FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
{X} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the quarterly period ended September 30, 2001
------------------
{ } 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: 0-22268
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
incorporation or organization) Identification No.)
3411 N. Perris Blvd.
Perris, California 92571
(909) 943-6007
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
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 November 13, 2001
----- --------------------------------
Common stock, par value 9,716,593
$.01 per share
NATIONAL R.V. HOLDINGS, INC.
INDEX
PAGE
PART 1 - FINANCIAL INFORMATION
Item 1. Consolidated Balance Sheets -
September 30, 2001 and December 31, 2000 3
Consolidated Statements of Income -
Three and Nine Months Ended September 30, 2001 and 2000 4
Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 2001 and 2000 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 6. Exhibits and Reports on Form 8-K 12
Signature 13
2
NATIONAL R.V. HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
September 30, December 31,
2001 2000
(Unaudited)
ASSETS
Current assets:
Cash $ 1,285 $ 16,696
Trade receivables, less allowance
for doubtful accounts ($202 and $321,
respectively) 14,280 15,109
Inventories 84,791 63,639
Deferred income taxes 6,035 6,035
Prepaid expenses 2,374 2,100
---------- ----------
Total current assets 108,765 103,579
Property, plant and equipment, net 45,573 44,460
Goodwill, net 6,229 6,539
Other 1,067 1,096
---------- ----------
$161,634 $155,674
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit $ 5,000 $ -
Current portion of long-term debt 20 20
Accounts payable 18,416 12,550
Accrued expenses 17,428 14,946
---------- ----------
Total current liabilities 40,864 27,516
Deferred income taxes 2,801 2,801
Long-term debt 48 64
---------- ----------
Total liabilities 43,713 30,381
---------- ----------
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,
10,648,493 and 10,595,536 issued,
respectively 106 106
Additional paid-in capital 48,299 47,800
Retained earnings 84,777 92,648
Less cost of treasury stock - 932,900 shares (15,261) (15,261)
---------- ----------
Total stockholders' equity 117,921 125,293
---------- ----------
$161,634 $155,674
========== ==========
See Notes to Consolidated Financial Statements.
3
NATIONAL R.V. HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
Three Months Nine Months
Ended September 30, Ended September 30,
2001 2000 2001 2000
Net sales $ 66,901 $ 83,962 $210,302 $268,528
Cost of goods sold 70,395 74,198 206,055 234,261
---------- ---------- ---------- ----------
Gross (loss) profit (3,494) 9,764 4,247 34,267
Selling expenses 3,989 3,669 10,263 10,176
General and administrative expenses 2,438 2,147 7,184 7,230
---------- ---------- ---------- ----------
Operating (loss) income (9,921) 3,948 (13,200) 16,861
Interest income and other expense, net (72) (148) (461) (606)
---------- ---------- ---------- ----------
(Loss) income before income taxes
and cumulative effect of change
in accounting principle (9,849) 4,096 (12,739) 17,467
(Benefit) provision for income taxes (3,745) 1,623 (4,866) 6,649
---------- ---------- ---------- ----------
(Loss) income before cumulative
effect of accounting change (6,104) 2,473 (7,872) 10,818
Cumulative effect on prior years of
change in accounting principle,
net of tax - - - (1,213)
---------- ---------- ---------- ----------
Net (loss) income $ (6,104) $ 2,473 $ (7,872) $ 9,605
========== ========== ========== ==========
Earnings per common share:
Basic:
(Loss) income before cumulative effect
of accounting change $ (0.63) $ 0.26 $ (0.81) $ 1.11
Cumulative effect of accounting change - - - (0.12)
---------- ---------- ---------- ----------
Net (loss) income $ (0.63) $ 0.26 $ (0.81) $ 0.98
========== ========== ========== ==========
Weighted average number of shares 9,688 9,585 9,671 9,770
========== ========== ========== ==========
Diluted:
(Loss) income before cumulative effect
of accounting change $ (0.63) $ 0.25 $ (0.81) $ 1.07
Cumulative effect of accounting change - - - (0.12)
---------- ---------- ---------- ----------
Net (loss) income $ (0.63) $ 0.25 $ (0.81) $ 0.95
========== ========== ========== ==========
Weighted average number of shares 9,688 9,847 9,671 10,146
========== ========== ========== ==========
See Notes to Consolidated Financial Statements.
4
NATIONAL R.V. HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months
Ended September 30,
2001 2000
Cash flows from operating activities:
Net (loss) income $ (7,872) $ 9,605
Adjustments to reconcile net (loss) income
to net cash provided by operating activities:
Depreciation and amortization 3,170 2,651
Loss on asset disposal - 28
Changes in assets and liabilities:
Decrease in trade receivables 829 2,236
(Increase) decrease in inventories (21,152) 3,483
Increase in prepaid expenses (274) (572)
Increase (decrease) in accounts payable 5,866 (851)
Increase in accrued expenses 2,482 1,438
Increase in net deferred income taxes - (746)
--------- ---------
Net cash (used in) provided by operating activities (16,951) 17,272
Cash flows from investing activities:
Decrease (increase) in other assets 29 (191)
Purchases of property, plant and equipment (3,974) (11,682)
--------- ---------
Net cash used in investing activities (3,945) (11,873)
Cash flows from financing activities:
Net advances under line of credit 5,000 -
Principal payments on long-term debt (16) (15)
Proceeds from issuance of common stock 500 32
Purchase of treasury stock - (15,261)
--------- ---------
Net cash provided by (used in) financing activities 5,484 (15,244)
--------- ---------
Net decrease in cash (15,411) (9,845)
Cash, beginning of period 16,696 20,301
--------- ---------
Cash, end of period $ 1,285 $ 10,456
========= =========
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.
Revenue Recognition
During 2000, sales were recorded by the Company when accepted by the
customer rather than at the time of shipment as in prior years. This change in
accounting principle was made to fully implement recent guidance issued by the
Securities and Exchange Commission and resulted in a cumulative effect of a
change in accounting principle in 2000 of $1,213,000.
NOTE 2 - INVENTORIES
Inventories consist of the following (in thousands):
September 30, Dec. 31,
2001 2000
---- ----
(Unaudited)
Finished goods $ 22,545 $ 15,989
Work-in-process 35,132 19,233
Raw materials 16,937 12,927
Chassis 10,177 15,490
-------- --------
$ 84,791 $ 63,639
======== ========
NOTE 3 - RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement requires that all derivative
instruments be recorded on the balance sheet at their fair value. Changes in the
fair value of derivatives will be recorded each period in current earnings or
other comprehensive income, depending on whether a derivative is designated as
part of a hedge transaction and, if it is, the type of hedge transaction. The
adoption of SFAS 133 in the first quarter of 2001 did not have any impact on the
Company's consolidated financial statements, as the Company holds no
derivatives.
In June 2001, the FASB issued SFAS 141, "Business Combinations." SFAS
141 requires that the purchase method of accounting be used for all business
combinations initiated after June 30, 2001. Use of the pooling-of-interest
method will be prohibited. The Company has evaluated this Standard and believes
that adoption will not have an impact on its consolidated financial statements.
6
In July 2001, The 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, will be effective for fiscal
years beginning after December 15, 2001. The Company has not determined the
impact that adoption of this Standard will have on its consolidated financial
statements.
NOTE 4 - AMENDMENT TO LOAN AGREEMENT
As of September 30, 2001, the Company was in default with certain
covenants of its loan agreement with Bank of America National Trust and Savings
Association. Bank of America waived the default as of September 30, 2001 and the
Company and Bank of America amended the loan agreement to provide for, among
other modifications, a reduction in the total facility from $15,000,000 to
$9,977,356 and an increase in the inherent rate by two percent per annum. The
credit facility with Bank of America expires on August 1, 2002.
NOTE 5 - SUBSEQUENT EVENT
On October 11, 2001, the Company cancelled 932,900 shares of its common
stock held as treasury stock. The cancellation of the treasury stock, totaling
$15,261,050, reduced common stock and additional paid-in capital, by $9,329 and
$15,251,721, respectively.
7
NATIONAL R.V. HOLDINGS, INC.
PART 1, ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management Changes
On September 26, 2001, Gary N. Siegler, the Company's Chairman of the Board
and Chief Executive Officer, resigned as an officer and director of the Company
to pursue other business opportunities. The Board of Directors appointed Bradley
C. Albrechtsen, the Company's former Chief Financial Officer, as its Chief
Executive Officer. In addition, the Company appointed Doy B. Henley, a current
director, as its Chairman of the Board and Mark D. Andersen, the former Senior
Vice President and Controller of the Company's Country Coach, Inc. subsidiary,
as its Chief Financial Officer. Robert B. Lee, the Company's President and Chief
Operating Officer and Wayne M. Mertes, the CEO of the Company's National R.V.,
Inc. subsidiary, retired from their executive positions. Messrs. Lee and Mertes
will continue to serve as consultants to, and directors of, the Company.
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 September 30, 2001, the Company had working capital of $67.9 million
compared to $76.1 million at December 31, 2000.
Net cash used in operating activities was $17.0 million for the nine
months ended September 30, 2001 compared to net cash provided by operating
activities of $17.3 million for the comparable period last year. The change was
due primarily to a $21.2 million increase in inventories at September 30, 2001,
compared to a $3.5 million decrease in inventories last year, and a net loss of
$7.9 million for the period compared to income of $10.4 million for last year.
Cash used in investing activities was $3.9 million for the nine months
ended September 30, 2001 compared to $11.9 million for the comparable period
last year. The change was due primarily to a decrease in expenditures on
property, plant and equipment in the first nine months of 2001.
Net cash provided by financing activities was $5.5 million for the nine
months ended September 30, 2001 compared to net cash used in financing
activities of $15.2 million for the comparable period last year. The difference
was due primarily to the Company borrowing $5.0 million under its line of credit
during the first nine months of 2001, and the Company using cash to repurchase
932,900 shares of its stock during the first nine months of 2000.
8
The Company believes the combination of internally generated funds and
existing capital, together with funds available under its credit facility, will
be sufficient to meet the Company's planned capital and operational requirements
for at least the next 24 months.
Results of Operations
Net sales of $66.9 million for the quarter ended September 30, 2001
represent a decrease of $17.1 million or 20.3% from the same quarter last year,
attributable to production problems related to the dramatic model year changes
implemented at the Company's National RV motorhomes division, in addition to an
industry-wide slowdown in recreational vehicle shipments. For the nine months
ended September 30, 2001, net sales of $210.3 million represent a decrease of
$58.2 million, or 21.7% compared to the same period last year, reflecting an
industry slowdown. The Company shipped 743 coaches on diesel chassis during the
first nine months, 278 less than last year for the same period. The unit
decrease was partially offset by an increase average price of diesel products of
10.5% to $183,300, resulting in a 19.6% decrease in net sales from diesel
products. The Company shipped 706 gas motor homes during the first nine months,
546 less than last year for the same period, a decrease of 43.6%. Unit sales of
the Company's towable products increased 175.0% to 990 units from 360 units for
the same period last year.
Cost of goods sold for the quarter ended September 30, 2001 decreased
by $3.8 million or 5.1% from the comparable period last year. The decrease was
due to the drop in sales offset by increases in costs due to National RV
motorhomes division production problems referred to above, National RV warranty
and recall expenses, inefficiencies attributable to operating at reduced
production levels, and continued sales discounting. As a result of these current
operating issues, the gross profit margin decreased to -5.2% for the current
period as compared to 11.6% for the same period last year. Cost of goods sold
for the first nine months of 2001 decreased 12.0% to $206.1 million from $234.3
million for the same period last year. The decrease was due to the drop in sales
partially offset by increases in costs as described above. As a result of these
current operating issues, the gross profit margin for the nine months decreased
to 2.0% compared to 12.8% for the same period last year.
Selling expenses for the three months ended September 30, 2001
increased to $4.0 million, an 8.7% increase from the same period last year. For
the nine months ended September 30, 2001, selling expenses increased to $10.3
million, a 0.9% increase from the same period last year. As a percentage of net
sales, selling expenses increased to 4.9%, from 3.8% for the same period last
year due to lower sales over which to spread the fixed selling expenses.
General and administrative expenses for the three months ended
September 30, 2001 increased to $2.4 million, a 13.6% increase from the same
period last year. For the nine months ended September 30, 2001, general and
administrative expenses decreased to $7.2 million, a 0.6% decrease from the same
period last year. As a percentage of net sales, general and administrative
expenses increased to 3.4%, from 2.7% for the same period last year due to lower
sales over which to spread the fixed general and administrative expenses.
Other income for the three months ended September 30, 2001 and
September 30, 2000 was $0.1 million. For the nine months ended September 30,
2001, other income decreased to $0.5 million, from $0.6 million for the same
period last year.
9
Benefit for income taxes for the three and nine months ended September
30, 2001 were $(3.7) million and $(4.9) million, respectively. The effective tax
rate for the nine months ended September 30, 2001 was 38.2% compared to 38.1%
for the same period last year.
As a result, net loss for the three and nine months ended September 30,
2001 was $(6.1) million and $(7.9) million, compared to net income of $2.5
million and $9.6 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 nine months ended September 30,
2001 does not differ materially from that discussed under Item 7A of the
registrant's Annual Report on Form 10-K for 2000.
11
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
10.1 Amendment No. 3 to Business Loan Agreement dated
November 1, 2001 between Bank of America, N.A. and the Company.
B. Form 8-K
None.
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: November 13, 2001 By /s/ MARK D. ANDERSEN
Mark D. Andersen
Chief Financial Officer
(Principal Accounting and
Finance Officer)
13