<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended June 30, 1996
OR
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Transition Period from ______ to ______
Commission File Number 0-23808
METROTRANS CORPORATION
(Exact name of Registrant as specified in its charter)
GEORGIA 58-1393777
(State of Incorporation) (I.R.S. Employer
Identification No.)
777 GREENBELT PARKWAY, GRIFFIN, GEORGIA 30223
(Address of principal executive offices, including zip code)
(770) 229-5995
(Registrant's telephone number, including area code)
_______________
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 twelve 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 August 13, 1996
- ---------------------------- ------------------------------
Common Stock, $.01 Par Value 4,076,275 shares
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METROTRANS CORPORATION
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1996
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
ITEM PAGE
NUMBER PART I. FINANCIAL INFORMATION NUMBER
- ------ ------
<S> <C> <C>
1 Financial Statements:
Balance Sheets as of June 30, 1996 and
December 31, 1995.......................................... 3
Statements of Income for the three and six months
ended June 30, 1996 and July 1, 1995..................... 4
Statements of Cash Flows for the three and six months ended
June 30, 1996 and July 1, 1995............................ 5
Notes to Financial Statements.............................. 6
2 Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................. 8
PART II. OTHER INFORMATION
1 Legal Proceedings......................................... 9
4 Submission of Matters to a Vote of Security Holders....... 10
6 Exhibits and Reports on Form 8-K.......................... 10
SIGNATURE................................................. 11
</TABLE>
2
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PART I. FINANCIAL INFORMATION
- ----------------------------------------
ITEM 1. FINANCIAL STATEMENTS
METROTRANS CORPORATION
BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS
JUNE 30, DECEMBER 31,
1996 1995
------------ ------------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
CASH....................................... $ 35 $ 23
ACCOUNTS RECEIVABLE, NET OF ALLOWANCE
FOR DOUBTFUL ACCOUNTS OF $277 AND $260 IN
1996 AND 1995, RESPECTIVELY................ 6,536 8,878
CURRENT PORTION OF NET INVESTMENT IN
SALES-TYPE LEASES......................... 741 626
INVENTORIES................................ 14,878 12,771
PREPAID EXPENSES AND OTHER................. 836 943
--------- ---------
TOTAL CURRENT ASSETS...................... 23,026 23,241
PROPERTY, PLANT AND EQUIPMENT, NET.......... 4,983 4,323
NET INVESTMENT IN SALES-TYPE LEASES......... 1,540 1,827
DEPOSITS AND OTHER.......................... 363 276
--------- ---------
$29,912 $29,667
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
CHECKS OUTSTANDING......................... $ 1,040 $ 1,025
ACCOUNTS PAYABLE AND ACCRUED EXPENSES...... 5,323 5,061
BORROWINGS UNDER LINE OF CREDIT............ 2,569 4,169
CURRENT PORTION OF LONG-TERM DEBT.......... 1,115 1,168
CUSTOMER DEPOSITS.......................... 772 604
--------- ---------
TOTAL CURRENT LIABILITIES................. 10,819 12,027
--------- ---------
LONG-TERM DEBT, NET OF CURRENT PORTION...... 3,401 3,727
--------- ---------
DEFERRED INCOME TAXES....................... 250 250
--------- ---------
COMMITMENTS AND CONTINGENCIES (NOTE 3)
STOCKHOLDERS' EQUITY:
PREFERRED STOCK, NO PAR VALUE;
10,000,000 SHARES AUTHORIZED.............. - -
COMMON STOCK, $.01 PAR VALUE;
20,000,000 SHARES AUTHORIZED, 4,076,275
SHARES ISSUED AND OUTSTANDING AT
JUNE 30, 1996, AND DECEMBER 31, 1995,
RESPECTIVELY............................... 41 41
ADDITIONAL PAID-IN CAPITAL.................. 10,457 10,457
DEFERRED COMPENSATION....................... (367) ( 420)
RETAINED EARNINGS........................... 5,311 3,585
--------- ---------
15,442 13,663
--------- ---------
$29,912 $29,667
========= =========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
3
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<TABLE>
<CAPTION>
METROTRANS CORPORATION
STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED SIX MONTHS ENDED
----------------------- ----------------------
JUNE 30, JULY 1, JUNE 30, JULY 1,
1996 1995 1996 1995
----------- ---------- ---------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
NET REVENUE $20,614 $ 16,303 $ 37,814 $ 31,489
COST OF SALES 16,463 12,925 30,618 25,451
-------- -------- -------- --------
GROSS PROFIT 4,151 3,378 7,196 6,038
SELLING, GENERAL, AND
ADMINISTRATIVE EXPENSES 2,248 1,919 4,007 3,540
-------- -------- -------- --------
OPERATING INCOME 1,903 1,459 3,189 2,498
INTEREST EXPENSE, NET 186 152 372 365
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 1,717 1,307 2,817 2,133
INCOME TAX PROVISION 665 496 1,090 810
-------- -------- -------- --------
NET INCOME $ 1,052 $ 811 $ 1,727 $ 1,323
======== ======== ======== ========
NET INCOME PER COMMON AND
COMMON EQUIVALENT
SHARE $ 0.26 $ 0.20 $ 0.42 $ 0.33
======== ======== ======== ========
WEIGHTED AVERAGE COMMON
AND COMMON EQUIVALENT
SHARES 4,117 4,007 4,083 3,994
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
4
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METROTRANS CORPORATION
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
--------------------------------
JUNE 30, JULY 1,
1996 1995
----------- -----------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 1,727 $ 1,323
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 300 465
Compensation under restricted stock award 53 21
Changes in assets and liabilities:
Accounts receivable 2,342 (2,780)
Inventories (2,107) 1,596
Other assets 19 (160)
Checks outstanding 15 854
Accounts payable and accrued expenses 262 166
Customer deposits 168 140
----------- -----------
Total adjustments 1,052 302
----------- -----------
Net cash provided by operating activities 2,779 1,625
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (870) (446)
Net decrease (increase) in property held for lease (205) 32
Net decrease in investment in sales-type leases 287 130
----------- -----------
Net cash (used in) investing activities (788) (284)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (repayments) under line of credit (1,600) (1,647)
Net (decrease) in collateralized borrowings (53) (256)
Payments of long-term debt (326) (384)
Cash repayments from majority stockholders 0 891
----------- -----------
Net cash (used in) financing activities (1,979) (1,396)
----------- -----------
INCREASE (DECREASE) IN CASH 12 (55)
CASH AT BEGINNING OF PERIOD 23 89
----------- -----------
CASH AT END OF PERIOD $ 35 $ 34
=========== ===========
CASH PAID FOR INTEREST $ 333 366
=========== ===========
CASH PAID FOR TAXES $ 892 $ 1,053
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
5
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METROTRANS CORPORATION
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
(UNAUDITED)
1. Basis of Presentation
---------------------
The financial statements include the accounts of Metrotrans
Corporation (the "Company"). During the quarter ended March 31, 1996 all
wholly owned subsidiaries of the Company, including Spalding Molded
Products, Inc., Metrotrans Overseas, Inc., and Eurotrans Corp. were merged
with and into the Company. The financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and, therefore, omit certain information and
footnotes required by generally accepted accounting principles for complete
financial statements. Accordingly, these statements should be read in
conjunction with the Company's audited financial statements included in its
Annual Report on Form 10-K for the year ended December 31, 1995 filed with
the Securities and Exchange Commission.
In the opinion of Management, the financial statements contain all
adjustments necessary for a fair presentation of the financial position,
results of operations and cash flows for the periods presented. The
adjustments were of a normal recurring nature. Certain reclassifications of
1995 income statement captions have been made to conform with the 1996
presentation. Results presented for the three-month and six-month periods
ended June 30, 1996 March 31, 1996 are not necessarily indicative of
results that may be expected for the full fiscal year.
2. Inventories
-----------
Inventories consist of (in thousands):
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
----------------- -----------------
<S> <C> <C>
Chassis awaiting conversion.. $1,467 $ 341
Raw materials................ 3,427 3,245
Work in process.............. 1,477 1,581
Finished goods............... 4,294 3,033
Used vehicles................ 4,213 4,571
----- -----
$14,878 $12,771
======= =======
</TABLE>
3. Commitments and Contingencies
-----------------------------
The Company enters into various leasing arrangements with customers
and leasing companies. Certain leases contingently obligate the Company to
indemnify the leasing company for any losses it incurs up to a specified
6
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amount on the lease in the event the lessee defaults. In addition, the
Company enters into agreements with a financial institution whereby the
Company guarantees varying amounts of customers' purchase debt obligations.
The Company's obligation under these guarantees becomes effective in the
case of default in payments or certain other defined conditions. The
Company's aggregate potential liability under these arrangements as of June
30, 1996 and December 31, 1995 was $8.5 million and $7.4 million,
respectively. However, no significant payments have been required under
these arrangements as of June 30, 1996.
The Company is involved in certain legal matters primarily arising in
the normal course of business. In the opinion of Management, the Company's
liability under any of these matters would not have a material adverse
effect on its financial condition or results of operations.
7
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The Company was incorporated in 1982 and introduced its second product, the
Classic(R), in 1986. During the intervening period, 1982 to 1986, the Company
focused its efforts on marketing buses manufactured by other companies. Since
the introduction of the Classic(R), the Company has experienced continuous
growth in unit sales and revenues. The Company's product development strategy
is to design and introduce new products after clearly identifying a market need
based, in large part, on suggestions made by existing and potential customers.
This approach resulted in the introduction of the Eurotrans(R) in 1990, the
Eurotrans XLT(R) and the Classic II(R) in 1992, the Classic Commuter(R)
in 1993 and the Legacy(R) in 1996.
RESULTS OF OPERATIONS
The following table sets forth, as a percentage of total revenue, the
relationship of selected items included in the Company's income statement for
the periods indicated.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ -----------------
June 30, July 1, June 30, July 1,
1996 1995 1996 1995
--------- ------- -------- --------
<S> <C> <C> <C> <C>
Net revenue.................... 100.0% 100.0% 100.0% 100.0%
Cost of sales.................. 79.9 79.3 80.9 80.8
------- ------- ------- -------
Gross profit................... 20.11 20.7 19.1 19.2
Selling, general and
administrative expeneses.... 10.9 11.8 10.6 11.3
------- ------- ------- -------
Operating income............... 9.2 8.9 8.5 7.9
Interest expense............... .9 0.9 1.0 1.1
------- ------- ------- -------
Income before income
taxes....................... 8.3 8.0 7.5 6.8
Income tax provision........... 3.2 3.0 2.9 2.6
------- ------- ------- -------
Net income..................... 5.1 5.0% 4.6% 4.2%
======= ======= ======= =======
</TABLE>
8
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NET REVENUE.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, 1996 June 30, 1996
-------------- --------------
Revenue Revenue
Units Per Unit Units Per Unit
-------- ---------------- ------------ ------------
<S> <C> <C> <C> <C>
Eurotrans 22 $142,727 30 $145,248
Classic 320 $ 47,031 640 $ 46,775
--- ---
Total 328 670
=== ===
</TABLE>
Net revenue increased $4.3 million or 26.4% during the first quarter of
1996 as compared to the same quarter in 1995 and $6.3 million or 20.1% during
the first six months of 1996 compared to the prior year period. The increases
are attributable to increases in volume unit sales and average price per unit as
well as increased sales of used buses.
Unit sales of Classics were up 15% during the second quarter of 1996 over
the comparable 1995 quarter while average revenue per unit increased 4% over the
same period. The increased Classic sales resulted from both increased demand for
Classics and improvements in the rate of production of the units. Eurotrans unit
sales were up 22% during that period while average revenue per unit increased
4%. Year-to-date unit sales in 1996 of Classics increased 26% over the prior
year while average revenue per unit increased 2% during the same prior-year
period. The Classic is produced in various lengths on chassis supplied by Ford
Motor Company, one of which is twenty-eight feet in length and to which the
Company adds a tag-axle assembly. This tag-axle assembly configuration is being
discontinued by Ford Motor Company. The Company anticipates it will be producing
its tag-axle twenty-eight foot Classic model later this year exclusively on a
chassis supplied by General Motors Corporation. Eurotrans units sales for the
six months ended June 30, 1996 were down 35% while average revenue per unit
increased 12%. The fluctuation in Eurotrans volume is reflective of both the
more volatile market for higher-priced buses and the timing and availability of
chassis relative to receipt of orders. Production backlog at June 30, 1996 was
$28.0 million compared with $21.3 million at the end of the second quarter of
1995.
Sales of used buses in the second quarter of 1996 acquired by the Company
from trade-ins and lease maturities grew 320% to $2.1 million over the prior
year quarter. Significant refurbishment activity in progress at the end of the
first quarter of 1996 contributed to sales completed during the second quarter.
The Company is developing a separate facility to continue to increase its used
coach refurbishment capacity which is expected to be completed in the fourth
quarter of 1996.
GROSS PROFIT. Gross profit increased 22.9% to $4.2 million in the second
quarter of 1996 over $3.4 million in the comparable prior year quarter. Gross
profit, as a percentage of net revenue, of 20.1% in 1996's second quarter was
comparable with but slightly below 1995's second quarter gross margin of 20.7%.
Gross margin for the six months ended June 30, 1996 of 19.1% is comparable with
19.2% for the comparable prior year period.
OPERATING INCOME. Operating income increased 30.4% to $1.9 million for the
second quarter of 1996 from $1.5 million for the same quarter in 1995 as a
result of the control of administrative expenses relative to the growth of
revenue. As a perentage of net revenue, operating margin for the quarter ended
June 30, 1996 improved to 9.2% from 8.9% for the comparable prior year quarter
and to 8.5% from 7.9% for the year-to-date periods in 1996 and 1995,
respectively.
9
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LIQUIDITY AND CAPITAL RESOURCES
Net cash provided from operations during the first six months of 1996
totaled $2.8 million compared to $1.6 million in the comparable 1995 period. A
reduction in accounts receivable coupled with an increase in payables was only
partially offset by an increase in inventory levels and enabled a reduction of
$1.6 million in the Company's line of credit. Anticipated capital expenditures
and increases in working capital are expected to be financed through internally
generated funds and through the Company's line of credit. At June 30, 1996, the
Company had approximately $2.6 million of borrowings outstanding under the
credit facility.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is a party to certain other legal proceedings, however, it
does not anticipate that any of such proceedings will have any material adverse
effect on its financial condition or results of operations. The Company may be
subject to product liability claims arising from the use of the Company's
products. The Company maintains product liability insurance which it currently
considers adequate.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Stockholders May 15, 1996 at which
the election of the Company's directors was held. D. Michael Walden, Randy B.
Stanley, M. Earl Meck, William C. Pitt, III George W. Mathews, Jr., and Patrick
L. Flinn were each re-elected as directors with 2,817,764 votes for election and
1,330 votes withheldMarch 31, 1996.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) No exhibits are filed with this report.
(b) No Current Reports on Form 8-K were filed by Company during the quarter
ended June 30, 1996.
10
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SIGNATURE
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.
METROTRANS CORPORATION
(Registrant)
/s/ Richard M. Bruno
Date: August 14, 1996 ________________________________
Richard M. Bruno
Chief Financial and Accounting Officer
Duly Authorized Officer
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 35
<SECURITIES> 0
<RECEIVABLES> 6,813
<ALLOWANCES> 277
<INVENTORY> 14,878
<CURRENT-ASSETS> 23,026
<PP&E> 8,045
<DEPRECIATION> 3,062
<TOTAL-ASSETS> 29,912
<CURRENT-LIABILITIES> 10,819
<BONDS> 0
0
0
<COMMON> 41
<OTHER-SE> 15,401
<TOTAL-LIABILITY-AND-EQUITY> 29,912
<SALES> 0
<TOTAL-REVENUES> 37,814
<CGS> 30,618
<TOTAL-COSTS> 4,007
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 372
<INCOME-PRETAX> 2,817
<INCOME-TAX> 1,090
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<CHANGES> 0
<NET-INCOME> 1,727
<EPS-PRIMARY> .42
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</TABLE>
