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, 2000
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 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 CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
6,535,104 Shares as of May 3, 2000
<PAGE>
FEATHERLITE, INC.
INDEX
Page No.
Index . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Part I. Financial Information:
Item 1. Consolidated Financial Statements (Unaudited)
Condensed Consolidated Balance sheets
March 31, 2000 and December 31, 1999. . . . . . . . . . . . . . . . . . 3
Condensed Consolidated Statements of Income
Three Month Periods Ended March 31, 2000 and 1999 . . . . . . . . . . . 4
Condensed Consolidated Statements of Cash Flows
Three Month Periods Ended March 31, 2000 and 1999 . . . . . . . . . . . 5
Notes to Consolidated Financial Statements. . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . . . . . . . . 9
Item 3. Quantitative & Qualitative Disclosures about Market Risk . . . . . 12
Part II. Other Information:
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . 13
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2
<PAGE>
Part I: FINANCIAL INFORMATION
Item 1:
Featherlite, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 2000 1999
---- ----
<S> <C> <C>
Current assets
Cash $ 350 $ 248
Receivables 12,908 8,915
-------- -------
Inventories
Raw materials 12,620 14,195
Work in process 20,443 21,476
Finished trailers/motorcoaches 41,427 38,961
-------- -------
Total inventories 74,490 74,632
-------- -------
Prepaid expenses 1,629 1,547
Deferred taxes 1,362 1,159
-------- -------
Total current assets 90,739 86,501
-------- -------
Property and equipment,net 20,205 19,880
Goodwill and other assets, net 13,454 13,403
-------- -------
$ 124,398 $ 119,784
======== =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt $ 1,872 $ 1,770
Other notes payable 21,079 22,919
Accounts payable 22,907 18,664
Accrued liabilities 6,624 6,405
Customer deposits 7,776 4,678
-------- -------
Total current liabilities 60,258 54,436
Long-term debt, net of current maturities 28,514 30,563
Other long term liabilities 1,098 1,059
Commitments and contingencies (Note 5)
Shareholders' equity 34,528 33,726
-------- -------
$ 124,398 $ 119,784
======== =======
</TABLE>
See notes to consolidated financial statements
3
<PAGE>
Featherlite, Inc.
Condensed Consolidated Statements of Income
(Unaudited)
(In thousands, except for per share data)
<TABLE>
<CAPTION>
Three months Ended
March 31,
----------------
2000 1999
---- ----
<S> <C> <C>
Net sales $ 69,404 $ 59,422
Cost of sales 58,894 49,725
---------- --------
Gross profit 10,510 9,697
Selling and administrative expenses 8,703 6,635
---------- --------
Income from operations 1,807 3,062
Other income (expense)
Interest (1,077) ( 897)
Gain on aircraft and property sales 105 211
Other, net 234 217
---------- --------
Total other expense ( 738) ( 469)
----------- ---------
Income before income taxes 1,069 2,593
Provision for income taxes 417 1,050
---------- --------
Net income $ 652 $ 1,543
========== ========
Net income per share - basic and diluted $ 0.10 $ 0.24
---------- --------
Average common shares outstanding-basic 6,535 6,501
---------- --------
Average common shares outstanding-diluted 6,535 6,506
---------- --------
</TABLE>
See notes to consolidated financial statements
4
<PAGE>
Featherlite, Inc.
Condensed Consolidated Statements of Cash Flow
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Three months Ended
March 31
-------------------
2000 1999
---- ----
<S> <C> <C>
Cash provided by (used for) operating activities
Net income $ 652 $ 1,543
Depreciation & amortization 688 571
Other non cash adjustments, net (35) (380)
Increase in working capital, net 3,354 1,005
-------- --------
Net cash provided by operating activities 4,659 2,739
-------- --------
Cash provided by (used for) investing activities
Purchases of property and equipment, net ( 867) ( 994)
Proceeds from sale of aircraft and other property, net 96 3,969
-------- --------
Net cash used for investing activities ( 771) (2,985)
-------- --------
Cash provided by (used for) financing activities
Change in short term debt (1,840) 1,759
Change in long term debt (1,946) (7,374)
-------- --------
Net cash used for financing activities (3,786) (5,615)
-------- --------
Net cash increase for period 102 109
Cash balance, beginning of period 248 188
-------- --------
Cash balance, end of period $ 350 $ 297
======== ========
</TABLE>
See notes to consolidated financial statements
5
<PAGE>
FEATHERLITE,INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 1: Basis of Presentation
The accompanying condensed consolidated 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, 1999 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 months ended
March 31, 2000 and 1999. The results of interim periods may not be indicative of
results to be expected for the year. For further information refer to the
consolidated financial statements and notes to consolidated financial statements
included in the Company's Form 10-K Annual Report for the year ended December
31, 1999.
Note 2: Goodwill and Other Assets
During the three month period ended March 31, 2000, an aircraft was purchased at
a cost of $2.9 million and subsequently resold for $3.0 million, with a gain of
$105,000 realized on the sale. During the three month period ended March 31,
1999, an aircraft with a cost of $3.9 million was sold and a gain of $200,000
realized.
Note 3: Income taxes
The Company is the subject of an Internal Revenue Service examination for the
years ended December 31, 1995, 1996 and 1997. The IRS has proposed adjustments
related to the treatment of various incentive grants received in connection with
the Company's building expansion in prior years. The Company believes its
position is valid and intends to vigorously defend it. No assurance can be given
that the Company will be successful in sustaining its treatment of these grants.
Any additional tax due will result in the reclassification of a recorded income
tax liability from deferred to current.
Note 4: Financing Arrangements
In March 2000, the Company's line of credit with Deutsche Financial Services
Corporation (DFS) on new and used motorcoach products was increased from $23.7
million to $30 million. The Wholesale Financing Agreement with DFS was also
amended to change the minimum current ratio to be maintained by the Company. DFS
waived the Company's compliance with this minimum current ratio at March 31,
2000.
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
6
<PAGE>
contingently liable under these arrangements for a maximum of $14.8 million at
March 31, 2000 and $14.5 million at December 31, 1999. During the three months
ended March 31, 2000, the Company was required to make repurchases totaling
$72,000.
The Company is partially 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 $4.0 million, including $1.6
million accrued for estimated unpaid claims at March 31,2000, and $1.3 million
at December 31, 1999. The Company has obtained an irrevocable standby letter of
credit in the amount of $1.7 million in favor of the workers' compensation claim
administrator to guaranty settlement of claims.
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.
The Company has obtained fixed price commitments from certain suppliers for a
substantial portion of its expected aluminum requirements in 2000 to reduce the
risk related to fluctuations in the cost of aluminum, the principal commodity
used in the Company's trailer segment. In certain instances there may be a
carrying charge added to the fixed price if the Company requests a deferral of a
portion of its purchase commitment to the following year.
The Company has a commitment to the City of Cresco, Iowa to construct a hangar
facility at a cost of $300,000 as part of an airport expansion project that may
be completed in 2000. This expansion would be financed with new borrowings from
banks or other financial institutions.
Note 6: Shareholders' Equity
Shareholders' equity may be further detailed as follows (in thousands)
Mar. 31, Dec. 31,
2000 1999
----- -----
Common stock - without par value;
Authorized- 40 million shares;
Issued- 6,535 shares at Mar.31,2000
6,510 shares at Dec.31,1999 $ 16,595 $16,445
Additional paid-in capital 4,062 4,062
Retained earnings 13,871 13,219
-------- -------
Total Shareholders' equity $ 34,528 $33,726
======== =======
7
<PAGE>
In 2000, the Company issued an additional 25,000 shares of common stock to the
former owner of Vantare International, Inc. These additional shares were earned
under the terms of the purchase agreement for this 1996 asset acquisition for
the achievement of defined earnings levels through December 31, 1999. An
additional 50,000 shares may still be earned under this agreement based on the
performance of the Vantare Division through December 31, 2000. Goodwill related
to this acquisition was increased by $150,000 for this stock issue.
Note 7: Stock Option Plan
In accordance with the stock option plan established by the Company in July
1994, as amended in May 1998, the Board of Directors has granted options to
purchase Company common stock to certain employees and directors in the total
amount of 556,160 shares at March 31,2000 and 536,160 at December 31,1999. These
options were granted at prices ranging from $5.50-$10.00 per share, and are
exercisable at varying dates not to exceed 10 years from the date of grant.
Options totaling 20,000 shares have been granted in 2000. No options were
exercised or forfeited during the three months ended March 31, 2000.
Note 8: Net Income Per Share
Following is a reconciliation of the weighted average shares outstanding used to
determine basic and diluted net income per share for the three months ended
March 31, 2000 and 1999 (in thousands, except per share data):
2000 1999
---- ----
Net income available to common shareholders $ 652 $ 1,543
----- -------
Weighted average number of shares outstanding-
basic 6,535 6,501
Dilutive effect of stock options - 5
----- ------
Weighted average number of shares outstanding-
dilutive 6,535 6,506
----- ------
Net income per share - basic and diluted $ .10 $ .24
----- ------
Note 9: Segment Reporting
The Company has two principal business segments that manufacture and sell
trailers and luxury motorcoaches to many different markets, including
recreational, entertainment and agriculture. Management evaluates the
performance of each segment based on income before income taxes.
The Company's sales are not materially dependent on a single customer or small
group of customers.
Information on business segment sales, income before income taxes and assets are
as follows for the three month periods ended March 31, 2000 and 1999 (in
thousands):
<TABLE>
<CAPTION>
Corporate and
Trailers Motorcoaches other Total
-------- ------------ -------------- -----
<S> <C> <C> <C> <C>
2000
Net sales to unaffiliated customers $ 35,020 $ 34,384 $ - $ 69,404
Income (loss) before income taxes 2,556 (1,306) (181) 1,069
Identifiable assets 40,167 76,735 7,496 124,398
1999
Net sales to unaffiliated customers $ 30,510 $ 28,912 $ - $ 59,422
Income (loss) before income taxes 2,145 508 (60) 2,593
Identifiable assets 41,469 58,964 6,948 107,381
</TABLE>
8
<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, 2000 and 1999.
Results of Operations
Three months ended March 31, 2000 and 1999
On a consolidated basis, the Company's net income for the first quarter ended
March 31, 2000, was $652,000 or 10 cents per diluted share, compared with $1.5
million, or 24 cents per diluted share, in the first quarter of 1999.
Net sales for the quarter increased by 16.8 percent to $69.4 million in 2000
compared with $59.4 million in 1999. This increase included a 14.8 percent
increase in sales of specialty trailers and transporters, which were up in all
categories except commercial trailers. In particular, livestock trailer sales,
which had been depressed since the fall of 1998, were up 68 percent. Motorcoach
segment sales were up 18.9 percent, including an increase of 11 percent in sales
of new bus conversion coaches and a 38 percent increase in sales of used
coaches.
Gross profit margin increased by $813,000 to $10.5 million in the first quarter
of 2000 from $9.7 million in 1999. As a percentage of sales, gross profit margin
for the quarter was 15.1 percent compared to 16.3 percent in 1999. This decline
reflects lower margins realized on sales in the luxury motorcoach segment.
Trailer margins were 90 basis points higher than 1999 due to the favorable
impact of reduced aluminum costs and improved labor and overhead utilization.
Motorcoach gross profit margins declined by almost 300 basis points as lower
margins realized on new motorcoach sales due to higher than expected conversion
costs more than offset the higher margins realized from increased prices on
sales of used units.
Selling and administration expenses increased in 1999 by $2.1 million, a 31.2
percent increase over 1999. As a percentage of sales, these expenses increased
to 12.5 percent in 2000 from 11.2 percent in 1999. Trailer segment expenses
increased by 26 percent due in part to higher trailer delivery costs, which are
included in this category, reflecting higher fuel costs. Motorcoach segment
expenses increased by 37 percent due mainly to increased marketing personnel and
selling costs.
Interest expense increased in 2000 compared to 1999 due to higher levels of debt
in 2000 and a higher interest rate.
Income before taxes (IBT) deceased by $1.5 million in the first quarter of 2000
compared to this quarter last year. This decrease reflects an increase in
trailer segment IBT of almost $400,000 and a decline of $1.8 million in
motorcoach segment IBT for the reasons discussed above.
The provision for income taxes was 39 percent in 2000 compared to 40 percent in
1999. The reduced provision rate in 1999 reflects a reduction to consider
Federal and state tax credits that will be available to the Company on its 2000
Federal and state income tax returns.
9
<PAGE>
Liquidity and Capital Resources
Operating activities in the first three months of 2000 provided net cash of $4.7
million. Net income was $652,000. This amount was increased by adjustments for
depreciation and amortization of $688,000 and decreased by other non-cash items
in an aggregate net amount of $35,000. Net changes in receivables, inventories
and other working capital assets used cash of $4.1 million with substantially
all the change resulting from increased receivables at the end of the quarter
due to sales growth in both segments. Net increases of accounts payable,
customer deposits and other current liabilities provided cash of $7.4 million.
These changes primarily included: increases of $4.2 million in accounts payable
due to an increase in the number of bus shells held on a consignment basis from
the manufacturer and increases of $3.1 million in customer deposits on trailers
and motorcoaches ordered during the quarter but not yet completed. Increased
expenditures for working capital items may be required to support increased
sales levels.
Investing activities in the first three months of 2000 used net cash of
$771,000, including $867,000 for property and equipment improvements, $3.0
million provided from an aircraft sale and $2.9 million used for an aircraft
purchase transaction.
Financing activities used net cash of $3.8 million, including new borrowings of
$712,000 for equipment purchases, a net decrease of $3.7 million in borrowings
on the wholesale floor plan and revolving line of credit, a net reduction of
$106,000 in aircraft debt and net other debt reductions of $647,000.
The Company has a working capital line of credit with its primary lender,
Firstar Bank. This line has a borrowing limit of $25.0 million based on levels
of eligible receivables and inventory and an interest rate of prime less .75%
(8.25 percent at March 31, 2000). The maturity date of borrowings under this
line is September 24, 2002, subject to renewal and extension. The agreement
contains covenants that limit annual capital expenditures, total liabilities in
relation to defined tangible net worth and total fixed charges in relation to
defined EBITDA. Borrowings under the line are secured by substantially all
assets of the Company. There was $15.6 million borrowed against this line as of
March 31, 2000. The Company also has available through Firstar various term
notes totaling $3 million as future borrowings for real estate projects and
equipment. There was $1.3 million borrowed on these notes at March 31, 2000.
The Company also has a wholesale floor plan agreement with Deutsche Financial
Services to borrow up to $30.0 million (increased from $23.7 million in March,
2000) for financing new and used motorcoaches held in inventory, with interest
at prime (9.00% at March 31, 2000) on borrowed funds. This agreement includes
covenants requiring maintenance of defined levels of tangible net worth,
leverage and working capital as measured by a current ratio. The lender waived
the Company's compliance with the minimum current ratio requirement at March 31,
2000. At March 31, 2000, $20.6 million was borrowed on this line.
The Company believes that its current cash balances, cash flow generated from
operations and available borrowing capacity will be sufficient to fund continued
operations and capital requirements consistent with past levels. Significant
future growth of the Company may necessitate additional sources of financing if
such funding cannot be arranged with the Company's current lenders. Such
financing may be in the form of debt, debt with equity features or a secondary
offering of common stock. No assurance can be given that such financing will be
available to the Company.
As discussed in Note 5 to consolidated financial statements, the Company is
contingently liable under certain dealer floor plan and retail financing
arrangements. These contingent liabilities total approximately $14.8 million at
March 31, 2000. Also, the Company is self-insured for a portion of certain
health benefit and workers' compensation insurance claims. At March 31, 2000,
the Company's maximum annual claim exposure under these programs is
approximately $4 million. The Company has obtained an irrevocable standby letter
of credit in the amount of $1.7 million in favor of the workers' compensation
claim administrator to guarantee payment of claims.
10
<PAGE>
The Company has also made a commitment to the City of Cresco, Iowa to construct
a hangar facility at a cost of $300,000 as part of an airport expansion project
that may be completed in 2000. This expansion would be financed with new
borrowings from banks or other financial institutions.
The Company leases certain office and production facilities under various leases
that expire at varying dates through fiscal year 2011. Minimum lease payments
for 2000 are expected to total $1.1 million. The Company may lease a new sales
and service center in North Carolina from an entity owned by certain of its
principal shareholders. This would be used for selling new and used motorcoaches
and to provide maintenance services for motorcoaches and Featherlite trailers
and transporters. The terms and conditions of this lease have not yet been
finanalized but are expected to comparable to those of the existing facility
lease. It is expected this facility will be completed in the fourth quarter of
2000.
The Company is the subject of an Internal Revenue Service examination for the
years ended December 31, 1995, 1996 and 1997. The IRS has proposed adjustments
related to the treatment of various incentive grants received in connection with
the Company's building expansion in prior years. The Company believes its
position is valid and intends to vigorously defend it. No assurance can be given
that the Company will be successful in sustaining its treatment of these grants.
Any additional tax due will result in the creation of a current income tax
liability and a reduction in deferred income tax liabilities.
Looking Forward and Risk Factors
The statements made in this Form 10-Q quarterly report which are forward looking
in time involve risks and uncertainties discussed here and in the Company's Form
10-K 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,
aircraft purchases and sales and the availability of additional capital required
for growth.
The Company expects consolidated sales to remain strong in the year 2000 unless
there is some unforeseen general economic downturn. The Company believes its
name recognition and close affiliation with the motorsports industry will
continue to have a positive impact on its sales of specialty trailers and luxury
motorcoaches as well as other trailers used for leisure and entertainment
purposes. With more than 75 percent of its revenue from end users in motorsports
and leisure and entertainment categories, which also includes horse trailers,
and with its strong position in the livestock trailer market, the Company
believes it is strategically well-situated to benefit from growth in these
markets.
Trailer segment growth should remain strong. This belief is based on a number of
factors, including the overall strength and quality of our dealer network and
the positive reponse from dealers and retail customers to nine new models of
trailers introduced throughout 1999 and more changes planned in 2000. Dealer
inventories continue to turn well and inventory levels they maintain have
remained relatively stable since the beginning of the year. Trailer segment
order backlog remains strong at March 31, 2000 at a level of $24.5 million,
which is 53 percent higher than December 31, 1999 and 116 percent higher than
March 31, 1999. This business segment is well situated for continued growth and
profitability.
11
<PAGE>
Despite the slow start in 2000, the Company believes the motorcoach segment of
the business will be well positioned for strong growth and improved
profitability when the changes made since the beginning of the year have time to
become fully effective. At the beginning of the quarter, a new president was
appointed for the Featherlite Luxury Motorocoach Division and other key division
management team members were changed. Since then, a number of new programs have
been implemented to improve production efficiency, and to reduce and control
production and selling costs. But those changes, and other improvements that are
underway, have not yet had enough time to have a positive impact on the
division's income before taxes. In the second half of the year, two new coach
models will be introduced. The motorcoach division backlog was $19.5 million at
March 31, 2000 compared with $17.2 million at December 31, 1999 and $22.9
million at March 31, 1999.
There are a number of risk factors related to the future operating results of
the Company, including the following:
1. The Company has obtained commitments from suppliers to provide, at an agreed
upon fixed price, substantially all of its anticipated aluminum requirements for
2000 at an average cost which is lower than 1999 levels. If the Company is
unable to obtain such commitments from suppliers or otherwise reduce the price
risk related to the purchases of aluminum in years beyond 2000, this could have
an adverse impact on the Company's operating results if the cost of alumimum
increases significantly above levels "locked-in" for 2000. The Company does not
engage in hedging transactions or other use of derivatives in connection with it
operations.
2. 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.
3. 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.
4. There is also a risk related to the timely delivery of certain custom
trailers and specialty transporters in the event the Company's sole supplier of
custom paint and graphics is interrupted from providing these services due to
unforeseen circumstances or customer delays in providing specifications to the
subcontractor.
5. The Company has made increased use of leverage and incurred increased
interest and related expenses in the three years ended December 31, 1999 and the
three months ended March 31, 2000. Increased debt has been incurred in
connection with financing the operations and facilities expansion at the
Featherlite Luxury Division and in financing its additional working capital
requirements. The Company may not be able to increase its current borrowing
limits for working capital or obtain additional funding for future capital
expenditures without the consent of its primary lender due to certain loan
covenants related to leverage and fixed charge coverage. Increased leverage and
related expenses create risk to future operating results of the Company.
6. The Company is exposed to market risks related to changes in U.S. and
International interest rates. Substantially all of the Company's debt bears
interest at a variable rate. To a limited extent, the Company manages its
interest rate risk through the use of interest rate swaps. An increase in
interest rates by one percentage point would the reduce the Company's future
annual net income by approximately $300,000 at current debt levels.
Item 3. Quantitative and Qualitative Disclosures about Market Risks
The information required by this item is incorporated by reference to
"Management Discussion and Analysis-Looking Forward and Risk Factor" section of
this Form 10-Q for the quarterly period ended March 31, 2000.
12
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits. See Exhibit Index on Page 14 following signatures.
(b) Form 8-K. The Registrant filed no Form 8-K reports during the three
months ended March 31, 2000.
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 10, 2000 /S/ CONRAD D. CLEMENT
---------------------
Conrad D. Clement
President & CEO
Date: May 10, 2000 /S/ JEFFERY A. MASON
--------------------
Jeffery A. Mason
Chief Financial Officer
13
<PAGE>
EXHIBIT INDEX
Form 10-Q
Quarter Ended March 31, 2000
Exhibit No. Description
10.1 Amendment Number 3 to Amended and Restated Agreement for Wholesale
Financing with Deutsche Financial Services Corporation dated October 6,
1997
27 Financial Data Schedule (filed in electronic format only)
14
Exibit 10.1
AMENDMENT TO AMENDED AND RESTATED AGREEMENT
FOR WHOLESALE FINANCING
(Amendment No. 3)
This Amendment to Amended and Restated Agreement for Wholesale Financing
("Amendment") is made by and between Deutsche Financial Services Corporation
("DFS") and Featherlite Mfg., Inc. ("Dealer").
WHEREAS, DFS and Dealer entered into that certain Amended and Restated
Agreement for Wholesale Financing dated October 6, 1997, as amended by that
certain Amendment to Amended and Restated Agreement for Wholesale Financing
(Amendment No. 1) dated April 1, 1998, and that certain Amendment to Amended and
Restated Agreement for Wholesale Financing (Amendment No. 2) dated May 8, 1998
(together, the "Agreement"); and
WHEREAS, DFS and Dealer desire to amend the Agreement as provided
herein.
NOW, THEREFORE, for and in consideration of the premises, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, DFS and Dealer agree as follows:
1. Amendment of Current Ratio. Paragraph 13.1(c) of the Agreement is
deleted and amended to read in its entirety as follows:
"(c) a ratio of Current Tangible Assets to current liabilities
of not less than ONE AND ONE-HALF to ONE (1.5:1)."
2. No Other Modifications. Except as expressly modified or amended
herein, all other terms and provisions of the Agreement shall remain
unmodified and in full force and effect and the Agreement, as hereby
amended, is ratified and confirmed by DFS and Dealer.
3. Capitalized Terms. Except as otherwise defined herein, all
capitalized terms will have the same meanings set forth in the
Agreement.
IN WITNESS WHEREOF, DFS and Dealer have executed this Amendment as of
the 25th day of March, 2000.
DEUTSCHE FINANCIAL SERVICES
CORPORATION
By: /s/ Leonard F. Buchan
Leonard F. Buchan
Vice President
FEATHERLITE MFG., INC.
By /s/ C. Clement
Conrad Clement
President
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 350
<SECURITIES> 0
<RECEIVABLES> 12,908
<ALLOWANCES> 0
<INVENTORY> 74,490
<CURRENT-ASSETS> 90,739
<PP&E> 30,267
<DEPRECIATION> (10,062)
<TOTAL-ASSETS> 124,398
<CURRENT-LIABILITIES> 60,258
<BONDS> 28,514
0
0
<COMMON> 16,595
<OTHER-SE> 17,933
<TOTAL-LIABILITY-AND-EQUITY> 124,398
<SALES> 69,404
<TOTAL-REVENUES> 69,743
<CGS> 58,894
<TOTAL-COSTS> 8,703
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,077
<INCOME-PRETAX> 1,069
<INCOME-TAX> 417
<INCOME-CONTINUING> 652
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 652
<EPS-BASIC> 0.10
<EPS-DILUTED> 0.10
</TABLE>
