UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ 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: 0-24804
Featherlite Mfg., Inc.
(Exact name of registrant as specified in its charter)
Minnesota 41-1621676
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Highways 63 & 9, P.O. Box 320, Cresco, IA 52136
(Address of principal executive offices) (Zip Code)
319/547-6000
(Registrant's telephone number, including area code)
- ----------------------------------------------------------------------------
(Former name,former address and former fiscal year,if changed since last report)
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 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.
[x] Yes [ ] No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
[ ] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
6,435,000 Shares as of August 13, 1996
<PAGE>
FEATHERLITE MFG., INC.
INDEX
Page No.
Index.................................................................2
Part I. Financial Information:
Item 1. Financial Statements (Unaudited)
Balance sheets
June 30, 1996 and December 31, 1996..............................3
Statements of Income
Three Months and Six Months
Ended June 30, 1996 and 1995.....................................4
Condensed Statements of Cash Flows
Six Months Ended June 30, 1996 and 1996..........................5
Notes to Financial Statements....................................6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations................8
Part II. Other Information:
Item 4. Submission of Matters to a Vote
of Security Holders.........................................11
Item 6. Exhibits and Reports on Form 8-K............................12
Signatures...........................................................13
<PAGE>
Part I: FINANCIAL INFORMATION
Item 1:
Featherlite Mfg., Inc.
Condensed Balance Sheets
(Unaudited)
(In thousands)
June 30, December 31,
ASSETS 1996 1995
(Note 1)
Current Assets
Cash and equivalents $ 831 $ 811
Trade receivables 5,942 5,501
Refundable income taxes 166 466
Inventories
Raw Materials 7,411 6,886
Work in process 2,916 3,329
Finished trailers 7,469 9,247
________ ________
Total inventories 17,796 19,462
Prepaid expenses 544 788
Deferred taxes 430 430
________ ________
Total current assets 25,709 27,458
________ ________
Property and equipment 16,857 16,115
Less accumulated depreciation (4,513) (3,781)
_________ ________
Property and equipment net 12,344 12,334
_________ ________
Other assets 6,320 6,293
________ ________
$ 44,373 $ 46,085
======== ========
LIABILITIES AND SHAREHOLDERS EQUITY
Current liabilities
Current maturities of long term debt $ 911 $ 1,095
Other notes payable 166 657
Accounts payable 6,542 8,418
Accrued liabilities 2,529 1,928
________ ________
Total current liabilities 10,148 12,098
________ ________
Long Term Debt, net of current
maturities (Note 2) 15,389 15,194
Deferred grant income 362 384
Deferred taxes 456 456
Commitments and contingencies (Note 3)
Shareholders' equity (Note 5 and 6) 18,018 17,953
________ ________
$ 44,373 $ 46,085
======== ========
See Notes to financial statements
<PAGE>
Featherlite Mfg., Inc.
Condensed Statements of Income
(Unaudited)
(In thousands, except for per share data)
<TABLE>
<CAPTION>
Three months Ended Six months Ended
June 30 June 30
------- -------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales $ 21,169 $ 17,396 $ 41,144 $ 35,610
Cost of Sales 18,465 14,833 35,422 29,768
_______ _______ _______ _______
Gross profit 2,704 2,563 5,722 5,842
Selling and administrative expenses 2,619 2,339 5,335 4,648
_______ _______ _______ _______
Income from operations 85 224 387 1,194
Other income (expense)
Interest (326) (195) (657) (303)
Airplane sales, net - 485 - 525
Grant and other income, net 263 287 375 856
_______ _______ _______ _______
Total Other income, net (63) 577 (282) 1,078
_______ _______ _______ _______
Income before taxes 22 801 105 2,272
Provision for income taxes 8 305 40 864
_______ _______ _______ _______
Net income 14 496 65 1,408
======= ======= ======= =======
Net income per share $ 0.00 $ 0.08 $ 0.01 $ 0.23
_______ _______ _______ _______
Weighted average shares outstanding 5,955 5,955 5,955 5,955
_______ _______ _______ _______
</TABLE>
See Notes to financial statements
<PAGE>
Featherlite Mfg., Inc.
Condensed Statements of Cash Flow
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Three months Ended Six months Ended
June 30 June 30
------- -------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Cash provided (used) by operating activities
Net income $ 14 $ 496 $ 65 $ 1,408
Non cash adjustments, net 381 (450) 696 (798)
Decrease (increase) in working capital, net 386 (2,467) 481 (4,017)
_______ ________ _______ ________
Net cash provided by (used for) operating
activities 781 2,421 1,242 (3,407)
_______ _______ _______ _______
Cash provided by (used for) investing activities
Additions to property and equipment, net (545) (649) (743) (2,139)
Additions to aircraft for resale - (2,684) - (2,684)
Proceeds from sale of aircraft - - - 1,890
_______ _______ _______ _______
Net cash provided by (used for)
investing activities (545) (3,333) (743) (2,933)
_______ _______ _______ _______
Cash provided (used for) Financing Activities
Distributions for taxes - (305) - (305)
Change in short term debt (168) 2,942 (491) 2,886
Change in long term debt and grants (253) 2,897 12 1,320
_______ _______ _______ _______
Net cash provided by (used for)
financing activities (421) 5,534 (479) 3,901
_______ _______ _______ _______
Net cash and cash equivalent increase (decrease) (185) (220) 20 (2,439
Cash and cash equivalents, begin of period 1,016 579 811 2,798
_______ _______ _______ _______
Cash and cash equivalents, end of period $ 831 $ 359 $ 831 $ 359
======= ======= ======= =======
</TABLE>
See Notes to financial statements
<PAGE>
FEATHERLITE MFG., INC
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Note 1: Basis of Presentation
The accompanying condensed financial statements have been prepared, without
audit, in accordance with the instructions of Form 10-Q and therefore do not
include all information and footnotes necessary for a fair presentation of
financial position, results of operations and cash flows in conformity with
generally accepted accounting principles. Financial information as of December
31, 1995 has been derived from the audited financial statements of the Company,
but does not include all disclosures required by generally accepted accounting
principles.
It is the opinion of management that the unaudited condensed financial
statements include all adjustments, consisting of normal recurring accruals,
necessary to fairly state the results of operations for the six month periods
ended June 30, 1996 and 1995. The results of interim periods are not necessarily
indicative of results to be expected for the year. For further information refer
to the financial statements and notes to financial statements included in the
Company's Form 10-K Annual Report for the year ended December 31, 1995.
Note 2: Long-term Debt
The Company has a Credit Agreement with a bank that provides a working capital
line of credit. The agreement includes covenants requiring maintenance of
defined levels of working capital, tangible net worth and cash flow and to limit
leverage and capital expenditures. During the six months ended June 30, 1996 the
Company requested and received permission from the lender to be below the cash
flow requirements defined by the agreement for the period and the year 1996.
There was $8.2 million borrowed against this line of credit as of June 30, 1996.
Note 3: Commitments and Contingencies.
Pursuant to dealer inventory floor plan financing arrangements, the Company may
be required, in the event of default by a financed dealer, to repurchase
products from financial institutions or to reimburse the institutions for unpaid
balances including finance charges plus costs and expenses. The Company was
contingently liable under the arrangement for a maximum of $4,700,000 at June
30, 1996 and $3,500,000 at December 31, 1995.
The Company has guaranteed certain notes payable by Featherlite Credit
Corporation (a related party) to a financial institution in the aggregate amount
of $50,000 at June 30, 1996 and $190,000 at December 31, 1995.
Also, the Company is self-insured for a portion of certain health benefit and
workers' compensation insurance claims. The Company's maximum annual claim
exposure under these programs is approximately $2.0 million, including $ 608,000
accrued for estimated unpaid claims at June 30, 1996 and $550,000 at December
31, 1995. The Company has obtained an irrevocable standby letter of credit in
the amount of $675,000 in favor of the workers compensation claim administrator.
<PAGE>
Note 4: Shareholders' Equity
Shareholders' equity may be further detailed as follows (Dollars in thousands)
June 30 Dec. 31,
1996 1995
---- ----
Common Stock - without par value;
authorized - 40,000 shares;
issued - 5,955,000 shares $ 12,420 $ 12,420
Additional paid-in capital 4,061 4,061
Retained earnings 1,537 1,472
__________ __________
Total Shareholders' equity $ 18,018 $ 17,953
========== ==========
Note 5: Stock Option Plan
The Board of Directors granted stock options to certain employees and directors
in the total amount of 249,380 shares at June 30, 1996 and 159,168 at December
31, 1995, pursuant to the stock option plan established by the Company in July
1994. These shares were granted at a prices ranging from $5.50-$9.00 per share,
and are exercisable at varying dates not to exceed 10 years from the date of
grant.
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Standards No. 123, Accounting for Stock-Based Compensation, which
establishes new standards for stock based employee compensation plans for years
beginning after December 31, 1995. The Company is not required to and has not
adopted Statement No. 123; however, beginning in 1996, it must present pro forma
net income and earnings per share as if Statement No. 123 had been adopted. At
June 30, 1996 and December 31, 1995, the market value of the company's stock was
less than the option share price and therefore, no compensation expense related
to these options has been computed.
Note 6: Acquisition of Business Subsequent to June 30, 1996
In July, 1996 the Company acquired all the assets of Vantare International,
Inc., a privately held manufacturer of luxury motorcoaches in exchange for
400,000 restricted shares of the Company's common stock (including 100,000
shares held in escrow pending the attainment of certain defined net earnings for
1996) with a value of approximately $2.4 million. This acquisition will be
accounted for as a purchase and, accordingly, the results of operations of
Vantare will be included in the Company's financial statements beginning on the
date of acquisition. In connection with the acquisition the Company will record
intangible assets in the estimated amount of $3.0 million, including goodwill,
tradenames and certain other rights which will be amortized over 20 years.
Reference should be made to the Company's Form 8K filing which will be completed
by September 13, 1996 for historical and pro forma financial information on the
combined entities. This information is not available at this time.
<PAGE>
Item 2:
Management's Discussion and Analysis of Financial Condition and Results of
Operations
The following discussion pertains to the Company's results of operations
and financial condition for the three month periods ended June 30, 1996 and
1995.
Results of Operations
Three months ended June 30, 1996 and 1995
Net sales of $21.2 million for the three months ended June 30, 1996
increased by 21% over the same period in 1995 which had sales of $17.4 million.
This growth was led by an increase of 26% in sales of horse and livestock
trailers and by an increase of more than 50% in sales of commercial trailers.
Sales of utility/recreational trailers and of car trailers and race car
transporters were essentially unchanged from second quarter sales in 1995.
Gross margin for the quarter increased to $2.7 million in 1996 from
$2.6 million in 1995. As a percentage of sales, gross margin for the quarter was
12.8% compared of 14.7% in 1995. This reduction was due mainly to an inventory
adjustment during the quarter in the amount of approximately $425,000. The
Company follows the practice of taking a complete physical count of all
inventory on a quarterly basis and a monthly physical count of work in process
and finished trailer inventories to verify methods used for determining cost of
sales and interim inventories. Historically, these methods have been accurate.
Because of the significance of the inventory adjustment, another complete
physical inventory was taken July 31, 1996, which confirmed that such adjustment
occurred during the second quarter and does not appear to have continued in the
third quarter. The Company continues to analyze the reasons for this adjustment
and has taken additional steps to insure the physical security of its inventory
and the adequacy of inventory controls and procedures. Labor costs were higher
during the second quarter due to start-up and development costs related to
furniture moving vans which were produced during the quarter.
Selling and administration expenses in 1996 increased by $280,000 to
$2.6 million from $2.3 million in the second quarter of 1995. As a percentage of
sales, these expenses were 12.4% in 1996 compared with 13.4% in 1995.
Interest expense in 1996 increased by $131,000 due to higher average
borrowings for working capital and aircraft in 1996. Other income was $510,000
less in 1996 due primarily to no aircraft sales in 1996 compared with a gain of
$485,000 from aircraft sales in 1995. Other income in 1996 includes a litigation
settlement.
Six months ended June 30, 1996 and 1995
Net sales of $41.1 million for the six months ended June 30, 1996
increased by 15.5% over the same period in 1995. This increase included the
added sales of Diamond D trailers (which was acquired in the 4th quarter of
1995), and increased sales of horse trailers, snowmobile and other recreational
trailers and of drop frame delivery and moving vans. On a product group basis,
horse and livestock trailer sales were up 21% and 5% respectively. Utility
trailer and commercial trailer sales were up 43%. Car trailer and race car
transporter sales are slightly higher than last year. There were no price
increases in trailer models during this period.
Gross margin decreased to $5.7 million in the first six months of 1996
from $5.8 million in 1995. As a percentage of sales, gross margin for the six
months was 13.9% compared to 16.4% for the comparable period in 1995. The margin
decrease from the comparable quarter of 1995 was primarily due to the inventory
adjustment occurring in the second quarter, as discussed above as well as
increased labor and overhead costs in 1996. The average cost of aluminum used,
which peaked in the third and fourth quarters of 1995, was slightly less in the
first half of 1996 than in the same period of 1995. Labor and overhead costs are
higher than a year ago due to increased average labor rates and overhead costs
related to the expansion completed at the end of the first quarter in 1995.
These cost increases have not been fully offset by increased volume and improved
efficiency.
<PAGE>
Selling and administrative expenses increased by $687,000 over 1995 but
remained essentially unchanged as a percentage of sales at 13.0% in 1996 and
13.1% in the same period in 1995. This increase in 1996 mainly reflects sales
and other personnel added throughout 1995 to improve product exposure and to
build a larger sales organization to support a higher sales volume and expanded
dealer network.
Interest expense increased in 1996 by $354,000 from 1995 as the result of
increased levels of borrowings for working capital and aircraft in 1996.
Borrowings against the line of credit were reduced in the first half of 1995 as
a portion of the proceeds from the initial public offering were available to
finance 1995 working capital increases. Other income decreased by $1.0 million
in 1996 over 1995, substantially due to the non-recurrence in 1996 of a $750,000
development grant received in 1995 for working capital and operating costs
related to the facilities expansion and additional sales of aircraft in 1995
which realized gains of $525,000. Other income in 1996 includes a litigation
settlement.
The provision for income taxes in 1996 reflects an effective federal and
state income tax rate of 40% in 1996 and 38% in 1995. The 1996 increase reflects
higher anticipated state income taxes.
Looking Forward
The statements made in this Form 10Q quarterly report which are forward
looking in time involve risks and uncertainties discussed here and in the
Company's Form 10K and other filings with the SEC, including but not limited to:
product demand and acceptance of new products in each segment of the Company's
markets, fluctuations in the price of aluminum, competition, facilities
utilization and aircraft purchases and sales.
Sales are expected to continue to remain strong for the remainder of 1996
in nearly all product groups. The Vantare acquisition on July 1 will add
significant luxury motorcoach sales in the last half of 1996. Vantare's sales
for 1995 were almost $20 million. Increases in livestock trailer sales are
expected to continue as cattle prices have improved. Significant additional
sales are expected during the last half of the year from the sale of private
label snowmobile trailers to Polaris dealers. Continued growth is expected in
drop frame delivery and moving van sales which the company introduced in late
1995. In July, price increases ranging from 2 to 5% were announced for new
orders received. The total sales backlog at June 30, 1996 was $11 million
compared with $9.5 million at June 30, 1995 and $7.2 million at December 31,
1995.
Continued decreases in the average cost of aluminum will have a positive
impact on gross margins. However, the overall gross margin percentage may not
improve as future Vantare sales will include a significant amount of used coach
sales which have a low gross margin and will hold down improvement in the
Company's overall gross margin percent. However the effect of this should be
reduced by lower than average sales and administration costs related to the
Vantare operation.
Sales and administration expenses are expected to increase at a lower rate
than sales growth as much of the organizational growth occurred in 1995. Also,
the addition of Vantare will not result in a significant increase in sales and
administration expense, except for amortization of intangibles as discussed in
Note 6 to financial statements. Interest expense will likely remain higher than
1995 as the average level of debt is expected to be greater in 1996 than 1995.
No significant amount of grant income will be realized in 1996.
Liquidity and Capital Resources
During the six months ended June 30, 1996, the Company's operations provided net
cash of $20,000, including $1,242,000 provided by operating activities, net of
$743,000 used for capital expenditures and $479,000 used for debt reduction. At
June 30, 1996, cash totaled $831,000.
<PAGE>
The Company has a working capital line of credit with its primary lender. This
line has a borrowing limit of $12.0 million and an interest rate of prime. The
maturity date of this line is July 31, 1997, subject to renewal and extension.
The Company is required by the lender to maintain defined levels of working
capital, tangible net worth and cash flow and to limit leverage and capital
expenditures. The Company requested and received permission to be below the cash
flow requirements of the agreement for the year 1996. Borrowings under the line
are secured by substantially all assets of the Company and guarantees of certain
shareholders under defined circumstances. There was $8.2 million borrowed
against this line as of June 30, 1996.
The Company believes that its current cash balances, cash flow generated from
operations and available borrowing capacity will be sufficient to fund
operations and capital requirements for the next year.
Operating activities in the six months ended June 30, 1996 provided cash of
$1,242,000. Net income from operations provided cash of $65,000. This amount
was increased by adjustments for depreciation of $737,000 and reduced by other
non-cash items in an aggregate amount of $41,000. Reductions in receivables,
inventories and other working capital items provided cash of $481,000. An
inventory decrease of $1,665,000, was partially offset by a $1,184,000 net
decrease in accounts receivable, prepaids, payables and accruals. Increased
expenditures for working capital items may be required to support increased
sales levels throughout 1996.
Investing activities in the six months ended June 30, 1996 used cash of $743,000
for plant and other improvements.
Financing activities used net cash of $479,000 after borrowing an additional
$600,000 on the line of credit and repaying $1,079,000 of aircraft and other
debt.
As discussed in Note 2 to financial statements, the Company is contingently
liable under certain dealer floor plan and retail financing arrangements and has
guaranteed certain notes payable of Featherlite Credit Corporation, a related
company. These contingent liabilities total approximately $ 4.7 million at June
30, 1996. Also, the Company is self-insured for a portion of certain health
benefit and workers' compensation insurance claims. At June 30, 1996, the
Company's maximum annual claim exposure under these programs is approximately
$1.8 million. The Company has obtained an irrevocable standby letter of credit
in the amount of $675,000 in favor of the workers compensation claim
administrator.
As discussed in Note 6 to financial statements, in July, 1996 the Company
acquired all the assets of Vantare International, Inc., a privately held
manufacturer of luxury motorcoaches in exchange for 400,000 restricted shares of
the Company's common stock (including 100,000 shares held in escrow pending the
attainment of defined earnings by the acquired business for 1996) with a value
of approximately $2.4 million. This acquisition will be accounted for as a
purchase and, accordingly, the results of operations of Vantare will be
included in the Company's financial statements beginning on the date of
acquisition. In connection with the acquisition the Company will record
intangible assets in the estimated amount of $3.0 million, including goodwill,
tradenames and certain other rights which will be amortized over 20 years.
Reference should be made to the Company's Form 8K filing which will be completed
by September 13, 1996 for historical and pro forma financial information on the
combined entities. This information is not available at this time.
<PAGE>
Item 4. Submission of Matters to a Vote of Security-Holders.
(a) The Annual Meeting of the Registrant's shareholders was held on
Wednesday, May 8, 1996.
(b) At the Annual Meeting a proposal to set the number of directors at
seven was adopted by a vote of 5,692,803 share in favor, with -0- shares
against, 900 shares abstaining and -0- shares represented by broker nonvotes.
(c) Proxies for the Annual Meeting were solicited pursuant to Regulation
14A under the Securities and Exchange Act of 1934. The following persons were
elected directors of the Registrant to serve until the next annual meeting of
shareholders and until their successors shall have been duly elected and
qualified:
NOMINEE NUMBER OF VOTES FOR NUMBER OF VOTES WITHHELD
Conrad D. Clement 5,671,681 22,022
Jeffery A. Mason 5,671,581 22,122
Tracy J. Clement 5,669,731 23,972
Donald R. Brattain 5,675,456 18,247
Thomas J. Winkel 5,675,181 18,522
Kenneth D. Larson 5,675,356 18,347
John H. Thomson 5,671,981 21,722
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
27. Financial Data Schedule (filed in electronic format only)
(b) Form 8-K. The Registrant did not file any reports on Form 8-K
during the three months ended June 30, 1996.
<PAGE>
SIGNATURES
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.
FEATHERLITE MFG., INC.
(Registrant)
Date: August 13, 1996 /S/ CONRAD D. CLEMENT
---------------------
Conrad D. Clement
President & CEO
Date: August 13, 1996 /S/ JEFFERY A. MASON
--------------------
Jeffery A. Mason
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
27 Financial Data Schedule (filed in
electronic format only)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 831
<SECURITIES> 0
<RECEIVABLES> 5942
<ALLOWANCES> 0
<INVENTORY> 17796
<CURRENT-ASSETS> 25709
<PP&E> 16857
<DEPRECIATION> (4513)
<TOTAL-ASSETS> 44373
<CURRENT-LIABILITIES> 10148
<BONDS> 15389
0
0
<COMMON> 12420
<OTHER-SE> 5598
<TOTAL-LIABILITY-AND-EQUITY> 44798
<SALES> 41144
<TOTAL-REVENUES> 41144
<CGS> 35422
<TOTAL-COSTS> 5335
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 657
<INCOME-PRETAX> 105
<INCOME-TAX> 40
<INCOME-CONTINUING> 65
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 65
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
