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 July 2, 2000
[ ] 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: August 7, 2000 - 4,242,059
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 - July 2, 2000 (Unaudited) 1
and October 3, 1999 (Audited)
Statements of Operations (Unaudited) for the three month 2
periods ended July 2, 2000 and June 27, 1999 and the
nine month periods ended July 2, 2000 and June 27, 1999
Statements of Cash Flow (Unaudited) for the nine month 3
periods ended July 2, 2000 and June 27, 1999
Notes to Financial Statements 4-7
Item 2. Management's Discussion and Analysis 8-11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
STARCRAFT CORPORATION
BALANCE SHEETS July 2, 2000 October 3, 1999
------------ ---------------
ASSETS (Dollars in Thousands)
Current Assets
<S> <C> <C>
Cash and cash equivalents ..................... $ 1,258 $ 600
Trade receivables, less allowance for doubtful
accounts of $175 for 2000 and $40 for 1999 22,386 16,608
Manufacturers' rebates receivable ............. 302 468
Inventories ................................... 16,087 16,377
Other ......................................... 1,426 530
-------- --------
Total current assets ...................... 41,459 34,583
Property and Equipment
Land, buildings, and improvements ............. 6,466 6,355
Machinery and equipment ....................... 6,601 6,677
-------- --------
13,067 13,032
Less accumulated depreciation ................. 5,744 5,168
-------- --------
7,323 7,864
Goodwill, at amortized cost ........................ 1,184 1,258
Other assets ....................................... 352 76
-------- --------
$ 50,318 $ 43,781
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current maturities of long-term debt .......... $ 1,057 $ 1,057
Accounts payable, trade ....................... 22,662 18,496
Accrued expenses:
Warranty .................................. 2,334 1,972
Income tax payable ........................ 248 --
Compensation and related expenses ......... 671 384
Taxes ..................................... 566 1,014
Other ..................................... 1,268 1,468
-------- --------
Total current liabilities ......................... 28,806 24,391
Long -Term Debt .................................... 11,376 13,506
Minority Interest in Subsidiary .................... 2,700 1,698
Shareholders' Equity
Preferred Stock, no par value;
authorized but unissued
2,000,000 shares
Common Stock, no par value;
10,000,000 shares authorized
4,237,559 shares issued as of July 2, 2000
and 4,176,928 as of October 3, 1999 ...... 14,354 14,144
Warrants (See Note 5) ........................ -- --
Additional paid-in capital ................... 1,008 1,008
Accumulated deficit ........................... (7,926) (10,966)
-------- --------
Total shareholders' equity ............... 7,436 4,186
-------- --------
$ 50,318 $ 43,781
======== ========
</TABLE>
- 1 -
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
STARCRAFT CORPORATION
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
3 Months Ended 9 Months Ended
-------------------------------------- -------------------------------
July 2, 2000 June 27, 1999 July 2, 2000 June 27, 1999
------------ ------------- ------------ -------------
(Dollars in thousands, except per share amounts)
Net Sales
<S> <C> <C> <C> <C>
Domestic ........................... $ 30,745 $ 26,092 $ 95,740 $ 52,216
Export ............................. 2,336 2,020 9,889 6,669
--------- --------- --------- ---------
33,081 28,112 105,629 58,885
Cost of Goods Sold ...................... 27,563 22,385 85,145 48,802
--------- --------- --------- ---------
Gross profit ................... 5,518 5,727 20,484 10,083
Operating Expenses
Selling and promotion .............. 1,296 1,258 3,716 3,211
General and administrative ......... 2,372 2,022 6,642 5,572
--------- --------- --------- ---------
3,668 3,280 10,358 8,783
--------- --------- --------- ---------
Operating Income ................... 1,850 2,447 10,126 1,300
Nonoperating (Expense) Income
Interest, net ...................... (343) (310) (1,109) (920)
Other, net ......................... 31 30 -- 89
--------- --------- --------- ---------
(312) (280) (1,109) (831)
--------- --------- --------- ---------
Income before minority ............. 1,538 2,167 9,017 469
interest and income taxes
Minority Interest in income of Subsidiary 1,278 677 5,531 677
--------- --------- --------- ---------
Income (Loss) before income taxes .. 260 1,490 3,486 (208)
Income Taxes ............................ 43 -- 446 --
--------- --------- --------- ---------
NET INCOME (LOSS) .................. $ 217 $ 1,490 $ 3,040 (208)
========= ========= ========= =========
EARNINGS (LOSS) PER SHARE .......... $ 0.05 $ 0.36 $ 0.72 $ (0.05)
========= ========= ========= =========
EARNINGS (LOSS) PER SHARE
ASSUMING DILUTION ........... $ 0.04 $ 0.33 $ 0.63 $ (0.05)
========= ========= ========= =========
</TABLE>
- 2 -
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
STARCRAFT CORPORATION
STATEMENTS OF CASH FLOW
9 Months Ended
-------------------------------
July 2, 2000 June 27, 1999
------------ -------------
(Dollars in Thousands)
Operating Activities
Net Income (Loss) .................... $ 3,040 $ (208)
Adjustments to net income (loss)
to net cash provided by operating
activities:
Depreciation and amortization ........ 952 929
Minority Interest .................... 1,002 677
Change in operating
assets and liabilities:
Receivables ............. (5,612) (3,520)
Inventories ............. 290 (7,752)
Other ................... (896) (466)
Accounts payable ........ 4,166 9,305
Accrued expenses ........ 249 (1,056)
------- -------
Net Cash from
operating activities .......... 3,191 (2,091)
Investing Activities
Purchase of property and equipment ... (603) (854)
Proceeds from sale of property
and equipment .................... 266 --
Other ................................ (276) (510)
------- -------
Net cash from
investing activities ......... (613) (1,364)
Financing Activities
Borrowings on credit agreements ...... 4,645 8,233
Repayments on credit agreements ...... (5,996) (5,014)
Payments on long-term installment debt (779) (650)
Issuance of Common Stock ............. 210 128
------- -------
Net cash from financing
activities .................... (1,920) 2,697
Increase (Decrease) in Cash and Cash
Equivalents .......................... 658 (758)
Cash and cash equivalents at
beginning of period ............... 600 1,369
------- -------
Cash and cash equivalents at
end of period ..................... $ 1,258 $ 611
======= =======
- 3 -
<PAGE>
NOTES TO FINANCIAL STATEMENTS
STARCRAFT CORPORATION
July 2, 2000
--------------------------------------------------------------------------------
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 October 3, 1999.
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 three month and
nine month periods ended July 2, 2000 and June 27, 1999. The
results of operations for the nine months ended July 2, 2000
are not necessarily indicative of the results which may be
expected for the year ending October 1, 2000.
Note 2. Inventories
The composition of inventories is as follows (dollars in
thousands):
July 2, 2000 October 3, 1999
------------ ---------------
Raw Materials $ 10,399 $ 10,844
Chassis 1,150 1,918
Work in Process 1,849 1,940
Finished Goods 2,689 1,675
------------ ------------
$ 16,087 $ 16,377
============ ============
- 4 -
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
STARCRAFT CORPORATION
--------------------------------------------------------------------------------
Note 3. Earnings Per Share
The computation of earnings per share and earnings per share
assuming dilution follows (in thousands, except share and per
share amounts):
<TABLE>
<CAPTION>
3 Months 9 Months
------------------------------ --------------------------------
July 2, 2000 June 27, 1999 July 2, 2000 June 27, 1999
------------ ------------- -------------- -------------
<S> <C> <C> <C> <C>
Earnings per share
Net income (loss) available
to common stockholders ........... $ 217 $ 1,490 $ 3,040 $ (208)
======= ======= ======= =======
Weighted average common
shares outstanding ............... 4,224 4,173 4,205 4,152
======= ======= ======= =======
EARNINGS (LOSS) PER SHARE ............. $ 0.05 $ 0.36 $ 0.72 $ (0.05)
======= ======= ======= =======
Earnings per share
Assuming dilution
Net income (loss) available
to common stockholders ........... $ 217 $ 1,490 $ 3,040 $ (208)
======= ======= ======= =======
Weighted average common
shares outstanding ............... 4,224 4,173 4,205 4,152
Add: Dilutive effects of
assumed exercises:
Incentive Stock Options 322 180 325 --
Warrants .............. 287 177 287 (a)
Other ................. 8 -- 6 --
------- ------- ------- -------
Weighted average common
and dilutive potential common
shares outstanding ............... 4,841 4,530 4,823 4,152
======= ======= ======= =======
EARNINGS (LOSS) PER SHARE
ASSUMING DILUTION ........ $ 0.04 $ 0.33 $ 0.63 $ (0.05)
======= ======= ======= =======
</TABLE>
(a) Calculation does not reflect the effect of the employee stock options and
warrants outstanding since their effect is antidilutive.
- 5 -
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
STARCRAFT CORPORATION
--------------------------------------------------------------------------------
Note 4. The tables below present information about segments used by
the chief operating decision maker of the Company for the
three and nine month periods ended July 2, 2000 and June 27,
1999.
<TABLE>
<CAPTION>
3 Months 9 Months
------------------------------ ------------------------------
July 2, 2000 June 27, 1999 July 2, 2000 June 27, 1999
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Net sales by geographic region:
Conversion Vehicle Products:
Domestic $ 12,520 $ 15,637 $ 32,796 $ 36,554
Export:
Japan 2,012 637 5,564 3,783
Europe 299 1,331 3,366 2,765
Middle East 25 43 495 106
Other -- 9 464 15
OEM Automotive Supply:
Domestic 18,225 10,455 62,944 15,662
Export -- -- -- --
--------- --------- --------- ---------
$ 33,081 $ 28,112 $ 105,629 $ 58,885
========= ========= ========= =========
Operating income (loss)*:
Conversion Vehicle Products $ (789) $ 972 $ (1,212) $ 836
OEM Automotive Supply 1,369 1,347 6,036 1,266
--------- --------- --------- ---------
$ 580 $ 2,319 $ 4,824 $ 2,102
========= ========= ========= =========
</TABLE>
July 2, 2000 October 3, 1999
------------ ---------------
Total Assets:
Conversion Vehicle Products $ 28,684 $ 25,155
OEM Automotive Supply 21,634 18,626
---------- ---------
$ 50,318 $ 43,781
========== =========
*Amounts are before general corporate expenses and after interest in income of
subsidiary.
- 6 -
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
STARCRAFT CORPORATION
--------------------------------------------------------------------------------
Note 5. Warrants / Related Party Transaction
On November 20, 1998 the Company issued warrants to purchase
shares of common stock to two individuals, both of whom are
currently directors and one of whom is an officer of the
Company, as incentive for their partial guarantee of the
Company's long-term debt. The individuals can each purchase up
to 200,000 shares of common stock of the Company for $2.20 per
share which was the ten day average market price preceding the
date of issuance. The warrants have a five year term.
The Company has elected to follow APB 25 and related
interpretations in accounting for its warrants. Under APB 25
no compensation expense has been recognized because the
exercise price of the Company's warrants equaled the market
price of the underlying stock on the date of grant. Proforma
information regarding net income and earnings per share is
required by FASB Statement No. 123, "Accounting for
Stock-Based Compensation," ("FAS 123") and has been determined
as if the Company had accounted for its warrants issued in
1999 under the fair value method of FAS 123. The fair value
was estimated as of the date of grant using a Black-Sholes
option pricing model using a risk free interest rate of 4.8%,
a 0% dividend yield, a volatility factor of 58% and an
expected life of 3 years. The Company's proforma net income
was $146,000 or $0.04 earnings per share, $0.03 earnings per
share assuming dilution, for fiscal year 1999.
- 7 -
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
STARCRAFT CORPORATION
--------------------------------------------------------------------------------
RESULTS OF OPERATIONS
Comparison of the three months ended July 2, 2000
(Third Quarter Fiscal Year 2000)
to the three months ended June 27, 1999
(Third Quarter Fiscal Year 1999)
--------------------------------------------------------------------------------
Net Sales
Net sales for the quarter ended July 2, 2000 increased $5.0 million to $33.1
million from $28.1 million for the quarter ended June 27, 1999. This growth is
primarily from the OEM Automotive Supply segment. OEM Automotive Supply sales in
the fiscal 2000 quarter were $18.2 million resulting from the Company's
performance under two customer contracts for the full fiscal quarter while the
prior year quarter sales of $10.5 million were generated from operations under
one customer contract in the start-up phase. Domestic Conversion Vehicle sales
declined to $12.5 million in the fiscal 2000 quarter from $15.6 million in the
fiscal 1999 quarter due to the decline in demand for conversion vans, partially
offset by increasing bus and mobility conversion sales. Export Conversion
Vehicle sales increased to $2.3 million in the fiscal 2000 quarter from $2.0
million in the fiscal 1999 quarter due to higher sales in Japan. Conversion Vans
accounted for 70.5% of total Conversion Vehicle sales in the fiscal 2000 quarter
compared to 82.4% in the prior year fiscal quarter. Commercial Bus and Mobility
sales comprised 29.5% of total Conversion Vehicle sales in the fiscal 2000
quarter compared to 17.6% in the prior year fiscal quarter.
Gross profit decreased to $5.5 million (16.7% of sales) for the quarter ended
July 2, 2000 from $5.7 million (20.4% of sales) for the quarter ended June 27,
1999. The decrease in gross profit is attributable to a change in product mix of
lower margin sales in the OEM Automotive Supply segment and lower volume and
larger sales discounts in the Conversion Vehicle segment.
Selling and promotion expense was $1.3 million for the quarters ended July 2,
2000 and June 27, 1999. General and administrative expense increased to $2.4
million in the fiscal 2000 quarter from $2.0 million for the quarter ended June
27, 1999 primarily due to the OEM Automotive Supply segment supporting an
additional plant operation.
Interest expense increased to $343,000 for the fiscal 2000 quarter from $310,000
for the fiscal 1999 quarter. The increase is due to higher borrowing levels
required to fund the working capital growth from the higher sales levels and
higher interest rates. Minority interest results from the Company owning 50% of
the OEM Automotive Supply segment. The prior year quarter benefitted from
$300,000 of cumulative minority interest credit. Income taxes for the fiscal
2000 quarter were $43,000 resulting from various state tax obligations. The
Company does not have federal income tax expense at this time due to existing
net operating loss carry forwards generated from prior year losses which were
fully reserved.
- 8 -
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
STARCRAFT CORPORATION
--------------------------------------------------------------------------------
RESULTS OF OPERATIONS
Comparison of the nine months ended July 2, 2000
to the nine months ended June 27, 1999
--------------------------------------------------------------------------------
Net Sales
Net sales for the fiscal 2000 period increased $46.7 million to $105.6 million
from $58.9 million for the fiscal 1999 period. This growth is primarily from the
OEM automotive supply segment. OEM Automotive Supply sales in the fiscal 2000
period were $62.9 million resulting from the Company's performance under two
customer contracts for the full fiscal nine month period while the prior year
nine month period sales of $15.7 million were generated from operations under
one customer contract in the start-up phase. Domestic Conversion Vehicle sales
declined $3.8 million to $32.8 million in the fiscal 2000 period from $36.6
million in the prior nine month period due to the decline in demand for
conversion vans, partially offset by increasing bus and mobility conversion
sales. Export Conversion Vehicle sales increased $3.2 million to $9.9 million in
the fiscal 2000 period from $6.7 million in the fiscal 1999 period primarily due
to higher sales in Europe, and improved economic conditions in Asia. Conversion
Vans accounted for 73.1% of total Conversion Vehicle sales in the fiscal 2000
period compared to 81.9% in the fiscal 1999 period. Commercial Bus and Mobility
sales accounted for 26.9% of sales in the fiscal 2000 period compared to 18.1%
in the fiscal 1999 period.
Gross profit increased to $20.5 million (19.4% of sales) for the 2000 fiscal
period from $10.1 million (17.1% of sales) for the fiscal 1999 period. The
increase in gross profit is attributable to the sales growth and higher margin
on the OEM Automotive Supply segment compared to the Conversion Vehicle segment.
Selling and promotion expense increased to $3.7 million for the fiscal 2000
period from $3.2 million for the fiscal 1999 period. The increase is primarily
due to the increase in OEM Automotive Supply sales. General and administrative
expense increased to $6.6 million in the fiscal 2000 period from $5.6 million
for the fiscal 1999 period. The increase is primarily due to the OEM Automotive
Supply segment supporting an additional plant operation.
Interest expense increased to $1,109,000 for the fiscal 2000 period from
$920,000 from the fiscal 1999 period. The increase is due to higher borrowing
levels required to fund the working capital growth from the higher sales levels
and higher interest rates. Minority interest results from the Company owning 50%
of the OEM Automotive Supply segment. Income taxes for the fiscal 2000 period
were $446,000 resulting from various state tax obligations. The Company does not
have federal income tax expense at this time due to existing net operating loss
carry forwards generated from prior year losses which were fully reserved.
- 9 -
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
STARCRAFT CORPORATION
--------------------------------------------------------------------------------
SEASONALITY AND TRENDS
The Company's sales and profits are dependent on the automotive markets in the
United States and overseas, primarily Japan and Europe, and the OEM's ability to
supply vehicle chassis. The OEM Automotive Supply segment is dependent on
specific long-term customer contracts. The business tends to be seasonal with
stronger sales in March through July and is influenced by a number of factors
including atypical weather for any sales region and OEM programs affecting the
price, supply and delivery of vehicle chassis.
The Company eliminated much excess production capacity and reduced overhead in
the last several years to address a decline in revenue. In 1997, the Company
began a plan to diversify both its product base and target markets as it
acquired National Mobility Corporation. In 1998, the Company continued to pursue
its cost reduction and diversification strategy with the introduction of the
shuttle bus product and the start-up of the OEM automotive supply business. The
Company plans to continue to develop these new products and to increase its
offerings in the vehicle conversion commercial market.
In June 2000, DaimlerChrysler Corporation announced that it would discontinue
manufacturing its fullsize van chassis after the 2002 model year. The Company
currently manufactures domestic van conversions and certain commercial products
on this chassis. Sales built on DaimlerChrysler Corporation fullsize van chassis
were $4.8 million (4.5% of total sales) and $7.0 million (7.8% of total sales)
for the nine months ended July 2, 2000 and the 1999 fiscal year, respectively.
In July 2000, the Company announced the launching of a sales and assembly
operation in Mexico. Conversion Vans will be assembled and distributed to the
Mexican market.
- 10 -
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
STARCRAFT CORPORATION
--------------------------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
Funds available from operations and under the Company's revolving credit
agreement were adequate to finance operations and provide for capital
expenditures during the nine months ended July 2, 2000.
Operations generated $3.2 million of cash in the first nine months of fiscal
2000 compared to consuming cash of $2.1 million in the fiscal 1999 period. Trade
receivables at July 2, 2000 are 35% higher than October 3, 1999 primarily due to
the increased OEM automotive supply business which has 45 day average collection
terms. Accounts payable increased $4.2 million from October 3, 1999 due to
increased OEM Automotive Supply purchases.
Capital expenditures for the 2000 year-to-date were $603,000, primarily for
building improvements, and machinery and equipment.
The Company's net generation of cash was used to reduce bank debt. As of July 2,
2000, bank debt was $12.4 million compared to $14.6 million at October 3, 1999.
The Company believes that future cashflows from operations, funds available
under its bank revolving credit agreement, and the continued use of OEM
financing arrangements to manage its chassis inventory will be sufficient to
satisfy its anticipated operating needs and capital improvements through fiscal
2001.
The Company's current debt arrangement expires in November 2001 and such debt is
payable to the financial institution. The Company believes that with the
continued improvement in the Company's operations, such debt will be reduced and
will likely be refinanced with extended terms prior to the expiration of the
debt agreement.
The Company has had significant working capital growth and liquidity over the
last year as the Company's sales increased. The Company believes its objectives
for growth over the next few years can be accomplished with minimal capital
investment and that its internal resources and existing or refinanced credit
facilities will provide sufficient liquidity for such purposes.
The foregoing discussion contains forward looking statements regarding cost
savings, adequacy of capital resources, seasonality and supply of, and demand
for, the Company's products, and the prospects of Management's operating
strategies, all of which are subject to a number of important factors which may
cause the Company's projections to be materially inaccurate. Some of such
factors are described in the Company's Form 10-K for the year ended October 3,
1999, under the subsection entitled "Discussion of Forward-Looking Information"
which is incorporated herein by reference.
- 11 -
<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.
----------
27 Financial Data Schedule.
(b) No reports on Form 8-K were filed during the quarter
for which this report is filed.
- 12 -
<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)
August 11, 2000 By: /s/ Michael H. Schoeffler
-----------------------------
Michael H. Schoeffler
President and
Chief Operating Officer
By: /s/ Richard J. Mullin
---------------------------
Richard J. Mullin
Chief Financial Officer
- 13 -
