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, 1998
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, 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) Identification 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)
Featherlite Mfg., Inc.
(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.
6,527,851 Shares as of May 13, 1998
<PAGE>
FEATHERLITE, INC.
INDEX
Page No.
Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Part I. Financial Information:
Item 1. Financial Statements (Unaudited)
Condensed Balance Sheets
March 31, 1998 and December 31, 1997 . . . . . . . . . . . . . . . . 3
Condensed Statements of Income
Three Months Ended March 31, 1998 and 1997. . . . . . . . . . . . . . 4
Condensed Statements of Cash Flows
Three months Ended March 31, 1998 and 1997 . . . . . . . . . . . . . . 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 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . .12
Signatures . . . . . . . . . . . . . . . . . . . . .. . . . . 13
<PAGE>
Part I: FINANCIAL INFORMATION
Item 1:
Featherlite, Inc.
Condensed Balance Sheets
(Unaudited)
(In thousands)
March 31, December 31,
ASSETS 1998 1997
--------- ------------
Current Assets
Cash and equivalents $ 431 $ 1,632
Trade receivables 7,925 7,050
Inventories
Raw Materials 10,696 10,052
Work in process 10,136 11,815
Finished trailers/coaches 18,878 17,797
-------- --------
Total inventories 39,710 39,664
Prepaid expenses 1,291 1,110
Deferred taxes 824 824
-------- --------
Total current assets 50,181 50,280
-------- --------
Property and equipment 20,947 20,460
Less accumulated depreciation (6,640) (6,280)
-------- --------
Property and equipment, net 14,307 14,180
Other assets 10,975 11,048
-------- --------
$ 75,463 $ 75,508
========= =========
LIABILITIES AND SHAREHOLDERS EQUITY
Current liabilities
Current maturities of long term debt $ 1,069 $ 1,173
Other notes payable 5,963 6,515
Accounts payable 12,470 11,984
Accrued liabilities 5,687 5,380
Customer deposits 2,956 3,585
-------- --------
Total current liabilities 28,145 28,637
-------- --------
Long Term Debt, net of current maturities 21,399 22,075
Deferred grant income 219 237
Deferred taxes 681 682
Commitments and Contingencies (Note 5)
Shareholders' equity 25,019 23,877
-------- --------
$ 75,463 $ 75,508
========= =========
See Notes to financial statements
<PAGE>
Featherlite, Inc.
Condensed Statements of Income
(Unaudited)
(In thousands, except for per share data)
Three months Ended
March 31
-------------------
1998 1997
---- -----
Net Sales $ 41,742 $ 34,034
Cost of sales 34,825 28,939
-------- --------
Gross profit 6,917 5,095
Selling and administrative expenses 4,661 3,600
-------- --------
Income from operations 2,256 1,495
Other income (expense)
Interest (576) (336)
Other, net 221 102
-------- --------
Total other expense (355) (234)
-------- --------
Income before taxes 1,901 1,261
Provision for income taxes 760 505
-------- --------
Net income 1,141 756
-------- --------
Net income per share - basic and diluted $ 0.18 $ 0.12
-------- --------
Weighted average shares outstanding - basic 6,255 6,255
-------- --------
Weighted average shares outstanding - diluted 6,340 6,296
-------- --------
See Notes to financial statements
<PAGE>
Featherlite, Inc.
Condensed Statements of Cash Flows
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Three months Ended
March 31
------------------------------------
1998 1997
--------------- ----------------
<S> <C> <C>
Cash provided (used) by operating activities
Net income $ 1,141 $ 756
Depreciation & amortization 406 428
Equity in earnings of joint venture (5) --
Other non cash adjustments, net 14 (13)
Decrease (increase) in working capital, net (938) 594
--------- ----------
Net cash provided by (used for) operating activities 781 2,421
--------- ----------
Cash provided used for investing activities
Additions to property and equipment, net (487) (265)
Purchase of aircraft, net (2,530)
--------- ----------
Net cash used for investing activities (487) (2,795)
--------- ----------
Cash used for Financing Activities
Change in short term debt (557) (665)
Change in long term debt and grants (775) 2,171
--------- ----------
Net cash used for financing activities (1,332) 1,506
--------- ----------
Net cash and cash equivalent increase (1,201) 476
Cash, begin of period 1,632 256
--------- ----------
Cash, end of period $ 431 $ 732
========= ==========
See Notes to financial statements
</TABLE>
<PAGE>
FEATHERLITE, 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, 1997 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, 1998 and 1997. 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, 1997.
Note 2: Property and Equipment
Property and equipment consists of the following at March 31, 1998 and December
31, 1997 (in thousands):
1998 1997
---- ----
Land and improvements $ 2,256 $ 2,098
Building and improvements 8,052 7,954
Machinery and equipment 10,639 10,408*
Accumulated depreciation (6,640) (6,280)
------- -------
Net Property and equipment $14,307 $ 14,180
------- -------
* This amount was incorrectly reported as $10,280 in the December 31,
1997 annual report.
Note 3: Goodwill and Other Assets
Goodwill and other assets consists of the following at March 31, 1998 and
December 31, 1997 (in thousands):
March 31, December 31,
1998 1997
---- ----
Goodwill, net $ 3,413 $ 3,461
Aircraft held for resale 6,726 6,726
Idle facilities 522 522
Advertising and other 299 328
Investment in joint venture 15 11
-------- ---------
Total $ 10,975 $ 11,048
-------- ---------
Note 4: Financing Arrangements
Other notes payable primarily include borrowings under a wholesale
finance agreement with a financial services company for a $11 million line of
credit to finance completed new and used motorcoaches. At March 31, 1998, $5.7
million was borrowed against this line.
<PAGE>
Long-term debt includes 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. The Company was in
compliance with all these covenants at March 31, 1998. There was $9.3 million
borrowed against this line of credit as of March 31, 1998.
Note 5: 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 $ $19.8 million at
March 31, 1998 and $14.8 million at December 31, 1997.
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 $882,000
accrued for estimated unpaid claims at March 31, 1998 and $844,000 at December
31, 1997. 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, in the course of its business, has been named as a defendant in
various legal actions. Most, but not all, of such actions are product liability
or workers' compensation claims in which the Company is covered by insurance
subject to applicable deductibles. Although the ultimate outcome of such claims
cannot be ascertained at this time, it is the opinion of management, after
consulting with counsel, that the resolution of such suits will not have a
material adverse effect on the financial position of the Company, but may be
material to the Company's operating results for any particular period.
Note 6: Shareholders' Equity
Shareholders' equity may be further detailed as follows (Dollars in thousands)
March 31, Dec 31,
1998 1997
---- ----
Common stock - without par value;
authorized- 40,000,000 shares;
issued- 6,255,000 shares $ 14,220 $14,220
Additional paid-in capital 4,062 4,062
Retained earnings 6,736 5,595
-------- -------
Total Shareholders' equity $ 25,018 $23,877
======== =======
In 1994, the Company completed an initial public offering of 1,955,000 shares of
Company common stock and granted an option to the Underwriter for an additional
120,000 shares at a price of 120 percent of the initial public offering price of
$6.00 per share. This option, which expires in September, 1999, has not yet been
exercised.
<PAGE>
Note 7: Stock Option Plan
The Board of Directors granted stock options to certain employees and directors
in the total amount of 311,380 shares at March 31, 1998 and December 31, 1997
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. No
new options have been granted in 1998. The shareholders will be voting on a
proposed amendment to the stock option plan which increases the shares reserved
for the stock option plan from 550,000 to 1,100,000.
Note 8: Earnings per Share
Effective December 31, 1997, the Company adopted FASB Statement No 128, Earnings
per Share. The statement 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.
The weighted-average number of shares of common stock used to compute the basic
earnings per share were increased by 85,322 at March 31,1998 and 41,238 at March
31, 1997 for the assumed exercise of options and warrants in computing the
diluted earnings per share data. Basic and diluted earnings per share share, as
calculated under FAS statement No. 128, are not materially different than the
primary and fully diluted earnings per share as previously reported in prior
periods.
Note 9: Business Combination
In May, 1998, the Company acquired all the assets of Mitchell Motorcoach
Companies in exchange for Company common stock with an aggregate value of
approximately $3.0 million and the assumption of certain liabilities. Additional
common stock with an aggregate value of approximately $3.0 million may be issued
if this newly formed division of the Company achieves certain defined earnings
levels through December 31, 2001. This acquisition will be accounted for as a
purchase and accordingly, results of operations of the newly formed division
will be included in the Company's operating statements beginning on the
acquisition date. The Mitchell Companies is a privately held company based in
Pryor, Oklahoma and had unaudited net sales for its most recently completed
fiscal year of approximately $34 million.
<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, 1998 and
1997.
Results of Operations
Three months ended March 31, 1998 and 1997
Net sales of $41.7 million for the quarter ended March 31, 1998 increased
by 22.6% over the same period in 1997. Sales of Featherlite aluminum and steel
brand trailers and other products increased by 23.6% and sales of Vantare luxury
motorcoaches were up 18.6% over 1997. On a sales group basis, horse trailer
sales increased by 18%, livestock trailers increased by almost 24%, car/racecar
and specialty transporter sales were up 27%, utility trailers increased by 49%
and commercial trailers sales were up by 9%. These increases are reflective of
the strong order backlog ($28 million) carried into 1998 from 1997 as well as
continued strong orders across most product lines during the quarter. There was
also a 2 percent increase in trailer models prices late in 1997, which was only
partially effective on current quarter sales.
Gross margin increased to $6.9 million in the first quarter of 1998 from
$5.1 million in 1997 as a result of the increased levels of sales. As a
percentage of sales, gross margin for the quarter increased to 16.7% in 1998
from 15.0% in 1997. The gross profit margin increase primarily reflects improved
gross margin in the Vantare luxury motorcoach division. This was offset in part,
by moderately lower gross margin in Featherlite's trailer product categories due
to increased labor costs which were not yet fully offset by price increases that
were effective late in the first quarter.
Selling and administrative expenses increased in 1998 by $1.1 million over
1997 and increased as a percentage of sales to 11.2% from 10.6% in 1997. This
increase primarily reflects additional marketing expenses.
Interest expense increased in 1998 compared to 1997 due to higher levels of
debt. The provision for income taxes reflects an effective federal and state
income tax rate of 40% in 1998 and 40% in 1997.
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:
costs of integrating the Vogue Division (assets and production facilities
acquired from Mitchell Motorcoach Companies) into the operations of the Company
and achieving anticipated operating results, 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 1998. The total
sales backlog at March 31, 1998 was $27 million compared with $28 million at
December 31, 1997. The sales backlog at March 31, 1998 and December 31, 1997
include motorcoach order backlog of $15 million and $14 million, respectively.
Overall gross margin levels should remain at substantially the same levels
for the remainder of 1998. The Company has obtained commitments from suppliers
to provide, at agreed upon fixed prices, substantially all of its aluminum
requirements for 1998 at a slightly higher cost than 1997. Price increases
effective in late 1997 should offset these increased costs. The labor cost
increases related to wage increases in the last quarter of 1997 are
<PAGE>
expected to be recovered in 1998 through reduced workforce turnover and training
costs and through price increases effective in 1998. Margin improvements
experienced in the first quarter of 1998 at the motorcoach division are expected
to continue as there will be no recurrence of the additional development costs
related to the slide-out motorcoaches experienced in 1997.
Sales and administration expenses for 1998 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 in 1998 than 1997
as the average level of debt is expected to be greater due to working capital
growth.
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 1998, the Company's operations used net cash of
$1,201,000, including $618,000 provided from operating activities, net of
$1,332,000 used for debt reductions, and $487,000 used for capital expenditures
for equipment.
Operating activities in the first quarter of 1998 provided cash of $618,000. Net
income from operations provided cash of $1,141,000. This amount was increased by
adjustments for depreciation and amortization of $406,000 and other non-cash
items in an aggregate amount of $9,000. Increases in receivables, inventories
and other working capital items provided cash of $938,000. Increased
expenditures for working capital items may be required to support increased
sales levels throughout 1998. 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 $487,000 for plant and
other improvements.
Financing activities used net cash of $1,332,000 after borrowing $1,500,000 and
repaying $2,000,000 on the line of credit and $832,000 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 less .5% (8.00% at March 31, 1998) The maturity date of
borrowings under this line is July 31, 1999, 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 is in compliance with these requirements at March 31,
1998. Borrowings under the line are secured by substantially all assets of the
Company. There was $9.3 million borrowed against this line as of March 31, 1998.
The Company also has a wholesale floor plan agreement with Deutsche Financial
Services to borrow up to $11 million for financing new and used motorcoaches
held in inventory, with interest at prime (8.5% at March 31, 1998) on borrowed
funds. The Company was in compliance with all the covenants of this Agreement as
March 31,1998 and at March 31,1998 $5.7 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.
<PAGE>
As discussed in Note 2 to financial statements, the Company is contingently
liable under certain dealer floor plan and retail financing arrangements. These
contingent liabilities total approximately $ 19.8 million at March 31, 1998. The
Company is no longer required to guarantee any repurchase obligations of
Featherlite Credit Corporation, a company related by common ownership. Also, the
Company is self-insured for a portion of certain health benefit and workers'
compensation insurance claims. At March 31, 1998, 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 $1,245,000
in favor of the workers compensation claim administrator.
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
1998 or 1999. In 1998, the Company may build a warehouse facility for raw
material storage at its Cresco location at an approximate cost of $2.0 million.
It may also begin some phases of an expansion at its Vantare facilities. These
programs would be financed with new borrowings from banks or other financial
institutions.
In October, 1997, the Company signed a joint venture agreement with GMR
Marketing to form Featherlite/GMR Sports Group, LLC. The joint venture will
focus on developing promotional events and implementing marketing strategies in
the rapidly growing motorsports industry. Since inception, the Company has
invested $20,000 in this venture and it is not expected that significant
additional amounts of capital will be required to maintain this operation.
The Company leases certain office and production facilities under various leases
that expire at varying dates through fiscal year 2007. Minimum lease payments
for 1998 are expected to total $497,000.
As discussed in Note 9 to financial statements, in May 1998 the Company acquired
the assets of Mitchell Motorcoach Companies in exchange for Featherlite common
stock with an aggregate value of approximately $3.0 million and the assumption
of certain liabilities. Additional shares with an aggregate value of
approximately $3.0 million may be issued if this new division of the Company
achieves certain defined earnings levels through December 31, 2001. The Company
expects to invest approximately $5 million of additional working capital in this
new division to finance its growth. These funds will come from the Company's
existing or expanded credit facilities.
<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, 1998.
<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, INC.
(Registrant)
Date: May 13, 1998 /S/ CONRAD D. CLEMENT
---------------------
Conrad D. Clement
President & CEO
Date: May 13, 1998 /S/ JEFFERY A. MASON
--------------------
Jeffery A. Mason
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
Form 10Q
Quarter Ended March 31, 1998
Exhibit No. Description
3.1 Articles of Incorporation, as amended to date
27 Financial Data Schedule (filed in electronic format only)
ARTICLES OF INCORPORATION
OF
FEATHERLITE, INC.
(As Amended through May 13, 1998)
ARTICLE 1 - NAME
1.1) The name of the corporation shall be Featherlite, Inc.
ARTICLE 2 - REGISTERED OFFICE
2.1 The registered office of the corporation is located at Highway 16 West,
P.O. Box 387, Grand Meadow, Minnesota 55936.
ARTICLE 3 - CAPITAL STOCK
3.1) Authorized Shares; Establishment of Classes and Series. The aggregate
number of shares the corporation has authority to issue shall be 50,000,000
shares, which shall have a par value of $.01 per share solely for the purpose of
a statute or regulation imposing a tax or fee based upon the capitalization of
the corporation, and which shall consist of 40,000,000 common shares and
10,000,000 undesignated shares. The Board of Directors of the corporation is
authorized to establish from the undesignated shares, by resolution adopted and
filed in the manner provided by law, one or more classes or series of shares, to
designate each such class or series (which may include but is not limited to
designation as additional common shares), and to fix the relative rights and
preferences of each such class or series.
3.2) Issuance of Shares. The Board of Directors of the corporation is
authorized from time to time to accept subscriptions for, issue, sell and
deliver shares of any class or series of the corporation to such persons, at
such times and upon such terms and conditions as the Board shall determine,
valuing all nonmonetary consideration and establishing a price in money or other
consideration, or a minimum price, or a general formula or method by which the
price will be determined.
3.3) Issuance of Rights to Purchase Shares. The Board of Directors is
further authorized from time to time to grant and issue rights to subscribe for,
purchase, exchange securities for, or convert securities into, shares of the
corporation of any class or series, and to fix the terms, provisions and
conditions of such rights, including the exchange or conversion basis or the
price at which such shares may be purchased or subscribed for.
<PAGE>
3.4) Issuance of Shares to Holders of Another Class or Series. The Board is
further authorized to issue shares of one class or series to holders of that
class or series or to holders of another class or series to effectuate share
dividends or splits.
ARTICLE 4 - RIGHTS OF SHAREHOLDERS
4.1) No Preemptive Rights. No shares of any class or series of the
corporation shall entitle the holders to any preemptive rights to subscribe for
or purchase additional shares of that class or series or any other class or
series of the corporation now or hereafter authorized or issued.
4.2 No Cumulative Voting Rights. There shall be no cumulative voting by the
shareholders of the corporation.
ARTICLE 5 - MERGER, EXCHANGE, SALE OF ASSETS AND DISSOLUTION
5.1) Where approval of shareholders is required by law, the affirmative
vote of the holders of at least a majority of the voting power of all shares
entitled to vote shall be required to authorize the corporation (i) to merge
into or with one or more other corporations, (ii) to exchange its shares for
shares of one or more other corporations, (iii) to sell, lease, transfer or
otherwise dispose of all or substantially all of its property and assets,
including its good will, or (iv) to commence voluntary dissolution.
ARTICLE 6 - AMENDMENT OF ARTICLES OF INCORPORATION
6.1) Any provision contained in these Articles of Incorporation may be
amended, altered, changed or repealed by the affirmative vote of the holders of
at least a majority of the voting power of the shares present and entitled to
vote at a duly held meeting or such greater percentage as may be otherwise
prescribed by the laws of the State of Minnesota.
ARTICLE 7 - INAPPLICABILITY OF
MINNESOTA CONTROL SHARE ACQUISITION STATUTE
7.1) Section 302A.671 of the Minnesota Statutes Annotated (entitled
"Control Share Acquisitions") shall not apply to this corporation.
ARTICLE 8 - INAPPLICABILITY OF
BUSINESS COMBINATION STATUTE
8.1) Section 302A.673 of the Minnesota Statutes Annotated (entitled
"Business Combinations") shall not apply to this corporation.
<PAGE>
ARTICLE 9 - LIMITATION OF DIRECTOR LIABILITY
9.1) To the fullest extent permitted by Chapter 302A, Minnesota Statutes,
as the same exists or may hereafter be amended, a director of this corporation
shall not be personally liable to the corporation or its shareholders for
monetary damages for breach of fiduciary duty as a director.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1
<CASH> 431
<SECURITIES> 0
<RECEIVABLES> 7,925
<ALLOWANCES> 0
<INVENTORY> 39,710
<CURRENT-ASSETS> 50,181
<PP&E> 20,947
<DEPRECIATION> (6,640)
<TOTAL-ASSETS> 75,463
<CURRENT-LIABILITIES> 28,145
<BONDS> 21,399
0
0
<COMMON> 14,220
<OTHER-SE> 10,798
<TOTAL-LIABILITY-AND-EQUITY> 75,463
<SALES> 41,742
<TOTAL-REVENUES> 41,742
<CGS> 34,825
<TOTAL-COSTS> 4,661
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 576
<INCOME-PRETAX> 1,901
<INCOME-TAX> 760
<INCOME-CONTINUING> 1,141
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,141
<EPS-PRIMARY> .18
<EPS-DILUTED> .18
</TABLE>
