1996 export sales were adversely impacted by the lack
of minivan chassis availability. Domestic sales declined 9.9%
due to the reduction of fullsize van units and truck sales.
The Company believes fullsize van sales continue to be
negatively impacted by the popularity of sport utility
vehicles.
Gross Profit For the 3 months ended December 29, 1996, gross profit
increased 31.9% to $2.0 million (11.5% of net sales) from $1.5
million (9.8% of net sales) for the 3 months ended December
31, 1995. The improvement in gross margin is attributable to
the increased sales, a decline in material expense and a
reduction in the sales discounts to promote prior year models.
Selling and Selling and promotion costs for the 3 months ended December
Promotion 29, 1996 decreased Promotion 3.8% to $1.7 million (9.7% of net
sales) from $1.8 million (11.4% of net sales) for the 3 months
ended December 31, 1995. The Company reduced its promotion
expenses in anticipation of the decline in the domestic sales
market.
General and General and administrative expense increased 10.7% to $1.8
Administrative million (10.1% of net Administrative sales) for the period
ended December 29, 1996 from $1.6 million (10.3% of net sales)
for the period ended December 31, 1995. Prior year amounts
were favorably impacted by a change in estimate related to
certain accruals for the Company's retirement plans.
Income Taxes For the 3 months ended December 29, 1996, income taxes were
recorded at an effective tax rate of 39.9%, which approximates
the 39.4% rate for the 3 months ended December 31, 1995.
Earnings Earnings per share decreased to a $0.33 loss on 4,118,600
Per Share average common shares Per Share outstanding for the 3 months
ended December 29, 1996, from a loss of $0.27 on 4,168,800
average common shares outstanding for the same period a year
ago.
- 7 -
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
- --------------------------------------------------------------------------------
The Company has financed its operations through positive cash flow from
operations, bank borrowings, and short-term financing from its suppliers.
The Company maintains a bank line of credit with a total credit of $15.0
million. Borrowings under the bank line bear interest at the prime rate of the
lending bank, or at the Company's option, LIBOR plus 1.25%. Borrowings at
December 29, 1996 and September 29, 1996 were $3.3 million and $0, respectively.
The bank line expires in January 1998 and is subject to various covenants, all
of which were complied with at December 29, 1996.
In addition to the bank line, the Company has entered into restricted sale
agreements with Ford Motor Credit Company, General Motors Acceptance Corporation
and Chrysler Credit Corporation pursuant to which the Company obtains van
chassis for 90 days at nominal interest rates. If the Company fails to match a
chassis with a dealer order within 90 days delivery of the chassis to the
Company, the interest under the restricted sale agreements increase to prime
rate plus 1%.
Trade accounts receivable and payable were significantly changed at December 29,
1996 relative to September 29, 1996. Accounts receivable decreased to $4.7
million at December 29, 1996, from $9.2 million at September 29, 1996. Trade
payables decreased to $3.7 million at December 29, 1996 from $9.3 million at
September 29, 1996. Trade accounts receivable and payables changes are a normal
consequence of the seasonal aspects of the Company's business and the timing of
its international business. A portion of the Company's accounts receivable is
represented by international shipments which average a collection time of 45
days. At December 29, 1996, the international shipments included in accounts
receivable were $2.4 million versus $5.8 million at September 29, 1996.
Inventories decreased to $10.8 million at December 29, 1996 compared to $11.5
million at September 29, 1996.
The Company incurred $276,000 in property and equipment expenditures for the
quarter ended December 29, 1996 primarily for miscellaneous plant improvements.
In December 1996 the Company completed the consolidation of its Imperial
Automotive Group manufacturing operation into Starcraft Automotive Group's
manufacturing complex in Goshen, Indiana. The consolidation is designed to
enhance profitable growth by reducing excess production capacity, personnel
count and fixed overhead expenses. The Company recorded a $750,000 restructure
charge in the first quarter of fiscal year 1997 for employee termination and
other costs ($62,000), leasehold asset write-offs ($256,000) and recognition of
contractual lease obligations ($432,000). The Company estimates it will realize
annual overhead expense reductions of approximately $1.1 million, primarily from
reduced facility costs and personnel reductions.
The foregoing estimates of annual cost savings constitute forward-looking
information. In reviewing such information it should be kept in mind that total
actual cost savings may differ materially from those set forth above. This
forward-looking information is based on various factors and was derived
utilizing numerous assumptions. Important assumptions and other important
factors that could cause actual cost savings to differ materially from the
estimates set forth above include achieving estimated staff reductions while
maintaining work flow in the functional areas affected and the assimilation of
Imperial production in Starcraft's facility without disruption to product
distribution. The failure of such assumptions to be realized may cause the
actual annual cost savings to differ materially from the estimates set forth
above.
The Company announced in January 1997 that it had reached an agreement in
principle to acquire National Mobility Corporation of Elkhart, Indiana. National
Mobility is one of the nation's largest manufacturers of conversion vehicles for
the physically challenged with annual sales in excess of $5 million and assets
of $2.7 million. National Mobility will continue to operate out of its Elkhart
facilities under it current management. The proposed acquisition is subject to
reaching a definitive agreement and satisfaction of a number of customary
conditions. Accordingly, there can be no assurance that the acquisition will be
consummated. The cost of the acquisition will be funded internally and through
borrowings on the Company's bank credit line.
The Company believes that cash flow from operations, funds available from its
bank line, and the continued use of financing arrangements to manage its chassis
inventory will be sufficient to satisfy the Company's working capital needs and
to fund its expansion.
- 8 -
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) The following are filed as exhibits to this report.
Exhibit No.
11 Computation of Earnings (Loss) per share.
27 Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter
for which this report is filed.
- 9 -
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
STARCRAFT CORPORATION
(Registrant)
February 12, 1997 By: /s/ Kelly L. Rose
---------------------------------------
Kelly L. Rose
Chairman of the Board and
Chief Executive Officer
By: /s/ Michael H. Schoeffler
---------------------------------------
Michael H. Schoeffler
President and Chief Financial Officer
- 10 -
Exhibit 11
COMPUTATION OF EARNINGS (LOSS) PER SHARE
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
13 Weeks
Dec. 29, 1996 Dec. 31, 1995
<S> <C> <C>
Primary
Average shares outstanding 4,118 4,169
Net effect of dilutive stock options - based
on the treasury stock method using
average market price -- --
Total 4,118 4,169
=========== ============
Net loss ($1,342) ($1,142)
=========== ============
Per share amount ($0.33) ($0.27)
=========== ============
Fully Diluted
Average shares outstanding 4,118 4,169
Net effect of dilutive stock options - based
on the treasury stock method using the
higher of the average market price for the
period or the market price at the end of
the period -- --
----------- ------------
Total 4,118 4,169
=========== ============
Net loss ($1,342) ($1,142)
=========== ============
Per share amount ($0.33) ($0.27)
=========== ============
</TABLE>
NOTE: Average shares outstanding used for earnings per share included
in the Company's financial statements do not reflect the effect of
the stock options granted since their effect is antidilutive.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
registrant's unaudited consolidated financial statements for the three months
ended December 29, 1996 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000906473
<NAME> Starcraft Corporation
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-28-1997
<PERIOD-START> SEP-30-1996
<PERIOD-END> DEC-29-1996
<EXCHANGE-RATE> 1.000
<CASH> 819
<SECURITIES> 0
<RECEIVABLES> 6,874
<ALLOWANCES> 51
<INVENTORY> 10,783
<CURRENT-ASSETS> 18,897
<PP&E> 10,456
<DEPRECIATION> 2,886
<TOTAL-ASSETS> 31,712
<CURRENT-LIABILITIES> 8,202
<BONDS> 3,300
<COMMON> 14,979
0
0
<OTHER-SE> 5,231
<TOTAL-LIABILITY-AND-EQUITY> 31,712
<SALES> 17,669
<TOTAL-REVENUES> 17,669
<CGS> 15,641
<TOTAL-COSTS> 15,641
<OTHER-EXPENSES> 4,252
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9
<INCOME-PRETAX> (2,233)
<INCOME-TAX> (891)
<INCOME-CONTINUING> (1,342)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,342)
<EPS-PRIMARY> (0.33)
<EPS-DILUTED> (0.33)
</TABLE>
