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United States
Securities and Exchange Commission
Washington, D. C. 20547
FORM 10-K
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended October 1, 2000.
or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _____________________
to _____________________.
Commission File number: 0-22048
STARCRAFT CORPORATION
(Exact name of Registrant as specified in its charter)
Indiana 34-1817634
(State or other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
Post Office Box 1903, 2703 College Avenue, Goshen, Indiana 46527-1903
(Address of Principal Executive Offices)
Registrant's telephone number including area code: (219) 533-1105
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, without par value
Common Share Purchase Rights
(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 (ss.229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ ]
The aggregate market value of the issuer's voting stock held by non-affiliates,
as of December 21, 2000, was $11,011,683.
The number of shares of the Registrant's Common stock, without par value,
outstanding as of December 22, 2000, was 4,245,059 shares.
STARCRAFT CORPORATION
Form 10-K
Index
PART 1
Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Item 7a. Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
PART III
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management
Item 13. Certain Relationships and Related Transactions
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on form 8-K.
Signatures
PART I
ITEM 1. BUSINESS
OVERVIEW
Starcraft Corporation (the "Company"), an Indiana corporation founded in 1990,
is a manufacturer of second-stage, custom vehicles. The business is comprised of
three segments; conversion vehicles, bus and mobility vehicles, and direct
Original Equipment Manufacturer ("OEM") automotive supply. Conversion vehicles
include conversion vans, pickup trucks and sport utility vehicles. Second stage
represents the manufacturing completion of incomplete (first stage) vehicles
from the OEMs.
BACKGROUND
Starcraft traces its history to 1903 when Star Tank Company was founded in
Goshen, Indiana as a maker of metal farm equipment. Over the course of the
century the Company's predecessor became a leading manufacturer of aluminum
boats and recreational vehicles and, in the late 1970's, led the automotive
conversion industry by producing luxury van conversions for middle and upper
income consumers. In 1987, the predecessor's management completed a leveraged
buyout and, in 1988, sold the boat manufacturing business. On January 18, 1991,
the Company purchased the assets of the automotive and recreational vehicle
divisions, and simultaneously sold the recreational vehicle division to a third
party.
In July 1994, the Company acquired substantially all of the assets of Imperial
Industries, Inc., another conversion vehicle manufacturer. In February 1997, the
Company purchased the assets of National Mobility Corporation in Elkhart,
Indiana, a manufacturer of vehicles for the mobility impaired. In October 1997,
the Company started an OEM automotive supply business with a partner. The
primary purpose of this business is to supply conversion vehicles directly to
the Big 3 automakers. In February 1998, the Company started manufacturing and
marketing commercial shuttle buses. In May 2000, the Company entered the School
Bus market through an exclusive agreement with DaimlerChrysler to manufacture
and sell School Vans.
The Company became a public company in July 1993 and its shares are currently
trading on the NASDAQ Small Cap Market.
SEGMENTS
The following table sets forth for the three years ended October 1, 2000, the
net sales and operating income (loss) for the Company's operating segments, in
thousands,
Net Sales
------------------------------------------------
2000 1999 1998
---- ---- ----
Conversion vehicles $ 36,907 $ 46,494 $ 48,916
Bus and mobility vehicles 17,272 10,310 4,176
OEM automotive supply 73,162 32,700 0
----------- ---------- --------
Total $ 127,341 $ 89,504 $ 53,092
=========== ========== ========
Operating Segment Income (Loss)
2000 1999 1998
---- ---- ----
Conversion vehicles $ (8,800) $ 557 $ (3,422)
Bus and mobility vehicles 958 (286) 223
OEM automotive supply 5,467 3,240 (488)
------------ ---------- --------
Total $ (2,375) $ 3,511 $ (3,687)
============ ========== ========
The following provides a reconciliation of segment information to consolidated
information.
2000 1999 1998
---- ---- ----
Operating segment income (loss) $ (2,375) $ 3,511 $ (3,687)
Nonoperating expense (1,364) (1,115) (792)
Income tax (expense)credit (439) 51 79
Unallocated corporate expenses ( 169) (1,925) (2,359)
----------- ---------- --------
Net income (loss) $ (4,347) $ 522 $ (6,759)
=========== ========== ========
Conversion Vehicles
The Company manufactures conversion vehicles on a variety of GMC, Chevrolet,
Ford and Dodge ("OEM") chassis. The Company receives chassis directly from the
OEM's which generally have no seats, floor covering or other interior
components. The Company modifies the exterior and interior of the chassis by
adding seats, carpeting, electronics, running boards and other items that
enhance passenger comfort and safety. Conversion vehicles are sold and
distributed through OEM automobile dealers.
A summary of sales by chassis type follows (000's):
2000 1999 1998
---- ----- ----
Fullsize vans $ 26,408 $ 34,915 $ 33,934
Minivans 6,317 6,265 9,482
Sport utility vehicles 73 1,528 1,566
Pickup trucks 497 103 747
Parts 3,612 3,683 3,187
----------- ---------- --------
$ 36,907 $ 46,494 $ 48,916
=========== ========== ========
The Company sells conversion vehicles to approximately 400 automobile dealers
throughout the continental U.S. and internationally. The product is sold through
a network of regional exclusive sales representatives and associate
representatives. Each of its U.S. dealers is an authorized dealer for General
Motors, Ford or Chrysler and most sell and service a full complement of cars,
sport utility vehicles and vans. During the past two years, the geographic areas
of the U.S. where the company's sales have been strongest include the Great
Lakes region (i.e., Illinois, Indiana, Michigan, Ohio), Pennsylvania, and New
York.
The Company exports conversion vehicles to 12 countries around the world and
employs an international department which is exclusively responsible for the
development of such sales. International sales fluctuate from country to country
and over time depending on import taxes and tariffs and fluctuations in currency
exchange rates as well as local economic conditions. Starcraft's primary
overseas markets are Japan and northern Europe. The increase in the value of
U.S. currency and turmoil in Asian financial markets have negatively impacted
the company's international sales over the last few years.
The Company believes the Starcraft name has a long-standing reputation in the
conversion vehicle industry for high quality and innovation.
The Company maintains two primary brands. The Starcraft line features high-end,
luxury custom vehicles while the Imperial brand competes in the entry level
segment of the market. Typical manufacturer suggested retail price (MSRP) to the
retail consumer, including the chassis, from the automotive dealer generally
ranges from $34,000 to $52,000 for the Starcraft line and $24,000 to $39,000 for
the Imperial line. Retail mark-ups vary widely among automotive dealers and are
not within the Company's control.
The Company's conversion vehicle sales do not include the cost of the chassis
(see Chassis and Other Suppliers). The Company's average conversion van sales
price to the dealer was $7,114, $6,930, and $6,250 in 2000, 1999 and 1998,
respectively.
According to the Recreational Vehicle Industry Association, domestic Van
Conversion products sold by manufacturers during the three preceding fiscal
years are as follows:
2000 1999 1998
---- ---- ----
Industry unit sales 126,400 156,400 148,700
Change from prior year (19.2%) 5.2% (23.7%)
Approximately 66% of the decline in sales from manufacturers occurred in the
second half of the year. RVIA statistics are based on reports of its member
manufacturers and its estimates with respect to non-member manufacturers. The
Company believes RVIA members produce 85% - 90% of conversion vehicles sold in
the United States.
Further, according to R.L. Polk, full size and mid size van vehicle
registrations, an indicator of actual consumer demand, declined 13.8% during the
year ended September 30, 2000. All of the decrease in demand occurred in the
second half of the year.
The domestic conversion vehicle industry has declined steadily over the last
several years. The Company believes that the increased popularity of sport
utility vehicles and factory minivans, price pressure from higher chassis costs,
less favorable leasing terms and OEM rebates available compared to other
competing products, lower levels of conversion inventory being held on dealer
lots, higher interest rates and gasoline prices, and fewer automotive dealers
selling conversion vehicles have adversely impacted the market. The Company
believes that the changing level of dealer support is due to the growing
availability of additional vehicle models to stock on dealer retail lots such as
sport utility vehicles and a general concern by dealers about the future of the
conversion vehicle industry.
The United States conversion vehicle market is very competitive with four
principal national manufacturers and numerous local and regional manufacturers,
many of which are relatively small companies serving local dealers. The Company
estimates it has approximately 50 competitors in the Conversion Van business.
Based on monthly or quarterly reports from each of the OEMs that show relative
volume rankings, the Company believes it is one of the four largest vehicle
conversion companies in the United States. The others are Glaval Inc., Mark III
Industries, Inc. and Explorer Van Company.
The Company believes the number of competitors will decline as increased
quality, financial and engineering standards are imposed by the OEMs. The OEMs
have implemented quality and engineering reviews, including system checks at the
conversion companies and direct retail customer quality checks. In addition,
specific financial requirements, including minimum volume requirements, have
been imposed by the OEMs. The penalty for not complying with such requirements
results in the loss of the conversion company's bailment agreement and ability
to receive chassis from the OEMs. Such requirements have been tightened over the
last few years resulting in a reduction of conversion vehicle manufacturers.
The Company is the leading exporter of conversion vehicles. Of the Company's
2000 export sales of $10.4 million, 37% and 54% of export sales were to Europe
and Japan, respectively. The Company utilizes various distributors throughout
Europe and one distributor in Japan to sell its products. In international
markets, the Company competes with numerous foreign manufacturers that produce
comparable conversion vehicles, although conversion vehicles such as the
Company's tend not to be widely produced within its foreign markets.
The increase in the U.S. dollar currency rate has put significant pressure on
the Company's export sales. In addition, the continuing turmoil in the Asian
financial markets and economies have negatively impacted the demand for the
Company's products. In 2000 the Company shipped conversion kits to start a van
conversion operation in Mexico.
Although the Company's conversions of sport utility vehicles and pickup trucks
have proven to be a popular line of products, the significant increase in the
number of models and the chassis availability of these products at automobile
dealerships have reduced the demand for conversions of these products. Many of
the OEM sport utility models now have options that were historically supplied by
the conversion industry. As a result, the Company believes its overall sales of
sport utility vehicles and pickup truck conversions will continue, but not have
significant growth. The Company will focus on select models and OEMs where it
feels it can continue to offer a unique product at a competitive price point.
At October 1, 2000, the Company had a backlog of 234 unit orders compared with a
backlog of 396 unit orders at October 3, 1999. The backlog declined from prior
year levels due to timing of certain international orders and the decline in the
domestic market. The Company considers such orders to be reasonably firm. All of
the Company's products are subject to certain seasonal sales influences and
sales tend to be stronger during March through July. The Company uses off-season
sales promotions to market its products with a view to reducing seasonal swings
in sales.
Due to the continued decline in the conversion vehicle market and the operating
losses sustained in two of the last three years, the Company is assessing its
long-term strategy for the conversion vehicle segment. Further, management has
reduced personnel and other overheads as the conversion vehicle business has
declined and intends to continually do so to minimize operating losses from this
segment.
The conversion vehicle industry is cyclical and is affected by the general
trends of the economy and consumer preferences and consumer confidence and
trends of the automotive and recreational vehicle industries. Consumer
preferences for sport utility vehicles in recent years has adversely affected
demand for conversion products. The level of disposable consumer income affects
the Company's sales because its products are generally considered discretionary
expenditures by consumers. In difficult economic times, consumers tend to spend
less of their income on discretionary items. Other economic factors affecting
the demand for the Company's products include the availability and price of
gasoline, the level of interest rates and the availability of consumer
financing. Reduced gasoline availability could adversely affect the demand for
the Company's products. A significant increase in the price of gasoline could
reduce demand for the Company's products because it would increase the cost of
operating these products. Because many consumers finance their purchase of
vehicle conversions, the availability of financing and level of interest rates
can affect a consumer's purchasing decision. A decline in general economic
conditions or consumer confidence can be expected to affect Starcraft's sales
adversely. The Company is dependent upon the OEMs to supply its requirements for
vehicle chassis. Labor stoppages, supply shortages and a variety of other
factors that influence OEM production can affect the availability or timely
delivery of vehicle chassis to the Company.
Chassis - Approximately 46%, 31% and 23% of the Company's domestic Conversion
Vehicle units in 2000 were manufactured on General Motors, Dodge and Ford
("OEM") chassis, respectively. All of the Company's export sales are currently
associated with General Motors product.
The OEMs supply incomplete chassis to Starcraft or other manufacturers or
dealers for restricted use. The Company obtains substantially all of its chassis
acquired for domestic sale from the OEMs pursuant to consignment or restricted
sale contracts. Under these contracts each OEM maintains strict control over the
disposition of chassis delivered to the Company for modification and the Company
is prohibited from delivering a converted chassis provided by the OEM to any
person except an authorized dealer for that OEM. All of the Company's
consignment and restricted sale contracts with chassis suppliers are terminable
by either party on short notice without cause.
Under restricted sale contracts with the OEMs, the OEM retains the certificate
of origin and the Company has no right to obtain it or any other evidence of
title. These contracts state that vehicle title technically passes to the
Company upon acceptance of a chassis and the Company pays state property taxes
on chassis, but the Company can only sell the chassis back to the OEM for resale
to an authorized dealer. Except for demonstration vehicles, the Company is
prohibited from making modifications to chassis under these contracts until it
matches them with a dealer order. In the past, the Company has obtained waivers
of this limitation to permit accumulation of GMC or Chevrolet inventory in
connection with model year changes or other periods of anticipated increasing
demand. Prior to matching a chassis to a dealer order, the Company finances the
chassis through the OEM's financing affiliates at nominal rates. Once the
Company notifies the OEM that it has matched a chassis with a dealer, the OEM
"repurchases" the chassis, crediting the Company's account with the OEM's
financing affiliate and invoicing its dealer (the Company's customer) for the
price of the chassis. Upon receiving the converted vehicle, the dealer is
obligated to pay the Company for the improvements the Company has made. If the
Company fails to match a chassis with a dealer order within 90 days, the finance
charge the Company must pay increases. The past 90-day finance charge is
currently the prime rate plus 1%.
Historically, the Company's international conversion sales have been primarily
manufactured on General Motors chassis. Generally, the foreign purchaser is an
authorized dealer for General Motors and Starcraft. The dealer submits an order
to General Motors' overseas sales affiliate (the "GM Export Affiliate") for the
chassis together with specifications for a Starcraft conversion. The GM Export
Affiliate purchases the chassis from General Motors and forwards it to Starcraft
for second stage manufacturing. Starcraft invoices the GM Export Affiliate for
the completed conversion, and the GM Export Affiliate arranges for shipment of
the unit, at the GM Export Affiliate's expense, from Starcraft to the foreign
dealer.
Starting in 1997, General Motors changed its chassis system for the Company's
sales to Europe. Under this program, the Company is the "Manufacturer of Record"
for units imported into Europe and is required to arrange and be responsible for
all U.S. export and shipping requirements. The Company is required to purchase
its chassis and the OEM assists in the financing of such purchases. The Company
continues to sell only to authorized General Motors dealers.
A variety of factors govern chassis ordering and availability. Chassis are
ordered from the OEM based on the Company's annual sales plan. The plan is
broken down by OEM and vehicle model. Vehicle specifications are determined on
the basis of historical trend analysis and analysis of the backlog of orders.
The Company's chassis order forecast is shared with each OEM to determine
chassis availability. The OEMs confirm chassis availability and timing on an
annual basis. After confirmation by the OEM, the Company orders a 90-day supply
prioritized through a central computerized system. On a weekly basis, the
Company releases the actual orders it requires and the OEMs schedule delivery
dates for the orders. Chassis allocation to the Company from the OEMs is based
on credit lines, prior usage and wholesale and retail sales rates.
The following table sets forth for the periods indicated the number of chassis
received by the Company under its restricted sales contracts with the OEM's and
the dollar value thereof, and, as of the end of such periods, the number of
chassis held over 90 days and the dollar value thereof.
Year Ended
(Dollars in thousands)
Oct. 1, 2000 Oct. 3, 1999 Sept. 27, 1998
- ------------------------------------------------------------------------------------------------
Chassis Received 5,711 7,060 7,132
Value of Chassis Received $114,220 $ 141,200 $ 142,640
Chassis Over 90 Days at period end 500 97 148
Value of Chassis Held Over 90 Days $ 10,000 $ 1,940 $ 2,960
The conversion process begins after a chassis is inspected and accepted and the
Company has received a confirmed order from an authorized dealer that is
compatible with the chassis. Generally, the order is scheduled for production
typically four to five days before work on the vehicle commences to allow for
completion of components to be installed in the chassis and the purchase of
necessary assembly material. The Company usually completes the conversion
process in an average of seven to eight days from the date that the vehicle is
first scheduled for production.
The Company is dependent upon the OEMs to supply its requirements for vehicle
chassis. Labor stoppages, supply shortages and a variety of other factors that
influence OEM production can affect the availability or timely delivery of
vehicle chassis to the Company. In 1998 chassis availability was adversely
impacted late in the fiscal year due to a labor stoppage at General Motors. The
Company estimates that sales were adversely impacted by $1.5 million due to
chassis shortages in 1998. Chassis availability was generally good in 2000 and
1999.
If vehicle chassis are unavailable, or if the Company must accept delivery
earlier or later than it otherwise would prefer, sales could be adversely
affected and financing expenses could increase. The Company must also comply
with its consignment and restricted sale contracts with the OEMs pursuant to
which the OEMs impose certain specifications for the Company's vehicle
conversions, including gross vehicle weight standards. Such contracts also
restrict the Company's ability to dispose of completed chassis and prohibit the
transfer of chassis to unauthorized U.S. and foreign dealers. All of the
Company's consignment and restricted sale contracts with chassis suppliers are
terminable by either party on short notice without cause. The availability of
the OEM financing rates is dependent upon the Company's compliance with its OEM
contracts and its ability to maintain satisfactory credit relationships with the
OEM's finance subsidiaries. Adverse changes in the Company's financial condition
or results of operations could cause such financing subsidiaries to seek to
adversely change the Company's financing terms or to terminate such financing
arrangements. Such a change or termination could have a material adverse effect
on the Company's financial condition and results of operations.
Vehicle converters can be penalized by the OEM for manufacturing overweight
vehicles and the National Highway Traffic Safety Administration ("NHTSA") could
require overweight vehicles to be recalled. See "Safety and Regulation." Such
standards are imposed by the OEMs in part to help assure that vehicle weight
does not exceed the capacity of the OEM's braking system.
The export of completed vehicles to unauthorized foreign dealers has been a
significant issue in the conversion industry in recent years. In the past, some
automotive dealers have sold vehicles to brokers who, in turn, have sold them to
unauthorized dealers overseas. The OEM financing subsidiaries have indicated an
intention to penalize or terminate financing arrangements with any firm deemed
responsible for unauthorized exports. The Company makes an effort to assure
itself that none of its vehicles are exported in an unauthorized manner
including obtaining written assurances from certain dealers. The Company has no
control over the eventual disposition of its vehicles by dealers, however, so it
cannot eliminate the possibility of unauthorized export. These efforts
nevertheless should help assure that the Company will not be deemed responsible
for any unauthorized export.
Bus and Mobility Vehicles
A summary of bus and mobility vehicles sales follows:
2000 1999 1998
---- ---- ----
Shuttle buses $ 14,365 $ 6,839 $ 1,199
Mobility vehicles 2,907 3,471 2,977
-------- -------- --------
$ 17,272 $ 10,310 $ 4,176
======== ======== ========
In 1998 the Company began manufacturing shuttle buses ranging in length from 20
to 28 feet with seating capacity for 14 to 29 passengers. Buses are offered with
a choice of interior and exterior storage areas, wheelchair lifts, diesel and
gasoline engines, and various seat types, arrangements and coverings. The buses
are marketed under the Starcraft(R) trade name and are primarily marketed to
churches, nursing homes and hotel resorts through independent commercial bus
dealers. Buses are built on truck chassis obtained from the OEM's or truck
companies. Chassis manufacturers typically do not build custom shuttle buses.
In fiscal 2000 the Company expanded its bus product offering to include a Dodge
School Van. As exclusive supplier to DaimlerChrysler, the Company will
manufacture a low-cost, fuel-efficient alternative to fullsize school buses. In
addition, the Company introduced a maximum 39-passenger tour bus including a
Freightliner chassis and Caterpillar diesel engine. The bus is offered in six
optional floor plans. The Company will continue to focus on innovative bus
products to increase sales in this segment.
The Company generally produces to firm orders. The vehicles are designed and
engineered internally. At October 1, 2000 the Company had a backlog of 188
units. The Company conducts quality control procedures to ensure that each
vehicle meets the customer's specifications. The Company provides limited
warranties against manufacturing defects in its vehicles. The warranties
generally provide for the replacement or repair of defective parts or
workmanship for one year from the date of sale.
The market for the Company's shuttle buses is highly competitive. The other
competitors in the bus industry include Thor Industries, Inc., Goshen Coach and
Supreme Industries, Inc., all of whom are substantially larger than the Company,
and other regional manufacturers. The Company's products are a very small
percentage of the bus market. The Company will continue to position its product
as an exceptional quality, high value product targeting the high end user niche
market. There can be no assurance that the Company will be able to maintain or
improve its competitive position in the bus market.
In 1997, the Company purchased National Mobility Corporation which modifies OEM
chassis so that they may be accessed by the mobility impaired. Primary products
are low-floor minivans with ramps and fullsize vans with wheelchair lifts.
The Company sells its products to government units (state and local), mobility
dealers and commercial enterprises such as taxicab and paratransit companies. At
October 1, 2000 the Company had a backlog of 38 units.
The Company believes the mobility impaired vehicle market is growing. By
utilizing the Company's conversion vehicle reputation and distribution systems,
the Company believes it can more effectively penetrate the retail market.
The shuttle bus and mobility operations utilizes bailment or consignment
arrangements with the OEM's, but must purchase the chassis prior to the start of
manufacturing. The shuttle bus operation is subject to the same risk factors of
chassis availability as the Company's vehicle conversion business.
OEM Automotive Supply
In 1998, the Company started a new operation (the "LLC") with a partner to
supply conversion vehicle type products directly to OEM automotive customers as
a Tier 1 automotive supplier. The Company currently owns 50% of this enterprise.
All of the LLC's OEM automotive supply sales in 2000 and 1999 were to General
Motors Corporation ("GM").
The LLC receives vehicle chassis from the OEM and adds certain appearance items
such as ground effects, wheels and badging. The vehicles are placed back into
the normal OEM distribution stream. The vehicles carry the full OEM warranty and
are marketed directly by the OEM. The LLC engineers and validates the products
to OEM standards. Programs range from two to five years and are backed by
contractual agreements with the OEMs.
The major domestic market for the LLC's products are highly competitive.
Competition is based primarily on price, product engineering and performance,
technology, quality and overall customer service, with the relative importance
of such factors varying among products. The LLC's global competitors include a
large number of other well-established independent manufacturers.
Chassis are provided by the OEM on a drop-ship basis and are not included in the
sales of the Company.
The LLC provides a limited warranty of its products to the OEM. The LLC warranty
is substantially the same as the OEM warranty provided to the OEM's retail
customers.
At October 1, 2000, the LLC's backlog of firm orders was $1.9 million compared
with a backlog of $5.7 at October 3, 1999. The reduction in backlog is primarily
due to the model changeover at the LLC's Texas plant. The LLC utilizes an
independent manufacturer representative to market and sell its services.
PATENTS AND TRADEMARKS
IBS. In 1996, the Company received a U.S. patent on IBS, which is designed to
reduce significantly the risk of seat back collapse in the event of a rear-end
collision by restraining the seat back. IBS is used in the conversion vehicle
business. A new seat belt integrated with the conventional seat belt system is
anchored to the vehicle roof or wall and traverses the seat back. In the event
of collision, the seat back is secured in place.
Trademarks. The Company's Predecessor manufactured boats, motor homes and other
recreational vehicles under the name "Starcraft." The boat manufacturing
business was sold by the Predecessor to Brunswick Corporation in 1988 which
subsequently sold the business. The Company initially acquired the recreational
vehicle business in the Predecessor's 1991 reorganization proceeding, but
immediately sold it to an RV company. The Predecessor's Canadian conversion
business was acquired by a Canadian firm. A corporation in the boating industry
has independently registered and owns the "Starcraft" and related trademarks for
use with boats and marine products and thus the Company has no control over the
quality of boats produced and sold under the "Starcraft" mark. The Company
retains ownership of "Starcraft" and related registered marks for use with
automotive and recreational vehicle products. It licenses the owners of the
Predecessor's RV business and Canadian van conversion business to use these
trademarks. While it has some control over the quality of its licensees'
products, it does not control all aspects of their businesses. The Canadian
entity is required to pay a royalty to the Company and to purchase its
components from the Company (or from others with the Company's approval). The
Company is not permitted to export to Canada and its Canadian licensee does not
export to the United States.
MANUFACTURING
All conversion vehicles and bus and mobility vehicles are manufactured in the
Goshen, Indiana plant.
As the conversion vehicle market declined over the last several years, the
Company consolidated its existing manufacturing facilities. In November 1999,
the Company relocated its Emma seating manufacturing operation into the Goshen
facility and terminated the seating operation in August 2000. Effective
September 1, 2000, all seating was outsourced.
OEM automotive supplier segment manufacturing facilities have been established
in Louisiana, Texas and New Jersey and are located near GM assembly plants. The
LLC also has an engineering operation in Detroit. Primary components for
conversion vehicles and bus and mobility vehicles are purchased from outside
suppliers. The principal raw materials used in the manufacturing process are
fabric, fiberglass, steel, aluminum, plywood and plastic. The Company's products
are generally produced to firm orders and are designed and engineered by the
company.
Supplies for the components and materials that the Company utilizes are
generally available from several sources. From time to time the Company
experiences delays in delivery of certain components or materials from
suppliers. In 1998, the availability of certain hardwood components adversely
impacted the Company's conversion vehicle production.
All components for the OEM automotive supply segment are purchased. The primary
raw material used in the components is plastic that the Company believes is
readily available from several sources.
SAFETY AND REGULATION
The manufacture, distribution and sale of the Company's products are subject to
governmental regulations in the United States at the federal, state and local
levels. The most extensive regulations are promulgated under the National
Traffic and Motor Vehicle Safety Act which, among other things, empowers the
National Traffic and Motor Vehicle Safety Administration ("NHTSA") to require a
manufacturer to remedy vehicles containing "defects related to motor vehicle
safety" or vehicles which fail to conform to all applicable federal motor
vehicle safety standards.
Federal Motor Vehicle Safety Standards are promulgated by the NHTSA. Many of the
Company's conversion components were affected by these standards. Starcraft
engaged a testing company, General Testing Laboratories, which also performs
testing for NHTSA, to test the company's components. The Company's components
subject to the new standards were determined to meet or exceed them.
Promulgation of additional safety standards in the future could require the
Company to incur additional testing and engineering expenses which could
adversely affect the Company's results of operations. NHTSA can require
automotive manufacturers to recall products. The Company has not experienced any
material recalls.
The Company's international sales are subject to foreign tariffs and taxes,
changes in which are difficult to predict and which can adversely affect
Starcraft sales. Starcraft's products must also comply with government safety
standards imposed in its foreign markets.
Both federal and state authorities have various environmental control standards
relating to air, water and noise pollution that affect the business and
operations of the Company. In particular, the Company generates paint, varnish
and other finishing wastes that it is required to dispose of in compliance with
environmental regulations. The Company believes that it has complied in all
material respects with applicable environmental regulations and standards and
does not currently expect that any failure of compliance will have any material
adverse effect on the Company.
Like other automotive manufacturers, the Company may be subject to claims that
its products caused or contributed to damage or injury sustained in vehicle
accidents or may be required to recall products deemed unsafe. Any such claims
in excess of the Company's insurance coverage or material product recall
expenses could adversely affect the Company's financial condition and results of
operations.
EMPLOYEES
As of October 1, 2000, the Company employed 477 people. Of these, 354 were
production line associates and 123 were salaried sales, engineering and
administrative staff. During peak production periods, the Company may increase
its work force. Historically, the available labor force has been adequate to
meet such periodic requirements. The Company considers its relationships with
its personnel to be satisfactory.
ITEM 2. PROPERTIES
The following table summarizes the Company's properties as of October 1, 2000:
Size of Owned
Location Facility or Type of Operation
Leased
Goshen, Indiana 454,400 s.f. Owned Executive Offices (20,420
s.f.); Manufacturing and
Assembly, Conversion Vehicle
Segment
Goshen, Indiana 10,000 s.f. Owned Chassis Storage (40 acres),
Conversion Vehicle Segment
Emma, Indiana 42,700 s.f. Owned Manufacturing - Vacant
Shreveport, Louisiana 38,000 s.f. Leased Manufacturing and
Assembly, OEM
Automotive Supply
Segment
Grand Prairie, Texas 100,000 s.f. Leased Manufacturing and
Assembly, OEM
Automotive Supply
Segment
Bridgewater, NJ 38,000 s.f. Leased Manufacturing and
Assembly, OEM
Automotive Supply
Segment
Madison Heights, MI 40,000 s.f. Leased Offices, Engineering and
Production Development,
OEM Automotive Supply
Segment
The Goshen and Emma production facilities were constructed in the 1960's. They
have been maintained and improved upon from time to time and are presently in
satisfactory condition and sufficient for the Company's current requirements.
These facilities are pledged as security under the loan agreement.
The Emma facility is no longer being utilized by the Company. The Company is
currently attempting to sell the Emma facility.
The Shreveport and Grand Prairie leases have terms that parallel the length of
the vehicle contracts at the respective plants. The New Jersey facility is
leased on a month-to-month basis pending resolution of a local zoning issue, at
which time a seven-year term commences. The Michigan lease has a six-year term.
ITEM 3. LEGAL PROCEEDINGS
The Company does not anticipate that any pending legal proceeding to which it is
party will have any material adverse effect on its financial conditions or
results of operations. The Company maintains product liability insurance which
it currently considers adequate.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Common Stock is quoted on the NASDAQ Small Cap Market, under the symbol "STCR."
As of December 2000, there were 64 shareholders of record of Starcraft's Common
Stock.
On June 23, 1999, the Company was placed on a conditional listing for the NASDAQ
Small Cap Market as it continued to work to meet the Market's net tangible asset
requirements. The terms of the conditional listing establish dates by which the
Company was requested to achieve certain tangible asset or profitability levels
and by which reports establishing compliance with the exception were requested
to be provided to NASDAQ and filed with the SEC. The first such report was
provided to NASDAQ by July 21, 1999 and the last report on November 15, 1999.
The Company met the terms of the conditional listing and, effective January 20,
2000, the conditional listing was terminated. The Company was granted continued
listing on the NASDAQ Small Cap Market. As of October 1, 2000 and the date of
this report, the Company no longer meets the minimum tangible asset or
profitability levels for continued inclusion in the Small Cap Market.
Accordingly, there is no assurance that the Company's shares will continue to be
listed on the NASDAQ Small Cap Market.
The following table sets forth the high and low closing prices per share of
Common Stock for the quarters ended as quoted on the NASDAQ Small Cap Market.
Quarter Ended
High Low
December 27, 1998 $ 2.625 $ 1.250
March 28, 1999 4.000 2.438
June 27, 1999 4.500 2.875
October 3, 1999 6.250 3.875
January 2, 2000 8.000 4.438
April 2, 2000 9.125 6.125
July 2, 2000 8.500 7.000
October 1, 2000 8.250 3.500
Dividend Policy. The Company has paid no cash dividends since its initial public
offering. The Company currently intends to retain earnings for use in the
operation and expansion of its business and therefore does not anticipate paying
cash dividends on Common Stock in the foreseeable future. The payment of
dividends is within the discretion of the Board of Directors and will be
dependent, among other things, upon earnings, capital requirements, any
financing agreement covenants and the financial condition of the Company.
Anti-Takeover Provisions. Indiana law and the Company's Articles of
Incorporation and Code of By-laws contain provisions that restrict the
acquisition of control of the Company. Such provisions can affect the rights of
shareholders acquiring substantial interests in the Company's shares. For
example, a shareholder who acquires more than 10% of the Company's shares
without prior board approval will be limited in the timing and terms of any
transaction it may enter into with the Company and will be subject to related
provisions.
SHAREHOLDER RIGHTS PLAN
In August 1997 the Company adopted a shareholders Rights Plan issuing one right
for each outstanding share. Each right entitles the registered holder to
purchase from the Company one share of common stock at $15 per share, subject to
adjustment. The rights become exercisable if a person or group (other than
certain related persons) acquires or announces a tender offer for prescribed
percentages of the Company's shares or is declared an "adverse person" by the
Company's Board of Directors. In these events, each right holder may purchase
shares with a value equal to twice the exercise price. Furthermore, if the
Company engages in certain mergers or similar business combinations a right
holder may purchase shares of the acquiring company with a value of two times
the purchase price of the right. The rights expire on August 12, 2007.
ITEM 6. SELECTED FINANCIAL DATA
(dollars in thousand, except per share data) Year Ended
- -----------------------------------------------------------------------------------------------------------------
Income Statement Data Oct. 1, Oct. 3, Sept. 27, Sept. 28, Sept. 29,
2000 1999 1998 1997 1996
- -----------------------------------------------------------------------------------------------------------------
Net Sales:
Domestic $ 116,980 $ 81,397 $ 42,857 $ 57,235 $ 73,317
Export 10,361 8,107 10,235 15,047 25,648
Total Net Sales 127,341 89,504 53,092 72,282 98,965
Cost of Goods Sold 110,045 74,548 49,590 66,342 83,669
Gross Profit 17,296 14,956 3,502 5,940 15,296
Operating Expenses 14,922 10,922 9,548 13,924 15,049
Restructuring and Goodwill
Impairment Charges ---- ---- ---- 5,926 ----
Operating Income (loss) 2,374 4,034 (6,046) (13,910) 247
Interest Expense (1,447) ( 1,230) ( 892) (400) (293)
Other Income, Net 83 115 100 194 176
Income (loss) Before Minority 1,010 2,919 ( 6,838) (14,116) 130
Interest and Taxes
Minority Interest (4,918) (2,448) ---- ---- ----
Income Tax (expense) Credit (439) 51 79 2,814 (20)
Net Income (Loss) (4,347) 522 (6,759) (11,302) 110
Weighted Average Common Shares 4,214 4,159 4,134 4,127 4,142
Outstanding
Earnings (loss) Per Share $ (1.03) $ 0.13 $ (1.63) $ (2.74) $ 0.03
Earnings (loss) Per Share (1.03) 0.12 (1.63) (2.74) 0.03
Assuming Dilution
Balance Sheet Data
- -----------------------------------------------------------------------------------------------------------------
Working Capital $ 2,165 $ 10,192 $ 5,402 $ 7,011 $ 8,476
Total Assets 34,994 43,781 29,015 27,779 36,524
Long-term Debt 9,957 13,506 10,777 5,696 0
Shareholders' Equity 77 4,186 3,536 10,295 21,552
Book Value per Share 0.02 1.00 0.86 2.49 5.23
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The consolidated statements of income summarize operating results for the last
three years. This section of Management's Discussion highlights the main factors
affecting the changes in operating results during the three-year period.
2000 VERSUS 1999
(Dollars in Thousands) 1999 to
2000
2000 1999 Change
---------------------------------------------------------------------
Net Sales $ 127,341 100.0% $ 89,504 100.0% 42.3%
Cost of goods sold 110,045 86.4% 74,548 83.3% 47.8%
--------- --------- --------- ------ ------
Gross profit 17,296 13.6% 14,956 16.7% 16.3%
Selling and promotion expenses 5,144 4.0% 4,638 5.2% 10.9%
General and administrative expenses 9,778 7.7% 6,284 7.0% 55.6%
--------- --------- --------- ------ ------
Operating income (loss) 2,374 1.9% 4,034 4.5% (41.2%)
Interest expense (1,447) (1.2%) (1,230) (1.3%) 17.6%
Other Income 83 0.1% 115 0.1% (27.8%)
--------- --------- --------- ------ ------
Income (loss) before taxes
and minority interest 1,010 0.8% 2,919 (3.3%) (65.4%)
Minority interest (4,918) (3.9%) (2,448) (2.7%) ---
Income tax (expense) credit (439) (0.3%) 51 0.0% ---
--------- --------- --------- ------ ------
NET INCOME (LOSS) ($4,347) (3.4%) $ 522 0.6% ---
========= ========= ========= ====== ======
Net sales increased $37.8 million and 42.3% to $127.3 million in 2000.
The OEM automotive supply segment sales increased $40.4 million in 2000. OEM
automotive supply operated under two customer contracts during 2000. In 1999
only one customer contract was in place for most of the year while a second
contract started up at the end of 1999. Conversion vehicle sales decreased $9.6
million as a result of a decline in the size of the market. Sales of bus and
mobility vehicles increased $7.0 million in 2000 as the Company expanded its
product offering and customer base.
The incremental OEM automotive supply sales generated $10.1 million of
additional gross profit in 2000. The conversion vehicle segment gross profit
declined $8.9 million due to lower sales and pricing, higher discounts from
competition, higher carrying charges on consignment chassis and higher warranty
expenses. Bus and mobility vehicles generated $1.1 million of additional gross
profit from higher sales.
Selling expenses increased $.5 million to support higher sales in the OEM
automotive supply segment, but declined 1.2%, as a percent of sales. General and
administrative expenses increased $3.5 million and .7%, as a percent of sales.
The increase is due to increased salaries and other expenses to support the
rapid growth in the automotive supply segment.
Interest expense increased $217,000 primarily due to higher interest rates.
Minority interest results from the Company owning only 50% of the OEM automotive
supply business. Tax expense in 2000 is comprised of state income taxes. The
Company did not record any federal income tax expense in 2000 due to existing
tax credit carry forwards generated from prior years' losses. The income tax
credit recorded in 1999 is due to deferred tax charges which offset state income
taxes.
1999 VERSUS 1998
(Dollars in Thousands) 1998 to
1999
1999 1998 Change
---------------------------------------------------------------------
Net Sales $ 89,504 100.0% $ 53,092 100.0% 68.6%
Cost of goods sold 74,548 83.3% 49,590 93.4% 50.3%
--------- ------ --------- ------ ------
Gross profit 14,956 16.7% 3,502 6.6% 327.1%
Selling and promotion expenses 4,638 5.2% 4,484 8.4% 3.4%
General and administrative expenses 6,284 7.0% 5,064 9.6% 24.1%
--------- ------ --------- ------ ------
Operating income (loss) 4,034 4.5% (6,046) (11.4%) ---
Interest expense (1,230) (1.3%) (892) (1.7%) 37.9%
Other Income 115 0.1% 100 0.2% 15.0%
--------- ------ --------- ------ ------
Income (loss) before taxes
and minority interest 2,919 3.3% (6,838) (12.9%) ---
Minority interest (2,448) (2.7%) --- --- ---
Income tax credit 51 0.0% 79 (0.2%) (35.4%)
--------- ------ --------- ------ ------
NET INCOME (LOSS) $ 522 0.6% ($ 6,759) (12.7%) ---
========= ====== ========= ====== ======
Net sales increased $36.4 million and 68.6% to $89.5 million in 1999.
The OEM automotive supply segment accounted for $32.7 million of the sales
growth in 1999. OEM automotive supply benefited from the start-up of a second
plant as a result of a new customer contract and a full years production from a
prior year plant start-up. Conversion vehicle segment sales decreased $2.4
million as a result of the decline in the size of the market. Bus and mobility
vehicles sales increased $6.1 million primarily from growth in shuttle buses.
The incremental OEM automotive supply sales generated $3.6 million of additional
gross profit in 1999. The conversion vehicle segment improved its gross margin
primarily due to reduced labor and overhead costs from plant consolidations. Bus
and mobility gross profit declined $.3 million due to start-up costs associated
with shuttle buses.
Selling expenses increased $154,000 but declined 3.2% as a percent of sales.
General and administrative expenses increased $1.6 million in the OEM automotive
supply segment in order to support the growth in this business, partially offset
by a $.4 million decrease in the conversion vehicle segment from personnel
reductions. General and administrative expenses decreased 2.6% as a percent of
sales.
Interest expense increased $338,000 due to higher borrowing levels to fund the
OEM Automotive Supply segment growth, and higher interest rates and a slightly
higher average borrowing level in the Conversion Vehicle segment. Minority
interest in 1999 results from the Company owning only 50% of the OEM Automotive
Supply business. The Company does not have income tax expense in 1999 due to
existing tax credit carry forwards generated from prior year losses. The income
tax credit recorded in 1999 is due to deferred tax changes. The minimal income
tax credit in 1998 is due to the Company's tax carry-back being fully utilized.
SEASONALITY AND TRENDS
The Company's sales and profits are dependent on the automotive markets in the
United States and overseas, primarily Japan and northern Europe, and the OEM's
ability to supply vehicle chassis. The business tends to be seasonal with
stronger sales in March through July and is influenced by a number of factors
including atypical weather for any sales region, interest rates, gasoline
prices, and OEM programs affecting the price, supply and delivery of vehicle
chassis.
The Company eliminated much excess production capacity and reduced overhead in
the last several years to address the decline in revenue in the conversion
vehicle segment. In 1997 the Company began a plan to diversify both its product
base and target markets as it acquired National Mobility Corporation. In 1998
the Company continued to pursue its cost reduction and diversification strategy
with the introduction of the shuttle bus product and the start-up of the OEM
automotive supply business. The Company plans to continue to develop these new
products and to increase its product offerings in the vehicle conversion
commercial market.
The conversion vehicle market continued to decline during 2000 and accordingly,
the Company sustained significant losses. With a market recovery unlikely in the
short term, management will reassess its strategy for the conversion vehicle
business. Further, management has reduced personnel and other overheads as the
conversion vehicle business has declined. Management intends to continue to
reduce costs on an on-going basis to minimize losses from this segment. If
future actual results fail to meet management's plan, additional losses could
occur.
The OEM automotive supply segment is dependent upon long-term contract business.
The business' current contracts run through 2004.
LIQUIDITY AND CAPITAL RESOURCES
Operating activities generated $4.8 million in cash in 2000 compared to using
cash of $2.6 million during 1999. Cash was generated as receivables and
inventory decreased significantly in 2000 primarily due to the decline in the
Conversion Van business and a plant shut down for a model year changeover in the
OEM Automotive Supply Segment.
The Company invested $962,000 in property and equipment during the year of which
$560,000 was for new plant start-ups. The remaining cash generated from
operations was used to reduce bank debt. As of October 1, 2000, bank debt was
$11.1 million.
On October 30, 1998, the Company entered into a $14 million credit agreement
with a lending institution. The agreement was amended in December 2000 as noted
below. Revolving advances under the agreement are limited to specified
percentages of eligible receivables and inventories and are subject to a maximum
limit of $9.2 million. The credit agreement also includes a $4.8 million term
loan which is payable in monthly principal installments of $57,000 beginning
December 1, 1998. The revolving borrowings bear interest of either 1/2% over
prime or 3% over the Eurodollar rate. The term loan bears interest at either
3/4% over prime or 3.5% over the Eurodollar rate. The borrowings are secured by
substantially all of the Company's assets. There is a fee of .25% of the average
unused portion of the maximum borrowing amount. The agreement is also subject to
various covenants with which the Company is in compliance (or for which it
obtained waivers) as of October 1, 2000. In addition, the Company was in
compliance with (or obtained waivers on January 23, 2001, for) all covenants as
of December 31, 2000.
On November 23, 1998, the Company entered into an amended credit agreement with
its former primary lender. The agreement called for all borrowings over $3
million to be paid with proceeds from the $14 million refinancing described
above. The remaining $3 million is payable in monthly principal installments of
$36,000 beginning December 1, 1998. The note matures in November 2001 at which
time any remaining principal balance is due. The note bears interest at 2% over
the bank's prime rate and is subordinate to the $14 million credit agreement
described above. The note is partially guaranteed by two individuals, one of
whom is a director and officer of the Company and the other is currently an
outside director. As incentive for their guarantees, the Company issued to the
individuals warrants to purchase a total of 400,000 shares of Common Stock for
$2.20 per share. The warrants have a five year term and are exercisable at the
date of the grant.
On December 20, 2000 the Company and its subsidiary, Tecstar, amended their
credit agreements with their primary lending institution. The amended agreements
increase the maximum amount of the combined loans from $14 million to $22
million and extend the term of the revolving advances to December, 2005 for the
Company, and November, 2004 for Tecstar. The amendments allow Tecstar to advance
funds and distribute earnings to the Company if certain conditions are met, and
expand the borrowing base against which Tecstar may receive advances under the
revolver. A portion of the Company's loan is guaranteed by two individuals, both
of whom are currently directors and one of whom is an officer of the Company. As
incentive for their guarantees, the Company issued to the individuals warrants
to purchase a total of 500,000 shares of Common Stock for $3.00 per share. All
other significant terms of the original agreements remain unchanged.
In addition to the availability of bank financing, the Company has restricted
sales agreements with General Motors Acceptance Corporation, DaimlerChrysler
Financial Corporation and Ford Motor Credit Company. Pursuant to these
agreements, the Company obtains vehicle chassis from the OEM's for 90 days at
nominal rates. If the Company fails to match a chassis with a dealer order
within 90 days after delivery of the chassis to the Company, carrying charges
increase to prime rate plus 1%.
The Company believes that future cash flows from operations, funds available
under its revolving credit agreement, and the continued use of OEM financing
arrangements to manage its chassis inventory will be sufficient to satisfy its
anticipated operating needs and capital improvements for 2001.
The Company believes that its objectives for growth over the next few years can
be accomplished with minimal capital investment and that its internal resources
and existing or refinanced credit facilities will provide sufficient liquidity
for such purposes.
DISCUSSION OF FORWARD-LOOKING INFORMATION
The discussion above includes forward-looking statements respecting
restructuring cost estimates, future personnel and facility expense reductions,
anticipated tax refunds, domestic and international market and economic trends,
the Company's product and target market diversification plans, anticipated
capital expenditures, the adequacy of capital resources and other matters. From
time to time, Starcraft may make oral or written forward-looking statements
regarding its anticipated sales, costs, expenses, earnings and matters affecting
its condition and operations. All such forward-looking statements are subject to
a number of material factors which could cause the statements or projections
contained therein to be materially inaccurate. Such factors include, without
limitation, the following:
General Operating Contingencies. The Company may not be able to attract and
retain employees with sufficient skills to conduct its operations efficiently
and may from time to time be subject to work slow-downs or stoppages. The
Company may be adversely affected by delay or unavailability of supply of
numerous component parts. The Company will not always be able to satisfy its
capital requirements with internally generated funds and may, from time to time,
need to rely on bank financing and other third party capital resources. There is
no assurance that such resources will always be available to the Company or as
to the terms that will apply to any financing, or as the Company's ability to
continue to comply with such terms over time.
Acquisitions and Diversification. The Company may be engaged in negotiations
from time to time regarding prospective acquisitions of van conversion or
related businesses. Such acquisitions could be material to the Company and, if
effected, could have a material effect on the Company's financial condition or
results of operations. There is no assurance as to when or whether the Company
will be able to effect acquisitions, whether it will be able to generate
requisite funding to effect such acquisitions, or as to the terms on which such
acquisitions may be effected. A significant aspect of the Company's strategy is
to diversify its product offerings into new product lines, such as taxis and
shuttle buses. The Company has less experience manufacturing and marketing such
products than it has in its core conversion vehicle business. There is no
assurance that such new product lines will be profitable.
Economic Conditions. The conversion vehicle industry is cyclical and is affected
by the general trends of the economy and consumer preferences and consumer
confidence and trends of the automotive and recreational vehicle industries both
domestically and in international markets. Consumer preferences for sport
utility vehicles in recent years has adversely affected demand for conversion
products. The level of disposable consumer income affects the Company's sales
because its products are generally considered discretionary expenditures by
consumers. In difficult economic times, consumers tend to spend less of their
income on discretionary items. Other economic factors affecting the demand for
the Company's products include the availability and price of gasoline, the level
of interest rates and the availability of consumer financing.
Reduced gasoline availability could adversely affect the demand for the
Company's products. A significant increase in the price of gasoline could reduce
demand for the Company's products because it would increase the cost of
operating these products. Because many consumers finance their purchase of
vehicle conversions, the availability of financing and level of interest rates
can affect a consumer's purchasing decision. A decline in general economic
conditions or consumer confidence can be expected to affect Starcraft's sales
adversely.
OEM Automotive Supply Segment. All of the Company's OEM automotive supply sales
in 2000 and 1999 were to GM. The Company's OEM automotive supply sales are
directly impacted by the size of the automotive industry and GM's market share.
Further, GM periodically reduces production or closes plants for several months
for model changeovers. During the fourth quarter of fiscal year 2000, one of the
Company's two manufacturing facilities was substantially shut down as a result
of GM's model changeover. This adversely affected the Company's fourth quarter
results. The shut down continued through the first quarter of fiscal 2001. The
facility is back in production in the second quarter of fiscal 2001.
Accordingly, a decline in sales in the automotive market or in GM's automotive
sales, or production cutbacks and plant shut downs for model changeovers by GM,
could have an adverse impact on the Company's sales and profits.
Supply and Financing of Vehicle Chassis. The Company is dependent upon the OEMs
to supply its requirements for vehicle chassis. Labor stoppages, supply
shortages and a variety of other factors that influence OEM production can
affect the availability or timely delivery of vehicle chassis to the Company. If
vehicle chassis are unavailable, or if the Company must accept delivery earlier
or later than it otherwise would prefer, sales could be adversely affected and
financing expenses could increase. The Company must also comply with its
consignment and restricted sale contracts with the OEMs pursuant to which the
OEMs impose certain specifications for the Company's vehicle conversions,
including gross vehicle weight standards. Such contracts also restrict the
Company's ability to dispose of completed chassis and prohibit the transfer of
chassis to unauthorized U.S. and foreign dealers. All of the Company's
consignment and restricted sale contracts with chassis suppliers are terminable
by either party on short notice without cause. The availability of the OEM
financing rates is dependent upon the Company's compliance with its OEM
contracts and its ability to maintain satisfactory credit relationships with the
OEM's finance subsidiaries. Adverse changes in the Company's financial condition
or results of operations could cause such financing subsidiaries to seek to
change adversely the Company's financing terms or to terminate such financing
arrangements. Such a change or termination could have a material adverse effect
on the Company's financial condition and results of operations. In addition,
sales of the automotive supply segment are subject to long-term contracts with
GM. Continued sales and growth of this segment is subject to the Company's
ability to continue to satisfactorily perform and to obtain such contracts over
time.
Regulation. The Company is subject to various foreign, federal, state and local
regulations. In particular, van conversion components produced by the Company
are required to comply with Federal Motor Vehicle Safety Standards and similar
safety standards imposed in its foreign markets. Promulgation of additional
safety standards in the future could require the Company to incur additional
testing and engineering expenses which could adversely affect the Company's
results of operations. The Company's international sales can be adversely
affected by changes in foreign import tariffs and taxes and fluctuations in
exchange rates. The Company must comply with certain Federal and state
regulations relating to the disposition of hazardous wastes generated in its
production processes. The Company's failure to comply with applicable
regulations or changes in current regulations, including the adoption of new
safety or environmental standards, could have material adverse effect on the
Company's results of operations.
Competition. The United States vehicle conversion industry is very competitive
with several principal nationwide manufacturers and numerous local and regional
competitors. The OEM Automotive Supply business is also highly competitive with
several large companies competing in this market. There is no assurance the
Company will be able to maintain its current competitive position in these
markets.
Potential Product Liability. Like other automotive manufacturers, the Company
may be subject to claims that its products caused or contributed to damage or
injury sustained in vehicle accidents or may be required to recall products
deemed unsafe. Any such claims in excess of the Company's insurance coverage or
material product recall expenses could adversely affect the Company's financial
condition and results of operations.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
STARCRAFT CORPORATION AND SUBSIDIARIES
Goshen, Indiana
FINANCIAL STATEMENTS
October 1, 2000, October 3, 1999 and September 27, 1998
CONTENTS
REPORT OF INDEPENDENT AUDITORS ............................................ 1
FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS .......................................... 2
CONSOLIDATED STATEMENTS OF OPERATIONS ................................ 4
CONSOLIDATED STATEMENTS OF CASH FLOWS ................................ 5
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY ...................... 6
NOTES TO FINANCIAL STATEMENTS ........................................ 7
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Starcraft Corporation and Subsidiaries
Goshen, Indiana
We have audited the accompanying consolidated balance sheets of Starcraft
Corporation and Subsidiaries as of October 1, 2000 and October 3, 1999 and the
related consolidated statements of operations, shareholders' equity, and cash
flows for the years ended October 1, 2000, October 3, 1999 and September 27,
1998. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated 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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Starcraft Corporation and Subsidiaries as of October 1, 2000 and October 3, 1999
and the consolidated results of its operations and its cash flows for the years
ended October 1, 2000, October 3, 1999 and September 27, 1998 in conformity with
generally accepted accounting principles.
/s/ Crowe, Chizek and Company LLP
Elkhart, Indiana
November 9, 2000, except for Note 6
as to which the date is December 20, 2000
and Note 3 as to which the dates are
December 20, 2000 and January 23, 2001
STARCRAFT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
October 1, 2000 and October 3, 1999
- --------------------------------------------------------------------------------
2000 1999
---- ----
(dollars in thousands)
ASSETS
Current assets
Cash and cash equivalents $ 1,294 $ 600
Accounts receivable
Trade less allowance for
doubtful accounts: 2000 - $255;
1999 - $40 10,523 16,358
Tooling and engineering services 2,110 250
Manufacturers' rebates receivable 329 468
Inventories 10,629 16,377
Other 1,153 530
--------- ---------
Total current assets 26,038 34,583
Property and equipment
Land, buildings and improvements 6,604 6,355
Machinery and equipment 6,794 6,677
--------- ---------
13,398 13,032
Less accumulated depreciation 5,752 5,168
--------- ---------
7,646 7,864
Goodwill, at amortized cost 1,160 1,258
Other assets 150 76
--------- ---------
$ 34,994 $ 43,781
========= =========
STARCRAFT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
October 1, 2000 and October 3, 1999
- --------------------------------------------------------------------------------
2000 1999
---- ----
(dollars in thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt $ 1,114 $ 1,057
Accounts payable, trade 16,814 18,496
Accrued expenses
Warranty 3,028 1,972
Compensation and related expenses 766 384
Taxes 1,088 1,014
Other 1,063 1,468
------------ ------------
Total current liabilities 23,873 24,391
Long-term debt 9,957 13,506
Minority interest in subsidiary 1,087 1,698
Shareholders' equity
Preferred stock, no par value: 2,000,000 shares
authorized but unissued - -
Common stock, no par value:
Authorized shares - 10,000,000 shares
issued and outstanding shares
- 2000 4,245,059; 1999 4,176,928 14,382 14,144
Additional paid-in capital 1,008 1,008
Accumulated deficit (15,313) (10,966)
------------ ------------
77 4,186
------------ ------------
$ 34,994 $ 43,781
============ ============
STARCRAFT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended October 1, 2000, October 3, 1999
and September 27, 1998
- --------------------------------------------------------------------------------
2000 1999 1998
---- ---- ----
(dollars in thousands, except per share data)
Net sales
Domestic $ 116,980 $ 81,397 $ 42,857
Export 10,361 8,107 10,235
---------- --------- ---------
127,341 89,504 53,092
Cost of goods sold 110,045 74,548 49,590
---------- --------- ---------
Gross profit 17,296 14,956 3,502
Operating expenses
Selling and promotion 5,144 4,638 4,484
General and administrative 9,778 6,284 5,064
---------- --------- ---------
Operating income (loss) 2,374 4,034 (6,046)
Nonoperating (expense) income
Interest (1,447) (1,230) (892)
Other income, net 83 115 100
---------- --------- ---------
(1,364) (1,115) (792)
---------- --------- ---------
Income (loss) before minority interest
and income taxes 1,010 2,919 (6,838)
Minority interest 4,918 2,448 -
Federal and state income taxes (credit) 439 (51) (79)
---------- --------- ---------
Net income (loss) $ (4,347) $ 522 $ (6,759)
========== ========= =========
Earnings (loss) per common share, basic $ (1.03) $ .13 $ (1.63)
Earnings (loss) per common share, assuming dilution $ (1.03) $ .12 $ (1.63)
STARCRAFT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended October 1, 2000, October 3, 1999 and September 27, 1998
- --------------------------------------------------------------------------------
2000 1999 1998
---- ---- ----
(dollars in thousands)
Cash flows from operating activities
Net income (loss) $ (4,347) $ 522 $ (6,759)
Adjustments to reconcile net income (loss)
to net cash from operating activities
Depreciation and amortization 1,031 1,065 1,018
Deferred income taxes - (331) (177)
Minority interest (611) 1,698 -
Change in operating assets and liabilities
Receivables 4,114 (9,930) 823
Inventories 5,748 (5,520) (1,587)
Accounts payable (1,682) 10,252 1,890
Accrued expenses 1,512 (266) 178
Other (983) (65) 30
----------- --------- ---------
Net cash from operating activities 4,782 (2,575) (4,584)
Cash flows from investing activities
Purchase of property and equipment (962) (1,024) (785)
Proceeds from sale of property and equipment 200 67 26
----------- --------- ---------
Net cash from investing activities (762) (957) (759)
Cash flows from financing activities
Proceeds from revolving credit agreement 6,755 8,664 11,604
Payments of revolving credit agreement (9,189) (4,915) (5,500)
Payments of long-term debt (1,058) (986) -
Issuance of common stock 166 - -
----------- --------- ---------
Net cash from financing activities (3,326) 2,763 6,104
----------- --------- ---------
Net change in cash and cash equivalents 694 (769) 761
Cash and cash equivalents at beginning of year 600 1,369 608
----------- --------- ---------
Cash and cash equivalents at end of year $ 1,294 $ 600 $ 1,369
=========== ========= =========
Supplemental disclosure of cash flow information
Interest paid $ 1,380 $ 1,411 $ 770
Income taxes paid (refunded) 454 (360) 10
STARCRAFT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the years ended October 1, 2000, October 3, 1999 and September 27, 1998
- --------------------------------------------------------------------------------
Outstanding Additional
Common Common Paid-In Accumulated
Shares Stock Capital Deficit Total
------ ----- ------- ------- -----
---------------(dollars in thousands)--------------
Balance, September 29, 1997 4,133,600 $ 14,016 $ 1,008 $ (4,729) $ 10,295
Net loss - - - (6,759) (6,759)
--------- --------- --------- --------- ---------
Balance, September 27, 1998 4,133,600 14,016 1,008 (11,488) 3,536
Net income - - - 522 522
Issuance of 43,328 shares of
common stock 43,328 128 - - 128
--------- --------- --------- --------- ---------
Balance, October 3, 1999 4,176,928 14,144 1,008 (10,966) 4,186
Net loss - - - (4,347) (4,347)
Issuance of 68,131 shares of
common stock 68,131 238 - - 238
--------- --------- --------- --------- ---------
Balance, October 1, 2000 4,245,059 $ 14,382 $ 1,008 $ (15,313) $ 77
========= ========= ========= ========= =========
STARCRAFT CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
October 1, 2000, October 3, 1999 and September 27, 1998
(Dollars in thousands, except per share data)
- --------------------------------------------------------------------------------
NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Nature of Business and Principles of Consolidation: Starcraft Corporation and
Subsidiaries (Company) are second stage manufacturers of custom van, pickup
truck and sport utility vehicle conversions, shuttle buses and mobility vehicles
and direct OEM (original equipment manufacturer) automotive supply. The
consolidated financial statements include the accounts of Starcraft Corporation
and its wholly owned subsidiaries: Starcraft Automotive Group, Inc., Imperial
Automotive Group, Inc. (Imperial), Starcraft Southwest, Inc., and National
Mobility Corporation. The Company has a 50% ownership interest in Tecstar, LLC
(Tecstar) which is an OEM automotive supplier. The accounts of Tecstar are also
included in these consolidated financial statements. All significant
intercompany accounts and transactions have been eliminated in consolidation.
The Company's customers operate primarily in the automotive industry. The
Company's conversion vehicles segment (see Note 12) sells product throughout the
United States, and export sales are principally to locations in Japan and
northern Europe. The bus and mobility vehicles segment primarily sells products
throughout the United States and Canada. The OEM automotive supply segment sales
are to one customer in the United States. Credit is extended to customers based
on an evaluation of the customer's financial condition, and when credit is
extended collateral generally is not required.
Statements of Cash Flows - Noncash Financing Activities: During 2000, the
Company issued 9,131 shares of common stock with a value of $72 to its 401(k)
plan. During 1999, the Company issued 29,926 shares of common stock with a value
of $90 to its 401(k) plan and issued 13,402 shares of common stock with a value
of $38 under the directors share plan.
Cash Equivalents and Concentrations: Cash equivalents include all highly liquid
investments with a maturity when purchased of three months or less. The first
$100 of deposits in each financial institution is insured by an agency of the
U.S. Government.
Tooling and Engineering Services Receivable: Tooling and engineering services
provided by third parties to Tecstar are reimbursed by Tecstar's customer and a
receivable is recorded for such costs.
Inventories: Inventories are stated at the lower of cost or market. Cost is
determined by the last-in, first-out (LIFO) method for certain inventories
($8,898 and $11,380 at October 1, 2000 and October 3, 1999, respectively) and by
the first-in, first-out (FIFO) method for all other inventories.
NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Property and Equipment: Property and equipment are stated at cost. Depreciation
is computed principally by the straight-line method over the estimated useful
lives of the assets. The Company is depreciating buildings over periods of 15 to
50 years, building improvements over periods of 5 to 20 years, and equipment
over periods of 3 to 12 years.
Goodwill: Goodwill is amortized by the straight-line method over a period of 15
years and is stated net of accumulated amortization of $350 and $252 at October
1, 2000 and October 3, 1999, respectively. The Company evaluates the
recoverability based on undiscounted projected operating cash flows when factors
indicate that an impairment may exist.
Warranties: The Company follows the policy of accruing an estimated liability
for warranties at the time the warranted products are sold.
Revenue Recognition: The Company generally manufactures products based on
specific orders from customers. Shipments are generally made by common carrier
after receiving authorization from the customer, and revenue is recognized upon
shipment. Net sales and cost of goods sold do not include the cost of consigned
chassis (see Note 8), except for certain bus chassis which totaled $5,930,
$3,287 and $567 for 2000, 1999 and 1998, respectively.
Stock Based Compensation: The Company periodically grants stock options for a
fixed number of shares to employees and directors. The Company accounts for
stock option grants in accordance with Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" ("APB 25").
Use of Estimates: Preparation of the financial statements in accordance with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates. Management
makes estimates for warranty and contingency reserves, allowance for doubtful
accounts, impairment of goodwill, and depreciation expense.
Earnings Per Common Share: Basic earnings per common share is based on net
income available to common shareholders divided by the weighted average number
of common shares considered to be outstanding during the period. The weighted
average number of common shares outstanding were 4,214,208, 4,158,651 and
4,133,600 for the years ended October 1, 2000, October 3, 1999 and September 27,
1998, respectively. Diluted earnings per common share shows the dilutive effect
of any additional potential common shares issuable under stock options.
NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Fiscal Year: The Company's fiscal year ends on the Sunday closest to September
30. The years ended October 1, 2000 and September 27, 1998 consisted of 52 weeks
and the year ended October 3, 1999 consisted of 53 weeks.
Recently Enacted Accounting Standards: New accounting guidance for derivatives
will apply October 2, 2000. All derivative instruments will be recorded in the
balance sheet at their fair value. Changes in the fair value of derivatives are
required to be recorded each period in current earnings or other comprehensive
income, depending on whether the derivative is designated as part of a hedge
transaction. There was no effect of adopting this standard on October 2, 2000.
In 2000, the AICPA issued SFAS No. 140, "Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities". This statement replaces
FASB No. 125, and is effective for 2001. Management does not expect the effects
of adoption to be significant.
Fair Value of Financial Instruments: The Company's carrying amount for its
financial instruments, which include cash, accounts receivable, accounts payable
and long-term debt, approximates fair value.
Reclassification: Certain items in the financial statements for prior years have
been reclassified to conform to current year presentation; primarily tooling and
engineering services in the Balance Sheet.
NOTE 2 - INVENTORIES
The composition of inventories at October 1, 2000 and October 3, 1999 is as
follows:
2000 1999
---- ----
Raw materials $ 6,453 $ 11,154
Chassis 2,499 1,918
Work-in-process 841 1,940
Finished goods 1,756 1,675
Obsolescence reserve (920) (310)
--------- ----------
$ 10,629 $ 16,377
========= ==========
The use of the LIFO method of determining the cost of inventories did not have a
material effect on inventories at October 1, 2000 and October 3, 1999.
NOTE 3 - DEBT ARRANGEMENTS
On October 30, 1998, the Company entered into a $14,000 credit agreement with a
lending institution. The agreement was amended in December 2000 as noted below.
Revolving advances under the agreement are limited to specified percentages of
eligible receivables and inventories and are subject to a maximum limit of
$9,200. At October 1, 2000 and October 3, 1999, the outstanding balance on the
revolver was $5,314 and $7,749, respectively. The credit agreement also includes
a $4,800 term loan which is payable in monthly principal installments of $57
which began December 1, 1998. At October 1, 2000 and October 3, 1999, the
outstanding balance on the term loan was $3,543 and $4,171, respectively. The
note matures in November 2001 at which time any remaining principal balance is
due. The revolver bears interest of either 1/2% over prime or 3% over the
Eurodollar rate. The term note bears interest at either 3/4% over prime or 3.5%
over the Eurodollar rate. The borrowings are secured by substantially all of the
Company's assets. There is a fee of .25% of the average unused portion of the
maximum borrowing amount. The loan agreements contain various covenants related
to financial ratios and other items. The Company complied with or obtained
waivers on December 20, 2000, for all the covenants at October 1, 2000.
Subsequent to year end certain debt covenants have also been amended. The
Company complied with or obtained waivers on January 23, 2001 through the end of
the fiscal year, for all the covenants as of December 31, 2000.
On November 23, 1998, the Company entered into an amended credit agreement with
its former primary lender. The agreement called for all borrowings over $3,000
to be paid with proceeds from the $14,000 refinancing described above. The
remaining $3,000 is payable in monthly principal installments of $36 which began
December 1, 1998. At October 1, 2000 and October 3, 1999, the outstanding
balance on this term note was $2,214 and $2,643, respectively. The note matures
in November 2001 at which time any remaining principal balance is due. The note
bears interest at 2% over the bank's prime rate and is subordinate to the
$14,000 credit agreement described above. The note is partially guaranteed by
two individuals, both of whom are currently directors and one of whom is an
officer of the Company (see Note 6).
On December 20, 2000 the Company and its subsidiary, Tecstar, amended their
credit agreements with their primary lending institution. The amended agreements
increase the maximum amount of the combined loans from $ 14,000 to $ 22,000, and
extend the term of the revolving advances to December 2005 for the Company, and
November 2004 for Tecstar. The amendments allow Tecstar to advance funds and
distribute earnings to the Company if certain conditions are met, and expands
the borrowing base against which Tecstar may receive advances under the
revolver. A portion of the Company's loan is guaranteed by two individuals, both
of whom are currently directors and one of whom is an officer of the Company
(see Note 6). All other significant terms of the original agreements remain
unchanged.
The carrying amount of the Company's long-term debt approximates fair value.
NOTE 3 - DEBT ARRANGEMENTS (Continued)
Long-term debt is due as follows:
Fiscal Year Ending
2001 $ 1,114
2002 4,643
2003 -
2004 435
2005 4,879
NOTE 4 - INCOME TAXES
Federal and state income taxes (benefit), all of which were
domestic, consist of the following:
2000 1999 1998
---- ---- ----
Current
Federal $ - $ - $ (61)
State 439 280 159
------- ------- --------
439 280 98
Deferred
Federal - (289) (154)
State - (42) (23)
------- ------- --------
- (331) (177)
------- ------- --------
$ 439 $ (51) $ (79)
======= ======= ========
The provisions for income taxes are different from amounts that would otherwise
be computed by applying a federal statutory rate of 34% to income taxes. A
reconciliation of the differences is as follows:
2000 1999 1998
---- ---- ----
Rate applied to pretax income (loss) $ (1,329) $ 160 $ (2,325)
State taxes - net 290 24 (196)
Change in valuation allowance:
Net operating loss for which no
benefit was recognized 1,242 474 2,231
Other 332 (747) 254
Other, net (96) 38 (43)
---------- --------- -----------
$ 439 $ (51) $ (79)
========== ========= ===========
NOTE 4 - INCOME TAXES (Continued)
The composition of the deferred tax assets and liabilities at October 1, 2000
and October 3, 1999 is shown below:
2000 1999
---- ----
Deferred tax liabilities
Accelerated depreciation $ (566) $ (522)
Inventory basis difference (331) (331)
----------- -----------
(897) (853)
Deferred tax assets
Inventory 388 181
Nondeductible accruals
Warranty 858 652
Other 410 301
Goodwill 1,295 1,441
Alternative minimum tax credit
carryforward 220 220
Net operating loss carryforward 4,056 2,814
----------- -----------
Total deferred tax assets 7,227 5,609
Valuation allowance (6,330) (4,756)
----------- -----------
897 853
----------- -----------
Net deferred tax asset (liability) $ - $ -
=========== ===========
The alternative minimum tax carryforward of $220 has no expiration date. The net
operating loss carryforward expires as follows: $6,015 in 2018, $1,011 in 2019
and $3,385 in 2020.
NOTE 5 - COMPENSATION PLANS
The Company sponsors a qualified profit-sharing plan, more commonly known as a
401(k) plan, for all of its employees with over six months of service. The plan
provides for a discretionary matching contribution by the Company of the
employee's salary deduction, up to 6% of compensation. Also, the plan provides
for an additional discretionary contribution annually as determined by the Board
of Directors. The amounts charged to expense for this plan were approximately
$144, $90 and $(250) in 2000, 1999 and 1998, respectively.
NOTE 6 - STOCK OPTIONS
The Company maintains two stock incentive plans under which stock options are
granted to key employees and directors. The plans authorize the granting of
stock options for up to 880,000 shares of the Company's common stock. The
options in these two plans have five year terms and generally become fully
exercisable after six months. The Company also sponsors a stock option plan with
40,000 shares of common stock reserved for options to certain sales
representatives who are not employees of the Company. These options have five
year terms.
Under the three plans, options may not be granted at prices below 85% of the
current market value of the stock at the date of grant. All options awarded
through October 1, 2000 have been at fair market value on the date of grant. For
the years ended October 1, 2000 and September 27, 1998, the effect of the stock
options in computing earnings per common share was antidilutive.
Additionally, on November 20, 1998 the Company issued options to purchase shares
of common stock to two individuals as incentive for their partial guarantee of
the Company's long-term debt (See Note 3). The individuals can each purchase up
to 200,000 shares of common stock of the Company for $2.20 per share, which was
the ten day, average market price preceding the date of grant. The options have
a five year term.
A summary of the Company's stock option activity and related information under
the plans discussed above for the years ended October 1, 2000, October 3, 1999
and September 27, 1998 follows:
2000 1 9 9 9 1 9 9 8
---- ------- -------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
------- ----- ------- ----- ------- -----
Outstanding at
beginning of year 969,849 $ 2.86 452,849 $ 3.97 407,349 $ 5.65
Granted 277,000 6.83 562,500 2.15 188,849 1.85
Canceled (26,500) 4.88 (31,500) 3.72 (85,000) 4.41
Exercised (59,000) 2.83 - - - -
Expired (78,500) 7.44 (14,000) 8.33 (58,349) 8.15
----------- ------- ----------- -------- ----------- -------
Outstanding at
end of year 1,082,849 $ 3.50 969,849 $ 2.86 452,849 $ 3.97
=========== ======= =========== ======== =========== =======
Exercisable at end of year 905,943 $ 2.83 959,849 $ 2.85 383,515 $ 4.22
=========== ======= =========== ======== =========== =======
NOTE 6 - STOCK OPTIONS (Continued)
As of October 1, 2000, there were 765,349 options outstanding with exercise
prices that ranged from $1.50 to $4.00. The weighted-average exercise price of
these options is $2.22, and the weighted-average remaining contractual life is
2.9 years. As of October 1, 2000, there were 317,500 options outstanding with
exercise prices that ranged from $4.75 to $8.00. The weighted-average exercise
price of these options is $6.58, and the weighted-average remaining contractual
life is 3.9 years.
The Company has elected to follow APB 25 and related interpretations in
accounting for its employee stock options. Under APB 25, no compensation expense
has been recognized because the exercise price of the Company's stock options
has equaled the market price of the underlying stock on the date of grant.
Proforma information regarding net income and earnings per share is required by
FASB Statement No. 123, "Accounting for Stock-Based Compensation," ("FAS 123")
and has been determined as if the Company had accounted for its stock options
issued in 2000, 1999 and 1998 under the fair value method of FAS 123. The fair
value was estimated as of the date of grant using a Black-Sholes option pricing
model with the following assumptions:
2000 1999 1998
---- ---- ----
Risk-free interest rate 5.23% - 6.79% 4.43% - 5.86% 4.52% - 5.63%
Dividend yield 0% 0% 0%
Volatility factor 75.88% - 77.83% 62.4% - 70.9% 54.8% - 59.8%
Expected option life 4 years 3-4 years 4 years
For purposes of proforma disclosures, the estimated fair value of the options is
amortized to expense over the options' vesting period. The Company's proforma
information follows:
2000 1999 1998
---- ---- ----
Proforma net loss $ (5,165) $ (65) $ (6,912)
Proforma net loss per share, basic $ (1.23) $ (0.02) $ (1.67)
Proforma net loss per share, diluted $ (1.23) $ (0.02) $ (1.67)
On December 12, 2000 the Company issued stock options to purchase shares of
common stock to two individuals as incentive for their partial guarantee of the
Company's long-term debt (See Note 3). The individuals can each purchase up to
250,000 shares of common stock of the Company for $3.00 per share, which was the
twenty-day, average market price preceding the date of grant. The options have a
5 year term.
NOTE 7 - SHAREHOLDER RIGHTS PLAN
In August 1997, the Company adopted a Shareholders Rights Plan issuing one right
for each outstanding share. Each right entitles the registered holder to
purchase from the Company one share of common stock at $15 per share, subject to
adjustment. The rights become exercisable if a person or group (other than
certain related persons) acquires or announces a tender offer for prescribed
percentages of the Company's shares or is declared an "adverse person" by the
Company's Board of Directors. In these events, each right holder may purchase
shares with a value equal to twice the exercise price. Furthermore, if the
Company engages in certain mergers or similar business combinations a right
holder may purchase shares of the acquiring company with a value to two times
the purchase price of the right. The rights expire on August 12, 2007.
NOTE 8 - CONSIGNMENT ARRANGEMENTS
The Company obtains vehicle chassis for modification from major vehicle
manufacturers (OEMs) under consignment and restricted sales agreements. These
agreements generally provide that (i) the Company may not obtain certificates of
origin or other evidence of ownership of chassis, (ii) modification must conform
to standards specified by OEMs, and (iii) modifications generally are performed
only after a sale has been negotiated with an OEM approved dealer. The Company
generally ships converted chassis only after dealer acceptance has been approved
by the OEM. The OEMs bill the dealer and provide warranty for the chassis.
Consistent with the practice in the industry, the Company accounts for chassis
as consignment inventory. Accordingly, the Company records chassis inventory and
related obligations only in the event they are required to purchase chassis from
the OEM. Provisions for decline in chassis value are recognized when, in
management's estimation, such provisions are necessary. Provisions for decline
in chassis value, chassis inventory, and chassis sales are not material to the
accompanying financial statements.
At October 1, 2000, the Company has possession of chassis in the aggregate
amount of $21,500 (of which $10,000 related to chassis on consignment for
periods exceeding 90 days) and has total chassis line availability of $30,900.
Carrying charges on consignment chassis, which are presented in cost of goods
sold, were approximately $1,318, $819 and $1,030 in 2000, 1999 and 1998,
respectively. The OEMs have also instituted marketing incentive rebates to
second-stage manufacturers based on the number of chassis delivered to dealers.
Those incentives reduced cost of goods sold by approximately $341, $476 and $731
in 2000, 1999 and 1998, respectively.
NOTE 9 - COMMITMENTS AND CONTINGENCIES
The Company leases certain of its facilities and equipment. The total rental
expense for 2000, 1999 and 1998 was $939, $667 and $270, respectively. Rental
commitments at October 1, 2000 for long-term noncancelable operating leases are
as follows:
2001 $ 923
2002 796
2003 750
2004 536
2005 240
------------
$ 3,245
The Company is subject to various legal proceedings and claims with respect to
such matters as product liabilities and other actions, which arise out of the
normal course of its business. Management and its legal counsel periodically
review the probable outcome of pending proceedings and the costs reasonably
expected to be incurred. The Company accrues for these costs when it is probable
that a liability has been incurred and the amount of the loss can be reasonably
estimated. In the opinion of management, any ultimate cost to the Company in
excess of amounts accrued will not materially affect its consolidated financial
position, cash flows or results of operations.
The Company's commitments with respect to its chassis arrangements are described
in Note 8.
NOTE 10 - RESEARCH AND DEVELOPMENT
The Company incurs costs to improve the appeal and safety of its products.
Research and development costs are charged to operations when incurred. Amounts
charged to operations were approximately $674, $490 and $520 in 2000, 1999 and
1998, respectively.
NOTE 11 - UNAUDITED FINANCIAL INFORMATION
Presented below is certain unaudited quarterly financial information for 2000,
1999 and 1998.
Quarter Ended
-------------
January 2, April 2, July 2, October 1,
2000 2000 2000 2000
---- ---- ---- ----
Net sales $ 36,193 $ 36,355 $ 33,081 $ 21,712
Gross profit (loss) 7,005 6,456 5,024 (1,189)
Net income (loss) 553 765 (277) (5,388)
Earnings (loss) per share 0.13 0.18 (0.07) (1.27)
Earnings (loss) per share
assuming dilution 0.12 0.16 (0.07) (1.27)
Quarter Ended
-------------
December 27, March 28, June 27, October 3,
1998 1999 1999 1999
---- ---- ---- ----
Net sales $ 12,134 $ 18,639 $ 28,112 $ 30,619
Gross profit 958 3,398 5,727 4,873
Net income (loss) (1,820) 122 1,490 730
Earnings (loss) per share (0.44) 0.03 0.36 0.17
Earnings (loss) per share
assuming dilution (0.44) 0.03 0.33 0.16
Quarter Ended
-------------
December 28, March 29, June 28, September 27,
1997 1998 1998 1998
---- ---- ---- ----
Net sales $ 13,419 $ 14,464 $ 11,820 $ 13,389
Gross profit (loss) 1,205 1,656 856 (215)
Net loss (1,137) (821) (1,281) (3,520)
Loss per share (0.28) (0.19) (0.31) (0.85)
Adjustments in the fourth quarter of the fiscal year ended September 27, 1998
included the start up loss related to Tecstar and certain accruals.
The gross loss in the fourth quarter of the fiscal year ended October 1, 2000
was primarily due to the decline in sales resulting from the extended plant
shutdown, at one of Tecstar's plants, for a model year changeover.
NOTE 12 - OPERATING SEGMENT INFORMATION
In 1999, the Company adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information". The Company has determined that its
reportable segments are those that are based on the Company's method of internal
reporting, which disaggregates its business by product category. The Company's
three reportable operating segments are conversion vehicles, bus and mobility
vehicles and OEM automotive supply. The Company evaluates the performance of its
segments and allocates resources to them based on operating income. The
accounting policies of the segments are the same as those described in Note 1
and there are no inter-segment revenues. Differences between reported operating
segment income amounts and consolidated net income represent corporate expenses
for administrative functions that are not allocated to segments, nonoperating
income or expense, and the provision for income taxes. The OEM automotive supply
segment was started during 1998 and did not have any sales revenue, but did have
costs associated with starting the business.
The table below presents information about segments used by the chief operating
decision maker of the Company for 2000, 1999 and 1998:
2000 1999 1998
---- ---- ----
Net sales by geographic region:
Conversion vehicles
Domestic $ 26,546 $ 38,387 $ 38,681
Export
Japan 5,564 3,981 5,579
Europe 3,801 3,574 3,461
Middle East 532 302 1,195
Other 464 250 -
Bus and mobility vehicles
Domestic 17,272 10,310 4,176
Export - - -
OEM automotive supply
Domestic 73,162 32,700 -
Export - - -
--------- --------- ---------
$ 127,341 $ 89,504 $ 53,092
========= ========= =========
Operating segment income (loss):
Conversion vehicles $ (8,800) $ 557 $ (3,422)
Bus and mobility vehicles 958 (286) 223
OEM automotive supply 5,467 3,240 (488)
--------- --------- ---------
$ (2,375) $ 3,511 $ (3,687)
========= ========= =========
NOTE 12 - OPERATING SEGMENT INFORMATION (Continued)
2000 1999
---- ----
Total assets:
Conversion vehicles $ 18,212 $ 21,863
Bus and mobility vehicles 4,501 3,292
OEM automotive supply 12,281 18,626
------------ ------------
$ 34,994 $ 43,781
============ ============
The following provides a reconciliation of segment information to consolidated
information.
2000 1999 1998
---- ---- ----
Operating segment income (loss) $ (2,375) $ 3,511 $ (3,687)
Nonoperating expense (1,364) (1,115) (792)
Federal and state income (tax) credit (439) 51 79
Unallocated corporate expenses (169) (1,925) (2,359)
------------ ------------ ------------
Net income (loss) $ (4,347) $ 522 $ (6,759)
============ ============ ============
The following specified amounts are included in the measure of segment income
(loss) reviewed by the chief operating decision maker:
2000 1999 1998
---- ---- ----
Depreciation and amortization expense
Conversion vehicles $ 784 $ 910 $ 963
Bus and mobility vehicles 73 68 55
OEM automotive supply 174 87 -
------------ ------------ ------------
$ 1,031 $ 1,065 $ 1,018
============ ============ ============
The information below contains information regarding significant customer
concentrations by segment for sales and accounts receivable. The Company has one
significant customer and this customer is the same for both segments.
NOTE 12 - OPERATING SEGMENT INFORMATION (Continued)
Sales by segment for this major customer are as follows:
2000 1999 1998
---- ---- ----
Conversion vehicles $ 5,423 $ 4,283 $ 6,774
Bus and mobility vehicles - - -
OEM automotive supply 73,163 32,700 -
Significant customer concentrations in accounts receivable for the Company's
major customer are as follows:
2000 1999
---- ----
Conversion vehicles $ 25 $ 389
Bus and mobility vehicles - -
OEM automotive supply 8,071 12,914
NOTE 13 - EARNINGS (LOSS) PER SHARE
A reconciliation of the numerators and denominators of the basic earnings (loss)
per common share and earnings (loss) per common share assuming dilution
computations for the years ended October 1, 2000, October 3, 1999 and September
27, 1998 is presented below.
2000 1999 1998
---- ---- ----
Earnings (loss) per share, basic
Net income (loss) available to
common shareholders $ (4,347) $ 522 $ (6,759)
========== ========== ==========
Weighted average common shares
outstanding 4,214 4,159 4,134
Earnings (loss) per share, basic $ (1.03) $ 0.13 $ (1.63)
========== ========== ==========
Earnings (loss) per share assuming
dilution
Net income (loss) available to
common shareholders $ (4,347) $ 522 $ (6,759)
========== ========== ==========
STARCRAFT CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
October 1, 2000, October 3, 1999 and September 27, 1998
(Dollars in thousands, except per share data)
- --------------------------------------------------------------------------------
NOTE 13 - EARNINGS (LOSS) PER SHARE (Continued)
2000 1999 1998
---- ---- ----
Weighted average common shares
outstanding 4,214 4,159 4,134
Add: dilutive effects of assumed
conversions and exercises:
Stock options - 289 -
Other - 2 -
---------- ---------- ----------
Weighted average common and dilutive
potential common shares outstanding 4,214 4,450 4,134
Earnings (loss) per share assuming
dilution $ (1.03) $ 0.12 $ (1.63)
========== ========== ==========
Stock options were not considered in computing loss per common share for 2000 or
1998 because they were antidilutive. In addition, incentive stock options on
211,500 shares of common stock were not considered in computing earnings per
share for 1999 because they were antidilutive.
NOTE 14 - RELATED PARTY TRANSACTIONS
The Company paid administrative and engineering support in the amounts of $3,230
and $1,193 for 2000 and 1999, respectively to the company's partner in Tecstar.
NOTE 15 - MANAGEMENT'S INTENT REGARDING FUTURE OPERATIONS
At October 1, 2000 and for the year then ended, the Company has minimal
shareholders' equity and had a significant current year loss. Primary factors
for the loss include the continued decline in demand in the conversion vehicles
segment and a plant shutdown at one of the OEM automotive supply segment
locations.
Future operations of the Company are intended to continue. The Company has
amended the terms of its existing debt agreement with its primary lender that
extends the maturity date on certain notes payable and gives the Company
additional liquidity (see Note 3). Production began in a new OEM automotive
supply plant in November 2000. Additionally, the OEM automotive supply plant
that experienced the extended shutdown for a model changeover started up
production again in January 2001. Management intends to reduce operating losses
and return the Company to profitability through continued diversification of its
products and markets, focus effort and resources on higher margin lines of
business, and through cost reductions. Management intends to reassess their
long-term strategy for the conversion vehicle segment based on current industry
trends. Further, subsequent to year-end, the Company has reduced certain
personnel and other overhead costs in the conversion vehicle segment as the
conversion vehicle business has continued to decline. Management anticipates
further decline in the conversion vehicle business and therefore intends to
continue to reduce costs on an ongoing basis to minimize operating losses from
this segment. If future actual results fail to meet management's plan,
additional losses could occur.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE - EFFECTS ON FINANCIAL STATEMENT
Not Applicable
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Incorporated by reference to the Registrant's proxy statement to be filed with
the Securities and Exchange Commission on or about January 25, 2001.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference to the Registrant's proxy statement to be filed with
the Securities and Exchange Commission on or about January 25, 2001.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference to the Registrant's proxy statement to be filed with
the Securities and Exchange Commission on or about January 25, 2001.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference to the Registrant's proxy statement to be filed with
the Securities and Exchange Commission on or about January 25, 2001.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K.
(a) The following documents are filed as part of the report:
Financial Statements (as of October 1, 2000 and October 3, 1999 and for
the fiscal periods ended October 1, 2000, October 3, 1999, and
September 27, 1998):
Report of Independent Auditors
Balance Sheets
Statements of Operations
Statements of Cash Flows
Statements of Shareholders' Equity
Notes to Financial Statements
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the quarter
ended October 1, 2000.
(c) The exhibits filed herewith or incorporated by reference herein are set
forth on the Exhibit Index beginning on page E-1.
(d) The following financial statement schedule is filed as part of this
report:
(i) Valuation and Qualifying Accounts and Reserves.
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are
not required under the related instructions or are inapplicable and
have been omitted.
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Starcraft Corporation and Subsidiaries
Goshen, Indiana
We have audited the consolidated financial statements of Starcraft Corporation
and Subsidiaries as of October 1, 2000 and October 3, 1999 and for the years
ended October 1, 2000, October 3, 1999 and September 27, 1998 and have issued
our report thereon dated November 9, 2000. Our audits also included the
information for the years ended October 1, 2000, October 3, 1999 and September
27, 1998 in the financial statement schedule listed in Item 14 of this Annual
Report. This schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information as of October 1, 2000
and October 3, 1999 and for the years ended October 1, 2000, October 3, 1999 and
September 27, 1998 set forth therein.
/s/ Crowe, Chizek and Company LLP
Elkhart, Indiana
November 9, 2000
Schedule II
Valuation and Qualifying Accounts and Reserves
(Dollars in Thousands)
Balance at Deductions from/ Balance at
Beginning of Charged to Additions to Close of
Period Operations Reserves (a) Period
Allowance for doubtful accounts - deducted from accounts receivable, trade in the consolidated balance sheets:
52 weeks ended October 1, 2000 40 276 (61) 255
53 weeks ended October 3, 1999 40 - - 40
52 weeks ended September 27, 1998 81 - (41) 40
(a) Write-off of bad debts, less recoveries
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) the Securities Exchange Act
of 1934, as amended, the Registrant has duly caused this report to be signed on
behalf of the undersigned, thereto duly authorized.
STARCRAFT CORPORATION
DATE: January 23, 2001 By: /s/ Kelly L. Rose
-----------------------------------
Kelly L. Rose,
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on this 23rd day of January, 2001.
1) Principal Executive Officer:
By: /s/ Kelly L. Rose
----------------------------------- Chairman, Chief Executive Officer
Kelly L. Rose
2) Principal Financial/Accounting Officer:
By: /s/ Richard J. Mullin
----------------------------------- Senior Vice President, Secretary
Richard J. Mullin Chief Financial Officer
3) The Board of Directors:
By: /s/ Kelly L. Rose
----------------------------------- Director
Kelly L. Rose
By: /s/ David J. Matteson
----------------------------------- Director
David J. Matteson
By: /s/ Allen H. Neuharth
----------------------------------- Director
Allen H. Neuharth
By: /s/ G. Raymond Stults
----------------------------------- Director
G. Raymond Stults
By: /s/ Michael H. Schoeffler
----------------------------------- Director
Michael H. Schoeffler
PART IV
EXHIBIT INDEX
Reference to Sequential
Regulation S-K Page
Exhibit Number Document Number
3.1 Registrant's Articles of Incorporation, as
amended. Incorporated by reference to Exhibit
3.1 to the Registrant's Form 10-K for the
year ending October 1, 1995. *
3.2 Registrant's Code of By-Laws, as amended. [ ]
4.1 Article 6 - "Terms of Shares" and Article 9 -
"Provisions for Certain Business
Combinations" of the Registrant's Articles of
Incorporation, as amended. Incorporated by
reference to Exhibit 3.1 to the Registrant's
Form 10-K for the year ending October 1,
1995. *
4.2 Article III - "Shareholder Meetings", Article
VI - "Certificates for Shares" and Article
VII - "Corporate Books and Records - Section
3" of the Registrant's Code of By-Laws, as
amended. Incorporated by reference to Exhibit
3.2 to the Registrant's Form 10-K for the
fiscal year ending September 29, 1996. *
4.3 Amended and Restated Credit Agreement between
the Registrant and Bank One Indianapolis,
N.A., dated November 30, 1994. Incorporated
by reference to Exhibit 4.6 of the
Registrant's Form 10-K for the fiscal year
ending October 2, 1994. *
4.4 First Amendment to Amended and Restated
Credit Agreement between the Registrant and
Bank One, Indianapolis, N.A. dated March 7,
1995. Incorporated by reference to Exhibit
10(2) to the Registrant's Form 10-Q for the
quarter ending April 2, 1995. *
4.5 Second Amendment to Amended and Restated
Credit Agreement dated April 6, 1996, among
Starcraft Corporation, Starcraft Automotive
Group, Inc. Imperial Automobile Group, Inc.
and Bank One, Indianapolis, N.A. Incorporated
by reference to the Registrant's Form 10-Q
for the Quarter Ended March 31, 1997. *
4.6 Third Amendment to Amended and Restated
Credit Agreement, effective January 31, 1997,
among Starcraft Corporation, Starcraft
Automotive Group, Inc., Imperial Automobile
Group, Inc. and Bank One, Indianapolis, N.A.
Incorporated by reference to the Registrant's
Form 10-Q for the Quarter Ended March 31,
1997. *
4.7 Fourth Amendment to Amended and Restated
Credit Agreement, effective June 29, 1997,
among Starcraft Corporation, Starcraft
Automotive Group, Inc., Imperial Automobile
Group, Inc. and Bank One, Indianapolis, N.A.
Incorporated by reference to Exhibit 4.7 of
the Registrant's Form 10-K for the fiscal
year ending September 28, 1997. *
4.8 Fifth Amendment to Amended and Restated
Credit Agreement, effective December 31,
1997, among Starcraft Corporation, Starcraft
Automotive Group, Inc., Imperial Automobile
Group, Inc. and Bank One, Indianapolis, N.A.
Incorporated by reference to Exhibit 4.8 of
the Registrant's Form 10-K for the fiscal
year ending September 28, 1997. *
4.9 Seventh Amendment to Amended and Restated
Credit Agreement, dated as of February 27,
1998, among Starcraft Corporation, Starcraft
Automotive Group, Inc., Imperial Automotive
Group, Inc. and Bank One, Indiana, N.A.
Incorporated by reference to Exhibit 10.1 of
the Registrant's Form 10-Q for the quarter
ending March 29, 1998. *
4.10 Eighth Amendment to Amended and Restated
Credit Agreement, effective November 23,
1998, among Starcraft Corporation, Starcraft
Automotive Group, Inc., Imperial Automobile
Group, Inc. and Bank One, Indianapolis, N.A.
Incorporated by reference to Exhibit 4.10 of
the Registrant's Form 10-K for the fiscal
year ending September 27, 1998. *
4.11 Rights Agreement, dated as of August 12,
1997, between Registrant and Harris Trust and
Savings Bank, as Rights Agent. Incorporated
by reference to the Registrant's 8-A filed
September 9, 1997. *
4.12 Promissory Note from Starcraft Automotive
Group, Inc. to Bank One, Indiana, N.A. dated
November 23, 1998. Incorporated by reference
to Exhibit 4.12 of the Registrant's Form 10-K
for the fiscal year ending September 27,
1998. *
4.13 Guaranty of Kelly L. Rose to the obligations
of Starcraft Automotive Group, Inc. to Bank
One, Indiana, N.A. dated November 23, 1998.
Incorporated by reference to Exhibit 4.13 of
the Registrant's Form 10-K for the fiscal
year ending September 27, 1998. *
4.14 Guaranty of Gerald R. Stults to the
obligations of Starcraft Automotive Group,
Inc. to Bank One, Indiana, N.A. dated
November 23, 1998. Incorporated by reference
to Exhibit 4.14 of the Registrant's Form 10-K
for the fiscal year ending September 27,
1998. *
4.15 Loan and Security Agreement by and among
Starcraft Automotive Group, Inc., National
Mobility Corporation, Starcraft Corporation,
Imperial Automotive Group, Inc. and Foothill
Capital Corporation, dated October 30, 1998.
Incorporated by reference to Exhibit 4.15 of
the Registrant's Form 10-K for the fiscal
year ending September 27, 1998. *
4.16 Secured Promissory Note from Starcraft
Automotive Group, Inc. and National Mobility
Corporation to Foothill Capital Corporation
dated October 30, 1998. Incorporated by
reference to Exhibit 4.16 of the Registrant's
Form 10-K for the fiscal year ending
September 27, 1998. *
4.17 Amended and Restated Loan and Security
Agreement by and between Tecstar, LLC, as
Borrower and Foothill Capital Corporation, as
Lender dated as of December 12,2000. [ ]
4.18 Subordination Agreement between Kelly L. Rose
and G. Ray Stults and Foothill Capital
Corporation dated as of December 12,2000. [ ]
4.19 Waiver, Consent and Second Amendment to Loan
Agreement among Starcraft Automotive Group,
Inc., National Mobility Corporation,
Starcraft Corporation and Imperial Automotive
Group, Inc. and Foothill Capital Corporation
entered into as of December 12, 2000. [ ]
10.1(a) The Starcraft Automotive Corporation Stock
Incentive Plan. **
10.1(b) The Starcraft Corporation 1997 Stock
Incentive Plan. Incorporated by reference to
Exhibit 10.1(b) to the Registrant's From 10-K
for the fiscal year ending September 29,
1996. *
10.2 Form of Tax indemnification agreement among
the Registrant, Mr. Kash, Mr. Rose, Mr.
Newberry and Mr. Hardin, dated as of July 21,
1993. Incorporated by reference to Exhibit
10.7 of the Registrant's registration
statement on Form S-1, Reg. No. 33- 63760. *
10.3(a) Employment Agreement with Kelly L. Rose dated
December 12, 1996. Incorporated by reference
to Exhibit 10.3(b) to the Registrant's From
10-K for the fiscal year ending September 29,
1996. *
10.3(b) Form of First Addendum to Employment
Agreement with Kelly L. Rose, December 31,
1997. Incorporated by reference to Exhibit
10.1 of the Registrant's Form 10-Q for the
fiscal year ending March 29, 1998. *
10.3(c) Second Addendum to Employment Agreement with
Kelly L. Rose, effective December 15, 1997.
Incorporated by reference to Exhibit 10.3(d)
of the Registrant's Form 10-K for the fiscal
year ending September 27, 1998. *
10.3(d) Consulting Agreement with Allen H. Neuharth
dated September 15, 1993. Incorporated by
reference to Exhibit 10.3(k) of the
Registrant's Form 10-K for the fiscal year
ending October 2, 1994. *
10.3(e) Employment Agreement between the Registrant
and Michael H. Schoeffler dated December 12,
1996. Incorporated by reference to Exhibit
10.3(e) to the Registrant's Form 10-K for the
fiscal year ending September 29, 1996. *
10.3(f) Employment Agreement between the Registrant
and Richard J. Mullin effective May 1, 2000. [ ]
10.4 Intercreditor Agreement between Ford Motor
Credit Company and Bank One, Indianapolis,
N.A. dated July 17, 1992. Incorporated by
reference to Exhibit 10.20 of the
Registrant's Form S-1. **
10.5 Truck Consignment Agreement between the
Registrant and Chrysler Corporation dated
August 29, 1991. Incorporated by reference to
Exhibit 10.21 of the Registrant's Form S-1. **
10.6 License Agreement by and between the
Registrant and AlliedSignal, Inc. dated
February 18, 1993. Incorporated by reference
to Exhibit 10.22 of the Registrant's Form
S-1. **
10.7 Agent Agreement by and between the
Registrant, Mitsui & Co. (U.S.A.), Inc. and
Mitsui & Co., Ltd. dated March 1, 1993.
Incorporated by reference to Exhibit 10.23 of
the Registrant's Form S-1. **
10.8 License Agreement by and between the
Registrant and Starcraft RV, Inc. dated
September 12, 1991. Incorporated by reference
to Exhibit 10.24 of the Registrant's Form
S-1. **
10.9 License Agreement by and between the
Registrant and Starcraft Recreational
Products, Ltd. dated January 18, 1991.
Incorporated by reference to Exhibit 10.25 of
the Registrant's Form S-1. **
10.10(a) Directors' Share Plan, restated effective
October 1, 1995. Incorporated by reference to
Exhibit 10.16(a) of the Registrant's Form
10-K for the year ending October 1, 1995. *
10.10(b) Directors' Compensation Deferral Plan
effective October 1, 1995. Incorporated by
reference to Exhibit 10.16(b) of the
Registrant's Form 10-K for the year ending
October 1, 1995. *
10.11 Intercreditor Agreement between General
Motors Acceptance Corporation and Bank One
Indianapolis, N.A. dated July 15, 1994.
Incorporated by reference to Exhibit 10.24 of
the Registrant's Form 10-K for the fiscal
year ending October 2, 1994. *
10.12 Agreement between Chrysler Corporation and
Starcraft Automotive Group, Inc. dated July
1, 1995. Incorporated by reference to Exhibit
10.29 of the Registrant's Form 10-K for the
year ending October 1, 1995. *
10.13 Pool Company Wholesale Finance Plan and
Security Agreement between Chrysler Credit
Corporation and Starcraft Automotive Group,
Inc. dated July 1, 1995. Incorporated by
reference to Exhibit 10.30 of the
Registrant's Form 10-K for the year ending
October 1, 1995. *
10.14 Warrant to Purchase 200,000 Shares of Common
Stock of Starcraft Corporation, issued to
Kelly L. Rose, dated November 23, 1998.
Incorporated by reference to Exhibit 10.33 of
the Registrant's Form 10-K for the fiscal
year ending September 27, 1998. *
10.15 Warrant to Purchase 200,000 Shares of Common
Stock of Starcraft Corporation, issued to G.
Ray Stults, dated November 23, 1998.
Incorporated by reference to Exhibit 10.34 of
the Registrant's Form 10-K for the fiscal
year ending September 27, 1998. *
10.16 Stock Options to Purchase Shares of Common
Stock of Starcraft Corporation of Kelly L.
Rose dated as of December 12, 2000. [ ]
10.17 Stock Options to Purchase Shares of Common
Stock of Starcraft Corporation of G. Raymond
Stults dated as of December 12, 2000. [ ]
10.18(a) Reimbursement Agreement between Starcraft
Corporation, National Mobility Corporation,
Imperial Automotive Group, Inc. and Starcraft
Automotive Group, Inc. and Kelly L. Rose and
G. Ray Stults dated as of December 12, 2000. [ ]
10.18(b) Security Agreement between Starcraft
Corporation and Starcraft Automotive Group,
Inc. and Kelly L. Rose and G. Ray Stults
entered into as of December 12, 2000. [ ]
10.18(c) Real Property Mortgage (LaGrange County,
Indiana)(Elkhart County, Indiana) made and
executed by Starcraft Corporation, f/k/a
Rokane Investment Group, Inc. in favor of
Kelly L. Rose and G. Ray Stults made as of
December 12, 2000. [ ]
10.19 Pool Company Wholesale Finance Plan
Application for Wholesale Financing and
Security Agreement to Ford Motor Credit
Company by Starcraft Automotive Group, Inc.
dated as of January 27, 1995. [ ]
10.20 Inventory Loan and Security Agreement by and
between General Motors Acceptance Corporation
and Starcraft Automotive Group, Inc. dated as
of February 1, 1996. [ ]
10.21 Special Vehicle Manufacturer Converters
Agreement by and between General Motors
Corporation and Starcraft Automotive Group,
Inc. effective July 1, 1999. [ ]
10.22 Ford Motor Company, Ford Authorized Agreement
for the Qualified Vehicle Modifiers (QVM)
Program between Starcraft Automotive Group,
Inc. and Ford Motor Company dated as of
December 15, 1999. [ ]
21 Subsidiaries of the Registrant. [ ]
23.1 Consent of Crowe, Chizek and Company LLP. [ ]
27 Financial Data Schedule [ ]
- ---------------
* Incorporated by reference as indicated in the description.
** Incorporated by reference to the exhibit, bearing the corresponding
exhibit number to the Registrant's registration statement on Form S-1,
Reg. No. 33-63760, unless another exhibit number is listed in the above
description.