Back to GetFilings.com
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarter ended June 30, 2002
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission file number: 0-22048
STARCRAFT CORPORATION
(Exact name of registrant as specified in its charter)
Indiana 35-1817634
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Post Office Box 1903
2703 College Avenue
Goshen, Indiana 46526
(Address of principal executive offices/zip code)
Registrant's telephone number, including area code: 574/533-1105
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes /X/ No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: August 7, 2002 - 4,414,059
shares of Common Stock, without par value.
- INDEX -
PART I. FINANCIAL INFORMATION PAGE
----
Item 1. Financial Statements
Balance Sheets - June 30, 2002 (Unaudited) 1
and September 30, 2001 (Audited)
Statements of Operations (Unaudited) for the three month 2
periods ended June 30, 2002 and July 1, 2001
and the nine month periods ended June 30, 2002 and
July 1, 2001
Statements of Cash Flow (Unaudited) for the nine month 3
periods ended June 30, 2002 and July 1, 2001
Notes to Financial Statements 4-6
Item 2. Management's Discussion and Analysis 7-10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
CERTIFICATION OF FINANCIAL STATEMENTS 13
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
STARCRAFT CORPORATION
Unaudited Audited
BALANCE SHEETS June 30, 2002 September 30, 2001
------------- ------------------
(Dollars in Thousands)
ASSETS
Current Assets
Cash and cash equivalents....................... $ 473 $ 300
Trade receivables, less allowance for doubtful
accounts: $172 at June 30, 2002
and $170 at September 30, 2001............. 17,471 11,200
Tooling and engineering services................ 499 430
Manufacturers' rebates receivable............... 0 109
Notes receivable................................ 65 421
Inventories ................................... 5,339 4,636
Other ................................... 2,755 1,408
--------- --------
Total current assets........................ 26,602 18,504
Property and Equipment
Land, buildings, and improvements............... 2,287 2,014
Machinery and equipment......................... 4,123 4,091
--------- --------
6,410 6,105
Less accumulated depreciation................... (2,857) (2,801)
--------- --------
3,553 3,304
Other assets ................................... 594 202
--------- --------
$ 30,749 $ 22,010
========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Note payable to bank ........................... $ 0 $ 814
Accounts payable, trade......................... 14,435 11,998
Accrued expenses:
Warranty.................................... 880 763
Compensation and related expenses........... 1,453 249
Taxes....................................... 386 912
Indemnification reserves.................... 296 472
Other....................................... 690 1,256
---------- --------
Total current liabilities............................ 18,140 16,464
Long -Term Debt ................................... 8,703 8,092
Commitments and Contingencies........................ -- --
Minority Interest in Subsidiary...................... 2,366 157
Shareholders' Equity
Preferred Stock, no par value; authorized
but unissued 2,000,000 shares
Common Stock, no par value;
10,000,000 shares authorized
4,414,059 shares issued as of June 30, 2002
and 4,255,059 shares as of September 30, 2001 14,734 14,401
Additional paid-in capital..................... 1,386 1,386
Accumulated deficit............................. (14,580) (18,490)
---------- --------
Total shareholders' equity (deficiency) 1,540 (2,703)
---------- --------
$ 30,749 $ 22,010
========== ========
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
STARCRAFT CORPORATION
STATEMENTS OF OPERATIONS - Unaudited
3 Months Ended 9 Months Ended
------------------------------------ ---------------------------------
June 30, 2002 July 1, 2001 June 30, 2002 July 1, 2001
------------- ------------ ------------- ------------
(Dollars in thousands, except per share amounts)
Net Sales $ 29,403 $ 16,250 $ 73,484 $ 33,544
Cost of Goods Sold ......................... 21,832 12,678 55,083 26,856
-------------- -------------- ------------- ------------
Gross profit ...................... 7,571 3,572 18,401 6,688
Operating Expenses
Selling and promotion ................. 490 211 1,369 822
General and administrative 3,536 2,180 9,220 6,705
-------------- -------------- ------------- ------------
Operating Income (Loss) 3,545 1,181 7,812 (839)
Nonoperating (Expense) Income
Interest, net ......................... (133) (345) (369) (847)
Other, net .......................... 124 77 190 150
------------- ------------ ------------- ------------
(9) (268) (179) (697)
------------- ------------ ------------- ------------
Income (loss) before minority
interest and income taxes.......... 3,536 913 7,633 (1,536)
Minority Interest in income of Subsidiary 1,500 0 3,463 (89)
------------- ------------ ------------- ------------
Income (loss) from continuing operations
before income taxes 2,036 913 4,170 (1,447)
Income Taxes 99 (1) 261 41
------------- ------------ ------------- ------------
Income (loss) from continuing operations
after income taxes 1,937 914 3,909 (1,488)
Discontinued Operations:
Income (Loss) from discontinued
operations, net of taxes 0 300 0 (1,226)
------------- ------------ ------------- ------------
Net Income (Loss) $ 1,937 $ 1,214 $ 3,909 $ (2,714)
============= ============ ============= ============
Earnings (loss) per share:
Basic:
Continuing operations $ 0.44 $ 0.22 $ 0.91 $ (0.35)
Discontinued operations 0.00 0.07 0.00 (0.29)
------------- ------------ ------------- ------------
Basic Earnings (loss) per share $ 0.44 $ 0.29 $ 0.91 $ (0.64)
============= ============ ============= ============
Dilutive:
Continuing operations $ 0.38 $ 0.21 $ 0.81 $ (0.35)*
Discontinued operations 0.00 0.07 0.00 (0.29)*
------------- ------------ ------------- ------------
Dilutive earnings (loss) per share $ 0.38 $ 0.28 $ 0.81 $ (0.64)*
============= ============ ============= ============
Shares Outstanding
Basic 4,366 4,245 4,299 4,245
Fully Diluted 5,036 4,270 4,799 4,245
* Does not reflect the effect of options and warrants since their impact is
antidilutive.
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
STARCRAFT CORPORATION
STATEMENTS OF CASH FLOW - Unaudited
9 Months Ended
------------------------------------
June 30, 2002 July 1, 2001
------------- ------------
(Dollars in Thousands)
Operating Activities
Net Income (loss) from continuing operations $ 3,909 $ (1,488)
Adjustments to reconcile net income (loss)
from continuing operations to
net cash provided by operating activities:
Depreciation and amortization ......... 56 789
Additional paid-in-capital stock options 0 378
Minority Interest...................... 2,209 (1,087)
Change in operating
assets and liabilities:
Receivables ............. (5,914) (3,821)
Inventories ............. (703) 376
Other ................... (1,307) (631)
Accounts payable ......... 2,437 869
Accrued expenses ......... 53 (705)
------------- ------------
Net cash from continuing operating activities 740 (5,320)
Net income (loss) from discontinued
operations................... 0 (1,226)
------------- ------------
Net cash from operating activities. 740 (6,546)
Investing Activities
Purchase of property and equipment (305) (758)
Proceeds from sale of conversion van business 0 303
Other.................................. (392) (85)
------------- ------------
Net cash from investing activities (697) (540)
Financing Activities
Borrowings on credit agreements .... 0 7,110
Payments on long-term debt .... (203) (852)
Issuance of common stock............... 333 --
------------- ------------
Net cash from financing activities 130 6,258
Increase (Decrease) in Cash and Cash
Equivalents ........................... 173 (828)
Cash and cash equivalents at
beginning of period................. 300 1,294
------------- ------------
Cash and cash equivalents at
end of period....................... $ 473 $ 466
============= ============
NOTES TO FINANCIAL STATEMENTS
STARCRAFT CORPORATION
June 30, 2002
Note 1. Basis of Presentation
The accompanying unaudited financial statements of Starcraft
Corporation (the "Company") have been prepared pursuant to the rules
and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in annual
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to those
rules and regulations. Reference is made to the Company's audited
financial statements set forth in its annual report on Form 10-K for
its fiscal year ended September 30, 2001.
In the opinion of the management of the Company, the unaudited
financial statements contain all adjustments (which include only
normally recurring adjustments) necessary for a fair statement of the
results of operations for the three month and nine month periods June
30, 2002 and July 1, 2001. The results of operations for the nine
months ended June 30, 2002 are not necessarily indicative of the
results which may be expected for the year ending September 29, 2002.
Note 2. Inventories
The composition of inventories is as follows (dollars in thousands):
June 30, 2002 September 30, 2001
------------- ------------------
Raw Materials $ 5,284 $ 4,582
Work in Process -- --
Finished Goods 340 262
Obsolescence Reserve (285) (208)
------------ ----------
$ 5,339 $ 4,636
============ =========
NOTES TO FINANCIAL STATEMENTS (Continued)
STARCRAFT CORPORATION
June 30, 2002
Note 3. Earnings Per Share
The computation of basic and dilutive earnings (loss) per share follows (in
thousands, except share and per share amounts):
3 Months 9 Months
--------------------------------- --------------------------------
June 30, 2002 July 1, 2001 June 30, 2002 July 1, 2001
------------- ------------ ------------- ------------
Basic earnings (loss) per share
Net income (loss) available
to common stockholders $ 1 ,937 $ 1,214 $ 3,909 $ (2,714)
============= ============ ============= ============
Weighted average common
shares outstanding 4,366 4,245 4,299 4,245
============= ============ ============= ============
Basic earnings (loss) per share $ 0.44 $ 0.29 $ 0.91 $ (0.64)
============= ============ ============= ============
Dilutive earnings (loss) per share
Net income (loss) available
to common stockholders $ 1,937 $ 1,214 $ 3,909 $ (2,714)
============= ============ ============= ============
Weighted average common
shares outstanding 4,366 4,245 4,299 4,245
============= ============ ============= ============
Add: Dilutive effects of
assumed exercises:
Incentive Stock Options 670 25 500 (a)
------------- ------------ ------------- ------------
Weighted average common
and dilutive potential common
shares outstanding 5,036 4,270 4,799 4,245
============= ============ ============= ============
Dilutive earnings (loss) per share $ 0.38 $ 0.28 $ 0.81 $ (0.64)
============= ============ ============= =============
(a) Calculation does not reflect the effect of the employee stock options and
warrants outstanding since their effect is antidilutive
NOTES TO FINANCIAL STATEMENTS (Continued)
STARCRAFT CORPORATION
June 30, 2002
Note 4. Operating Segment Information
The tables below present information about segments used by the chief
operating decision maker of the Company for the three month and nine month
periods ended June 30, 2002 and July 1, 2001. (Dollars in thousands)
3 Months 9 Months
------------------------------------ ---------------------------------
June 30, 2002 July 1, 2001 June 30, 2002 July 1, 2001
------------- ------------ ------------- ------------
Net sales by geographic region:
OEM automotive supply
Domestic $ 28,875 $ 14,993 $ 71,530 $ 29,084
Export -- -- -- --
Conversion vehicle parts:
Domestic 294 552 1,632 2,631
Export 234 705 322 1,829
---------------- ------------ ------------- ------------
$ 29,403 $ 16,250 $ 73,484 $ 33,544
============= ============= ============= ============
Operating income (loss):*
OEM automotive supply $ 1,662 $ 705 $ 3,922 $ (10)
Conversion vehicle parts (193) 285 (334) (1,097)
-------------- ------------ ------------- ------------
$ 1,469 $ 990 $ 3,588 $ (1,107)
============= ============ ============= ============
* Amounts are before general corporate expenses and after interest in income
of subsidiary.
The following provides a reconciliation of segment information to consolidated
information:
3 Months 9 Months
------------------------------------ --------------------------------
June 30, 2002 July 1, 2001 June 30, 2002 July 1, 2001
------------- ------------ ------------- ------------
Operating income (loss)
from continuing operations: $ 1,469 $ 990 $ 3,588 $ (1,107)
Non-operating expenses (9) (268) (179) (697)
Federal and state income
tax expense (99) 1 (261) (41)
Minority interest income (loss) -- -- -- (89)
Corporate income (expenses) 576 191 761 268
------------- ------------ ------------- ------------
Net income (loss) from
continuing operations: $ 1,937 $ 914 $ 3,909 $ (1,488)
============= ============ ============= ============
June 30, 2002 September 30, 2001
------------- ------------------
Total Assets:
OEM automotive supply $ 27,713 $ 17,504
Conversion vehicle parts 3,036 4,506
------------- ----------
$ 30,749 $ 22,010
============= ===========
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
STARCRAFT CORPORATION
RESULTS OF OPERATIONS
Comparison of the three months ended June 30, 2002
(Third Quarter Fiscal Year 2002) to the three
months ended July 1, 2001 (Third Quarter Fiscal
Year 2001)
Continuing Operations:
Net sales for the quarter ended June 30, 2002 increased $13.1 million to $29.4
million from $16.3 million for the quarter ended July 1, 2001. OEM Automotive
Supply sales increased $13.9 million to $28.9 million from $15.0 million. All
three OEM Supply plants were in production in the third quarter of fiscal 2002.
In the third quarter of fiscal 2001, the largest plant was shutdown for a model
changeover. Conversion Vehicle Parts sales declined $0.8 million to $0.5 million
from $1.3 million.
Gross profit increased to $7.6 million (25.7% of sales) for the fiscal 2002
quarter from $3.6 million (22.0% of sales) for the fiscal 2001 quarter. The
increase is attributable to the higher sales level in the OEM Automotive Supply
segment.
Selling and promotion expense was $0.5 million for the fiscal 2002 quarter
compared to $0.2 million for the fiscal 2001 quarter. The increase was
attributed to the support of the higher level of sales. General and
administrative expense was $3.5 million for the fiscal 2002 quarter compared to
$2.2 million for the fiscal 2001 quarter. The increase was due to higher wages
to support the higher sales level and increased costs related to new projects
and increased capacity in the fiscal 2002 quarter.
Interest expense decreased to $133,000 on lower borrowings and lower interest
rates. Minority interest income/(loss) reflects the results from the Company
owning 50% of the OEM Automotive Supply segment. The Company does not have
federal income tax expense at this time due to existing operation loss carry
forwards generated from prior year losses that were fully reserved.
Discontinued Operations:
On May 25, 2001 the Company sold certain assets of its Conversion Vehicle
business to Centurion Vehicles, Inc. On August 31, 2001 the Company sold certain
assets of its Bus and Mobility Vehicle business to Forest River, Inc. These
operations earned income of $0.3 million on sales of $12.5 million in the fiscal
2001 quarter. The results of operations of these businesses are recorded as
discontinued operations.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
STARCRAFT CORPORATION
RESULTS OF OPERATIONS
Comparison of the nine months ended June 30, 2002
(Third Quarter Fiscal Year 2002) to the nine
months ended July 1, 2001 (Third Quarter Fiscal
Year 2001)
Net sales for the nine months ended June 30, 2002 increased $40.0 million to
$73.5 million from $33.5 million for fiscal 2001 period. OEM Automotive Supply
sales increased $42.4 million to $71.5 million from $29.1 million. All three OEM
Supply plants were in production in the 2002 nine month period. In the
comparable 2001 nine month fiscal period the largest plant remained shut-down
until March. Conversion Vehicle Parts Sales declined $2.4 million from $4.4
million in 2001 to $2.0 million for the first nine months of fiscal 2002.
Gross profit increased to $18.4 million (25.0% of sales) for the fiscal 2002
period from $6.7 million (19.9% of sales) for the comparable fiscal 2001 period.
The increase is attributable to the higher sales level in the OEM Automotive
Supply Segment.
Selling and Promotion expense was $1.4 million for the nine month fiscal 2002
period compared to $0.8 million for the fiscal 2001 period. The increase was
attributed to the support of the higher level of sales. General and
administrative expense was $9.2 million for the fiscal 2002 period compared to
$6.7 million for the comparable 2001 period. The increase was due to higher
wages to support higher sales level and increased costs related to new projects
and increased capacity in 2002.
Interest expense decreased $0.5 million to $0.4 million, reflecting lower
borrowing levels and interest rates. Minority interest income/(loss) reflects
the results from the Company owning 50% of the OEM Automotive Supply segment.
The Company does not have federal income tax expense due to existing operating
loss carry forwards generated from prior year losses that were fully reserved.
Discontinued Operations:
On May 25, 2001 the Company sold certain assets of its Conversion Vehicle
business to Centurion Vehicles, Inc. On August 31, 2001 the Company sold certain
assets of its Bus and Mobility Vehicle business to Forest River, Inc. These
operations incurred losses of $1.2 million on sales of $37.1 million in the
first nine months of fiscal 2001. The results of operations of these businesses
are recorded as discontinued operations.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
STARCRAFT CORPORATION
SEASONALITY AND TRENDS
The Company's OEM automotive supply business sales and profits are dependent on
the automotive markets in the United States. The business is influenced by a
number of factors including OEM plant shutdowns, model year changeovers, general
economic conditions and unemployment levels in the United States, atypical
weather for any sales region, interest rates, gasoline prices, and OEM programs
affecting price and supply. The OEM automotive supply segment is dependent upon
long-term contract business. The business' current contracts expire at various
times through 2006.
The Company intends to focus on its OEM automotive supply and conversion vehicle
parts businesses and expects to be profitable in 2002 and 2003. If future actual
results fail to meet management's plan, additional losses could occur.
LIQUIDITY AND CAPITAL RESOURCES
Funds available from operations and under the Company's revolving credit
agreements were adequate to finance operations and provide for capital
expenditures during the nine months ended June 30, 2002.
Continuing operations provided $0.7 million of cash in the first nine months of
fiscal 2002 compared to consuming $6.5 million in the fiscal 2001 period. Trade
receivables at June 30, 2002 were $6.3 million higher than September 30, 2001
due to the higher OEM automotive sales volume.
The Company spent $0.3 million on capital expenditures during the nine months
ended June 30, 2002. As of June 30, 2002 bank debt was $8.7 million.
On December 20, 2000 the Company and its subsidiary, Tecstar, amended their
credit agreements with their primary lending institution. The amended agreements
increased the maximum amount of the combined loans from $14 million to $22
million, and extended the terms of the revolving advances to December 2005 for
the Company, and November 2004 for Tecstar. The amendments allowed Tecstar to
advance funds and distribute earnings to the Company if certain conditions were
met, and expand the borrowing base against which Tecstar could receive advances
under the revolver. A portion of the Company's loan was guaranteed by two
individuals, both of whom are currently directors and one of whom is an officer
of the Company. All other significant terms of the original agreements were not
changed.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
STARCRAFT CORPORATION
LIQUIDITY AND CAPITAL RESOURCES (Continued)
On March 30, 2001 the credit agreements were amended to increase the maximum
borrowing amount of Tecstar's loan from $8 million to $10 million and modify the
financial covenants related to financial ratios and other items.
The Company paid off the term loan portion of its credit agreement in September
2001, and agreed to pay off any revolving advances outstanding at December 31,
2001 instead of December 2005. On December 4, 2001, the lending institution
granted the Company an extension of time to repay the outstanding advances to
June 30, 2002.
On February 13, 2002, Tecstar replaced its $10 million credit facility with a
similar facility provided by a new bank lender. The facility contains terms and
covenants similar to the prior facility and expires on April 1, 2004. In April,
2002, the facility was increased from $10 million to $15 million.
On June 28, 2002, the Company replaced its expiring $2 million facility with a
similar facility provided by a new bank lender. The facility contains terms and
covenants similar to the prior facility and expires on April 1, 2004. The
Company's credit facility is guaranteed by two individuals, both of whom are
currently directors and one of whom is an officer of the Company.
The two new credit agreements described above are provided by the same bank and
are subject to various covenants with which the Company and Tecstar are in
compliance as of June 30, 2002. The total amount of these two commitments is $17
million.
At June 30, 2002, the balance sheet reflected $0.4 million of trade debt
remaining from the sale of the conversion vehicle business. The Company is
paying off these obligations in amounts satisfactory to its vendors over the
next two fiscal quarters. The Company believes that future cash flows from
operations and funds available under its revolving credit agreements will be
sufficient to satisfy its anticipated operating needs and capital improvements
for 2002 and 2003.
The Company believes that its growth objectives 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.
The foregoing discussion contains forward looking statements regarding economic
conditions and trends, adequacy of capital resources, seasonality and supply of,
and demand for, the Company's products, and the prospects of Management's
operating strategies, all of which are subject to a number of important factors
which may cause the Company's projections to be materially inaccurate. Some of
such factors are described in the Company's Form 10-K for the year ended
September 30, 2001, under the subsection entitled "Discussion of Forward-Looking
Information" which is incorporated herein by reference.
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) No reports on Form 8-K were filed by the registrant for the Period
covered by this report.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
STARCRAFT CORPORATION
---------------------
(Registrant)
August 7, 2002 By: /s/ Timothy L. Burke
-----------------------
Timothy L. Burke
Chief Financial Officer
CERTIFICATION
By signing below, each of the undersigned officers hereby certifies that,
to his or her knowledge, (i) this report fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the
information contained in this report fairly presents, in all material respects,
the financial condition and results of operations of Starcraft Corporation.
Signed this 7th day of August, 2002.
/s/ Kelly L. Rose /s/ Timothy L. Burke
- -------------------------- --------------------
Kelly L. Rose Timothy L. Burke
Chairman, President & CEO Chief Financial Officer