<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 March 31, 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 May 10, 1996
- - ---------------------------- ---------------------------
Common Stock, $.01 Par Value 4,076,275 shares
Page 1 of 12
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METROTRANS CORPORATION
Quarterly Report on Form 10-Q
For the Quarter Ended March 31, 1996
Table of Contents
-----------------
Item Page
Number PART I. FINANCIAL INFORMATION Number
- - ------ ------
1 Financial Statements:
Balance Sheets as of March 31, 1996 and
December 31, 1995.............................................. 3
Statements of Income for the three months
ended March 31, 1996 and April 1, 1995......................... 4
Statements of Cash Flows for the three
months ended March 31, 1996 and April 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............................................. 10
4 Submission of Matters to a Vote of Security Holders........... 10
6 Exhibits and Reports on Form 8-K.............................. 11
SIGNATURE.................................... 12
2
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PART I. FINANCIAL INFORMATION
- - ------------------------------
Item 1. Financial Statements
METROTRANS CORPORATION
BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash......................................................... $ 43 $ 23
Accounts receivable, net of allowance for doubtful
accounts of $272 and $260 in 1996 and 1995, respectively.... 6,511 8,878
Current portion of net investment in sales-type leases....... 639 626
Inventories.................................................. 14,336 12,771
Prepaid expenses and other................................... 924 943
------------ ------------
Total current assets........................................ 22,453 23,241
PROPERTY, PLANT AND EQUIPMENT, net............................ 4,516 4,323
NET INVESTMENT IN SALES-TYPE LEASES........................... 1,678 1,827
DEPOSITS AND OTHER............................................ 341 276
------------ ------------
$28,988 $29,667
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Checks outstanding........................................... $ 1,047 $ 1,025
Accounts payable and accrued expenses........................ 5,777 5,061
Borrowings under line of credit.............................. 2,527 4,169
Current portion of long term debt............................ 1,072 1,168
Customer deposits............................................ 366 604
------------ ------------
Total current liabilities................................... 10,789 12,027
------------ ------------
LONG-TERM DEBT, net of current portion........................ 3,586 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
March 31, 1996 and December 31, 1995........................ 41 41
Additional paid-in capital................................... 10,457 10,457
Deferred compensation........................................ ( 394) ( 420)
Retained earnings............................................ 4,259 3,585
------------ ------------
14,363 13,663
------------ ------------
$28,988 $29,667
============ ============
</TABLE>
The accompanying notes are an integral part of these balance sheets.
3
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METROTRANS CORPORATION
STATEMENTS OF INCOME
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Three Months Ended
--------------------------
March 31, April 1,
1996 1995
--------- ----------
(Unaudited)
<S> <C> <C>
NET REVENUE $17,200 $15,186
COST OF SALES 14,144 12,526
--------- ----------
Gross Profit 3,056 2,660
SELLING, GENERAL, AND
ADMINISTRATIVE EXPENSES 1,770 1,621
--------- ----------
Operating Income 1,286 1,039
INTEREST EXPENSE, net 186 213
--------- ----------
INCOME BEFORE INCOME TAXES 1,100 826
INCOME TAX PROVISION 426 314
--------- ----------
NET INCOME $ 674 $ 512
========= ==========
NET INCOME PER COMMON AND
COMMON EQUIVALENT
SHARE $0.17 $ 0.13
========= ==========
WEIGHTED AVERAGE COMMON
AND COMMON EQUIVALENT
SHARES 4,068 3,985
========= ==========
</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>
Three Months Ended
-------------------
March 31, April 1,
1996 1995
-------- --------
<S> <C> <C>
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 674 $ 512
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 141 241
Compensation under restricted stock award 26 26
Changes in assets and liabilities:
Accounts receivable 2,368 (913)
Inventories (1,565) 1,721
Other assets (46) 41
Checks outstanding 21 175
Accounts payable and accrued expenses 716 (608)
Customer deposits (238) (41)
-------- --------
Total adjustments 1,423 642
-------- --------
Net cash provided by operating activities 2,097 1,154
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (282) (65)
Net (increase) in property held for lease (65) (2)
Net decrease (increase) in investment in sales-type leases 149 (66)
-------- --------
Net cash (used in) investing activities (198) (133)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (repayments) under line of credit (1,642) (1,567)
Net (decrease) increase in collateralized borrowings (96) 39
Payments of long-term debt (141) (238)
Cash repayments from majority stockholders 0 695
-------- --------
Net cash (used in) financing activities (1,879) (1,071)
-------- --------
INCREASE (DECREASE) IN CASH 20 (50)
CASH AT BEGINNING OF PERIOD 23 89
-------- --------
CASH AT END OF PERIOD $ 43 $ 39
======== ========
CASH PAID FOR INTEREST $ 150 $ 185
======== ========
CASH PAID FOR TAXES $ 440 $ 0
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
5
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METROTRANS CORPORATION
Notes to Financial Statements
March 31, 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 period ended 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>
March 31, 1996 December 31, 1995
-------------- -----------------
<S> <C> <C>
Chassis awaiting conversion.. $ 1,124 $ 341
Raw materials................ 3,336 3,245
Work in process.............. 1,560 1,581
Finished goods............... 3,489 3,033
Used vehicles................ 4,827 4,571
------- -------
$14,336 $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 amount
on the lease in the event the lessee defaults. In addition, the Company enters
into
6
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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 March 31, 1996 and December 31, 1995
was $7.3 million and $7.4 million, respectively. However, no significant
payments have been required under these arrangements as of March 31, 1996 and
December 31, 1995.
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 a 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 late 1992 and the Classic Commuter(R)
in late 1993.
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
--------------------------
March 31, April 1,
1996 1995
----- -----
<S> <C> <C>
Net revenue............... 100.0% 100.0%
Cost of sales............. 82.2 82.5
----- -----
Gross profit.............. 17.8 17.5
Selling, general and
administrative expenses.. 10.3 10.7
----- -----
Operating income.......... 7.5 6.8
Interest expense.......... 1.1 1.4
----- -----
Income before income
taxes.................... 6.4 5.4
Income tax provision...... 2.5 2.0
----- -----
Net income................ 3.9% 3.4%
===== =====
</TABLE>
Net Revenue. Net revenue increased 13.3% from $15.2 million for the three
months ended April 1, 1995 to $17.2 million for the three months ended March 31,
1996. Total unit sales and average revenue per unit for the three month period
ended March 31, 1996 were:
8
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<TABLE>
<CAPTION>
Three Months Ended
March 31, 1996
------------------
Revenue
Units Per Unit
------- ---------
<S> <C> <C>
Eurotrans 8 $152,180
Classic 320 $ 46,518
---
Total 328
===
</TABLE>
Both unit sales and average revenue per unit of the Classic product
increased from the first quarter of 1995 to the first quarter of 1996. Unit
sales in the quarter ended March 31, 1996 of the Eurotrans product were below
those reported for the quarter ended April 1, 1995 which contained the highest
level of quarterly Eurotrans unit sales reported to date. The fluctuation in
Eurotrans unit volume is reflective of the more volatile market for the higher-
priced product. Average revenue per Eurotrans unit rose in the first quarter of
1996 largely due to the sales mix of the various Eurotrans models. Production
backlog at March 31, 1996 was $24.0 million compared with $21.3 million at the
end of the first quarter of 1995.
Sales of used buses in the first quarter of 1996 acquired by the Company
from trade-ins and lease maturities of $720,000 were 8.6% below sales of
$788,000 reported for the first quarter of 1995. Refurbishment activity in
progress at the end of the quarter ended March 31, 1996 decreased the rate of
sales completed by quarter-end.
Gross Profit. Gross profit increased 14.8% to $3.1 million in the first
quarter of 1996 over $2.7 million in the first quarter of 1995. Gross profit,
as a percentage of net revenue, improved to 17.8% from 17.5% for the first
quarter of 1996 and 1995, respectively, but was below the percentage reported
for the year ended December 31, 1995 of 20.5% primarily as a result of two
factors: Highly subjective delivery requirements associated with the completion
of a large transit authority contract and the shortage of customer-specific
Eurotrans chassis resulted in higher than normal manufacturing costs.
Operating Income. Operating income increased 23.6% to $1.3 million for the
first quarter of 1996 from $1.0 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 March 31,
1996 improved to 7.5% from 6.8% for the comparable prior year quarter
Liquidity and Capital Resources
Net cash provided from operations during the first three months of 1996
totaled $2.1 million compared to $1.2 million provided from operations in the
comparable period during 1995. A reduction in accounts receivable over the
first quarter of 1996 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
increased working capital requirements are expected to be financed through
internally generated funds and through the Company's bank line of credit. At
March 31, 1996, the Company had approximately $2.5 million of borrowings
outstanding under the credit facility.
9
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company, from time to time, is a party to legal proceedings arising out
of, and incidental to, the Company's operations. On June 14, 1994, Harmony
Travel Company ("Harmony") filed a complaint against the Company in the United
States District Court, Northern District of Georgia, Newnan Division and the
complaint was served on the Company on June 16, 1994. Harmony Travel Company v.
Metrotrans Corporation, Civil Action File No. 3:94-CV-63-JTC. The case arises
out of the sale of four buses by the Company to Harmony in Cairo, Egypt.
Harmony bases its claims on allegations that the seating layout of the buses is
cramped, the fit and finish of the buses is substandard in a number of respects,
and alleged problems regarding the chassis of the buses, including that the
buses are too heavy for the chassis. Harmony has sued based on theories of
breach of contract, fraud and breach of warranty. Harmony sought recision and
restitution of the purchase price of approximately $525,000, lost profits
alleged to be $400,000, other incidental damages claimed to be $20,000, punitive
damages of not less than $2,000,000, and attorney's fees. The Company has
answered and denied Harmony's claims based upon (1) Harmony's written approval
prior to delivery of the seating layout, (2) the Company's remediation of many
of the fit and finish items, and provision of parts and payment for labor to
remediate remaining fit and finish problems, (3) Harmony's unauthorized
modifications of the chassis or improper maintenance thereof, and (4) Harmony's
failure to implement remedial measures offered by the Company or a Company
representative. The Company also denies Harmony's claim for damages for alleged
lost profits and incidental damages based upon the depressed state of tourism in
Egypt due to terrorist incidents and threats that began shortly after the buses
were delivered and on Harmony's continued use of the buses.
This matter is settled, and the settlement documents for this action have
been executed. Pursuant to the settlement documents, the Company has refunded
the purchase price of the buses, $525,140, to the United States Agency for
International Development ("USAID"), which provided financing for the
transaction, and has paid $65,000 to Harmony's attorneys for alleged incidental
and consequential damages. The buses are in the process of being shipped back to
the Company as per the terms of the settlement agreement. As part of the
settlement, the manufacturer of the chassis of the buses agreed to pay one-half
of the settlement amount to the Company, which the Company has received. The
Office of Inspector General of USAID is conducting an investigation of the
transaction based on Harmony's allegations. The Company is cooperating with the
investigation.
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
No matter was submitted by the Company to a vote of security holders during
the fiscal quarter ended March 31, 1996.
10
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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 March 31, 1996
11
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SIGNATURE
Pursuant to the requirements of the Securities and 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)
Date: May 14, 1996 /s/ Richard M. Bruno
--------------------
Richard M. Bruno
Chief Financial and Accounting Officer
Duly Authorized Officer
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 43
<SECURITIES> 0
<RECEIVABLES> 6,783
<ALLOWANCES> 272
<INVENTORY> 14,336
<CURRENT-ASSETS> 22,453
<PP&E> 7,418
<DEPRECIATION> 2,902
<TOTAL-ASSETS> 28,988
<CURRENT-LIABILITIES> 10,789
<BONDS> 0
0
0
<COMMON> 41
<OTHER-SE> 14,322
<TOTAL-LIABILITY-AND-EQUITY> 28,988
<SALES> 0
<TOTAL-REVENUES> 17,200
<CGS> 14,144
<TOTAL-COSTS> 1,770
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 186
<INCOME-PRETAX> 1,100
<INCOME-TAX> 426
<INCOME-CONTINUING> 674
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 674
<EPS-PRIMARY> .17
<EPS-DILUTED> 0
</TABLE>
