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Securities and Exchange Commission
Washington, DC 20549
FORM 10-K
(Mark One)
[ X ] Annual report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 [Fee Required]
For the fiscal year ended October 31, 1997 or
[ ] Transition report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934 [No Fee Required]
For the transition period from _________ to ___________
Commission file number 0-12619
Collins Industries, Inc.
(Exact name of registrant as specified in its charter)
Missouri
(State or other jurisdiction of incorporation)
43-0985160
(I.R.S. Employer Identification Number)
15 Compound Drive Hutchinson, Kansas 67502-4349
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code 316-663-5551
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None N/A
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $.10 per share
(Title of class)
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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the registrant's knowledge, in definitive
proxy of information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. (X)
The aggregate market value of voting stock held by non-affiliates of
the registrant was $28,588,014 as of January 19, 1998.
The number of shares of Common Stock outstanding on January 19, 1998 was
7,571,381.
Documents Incorporated by Reference
The following are the documents incorporated by reference and the part
of the Form 10-K into which the document is incorporated:
Document: Part of Form 10-K
Proxy Statement for Annual Meeting
of Shareholders on February 27, 1998 Part III
PART I
Item 1. BUSINESS
General Development of Business
Collins Industries, Inc. was founded in 1971 as a manufacturer of small
school buses and ambulances built from modified cargo vans. The
Company's initial product was the first "Type A" school bus, designed to
carry 16 to 20 passengers. Today the Company manufacturers specialty
vehicles and accessories for various basic service niches of the
transportation industry. The Company's products include ambulances,
small school buses, shuttle and mid-size commercial buses, terminal
trucks, and commercial bus chassis. From its inception, Collins' stated
goal has been to become the largest manufacturer of specialty vehicles in
the U.S. The Company has grown primarily through the internal
development of new products and the acquisition of complementary product
lines.
In the U.S., Collins is the largest manufacturer of ambulances, the
second largest manufacturer of terminal trucks and a leading manufacturer
of small school buses, shuttle and mid-size commercial buses and
commercial bus chassis. The Company sells its products under several well-
known trade names, including Wheeled Coach (ambulances), Collins Bus
(small school buses), World Trans (commercial buses), and Capacity
(terminal trucks).
Most Collins products are built to customer specifications from a wide
range of options offered by the Company. Collins sells to niche markets
which demand manufacturing processes too sophisticated for small job shop
assemblers, but is not the highly automated assembly line operations of
mass production vehicle manufacturers. The Company emphasizes specialty
engineering and product innovation. In the last few years, it has
introduced new products and product improvements, which include the
Moduvan ambulance, the first ambulance of its size with advanced
life-support system capability, the Dura-Ride suspension system, the
first frame-isolating suspension system for terminal trucks, and the
innovation of a larger seating capacity, Type A Super Bantam school bus
capable of carrying up to 24 passengers, the largest Type A in the
industry.
Description of Business
The Company principally manufactures and markets Specialty Vehicles.
Ambulances. The Company manufactures both modular and van-type
ambulances at its Hutchinson, Kansas and Orlando, Florida plants.
Modular ambulances are produced by attaching an all-aluminum, box-type,
patient compartment to either a dual rear-wheel cab chassis ("Type I")
ambulance or a dual rear-wheel, van-type, cutaway chassis ("Type III")
ambulance or to a single rear-wheel cutaway chassis ("Moduvan") ambulance.
A cutaway chassis consists of only the front portion of the driver's
compartment, engine, drive train, frame, axle and wheels. Van ("Type
II") ambulances are cargo vans modified to include a patient compartment
and a raised fiberglass roof. Type II ambulances are smaller and less
expensive than modular ambulances.
The Company also produces a limited number of medical support vans
designed to transport medical and life-support equipment. Medical
support vans are modified commercial vehicles which do not have a patient
compartment for advanced life support systems.
Buses. The Company manufacturers small school buses, commercial and
shuttle buses at its Hutchinson and South Hutchinson, Kansas facilities.
School Buses. The Company manufacturers small Type A school buses which
carry from 16 to 24 passengers. The Company built Type A school buses by
extensively modifying vendor-supplied cargo vans. The majority of Type A
school buses built by the Company are now produced by fabricating the
body and mounting it on a vendor-supplied, dual rear-wheel or single
rear-wheel, cutaway chassis. The Company was the first manufacturer to
produce a Type A school bus on this type of chassis, which permits
greater seating capacity than a van chassis. School buses are produced
in compliance with Federal, state and local laws regarding school
transportation vehicles.
Commercial and Shuttle Buses. The Company produces shuttle and transit
buses for car rental agencies, transit authorities, hotels and resorts,
retirement centers, nursing homes and similar users. These buses are
built to customer specifications and are designed to transport 14 to 30
passengers over short distances.
Collins offers commercial bus products in various price ranges. The
Diplomat is a steel body bus built on a vendor-supplied, cutaway chassis
that carries 17 to 25 passengers and targets a low-to mid-price range
market. The World Trans 3000, introduced in early 1993, is an aluminum
body bus built on the Company's rear-engine, rail-type chassis. This
product is designed for the medium duty segment of the transit and
shuttle markets.
Terminal Trucks. The Company produces two basic models of terminal trucks
at its Longview, Texas facility, the Trailer Jockey and the Yardmaster.
Terminal trucks are designed and built to withstand heavy-duty use by
moving trailers and containers at warehouses, rail yards, rail terminals
and shipping ports. Most terminal trucks manufactured by the Company are
built to customer specifications. The Company manufactures the entire
truck except for major drivetrain components which are purchased from
outside suppliers. The Dura-Ride suspension system, an increasingly
popular option on the Company's terminal trucks, was installed on over
half of the terminal trucks built by the Company during fiscal 1997.
Bus Chassis. The Company produces a rear-engine bus chassis for use by
the Company and for sale to other manufacturers. This chassis is
suitable for both commercial and large school buses. To date, the
Company has produced and sold limited quantities of these chassis. The
Company plans to continue manufacturing bus chassis suitable for its own
products and for sale to other manufacturers.
Manufacturing
Manufacturing consists of the assembly of component parts either
purchased from others or fabricated internally. With the exception of
chassis, chassis components and certain terminal truck components which
are purchased from outside suppliers, the Company fabricates the principal
components of its products. Collins' internal capabilities include CNC
punching and forming of sheet metal, metal stamping, tooling, molding of
fiberglass components, mechanical and electrical component assembly,
upholstry, painting and finishing and Computer-Aided-Design and
Manufacturing (CAD/CAM) systems.
Collins intends to continue to improve its manufacturing facilities from
time-to-time through the selective upgrading of equipment and the
mechanization or automation of appropriate portions of the manufacturing
process. Management believes the Company's manufacturing facilities are
in good condition and are adequate for the purposes for which they
currently are used. The capacity of the Company's current facilites,
particularly if operated on a multiple shift basis, is considered
adequate to meet current needs and anticipated sales volumes.
New Products
The Company is not presently engaged in activities which would require
a significant amount of expenditures or use of material amounts of assets
for development of products in the planning stage or otherwise for the
foreseeable future.
Suppliers
In order to ensure that it has a readily available supply of chassis for
ambulance and bus production, the Company has entered into consignment
agreements with General Motors Corporation ("GMC") and Ford Motor
Company ("Ford"). Under those agreements, chassis are kept at Company
production facilities at no cost to the Company other than chassis
storage costs. When an individual chassis is selected from the Company's
consignment pool for use in vehicle production, title to the chassis
passes to the Company and the Company becomes liable to the consignor for
the cost of the chassis. Chassis currently in the consignment pool are
supplied by Ford and GMC. While an interruption in supply from one
source may cause a temporary slowdown in production, the Company believes
that it could obtain adequate numbers of chassis from alternate sources of
supply.
The Company uses substantial amounts of steel in the production of its
terminal truck products and purchases certain other major components
(primarily engines, transmissions and axles). Collins also uses large
amounts of aluminum, steel, fiberglass and glass in the production of
ambulances and buses. There is substantial competition among suppliers
of such raw materials and components, and the Company does not believe
that a loss of a single source of supply would have a material adverse
effect on its business.
Patents, Trademarks and Licenses
The Company owns federal registrations for most of the trademarks which it
uses on its products. The Company also owns patents on its bus body
design, ambulance design, Dura-Ride air suspension system, ambulance
warning light system and air-activated bus door. The Company believes
that its patents are helpful, because they may force competitors to do
more extensive design work to produce a competitive product. The
Company believes that its production techniques and skills are as
important as product design, and, therefore, in management's opinion, any
lack of patent protection would not adversely affect the Company's
business.
Seasonality of Business
Historically a major portion of the Company's net income has been earned
in the second and third fiscal quarters ending April 30 and July 31,
respectively. The purchasing patterns of school districts are typically
strongest in the spring and summer months which accounts for typically
stronger sales of small school buses in the quarters ending April 30
and July 31. Generally, the Company's sales tend to be lower in the fall
and winter months due to the purchasing patterns of the Company's
customers in general and purchasing activities are normally lower near
the end of the calendar year.
Sales Terms
The Company produces the majority of its products on an order-only basis.
Most products are delivered on a cash basis. Products sold on a direct
basis (not through dealers) are sold on trade terms common to the
respective industry. Finished goods that are reflected on the financial
statements are generally sold units that are ready for customer delivery.
Sales to dealers have generally been financed through an unrelated third
party for the dealers, resulting in payment generally within days of the
sale.
Customer Concentration
The Company has no single customer whose loss would have a material
adverse effect on the company as a whole.
Sales Backlog
The sales backlog at October 31, 1997 was approximately $45.5 million.
This compares to $40.4 million at October 31, 1996. In the opinion of
management, the majority of this sales backlog will be shipped during the
coming fiscal year.
Governmental Sales
The Company has, and will continue to, pursue opportunities in government
sales as they occur. No material portion of the Company's business,
however, is subject to renegotiation of profits or termination of
contracts or subcontracts at the election of the government.
Marketing and Distribution
The Company, through its wholly owned subsidiaries, markets its products
throughout the U.S. and, to a limited extent, abroad through independent
dealers and distributors, Company-owned stores and the direct sales
efforts of Company personnel. Each of the Company's product groups is
responsible for its own marketing activities and maintains independent
relationships with dealers and distributors. Support is provided to
dealers and distributors in bidding specification writing and customer
service.
The Company regularly advertises in consumer and trade magazines and
other print media and actively participates in national, regional and
local trade shows. In addition, company representatives attend a number
of national conventions and regional meetings of important constituent
groups such as school boards and emergency medical groups.
Competition
The markets for most of the Company's product lines are very competitive,
and the Company currently has several direct competitors in most markets.
Some of these competitors may have greater relative resources. The
Company believes it can compete successfully (i) in the ambulance market
on the basis of the quality and price of its products, its design
engineering and product innovation capabilities and the strength of the
Wheeled Coach brand name, (ii) in the small school bus market on the
basis of its product price and quality and favorable recognition of its
Collins Bus brand name and (iii) in the commercial bus market on the
basis of its various product models, product quality, price and
distribution network.
In the terminal truck market, the Company competes primarily with one
larger domestic competitor, Ottawa Truck Corporation which is owned by
Sisu of Finland. Sisu has international distribution channels and is
owned by the government of Finland and may have greater relative
resources than the Company. The Company believes it can compete
successfully in this market on the basis of its Capacity brand name,
price, product quality and customer demand for its exclusive Dura-Ride
suspension system.
Research and Development Costs
Research and Development Expenses 1997 1996 1995
$162,002 $215,313 $261,747
This table cites the level of research and development costs the Company
incurred the past three fiscal years. It should be noted the Company
does significant research and development work on the production line
and, therefore, the major costs of new programs are recorded as cost of
sales and are expensed as prototypes.
Regulations
The Company is subject to various laws and regulations with respect to
employees' health and safety and the protection of the environment. In
addition, all of the Company's on-road vehicles must satisfy certain
standards applicable to such vehicles as established by the United States
Department of Transportation. Certain of its products must also satisfy
specifications established by other federal, state and local regulatory
agencies, primarily dealing with safety and performance standards. In
management's opinion, the Company and its products are in compliance in
all material respects with all applicable governmental regulations. A
substantial change in any such regulations could have a significant
impact on the business of the Company.
Employees
The Company employs approximately 900 persons full time, including
officers and administrative personnel. The Company has not experienced
any strikes or work stoppages due to labor problems and considers its
relations with its employees to be satisfactory.
Export Sales
The Company has no significant foreign or export sales.
Item 2. PROPERTIES
The following table sets forth certain information with respect to the
Company's manufacturing and office facilities. The Company owns all
properties listed below in fee simple, except as otherwise noted.
Approximate
Location Use Size (sq ft)
Hutchinson, Kansas (1) Corporate Headquarters 4,000
Hutchinson, Kansas (1),(2) Ambulance production; 300,000
Commercial Buses;
Wheelchair lifts and
accessories production;
Office space
Hutchinson, Kansas (1) Building presently leased 60,000
and available for future
production
South Hutchinson, Kansas (1), (3) Small school bus and 160,000
commercial bus production;
Office space
Orlando, Florida (1) Ambulance production; 229,000
Office space
Longview, Texas (1) Terminal truck production; 120,000
Chassis production;
Office space
Mansfield, Texas (1) Ambulance sales, service 25,000
and distribution center
(1) This property is pledged as collateral to secure payment of the
Company's debt obligations. See "Notes 2 and 3 to Consolidated
Financial Statements."
(2) Approximately 80 percent of this facility, together with related
machinery and equipment, is financed by industrial revenue bonds
in the original principal amount of $3,500,000 issued by the City
of Hutchinson under a lease purchase agreement providing for
rental payments sufficient to amortize the bonds in accordance
with their terms.
(3) This facility and certain related equipment are financed by
industrial revenue bonds in the original principal amount of
$1,750,000 issued by the City of South Hutchinson under a lease
purchase agreement similar to the one in effect for the Hutchinson
production facility.
The Company leases several facilities throughout the U.S. for the sale
and distribution of ambulances. Although the Company evaluates
opportunities to acquire additional properties at favorable prices as they
arise, it believes that its facilities are well maintained and will be
adequate to serve its needs in the foreseeable future. Several Company
facilities have room to expand in existing buildings and others have land
upon which additional buildings can be constructed.
Item 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings, other than ordinary
routine litigation incidental to the business, to which the Company
is a party or of which any of its property is subject.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company did not submit any matter to a vote of security holders
during the fourth quarter of the fiscal year ended October 31, 1997.
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
Collins Industries, Inc. common stock is quoted on the Nasdaq Stock
Market under the symbol COLL. The following table sets forth the high
and low sales prices per share of the common stock as reported by the
Nasdaq Stock Market. On October 31, 1997 there were approximately
650 shareholders of record of the Company's common stock.
FISCAL 1997
Quarter High Low Volume
(000s)
First 6 4-1/2 1,261
Second 5-1/4 4 547
Third 8-1/4 4-1/4 1,660
Fourth 8-7/8 6-1/2 997
FISCAL 1996
Quarter High Low Volume
(000s)
First 2-1/4 1-7/16 1,049
Second 3-7/8 1-9/16 2,561
Third 6 3-7/16 2,954
Fourth 6-1/2 4-7/16 1,392
During the period covered by this Report, the Company did not sell any
equity securities that were not registered under the Securities Act.
Item 6. SELECTED FINANCIAL DATA
Operating History
(In thousands except share and per-share data)
Fiscal years ended 1997 1996 1995 1994 1993
October 31,
Sales $157,522 $151,879 $140,725 $143,763 $146,992
Cost of sales 131,920 129,652 123,911 126,664 137,436
Gross profit 25,602 22,227 16,814 17,099 9,556
Selling, general and
administrative (including
research & development) 15,379 15,236 13,925 13,661 14,992
Income (loss) from operations 10,223 6,991 2,889 3,438 (5,436)
Other income (expenses):
Interest, net (1,642) (2,241) (2,783) (3,410) (3,311)
Other, net (Note A) 262 262 (27) (999) (3,220)
Income (loss) from continuing
operations before provision
(benefit) for income taxes and
extraordinary items 8,843 5,012 79 (971) (11,967)
Provision (benefit) for
income taxes 1,600 0 0 0 (749)
Income (loss) before
extraordinary items 7,243 5,012 79 (971) (11,218)
Extraordinary items 0 0 (420) 0 0
Net income (loss) $ 7,243 $ 5,012 $ (341) $ (971) $ (11,218)
Earnings (loss) per share:
Continuing operations $ .93 $ .66 $ .01 $ (.14) $ (1.59)
Extraordinary items 0 0 (.06) 0 0
Net income (loss) .93 .66 (.05) (.14) (1.59)
Dividends per share $ .075 $ 0 $ 0 $ 0 $ .0625
Weighted average shares
outstanding 7,806,373 7,621,403 7,240,926 7,106,082 7,071,097
Non-cash charges $ 1,782 $ 2,128 $ 3,040 $ 2,889 $ 3,117
Note A: Includes non-recurring expenses of $1,010,761 and $3,115,531 in
1994 and 1993, respectively, associated with the restatement of
the October 31, 1992 consolidated financial statements.
Financial Position
(In thousands except share and per-share data)
Fiscal years ended 1997 1996 1995 1994 1993
October 31,
Current assets $34,002 $32,640 $32,086 $37,733 $40,651
Current liabilities 18,959 18,436 18,670 23,769 25,376
Working capital 15,043 14,204 13,416 13,964 15,275
Total assets 47,163 45,744 46,881 54,794 59,309
Long-term debt and
capitalized leases
(less current maturities) 8,362 13,418 19,406 20,544 22,622
Shareholders' investment 19,842 13,891 8,805 8,994 9,811
Book value per share 2.69 1.91 1.21 1.26 1.38
Financial Comparisons
Gross profit margin 16.3% 14.6% 11.9% 11.9% 6.5%
Net profit margin 4.6% 3.3% NA NA NA
Selling, general and
administrative (including
R&D) as percent of sales 9.8% 10.0% 9.9% 9.5% 10.2%
Current ratio 1.8:1 1.8:1 1.7:1 1.6:1 1.6:1
Long-term debt and
capitalized leases to
shareholders' investment 0.4:1 1.0:1 2.2:1 2.3:1 2.3:1
Manufacturing space
(000s square feet) 898 898 978 978 978
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis provides information which
management believes is relevant to an assessment and understanding of the
Company's consolidated results of operations and financial condition. The
discussion should be read in conjunction with the consolidated financial
statements and notes thereto.
Results of Operations
Fiscal 1997 Compared to Fiscal 1996. Sales for fiscal 1997 increased
to $157.5 million compared to $151.9 million. The sales increase for
fiscal 1997 was principally due to improved sales of terminal truck
products. The sales increase of terminal trucks was principally due to
a sales contract with U.S. Postal Service.
At October 31,1997 the Company's consolidated sales backlog was $45.5
million compared to $40.4 million at October 31, 1996. The Company
believes a majority of its consolidated sales backlog will be shipped
in fiscal 1998.
Cost of sales for fiscal 1997 was 83.7% of sales compared to 85.4% of
sales in fiscal 1996. The principal reasons for this improvement
include: the $1.2 million gain from the sale of the Company's UVL
product line which was recorded as a reduction of cost of sales and
lower material costs associated with an improved sales mix in ambulance
products.
Selling, general and administrative expenses for fiscal 1997 were
$15.2 million or 9.6% of sales compared to $15.0 million or 9.9% of
sales in fiscal 1996. The overall dollar increase was principally due
to higher marketing and selling expenses associated with new sales
personnel and the addition of a corporate telemarketing center.
Interest expense for fiscal 1997 decreased $.6 million over fiscal 1996.
This decrease was principally due to reduced average borrowings during
fiscal 1997. The Company's base interest rate with its lead Bank will
decrease in fiscal 1998 by 1/2% (to prime + 1/2%) due to the Company's
meeting certain financial thresholds at October 31, 1997.
Income tax expense in fiscal 1997 was $1.6 million. Income tax expense
as a percentage of pretax income was 18% in fiscal 1997 and was less
than the Federal statutory rate principally due to the utilization of
net operating loss carryforwards and general business tax credits.
There was no provision for income taxes in fiscal 1996 due to the
Company's utilization of its net operating loss carryforwards from
prior years.
The Company's income before extraordinary items in fiscal 1997 increased
to $7.2 million ($.93 per share) compared to $5.0 million ($.66 per
share) in fiscal 1996. This increase was principally a result of profit
improvements from ambulance and terminal truck products, the gain from
the sale of the UVL product line and lower interest costs associated with
an overall reduction in interest-bearing debt. These increases were
partially offset by income taxes of $1.6 million in fiscal 1997.
Fiscal 1996 Compared to Fiscal 1995. Sales for fiscal 1996 increased
8% to $151.9 million compared to $140.7 million in fiscal 1995. The
sales increase for fiscal 1996 was principally due to improved sales
of buses and ambulances. Sales related to school bus products increased
in fiscal 1996, principally due to improved sales of units carrying
higher sales prices.
Cost of sales for fiscal 1996 was 85.4% of sales compared to 88.1% of
sales in fiscal 1995. The principal reasons for this improvement
include: lower material costs associated with the Company's consolid-
ation of certain purchasing operations; improved efficiencies in the
operations of the bus product lines and change in sales mix in
ambulance products to higher margin units.
Selling, general and administrative expenses for fiscal 1996 were $15.0
million or 9.9% of sales compared to $13.7 million or 9.7% of sales
in fiscal 1995. The overall dollar increase was principally higher
selling expenses and incentive payments and the impact of an unfavorable
jury verdict of certain litigation.
Interest expense for fiscal 1996 decreased $.5 million over fiscal 1995.
This decrease was principally due to reduced average borrowings during
fiscal 1996.
There was no provision for income taxes in fiscal 1996 due to the
Company's utilization of its net operating loss carryforwards from prior
years.
The Company's income before extraordinary items in fiscal 1996 was
$5.0 million ($.66 per share) compared to $.1 million ($.01 per share)
in fiscal 1995. Income before extraordinary items increased in fiscal
1996 principally as a result of improved sales of ambulance and bus
products, lower material costs gained through the consolidation of
certain purchasing operations and lower interest costs associated with
an overall reduction of interest-bearing debt.
In fiscal 1995, the Company incurred extraordinary net charges of
$.4 million associated with the early retirement of certain debt. No
extraordinary expenses were incurred in fiscal 1996.
Liquidity and Capital Resources
Historically, the Company has principally relied on internally generated
funds, supplier financing and bank borrowings to finance its operations
and capital expenditures. The Company's working capital requirements
vary from period to period depending on the production volume, the timing
of vehicle deliveries and the payment terms offered to its customers.
Cash provided by operations was $8.1 million in fiscal 1997 compared to
$5.8 million in fiscal 1996. Primary sources of the 1997 cash provided
by operations related to the Company's improved profit levels and
reductions in accounts receivable. The sources of cash from operations
were partially offset by increased income taxes paid ($1.6 million) and
increases in inventories ($2.1 million) and a prepaid expense
($.9 million).
Cash provided by operations was $5.8 million in fiscal 1996 compared to
$5.3 million in fiscal 1995. Primary sources of the 1996 cash provided
by operations related to the Company's improved profit levels. The
sources of cash from operations were partially offset by increases in
receivables and a reduction in accounts payable.
Cash provided by operations was $5.3 million in fiscal 1995. Primary
sources of the 1995 cash provided by operations related to the profitable
operations of the ambulance and terminal truck product lines and to
reductions in receivables, inventories and prepaid expenses.
Cash used in investing activities was $1.8 million in fiscal 1997
compared to $.3 million in fiscal 1996. In fiscal 1997 the principal
use of cash for investing activities related to the acquisition of
property and equipment. In fiscal 1996 the principal use of cash for
investing activities was for the acquisition of property and equipment
($.8 million) and certain other assets ($.2 million). In fiscal 1995
the principal use of cash for investing activities was for the
acquisition of property and equipment ($.6 million) and certain other
assets ($.3 million). (In fiscal 1996 and 1995 these uses of cash were
partially offset by the proceeds from the sale of vacant land
($.6 million).)
Cash used in financing activities was $6.4 million in fiscal 1997
compared to $6.0 million in fiscal 1996. In fiscal 1997 the Company
used cash to reduce its long-term borrowings by $5.1 million, to
purchase and retire common stock of $.8 million and to pay cash
dividends totalling $.6 million. Cash used in financing activities was
$6.0 million in fiscal 1996 compared to $8.0 million in fiscal 1995. In
fiscal 1996, the Company reduced its net long-term borrowings $6.0
million compared to a net reduction of $3.7 million in fiscal 1995.
The Company obtained a $33.05 million credit facility from NationsBank
in 1995. The proceeds of that financing were used to repay the Company's
chassis floorplan notes (short-term) and to pay off Guaranteed Senior
Notes of $17.5 million. Additionally, the Company reduced short-term
borrowings by $4.3 million in fiscal 1995.
The Company believes that its cash flows from operations and its credit
facility with NationsBank will be sufficient to satisfy its future
working capital, capital expenditure requirements and anticipated
dividends.
At October 31, 1997 there were no significant or unusual contractual
commitments or capital expenditure commitments. However, subsequent to
October 31, 1997 the Company entered into a capitalized lease agreement
with the City of South Hutchinson, Kansas for the issuance of $3.5
million of 1997 Industrial Revenue Bonds. The net proceeds will be used
to construct and equip an addition to the Company's bus manufacturing
facilities.
Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of" and Statement of Financial Accounting Standards (SFAS)
No. 123 "Accounting for Stock-Based Compensation" were effective for the
Company's 1997 fiscal year. The adoption of SFAS No. 121 and No. 123
did not have a material effect on the Company's financial position or
results of operations.
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings
per Share" is effective for the Company's 1998 fiscal year and the
Company has disclosed pro forma earnings per share amounts under
SFAS No. 128 for fiscal 1997, 1996 and 1995 in Note 1 to the Company's
consolidated financial statements.
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income" and Statement of Financial Accounting Standards
(SFAS) No. 131, "Disclosure about Segments of an Enterprise and Related
Information" are effective for the CompanyOs 1999 fiscal year and are
not expected to have a material effect on the Company's financial
position or results of operations.
IMPACT OF INFLATION AND FOREIGN CURRENCY EXCHANGE FLUCTUATIONS
The results of the Company's operations for the periods discussed have
not been significantly affected by inflation or foreign currency
fluctuations. Facility costs result primarily from interest and
principal and are not affected by inflation. Further, although the
Company often sells products on a fixed quote basis, the average time
between the receipt of an order and delivery is typically a few
months. Therefore, the Company generally is not adversely affected by
increases in the cost of raw materials and components. This could
change in situations in which the Company is producing against a
substantial backlog and may not be able to pass on higher costs to
customers. In addition, interest on the Company's debt is tied to the
prime rate and therefore may increase with inflation.
Collins makes substantially all sales to foreign customers in U.S.
dollars. Thus, notwithstanding fluctuation of foreign currency
exchange rates, the Company's profit margin for any purchase order is
not subject to change due to exchange rate fluctuations after the time
the order is placed.
YEAR 2000
The Company currently uses MAPICS software on an IBM AS400 platform. The
IBM operating system is year 2000 compatible. The MAPICS software will
require an upgrade to make it year 2000 compliant, which the Company
intends to complete prior to December 31, 1998. The Company does not
believe there will be any additional cost associated with the software
upgrade and additional implementation and training costs will not be
material to the Company's financial position or results of operations.
ITEM 8. Financial Statements and Supplementary Data
Collins Industries, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
For the years ended October 31,
1997 1996 1995
Sales $157,522,016 $151,878,862 $140,725,065
Cost of sales (Note 1) 131,919,939 129,651,654 123,910,694
Gross profit 25,602,077 22,227,208 16,814,371
Selling, general and
administrative expenses 15,216,609 15,020,673 13,663,037
Research and development expenses 162,002 215,313 261,747
Income from operations 10,223,466 6,991,222 2,889,587
Other income (expense):
Interest, net (1,642,573) (2,241,575) (2,783,198)
Other, net 262,323 262,420 (26,704)
(1,380,250) (1,979,155) (2,809,902)
Income before provision for
income taxes and
extraordinary items 8,843,216 5,012,067 79,685
Provision for income taxes (Note 3) 1,600,000 0 0
Income before extraordinary
items 7,243,216 5,012,067 79,685
Extraordinary items -
Early retirement of debt (Note 2) 0 0 (420,444)
Net income (loss) $ 7,243,216 $ 5,012,067 $ (340,759)
Earnings (loss) per share (Note 1):
Before extraordinary itmes $ .93 $ .66 $ .01
Extraordinary itmes 0 0 (.06)
Net income (loss) $ .93 $ .66 $ (.05)
Dividends per share $ .075 $ 0 $ 0
The accompanying notes are an integral part of these statements.
Collins Industries, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
October 31,
ASSETS 1997 1996
Current assets:
Cash (Note 1) $ 189,152 $ 255,405
Receivables, less allowance for
doubtful accounts of $39,000 in
1997 and $98,000 in 1996 (Note 2) 6,745,973 8,310,009
Inventories (Notes 1 & 2) 25,686,022 23,615,159
Prepaid expenses and other current assets 1,380,998 459,275
Total current assets 34,002,145 32,639,848
Property and equipment, at cost (Notes 1 & 2)
Land and improvements 2,341,943 2,332,717
Buildings and improvements 15,072,087 14,879,948
Machinery and equipment 11,817,691 14,661,124
Office furniture and fixtures 3,000,769 2,736,581
32,232,490 34,610,370
Less - accumulated depreciation 19,800,671 22,573,220
12,431,819 12,037,150
Other assets 729,166 1,067,454
$ 47,163,130 $ 45,744,452
LIABILITIES & SHAREHOLDERS' INVESTMENT
Current liabilities:
Current maturities of long-term debt and
capitalized leases (Note 2) $ 1,094,948 $ 1,125,842
Accounts payable 14,200,975 13,729,044
Accrued expenses 3,663,382 3,580,731
Total current liabilities 18,959,305 18,435,617
Long-term debt and
capitalized leases (Note 2) 8,361,887 13,418,010
Commitments and contingencies (Note 6)
Shareholders' investment (Notes 2, 4, & 5)
Preferred stock, $.10 par value
Authorized - 750,000 shares
Outstanding - No shares outstanding
Common stock, $.10 par value
Authorized - 17,000,000 shares
Issued - 7,385,681 shares in 1997;
7,274,110 in 1996 738,568 727,411
Capital stock, $.10 par value
Authorized - 3,000,000 shares
Outstanding - No shares outstanding
Paid-in capital 18,918,903 19,701,491
Retained earnings (deficit) 184,467 (6,505,077)
19,841,938 13,923,825
Less -Treasury stock, 6,000 shares,
at cost in 1996 0 (33,000)
Total shareholders' investment 19,841,938 13,890,825
$ 47,163,130 $ 45,744,452
The accompanying notes are an integral part of these balance sheets.
Collins Industries, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended October 31,
1997 1996 1995
Cash flow from operations:
Cash received from customers $159,086,052 $150,944,345 $141,425,892
Cash paid to suppliers and
employees (147,534,561) (142,919,078) (132,956,101)
Interest paid, net (1,759,087) (2,265,324) (3,209,818)
Income taxes paid (1,650,700) 0 0
Cash provided by operations 8,141,704 5,759,943 5,259,973
Cash flow from investing activities:
Capital expenditures (1,731,543) (862,889) (551,528)
Sale of property and equipment 16,500 668,038 643,667
Expenditures for other assets (97,995) (176,305) (237,519)
Other, net 0 57,863 (57,034)
Cash used in investing
activities (1,813,038) (313,293) (202,414)
Cash flow from financing activities:
Net reduction in short-term
borrowings 0 0 (4,301,111)
Principal payments of long-term
debt and capitalized leases (5,087,017) (6,019,948) (19,783,293)
Addition to long-term debt 0 0 16,055,400
Purchase of common stock and
other capital transactions (754,230) (14,250) 0
Payment of dividends (553,672) 0 0
Cash used in financing
activities (6,394,919) (6,034,198) (8,029,004)
Net decrease in cash (66,253) (587,548) (2,971,445)
Cash at beginning of year 255,405 842,953 3,814,398
Cash at end of year $ 189,152 $ 255,405 $ 842,953
Reconciliation of net income (loss)
to net cash provided by operations:
Net income (loss) $ 7,243,216 $ 5,012,067 $ (340,759)
Depreciation and amortization 1,781,740 2,019,938 2,513,541
Common stock issued for benefit
of employees 0 108,170 106,365
Decrease (increase) in
receivables, net 1,564,036 (934,517) 700,827
Decrease (increase) in
inventories (2,070,863) (148,432) 1,614,442
Decrease (increase) in
prepaid expenses (921,723) (58,522) 329,517
Increase (decrease) in
accounts payable 471,931 (425,847) 276,782
Increase (decrease) in
accrued expenses 82,651 223,521 (261,519)
Gain on sale of property
and equipment (9,284) (36,435) (99,667)
Loss on early extinguishment
of debt 0 0 420,444
Cash provided by operations $ 8,141,704 $ 5,759,943 $ 5,259,973
The accompanying notes are an integral part of these statements.
Collins Industries, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT
For the years ended October 31,
Common Stock Paid-In
Shares Amount Capital
Balance October 31, 1994 7,137,348 713,735 19,457,056
Stock issued under various
discretionary arrangements (Note 4) 110,000 11,000 9,000
Stock issued to Tax Deferred
Savings Plan and Trust (Note 5) 39,539 3,954 82,410
Amortization of deferred
compensation 0 0 45,139
Net loss 0 0 0
Balance October 31, 1995 7,286,887 728,689 19,593,605
Stock issued (rescinded)
under various discretionary
arrangements (Note 4) (54,500) (5,450) 18,451
Stock issued to Tax Deferred
Savings Plan and Trust (Note 5) 31,723 3,172 71,685
Stock issued under Stock
Option Plans (Note 4) 10,000 1,000 17,750
Net income 0 0 0
Purchase of treasury stock 0 0 0
Balance October 31, 1996 7,274,110 727,411 19,701,491
Stock issued under Stock
Option Plans (Note 4) 275,196 27,520 (86,097)
Amortization of deferred
compensation 0 0 15,799
Net income 0 0 0
Cash dividends paid 0 0 0
Purchase of treasury stock 0 0 0
Retirement of treasury stock (163,625) (16,363) (934,825)
Tax benefit from exercise of
stock options 0 0 222,535
Balance October 31,1997 7,385,681 $738,568 $18,918,903
Collins Industries, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT (CON'T.)
For the years ended October 31,
Retained
Earnings Treasury Stock
(Deficit) Shares Amount
Balance at October 31, 1994 (11,176,385) 0 0
Stock issued under various
discretionary arranements (Note 4) 0 0 0
Stock issued to Tax Deferred
Savings Plan and Trust (Note 5) 0 0 0
Amortization of deferred
compensation 0 0 0
Net loss (340,759) 0 0
Balance October 31, 1995 (11,517,144) 0 0
Stock issued (rescinded)
under various discretionary
arrangements (Note 4) 0 0 0
Stock issued to Tax Deferred
Savings Plan and Trust (Note 5) 0 0 0
Stock issued under Stock
Option Plans (Note 4) 0 0 0
Net income 5,012,067 0 0
Purchase of treasury stock 0 6,000 (33,000)
Balance October 31, 1996 (6,505,077) 6,000 (33,000)
Stock issued under Stock
Option Plans (Note 4) 0 0 0
Amortization of deferred
compensation 0 0 0
Net income 7,243,216 0 0
Cash dividends paid (553,672) 0 0
Purchase of treasury stock 0 157,625 (918,188)
Retirement of treasury stock 0 (163,625) 951,188
Tax benefit from exercise of
stock options 0 0 0
Balance October 31, 1997 $ 184,467 0 $ 0
The accompanying notes are an integral part of these statements.
Collins Industries, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the three years ended October 31, 1997
(1) Summary of Significant Accounting Policies
(a) Consolidation and Operations - The consolidated financial statements
include the accounts of Collins Industries, Inc. (the Company) and
its wholly owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated in consolidation
The Company primarily operates in the Specialty Vehicle Manufacturing
segment and related vehicle accessories. Manufacturing activies are
carried on solely in the United States. However, the Company does market
its products in other countries. Revenues derived from export sales to
unaffiliated customers were less than 10% of consolidated sales in fiscal
1997, 1996 and 1995.
(b) Cash and cash management - Cash includes checking accounts and funds
invested in overnight and other short-term, interest-bearing accounts.
The Company maintains controlled disbursement accounts with its lead bank
under an arrangement whereby all cash receipts and checks are centralized
and presented to the bank daily. All deposits are applied directly
against the Company's revolving credit line and all checks presented for
payment in the controlled disbursement accounts are funded through borrow-
ings under the Company's revolving credit facility. At October 31, 1997
and 1996 accounts payable included outstanding checks drawn on controlled
disbursement accounts of $2,082,355 and $1,698,208, respectively.
(c) Inventories - Inventories are stated at the lower of cost
(first-in, first-out) or market. Major classes of inventories which
include material, labor, and manufacturing overhead required in
production of Company products consisted of the following as of
October 31, 1997 and 1996:
1997 1996
Chassis $ 7,675,115 $ 6,466,570
Raw materials & components 8,673,308 8,867,477
Work-in-process 4,173,173 3,061,276
Finished goods 5,164,426 5,219,836
$25,686,022 $23,615,159
(d) Depreciation and Maintenance - Depreciation is provided using the
straight-line method for financial reporting purposes and accelerated
methods for income tax purposes. The estimated useful lives of property
are as follows:
Land improvements 10 to 20 years
Buildings and improvements 10 to 30 years
Machinery and equipment 3 to 15 years
Office furniture and fixtures 3 to 10 years
Maintenance and repairs are charged to expense as incurred. The cost of
additions and betterments are capitalized. The cost and related
depreciation of property retired or sold are removed from the applicable
accounts and any gain or loss is taken into income.
(e) Revenue Recognition - The Company records vehicle sales at the
earlier of completion of the vehicle and receipt of full payment or
shipment or delivery to the customer as specified by the customer
purchase order. Customer deposits for partial payment of vehicles are
deferred and treated as current liabilities until the vehicle is
completed and recognized as revenue.
(f) Earnings Per Share - The computation of earnings per share is based
on the weighted average number of outstanding common shares during the
period plus, when their effect is dilutive, common stock equivalents
consisting of stock options.
The weighted average number of shares used to calculate earnings per
share was 7,806,373 in 1997, 7,621,403 in 1996 and 7,240,926 in 1995.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings
per Share." The new standard simplifies the computation of earnings
per share (EPS) and increases the comparability to international
standards. Under SFAS No. 128 primary EPS is replaced by "Basic" EPS,
which excludes dilution and is computed by dividing income available to
common shareholders by the weighted-average number of common shares
outstanding for the period. "Diluted" EPS, which is computed similarly
to fully diluted EPS, reflects the potential dilution that could occur
if securities or other contracts to issue common stock were exercised
or converted into common stock.
SFAS No. 128 is effective for periods ending after December 15, 1997 and
does not allow for early adoption. Upon adoption, all prior-period EPS
information (including interim EPS) is required to be restated. Pro
forma EPS, under SFAS No. 128 for each of the three years ended
October 31, 1997 is as follows:
1997 1996 1995
Basic EPS $ .99 $ .69 $(.05)
Diluted EPS $ .93 $ .65 $(.05)
(g) Cost of Sales - Cost of sales for the year ended October 31, 1997
has been reduced by the $1.2 million gain from the sale of the Company's
UVL" product line which was completed in May, 1997.
(h) Reclassification - Certain amounts in the prior year financial
statements have been reclassified to conform with the 1997 presentation.
(2) Long-term Debt and Capitalized Leases
Long-term debt and capitalized leases at October 31, 1997 and 1996
consist of the following:
1997 1996
Bank credit facility:
Revolving credit borrowings $4,780,277 $ 6,360,948
Term Loan A 3,474,167 5,321,667
10.75%, Term loan from
insurance company 662,500 788,342
Capitalized leases:
City of Hutchinson, Kansas,
8.25% to 8.5%, due in 1998 164,891 430,441
City of South Hutchinson,
Kansas, 11%. Annual
principal and sinking fund
payments are approximately
$200,000 in 1998 and
$175,000 in 1999 375,000 540,160
8.75%, subordinated debentures 0 1,102,294
9,456,835 14,543,852
Less - current maturities 1,094,948 1,125,842
$8,361,887 $13,418,010
The Company has a Loan Agreement with NationsBank of Georgia, N.A.,
Atlanta, Georgia (the "Bank") for a revolving credit facility of $25.0
million and a long-term credit facility of $8.05 million.
The credit facility is collateralized by receivables, inventories,
equipment and certain real property. Under the terms of the Agreement,
the Company is required to maintain certain financial ratios and other
financial conditions. The Agreement also prohibits the Company from
incurring certain additional indebtedness, limits certain investments,
advances or loans and restricts substantial asset sales, capital
expenditures and cash dividends. At October 31, 1997 and 1996 the
Company was in compliance with all loan covenants.
The revolving credit facility requires payment of interest (only) at 1%
over the Bank's prime rate which was 8.50% at October 31, 1997. The
revolving credit facility also provides for a maximum of $3.0 million in
letters of credit, of which $1.5 million was outstanding at October 31,
1997. The total amount of unused revolving credit available to the
Company at October 31, 1997 was $9.1 million.
The long-term facility includes a $6.2 million term loan which is
payable in monthly installments of $49,167 plus interest at 1% over
the Bank's prime rate. Term Loan A matures upon the expiration of the
Agreement in November, 1998.
On September 30, 1991, a $1,250,000 10-year loan with a fixed interest
rate of 10.75% was obtained from an insurance company to refinance
existing manufacturing facilities. The note matures in 2001 and is
secured by the facilities which it finances. Interest and principal are
payable in equal monthly installments of $17,042. At October 31, 1997,
the facilities had a net book value of $1,209,000.
Certain of the Company's manufacturing facilities were financed from the
proceeds of industrial revenue bonds. Lease purchase agreements with
the respective cities provide that the Company may purchase the
manufacturing facilities at any time during the lease terms by paying
the outstanding principal amount of the bonds plus a nominal amount.
In fiscal 1996, the Company deposited approximately $1,023,000 in cash
and U.S. Government securities into an irrevocable trust to complete an
in-substance defeasance of the Company's 1989 Industrial Revenue Bonds
with the City of Newton, Kansas. The transaction did not result in any
material gain or loss. At October 31, 1997 the principal balance of the
defeased debt was approximately $805,000.
At October 31, 1997, the net book value of manufacturing facilities
subject to these lease purchase agreements was approximately $2,306,000.
In May, 1997, the Company retired at par value $1,102,294 in 8.75%
subordinated debentures which were due in 2000.
The extraordinary items of $420,444 ($.06 per share) for the year ended
October 31, 1995 resulted from the retirement of certain subordinated
debentures prior to their maturity.
The carrying amount of the Company's long-term obligations does not
differ materially from fair value based on current market rates
available to the Company.
The aggregate maturities of capitalized leases and long-term debt for
the years subsequent to October 31, 1997 are as follows:
1998 $1,094,948
1999 7,995,321
2000 173,485
2001 193,081
(3) Income Taxes
The provision for income taxes for the year ended October 31, 1997
includes current income tax expense of $1,954,000 and deferred income
tax benefits of $354,000.
There was no current or deferred tax expense for the years ended
October 31, 1996 and 1995. The Company utilized net operating loss
carryforwards in 1997, 1996 and 1995. The benefits of temporary
differences were not recorded prior to 1997.
The deferred tax consequences of temporary differences in reporting
items for financial statement and income tax purposes were recognized
in 1997. Realization of the future tax benefits related to the
deferred tax assets is dependent on many factors, including the
Company's ability to generate taxable income within the net operating
loss carryforward period. The income tax effect of temporary
differences comprising the deferred tax assets and deferred tax
liabilities on the accompanying consolidated balance sheets is a result
of the following:
1997 1996
Deferred tax assets:
Self-insurance reserves $ 106,000 $ 292,000
Vacation 153,000 158,000
Warranty 88,000 130,000
Doubtful accounts 15,000 38,000
Inventories 349,000 212,000
Subordinated debentures 0 420,000
Amortization 189,000 74,000
Revenue recognition 80,000 121,000
Federal tax operating loss
and general tax
credit carryforwards 0 1,233,000
Other 58,000 48,000
1,038,000 2,726,000
Deferred tax liabilities:
Depreciation (684,000) (708,000)
Valuation allowance 0 (2,018,000)
Net deferred tax assets $ 354,000 $ 0
A reconciliation between the statutory federal income tax rate (34%) and
the effective rate of income tax expense for each of the three years
during the period ended October 31, 1997 follows
1997 1996 1995
Statutory federal income
tax rate 34% 34% (34%)
Increase (decrease) in taxes
resulting from:
State tax, net of federal
benefit 4 4 0
Increase in (utilization) of
net operating loss
carryforwards (14) (38) 34
Decrease in tax asset
valuation allowance (9) 0 0
Other 3 0 0
Effective tax rate 18% 0% 0%
(4) Capital Stock
Common Stock - During fiscal 1996 and 1995, the Company awarded 20,500
and 110,000 shares, respectively, of unregistered common stock to senior
management which was treated as compensation. During fiscal 1996,
75,000 shares awarded in fiscal 1995 were rescinded.
Warrants which were issued in connection with the 10.5% subordinated
debentures (retired in fiscal 1992) are exercisable until February 28,
1998. There are 479,999 warrants outstanding and each warrant may be
used to purchase 1.25 shares of common stock. The exercise price of
$9.75 per warrant will be payable in cash. The warrants are redeemable
by the Company at $3.00 per warrant at any time if the closing price for
the Company's common stock has been at least 150% of the then prevailing
exercise price of the warrants for 20 of 30 consecutive trading days.
Preferred Stock - On March 28, 1995 the Company's Board of Directors
adopted a stockholders rights plan (Plan) and declared a dividend
distribution of one right (Right) for each outstanding share of common
stock to stockholders of record on April 20, 1995. Under the terms of
the Plan each Right entitles the holder to purchase one one-hundredth of
a share of Series A Participating Preferred Stock (Unit) at an exercise
price of $7.44 per Unit. The Rights are exercisable a specified number
of days following (i) the acquisition by a person or group of persons of
20% or more of the Company's common stock or (ii) the commencement of a
tender offer or an exchange offer for 20% or more of the Company's
common stock or (iii) when a majority of the Company's unaffiliated
directors (as defined) declares that a person is deemed to be an adverse
person (as defined) upon determination that such adverse person has
become the beneficial owner of at least 10% of the Company's common
stock. The Company has authorized and reserved 750,000 shares of
preferred stock, $.10 par value, for issuance upon the exercise of the
Rights. The Company may redeem the Rights in whole, but not in part, at
a price of $.01 per Right in accordance with the provisions of the plan.
Rights expire on April 1, 2005 unless redeemed by the Company.
Stock-Based Compensation Plans - The Company has two shareholder-approved
stock plans, the 1997 Omnibus Incentive Plan (the "1997 Plan") and 1995
Stock Option Plan (the "1995 Plan"). Under the 1997 Plan, directors,
officers and key employees may be granted stock options and other
stock-based awards. A total of 2,000,000 shares may be granted under
the 1997 Plan. At October 31, 1997, options for 502,500 shares were
outstanding under the 1997 Plan.
Under the 1995 Plan, a total of 1,000,000 shares of the Company's common
stock were available for grant to officers, directors and key employees.
As of October 31, 1997, all of these shares had been granted and options
for 569,400 shares were outstanding under the 1995 Plan.
Under both plans, the exercise price of all options granted through
October 31, 1997 equaled the stock's market price on the date of grant
and fully vest six months after the date of grant. The expiration dates
of the options range from 5 to 10 years. Options outstanding at
October 31, 1997 had a weighted average contractual life of eight years,
five months and exercise prices ranged from $1.75 to $7.56.
A summary of the Company's two stock option plans at October 31, 1997,
1996 and 1995 and changes during the years then ended are presented in
the table following:
1997 1996 1995
Per Per Per
Shares Share (a) Shares Share (a) Shares Share (a)
Outstanding
at beginning
of year 814,500 $1.89 745,000 $1.80 600,000 $1.77
Granted 677,300 4.55 147,000 2.27 180,000 1.92
Exercised (411,400) 1.84 (10,000) 1.88 0 0
Forfeited (8,000) 4.81 (67,500) 1.86 (35,000) 1.75
Outstanding
at end of
year 1,072,400 $3.57 814,500 $1.89 745,000 $1.80
Exercisable
at end of
year 1,069,900 $3.56 797,000 $1.82 740,000 $1.80
Weighted
average
fair value
of options $1.50 $.81 $.78
(a) Weighted average exercise price per share.
The fair value of each option grant is estimated using the Black-Scholes
option pricing model with the following assumptions used for grants in
1997, 1996 and 1995 respectively: risk free interest rate of 6.76% for
the 1997 Plan options and a range from 5.36% to 7.37% for the 1995 Plan
options; expected dividend yield of 1.5%; expected life of four years;
and expected volatility of 50.5%.
The Company applies Accounting Principles Board Opinion No. 25,
accounting for Stock Issued to Employees, in accounting for its Plans.
Accordingly, no compensation expense has been recognized for its
stock-based compensation plans other than for restricted stock awards,
which was not significant.
Had compensation cost for the Company's stock options been determined
consistent with the methodology prescribed under FASB Statement No. 123,
Accounting for Stock-Based Compensation, the CompanyOs net income (loss)
and income (loss) per share would have been reduced to the following
pro forma amounts:
1997 1996 1995
Net income (loss)
As reported $7,243,216 $5,012,067 $(340,759)
Pro forma 6,993,318 4,940,057 (386,609)
Earnings (loss)
per share
As reported $.93 $.66 $(.05)
Pro forma .90 .65 (.05)
Because the FASB Statement No. 123 method of accounting has not been
applied to options granted prior to January 1, 1995, the resulting pro
forma compensation cost may not be representative of that to be expected
in future years.
(5) Tax Deferred Savings Plan and Trust
In 1985 the Company made available to all eligible employees the
opportunity to participate in the Company's Tax Deferred Savings Plan
and Trust. The Company provides a 50% matching contribution in the
form of unregistered common stock of the Company on the eligible amount
invested by participants in the plan to purchase common stock of the
Company. The Company's contribution to this plan was $71,130 in 1997,
$74,858 in 1996 and $86,365 in 1995. This plan held 405,325 shares of
the Company's common stock at October 31, 1997 and 458,588 shares at
October 31, 1996.
(6) Commitments and Contingencies
(a) General - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
(b) Repurchase Agreements - It is customary practice for companies in
the specialty vehicle industry to enter into repurchase agreements with
financing institutions to provide floor plan financing for dealers.
Generally, these agreements provide for repurchase of products from the
financing institution at the original invoice price in the event of
dealer default.
Under these agreements, the Company's repurchase obligation is
limited to vehicles which are in new condition and as to which the
dealer still holds title. At October 31, 1997, the Company had
repurchase agreements covering units with an aggregate invoice cost of
approximately $814,000.
The risk of loss under the agreements is limited to the risk that market
prices for these products may decline between the time of delivery to
the dealer and time of repurchase by the Company. The risk is spread
over numerous dealers and the Company has not incurred significant
losses under these agreements. The Company also has repurchase
agreements for a limited number of used vehicles. In the opinion of
management, any future losses under these agreements will not have a
material adverse effect on the Company's financial position or results
of operations.
(c) Letters of Credit - The Company has outstanding letters of credit
as more fully described in Note 2.
(d) Operating Leases - The Company has operating leases principally for
certain vehicles and equipment. Future lease payments required under
these operating leases are not material.
Operating lease expense was $184,813 in 1997, $222,542 in 1996
and $167,178 in 1995.
(e) Litigation - At October 31, 1997 the Company has litigation pending
which arose in the ordinary course of business. Litigation is subject
to many uncertainties and the outcome of the individual matters is not
presently determinable. It is management's opinion that this litigation
will not result in liabilities that would have a material adverse effect
on the Company's financial position or results of operations.
(f) Self-insurance Reserves - The Company is self-insured for workers
compensation, health insurance, general liability and product liability
claims, subject to specific retention and reinsurance levels.
(g) Chassis Contingent Liabilities - The Company obtains certain vehicle
chassis from two automotive manufacturers under agreements that do not
transfer the vehicle's certificate of origin to the Company and,
accordingly, the Company accounts for the chassis as consigned inventory.
Chassis are typically converted and delivered to customers within 90
days.
(7) Subsequent Event
In November 1997, the Company entered into a capitalized lease agreement
with the City of South Hutchinson, Kansas for the issuance of $3.5
million of 1997 Industrial Revenue Bonds. The Bonds will bear interest
at annual rates ranging from 4.75% to 5.80% and will mature serially
over a period of ten years. The Bonds will be callable at par on
February 1, 2003. The net proceeds will be used to construct and equip
an addition to the Company's bus manufacturing facilities.
Report of Independent Public Accountants
To the Board of Directors and
Shareholders of Collins Industries, Inc.
We have audited the accompanying consolidated balance sheets of Collins
Industries, Inc. (a Missouri corporation) and Subsidiaries as of
October 31, 1997 and 1996, and the related consolidated statements of
income, shareholders' investment and cash flows for each of the three
years in the period ended October 31, 1997. These financial statements
are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Collins
Industries, Inc. and Subsidiaries as of October 31, 1997 and 1996, and
the results of their operations and their cash flows for each of the
three years in the period ended October 31, 1997, in conformity with
generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in Part IV,
Item 14(a)(2) is the responsibility of the Company's management and is
presented for purposes of complying with Securities and Exchange
Commission's rules and is not part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied in
the audit of the basic financial statements and, in our opinion, fairly
states in all material respects the financial data required to be set
forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Kansas City, Missouri
November 25, 1997
Item 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to Directors and Executive Officers is
contained in the section entitled "Management" in the Proxy Statement
for the Annual Meeting of Shareholders to be held February 27, 1998,
and is incorporated herein by reference.
Item 11. EXECUTIVE COMPENSATIONS
Information with respect to executive compensation is contained in the
section entitled "Executive Compensation" in the Company's Proxy
Statement for the Annual Meeting of Shareholders to be held on
February 27, 1998, and is incorporated herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Information with respect to security ownership of certain beneficial
owners and management is contained in the section entitled "Security
Ownership of Certain Beneficial Owners and Management" in the Company's
Proxy Statement for the Annual Meeting of Shareholders to be held on
February 27, 1998.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None
PART IV
Item 14. EXHIBITS FINANCIAL STATEMENT SCHEDULES, REPORTS
ON FORM 8-K
(a) The following documents are filed as a part of this
Report:
(1) Financial Statements:
All financial statements and notes thereto as set
forth under Item 8 of this Report on Form 10-K:
Report of Independent Public Accountants
Consolidated Statements of Income for
the Three Years Ended October 31, 1997
Consolidated Statements of Shareholders' Investments
for Three Years Ended October 31, 1997
Consolidated Statements of Cash Flows for
the Three Years Ended October 31, 1997
Consolidated Balance Sheets--October 31, 1997
and 1996
(2) Financial Statement Schedules:
Schedule II--Valuation and Qualifying Accounts
Schedules other than those referred to above have
been omitted as not applicable or not required
under the instructions contained in Regulation S-X
or the information is included in the financial
statements or notes thereto.
(3) Exhibits:
Exhibit Number Document
3.1 - Certificate of Incorporation of Registrant,
as amended (included as Exhibit 3.1 of the
Company's Amendment No. 2 to Form S-1, No. 2-93247
and incorporated herein by reference).
3.2 - Amendment to Certificate of Incorporation of
Registrant (included as Exhibit 3.3 of the
Company's Amendment No. 1 to Form S-1,
No. 2-93247 and incorporated herein by reference).
3.3 - Amendment to Certificate of Incorporation of
Registrant (included as Exhibit 3.3(c) of the
Company's Amendment No. 1 to Form S-1, No 33-48323
and incorporated herein by reference).
3.4 - By-Laws of the Registrant, as amended (included as
Exhibit 3.4 of the Company's S-1, No. 33-48323 and
incorporated herein by reference).
4.1 - Indenture, dated as of November 1, 1984, between
the Company and Allied Bank of Texas, as Trustee
(included as Exhibit 4.3 of the Company's
Registration Statement on Form S-1, No. 2-93247 and
incorporated herein by reference).
4.2 - Form of Representatives Warrants (included as
Exhibit 4.8 on the Company's Registration
Statement on Form S-1, No. 2-93247 and incorporated
herein by reference).
Exhibit Number Document
4.3 - Warrant Agreement dated as of November 1, 1984,
between the Company and Allied Bank of Texas, as
Warrant Agent (included as Exhibit 4.5 on the
Company's Registration Statement on Form S-1,
No. 2-93247 and incorporated herein by reference).
4.4 - Extension Agreement as to Warrant Agreement between
Registrant and First Interstate Bank of Texas,
N.A., dated February 11, 1991 (included as Exhibit
4(d) to Registrant's Registration Statement on
Form S-1, No. 33-40035 and incorporated herein by
reference).
4.5 - Extension Agreement as to Warrant Agreement between
Registrant and First Interstate Bank of Texas,
N.A., dated February 12, 1992 (included as Exhibit
4.5 of the Company's Registration Statement on
Form S-1, No 33-48303 and incorporated herein by
reference).
4.6 - Specimen Common Stock Certificate (included as
Exhibit 4.1 to Company's Amendment to its
Registration Statement on Form S-1, No. 2-81977
and incorporated herein by reference).
4.7 - Rights Agreement dated as of March 28, 1995 between
the Registrant and Mellon Bank, N.A. (included
as Exhibit 1 to Form 8-A filed with the SEC as
of March 28, 1995).
4.8 - First Amendment to the Rights Agreement dated as
of April 25, 1995 (included as Exhibit 4 to
Form 8-A/A filed with the SEC as of May 8, 1995.
Exhibit Number Document
10.1 - Lease dated November 1, 1981, between the
Registrant and Hutchinson Air Base Investors
(included as Exhibit 10.1 to the Company's
Registration Statement on Form S-1, No. 2-81977
and incorporated herein by reference).
10.2 - Lease dated August 14, 1979, by and between
the Registrant and city of Hutchinson, Kansas
(included as Exhibit 10.2 to the Company's
Registration Statement on Form S-1, No 2-81977
and incorporated herein by reference).
10.3 - Various bailment and consignment agreements
between the Registrant and Automotive manufacturers
(included as Exhibit 10.2 to the Company's
Registration Statement on Form S-1, No. 33-48323
and incorporated herein by reference).
10.4 - Lease dated August 1, 1984 between the city of
South Hutchinson, Kansas (included as Exhibit
10.11 of the Company's Registration Statement on
Form S-1, No. 2-93247 and incorporated herein by
reference).
10.5 - Lease Agreement dated October 1, 1989 between
Registrant and the city of Newton, Kansas.
(Incorporated herein by reference to Exhibit 10.17
to Registrant's Report on Form 10-K for the fiscal
year ended October 31, 1989.)
Exhibit Number Document
10.6 - Promissory Note and Security Agreement between
Capacity of Texas, Inc. and Metlife Capital
Corporation dated September 30, 1991. (Incorporated
herein by reference to Exhibit 10.20 to Registrant's
Report on Form 10-K for the fiscal year ended
October 31, 1991.)
10.7 - Form of Indemnification Agreement between Registrant
and its directors. (Incorporated herein by reference
to Exhibit 10.21 to the Registrant's Report on Form
10-K for the fiscal year ended October 31, 1991.)
10.8 - Loan and Security Agreement for 33.05 million credit
facility dated May 9, 1995 between Registrant and
NationsBank of Georgia, N.A. (Incorporated herein
by reference to Exhibit 10.14 to Registrant's Report
on Form 10-Q for the fiscal period ended July 31,
1995.)
Exhibit Number Document
21.1 - The following are the names and jurisdiction of
incorporation of the subsidiaries of the Company:
Jurisdiction
Names of Incorporation
Collins Bus Corporation Kansas
Capacity of Texas, Inc. Texas
Wheeled Coach Industries, Inc. Florida
Collins Ambulance Corporation Kansas
Collins Financial Services, Inc. Kansas
Global Captive Casualty
and Surety Company Kansas
Mobile-Tech Corporation Kansas
World Trans, Inc. Kansas
27.0 - EDGAR Financial Data Schedule
(b) Reports on Form 8-K
There were no reports filed on Form 8-K by the Company
during the fourth quarter ended October 31, 1997.
COLLINS INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Balance Balance
at Charged Deductions at
Beginning to From End of
of Period Income Reserve Period
(In 000s)
ALLOWANCE FOR DOUBTFUL
ACCOUNTS:
For the year ended
October 31, 1997 $ 98 $ 47 $ 106 $ 39
For the year ended
October 31, 1996 $ 81 $ 54 $ 38 $ 98
For the year ended
October 31, 1995 $ 95 $ 51 $ 64 $ 82
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.
COLLINS INDUSTRIES, INC.
By /s/Don L. Collins
Don L. Collins, Chairman
and Chief Executive Officer
Dated: January 29, 1998
By /s/ Larry W. Sayre
Larry W. Sayre, Vice President
Finance and Chief Financial Officer
(Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of
the Registrant, in their capacities as Directors of the Registrant,
and on the dates indicated.
Dated: January 29, 1998 /s/ Don L. Collins
Don L. Collins
Dated: January 29, 1998 /s/Donald Lynn Collins
Donald Lynn Collins
Dated: January 29, 1998 /s/ Lewis W. Ediger
Lewis W. Ediger
Dated: January 29, 1998 /s/ Arch G. Gothard
Arch G. Gothard
Dated: January 29, 1998 /s/ Robert E. Lind
Robert E. Lind
Dated: January 29, 1998 /s/ Don S. Peters
Don S. Peters