<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 June 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.
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
California 93-1000272
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
--- ----
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
State the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date. As of August 13, 1996:
Title Outstanding
Common Stock, No Par Value 3,704,579
Transitional Small Business Disclosure Format (check one);
Yes No X
--- ---
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
BOYDS WHEELS, INC
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, 1996 DECEMBER 31, 1995
------------- -----------------
<S> <C> <C>
ASSETS:
Current Assets:
Cash and Cash Equivalents $ 9,493,736 $ 1,039,552
Accounts receivable, net 2,170,826 1,287,275
Inventories 5,508,767 3,643,512
Due from affiliate 100,000 100,000
Prepaids and other current assets 585,936 593,642
Deferred tax asset 156,946 156,946
----------- -----------
Total current assets 18,016,211 6,820,927
Due from affiliate 54,969 72,684
Property and equipment,net 6,481,963 4,689,372
Covenants not to compete, net 164,585 150,000
Other assets 16,749 49,034
----------- -----------
Total assets $24,734,477 $11,782,017
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current Liabilities:
Accounts payable $ 3,480,926 $ 2,449,674
Accrued liabilities 606,481 1,458,980
Revolving Credit Agreements - 289,554
Current maturities of long-term debt 621,149 343,413
Due to affiliate 39,770 35,769
Income taxes payable 276,908 130,689
----------- -----------
Total current liabilities 5,025,234 4,708,079
Long-term debt 820,337 902,754
Other long-term liabilities 66,067 79,757
Income taxes payable 235,179 235,179
----------- -----------
Total liabilities 6,146,817 5,925,769
Preferred stock, no par value;
5,000,000 shares authorized,
no shares issued and outstanding - -
----------- -----------
Shareholders' equity:
Common stock, no par value;25,000,000
shares authorized, 3,704,579 shares
issued and outstanding at
June 30, 1996 17,718,457 5,957,207
Contributed capital 826,511 826,511
Unearned compensation (9,375) -
Accumulated earnings (deficit) 52,067 (927,470)
----------- -----------
Total shareholders' equity 18,587,660 5,856,248
----------- -----------
Total liabilities and
shareholders' equity $24,734,477 $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 MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------ -------------------------------
1996 1995 1996 1995
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Net sales $7,676,843 $4,680,736 $13,010,917 $8,340,405
Cost of goods sold 5,633,475 3,517,039 9,609,493 6,298,760
---------- ---------- ----------- ----------
Gross margin 2,043,368 1,163,697 3,401,424 2,041,645
Selling, general and
administrative expenses 999,739 607,030 1,714,765 1,071,963
---------- ---------- ----------- ---------
Income from operations 1,043,629 556,667 1,686,659 969,682
Interest and other expenses,net 34,828 116,358 82,700 258,750
---------- ---------- ----------- ---------
Income before provision
for income taxes 1,008,801 440,309 1,603,959 710,932
Provision for incometaxes 388,387 173,299 624,419 284,373
---------- ---------- ----------- ----------
Net income $ 620,414 $ 267,010 $ 979,540 $ 426,559
========== ========== =========== ==========
Net income per common share
and common equivalent
share, before accretion
of Series A redeemable
preferred stock $ 0.21 $ 0.16 $ 0.34 $ 0.25
========== ========== =========== ==========
Accretion of Series A redeemable
preferred stock:
Net income, as above $ 620,414 $ 267,010 $ 979,540 $ 426,559
Adjustment for accretion of
Series A redeemable preferred stock - (313,840) - (627,679)
---------- ---------- ----------- ----------
Net income (loss) applicable
to common shareholders $ 620,414 $ (46,830) $ 979,540 $ (201,120)
========== ========== =========== ==========
Net income per share as above $ 0.21 $ 0.16 $ 0.34 $ 0.25
Adjustment for accretion of
Series A redeemable preferred stock - (0.19) $ - (0.37)
---------- ---------- ----------- ----------
Net income (loss) per common
share and common equivalent share $ 0.21 $ ( 0.03) $ 0.34 $ (0.12)
========== ========== =========== ==========
Weighted average common shares
and common equivalent shares
outstanding 2,916,000 1,699,000 2,888,000 1,699,000
========== ========== =========== ==========
</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>
SIX MONTHS ENDED
JUNE 30,
-------------------------------
1996 1995
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 979,540 $ 426,569
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 399,580 259,414
Loss on disposal of property and
equipment 50,729 3,882
Bad debt expense 36,370 -
Reserve for inventory obsolencence 20,000 -
Deferred taxes - 230,083
Increase in accounts receivable (912,045) (609,626)
Increase in inventories (1,853,668) (1,042,968)
Increase in prepaids and other
assets (7,706) (56,895)
Increase in accounts payable 1,028,536 855,529
Decrease in accrued liabilities (876,939) (50,381)
Increase in income taxes payable 146,219 -
(Decrease) increase in other long-term
liabilities (13,690) 35,909
----------- -----------
Net cash (used)provided by operating activities (1,003,074) 51,516
----------- -----------
Cash flows from investing activities:
Purchase of property and equipment (2,298,724) (543,576)
Proceeds from the sale of property and
equipment 492,400 1,500
Payments on covenants not to comppete (24,585) -
Decrease in due to (from) affiliates 21,716 32,816
----------- -----------
Net cash used by investing activities (1,809,193) (509,260)
----------- -----------
Cash flows from financing activities:
(Decrease) in due to (from) majority
shareholder - (32,347)
Borrowing on revolving line of credit 1,400,000 550,000
Payments on revolving line of credit (1,400,000) -
Proceeds from issuance of long-term debt 463,932 1,195,512
Principal repayments of long-term debt (908,729) (1,206,923)
Proceeds from sale of common stock 12,948,750 -
Cost of equity issuances (1,237,502) -
----------- -----------
Net cash provided by financing activities 11,266,451 506,242
----------- -----------
Net increase in cash 8,454,184 48,498
Cash at beginning of period 1,039,552 144,595
----------- -----------
Cash at end of period $ 9,493,736 $ 193,093
=========== ===========
</TABLE>
Continued
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
BOYDS WHEELS, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30
1996 1995
---------------- ---------
<S> <C> <C>
Supplemental schedule of noncash investing and
financing activities:
Equipment leases capitalized $124,396 $ 18,400
Equipment financed with long-term debt - 20,000
Accretion of Series A redeemable preferred
stock - (627,679)
Common stock issued in settlement
of employment contract 50,000 -
</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 June 30, 1996
(Unaudited)
1. Summary of Significant Accounting Policies:
Basis of Presentation:
The interim financial data as of and for the six months ended June 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>
(UNAUDITED)
-------------
JUNE 30, 1996 DECEMBER 31, 1995
------------- -----------------
<S> <C> <C>
Raw materials $1,043,539 $ 921,819
Work in process 3,683,735 1,805,882
Finished goods 781,493 915,811
---------- ----------
$5,508,767 $3,643,512
========== ==========
</TABLE>
3. Public Offering:
On June 11, 1996, the Company completed a secondary public offering of
1,151,000 common shares at $11.25 per share. The proceeds to the
Company from the secondary public offering were $12,948,750. The net
proceeds to the Company, net of issuance costs of $1,237,502, were
$11,711,248.The additional shares sold were listed on the Nasdaq (NMS)
Stock Exchange.
Continued
6
<PAGE> 7
BOYDS WHEELS, INC.
NOTES TO FINANCIAL STATEMENTS
For the Period Ending June 30, 1996
(Unaudited)
4. 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 SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------------------- -------------------------------------
1996 1995 1996 1995
--------------- --------------- --------------- ----------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Reported net income and
net income per share $ 620 $ .21 $ 267 $ .16 $ 979 $ .34 $ 426 $ .25
Adjustment for accretion
of Series A redeemable
preferred stock - - (313) (.19) - - (627) (.37)
------ ----- ------ ----- ------ ----- ------ -----
Net income (loss)
applicable to common
shareholders and net
income per share $ 620 $ .21 $ (46) $(.03) $ 979 $ .34 $ (201) $(.12)
====== ===== ====== ===== ====== ===== ====== =====
Weighted average number
of:
Common shares 2,737 1,317 2,718 1,317
Common equivalent
shares 179 382 170 382
------ ------ ------ ------
Weighted average common
shares and common
equivalent shares 2,916 1,699 2,888 1,699
====== ====== ====== ======
</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 JUNE 30, 1996, AND THREE MONTHS ENDED JUNE 30,
1995
NET SALES
Net sales for the three months ended June 30, 1996, were $7,676,843
compared to $4,680,736 for the same period in 1995, an increase of $2,996,107
or 64.0%. The increase was primarily attributable to the continued demand for
the Company's main product lines, two-piece cast wheels and billet wheels,
sales of which increased approximately $1,800,000. The new motorcycle wheels
and accessories, introduced in mid 1995 accounted for approximately $ 600,000
of the increase. The new one-piece cast wheels, introduced in the fourth
quarter of 1995, contributed approximately $ 200,000 to the increase in net
sales and private label sales contributed approximately $ 400,000 to the
increase in net sales.
GROSS MARGIN
Gross margin for the three months ended June 30, 1996, was $2,043,368
compared to $1,163,697 for the same period in 1995, an increase of $879,671 or
75.6%. 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 June 30, 1996, were $999,739 compared to $607,030 for the same period in
1995, an increase of $392,709 or 64.7%. 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
remained constant.
Interest and Other Expense
Interest and other expenses for the three months ended June 30, 1996 ,
were $34,828 compared to $116,358 for the same period in 1995, a decrease of
$81,530 or 70.1%. This decrease was attributable to the partial application of
the proceeds from the Company's initial public offering which were used to
reduce debt and invest in short-term interest bearing securities.
Income Taxes
Income taxes for the three months ended June 30, 1996 were $388,387
compared to 173,299 for the same period in 1995, an increase of $ 215,088 or
124.1 %. 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 June
30, 1996, was $620,414 compared to $267,010 for the same period in 1995, an
increase of $353,404 or 132.4%.
8
<PAGE> 9
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1996, AND SIX MONTHS ENDED JUNE 30 ,
1995
NET SALES
Net sales for the six months ended June 30, 1996, were $13,010,917
compared to $8,340,405 for the same period in 1995, an increase of $4,670,512
or 56.0%. The increase was primarily attributable to the continued demand for
the Company's main product lines, two-piece cast wheels and billet wheels,
sales of which increased approximately $ 2,300,000. The new motorcycle wheels
and accessories, introduced in mid 1995 accounted for approximately $ 1,100,000
of the increase. The new one-piece cast wheels, introduced in the fourth
quarter of 1995, contributed approximately $ 400,000 to the increase in net
sales and private label sales contributed approximately $ 700,000 to the
increase in net sales.
GROSS MARGIN
Gross margin for the six months ended June 30, 1996, was $3,401,424
compared to $2,041,645 for the same period in 1995, an increase of $1,359,779
or 66.5%. As a percentage of net sales, gross margin increased to 26.1 % in
1996 from 24.5 % 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 six months ended
June 30, 1996, were $1,714,765 compared to $1,071,963 for the same period in
1995, an increase of $642,802 or 60.0%. 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 six months ended June 30, 1996,
were $82,700 compared to $258,750 for the same period in 1995, a decrease of
$176,050 or 68.0%. The decrease is attributable to the reduction of debt and
interest revenue earned on short-term interest bearing investments.
INCOME TAXES
Income taxes for the six months ended June 30, 1996 were $ 624,419
compared to $ 284,373 for the same period in 1995, an increase of $ 340,046 or
120.0 %. The provision for income taxes in the first quarter of 1996 and 1995
represents the Company's expected annual effective tax rate of 38.9 % and
40.0 % for 1996 and 1995, respectfully..
NET INCOME
As a result of the above, net income for the six months ended June 30,
1996, was $979,540 compared to $426,559 for the same period in 1995, an
increase of $552,981 or 129.6%.
LIQUIDITY AND CAPITAL RESOURCES
Working capital was $12,990,977 at June 30, 1996 as compared to $2,113,000 at
December 31, 1995 or an increase of $10,877,977. The increase in working
capital was the result of the Company's secondary stock offering, completed on
June 11, 1996. The Company intends to utilize these 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 June 30, 1996, the $2,500,000 revolving line of credit had available
funds, based on assets, of $2,015,000, in addition to $1,000,000 available for
equipment financing. 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 THROUGH 3 AND ITEM 5
Have been omitted because the related information is either
inapplicable or has been previously reported.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company's 1995 annual meeting of shareholders was held on June
12, 1996. The matters voted upon at the meeting included the election of
members of the Board of Directors, the approval of an amendment to the
Company's 1995 stock plan, and to ratify the appointment of Coopers & Lybrand
L.L.P. as independent accountants for the company.
The persons elected at the meeting to the Company's Board of Directors
were Boyd Coddington, Stanley Clark, Marcus Sorenson, Curt Barwick and Melanie
McCaffery.
The 1995 Stock option plan amendment submitted to the shareholders for
approval provides for an increase to the number of share of common stock
reserved for issuance there under by 200,000 shares bringing the total number
of shares issuable under the plan to 450,000 shares.
Upon the recommendation of the Audit Committee, the Board has selected
Coopers & Lybrand L.L.P. to provide audit service to the Company for the fiscal
year ending December 31, 1996.
The number of shares voting in favor of, against, and abstaining from
the above matters were as follows:
ELECTION OF DIRECTORS
<TABLE>
<CAPTION>
Name of Nominee Votes in Favor Votes Withholding Authority
--------------- -------------- ---------------------------
<S> <C> <C>
Boyd Coddington 1,981,235 278,674
Stanley Clark 1,981,235 278,674
Marcus Sorenson 1,981,235 278,674
Curt Barwick 1,981,235 278,674
Melanie McCaffery 1,981,235 278,674
</TABLE>
1995 STOCK OPTION PLAN AMENDMENT
The proposal to approve an amendment to the 1995 Stock Option Plan was
approved by a vote of 1,559,629 shares voting in favor of the amendment, 36,835
shares voting against and 663,445 shares abstaining.
INDEPENDENT PUBLIC ACCOUNTANTS
The proposal to approve the selection of Coopers & Lybrand L.L.P.,
to provide audit services to the Company was approved by a vote of 1,959,621
shares voting in favor of the selection, 13,050 shares voting against and
287,238 shares abstaining.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
27. Financial Data Schedule
(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.
By: /s/ Boyd L. Coddington
--------------------------------------------------------------------
Boyd L. Coddington
Chief Executive Officer (Principal Executive Officer)
Date: August 14, 1996
By: /s/ Rex A. Ours
--------------------------------------------------------------------
Rex A. Ours
Chief Financial Officer and Corporate Secretary (Principal Financial
Officer)
Date: August 14, 1996
11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 9,493,736
<SECURITIES> 0
<RECEIVABLES> 2,210,826
<ALLOWANCES> 40,000
<INVENTORY> 5,508,767
<CURRENT-ASSETS> 18,016,211
<PP&E> 8,739,212
<DEPRECIATION> 2,257,249
<TOTAL-ASSETS> 24,734,477
<CURRENT-LIABILITIES> 5,025,234
<BONDS> 0
0
0
<COMMON> 17,718,457
<OTHER-SE> 869,203
<TOTAL-LIABILITY-AND-EQUITY> 24,734,477
<SALES> 7,676,843
<TOTAL-REVENUES> 7,676,843
<CGS> 5,633,475
<TOTAL-COSTS> 999,739
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 34,828
<INCOME-PRETAX> 1,008,801
<INCOME-TAX> 388,387
<INCOME-CONTINUING> 620,414
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 620,414
<EPS-PRIMARY> .21
<EPS-DILUTED> .21
</TABLE>
