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 December 28, 2003
[ ] 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
1123 South Indiana Avenue
Goshen, Indiana 46526
(Address of principal executive offices/zip code)
Registrant's telephone number, including area code: 574/534-7827
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 whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes: No: [X]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: February 6, 2004 - 8,431,127
shares of Common Stock, without par value.
STARCRAFT CORPORATION December 28, 2003
Form 10-Q
- INDEX -
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Balance Sheets - December 28, 2003 (unaudited)
and September 28, 2003 (Audited) 1
Consolidated Statements of Operations (Unaudited) for
the three month periods ended December 28, 2003
and December 29, 2002 2
Consolidated Statements of Cash Flow (Unaudited) for
the three month periods ended December 28, 2003
and December 29, 2002 3
Notes to Consolidated Financial Statements 4-8
Item 2. Management's Discussion and Analysis 9-14
Item 3. Quantitative and Qualitative Discussions About Market Risks 15
Item 4. Controls and Procedures 16
PART II. OTHER INFORMATION
Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases
of Equity Securities 17
Item 6. Exhibits and Reports on Form 8-K 17-18
SIGNATURES 19
CERTIFICATIONS 20 - 28
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
STARCRAFT CORPORATION
(Unaudited) (Audited)
CONSOLIDATED BALANCE SHEETS December 28, 2003 September 28, 2003
----------------- ------------------
(Dollars in Thousands)
ASSETS
Current Assets
Cash and cash equivalents....................... $ 1,145 $ 836
Accounts receivable trade, less allowance for doubtful
accounts: $207 at December 28, 2003
and $200 at September 28, 2003............. 24,112 28,606
Other receivables............................... 2,632 576
Inventories ................................... 14,748 10,060
Tooling and engineering services................ 6,491 6,593
Other current assets............................ 2,452 2,409
----------- ---------
Total current assets........................ 51,580 49,080
Property and Equipment
Land, buildings, and improvements............... 6,932 6,005
Machinery and equipment......................... 8,499 7,321
----------- ---------
15,431 13,326
Less accumulated depreciation................... 4,641 4,190
----------- ---------
10,790 9,136
Other assets ................................... 1,107 514
----------- ---------
$ 63,477 $ 58,730
=========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable, trade......................... $ 21,682 $ 19,549
Accrued expenses:
Compensation and related expenses........... 756 2,668
Warranty.................................... 698 698
Income taxes................................ 321 3,378
Taxes - other............................... 289 434
Other....................................... 503 394
----------- ---------
Total current liabilities................... 24,249 27,121
Long -term debt ................................... 16,662 9,148
Minority interest in subsidiary...................... 8,228 9,821
Commitments and contingencies........................ -- --
Shareholders' Equity
Preferred Stock, no par value: 2,000,000 shares-- ---
authorized, none issued
Common Stock, no par value: 10,000,000 shares
authorized, issued and outstanding
4,881,127 shares as of December 28, 2003
and 4,804,102 shares as of September 28, 2003 15,445 15,203
Additional paid-in capital..................... 3,420 3,420
Accumulated deficit............................. (4,828) (6,151)
Accumulated other comprehensive income.......... 301 168
----------- ---------
Total shareholders' equity ................ 14,338 12,640
----------- ---------
$ 63,477 $ 58,730
=========== =========
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
STARCRAFT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
3 Months Ended
-------------------------------------------
(Unaudited) (Unaudited)
December 28, 2003 December 29, 2002
----------------- -----------------
(Dollars in thousands, except per share amounts)
Net Sales $ 43,798 $ 39,882
Cost of Goods Sold ......................... 36,152 31,015
---------- ---------
Gross profit ...................... 7,646 8,867
Operating Expenses
Selling and promotion ................. 629 383
General and administrative 4,017 4,489
---------- ---------
Operating income....................... 3,000 3,995
Nonoperating (Expense) Income
Interest, net ......................... (73) (113)
Other, net .......................... -- 43
---------- ---------
(73) (70)
---------- ---------
Income before minority
interest and income taxes ........ 2,927 3,925
Minority Interest in income of Subsidiary 1,407 1,734
---------- ---------
Income before income taxes 1,520 2,191
Income Taxes 197 238
---------- ---------
Net income $ 1,323 $ 1,953
========== =========
Basic earnings per share $ 0.27 $ 0.42
========== =========
Dilutive earnings per share $ 0.25 $ 0.39
========== =========
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
STARCRAFT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW
3 Months Ended
-------------------------------------------
(Unaudited) (Unaudited)
December 28, 2003 December 29, 2002
----------------- -----------------
(Dollars in thousands)
Operating Activities
Net income ......................... $ 1,323 $ 1,953
Adjustments to reconcile net income
to net cash from operations:
Depreciation and amortization 441 329
Minority interest.................. (1,593) 1,734
Change in operating
assets and liabilities:
Receivables ...................... 2,568 2,213
Inventories ...................... (4,253) 1,211
Other current assets ............. 59 (2,376)
Accounts payable .................. 2,321 (1,647)
Accrued expenses................... (5,005) (2)
Other .......................... 160 --
---------- ---------
Net cash from operating activities. (3,979) 3,415
Investing Activities
Purchase of property and equipment (1,675) (1,564)
Acquisitions (1,200) --
Other assets ......................... (593) (117)
---------- ---------
Net cash from investing activities (3,468) (1,681)
Financing Activities
Net proceeds (payments) on revolving
credit agreements ............. 7,514 (1,709)
Proceeds from exercise of stock options 242 57
---------- ---------
Net cash from financing activities 7,756 (1,652)
Increase in Cash and Cash
Equivalents ........................... 309 82
Cash and cash equivalents at
beginning of period................. 836 284
---------- ---------
Cash and cash equivalents at
end of period....................... $ 1,145 $ 366
========== =========
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
STARCRAFT CORPORATION
December 28, 2003
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 accounting principles generally accepted in the United
States of America 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 28, 2003.
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 period ended December 28, 2003 and the three month
period ended December 29, 2002. The results of operations for the three
months ended December 28, 2003 are not necessarily indicative of the
results which may be expected for the fiscal year ending October 3, 2004.
The Company has adopted a 52 or 53 week fiscal year ending the last Sunday
nearest to September 30. The results of operations for the three months
ended December 28, 2003 and December 29, 2002 are 13 week periods.
Note 2. Principles of Consolidation
During the quarter presented, the Company had 50% ownership interest in
each of Tecstar, LLC and Tecstar Manufacturing Canada Limited (collectively
"Tecstar"). The accounts of Tecstar are included in these consolidated
financial statements as the Company was deemed to exercise effective
control over Tecstar's financial policies through its representation on the
Boards of Managers, participation in policymaking processes, and
interchange of managerial personnel. See Note 9 for further information.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
STARCRAFT CORPORATION
December 28, 2003
Note 3. Inventories
The composition of inventories is as follows (dollars in thousands):
(Unaudited) (Audited)
December 28, 2003 September 28, 2003
----------------- ------------------
Raw materials $ 14,713 $ 9,583
Finished goods 440 877
----------- ---------
15,153 10,460
Allowance for slow-moving
and obsolete inventories (405) (400)
----------- ---------
Total $ 14,748 $ 10,060
=========== =========
Note 4. Comprehensive Income
Other comprehensive income consists of foreign currency translation
adjustments. Comprehensive income, which consists of new income and other
comprehensive income, for the three months ended December 28, 2003 was
$1,456. There were no foreign currency transactions for the corresponding
prior year periods.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
STARCRAFT CORPORATION
December 28, 2003
Note 5. Earnings Per Share
The computation of basic and dilutede earnings per share follows (in
thousands, except share and per share amounts):
3 Months Ended
-------------------------------------------
(Unaudited) (Unaudited)
December 28, 2003 December 29, 2002
----------------- -----------------
Basic earnings per share
Net income available
to common stockholders $ 1,323 $ 1,953
========== =========
Weighted average common
shares outstanding 4,860 4,685
========== =========
Basic earnings per share $ 0.27 $ 0.42
========== =========
Diluted earnings per share
Net income available
to common stockholders $ 1,323 $ 1,953
========== =========
Weighted average common
shares outstanding 4,860 4,685
Add: Potential dilutive effects of
incentive stock options 536 350
---------- ---------
Weighted average potential
diluted common shares outstanding 5,396 5,035
========== =========
Diluted earnings per share $ 0.25 $ 0.39
========== =========
Prior year information restated for effects of common stock dividend distributed
in March, 2003.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
STARCRAFT CORPORATION
December 28, 2003
Note 6. Stock-Based Compensation
During the second quarter ended March 30, 2003, the Company adopted the
disclosure-only provisions of Statement of Financial Accounting Standards
("SFAS") No. 123, "Accounting for Stock-Based Compensation," as amended by SFAS
No. 148, "Accounting for Stock Based Compensation - Transition and Disclosure."
Stock options are granted for a fixed number of shares to employees with an
exercise price equal to the fair market value of the shares at the date of
grant. The Company accounts for the stock option grants in accordance with APB
Opinion No. 25, "Accounting for Stock Issued to Employees" and related
interpretations. Accordingly, the Company recognizes no compensation expense for
the stock options.
The following table illustrates the effect on net income and earnings per share
as if the Company had applied the fair value recognition provisions of Financial
Accounting Standards Board (FASB) Statement No. 123 "Accounting for Stock-Based
Compensation.
3 Months Ended
-------------------------------------------
(Unaudited) (Unaudited)
December 28, 2003 December 29, 2002
----------------- -----------------
(Dollars in thousands, except per share amounts)
Net Income - as reported $ 1,323 $ 1,953
Deduct: total stock-based employee
compensation expense determined under
fair value based methods for all awards 986 31
---------- ---------
Net income - pro forma $ 337 $ 1,922
========== =========
Earnings per share - as reported
Basic earnings per share $ 0.27 $ 0.42
========== =========
Diluted earnings per share $ 0.25 $ 0.39
========== =========
Earnings per share - pro forma
Basic earnings per share $ 0.07 $ 0.41
========== =========
Diluted earnings per share $ 0.06 $ 0.38
========== =========
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
STARCRAFT CORPORATION
December 28, 2003
Note 7. Operating Segment Information
The Company's principal business is the supply of the OEM Automotive
Industry. The Company's previously reported Automotive Parts and Products
segment no longer meets the quantitative thresholds for separate disclosure
as set forth in SFAS No. 131, "Disclosure about Segments of an Enterprise
and Related Information."
Note 8. Warranty Expense
The Company provides products to Original Equipment Manufacturers ("OEM")
under warranty terms similar to terms offered by the OEM to its customers,
which are generally 3 years or 36,000 miles. The Company accrues an
estimated liability for potential warranties at the time products are sold,
based on past experience.
Note 9. Subsequent Events
On January 16, 2004, the Company through Wheel to Wheel Acquisition
Company, LLC, an Indiana corporation and a wholly owned subsidiary of the
Company (the "Acquisition Subsidiary"), acquired Wheel to Wheel, Inc., a
Michigan corporation ("Wheel to Wheel"). The merger agreement provided for
the acquisition of Wheel to Wheel by the Company pursuant to a merger of
Wheel to Wheel with and into the Acquisition Subsidiary (the "Merger"),
with the Acquisition Subsidiary surviving the Merger and continuing as a
wholly owned subsidiary of the Company.
The Company entered into a $30 million dollar revolving credit agreement
with its current lending institution on January 16, 2004. Advances under
the agreement are limited to a specific percentage of eligible receivables
and inventory, subject to a maximum of $30 million. The advances bear
interest subject to a pricing matrix with ranges of 3/4% below the prime
rate to 1/4% above the prime rate dependent upon a ratio of funded debt to
EBITDA. The revolver also contains a LIBOR based borrowing option with
rates ranging from 150 to 250 basis points above Euro dollar rates,
dependent upon the same ratio of funded debt to EBITA. The credit facility
matures April 1, 2006 and as a result all borrowings under the credit
facility at December 28, 2003 are classified as long-term debt.
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 December 28, 2003
(First Quarter Fiscal Year 2004) to the three months ended
December 29, 2002 (First Quarter Fiscal Year 2003)
Net sales for the quarter ended December 28, 2003 increased $3.9 million to
$43.8 million from $39.9 million for the quarter ended December 29, 2002. Three
out of four assembly plants were operating during the first quarter of fiscal
2004. The remaining plant is in a start-up mode for a new program expected to
launch in March 2004. This plant contributed $3.5 million of sales during the
first quarter of fiscal 2003 for a program that was discontinued in 2003 and
provided minimal sales during the first quarter of 2004. During the first
quarter of fiscal 2003, three plants were operating while one plant was in a
start-up phase. Revenue related to new businesses acquired in late 2003 and the
first quarter of fiscal 2004 added $1.5 million of sales during the first
quarter of fiscal 2004. Sales at the Canadian facility, which was in a start-up
mode during the first quarter of fiscal 2003, were $4.0 million in fiscal 2004.
Fiscal 2003 first quarter sales included $.5 million from two divisions which
contributed no sales during the first quarter of fiscal 2004, as these
operations have ceased.
Gross profit decreased to $7.6 million or 17.5% for the first quarter of fiscal
2004 from $8.9 million or 22.2% during fiscal 2003 first quarter. Gross profit
was adversely affected by higher labor expenses at our Texas facility associated
with implementing an additional shift. Lower volume in Louisiana and H2 pricing
reductions also contributed to the narrower margin. In addition, although the
Canadian sales were incremental to the first quarter of fiscal 2004, reduced
volumes caused small profit generation and reduced the margin percentage.
Margins should improve moving forward as volume increases, historical
performance in our Texas facility is regained, and the performance of recently
acquired businesses improves.
Selling and promotion expenses were $.6 million for the first quarter of 2004
compared to $.4 million for the fiscal 2003 quarter. Marketing expenditures
associated with show attendance in the first quarter drove the increase. General
and administrative costs declined to $4.0 million from $4.5 million in the first
quarter of 2003 due to reductions in incentive compensation, lower prototype
expenses, and a net currency gain of $.1 million.
Interest expense was $.1 million in the first quarter of 2004, identical to the
first quarter of 2003. The Company does anticipate increasing interest costs in
2004. Distributions associated with the merger with Wheel to Wheel, and working
capital levels associated with the acquisitions will increase the average
balance on the revolver.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
STARCRAFT CORPORATION
SEASONALITY AND TRENDS
The Company's 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, atypical weather for any sales region,
interest rates, gasoline prices, and OEM programs affecting price and supply.
The business is also dependent upon long-term contracts.
The Company provided updates on the status of our OEM programs in the Company's
annual report on Form 10-K for the year ended September 28, 2003. There has been
no material change in the status of these programs.
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 three months ended December 28, 2003. Long-term debt was
$16.7 million at December 28, 2003 compared to $9.1 million at September 28,
2003.
Operations utilized $4.0 million of cash during the first quarter of fiscal
2004, compared to generating $3.4 million of cash in the fiscal 2003 period.
Trade receivables at December 28, 2003 were $4.5 million lower than at September
28, 2003 due to seasonal trends which typically reflect lower December sales.
Inventory at December 28, 2003 was $4.7 million higher than September 28, 2003
levels, predominantly due to wheel inventory of $2.6 million associated with the
Silverado and GMC Sierra wheel program. Also, the Texas facility had increased
inventory due to a parts program that has not reached anticipated levels. Other
receivables and tooling development and reimbursement engineering services
increased $2.0 million during the first quarter of 2004 predominantly due to
investment in potential new sales programs and timing of tooling and engineering
reimbursements from customers. Accrued expenses at December 28, 2003 were $5.0
million lower than September 28, 2003 and were reflective of $3.1 million in
Canadian tax payments and $2.5 million in incentive compensation payments. A
$3.0 million distribution was also made to the minority partner in December
2003. Capital expenditures totaled $1.7 million during the first quarter of
fiscal 2004. Major items included tooling expenditures for aftermarket parts of
$.8 million and $.4 million for leasehold improvements in our Texas facility.
In October 2003, Starcraft and Wheel to Wheel jointly acquired the assets of
Tarxien Automotive in Ontario, Canada. Tarxien, with $3.0 million in annual
sales, was acquired for its OEM-compliant horizontal paint line, and its plastic
injection molding facilities that will further support Starcraft's ongoing
automotive aftermarket parts business.
In November 2003, the Company acquired the assets of Classic Design Concepts,
Inc. of Walled Lake, Michigan. Classic Design provides design and engineering
services, concepting and show car development for automotive OEMs, primarily
Ford Motor Company. Classic also develops and markets aftermarket parts. Classic
Design's senior staff brings additional expertise in direct sales and corporate
relationships.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
STARCRAFT CORPORATION
Total purchase price of the assets net of assumed liabilities, for Tarxien
Automotive and Classic Design was $1.2 million.
The Company, in relation to the acquisition of Wheel to Wheel, has entered into
employment contracts with three employees, that among other things, allow for
severance payments of two years worth of base salary for termination without
cause. Obligations under these severance agreements would total $1.8 million
annually.
In January 2004, subsequent to quarter end, the Company entered into a $30
million revolving credit agreement with its current lending institution, and a
new lending institution, which matures on April 1, 2006. The facility was
amended to accommodate the increased revolver needs associated with recent
acquisitions and the Wheel to Wheel merger. Advances under the agreement are
limited to a specific percentage of eligible receivables and inventory, subject
to a maximum of $30 million. The advances bear interest subject to a pricing
matrix with ranges of 3/4% below the prime rate to 1/4% above the prime rate
dependent upon a ratio of funded debt to EBITDA. The revolver also contains a
LIBOR based borrowing option with rates ranging from 150 to 250 basis points
above Euro dollar rates, dependent upon the same calculation. The borrowings are
collateralized by substantially all of the Company's assets.
The Company believes that future cash flows from operations and funds available
under its revolving credit agreement will be sufficient to satisfy its
anticipated operating needs and capital and liquidity requirements for 2004. The
Company also believes that its objectives for growth over the next few years can
be accomplished with capital investment levels consistent with prior years, and
that its internal resources and existing or refinanced credit facilities will
provide sufficient liquidity for such purposes.
The Company is in the process of reviewing its capital structure and potential
transactions to mitigate exposure to near-term debt and to better align the
capital structure with the long-term risks and opportunities of the business.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
STARCRAFT CORPORATION
MANUFACTURING AND OPERATING TRENDS
The OEM automotive supply program related to the Shreveport facility ended
during the fourth quarter of fiscal 2003. GM has announced plans to introduce an
ESV program to be produced by GM's Shreveport, Louisiana facility, for which the
Company will provide second stage manufacturing. The program, originally
expected to launch early in the second quarter of fiscal 2004, is now expected
to begin late in the second quarter.
During the first quarter of 2004, the Company decided to close the conversion
kit business in Mexico.
During the first quarter of fiscal 2004, Tecstar signed new distribution
agreements with GM's SPO division. It will exclusively offer certain parts
through GM dealers, including ten styles of certified 20-inch wheels, caps and
lug nut covers for Chevrolet Silverado and GMC Sierra trucks. New
Tecstar-supplied accessory components will be available for the H2 Hummer and
other Hummer vehicles as they are introduced during 2004.
APPLICATION OF CRITICAL ACCOUNTING POLICIES
In the course of normal business and in the preparation of its consolidated
financial statements in accordance with accounting principles generally accepted
in the United States, Management is required to make estimates and assumptions
that affect the amounts reported in the financial statements. Actual results
could differ from those estimates. Some of the more significant policies
include:
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
STARCRAFT CORPORATION
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 under FOB factory terms.
Warranties: The Company follows the policy of accruing an estimated liability
for warranties at the time the warranted products are sold. The estimate is
generally based on past claims experience.
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.
Identifiable Intangible Asset and Goodwill: The identifiable intangible assets
generated by the Wheel to Wheel merger will be amortized to expense over the
expected lives of the assets ranging from one to three years. Goodwill will not
be amortized to expense, but rather will be evaluated annually for any
impairment in the carrying value, and adjusted accordingly through the income
statement.
FORWARD LOOKING STATEMENTS
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, reviews and profits, 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 28, 2003, under the subsection entitled "Discussion of
Forward-Looking Information" which is incorporated herein by reference.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
STARCRAFT CORPORATION
INCOME TAXES
At this time, the Company does not have U.S. federal income tax expenses due to
a reserve on existing deferred tax assets. The Company is incurring Canadian
taxes related to its operation in Canada, and state taxes.
As the operating loss carryforwards are utilized, the Company will begin
recording U.S. federal income taxes, along with Canadian and state taxes. At
December 28, 2003, the operating loss carryforwards were approximately $1.8
million. Management believes the proforma information presented below is useful
to enable a reader to determine the impact income taxes would have on earnings,
if the Company had not incurred the operating loss carryforwards in prior years.
The following table illustrates the effect on net income and earnings per share
as if the Company were incurring income tax expenses at a 39% effective tax rate
for the first quarter ended December 28, 2003 and December 29, 2002,
respectively.
Year Ended
-------------------------------------------
December 28, 2003 December 29, 2002
----------------- -----------------
(Dollars in thousands, except per share amounts)
Net Income - as reported $ 1,323 $ 1,953
Deduct: pro-forma provision for
income taxes 417 483
---------- ---------
Net income - pro forma $ 906 $ 1,470
========== =========
Earnings per share - as reported
Basic Earnings per share $ 0.27 $ 0.42
========== =========
Dilutive earnings per share $ 0.25 $ 0.39
========== =========
Earnings per share - pro forma
Basic Earnings per share $ 0.19 $ 0.31
========== =========
Dilutive earnings per share $ 0.17 $ 0.29
========== =========
STARCRAFT CORPORATION
ITEM 3. QUANTATIVE AND QUALITATIVE DISUCSSIONS ABOUT MARKET RISKS
There have been no material changes from the information provided in the
Company's annual report on Form 10-K for the year ended September 28, 2003.
STARCRAFT CORPORATION
ITEM 4. CONTROLS AND PROCEDURES
Starcraft carried out an evaluation, under the supervision and with the
participation of Starcraft's management, including Starcraft's Co-Chief
Executive Officers and Chief Financial Officer, of the effectiveness of the
design and operation of Starcraft's disclosure controls and procedures pursuant
to Exchange Act Rule 13a-15. Based upon that evaluation, the Co-Chief Executive
Officers and Chief Financial Officer concluded that, at December 28, 2003,
Starcraft's disclosure controls and procedures are effective in accumulating and
communicating to management (including such officers) the information relating
to Starcraft (including its consolidated subsidiaries) required to be included
in Starcraft's periodic SEC filings.
PART II OTHER INFORMATION
Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity
Securities.
(a) By action of the Registrant's Board of Directors and its shareholders,
the Articles of Incorporation of the Registrant were amended effective
January 13, 2004, to increase the number of authorized common shares
from 10,000,000 to 20,000,000.
(c) The Registrant issued 3,550,000 shares of Common Stock to the 7
shareholders of Wheel to Wheel, Inc. in connection with the
acquisition of Wheel to Wheel, Inc. on January 16, 2004. Such issuance
was exempt from registration under the Securities Act of 1933 as a
private placement under Section 4(2) and Regulation D.
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed with this report
3.1 Restated Articles of Incorporation of Starcraft Corporation, as
amended
3.2 Code of By-Laws of Starcraft Corporation, as amended
4.1 Credit Agreement by and between Starcraft Corporation and
Comerica Bank dated January 16, 2004
4.2 Form of Revolving Note of Starcraft Corporation to bank, dated as
of January 16, 2004
4.3 Form of Swing-line Note of Starcraft Corporation to Comerica
Bank, dated as of January 16, 2004
10.1 Employment agreement dated as of January 16, 2004, between
Starcraft Corporation and Jeffrey P. Beitzel
10.2 Employment agreement dated as of January 16, 2004, between
Starcraft Corporation and Douglass C. Goad
10.3 Employment agreement dated as of January 16, 2004, between
Starcraft Corporation and Richard C. Anderson
10.4 Starcraft Corporation 1997 Stock Incentive Plan, as amended
31.1 Certification by Co-Chief Executive Officer required by Rule
31a-14(a) or 15d-14(a)
31.2 Certification by Co-Chief Executive Officer required by Rule
31a-14(a) or 15d-14(a) PART II OTHER INFORMATION - Continued
31.3 Certification by Chief Financial Officer required by Rule
31a-14(a) or 15d-14(a)
32 Certification required under Section 1350
(b) The Company filed a report on Form 8-K on October 30, 2003 to report
entering into a merger agreement with Wheel to Wheel.
The Company filed a report on Form 8-K on November 18, 2003 to report
the issuance of a press release relating to fourth quarter results.
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)
February 11, 2004 By: /s/ Joseph E. Katona, III
----------------------------
Joseph E. Katona, III
Chief Financial Officer