<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number: 0-26738
BOYDS WHEELS, INC.
California 93-1000272
----------------------------- -------------------
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
8380 Cerritos Ave.
Stanton, CA 90680
714-952-4038
Check whether the issuer (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 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
---- ----
State the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
Title Outstanding
----- -----------
<S> <C>
Common Stock , No Par Value 3,709,842
</TABLE>
Transitional Small Business Disclosure Format (check one): Yes No X
---- ----
<PAGE> 2
PART 1. FINANCIAL INFORMATION
ITEM 1.
BOYDS WHEELS, INC
BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996 DECEMBER 31, 1995
------------------ -----------------
(UNAUDITED)
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 6,770,935 $ 1,039,552
Accounts receivable, net 1,578,437 1,287,275
Inventories 6,979,323 3,643,512
Due from affiliate 100,000 100,000
Prepaids and other current assets 798,746 593,642
Deferred income taxes 156,946 156,946
----------- -----------
Total current assets 16,384,387 6,820,927
Due from affiliate 183,757 72,684
Property and equipment,net 9,073,009 4,689,372
Covenants not to compete, net 157,085 150,000
Other assets 86,850 49,034
----------- -----------
Total assets $25,885,088 $11,782,017
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current Liabilities:
Accounts payable $ 2,607,520 $ 2,449,674
Accrued liabilities 893,458 1,458,980
Revolving credit agreements 754,250 289,554
Current maturities of long-term debt 886,321 343,413
Due to affiliate 28,370 35,769
Income taxes payable 462,570 130,689
----------- -----------
Total current liabilities 5,632,489 4,708,079
Long-term debt 779,257 902,754
Other long-term liabilities 61,026 79,757
Deferred income taxes 235,179 235,179
----------- -----------
Total liabilities 6,707,951 5,925,769
----------- -----------
Shareholders' Equity:
Preferred stock, no par value;
5,000,000 shares authorized,
no shares issued and outstanding - -
Common stock, no par value;
25,000,000 shares authorized, 3,709,842 shares
issued and outstanding at September 30, 1996 17,689,957 5,957,207
Contributed capital 826,511 826,511
Unearned compensation (6,249) -
Accumulated earnings (deficit) 666,918 (927,470)
----------- -----------
Total shareholders' equity 19,177,137 5,856,248
----------- -----------
Total liabilities and shareholders' equity $25,885,088 $11,782,017
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
- 2 -
<PAGE> 3
BOYDS WHEELS, INC.
STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE NINE TWELVE
MONTHS ENDED MONTHS ENDED MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
------------------------- --------------------------- -------------
1996 1995 1996 1995 1996
---------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net sales $7,521,026 $4,593,682 $20,531,943 $12,934,087 $25,393,966
Cost of goods sold 5,579,184 3,454,576 15,188,677 9,753,336 18,697,863
---------- ---------- ----------- ----------- -----------
Gross margin 1,941,842 1,139,106 5,343,266 3,180,751 6,696,103
Selling, general and
administrative expenses 975,466 622,698 2,690,231 1,694,661 3,736,018
---------- ---------- ----------- ----------- -----------
Income from operations 966,376 516,408 2,653,035 1,486,090 2,960,085
Interest and other expenses, net (34,134) 97,706 48,566 356,456 74,971
---------- ---------- ----------- ----------- -----------
Income before provision
for income taxes 1,000,510 418,702 2,604,469 1,129,634 2,885,114
Provision for income taxes 385,662 165,825 1,010,081 450,198 1,021,652
---------- ---------- ----------- ----------- -----------
Net income $ 614,848 $ 252,877 $ 1,594,388 $ 679,436 $ 1,863,462
========= ========== =========== =========== ===========
Net income per common share and
common equivalent share, before accretion
of Series A redeemable preferred stock $ 0.16 $ 0.14 $ 0.52 $ 0.39 $ 0.64
========== ========== =========== =========== ===========
Accretion of Series A redeemable
preferred stock:
Net income, as above $ 614,848 $ 252,877 $ 1,594,388 $ 679,436 $ 1,863,462
Adjustment for accretion of Series A
redeemable preferred stock - (314,400) - (1,068,629) 0
---------- ----------- ----------- ----------- -----------
Net income (loss) applicable
to common shareholders $ 614,848 $ (61,523) $ 1,594,388 $ (389,193) $ 1,863,462
========== ========== =========== =========== ===========
Net income per share, as above $ 0.16 $ 0.14 $ 0.52 $ 0.39 $ 0.64
Adjustment for accretion of Series A
redeemable preferred stock - (0.17) - (0.61) -
---------- ---------- ----------- ----------- -----------
Net income (loss) per common
share and common equivalent share $ 0.16 $ (0.03) $ 0.52 $ (0.22) $ 0.64
========== ========== =========== =========== ===========
Weighted average common shares
and common equivalent shares
outstanding 3,932,000 1,851,228 3,052,000 1,746,230 2,930,000
========== ========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
- 3 -
<PAGE> 4
BOYDS WHEELS, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------------
1996 1995
----------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,594,388 $ 679,436
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 692,415 396,781
Compensation related to stock options 6,251 -
Loss (Gain) on disposal of property and equipment 78,264 (9,200)
Bad debt expense 36,370 -
Reserve for inventory obsolencence 20,000 -
Deferred income taxes - 429,173
Increase in accounts receivable (319,656) (491,177)
Increase in inventories (3,324,223) (1,412,250)
(Increase) decrease in prepaids and other assets (205,104) 110,118
Increase in accounts payable 155,129 384,141
(Decrease) increase in accrued liabilities (589,962) 217,616
Increase in income taxes payable 331,881 -
(Decrease) in other long-term liabilities (18,731) (141,309)
----------- -----------
Net cash (used) provided by operating activities (1,542,978) 163,329
------------ -----------
Cash flows from investing activities:
Purchase of property and equipment (3,743,536) (1,209,355)
Proceeds from the sale of property and equipment 6,400 71,500
Payments on covenants not to compete (24,585) -
(Increase) decrease in due to (from) affiliates (130,664) 28,630
------------ -----------
Net cash used by investing activities (3,892,385) (1,109,225)
------------ -----------
Cash flows from financing activities:
(Decrease) in due to (from) majority shareholder - (25,545)
Borrowing on revolving credit agreements 1,689,554 -
Payments on revolving credit agreements (1,689,554) -
Proceeds from issuance of long-term debt 493,637 1,173,230
Principal, repayments of long-term debt (997,141) (1,853,560)
Proceeds from sale of common stock 12,936,250 5,312,500
Cost of equity issuances (1,266,000) (1,294,404)
Redemption of preferred stock - (1,250,000)
----------- -----------
Net cash provided by financing activities 11,166,746 2,062,221
----------- -----------
Net increase in cash and cash equivalents 5,731,383 1,116,325
Cash at beginning of period and cash equivalents 1,039,552 144,595
----------- -----------
Cash at end of period and cash equivalents $ 6,770,935 $ 1,260,920
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
- 4 -
<PAGE> 5
BOYDS WHEELS, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
------------------------
1996 1995
-------- ----------
<S> <C> <C>
Cash paid during the year for:
Income taxes $550,200 $ 1,600
======== ==========
Interest $190,101 $ 337,808
======== ==========
Supplemental schedule of noncash investing and
financing activities:
Equipment leases capitalized $169,687 $ 40,682
Equipment financed with a contract payable 540,998 -
Equipment financed with equipment line of credit 754,250 -
Leasehold improvements paid for by an affiliate - 43,000
Noncash reductions of due from affiliate 27,720 -
Accretion of Series A redeemable preferred stock - 1,068,629
Common stock issued in settlement
of employment contract 50,000 -
Unearned compensation related to stock
options granted 12,500 -
</TABLE>
The accompanying notes are an integral part of these financial statements.
- 5 -
<PAGE> 6
BOYDS WHEELS, INC.
NOTES TO FINANCIAL STATEMENTS
For the Period Ending September 30, 1996
(Unaudited)
1. Summary of Significant Accounting Policies:
Basis of Presentation:
The interim financial data as of and for the nine months ended
September 30, 1996 is unaudited; however, in the opinion of the
Company, the interim data includes all adjustments, consisting only of
normal recurring adjustments, necessary for a fair statement of the
results for the interim periods.
The year-end balance sheet information was derived from audited
financial statements, but does not include all disclosures required by
generally accepted accounting principles. These financial statements
should be read in conjunction with the Company's audited financial
statements.
2. Inventories:
Inventories consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996 DECEMBER 31, 1995
------------------ -----------------
(UNAUDITED)
<S> <C> <C>
Raw materials $1,273,316 $ 921,819
Work in process 4,096,874 1,805,882
Finished goods 1,609,133 915,811
---------- ----------
$6,979,323 $3,643,512
========== ==========
</TABLE>
- 6 -
<PAGE> 7
BOYDS WHEELS, INC.
NOTES TO FINANCIAL STATEMENTS
For the Period Ending September 30, 1996
(Unaudited)
3. Net Income Per Common Share:
Net income per share is based on the reported net income, with such
reported net income reduced for the accretion of the Series A
Redeemable Preferred Stock. The resulting amount is presented below
as income applicable to common shareholders.
Such income applicable to common shareholders in each period is
divided by the weighted average number of outstanding common shares
and common equivalent shares in accordance with Securities and
Exchange Commission Staff Accounting Bulletin ("SAB") No. 83. The SAB
requires that common stock issued by the Company in the twelve months
immediately preceding a proposed public offering plus the number of
common equivalent shares which became issuable during the same period
pursuant to the issuance of common stock options and warrants (using
the modified treasury stock method) at prices substantially less than
the initial public offering price be included in the calculation of
common stock and common stock equivalents as if they were outstanding
for all periods presented.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------------ ------------------------------------------
1996 1995 1996 1995
---------------- --------------- ---------------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Reported net income and
net income per share $ 615 $ .16 $ 253 $ .14 $1,594 $ .52 $ 679 $ .39
Adjustment for accretion
of Series A redeemable
preferred stock - - (314) (.17) - - (1,069) (.61)
------ ---- ------ ----- ------ ----- ------- -----
Net income (loss)
applicable to common
shareholders and net
income per share $ 615 $ .16 $ (61) $(.03) $1,594 $ .52 $ (390) $(.22)
====== ===== ====== ===== ====== ===== ======= =====
Weighted average number of:
Common shares 3,707 1,782 2,852 1,681
Common equivalent shares 225 69 200 65
------ ------ ------ -------
Weighted average common
shares and common
equivalent shares 3,932 1,851 3,052 1,746
====== ====== ====== =======
</TABLE>
- 7 -
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION.
The Company designs, manufactures and markets high quality aluminum wheels
for the specialty automotive aftermarket. In addition to its premium aluminum
wheels, the Company designs, manufactures and markets motorcycle wheels,
steering wheels and billet aluminum accessories, and also sells car care
products under its own label. The Company sells its products domestically
through a national distribution network of tire and performance retailers,
warehouse distributors and mail order outlets and internationally through
foreign distribution channels.
COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 1996,
AND THREE MONTHS ENDED SEPTEMBER 30, 1995
NET SALES
Net sales for the three months ended September 30, 1996, were
$7,521,026 compared to $4,593,682 for the same period in 1995, an increase of
$2,927,344 or 63.7%. The increase was primarily attributable to the continued
demand for the Company's main product line, automotive wheels, sales of which
increased approximately $1,900,000. The new motorcycle wheels and accessories,
introduced in mid 1995 accounted for approximately $360,000 of the increase.
The new one-piece cast wheels, introduced in the fourth quarter of 1995,
contributed approximately $290,000 to the increase in net sales and private
label sales contributed approximately $370,000 to the increase in net sales.
GROSS MARGIN
Gross margin for the three months ended September 30, 1996, was
$1,941,842 compared to $1,139,106 for the same period in 1995, an increase of
$802,736 or 70.5%. The increase in gross margin was primarily attributable to
volume discounts associated with larger quantity purchases of raw materials, an
increase in average sales price and a change in sales mix including new
products at higher gross margins. The increase in gross margin was slightly
offset by an increase in general factory overhead.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the three months
ended September 30, 1996, were $975,466 compared to $622,698 for the same
period in 1995, an increase of $352,768 or 56.6%. This increase was
attributable to additional administrative facility costs incurred to support
the Company's growth. As a percentage of sales, selling, general and
administrative expenses declined one-half of one percent.
INTEREST AND OTHER EXPENSE
Interest and other expenses for the three months ended September 30,
1996, were $(34,134) compared to $97,706 for the same period in 1995, a
decrease of $131,840 or 135.0%. This decrease was attributable to the partial
application of the proceeds from the Company's public offerings which were
used to reduce debt and invest in short-term interest bearing securities.
INCOME TAXES
Income taxes for the three months ended September 30, 1996 were
$385,662 compared to $165,825 for the same period in 1995, an increase of
$219,837 or 132.6%. The provision for income taxes in the three months of
1996 and 1995 represents the Company's expected annual effective tax rate of
approximately 39.0%.
NET INCOME
As a result of the above, net income for the three months ended
September 30, 1996, was $614,848 compared to $252,877 for the same period in
1995, an increase of $361,971 or 143.1%.
- 8 -
<PAGE> 9
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1996,
AND NINE MONTHS ENDED SEPTEMBER 30, 1995
NET SALES
Net sales for the nine months ended September 30, 1996, were
$20,531,943 compared to $12,934,087 for the same period in 1995, an increase of
$7,597,856 or 58.7%. The increase was primarily attributable to the continued
demand for the Company's main product line, automotive wheels, sales of which
increased approximately $4,700,000. The new motorcycle wheels and
accessories, introduced in mid 1995 accounted for approximately $1,200,000 of
the increase. The new one-piece cast wheels, introduced in the fourth quarter
of 1995, contributed approximately $800,000 to the increase in net sales and
private label sales contributed approximately $750,000 to the increase in net
sales.
GROSS MARGIN
Gross margin for the nine months ended September 30, 1996, was
$5,343,266 compared to $3,180,751 for the same period in 1995, an increase of
$2,162,515 or 68.0%. As a percentage of net sales, gross margin increased to
26.0% in 1996 from 24.6% in 1995. The increase in gross margin was primarily
attributable to volume discounts associated with larger quantity purchases of
raw materials, an increase in average sales price and a change in sales mix
including new products at higher gross margins. The increase in gross margin
was slightly offset by an increase in general factory overhead.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the nine months ended
September 30, 1996, were $2,690,231 compared to $1,694,661 for the same period
in 1995, an increase of $995,570 or 58.7%. This increase was primarily
attributable to an increase in expenditures related to new product development,
advertising and promotional costs associated with new product introductions and
legal, accounting and other costs related to being a public company. As a
percentage of sales, selling, general and administrative expenses remained
constant.
INTEREST AND OTHER EXPENSE
Interest and other expenses for the nine months ended September 30,
1996, were $48,566 compared to $356,456 for the same period in 1995, a decrease
of $307,890 or 86.4%. The decrease is attributable to the reduction of debt
and interest income earned on short-term interest bearing investments.
INCOME TAXES
Income taxes for the nine months ended September 30, 1996 were $
1,010,081 compared to $450,198 for the same period in 1995, an increase of
$559,883 or 124.4%. The provision for income taxes for 1996 and 1995
represents the Company's expected annual effective tax rate of 38.9% and
40.0%, respectfully.
NET INCOME
As a result of the above, net income for the nine months ended
September 30, 1996, was $1,594,388 compared to $679,436 for the same period in
1995, an increase of $914,952 or 134.7%.
LIQUIDITY AND CAPITAL RESOURCES
Working capital was $10,752,000 at September 30, 1996 as compared to
$2,113,000 at December 31, 1995 or an increase of $8,639,000. The increase in
working capital was the result of the Company's June 11, 1996 public offering.
Inventory increased to $6,979,323 from $3,643,512 at December 31, 1995, an
increase of $3,335,811. This increase was made to allow the Company to meet
the anticipated increase in demand for automotive wheels and the change in
distribution to a dealer direct program for motorcycle products. The Company
has also invested in capital equipment necessary to meet the growing demand for
its products. The Company intends to utilize the current funds, along with
cash generated from operations to continue the growth of the Company. In
addition, the Company has available a revolving line of credit and equipment
line of credit. At September 30, 1996, the $2,500,000 revolving line of credit
had available funds, based on assets, of $1,653,000, in addition to a
$1,000,000 equipment line, with available funds of $245,750. To the extent
that such amounts are insufficient to finance the Company's working capital
requirements, the Company will be required to raise additional funds through
additional equity or debt financing
- 9 -
<PAGE> 10
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company is involved in routine litigation incidental to the
conduct of its business. There are currently no material pending legal
proceedings to which the Company is a party or to which any of its property is
subject.
ITEM 2 THROUGH ITEM 5.
Have been omitted because the related information is either
inapplicable or has been previously reported.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
1. (a) Exhibits.
27.1 -- Financial Data Schedule
2. (b) None.
- 10 -
<PAGE> 11
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.
BOYDS WHEELS, INC.
Date: November 14, 1996 By: /s/ BOYD L. CODDINGTON
---------------------------------
Boyd L. Coddington
Chief Executive Officer
(Principal Executive Officer)
Date: November 14, 1996 By: /s/ REX A. OURS
-----------------------------
Rex A. Ours
Chief Financial Officer
and Corporate Secretary
(Principal Financial Officer)
- 11 -
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 6,770,935
<SECURITIES> 0
<RECEIVABLES> 1,618,437
<ALLOWANCES> 40,000
<INVENTORY> 6,979,323
<CURRENT-ASSETS> 16,384,387
<PP&E> 11,487,948
<DEPRECIATION> 2,414,939
<TOTAL-ASSETS> 25,885,088
<CURRENT-LIABILITIES> 5,632,489
<BONDS> 0
0
0
<COMMON> 17,689,957
<OTHER-SE> 1,487,180
<TOTAL-LIABILITY-AND-EQUITY> 25,885,088
<SALES> 7,521,026
<TOTAL-REVENUES> 7,521,026
<CGS> 5,579,184
<TOTAL-COSTS> 975,466
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (34,134)
<INCOME-PRETAX> 1,000,510
<INCOME-TAX> 385,662
<INCOME-CONTINUING> 614,848
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 614,848
<EPS-PRIMARY> .16
<EPS-DILUTED> .16
</TABLE>
