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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 March 31, 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 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.
6,255,000 Shares as of May 1, 1997
<PAGE>
FEATHERLITE MFG., INC.
INDEX
Page No.
Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Part I. Financial Information:
Item 1. Financial Statements (Unaudited)
Condensed Balance sheets
March 31, 1997 and December 31, 1996 . . . . . . . . . . . . . . . . 3
Condensed Statements of Income
Three Months Ended March 31, 1997 and 1996. . . . . . . . . . . . . . 4
Condensed Statements of Cash Flows
Three months Ended March 31, 1997 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 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . .11
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
<PAGE>
Part I: FINANCIAL INFORMATION
Item 1:
Featherlite Mfg., Inc.
Balance Sheets
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1997 1996
--------- ----------
<S> <C> <C>
Current assets
Cash and equivalents $ 732 $ 256
Trade receivables 6,614 6,783
Inventories
Raw materials 8,775 8,053
Work in process 8,920 8,410
Finished trailers/coaches 8,510 8,772
--------- -----
Total inventories 26,205 25,235
Prepaid expenses 1,008 1,094
Deferred taxes 481 481
--------- -----
Total current assets 35,040 33,849
--------- -----
Property and equipment 17,951 17,687
Less accumulated depreciation ( 5,309) (4,914)
--------- -----
Property and equipment, net 12,642 12,773
--------- -----
Goodwill and other assets 9,403 6,912
--------- -----
$ 57,085 $ 53,534
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current maturities of long term debt $ 1,107 $ 1,146
Other notes payable 1,572 2,255
Accounts payable 10,723 9,776
Accrued liabilities 3,412 3,110
Customer deposits 2,028 2,157
Income taxes payable 423 240
--------- -----
Total current liabilities 19,265 18,684
--------- -----
Long Term debt, net of current maturities 15,578 13,346
Deferred grant income 292 310
Deferred taxes 599 599
Commitments and contingencies (Note 4)
Shareholders' equity 21,351 20,595
--------- -----
$ 57,085 $ 53,534
======== ========
See Notes to financial statements
</TABLE>
<PAGE>
Featherlite Mfg., Inc.
Condensed Statements of Income
(Unaudited)
(In thousands, except for per share data)
<TABLE>
<CAPTION>
Three months Ended
March 31
1997 1996
---- ----
<S> <C> <C>
Net Sales $ 34,034 $ 19,976
Cost of Sales 28,939 16,958
-------- --------
Gross profit 5,095 3,018
Selling and administrative expenses 3,600 2,716
-------- --------
Income from operations 1,495 302
Other income (expense)
Interest (336) (331)
Other, net 102 112
-------- --------
Total other expense (234) (219)
-------- --------
Income before taxes 1,261 83
Provision for income taxes 505 32
-------- --------
Net income $ 756 $ 51
======== ========
Net income per share $ 0.12 $ 0.01
-------- --------
Weighted average shares outstanding 6,296 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
March 31
-------------------------------------
1997 1996
---- ----
<S> <C> <C>
Cash provided (used) by operating activities
Net income $ 756 $ 51
Non cash adjustments, net 415 315
Decrease in working capital, net 594 95
------ ------
Net cash provided by operating activities 1,765 461
------ ------
Cash used for investing activities
Additions to property and equipment, net (265) (198)
Purchase of aircraft, net (2,530) --
------ ------
Net cash used for investing activities (2,795) (198)
------ ------
Cash used for Financing Activities
Change in short term debt (665) (323)
Change in long term debt and grants 2,171 265
------ ------
Net cash used for financing activities 1,506 (58)
------ ------
Net cash and cash equivalent increase 476 205
Cash, beginning of period 256 811
------ ------
Cash, end of period $ 732 $ 1,016
========= =========
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 three month periods
ended March 31, 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 March 31, 1997 and
December 31, 1996 (in thousands)
March 31, December 31,
1997 1996
-------- ---------
Goodwill,net $ 3,504 $ 3,536
Aircraft held for resale 5,345 2,815
Idle facilities 522 522
Advertising and other 32 39
-------- ---------
Total $ 9,403 $ 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 March 31, 1997, $1.3 million was
borrowed against this line.
Long-term debt includes a credit agreement with 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. No dividend
payments are allowed without the lenders consent. There was $9.0 million
borrowed against this line of credit as of March 31, 1997.
<PAGE>
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 $7,524,000 at March
31, 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 $802,000
accrued for estimated unpaid claims at March 31, 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.
Note 5: Shareholders' Equity
Shareholders' equity may be further detailed as follows (Dollars in thousands)
March 31, 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 3,070 2,314
-------- -------
Total Shareholders' equity $ 21,351 $20,595
====== ======
Note 6: Stock Option Plan
The Board of Directors granted stock options to certain employees and directors
in the total amount of 299,380 shares and 249,380 shares at March 31, 1996 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. If all the options "in the money" were exercised
during the quarter and the proceeds then used to repurchase shares on the open
market at the weighted average closing price for the quarter, the issued and
outstanding shares would have increased by 41,238, which has been included in
weighted average shares for calculating earnings per share for the quarter.
<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 March 31, 1997 and
1996.
Results of Operations
Three months ended March 31, 1997 and 1996
Net sales of $34.0 million for the quarter ended March 31, 1997 increased
by 70.4% over the same period in 1996. Eighty percent (80%) of this increase
related to the sales of Vantare luxury motorcoaches (which was acquired in the
3rd quarter of 1996) and 20% related to greater sales of Featherlite aluminum
and steel brand trailers and other products. On a product group basis, horse
trailer sales increased by 4.5%, livestock trailers increased by 28.1%,
car/racecar and specialty transporter sales were up 52.3%, utility trailers
increased by 14.9% and commercial trailers sales were down by 36.5%. Luxury
motorcoaches added sales of $11.0 million in 1997. These increases are
reflective of the strong order backlog ($28 million) carried into 1997 from 1996
as well as continued backlog growth in certain product lines during the quarter.
Commercial sales were 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 quarter compared to 1996. There was also a
2 percent increase in trailer models prices in 1997, which was only partially
effective on current quarter sales.
Gross margin increased to $5.1 million in the first quarter of 1997 from
$3.0 million in 1996 as a result of the increased levels of sales. As a
percentage of sales, gross margin for the quarter remained essentially unchanged
at 15.0% compared to 15.1% in 1996. While the 1997 gross margin percentage
benefited from reduced aluminum costs, which were approximately 10% lower than
in 1996, this increase was substantially offset by the effect of used
motorcoaches sales which had a lower gross margin. 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 17.2%
Selling and administrative expenses increased in 1997 by $883,000 over 1996
but decreased as a percentage of sales to 10.6% in 1997 from 13.6% 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 14.4% which is
comparable to the rate of increase in trailer sales.
Interest expense and other income levels remained at approximately the same
levels as 1996.
The provision for income taxes reflects an effective federal and state
income tax rate of 40% in 1997 and 39% in 1996. The rate increase reflects
anticipated higher state income tax accruals.
<PAGE>
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 all product lines in 1997. The
Vantare acquisition in 1996 will add significant luxury motorcoach sales in
1997. The total sales backlog at March 31, 1997 was $27 million compared with
$28 million at December 31, 1996 and $8.3 million at March 31, 1996. The sales
backlog at March 31, 1997 and December 31, 1996 include motorcoach order backlog
of $11 million and $16 million, respectively.
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. The Company has no aluminum commitments for 1998
as of the date of this report. Increases in the price of aluminum above 1997
levels could reduce future years gross margin if additional selling price
adjustments cannot be made without adversely affecting future sales. The 1997
gross margin percentage may not improve significantly above 1996 levels as
future Vantare sales may include a significant amount of used motorcoach sales
which have a low gross margin. Also, development costs related to the slide-out
model motorcoaches are expected to reduce margin improvement and earnings per
share by about $.03 for the remainder of 1997. 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 as a percentage of sales as
operational efficiencies improve and price increases become 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. 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.
Liquidity and Capital Resources
During the first quarter of 1997, the Company's operations provided net cash of
$476,000, including $1,765,000 provided from operating activities and $1,506,000
from increased debt, net of $2,795,000 used for capital expenditures for
equipment and aircraft.
<PAGE>
Operating activities in the first quarter of 1997 provided cash of $1,765,000.
Net income from operations provided cash of $756,000. This amount was increased
by adjustments for depreciation and amortization of $428,000 and reduced by
other non-cash items in an aggregate amount of $13,000. Inventory and receivable
increases of $800,000 were partially offset by a $1,394,000 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 current quarter used cash of $2,795,000, including
$265,000 for plant and other improvements and $2,530,000 for net aircraft
additions.
Financing activities provided net cash of $1,506,000 after borrowing $2,601,000
for the purchase of aircraft and repaying $100,000 on the line of credit and
$995,000 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 borrowing limit of $12.0 million and an
interest rate of prime(8.5% at March 31, 1997). 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 $9.0 million borrowed against this line as of March 31, 1997.
The Company also has a wholesale floor plan agreement with Duetsche 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 March 31, 1997 $1.3 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 to repurchase products under certain dealer floor plan arrangements.
These contingent liabilities total approximately $7.5 million at March 31, 1997.
Also, the Company is self-insured for a portion of certain health benefit and
workers' compensation insurance claims. At March 31, 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 $855,000 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 will provide financing for the construction using funds borrowed from a
Florida bank. 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.
For the forseeable future, the Company does not plan to pay dividends but
instead will follow the policy of reinvesting earnings in order to finance the
expansion and development of its business. As discussed in Notes to financial
statements, the Company is a party to certain loan agreements which prohibit the
payment of dividends without the lender's consent.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. See Exhibit Index on page following signatures.
(b) Form 8-K. The Registrant did not file any reports on Form 8-K
during the three months ended March 31, 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: May 1, 1997 /S/ CONRAD D. CLEMENT
---------------------
Conrad D. Clement
President & CEO
Date: May 1, 1997 /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
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS CONTAINED IN THE REGISTRANT'S FORM 10-Q FOR THE
QUARTER ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 732
<SECURITIES> 0
<RECEIVABLES> 6614
<ALLOWANCES> 0
<INVENTORY> 26205
<CURRENT-ASSETS> 35040
<PP&E> 17951
<DEPRECIATION> (5309)
<TOTAL-ASSETS> 57085
<CURRENT-LIABILITIES> 19265
<BONDS> 15578
0
0
<COMMON> 14220
<OTHER-SE> 7131
<TOTAL-LIABILITY-AND-EQUITY> 57085
<SALES> 34034
<TOTAL-REVENUES> 34034
<CGS> 28939
<TOTAL-COSTS> 32539
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 336
<INCOME-PRETAX> 1261
<INCOME-TAX> 505
<INCOME-CONTINUING> 1261
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 756
<EPS-PRIMARY> .12
<EPS-DILUTED> .12
</TABLE>
