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, 2002
{ } TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 0-22268
NATIONAL R.V. HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware 33-0371079
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3411 N. Perris Blvd., Perris, California 92571
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (909) 943-6007
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.
YES X NO
--- ---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at July 29, 2002
----- ----------------------------
Common stock, par value 9,821,062
$.01 per share
1
NATIONAL R.V. HOLDINGS, INC.
INDEX
PART 1 - FINANCIAL INFORMATION PAGE
------------------------------ ----
Item 1. Consolidated Balance Sheets -
June 30, 2002 and December 31, 2001 3
Consolidated Statements of Operations -
Three and Six Months Ended June 30, 2002 and 2001 4
Consolidated Statements of Cash Flows -
Six Months Ended June 30, 2002 and 2001 5
Notes to Consolidated Financial Statements 6 - 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8 - 10
Item 3. Quantitative and Qualitative Disclosures about Market Risk 11
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 6. Exhibits and Reports on Form 8-K 12
Signature 13
2
NATIONAL R.V. HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
June 30, December 31,
2002 2001
-------- --------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents............................. $ 3,379 $ 22
Trade receivables, less allowance for doubtful
accounts ($309 and $224, respectively).............. 25,178 16,378
Inventories........................................... 68,385 85,385
Deferred income taxes................................. 7,294 7,267
Income taxes receivable............................... 2,526 6,688
Prepaid expenses...................................... 881 1,647
-------- --------
Total current assets................................ 107,643 117,387
Goodwill, net........................................... 6,126 6,126
Property, plant and equipment, net...................... 43,868 45,257
Other................................................... 946 1,012
-------- --------
$158,583 $169,782
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Book overdraft........................................ $ - $ 608
Current portion of long-term debt..................... 22 20
Accounts payable...................................... 22,471 29,480
Accrued expenses...................................... 22,248 21,750
-------- --------
Total current liabilities........................... 44,741 51,858
Deferred income taxes................................... 3,037 3,469
Long-term debt.......................................... 30 43
-------- --------
Total liabilities....................................... 47,808 55,370
-------- --------
Commitments and contingencies
Stockholders' equity:
Preferred stock - $.01 par value; 5,000 shares
authorized, 4,000 issued and outstanding............ - -
Common stock - $.01 par value; 25,000,000 shares
authorized, 9,821,062 and 9,718,025 issued
and outstanding, respectively....................... 98 97
Additional paid-in capital............................ 34,201 33,128
Retained earnings..................................... 76,476 81,187
-------- --------
Total stockholders' equity.......................... 110,775 114,412
-------- --------
$158,583 $169,782
======== ========
See Notes to Consolidated Financial Statements.
3
NATIONAL R.V. HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
Three Months Six Months
Ended June 30, Ended June 30,
------------------ ------------------
2002 2001 2002 2001
-------- -------- -------- --------
Net sales............................. $ 87,466 $ 81,021 $166,787 $143,401
Cost of goods sold.................... 83,603 75,473 163,177 135,660
-------- -------- -------- --------
Gross profit........................ 3,863 5,548 3,610 7,741
-------- -------- -------- --------
Selling expenses...................... 3,398 3,235 6,827 6,274
General and administrative expenses... 2,662 2,175 4,570 4,539
Amortization of intangibles........... - 104 - 207
-------- -------- -------- --------
Operating (loss) income............. (2,197) 34 (7,787) (3,279)
Interest income and other expense, net (4) (169) (309) (389)
-------- -------- -------- --------
(Loss) income before income taxes... (2,193) 203 (7,478) (2,890)
(Benefit) provision for income taxes.. (797) 77 (2,767) (1,121)
-------- -------- -------- --------
Net (loss) income.................. $ (1,396) $ 126 $ (4,711) $ (1,769)
======== ======== ======== ========
(Loss) earnings per common share:
Basic.............................. $ (0.14) $ 0.01 $ (0.48) $ (0.18)
Diluted............................ $ (0.14) $ 0.01 $ (0.48) $ (0.18)
Weighted average number of shares:
Basic.............................. 9,776 9,663 9,747 9,663
Diluted............................ 9,776 9,948 9,747 9,663
See Notes to Consolidated Financial Statements.
4
NATIONAL R.V. HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months
Ended June 30,
--------------------
2002 2001
-------- --------
Cash flows from operating activities:
Net loss.............................................. $ (4,711) $ (1,769)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation........................................ 1,908 1,879
Amortization of intangibles......................... - 207
Gain on asset disposal.............................. (348) -
Changes in assets and liabilities:
(Increase) decrease in trade receivables.......... (8,800) 1,143
Decrease (increase) in inventories................ 17,000 (6,614)
Decrease in income taxes receivable............... 4,162 -
Decrease in prepaid expenses...................... 766 583
Decrease in book overdraft........................ (608) -
Decrease in accounts payable...................... (7,009) (1,785)
Increase in accrued expenses...................... 498 1,688
Decrease in deferred income taxes................. (459) -
-------- --------
Net cash provided by (used in) operating activities 2,399 (4,668)
-------- --------
Cash flows from investing activities:
Decrease in other assets.............................. 66 -
Proceeds from sale of assets.......................... 2,424 -
Purchases of property, plant and equipment............ (2,595) (3,478)
-------- --------
Net cash used in investing activities............... (105) (3,478)
-------- --------
Cash flows from financing activities:
Principal payments on long-term debt.................. (11) (10)
Proceeds from issuance of common stock................ 1,074 -
-------- --------
Net cash provided by (used in) financing activities 1,063 (10)
-------- --------
Net increase (decrease) in cash......................... 3,357 (8,156)
Cash, beginning of period............................... 22 16,696
-------- --------
Cash, end of period..................................... $ 3,379 $ 8,540
======== ========
See Notes to Consolidated Financial Statements.
5
NATIONAL R.V. HOLDINGS, INC.
PART I, ITEM 1
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTE 1 - GENERAL
In the opinion of National R.V. Holdings, Inc. (collectively, with its
subsidiaries National R.V., Inc. and Country Coach, Inc. referred to herein as
the "Company"), the accompanying unaudited consolidated financial statements
contain all adjustments, consisting only of normal recurring adjustments,
necessary for the fair presentation of the financial position, results of
operations and cash flows for all periods presented. Results for the interim
periods are not necessarily indicative of the results for an entire year and the
financial statements do not include all of the information and footnotes
required by generally accepted accounting principles. These financial statements
should be read in conjunction with the financial statements and notes thereto
contained in the Company's latest annual report on Form 10-K.
NOTE 2 - INVENTORIES
Inventories consist of the following (in thousands):
June 30, December 31,
2002 2001
-------- --------
(Unaudited)
Finished goods....................................... $ 17,701 $ 21,525
Work-in-process...................................... 29,309 32,415
Raw materials........................................ 17,247 18,176
Chassis.............................................. 4,128 13,269
-------- --------
$ 68,385 $ 85,385
======== ========
NOTE 3 - RECENT ACCOUNTING PRONOUNCEMENTS
In July 2001, the Financial Accounting Standards Board (FASB) issued SFAS
142, "Goodwill and Other Intangible Assets." SFAS 142, which changes the
accounting for goodwill from an amortization method to an impairment-only
approach, is effective for fiscal years beginning after December 15, 2001.
Beginning January 1, 2002, and in accordance with the Standard, the Company
discontinued goodwill amortization which results in the reduction of
approximately $413,000 of operating expenses per year. In addition, the Company
recently completed its initial testing for goodwill impairment and determined
there was no impairment of goodwill as of December 31, 2001. Goodwill impairment
testing will be performed annually as well as on an interim basis whenever there
is reason to believe goodwill impairment may exist.
If the Company had adopted SFAS 142 effective January 1, 2001, net (loss)
income, basic (loss) earnings per share and diluted (loss) earnings per share
would have been as follows:
6
NATIONAL R.V. HOLDINGS, INC.
PART I, ITEM 1
(Continued)
Three Months Ended Six Months Ended
June 30, June 30,
(in thousands) (in thousands)
------------------ -----------------
2002 2001 2002 2001
-------- -------- -------- --------
Reported net (loss) income.......... $ (1,396) $ 126 $ (4,711) $ (1,769)
Add back: goodwill amortization,
net of tax effect.................. - 64 - 127
-------- -------- -------- --------
Adjusted net (loss) income.......... $ (1,396) $ 190 $ (4,711) $ (1,642)
======== ======== ======== ========
Basic (loss) earnings per share:
Reported net (loss) earnings........ $ (0.14) $ 0.01 $ (0.48) $ (0.18)
Goodwill amortization............... - 0.01 - 0.01
-------- -------- -------- --------
Adjusted net (loss) earnings........ $ (0.14) $ 0.02 $ (0.48) $ (0.17)
======== ======== ======== ========
Diluted (loss) earnings per share:
Reported net (loss) earnings........ $ (0.14) $ 0.01 $ (0.48) $ (0.18)
Goodwill amortization............... - 0.01 - 0.01
-------- -------- -------- --------
Adjusted net (loss) earnings........ $ (0.14) $ 0.02 $ (0.48) $ (0.17)
======== ======== ======== ========
NOTE 4 - CREDIT FACILITY
As of June 30, 2002, the Company was in default with certain financial
covenants of its loan agreement with Bank of America National Trust and Savings
Association; however, no amounts were outstanding under this facility. As a
result, Bank of America may restrict the Company from borrowing any funds
available under the facility, and there can be no assurance that the Company
will be able to utilize the facility any longer, though the bank has not
indicated intent to assert such a restriction. The Company is currently in the
process of finalizing a new banking relationship and expects to have a new
borrowing facility in place in August 2002.
NOTE 5 - RECOURSE ON DEALER FINANCING
As is customary in the industry, the Company generally agrees with its
dealers' lenders to repurchase any unsold RVs if the dealers become insolvent
within the term of the curtailment period as defined in the repurchase
agreement. Curtailment periods typically expire within twelve to eighteen months
of the purchase of such RVs by the dealer. Although the total contingent
liability under these agreements approximates $95.2 million at June 30, 2002,
the risk of loss is spread over numerous dealers and lenders and is further
reduced by the resale value of the RVs that the Company would be required to
repurchase. Losses under these agreements have been negligible in the past and
management believes that any future losses under such agreements will not have a
significant effect on the consolidated financial position or results of
operations of the Company.
7
NATIONAL R.V. HOLDINGS, INC.
PART 1, ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Disclosure Regarding Forward Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
Investors are cautioned that forward-looking statements are inherently
uncertain. Actual performance and results may differ materially from that
projected or suggested herein due to certain risks and uncertainties including,
without limitation, the cyclical nature of the recreational vehicle industry;
seasonality and potential fluctuations in the Company's operating results; the
Company's dependence on chassis suppliers; potential liabilities under
repurchase agreements; competition; government regulation; warranty claims;
product liability; and dependence on certain dealers and concentration of
dealers in certain regions. Certain risks and uncertainties that could cause
actual results to differ materially from that projected or suggested are set
forth in the Company's filings with the Securities and Exchange Commission (SEC)
and the Company's public announcements, copies of which are available from the
SEC or from the Company upon request.
Liquidity and Capital Resources
At June 30, 2002, the Company had working capital of $62.9 million compared
to $65.5 million at December 31, 2001.
Net cash provided by operating activities was $2.4 million for the six
months ended June 30, 2002 compared to net cash used in operating activities of
$4.7 million for the comparable period last year. The change was primarily due
to a $17.0 million decrease in inventories and a $4.2 million decrease in income
taxes receivable, mostly offset by an $8.8 million increase in trade
receivables, a $7.0 million decrease in accounts payable and a $4.7 million net
loss for the period. The decrease in inventories reflects the Company's
continuing efforts to manage working capital. The increase in trade receivables
reflects the timing of the recent Great North American RV Rally, which occurred
in late June 2002. The decrease in accounts payable reflects the Company's
efforts to become more current with its suppliers.
Net cash used in investing activities was $0.1 million for the six months
ended June 30, 2002 compared to net cash used in investing activities of $3.5
million for the comparable period last year. The change was primarily due to the
sale of the Company's airplane in the first quarter of 2002 offset by lower
current year capital expenditures.
Net cash provided by financing activities was $1.1 million for the six
months ended June 30, 2002 compared to net cash used in financing activities of
$10,000 for the comparable period last year. The change was mainly due to the
proceeds from issuance of common stock through the exercise of employee stock
options during the second quarter of 2002.
The Company has a revolving credit facility of $9,977,356 with Bank of
America, N.A., of which $5,310,077 is reserved for a letter-of-credit, required
by the State of California, serving as security for the Company's self-insured
workers' compensation program. At June 30, 2002, no amounts were outstanding
under this facility; however, the Company was in default with certain financial
covenants of the loan agreement. As a result, Bank of America may restrict the
Company from borrowing any funds available under the facility, and there can be
no assurance that the Company will be able to utilize the facility any longer,
though the bank has not indicated intent to assert such a restriction. The
Company is finalizing a new banking relationship and expects to have a new
borrowing facility in place in August 2002.
8
R.V. HOLDINGS, INC.
PART 1, ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(Continued)
The Company believes the combination of internally generated funds and
working capital will be sufficient to meet the Company's planned capital and
operational requirements for at least the next 12 months.
Results of Operations
Net sales of $87.5 million for the quarter ended June 30, 2002 represent an
increase of $6.5 million or 8.0% from the same quarter last year, attributable
principally to price increases on the Company's 2003 model year motorhomes
resulting from significant modifications to those units. Wholesale unit
shipments of the Company's motorhomes built on diesel chassis decreased 17.3% to
229 units for the second quarter 2002, compared to 277 units for the second
quarter of the prior year. In addition to a slowing in retail demand for
National RV diesel products, this decline reflects the inclusion of sales from
the key winter Family Motor Coach Association show in the second quarter of 2001
versus in the first quarter for 2002 due to the timing of that show. Shipments
of the Company's gas motorhome products increased 17.5% to 323 units in the
current quarter from 275 units in last year's second quarter. Unit sales of the
Company's towable products increased 45.8% to 519 units in the second quarter
2002 from 356 units in the same period in 2001. For the six months ended June
30, 2002, net sales of $166.8 million represent an increase of $23.4 million, or
16.3% compared to the same period last year, reflecting an industry-wide rebound
as well as the Company's model year 2003 price increases in the second quarter
referred to above. Wholesale unit shipments of the Company's motorhomes built on
diesel chassis increased 9.5% to 554 units during the first six months, 48 more
than last year for the same period. Shipments of the Company's gas motorhome
products increased 6.6% to 520 units during the first six months, 32 more than
last year for the same period. Unit sales of the Company's towable products
increased 41.5% to 883 units for the first six months, from 624 units for the
same period last year.
Cost of goods sold for the quarter ended June 30, 2002 increased by $8.1
million or 10.8% from the comparable period last year. The increase was
primarily due to the increase in sales. Additionally for the second quarter
ended June 30, 2002, manufacturing inefficiencies stemming from operating at
reduced production rates was the most significant factor leading to a 2.4%
reduction in gross margin down to 4.4% compared to a 6.8% gross margin for the
same period last year. Price concessions on older Country Coach bus conversion
products also hampered gross margins in the quarter. Cost of goods sold for the
first six months of 2002 increased 20.3% to $163.2 million from $135.7 million
for the same period last year. The increase was mainly due to the increase in
sales with an additional factor being inefficiencies attributable to operating
at reduced production levels. Mainly as a result of manufacturing inefficiencies
stemming from operating at reduced production rates, the gross profit margin for
the six months decreased to 2.2% compared to 5.4% for the same period last year.
Selling expenses of $3.4 million for the quarter ended June 30, 2002 was an
increase of $0.2 million or 5.0% over the same period last year. For the six
months ended June 30, 2002, selling expenses increased to $6.8 million, an 8.8%
increase from the same period last year. Additionally, for the six months ended
June 30, 2002, selling expenses, as a percentage of net sales, decreased to
4.1%, from 4.4% for the same period last year due to higher sales over which to
spread the fixed selling expenses.
9
NATIONAL R.V. HOLDINGS, INC.
PART 1, ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(Continued)
General and administrative expenses for the quarter ended June 30, 2002
increased $0.5 million to $2.7 million, or 22.4% from the same period last year.
For the six months ended June 30, 2002, general and administrative expenses
remained essentially flat at $4.6 million, up $31 thousand or 0.7% from the same
period last year. Additionally, for the six months ended June 30, 2002, general
and administrative expenses, as a percentage of net sales, decreased to 2.7%,
from 3.2% for the same period last year due to personnel reductions and higher
sales over which to spread the fixed general and administrative expenses.
Excluding a $0.6 million legal settlement reached with four former National RV
sales employees during the quarter, general and administrative expenses were
only 2.4% of net sales for the six months ended June 30, 2002.
Due to the discontinuance of goodwill amortization as required by SFAS 142,
there will no longer be a $0.1 million quarterly amortization expense.
Other income for the quarter ended June 30, 2002 was $4,000 compared to
$0.2 million for the same period last year. For the six months ended June 30,
2002, other income decreased to $0.3 million, from $0.4 million for the same
period last year. The decrease was due to a decrease in interest income, mostly
offset by a gain recognized on the sale of the Company's airplane in the first
quarter of 2002.
The benefit for income taxes for the three and six months ended June 30,
2002 was $0.8 million and $2.8 million, respectively. The effective tax rate for
the six months ended June 30, 2002 was 37.0% compared to 38.8% for the same
period last year.
As a result, the Company's net loss for the three and six months ended June
30, 2002 was $1.4 million and $4.7 million, compared to net income of $0.1
million and net loss of $1.8 million, respectively, for the same periods last
year.
10
NATIONAL R.V. HOLDINGS, INC.
PART 1, ITEM 3 - Quantitative and Qualitative Disclosures about Market Risk
Information about market risks for the six months ended June 30, 2002 does
not differ materially from that discussed under Item 7A of the registrant's
Annual Report on Form 10-K for the year ended December 31, 2001.
11
NATIONAL R.V. HOLDINGS, INC.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company settled the previously reported age discrimination employment
case brought by four former sales representatives. As a result of the
settlement, the Company recorded a $600,000 charge in the second quarter of
2002.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On June 3, 2002, the Company held its 2002 Annual Meeting of Stockholders
(the "Annual Meeting"). The matters voted upon at the Annual Meeting and the
votes cast for such matters were as follows:
1. The Company's stockholders elected Bradley C. Albrechtsen and Wayne M.
Mertes as directors. Voting for the nominees for director was as
follows: Bradley C. Albrechtsen; 6,920,453 shares FOR and 796,136
shares WITHHELD; and Wayne M. Mertes; 7,548,289 shares FOR and 168,300
shares WITHHELD.
2. The Company's stockholders approved the appointment of
PricewaterhouseCoopers LLP as the Company's auditor for the current
fiscal year. For the appointment of PricewaterhouseCoopers LLP as the
Company's auditor, the vote was 7,700,674 shares FOR; 12,000 shares
AGAINST; and 3,915 shares WITHHELD.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
99.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
B. Form 8-K
A report was filed on June 25, 2002 announcing, under Item 5
thereof, the promotion of Michael Jacque to the newly created
post of Executive Vice President of Operations.
12
SIGNATURE
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.
NATIONAL R.V. HOLDINGS, INC.
----------------------------
(Registrant)
Date: August 7, 2002 By /s/ MARK D. ANDERSEN
Mark D. Andersen
Chief Financial Officer
(Principal Accounting and
Financial Officer)
13