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, 1997
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 (I.R.S. Employer
of incorporation or organization) Identificaton No.)
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.
6,255,000 Shares as of August 12, 1997
<PAGE>
FEATHERLITE MFG., INC.
INDEX
Page No.
Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Part I. Financial Information:
Item 1. Financial Statements (Unaudited)
Balance sheets
June 30, 1997 and December 31, 1996 . . . . . . . . . . . . . . . 3
Statements of Income
Three Months and Six Months
Ended June 30, 1997 and 1996 . . . . . . . . . . . . . . . . . . 4
Condensed Statements of Cash Flows
Six months Ended June 30, 1997 and 1996 . .. . . . . . . . . . . . 5
Notes to Financial Statements . . . . . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . . 9
Part II. Other Information:
Item 4. Submission of Matters to a Vote
of Security Holders . . . . . . . . . . . . . . . . . . .. . 13
Item 6. Exhibits and Reports on Form 8-K . .. . . . . . . . . . . . 14
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
<PAGE>
Part I: FINANCIAL INFORMATION
Item 1:
Featherlite Mfg., Inc.
Condensed Balance Sheets
(Unaudited)
(In thousands)
June 30, December 31,
ASSETS 1997 1996
Current Assets
Cash $ 856 $ 256
Trade receivables 8,316 6,783
Inventories
Raw Materials 9,373 8,053
Work in process 8,870 8,410
Finished trailers 9,222 8,772
-------- --------
Total inventories 27,465 25,235
Prepaid expenses 1,033 1,094
Deferred taxes 481 481
-------- --------
Total current assets 38,151 33,849
-------- --------
Property and equipment 19,829 17,687
Less accumulated depreciation (5,705) (4,914)
-------- --------
Property and equipment, net 14,124 12,773
-------- --------
Goodwill and Other assets 9,737 6,912
-------- --------
$ 62,012 $ 53,534
======== ========
LIABILITIES AND SHAREHOLDERS EQUITY
Current liabilities
Current maturities of long term
debt $ 1,372 $ 1,146
Other notes payable 2,710 2,255
Accounts payable 11,077 9,776
Accrued liabilities 3,928 3,110
Customer deposits 1,728 2,157
Accrued income taxes 223 240
-------- --------
Total current liabilities 21,038 18,684
-------- --------
Long Term Debt, net of current maturities 18,136 13,346
Deferred grant income 274 310
Deferred taxes 599 599
Commitments and contingencies (Note 4)
Shareholders' equity 21,965 20,595
-------- --------
$ 62,012 $ 53,534
======== ========
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
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Net Sales $ 32,652 $ 21,169 $ 66,686 $ 41,144
Cost of Sales 27,451 18,465 56,390 35,422
-------- -------- -------- --------
Gross profit 5,201 2,704 10,296 5,722
Selling and administrative expenses 3,817 2,619 7,416 5,335
------- ------- ------- -------
Income from operations 1,384 85 2,880 387
Other income (expense)
Interest (440) (326) (776) (657)
Grant and other income, net 78 263 180 375
-------- -------- -------- --------
Total Other expense, net (362) (63) (596) (282)
-------- -------- -------- --------
Income before taxes 1,022 22 2,284 105
Provision for income taxes 408 8 913 40
-------- -------- -------- --------
Net income 614 14 1,371 65
======== ======== ======== ========
Net income per share $ 0.10 $ 0.00 $ 0.22 $ 0.01
-------- -------- -------- --------
Weighted average shares
outstanding 6,326 5,955 6,311 5,955
-------- -------- -------- --------
See Notes to financial statements
</TABLE>
<PAGE>
Featherlite Mfg., Inc.
Condensed Statements of Cash Flow
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Three months Ended Six months Ended
June 30 June 30
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Cash provided (used) by operating activities
Net income $ 614 $ 14 $ 1,371 $ 65
Non cash adjustments, net 44 381 460 696
Decrease (increase) in working capital, net (2,617) 386 (2,025) 481
-------- -------- -------- --------
Net cash provided by (used for) operating activities (1,959) 781 (194) 1,242
-------- -------- -------- --------
Cash provided by (used for) investing activities
Additions to property and equipment, net (1,878) (545) (2,142) (743)
Additions to aircraft for resale - - (2,531) -
-------- -------- -------- --------
Net cash (used for) investing activities (1,878) (545) (4,673) (743)
-------- -------- -------- --------
Cash provided (used for) Financing Activities
Change in short term debt 1,750 (168) 1,085 (491)
Change in long term debt and grants 2,211 (253) 4,382 12
-------- -------- -------- --------
Net cash provided by (used for) financing activities 3,961 (421) 5,467 (479)
-------- -------- -------- --------
Net cash and cash equivalent increase (decrease) 124 (185) 600 20
Cash and cash equivalents, begin of period 732 1,016 256 811
-------- -------- -------- --------
Cash and cash equivalents, end of period $ 856 $ 831 $ 856 $ 831
======= ======== ======== ========
See Notes to financial statements
</TABLE>
<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, 1996 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, 1997 and 1996. 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, 1996.
Note 2: Goodwill and other assets
Goodwill and other assets consists of the following at June 30, 1997 and
December 31, 1996 (in thousands)
June 30, December 31,
1997 1996
Goodwill, net $ 3,555 $ 3,536
Aircraft held for resale 5,345 2,815
Idle facilities 522 522
Advertising and other 315 39
-------- ---------
Total Other $ 9,737 $ 6,912
======== =========
Note 3: Financing Arrangements
Other notes payable primarily include borrowings under a wholesale finance
agreement with a financial services company for a $3.5 million line of credit to
finance completed new and used motorcoaches. At June 30, 1997, $2.6 million was
borrowed against this line.
Long-term debt includes a credit agreement with a Firstar Bank, N.A., 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. There was $6.4
million borrowed against this line of credit as of June 30, 1997.
In June, 1997, the Company borrowed $5 million dollars under a term note
agreement with Firstar Bank, N.A. This note bears interest at 8.25% fixed and is
payable in monthly installments based on a 12 year term and it has a five year
maturity. The proceeds from this note were used to reduce the outstanding
balance on the line of credit.
<PAGE>
The Company is providing financing for the production facility expansion at its
Vantare facility using funds borrowed from a bank which total $618,000 at June
30, 1997. Upon completion of this project, the building will be sold at cost to
Seminole Port Authority and leased back to the Company under the terms of a 10
year capitalizable lease.
Note 4: 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 $9,612,000 at June
30, 1997 and $6,059,000 at December 31, 1996.
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 $2.2 million, including $813,000
accrued for estimated paid claims at June 30, 1997 and $634,000 at December 31,
1996. The Company has obtained an irrevocable standby letter of credit in the
amount of $1,225,000 in favor of the workers compensation claim administrator.
There is a risk to future operating results if the Company were to lose its sole
supplier of motorcoach conversion shells, Prevost Car Company, although the
Company could purchase certain shells from other manufacturers. The Company does
have business interruption insurance to cover all or a portion of the losses it
may sustain if Prevost's plant is destroyed by fire or certain other
catastrophes.
The Company has made an offer to purchase land for future expansion at its
Vantare location in Florida. A commitment letter has been obtained from a bank
to fund substantially all the $900,000 purchase price if the deal is completed.
Note 5: Shareholders' Equity
Shareholders' equity may be further detailed as follows (Dollars in thousands)
June 30, Dec. 31,
1997 1996
Common Stock - without par value;
authorized - 40,000,000 shares;
issued - 6,255,000 shares $ 14,220 $ 14,220
Additional paid-in capital 4,061 4,061
Retained earnings 3,684 2,314
-------- --------
Total Shareholders' equity $ 21,965 $ 20,595
========== ==========
Note 6: Stock Option Plan
The Board of Directors granted stock options to certain employees and directors
in the total amount of 305,710 shares and 249,380 shares at June 30, 1997 and
December 31, 1996, respectively, pursuant to the stock option plan established
by the Company in July 1994. These shares were granted at 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. There is also an outstanding 5 year warrant that
was granted to the Underwriter in connection with the initial public offering of
the Company's stock in September, 1994, to purchase 120,000 shares of the
Company's stock at 120% of the public offering price of $6.00 per share.
<PAGE>
Note 7: Potential Business Acquisition
In June, the Company signed a letter of intent to acquire Camp & Associates,
Inc. a company which handles sports marketing. As a result of the due diligence
process, the parties concluded that completion of this acquisition would not be
in the best interests of both companies and mutually agreed to terminate
negotiations.
Note8: Earnings per Share
The FASB has issued Statement No. 128, Earnings per share, which supersedes APB
Opinion No. 15. Statement No. 128 requires the presentation of earnings per
share by all entities that have common stock or potential common stock, such as
options, warrants and convertible securities, outstanding that trade in a public
market. Those entities that have only common stock outstanding are required to
present basic earnings per share amounts. All other entities are required to
present basic and diluted per share amounts. Diluted per share amounts assume
the conversion, exercise or issuance of all potential common stock instruments
unless the effect is to reduce a loss or increase the income per common share
from continuing operations. All entities required to present per share amounts
must initially apply Statement No. 128 for annual and interim periods ending
after December 15, 1997. Earlier application is not permitted.
Because the Company has potential common stock outstanding (stock options and
warrants as discussed in Note 5) the Company will be required to present basic
and diluted earnings per share. If the Company had applied Statement No. 128 in
the accompanying financial statements, the following per share amounts would
have been reported:
Three months ended June 30, Six months ended June 30
1997 1996 1997 1996
Basic earnings per share .10 .00 .22 .01
=== === === ===
Diluted earnings per share .10 .00 .22 .01
=== === === ===
The weighted average number of shares of common stock used to compute the basic
earnings per share was incrased by 71,302 and 56,270, for the three months and
six months ended June 30, 1997, respectively, for the assumed exercise of the
employee stock options and warrants in computing the diluted per share data.
There was no increase for the same periods in 1996 because the exercise price of
those options and warrants exceeded the average market price of the common
shares during those periods.
<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 six month period ended June 30, 1997 and 1996:
Results of Operations
Three months ended June 30, 1997 and 1996
Net sales of $32.6 million for the quarter ended June 30, 1997 increased by
54.2% over the same period in 1996, including 23.5% related to greater sales of
Featherlite aluminum and steel brand trailers. Sales of Vantare luxury
motorcoaches which was acquired in the 3rd quarter of 1996 added sales of $6.2
million. On a product group basis, horse trailer sales decreased by 10.7%,
livestock trailers increased by 32.7%, car/racecar and specialty transporter
sales were up 100%, utility trailer sales increased by 135.6% and commercial
trailers sales were down by 7.3%. These increases are reflective of the strong
order backlog ($27 million) carried into the second quarter from the first
quarter as well as continued backlog growth in certain product lines during the
quarter. Horse trailer sales were down slightly in 1997 during the quarter due
to changes in the production schedule and in the availability of dealer pool
inventory. Commercial sales were down in 1997 compared to 1996 due lower levels
of orders for dropframe specialty trailers during the current quarter compared
to 1996. There was also a 2 percent increase in trailer models prices during the
first quarter of 1997 which was effective in second quarter.
Gross margin increased to $5.2 million in the second quarter of 1997 from
$2.7 million in 1996 as a result of the increased levels of sales and an
improved margin percentage. As a percentage of sales, gross margin for the
quarter increased to 15.9% compared to 12.8% in 1996 which was adversely
impacted by inventory adjustments and increased labor costs which were not
present in 1997. The 1997 gross margin percentage benefited from reduced
aluminum costs, which were approximately 9% lower than in 1996 and improved
labor efficiencies resulting from a strong order backlog. These increases were
partially offset by the effect of development costs related to slide-out model
motorcoaches as well as the sale of certain new coaches and used motorcoaches at
a lower than normal gross margin. Used motorcoaches are normally obtained as
trade-ins in connection with the sale of new motorcoaches. If motorcoach sales
were excluded, gross margin would have increased to 20.1% in the second quarter.
Selling and administrative expenses increased in 1997 by $1.2 million over
1996 but decreased as a percentage of sales to 11.7% in 1997 from 12.4% in the
same period in 1996. This decrease reflects the additional operating expense
leverage obtained through the acquisition of Vantare in 1996. Excluding
Vantare's selling and administrative expenses, these costs increased by about
31.2% which is slightly higher that the increase in trailer sales during the
quarter.
Interest expense was about $114,00 greater in 1997 than 1996 due to an
increased level of borrowings for working capital in 1997 as well as higher
interest rates. Other income was $186,000 less in 1997 than 1996 due to a
non-recurring litigation settlement income of $245,000 received in 1996.
The provision for income taxes reflects an effective federal and state
income tax rate of 40% in 1997 and 37% in 1996.
<PAGE>
Six months ended June 30, 1997 and 1996
Net sales of $66.7 million for the six months ended June 30, 1997 increased
by 62.1% over the same period in 1996, including an increase of 18.5% in sales
of Featherlite aluminum and steel brand trailers. Vantare luxury motorcoaches
which was acquired in the 3rd quarter of 1996 added sales of $17.2 million
during this period. On a product group basis, horse trailer sales decreased by
4.0%, livestock trailers increased by 30.6%, car/racecar and specialty
transporter sales were up 72.1%, utility trailer sales increased by 67.9% and
commercial trailers sales were down by 21.6%. These increases are a result of
the strong order backlog ($28 million) carried into 1997 from 1996 as well as
continued backlog growth in all product lines during the period. Horse trailer
sales are down slightly in 1997 due to reduced sales from dealer pool inventory
which is at a lower level than in 1996 and adjustments in the production
schedule due to product mix. Commercial sales are down in 1997 compared to 1996
due to discontinuation of semi-flatbeds models during 1996 and lower levels of
orders for dropframe specialty trailers during the current period compared to
1996. There was also a 2 percent increase in trailer models prices in the first
quarter of 1997, which was partially effective on sales during this period.
Gross margin increased to $10.3 million in the first six months of 1997
from $5.7 million in 1996 as a result of the increased levels of sales and a
higher gross margin percentage. As a percentage of sales, gross margin for the
period improved to 15.4% compared to 13.9% in 1996. The 1997 gross margin
percentage benefited from reduced aluminum costs, which were approximately 9%
lower than in 1996 and improved labor efficiency. This increase was
substantially offset by the effect of used and certain new motorcoaches sales
which had a lower than normal gross margin. Also, development costs related to
slideout model motorcoaches have also reduced the gross margin percentage. Used
motorcoaches are normally obtained as trade-ins in connection with the sale of
new motorcoaches. If motorcoach sales are excluded, gross margin would have
increased to 18.8% in 1997 compared to 13.9% in 1996.
Selling and administrative expenses increased in 1997 by $2,082,000 over
1996 but decreased as a percentage of sales to 11.1% in 1997 from 13.0% in the
same period in 1996. This decrease reflects the additional operating expense
leverage obtained through the acquisition of Vantare in 1996. Excluding
Vantare's selling and administrative expenses, these costs increased by 22.6%,
which is slightly higher than the rate of increase in trailer sales.
Interest expense increased by $119,000 over 1997 due to increased
borrowings and higher interest rates and other income decreased by $195,000,
primarily due to the non-recurrence of $245,000 litigation settlement during
1996.
The provision for income taxes reflects an effective federal and state
income tax rate of 40% in 1997 and 38% in 1996. The rate increase reflects
anticipated higher state income accruals.
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 remain strong in most product lines for the balance
of 1997. The Vantare acquisition will continue to add significant luxury
motorcoach sales. The total trailer and motorcoach backlog at June 30, 1997 was
$32 million compared with $28 million at December 31, 1996 and $11 million at
June 30, 1996. The sales backlog at June 30, 1997 and December 31, 1996 included
<PAGE>
luxury motorcoach order backlog of $17.4 million and $16 million, respectively,
including approximately $5.6 million ordered for 1998 delivery at June 30, 1997.
Gross margins are expected to continue to benefit from lower average costs
of aluminum in 1997 over 1996. The Company has obtained commitments from
suppliers to provide, at an agreed upon fixed price, substantial portions of its
aluminum requirements for 1997. However, the overall gross margin percentage
improvement in 1997 will be partially reduced by future Vantare sales which may
include a significant amount of used motorcoach sales which have a low gross
margin. No significant amount of development costs related to the slide-out
motorcoaches are expected to adversely impact margin improvement during the next
several quarters. The effect of these factors on overall operating margin should
be partially reduced by lower than average sales and administrative costs
related to the Vantare operation. Labor and overhead costs are expected to
increase but remain unchanged or be less, as a percentage of sales, as
operational efficiencies improve and price increases become fully effective.
Sales and administration expenses for 1997 are expected to increase but at
a lower rate than sales growth as much of the organizational growth occurred in
prior years and due to the operating expense leverage obtained from the Vantare
acquisition. Interest expense will likely remain higher than 1996 as the average
level of debt is expected to be greater due to working capital growth and the
average interest rate will be higher due to increases in the prime rate.
There is a risk to future operating results related to losing a major
supplier of aluminum. This risk is relatively nominal as there are alternate
sources of supply. There is also a risk to future operating results if the
Company were to lose its sole supplier of motorcoach shells, Prevost Car
Company, although the Company could purchase certain shells from other
manufacturers. The Company does have business interruption insurance to cover
all or a portion of the losses it may sustain if Prevost's plant is destroyed by
fire or certain other catastrophes.
Beginning the fourth quarter of 1997, the Company will be required to apply
the privisions of the FASB Statement No. 128, Earnings per share. See Note 8 to
financial statements for an application of this Statement to earnings per share
reported in this Form 10-Q.
Liquidity and Capital Resources
During the first half of 1997, the Company's operations provided net cash of
$600,000, including $194,000 used for operating activities, $5,467,000 provided
by increased debt, and $4,673,000 used for capital expenditures for property,
equipment and aircraft.
Operating activities in the first half of 1997 used cash of $194,000. Net income
from operations provided cash of $1,371,000. This amount was increased by
adjustments for depreciation and amortization of $796,000 and reduced by other
non-cash items in an aggregate amount of $336,000. Increases in receivables,
inventories and other working capital items used cash of $2,025,000. Inventory
and receivable increases of $3,763,000 required to support increased sales in
1997, were partially offset by a $1,738,000 net increase in prepaids, payables
and accruals. Increased expenditures for working capital items may be required
to support increased sales levels throughout 1997. These increases will be
funded by cash generated from operations as well as the Company's available
lines of credit.
Investing activities for the first half of 1997 used cash of $4,673,000,
including $2,143,000 for plant and other improvements and $2,530,000 for
aircraft. Plant additions include $670,000 related to the Vantare production
facility expansion, $907,000 for luxury motorcoaches leased to outsiders and
$566,000 for other machinery and equipment additions. Aircraft transactions of
$2,531,000 primarily include the purchase of aircraft for $2,650,000.
<PAGE>
Financing activities during the first half of 1997 provided net cash of
$5,467,000, after borrowings of $12,617,000 and payments of $7,150,000.
Borrowings included $2,601,000 for the purchase of aircraft, $9,366,000 from
term and line of credit notes and $650,000 for plant expansion and other
projects. Repayments included payments of $6,300,000 on the line of credit notes
and $756,000 for the reduction of other debt.
The Company has a working capital line of credit with its primary lender,
Firstar Bank, N.A. This line has a defined borrowing limit equal to the lesser
of $12.0 million or a defined percentage of eligible receivables and inventory
and an interest rate of prime. The maturity date of borrowings under this line
is July 31, 1998, 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. Borrowings under the
line are secured by substantially all assets of the Company. There was $6.4
million borrowed against this credit line as of June 30, 1997. During the second
quarter, the Company secured a $5 million term loan from Firstar. The proceeds
of this loan were used to reduce the outstanding balance on the credit line. The
term note bears interest at 8.25 percent fixed, payable in monthly installments
based on a 12 year term and a five year maturity.
The Company also has a wholesale floor plan agreement with Deutsche Financial
Services to borrow up to $3.5 million for financing new and used motorcoaches
held in inventory, with interest at prime plus one-quarter percent on borrowed
funds. At June 30, 1997 $2.6 million was borrowed against this line.
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 and the foreseeable
future.
As discussed in Note 2 to financial statements, the Company is contingently
liable under certain dealer floor arrangements. These contingent liabilities
total approximately $9.6 million at June 30, 1997. Also, the Company is
self-insured for a portion of certain health benefit and workers' compensation
insurance claims. At June 30, 1997, the Company's maximum annual claim exposure
under these programs is approximately $2.2 million. The Company has obtained an
irrevocable standby letter of credit in the amount of $1,225,000 in favor of the
workers compensation claim administrator.
The Company is expanding its production facilities in Sanford, Florida. Upon
completion, this expansion project will be sold at its completed cost of
approximately $966,000 to the Seminole County Port Authority, the present owner
of the facility. The facility will then be leased back to the Company under the
terms of a 10 year capitalizable lease. During the construction period the
Company is providing financing for the construction using funds borrowed from a
Florida bank. At June 30, 1997, borrowings on this project totaled $618,000.
This project will be completed during the third quarter of 1997. The Company has
also made an offer in the amount of approximately $900,000 to purchase land near
its Sanford facility for future expansion use. This purchase will be funded
before the end of 1997 by additional borrowings from the Florida bank providing
financing on the plant expansion project.
The Company has also made a commitment to the City of Cresco to construct a
hangar facility at a cost of $300,000 as part of an airport expansion project in
1997 or 1998.
In June the Company signed a letter of intent to acquire Camp & Associates,
Inc., a company which handles sports marketing for some of the top National
Association of Stock Car Auto Racing (NASCAR) Winston Cup teams, drivers and
sponsors. As a result of the due diligence process, the parties concluded that
completion of this acquisition would not be in the best interests of both
companies and mutually agreed to terminate negotiations.
<PAGE>
FEATHERLITE MFG., INC.
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 7, 1997.
(b) At the Annual Meeting a proposal to set the number of directors at
seven was adopted by a vote of 5,537,925 share in favor, with 11,000 shares
against, 20,247 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 5,538,461 30,711
Jeffery A. Mason 5,538,461 30,711
Tracy J. Clement 5,538,461 30,711
Donald R. Brattain 5,538,961 30,211
Thomas J. Winkel 5,538,961 30,211
Kenneth D. Larson 5,539,161 30,011
John H. Thomson 5,540,161 29,011
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits. See Exhibit Index on Page 16 following signatures.
(b) Form 8-K. The Registrant did not file any reports on Form 8-K
during the three months ended June 30, 1997.
<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 12, 1997 /S/ CONRAD D. CLEMENT
---------------------
Conrad D. Clement
President & CEO
Date: August 12, 1997 /S/ JEFFERY A. MASON
--------------------
Jeffery A. Mason
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
Form 10Q
Quarter Ended June 30, 1997
Exhibit No. Description
10.1 First Amendment to Amended and Restated Credit and Security Agreement
27 Financial Data Schedule (filed in electronic format only)
FIRST AMENDMENT TO AMENDED AND RESTATED
CREDIT AND SECURITY AGREEMENT
This First Amendment to the Amended and Restated Credit and Security
Agreement ("First Amendment") is dated as of June 18, 1997 and is by and between
the following identified parties:
Featherlite Mfg., Inc., a corporation duly organized and validly existing
under the laws of the State of Minnesota, with its principal place of
business at Hwy. 63 & 9, Cresco, Iowa 52136 ("Borrower");
Conrad Clement, Larry Clement, Kathy Clement, residents of Iowa, and
Tracy Clement and Nancy Clement, residents
of Minnesota (each a "Guarantor" and collectively the "Guarantors"); and
Firstar Bank Iowa, N.A., a national barking institution ("Bank").
RECITALS
A. Borrower, Guarantors and Bank entered into an Amended and Restated
Credit and Security Agreement dated as of December 30, 1996 ("Restated
Agreement").
B. Borrower has requested that the Bank extend an additional $5,000,000
term loan to Borrower, amend certain terms and conditions in the Restated
Agreement, and release the guarantees given by the Guarantors.
C. Bank is willing to grant the request subject to the terms of this First
Amendment.
The parties agree:
1. Change in Definitions. In Section 1, Definitions and Accounting, the
following definitions shall be added:
"Term Out Term Loan Promissory Note" shall have the meaning described
thereto in Section 6A.
"Term Loan" shall reference the term loans described in Section 6 and
Section 6A.
2. Guarantees. Section 4, Guarantors, is deleted in its entirety. All
guarantees of Guarantors are released in full.
<PAGE>
3. Term Out Term Loan. A new Section 6A is inserted as follows:
6A. Term Out Term Loan and Payment Provisions.
(a) Subject to the terms and conditions of the Restated Agreement, as
amended, Bank shall lend to Borrower the principal sum of $5,000,000.
(b) Borrower shall execute and deliver to Bank the Term Out Term Loan
Promissory Note with this First Amendment.
(c) In accordance with the Term Out Term Loan Promissory Note, Borrower
shall pay to Bank principal and interest in 59 installments of $55,150 each,
beginning July 18, 1997, and on the same date of each consecutive months
thereafter plus a final payment equal to all unpaid principal and accrued
interest on June 18, 2002, the maturity date.
5. Conditions Precedent to Funding Term Out Term Loan. Borrower shall
satisfy each of the following conditions prior to the making of the Term Out
Term Loan:
(i) All the representations and warranties of Borrower as set forth in
Section 2 of the Restated Agreement shall be true and correct as of the date of
this First Amendment.
(ii) Borrower shall be in full compliance with the terms and conditions of
the Restated Agreement and no Event of Default shall have occurred and be
continuing.
(iii) Borrower shall have delivered to Bank, all in form and substance
satisfactory to Bank:
(a) A certificate of the Secretary or other officer of Borrower containing
copies of resolutions of the Board of Directors and, if applicable, stockholders
of Borrower authorizing the execution, delivery and performance of this First
Amendment to Restated Agreement, any document or instrument to be delivered
pursuant to this First Amendment and identifying the officer or officers
authorized to execute this First Amendment and other documents and to make such
requests for loans.
(b) Term Out Term Loan Promissory Note.
(c) Collateral Agreement.
<PAGE>
(d) Execution and delivery of Mortgage on all the property owned by
Borrower in Cresco, Iowa.
(e) Such other documents or instruments as Bank shall reasonably request.
6. Amended Negative Covenant Section 9, Negative Covenants subpart (c)
dealing with third party liabilities is amended to allow third party liabilities
as long as they are not in excess of $15,000,000.
7. Amended Financial Covenant Section 11, Financial Covenants of Borrower,
subpart (e) Leverage Ratio is amended to require Borrower to maintain at all
times a ratio of total liabilities to tangible net worth of not greater than
2.25 to 1.
8. Representations and Warranties. All the representations and warranties
of Borrower as set forth in the Restated Agreement are true and correct in all
material respects as of the date of this First Amendment.
9. Acknowledgment of Receipt. By their execution of this First Amendment,
the parties acknowledge receipt of a copy of this document.
10. Savings. All other terms and conditions of the Restated Agreement, not
specifically modified by this First Amendment, shall remain in full force and
effect.
11. Representation. The Borrower represents that no Event of Default has
occurred and is continuing under the Restated Agreement, as amended, and no
event or circumstance has occurred and is continuing that, with the giving of
notice, the passage of time, or both, would constitute an Event of Default under
the Restated Agreement, as amended. Further, the Borrower represents that the
representations and warranties as contained in the Restated Agreement, as
amended, continue to be true.
12. Counterparts. This First Amendment may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute but one and the same instrument.
IMPORTANT: READ BEFORE SIGNING. THE TERMS OF THIS AMENDMENT SHOULD BE READ
CAREFULLY BECAUSE ONLY THOSE TERMS IN WRITING ARE ENFORCEABLE. NO OTHER TERMS OR
ORAL PROMISES NOT CONTAINED IN THIS WRITTEN AGREEMENT (EXCEPT THE CREDIT
AGREEMENT AS PREVIOUSLY AMENDED AND DOCUMENTS REFERRED TO IN THE CREDIT
AGREEMENT AS PREVIOUSLY AMENDED) MAY BE LEGALLY ENFORCED. YOU MAY CHANGE THE
TERMS OF THIS AGREEMENT ONLY BY ANOTHER WRITTEN AGREEMENT.
<PAGE>
FEATHERLITE MFG., INC.
BY:
Conrad Clement, President
BY:
Tracy J. Clement, Executive Vice
President
Conrad Clement, individually
Larry Clement, individually
Kathy Clement, individually
Tracy Clement, individually
Nancy Clement, individually
FIRSTAR BANK IOWA, N.A.
BY:Mitch McElree, Vice President
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