FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
{X} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the quarterly period ended September 30, 1999
{ } TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the transition period from ........ to .........
Commission file number: 0-22268
NATIONAL R.V. HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware 33-0371079
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3411 N. Perris Blvd.
Perris, California 92571
(909) 943-6007
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
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.
Class Outstanding at November 3, 1999
- ----- -------------------------------
Common stock, par value 10,498,886
$.01 per share
1
<PAGE>
NATIONAL R.V. HOLDINGS, INC.
FORM 10-Q
September 30, 1999
INDEX
Page
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet -
September 30, 1999 and December 31, 1998 3
Consolidated Statement of Income -
Three and Nine Months Ended September 30, 1999 and 1998 4
Consolidated Statement of Cash Flows -
Nine Months Ended September 30, 1999 and 1998 5
Consolidated Statement of Changes in Stockholders' Equity 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8 - 13
Item 3. Quantitative and Qualitative Disclosures about Market Risk 14
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 15
Signature 16
2
<PAGE>
NATIONAL R.V. HOLDINGS, INC.
CONSOLIDATED BALANCE SHEET
(In thousands except shares)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
ASSETS
<S> <C> <C>
Current Assets:
Cash $ 31,457 $ 10,446
Trade receivables, less allowance for
doubtful accounts of $188 22,204 20,719
Inventories 58,709 46,832
Deferred income taxes 4,663 3,883
Prepaid expenses 3,200 809
-------------- --------------
Total current assets 120,233 82,689
Goodwill 6,681 7,365
Property, plant and equipment, net 29,681 24,341
Other 1,235 3,344
-------------- --------------
$ 157,830 $ 117,739
============== ==============
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current portion of long-term debt $ 20 $ 166
Accounts payable 19,396 8,771
Accrued expenses 15,083 10,272
-------------- --------------
Total current liabilities 34,499 19,209
Deferred income taxes 2,391 2,341
Long-term debt 90 1,700
Commitments and contingencies
Stockholders' equity:
Preferred stock - $.01 par value; 5,000 shares
authorized, 4,000 issued and outstanding - -
Common stock - $.01 par value; 25,000,000 shares
authorized, 10,488,886 and 10,322,837 issued and
outstanding, respectively 105 103
Additional paid-in capital 46,402 44,645
Accumulated earnings 74,343 49,741
-------------- --------------
Total stockholders' equity 120,850 94,489
-------------- --------------
$ 157,830 $ 117,739
============== ==============
</TABLE>
See Notes to Consolidated Financial Statements
3
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NATIONAL R.V. HOLDINGS, INC.
CONSOLIDATED STATEMENT OF INCOME
(In thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Net sales $ 108,947 $ 96,403 $ 317,267 $ 267,562
Cost of goods sold 89,333 81,124 263,520 225,596
---------- --------- ---------- ----------
Gross profit 19,614 15,279 53,747 41,966
Selling expenses 3,079 2,842 8,403 8,117
General and administrative
expenses 1,648 1,684 5,382 4,710
Amortization of intangibles 103 103 310 310
---------- --------- ---------- ----------
Operating income 14,784 10,650 39,652 28,829
Other expense (income):
Interest expense - 24 28 129
Interest income (381) (110) (974) (269)
Other 11 (3) (373) 220
---------- --------- ---------- ----------
Income before income taxes 15,154 10,739 40,971 28,749
Provision for income taxes 6,134 4,138 16,369 11,403
---------- --------- ---------- ----------
Net income $ 9,020 $ 6,601 $ 24,602 17,346
Earnings per common share
and common equivalent
shares:
Basic $ 0.86 $ 0.65 $ 2.37 $ 1.76
Diluted $ 0.82 $ 0.57 $ 2.20 $ 1.52
Weighted average number
of shares:
Basic 10,448 10,113 10,392 9,861
Diluted 11,054 11,498 11,185 11,409
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE>
NATIONAL R.V. HOLDINGS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months
Ended September 30,
1999 1998
<S> <C> <C>
Cash flows from operating activities:
Net income $ 24,602 $ 17,346
Adjustments to reconcile net income
to net cash provided
by operating activities:
Depreciation expense 1,781 1,333
Amortization of intangibles 310 310
Gain on asset disposal (387) -
Tax benefit related to exercise of
stock options 900 -
Increase in trade receivables (1,485) (14,225)
Increase in inventories (11,877) (1,961)
(Increase) decrease in prepaid expenses (2,391) 41
Increase in accounts payable 10,625 5,792
Increase in accrued expenses 4,811 3,954
Increase in deferred income taxes (730) (1,333)
----------- -----------
Net cash provided by operating activities 26,159 11,257
Cash flows from investing activities:
Increase in other assets (68) (194)
Purchases of property, plant and equipment (7,094) (3,397)
Distributions from Dune Jet Services, LP 2,912 -
----------- -----------
Net cash used in investing activities (4,250) (3,591)
Cash flows from financing activities:
Principal payments on long-term debt (1,756) (5,349)
Proceeds from issuance of common stock 857 4,323
----------- -----------
Net cash used in financing activities (899) (1,026)
----------- -----------
Net increase in cash 21,010 6,640
Cash beginning of period 10,446 3,542
----------- -----------
Cash end of period $ 31,456 $ 10,182
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
5
<PAGE>
NATIONAL R.V. HOLDINGS, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(In thousands except shares)
(Unaudited)
<TABLE>
<CAPTION>
Preferred Common Stock Paid-in Accumulated
Stock Shares Amount Capital Earnings Total
--------- ---------- ------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1998 $ - 10,322,837 $ 103 $44,645 $ 49,741 $ 94,489
Common Stock issued upon
exercise of warrants 295 3 3
Common Stock issued under
option plan 165,754 2 854 856
Tax benefit related to
exercise of stock options 900 900
Net income 24,602 24,602
-------- ---------- ----- ------- -------- ---------
Balance, June 30, 1999 $ - 10,488,886 $ 105 $46,402 $ 74,343 $ 120,850
======== ========== ===== ======= ======== =========
</TABLE>
See Notes to Consolidated Financial Statements
6
<PAGE>
NATIONAL R.V. HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - GENERAL
In the opinion of National R.V. Holdings, Inc. (collectively, with its
subsidiaries National R.V., Inc., and Country Coach, Inc. referred to herein as
the "Company"), the accompanying unaudited consolidated financial statements
contain all adjustments, consisting only of normal recurring adjustments,
necessary for the fair presentation of the financial position, results of
operations and cash flows for all periods presented. All significant
intercompany accounts and transactions have been eliminated in the
consolidation. The balance sheet data as of December 31, 1998 was derived from
audited financial statements, but does not include all disclosures contained in
the Company's Annual Report to Stockholders. Results for the interim periods are
not necessarily indicative of the results for an entire year and the financial
statements do not include all of the information and footnotes required by
generally accepted accounting principles. These financial statements should be
read in conjunction with the Company's Annual Report to Stockholders and notes
thereto contained in the Company's latest annual report on Form 10-K.
NOTE 2 - INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------ -------------
<S> <C> <C>
Finished goods $ 12,556,000 $ 11,112,000
Work-in-process 14,726,000 13,815,000
Raw materials 14,900,000 12,477,000
Chassis 16,527,000 9,428,000
------------ ------------
$ 58,709,000 $ 46,832,000
============ ============
</TABLE>
7
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Statements contained in this Quarterly Report on Form 10-Q that are not
historical facts are forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Investors are cautioned that
forward-looking statements are inherently uncertain. Actual performance and
results may differ materially from that projected or suggested herein due to
certain risks and uncertainties including, without limitation, the cyclical
nature of the recreational vehicle industry; seasonality and potential
fluctuations in the Company's operating results; the pricing and availability of
gasoline; the Company's dependence on chassis suppliers; the integration by the
Company of acquired businesses and the management of growth; potential
liabilities under repurchase agreements; competition; government regulation;
product liability; and dependence on certain dealers and concentration of
dealers in certain regions. The reader should carefully consider, together with
the other matters referred to herein, the factors set forth under the caption
"Factors That May Affect Future Operating Results." The Company cautions the
reader, however, that these factors may not be exhaustive.
Liquidity and Capital Resources
- -------------------------------
At September 30, 1999, the Company had working capital of $85.7 million compared
to $63.5 million at December 31, 1998. Net cash provided by operating activities
was $26.2 million for the nine months ended September 30, 1999, compared to
$11.3 million for the same period in 1998. Increases in net income, accounts
payable and accrued expenses were offset by increases in trade receivables,
inventories, and prepaid expenses. Inventories were up $11.9 million at
September 30, 1999 over their December 31, 1998 levels. Of that total, $7.1
million related to chassis inventory increases resulting from a build up of Ford
chassis in anticipation of a reduced allocation from Ford over the next several
quarters. Furthermore, additional diesel chassis were on hand at September 30,
1999 in anticipation of the introduction of two new diesel motorhome products at
the National RV, Inc. subsidiary in the fourth quarter of 1999.
Cash used in investing activities was $4.3 million compared to $3.6 million for
the comparable period last year. However, purchases of property, plant, and
equipment were $7.1 million compared to $3.4 million for the comparable period
last year. This increase was offset by a $2.9 million distribution in respect to
the Company's limited partnership interest in Dune Jet Services, LP. The Company
expects that its limited partnership interest in Dune Jet Services will be fully
liquidated during 1999.
Cash used in financing activities was $0.9 million compared $1.0 million for the
comparable period last year.
The Company believes that the combination of internally generated funds,
existing capital and funds available from its existing credit facility, will be
sufficient to meet the Company's planned capital and operational requirements
for at least the next 24 months.
8
<PAGE>
Results of Operations
- ---------------------
Net sales for the third quarter of 1999 increased by $12.5 million or 13.0% from
the comparable period last year. For the first nine months of 1999, the Company
reported sales of $317.3 million, 18.6% higher than sales of $267.6 million for
the first nine months of last year. The Company's Country Coach subsidiary
shipped 448 Class A motorhomes for the nine months ending September 30, 1999
compared to 419 for the same time period last year. The National RV subsidiary
shipped 2,615 Class A motorhomes and 300 fifth-wheel units for the nine months
ending September 30, 1999 compared to 2,334 and 297, respectively, for the same
time period last year. The average sales price for Class A motorhomes at the
National RV subsidiary increased 8.5% to $76,801 reflecting strong demand for
higher-priced diesel motorhomes and motorhomes with slide-out rooms. The average
sales price for Class A motorhomes at the Country Coach subsidiary increased
5.9% to $226,244, also reflecting stronger demand for higher-priced units.
Cost of goods sold of $89.3 million for the third quarter of 1999 resulted in a
gross margin of 18.0% compared to a gross margin of 15.8% for the same period
last year. Cost of goods sold of $263.5 million for the first nine months of
1999 resulted in a gross margin of 16.9% compared to a gross margin of 15.7% for
the same period last year. The increase was due primarily to manufacturing
efficiencies resulting from increased production volume at both subsidiaries.
Selling expense for the third quarter of 1999 increased to $3.1 million or 2.8%
of net sales, compared to $2.8 million or 2.9% of net sales for the same period
last year. Selling expense for the first nine months of 1999 increased to $8.4
million or 2.6% of net sales, compared to $8.1 million or 3.0% of net sales for
the same period last year. The decrease as a percentage of net sales was
primarily due to a change in the method of calculating commissions at the
National RV subsidiary.
General and administrative expense for the third quarter of 1999 decreased to
$1.6 million or 1.5% of net sales, compared to $1.7 million or 1.7% of net sales
for the same period last year. General and administrative expense for the first
nine months of 1999 increased to $5.4 million or 1.7% of net sales, compared to
$4.7 million or 1.8% of net sales for the same period last year.
As a result of the foregoing, operating income for the third quarter of 1999
increased 38.8% to $14.8 million or 13.6% of net sales, compared to $10.7
million or 11.0% of net sales for the same period last year. Operating income
for the first nine months of 1999 increased 37.5% to $39.7 million or 12.5% of
net sales, compared to $28.8 million or 10.8% of net sales for the same period
last year.
Interest expense for the first nine months of 1999 decreased $101,000 compared
to the same period last year due to the retirement of debt. Interest income
increased $705,000 for the nine months due to an increase in cash. Other income
of $373,000 for the first nine months of 1999 is comprised primarily of a gain
of $362,000 from the distribution of the investment in Dune Jet Services, LP, as
noted above.
As a result of the foregoing, income before income taxes for the third quarter
of 1999 increased to $15.2 million or 13.9% of net sales, compared to $10.7
million or 11.1% of net sales for the same period last year. Income before
income taxes for the first nine months of 1999 increased to $41.0 million or
12.9% of net sales, compared to $28.7 million or 10.7% of net sales for the same
period last year.
9
<PAGE>
Provision for income taxes for the third quarter of fiscal 1999 was $6.1 million
compared to $4.1 million for the same period last year. Provision for income
taxes for the first nine months of 1999 was $16.4 million compared to $11.4
million for the same period last year.
As a result of the foregoing, net income for the third quarter of 1999 increased
36.6% to $9.0 million or 8.3% of net sales, compared to $6.6 million or 6.8% of
net sales for the same period last year. Net income for the first nine months of
1999 increased 41.8% to $24.6 million or 7.8% of net sales, compared to $17.3
million or 6.5% of net sales for the same period last year.
IMPACT OF THE YEAR 2000 ISSUE
- -----------------------------
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Computer programs that
have date sensitive software may recognize a date using "00" as the year 1900,
rather than the year 2000. To be in "Year 2000 compliance" a computer program
must be written using four digits to define years. As a result, before the end
of 1999, computer systems and/or software used by many companies may need to be
upgraded to comply with such "Year 2000" requirements. Without upgrades,
computer systems could fail or miscalculate causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices or engage in similar normal business activities.
The Company has identified its Year 2000 risk in four categories: internal
computer hardware infrastructure, application software (including a combination
of "canned" software applications and internally written or modified
applications for both financial and non-financial uses), imbedded chip
technology, and third-party suppliers and customers. The Company's Year 2000
risk project phases consist of assessment of potential year 2000 related
problems, development of strategies to mitigate those problems, remediation of
the affected systems, and internal certification that the process is complete
through documentation and testing of remediation efforts. None of the Company's
other information technology (IT) projects has been delayed due to the
implementation of its Year 2000 project.
INTERNAL COMPUTER HARDWARE INFRASTRUCTURE The certification and upgrading of
computer hardware is substantially complete with only a number of personal
computers remaining to be tested. Such testing will be completed by the middle
of the fourth quarter.
APPLICATION SOFTWARE The Company completed the analysis, upgrading, and
certification of all applications software during the third quarter. All
applications have been certified as Year 2000 compliant.
IMBEDDED CHIP TECHNOLOGY The Year 2000 risk also exists among other types of
machinery and equipment that use imbedded computer chips or processors. For
example: phone systems, security alarm systems, or other manufacturing and
diagnostic equipment may contain computer chips that rely on date information to
function properly. The Company completed the certification of its imbedded chip
technology in the third quarter of 1999.
10
<PAGE>
THIRD-PARTY SUPPLIERS AND CUSTOMERS The third-party suppliers and customers
category includes completing all phases of the Year 2000 project using a
prioritized list of third-parties most critical to the Company's operations and
communicating with them about their plans and progress toward addressing the
Year 2000 problem. The most significant third-party relationships and
dependencies exist with financial institutions, along with suppliers of
materials, communication services, utilities, and supplies. The Company has
completed its validation process regarding critical third-parties' state of
readiness for Year 2000.
COSTS The Company has not incurred any significant costs in relation to the Year
2000 compliance project.
RISKS Although the Company expects its Year 2000 project to reduce the risk of
business interruptions due to the Year 2000 problem, there can be no assurance
that these results will be achieved. Failure to correct a Year 2000 problem
could result in an interruption in, or failure of, certain normal business
activities or operations. Factors that give rise to uncertainty include failure
to identify all susceptible systems, failure by third parties to address the
Year 2000 problem whose systems or products, directly or indirectly, are
depended on by the Company, loss of personnel resources within the Company to
complete the Year 2000 project, or other similar uncertainties. Based on an
assessment of the Company's current state of readiness with respect to the Year
2000 problem, the Company believes that the most reasonably likely worst case
scenario would involve the noncompliance of one or more of the Company's
third-party financial institutions or key suppliers. Such an event could result
in a material disruption to the Company's operations. Specifically, the Company
could experience an interruption in its ability to collect funds from dealer
finance companies, process payments to suppliers, and receive key material
components from suppliers thus slowing or interrupting the production process.
If this were to occur it could, depending on its duration, have a material
impact on the Company's business, results of operations, financial condition and
cash flows.
FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS
- ------------------------------------------------
POTENTIAL FLUCTUATIONS IN OPERATING RESULTS The Company's net sales, gross
margin and operating results may fluctuate significantly from period to period
due to factors such as the mix of products sold, the ability to utilize and
expand manufacturing resources efficiently, material shortages, the introduction
and consumer acceptance of new models offered by the Company, competition, the
addition or loss of dealers, the timing of trade shows and rallies, and factors
affecting the recreational vehicle industry as a whole. In addition, the
Company's overall gross margin on its products may decline in future periods to
the extent the Company increases its sales of lower gross margin towable
products or if the mix of motor coaches sold shifts to lower gross margin units.
Due to the relatively high selling prices of the Company's products (in
particular, its High-Line Class A motor coaches), a relatively small variation
in the number of recreational vehicles sold in any quarter can have a
significant effect on sales and operating results for that quarter.
CYCLICALITY AND SEASONALITY The RV industry has been characterized by cycles of
growth and contraction in consumer demand, reflecting prevailing economic
conditions which affect disposable income for leisure-time activities. Concerns
about the availability and price of gasoline, decreases in consumer confidence,
increases in interest rates and reductions in available financing have had, and
may in the future have, an adverse impact on RV sales. Seasonal factors, over
which the Company has no control, also have an effect on the demand for the
Company's products. Demand in the RV industry declines over the winter season,
while sales are generally highest during the spring and summer months.
11
<PAGE>
INTEGRATION OR ACQUIRED BUSINESS; MANAGEMENT OF GROWTH One of the Company's
objectives is to acquire businesses in the RV industry or related areas.
Successfully accomplishing this goal depends upon a number of factors, including
the Company's ability to find suitable acquisition candidates, negotiate
acquisitions on acceptable terms, retain key personnel of the acquired entities,
hire and train other competent managers, and effectively and profitably
integrate the operations of the acquired businesses into the Company's existing
operations. The process of integrating acquired businesses may require a
significant amount of resources and management attention, which could
temporarily detract attention from the day-to-day business of the Company. The
Company's ability to manage its growth effectively will require it to continue
to improve its operational, financial and management information systems and
controls, and to attract, retain, motivate and manage employees effectively. The
failure of the Company to manage growth in its business effectively could have a
material adverse effect on the financial condition and results of operations of
the Company.
EXPANSION OF MANUFACTURING FACILITIES In 1999, the Company purchased additional
land in Perris, California, Junction City, Oregon, and Hillsborough County,
Florida for planned expansion of manufacturing and service facilities. There can
be no assurance that such facilities or future additional facilities will be
able to meet the manufacturing needs of the Company or that the Company will be
able to attract and retain qualified technical, supervisory and manufacturing
personnel required in order to operate such facility in an effective and
efficient manner.
DEPENDENCE ON CERTAIN DEALERS; CONCENTRATION OF DEALERS IN CERTAIN REGIONS
Although no one dealer accounted for more than 10% of the Company's net sales
during the year ended December 31, 1998 and the nine months ended September 30,
1999, the Company's top ten dealers accounted for approximately 44% and 42% of
the Company's sales during the year ended December 31, 1998 and the nine months
ended September 30, 1999, respectively. The loss by the Company of one or more
of these dealers could have a material adverse effect on the Company's financial
condition and results of operations. In addition, a significant portion of the
Company's sales is from dealers located in states in the western part of the
United States. Consequently, a general downturn in economic conditions or other
material events in such region could materially adversely affect the Company's
sales.
DEPENDENCE ON CHASSIS SUPPLIERS One of the principal components used in the
manufacture of motorhomes and bus conversions is the chassis and bus shell,
respectively, which include the engine, drive train and other operating
components. Although Country Coach manufactures chassis used in certain of its
products, the Company obtains the required chassis for most of its Class A
motorhomes from a limited number of manufacturers and the required bus shells
from Prevost Corporation. Prevost is the only manufacturer of bus shells used in
the Company's bus conversions and there is only one other manufacturer of bus
shells in North America. As is standard in the industry, arrangements with such
suppliers permit them to terminate their relationship with the Company at any
time. Lead times for the delivery of chassis frequently exceed five weeks, and
the RV industry as a whole has from time to time experienced temporary shortages
of chassis. In the second quarter of 1999, Ford announced a temporary reduction
in the availability of a particular chassis that the Company uses in several of
its current models. The reduced allocation is set to begin in the fourth quarter
of 1999. The Company presently believes that its expected allocation of chassis
is sufficient to enable the growth planned for these models and does not
presently foresee operating difficulties with respect to this issue. However, if
any of the Company's suppliers were to discontinue the manufacture of chassis
utilized by the Company in the manufacture of its Class A motorhomes, materially
reduce their availability to the RV industry in general or limit or terminate
their availability to the Company in particular, the business and financial
condition of the Company could be materially and adversely affected.
12
<PAGE>
POTENTIAL LIABILITIES UNDER REPURCHASE AGREEMENTS As is common in the industry,
the Company enters into repurchase agreements with the financing institutions
used by its dealers to finance their purchases. These agreements obligate the
Company to purchase a dealer's inventory under certain circumstances in the
event of a default by the dealer to its lender. The risk of loss, however, is
spread over many dealers and is further reduced by the resale value of the RVs
that the Company would be required to repurchase. Although losses under these
agreements have not been significant in the past, if the Company were obligated
to repurchase a significant number of RVs in the future, it could result in
losses and a reduction in new RV sales. The Company's contingent obligations
under repurchase agreements vary from period to period and totaled approximately
$88 million as of December 31, 1998.
COMPETITION The Company competes with numerous manufacturers, many of which have
multiple product lines of RVs, are larger and have substantially greater
financial and other resources than the Company. According to an industry source,
the two largest motorhome manufacturers had sales aggregating 42% of
industry-wide retail unit sales of Class A motorhomes for the year ended
December 31, 1998. In addition, sales of used RVs provide competition to RV
manufacturers.
GOVERNMENT REGULATION The Company is subject to the provisions of the National
Traffic and Motor Vehicle Safety Act (the "Motor Vehicle Act") and the safety
standards for RVs and components which have been promulgated thereunder by the
Department of Transportation. The Motor Vehicle Act authorizes the National
Highway Traffic Safety Administration ("NHTSA") to require a manufacturer to
recall and repair vehicles which contain certain hazards or defects. The Company
has from time to time instituted voluntary recalls of certain motorhome units,
none of which had a material adverse effect on the Company. The Company is also
subject to numerous state consumer protection laws and regulations relating to
the operation of motor vehicles, including so-called "Lemon Laws."
The Company's manufacturing operations are subject to a variety of federal and
state environmental regulations relating to the use, generation, storage,
treatment, emissions, and disposal of hazardous materials and wastes and noise
pollution. Such laws and regulations are becoming more stringent, and it is
likely that future amendments to these environmental statutes and additional
regulations promulgated thereunder will be applicable to the Company, its
manufacturing operations and its products in the future. The failure of the
Company to comply with present or future regulations could result in fines being
imposed on the Company, potential civil and criminal liability, suspension of
production or operations, alterations to the manufacturing process or costly
cleanup or capital expenditures.
PRODUCT LIABILITY The Company maintains product liability insurance with
coverage in amounts which management believes is reasonable. To date, the
Company has been successful in obtaining product liability insurance on terms
the Company considers acceptable. Given the nature of the Company's business,
product liability in excess of the Company's insurance coverage, if incurred,
could have a material adverse effect on the Company.
ANTITAKEOVER PROVISIONS Certain provisions of the Company's Certificate of
Incorporation, as well as Delaware corporate law and the Company's Stockholder
Rights Plan (the "Rights Plan"), may be deemed to have anti-takeover effects and
may delay, defer or prevent a takeover attempt that a stockholder might consider
in its best interest. Such provisions also may adversely affect prevailing
market prices for the Common Stock. Certain of such provisions allow the
Company's Board of Directors to issue, without additional stockholder approval,
preferred stock having rights senior to those of the Common Stock. In addition,
the Company is subject to the anti-takeover provisions of Section 203 of the
Delaware General Corporation Law, which prohibits the Company from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed matter.
In August 1996, the Company adopted the Rights Plan, pursuant to which holders
of the Common Stock received a distribution of rights to purchase additional
shares of Common Stock, which rights become exercisable upon the occurrence of
certain events.
13
<PAGE>
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
14
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
None
B. Reports on Form 8-K
None
15
<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.
NATIONAL R.V. HOLDINGS, INC.
(Registrant)
Date: November 11, 1999 By /s/ BRADLEY C. ALBRECHTSEN
Bradley C. Albrechtsen
Chief Financial Officer,
Treasurer, and Assistant
Secretary (Principal
Accounting and Finance
Officer)
16
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0
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