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Previous: BOYDS WHEELS INC, SB-2, 1996-05-17 |
Next: FINANCIAL SECURITY ASSURANCE HOLDINGS LTD/NY/, POS AM, 1996-05-17 |
<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 March 31, 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.
- -------------------------------------------------------------------------------
(Name of Small Business Issuer in its Charter)
CALIFORNIA 93-1000272
- ---------------------------------------- ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8380 Cerritos Ave., Stanton, CA 90680
- ---------------------------------------- ---------------------
(Address of Principal Executive Offices) (Zip Code)
Issuer's Telephone Number, including area code: (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 May 13, 1996:
Title Outstanding
-------------------------- -----------
Common Stock, No Par Value 2,502,414
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
<TABLE>
<CAPTION>
MARCH 31, 1996 DECEMBER 31, 1995
-------------- -----------------
(UNAUDITED)
<S> <C> <C>
ASSETS:
Current Assets:
Cash $ 554,606 $ 1,039,552
Accounts receivable, net 1,375,453 1,287,275
Inventories, net 4,667,007 3,643,512
Due from affiliate 100,000 100,000
Deferred tax asset 156,946 156,946
Prepaids and other current assets 753,566 593,642
----------- -----------
TOTAL CURRENT ASSETS 7,607,578 6,820,927
Due from affiliate 58,142 72,684
Property and equipment, net 4,977,752 4,689,372
Other assets, net 218,712 199,034
----------- -----------
TOTAL ASSETS $12,862,184 $11,782,017
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current Liabilities:
Accounts payable $ 2,695,326 $ 2,449,674
Accrued liabilities 988,749 1,458,980
Revolving credit agreements 550,000 289,554
Current maturities of long-term debt 494,932 343,413
Due to affiliate 29,170 35,769
Income taxes payable 203,521 130,689
----------- -----------
TOTAL CURRENT LIABILITIES 4,961,698 4,708,079
Long-term debt 1,326,072 902,754
Other long-term liabilities 72,979 79,757
Deferred income taxes 235,179 235,179
----------- -----------
TOTAL LIABILITIES 6,595,928 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, 2,489,856 shares
and 2,484,593 shares issued and
outstanding at March 31, 1996 and
December 31,1995,respectfully 6,007,207 5,957,207
Contributed capital 826,511 826,511
Accumulated deficit (567,462) (927,470)
----------- -----------
TOTAL SHAREHOLDERS' EQUITY 6,266,256 5,856,248
----------- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $12,862,184 $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 MARCH 31,
-----------------------------
1996 1995
---------- ----------
<S> <C> <C>
Net sales $5,334,074 $3,659,669
Cost of goods sold 3,976,019 2,781,721
---------- ----------
Gross margin 1,358,055 877,948
Selling, general and administrative expenses 714,142 464,932
---------- ----------
Income from operations 643,913 413,016
Interest and other expenses, net 47,873 142,392
---------- ----------
Income before provision for income taxes 596,040 270,624
Provision for income taxes 236,032 111,074
---------- ----------
Net income $ 360,008 $ 159,550
========== ==========
Net income per common share and
common equivalent share, before
accretion of Series A redeemable
preferred stock $ 0.14 $ 0.09
========== ==========
Accretion of Series A redeemable preferred stock:
Net income, as above $ 360,008 $ 159,550
Adjustment for accretion of Series
A redeemable preferred stock - (313,840)
---------- ----------
Net income (loss) applicable
to common shareholders $ 360,008 $ (154,290)
========== ==========
Net income per share, as above $ 0.14 $ 0.09
Adjustment for accretion of Series
A redeemable preferred stock - (0.18)
---------- ----------
Net income (loss) per common share
and common equivalent share $ 0.14 $ (0.09)
========== ==========
Weighted average common shares and
common equivalent shares outstanding 2,655,000 1,697,000
========== ==========
</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>
THREE MONTHS ENDED MARCH 31,
-----------------------------
1996 1995
----------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 360,008 $ 159,550
Adjustments to reconcile net income to net
cash used by operating activities:
Depreciation and amortization 185,392 125,665
Loss on disposal of property and equipment 8,160 -
Bad debt expense 20,000 -
Reserve for inventory obsolescence 20,000
Deferred income taxes - 111,073
Increase in accounts receivable (100,302) (578,522)
Increase in inventories (1,011,907) (841,157)
Increase in prepaids and other assets (157,217) (77,440)
Increase in accounts payable 242,935 906,224
Decrease in accrued liabilities (494,671) (277,296)
Increase in income taxes payable 72,832 -
(Decrease) increase in other long-term liabilities (6,778) 32,965
----------- -----------
Net cash used by operating activities (861,548) (438,938)
----------- -----------
Cash flows from investing activities:
Purchase of property and equipment (442,049) (178,773)
Cash acquired in acquisition 37,693 -
Proceeds from the sale of property and equipment 2,400 -
Payments on covenants not to compete (24,585) -
Decrease in due to (from) affiliates 7,943 24,114
----------- -----------
Net cash used by investing activities (418,598) (154,659)
----------- -----------
Cash flows from financing activities:
Increase in revolving purchasing agreement 550,000 550,000
Decrease in due to (from) majority shareholder - (20,641)
Proceeds from issuance of long-term debt 332,407 1,111,782
Principal repayments of long-term debt (87,207) (1,187,347)
----------- -----------
Net cash provided by financing activities 795,200 453,794
----------- -----------
Net decrease in cash (484,946) (139,803)
Cash at beginning of period 1,039,552 144,595
----------- -----------
Cash at end of period $ 554,606 $ 4,792
=========== ===========
</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>
THREE MONTHS ENDED
MARCH 31,
------------------------
1996 1995
-------- --------
<S> <C> <C>
Cash paid during the period for:
Income taxes $163,200 $ 800
======== ========
Interest $142,956 $ 47,998
======== ========
Supplemental schedule of noncash investing and
financing activities:
Equipment leases capitalized $ 40,084 $ 53,875
Common stock issued in settlement of employment agreement 50,000 -
Noncash reductions of due from affiliates 14,542 30,605
Accretion of Series A redeemable preferred stock - 313,840
</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 March 31, 1996
(Unaudited)
1. Summary of Significant Accounting Policies:
Basis of Presentatio:
The interim financial data as of and for the three months ended March
31, 1996, and 1995 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>
MARCH 31, 1996 DECEMBER 31, 1995
-------------- -----------------
(UNAUDITED)
-----------
<S> <C> <C>
Raw materials $ 821,642 $ 921,819
Work in process 3,043,871 1,805,882
Finished goods 801,494 915,811
---------- ----------
$4,667,007 $3,643,512
========== ==========
</TABLE>
3. Net Income Per Common Share:
Net income per share is based on the reported net income, with such
reported net income reduced in 1995 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.
Continued
- 6 -
<PAGE> 7
BOYDS WHEELS, INC.
NOTES TO FINANCIAL STATEMENTS
For the Period Ending March 31, 1996
(Unaudited)
3. Net Income Per Common Share, continued:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31
------------------------------------------------------
1996 1995
---------------------- ---------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<S> <C> <C> <C> <C>
Reported net income and
net income per share $ 360 $ .14 $ 160 $ .09
Adjustment for accretion
of Series A redeemable
preferred stock - - (314) (0.18)
----- ----- ------ ------
Net income (loss)
applicable to common
shareholders and net
income per share $ 360 $0.14 $ (154) $(0.09)
===== ===== ====== ======
Weighted average number of:
Common shares 2,490 1,634
Common equivalent shares 165 63
----- ------
Weighted average common
shares and common
equivalent shares 2,655 1,697
===== ======
</TABLE>
- 7 -
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
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 for automobiles, automotive and motorcycle 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 MARCH 31, 1996 AND THREE MONTHS ENDED MARCH
31, 1995
NET SALES
Net sales for the three months ended March 31, 1996, were $5,334,074
compared to $3,659,669 for the same period in 1995, an increase of $1,674,405
or 45.8%. 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 $600,000. The new motorcycle wheels and
accessories, introduced in mid 1995 accounted for approximately $500,000 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 $300,000 to the increase in net
sales.
GROSS MARGIN
Gross margin for the three months ended March 31, 1996 was $1,358,055
compared to $877,948 for the same period in 1995, an increase of $480,107 or
54.7%. As a percentage of net sales, gross margin increased to 25.5% in 1996
from 24.0% 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 three months ended
March 31, 1996 were $714,142 compared to $464,932 for the same period in 1995,
an increase of $249,210 or 53.6%. As a percentage of net sales, selling,
general and administrative expenses increased to 13.4% in 1996 from 12.7% in
1995. 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.
INTEREST AND OTHER EXPENSES, NET
Interest and other expenses, net, for the three months ended March 31,
1996 were $47,873 compared to $142,393 for the same period in 1995, a decrease
of $94,520 or 66.4%. 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 securites.
INCOME TAXES
Income taxes for the three months ended March 31, 1996 were $236,032
compared to $111,074 for the same period in 1995, an increase of $124,958 or
112.5%. The provision for income taxes in the first quarter of 1996 and 1995
represents the Company's expected annual effective tax rate and was 39.6% and
41.0% for 1996 and 1995, respectfully.
NET INCOME
As a result of the above, net income for the three months ended March
31, 1996 was $360,008 compared to $159,550 for the same period in 1995, an
increase of $200,458 or 125.6%.
- 8 -
<PAGE> 9
LIQUIDITY AND CAPITAL RESOURCES
Working capital was $2,645,880 at March 31, 1996 compared to $2,112,848
at December 31, 1995, an increase of $533,032. The Company has a revolving
line of credit with a bank which was increased to $2,500,000 from $2,000,000 in
April 1996. Availability of funds are based upon certain balances of the
Company's eligible accounts receivable and inventory with availability of
approximately $990,000 at March 31, 1996. The Company also has an equipment
line of credit which was increased to $1,000,000 from $750,000 in April 1996.
Availability was approximately $150,000 on the equipment line at March 31,
1996. In April 1996 the amount borrowed on the equipment line of $600,000 was
converted into a five year note payable, resulting in $1,000,000 availability
commencing in April 1996. The Company intends to use its revolving line of
credit, equipment line and cash generated from operations, if any, to continue
the growth of the Company. To the extent that such amounts are inadequte to
finance the Company's capital requirements, the Company may be required to
raise additional funds through additional equity or debt financing.
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. CHANGES IN SECURITIES.
NOT APPLICABLE.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
NOT APPLICABLE.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
NOT APPLICABLE.
ITEM 5. OTHER INFORMATION.
NONE.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(A) EXHIBITS.
EXHIBIT 27 - FINANCIAL DATA SCHEDULE
(B) REPORTS OF FORM 8-K
NONE.
- 9 -
<PAGE> 10
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: May 15, 1996
By: /s/ REX A. OURS
- -----------------------------
Rex A. Ours
Chief Financial Officer
and Corporate Secretary
(Principal Financial Officer)
Date: May 15, 1996
- 10 -
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 554,606
<SECURITIES> 0
<RECEIVABLES> 1,399,083
<ALLOWANCES> 23,630
<INVENTORY> 4,667,007
<CURRENT-ASSETS> 7,607,578
<PP&E> 6,833,662
<DEPRECIATION> 2,144,290
<TOTAL-ASSETS> 12,862,184
<CURRENT-LIABILITIES> 4,961,698
<BONDS> 1,634,230
0
0
<COMMON> 6,007,207
<OTHER-SE> 259,049
<TOTAL-LIABILITY-AND-EQUITY> 12,862,184
<SALES> 5,334,074
<TOTAL-REVENUES> 5,337,074
<CGS> 3,976,019
<TOTAL-COSTS> 3,976,019
<OTHER-EXPENSES> 694,142
<LOSS-PROVISION> 20,000
<INTEREST-EXPENSE> 47,873
<INCOME-PRETAX> 596,040
<INCOME-TAX> 236,032
<INCOME-CONTINUING> 596,040
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 360,008
<EPS-PRIMARY> .14
<EPS-DILUTED> .14
</TABLE>
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