Back to GetFilings.com
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the year ended December 31, 2001
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 0-22268
NATIONAL R.V. HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware No. 33-0371079
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3411 N. Perris Blvd., Perris, California 92571
---------------------------------------- -----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (909) 943-6007
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, par value $.01 per share New York Stock Exchange
- -------------------------------------- ---------------------------------------
(Title of class) (Name of each Exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of 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. [X]
Aggregate market value (based upon the closing sale price) of the voting stock
held by nonaffiliated stockholders of Registrant as of March 1, 2002 was
approximately $89,840,000.
The number of shares outstanding of the Registrant's common stock, as of March
1, 2002, was 9,718,605.
Documents Incorporated by Reference: Part III incorporates by reference portions
of the National R.V. Holdings, Inc. Proxy Statement for the 2002 Annual Meeting
of Stockholders to be filed within 120 days of December 31, 2001.
1
TABLE OF CONTENTS
PART I........................................................................3
Item 1. Business...........................................................3
Item 2. Properties........................................................14
Item 3. Legal Proceedings.................................................15
Item 4. Submission of Matters to a Vote of Security Holders...............15
PART II......................................................................16
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters...........................................................16
Item 6. Selected Financial Data...........................................16
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.............................................18
Item 7A. Quantitative and Qualitative Disclosures About Market Risk........27
Item 8. Financial Statements and Supplementary Data.......................28
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure..............................................28
PART III.....................................................................29
Item 10. Directors and Officers of the Registrant..........................29
Item 11. Executive Compensation............................................29
Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters.......................................29
Item 13. Certain Relationships and Related Transactions....................29
PART IV......................................................................30
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K...30
SIGNATURES.................................................................31
2
PART I
Item 1. Business
General
National R.V. Holdings, Inc. (the "Company") is one of the nation's leading
manufacturers of Class A motorhomes. From its Perris, California facility, the
Company designs, manufactures and markets National R.V., Inc. ("NRV") Class "A"
motorhomes under brand names including Tradewinds, Dolphin, Sea Breeze, and
Islander, and travel trailers under brand names including Sea Breeze, Palisades,
Splash, Rage'n, and Blaze'n. From its Junction City, Oregon facility, the
Company designs, manufactures and markets Country Coach, Inc. ("CCI") high-end
(Highline) Class "A" motorhomes under the brand names including Affinity,
Allure, Intrigue, Lexa and Magna, and bus conversions under the Country Coach
Prevost brand, though the bus conversion will be discontinued in 2002. The
Company, which began manufacturing recreational vehicles ("RVs") in 1964, is the
fifth largest domestic manufacturer of Class A motorhomes and sells its
motorhomes and travel trailers through a network of approximately 172 dealer
locations in 40 states and Canada.
The Company was incorporated in Delaware in 1988. NRV's predecessor was
organized in 1963. CCI's predecessor was organized in 1973. As used herein, the
term "Company" refers to National R.V. Holdings, Inc., NRV and CCI unless the
context otherwise requires.
The Company's headquarters are located at 3411 N. Perris Blvd., Perris,
California 92571, and its telephone number is (909) 943-6007.
Recreational Vehicle Industry Overview
Products
Based upon standards established by the Recreational Vehicle Industry
Association (the "RVIA"), RVs are commonly classified into three main
categories: (i) motorhomes, composed of Class A, B and C types; (ii) towables,
composed of fifth-wheel travel trailers, conventional travel trailers, truck
campers and folding camping trailers, and (iii) van conversions.
Motorhomes: Motorhomes are self-powered RVs built on a motor vehicle
chassis. The interior typically includes a driver's area and kitchen, bathroom,
dining and sleeping areas. Motorhomes are self-contained, with their own power
generation, heating, cooking, refrigeration, sewage holding and water storage
facilities, so that they can be lived in without being attached to utilities.
Motorhomes are generally categorized into A, B and C classes. Class A motorhomes
are constructed on a medium-duty truck chassis, which includes the engine, drive
train and other operating components. Retail prices for Class A motorhomes
generally range from $40,000 to $200,000. Highline motorhomes, which are a
subset of Class A motorhomes, generally range in retail price from $200,000 to
$1,000,000. Class C motorhomes are built on a van or pick-up truck chassis,
which includes an engine, drive-train components and a finished cab section, and
generally range in retail price from $40,000 to $70,000. Class B motorhomes are
van campers, which generally contain fewer features than Class A or Class C
motorhomes.
3
Towables: Towables are non-motorized RVs. Fifth-wheel travel trailers,
similar to motorhomes in features and use, are constructed with a raised forward
section that attaches to the bed of a pick-up truck. This allows a bi-level
floor plan and generally more living space than conventional travel trailers.
Fifth-wheel travel trailers are typically less expensive than motorhomes and
range in retail price from $15,000 to $80,000. Conventional travel trailers are
similar to fifth-wheel travel trailers but do not have the raised forward
section. Truck campers have many of the amenities found on travel trailers and
slide into the bed of a pickup truck. Folding camping trailers contain fewer
features than other towables and are constructed with collapsible "tent"
sidewalls that fold for easy towing.
Van Conversions: Van conversions are automotive vans converted by van
upfitters to include such features as entertainment centers, comfortable
seating, window treatments and lighting.
Trends and Demographics
According to the RVIA's wholesale statistics, RV unit sales (excluding van
conversions) in 2001 decreased 14.4% to 256,800 from 300,100 in 2000. The
aggregate wholesale value of these 2001 shipments was approximately $6.9
billion, with Class A motorhomes comprising $3.5 billion or 51% of the total and
travel trailers comprising $2.4 billion or 35% of the total. Unit shipments of
Class A motorhomes in 2001 decreased 18.5% to 33,400 from 41,000 in 2000. The
average wholesale price of Class A motorhomes increased 11.0% in 2001 to
$104,386 from $94,003 in 2000. Unit shipments of travel trailers decreased 11.3%
in 2001 to 156,900 from 176,800 in 2000. The average wholesale price of
conventional travel trailers increased 4.3% in 2001 to $12,269 from $11,763 in
2000, while the average wholesale price of fifth-wheel travel trailers increased
8.6% to $20,670 in 2001 from $19,032 in 2000.
While overall unit shipments have increased over the past five years, the
RV industry's manufacturing base has undergone a consolidation. Between 1992 and
2001, the number of Class A motorhome manufacturers declined from 45 to 28. In
addition, during this period, the aggregate retail market share of the ten
largest Class A motorhome manufacturers increased from 82.5% to 91.7%.
RVs are purchased for a variety of purposes, including camping, visiting
family and friends, sightseeing, vacationing and enjoying outdoor activities and
sporting events. According to a University of Michigan study, approximately 6.9
million households (or 7.6% of all households) in the United States owned RVs in
2001, up from 6.4 million in 1997, 5.8 million in 1993 and 5.8 million in 1988.
In addition, the study indicated that 59% of all current RV owners and 31% of
all former RV owners plan to purchase another RV in the future. This study
further indicated that 67% of all future RV purchases will be used RVs (RVIA and
market share statistics reflect new product sales only) with 32% of these used
RVs older than 15 years.
4
Ownership of RVs reaches its highest level among those Americans aged 55 to
64, with 13.7% of households in this category owning RVs. The number of
households in this group, which constitutes the Company's primary target market,
is projected to grow by 6.4 million households, or 45% from 2001 to 2010 as
compared to total growth of 10.5 million households, or 10.0%. Baby Boomers are
defined as those born between the years 1946 and 1964, and thus the leading edge
of the Baby Boomer generation began turning 50 in 1996. This generation is
expected to be more affluent and retire earlier than past generations. As Baby
Boomers enter and travel through the important 50 to 65 age group for RV sales,
they represent the potential for a secular uptrend in the RV industry.
As motorhomes have increased in popularity due, in part, to the entry of
the Baby Boomer generation into the target market, the purchasers of these
products have grown more sophisticated in their tastes. The Company believes
that as a result, customers have demanded more value for their money, and brand
recognition and loyalty have become increasingly important. These trends have
favored companies that can deliver quality, value and reliability on a sustained
basis.
Business Development and Strategy
The Company's business development and operating strategy is to deliver
high quality, innovative products that offer superior value to enhance the
Company's position as one of the nation's leading manufacturers of RVs. This
strategy focuses on the following key elements: (i) building upon and exploiting
recognition of the Company's brand names; (ii) offering the highest value
products at multiple price points to appeal to first time and repeat buyers;
(iii) expanding its manufacturing capacity and continuing to utilize vertically
integrated manufacturing processes; and (iv) capitalizing on the Company's
reputation to expand its presence in the Highline market.
Building upon and Exploiting Recognition of the Company's Brand Names. The
Company believes that its brand names and reputation for manufacturing quality
products with excellent value have fostered strong consumer awareness of the
Company's products and have contributed to the growth of its net sales and
market share. The Company intends to capitalize on its brand name recognition in
order to increase its sales and market share, facilitate the introduction of new
products and enhance its dealer network.
Offering the Highest Value Products at Multiple Price Points to Appeal to
First Time and Repeat Buyers. The Company currently offers fifteen distinct
lines of RVs, which are available in a variety of lengths, floorplans, color
schemes and interior designs and range in suggested retail price from $12,000 to
$1,200,000. Each model is intended to attract customers seeking an RV within
their price range by offering value superior to competitive products from other
manufacturers. RVIA data indicates that most motorhome purchasers have
previously owned a recreational vehicle, and the Company's models are positioned
to address the demands of these repeat customers as well as first time buyers.
5
Expanded Manufacturing Capacity and Vertically Integrated Manufacturing
Processes. The Company has expanded certain of its manufacturing facilities in
order to increase its production flexibility and substantially increase overall
production volume to meet demand and anticipated growth. The Company designs and
manufactures a significant number of the components used in the assembly of its
products, rather than purchasing them from third parties. The Company believes
that its vertically integrated manufacturing processes allow it to achieve cost
savings and better quality control. The Company's in-house research and
development staff and on-site component manufacturing departments enable the
Company to ensure a timely supply of necessary products and to respond rapidly
to market changes.
Capitalizing on the Company's Reputation to Expand its Presence in the
Highline Market. The Company's Country Coach product offerings focus exclusively
on the Highline segment of the Class A motorhome market. The Company has a
strong market share in the Highline segment. For the twelve months ended
December 31, 2001, the Company was the third largest manufacturer of Highline
motorhomes, with approximately 16.8% of this market, up from 16.4% in 2000. The
Company is actively seeking to expand its share of this market by capitalizing
on its established reputation, continuing to offer superior products while
reducing its costs, and expanding its production capacity in order to target the
market's growing population and satisfy the desire of many current RV owners to
purchase more upscale vehicles.
Products
The Company's product strategy is to offer the highest value RVs across a
wide range of retail prices to appeal to a broad range of potential customers
and to capture the business of brand-loyal repeat purchasers who tend to trade
up with each new purchase. National RV currently manufactures Class A motorhomes
under Tradewinds, Dolphin, Sea Breeze, and Islander brand names and travel
trailers under the Sea Breeze, Palisades, Splash, Rage'n, and Blaze'n brand
names. Country Coach currently manufactures Highline Class "A" motorhomes under
the brand names including Affinity, Allure, Intrigue, Lexa and Magna, and bus
conversions under the Country Coach Prevost brand, though the bus conversion
will be discontinued in 2002.
The Company's products are offered with a wide range of accessories and
options and manufactured with high-quality materials and components. Certain of
the Company's Highline motorhomes can be customized to a particular purchaser's
specifications. Each vehicle is equipped with a wide range of kitchen and
bathroom appliances, audio and video electronics, communication devices,
furniture, climate control systems and storage spaces.
Lexa. To a significant extent custom, inside and out, the Lexa is available
in 42' and 45' lengths with double or triple slide-outs. Built on the DynoMax
chassis with independent front suspension and a liftable tag axle, the Lexa is
equipped with the Caterpillar C-15 515 HP diesel engine teamed with Allison's
4000MH transmission. Along with numerous choices, the Lexa offers the newest
technologies, like a 42" plasma color matrix television screen which folds out
of sight with an electronic TV lift when not in use; a vacuum formed, sculpted
dash with "Soft Touch" covering; optional CompuDigital dash; and new On-Q
positioning adjustable gauge panel for individual viewing comfort. The driver's
panel also features a fully interactive Coach Command monitoring system.
Suggested retail pricing for the Lexa starts at $682,000. The Lexa debuted in
2001.
6
Affinity. The 40' and 42' Affinity is powered by the Caterpillar C-12 505
HP engine teamed with Allison's 4000MH transmission. This engine has 1550 lb-ft
of torque at 1200 RPM. Built on the DynoMax chassis, the all fiberglass coach
features independent front suspension, ABS brakes, front disc brakes, IPD sway
bar and liftable tag axle. Among the chassis' attributes are a longer wheelbase
(for enhanced driveability), shorter front and rear overhang and V-weight
distribution (the distribution of the weight of the house and the storage bays
down toward the center of the coach). An interducted triple roof air system, a
12.5 kw diesel generator on electric rollout tray, and over-the-road air
conditioning are among the many special features. Six designer-coordinated
interior packages (or option to customize) and dual slide-out floorplan
combinations offer significant opportunities for personalization. Custom
exterior graphics ensure a unique and attractive exterior. Suggested retail
prices for the Affinity start at $526,000. The Affinity was introduced in 1991.
Magna. Available in 40' and 42' lengths with dual slide-outs floorplans,
this motorcoach is built on the DynoMax chassis with independent front
suspension driveability. The Caterpillar C-12 505 HP diesel engine teamed with
Allison's 4000MH transmission powers it. Six designer coordinated interior
packages (buyers may also modify a standard scheme or significantly customize)
complement the fiberglass exterior with 4 exterior paint graphic packages. A 42"
swing down TV with plasma display, vacuum formed cab overhead and burlwood dash
panels, concealable color back-up monitor, over-the-road air conditioning with
individual controls, an interducted roof air system, and a 12.5 kw diesel
generator on a convenient electric roll-out tray are among the special features.
Suggested retail prices for the Magna start at $424,000. The Magna was
introduced in 1991.
Intrigue. Built on the DynoMax chassis, the Intrigue features independent
front suspension, ABS brakes, and an IPD sway bar for an enviable drive. It is
available in 32', 36' and 40' lengths. This diesel pusher is powered by the
Cummins ISL 370 HP engine, or optional 400 HP diesel engine which delivers 1200
lb-ft torque at 1300 RPM. The fiberglass exterior features painted exterior
graphics including full body paint with complete clear coat protection. Special
features include a concealable color back-up monitor, burlwood dash panels, a
digital power package, 8.0 kw "quiet" diesel generator, automatic low-voltage
generator start, and hydronic heating system. Custom crafted cabinetry is
standard in each of the single, dual, Grand Opening dual living room slide-outs
and triple slide-out floorplans. Suggested retail prices for the Intrigue start
at $278,000. The Intrigue was introduced in 1994.
Allure. Available in 32', 36' and 40' lengths, this diesel pusher
motorcoach is built on the DynoMax chassis. It is powered by the Cummins
Interact System (ISC) 350 HP diesel engine teamed with Allison's 3000MH
transmission (or opt for the ISC 370 HP engine). The fiberglass exterior, with
its painted graphics, including full body paint, complete clear coat protection
and bus-style aerodynamics, is complemented by four designer coordinated
interior packages. Among the Allure's special features are: burlwood dash
panels, automatic low-voltage generator start, 8.0 kw "quiet" diesel generator,
and a full awning patio package. Single, dual, Grand Opening dual living room
slides and triple slide-out floorplan arrangements are available. Suggested
retail prices for the Allure start at $244,000. The Allure was introduced in
1995.
7
Country Coach Prevost XLII Conversion. This completely customized bus,
billed as the ultimate in mobile livability, is built on the 40' and 45'
LeMirage XLII Prevost chassis. Fully custom interiors are equaled by multi-color
custom exterior graphics with clear coat. The coach offers custom modifications,
CompuDigital dash, optional GPS navigation system, concealable color back-up
monitor, computerized touch pad switching, computerized air leveling, and a 42"
plasma display that folds neatly away into the ceiling when not in use. Slide
room floorplans expand the interior living space. Suggested retail prices for
the XLII start at $967,000. The Country Coach Prevost Conversion was introduced
in 1979. However, the Company has announced that it intends to discontinue this
product in 2002 in order to focus additional Junction City facility resources on
the manufacturing of entry-level luxury motorcoaches.
Islander. The 40' Islander is a luxury, bus-style diesel pusher built on
the Country Coach Dynomax 10TDX chassis, offering considerable strength in
addition to features like a 400 HP Cummins diesel engine, independent front
suspension, and high tow ratings. The Islander features large double slide rooms
that add approximately 45 square feet of additional living space. This motorhome
receives intricate full exterior paint designs, in addition to luxury interior
appointments like Ultraleather and upgraded electronics. Suggested retail prices
for the Islander start at $255,000. The Islander debuted in 1999.
Tradewinds. The Tradewinds nameplate is found on two motorhome
incarnations, each with a different offering of features and options. The
Tradewinds LTC is available in 37' to 39' floorplans and will soon be built on
the Country Coach Dynomax 8TDX chassis. The Tradewinds LTC (Luxury Touring
Class) features an extensively upgraded diesel chassis from its sister product,
the Tradewinds LE. These upgrades include a more powerful engine, greater
storage space and independent front suspension. Featuring many luxury
appointments in addition to full body paint, the Tradewinds LTC is both upscale
and affordable. The more economical Tradewinds LE is available in four
floorplans on a diesel-powered chassis. The Tradewinds LE features a superior
diesel chassis when compared with other "entry diesel" products. These chassis
features include a raised rail chassis design and independent front suspension.
Each Tradewinds model is a full-basement, bus-style motorhome with automatic
double slide-out features that expand the interior of the motorhome to add
additional living space. Depending on the model, Tradewinds are produced in 35
to 39 foot lengths and are available with a choice of cherry, walnut or maple
interiors. Suggested retail prices for the Tradewinds start at $170,000.
Dolphin. The Dolphin is available in three floorplans, and is built
exclusively on Workhorse's W-22 gas-powered chassis. The first RV manufacturer
to bring this chassis to market, National RV debuted this chassis in the 2002
Dolphin. These models are full-basement, bus-style motorhomes. All models have
automatic double slide-out features that expand the interior of the motorhomes
and add additional living space. The Dolphin LX is an upgraded Dolphin, offering
certain distinct features, exterior styling and floorplans. Many optional
Dolphin features become standard on the Dolphin LX, and the LX features many
items not available on the standard Dolphin. Many items found on the Dolphin LX
are usually reserved for higher-priced diesel motorhomes. The Dolphin products
are produced in 34 to 35 foot lengths. Suggested retail prices for the Dolphin
start at $114,000. The Class A Dolphin motorhome was introduced in 1985.
8
Sea Breeze. The Sea Breeze is a moderately priced, bus-style motorhome,
built on a Ford gas-powered chassis. A full-height motorhome, the Sea Breeze
offers considerable basement storage. The Sea Breeze features Corian(R)
countertops, power heated side-view mirrors, deluxe trim and heated water and
waste holding tanks. The Sea Breeze is 30 feet in length. Also offered under the
Sea Breeze name is the Sea Breeze LX. The Sea Breeze LX includes automatic
double slide-out features that expand the interior of the motorhomes and create
additional living space, in addition to many upgrades not available in the
standard Sea Breeze. The Sea Breeze LX models are produced in 31 to 34 foot
lengths. Suggested retail prices for the Sea Breeze start at $83,000. The Class
A Sea Breeze product was introduced in 1992.
Palisades Fifth-Wheel Travel Trailer. The Palisades fifth-wheel travel
trailer comes in four, triple-slide floorplans ranging from 33 to 36 feet in
length. All floorplans feature a choice of oak or maple interiors, and many
other amenities. Suggested retail prices start at $60,000. The Palisades was
introduced in 1999.
Sea Breeze Fifth-Wheel Travel Trailer. The Sea Breeze fifth-wheel travel
trailer comes in three floorplans equipped similar to a Sea Breeze motorhome.
All floorplans feature standard living room and bedroom slide-out sections and
are produced in 33 to 36 foot lengths. Suggested retail prices start at $52,000.
The Sea Breeze fifth-wheel trailer was introduced in 1995.
Blaze'n Travel Trailer. The Blaze'n is a dual purpose conventional travel
trailer and contains capacity for hauling ATVs or small watercraft while
providing all of the comfort and roominess of a full-size RV. Suggested retail
prices for the Blaze'n start at $26,000. This product was introduced in 2001.
Rage'n Travel Trailer. The Rage'n is a ramp travel trailer with both
conventional and fifth-wheel floorplans and contains cargo capacity for hauling
ATVs or small watercraft. Suggested retail prices for the Rage'n start at
$16,000. This product was introduced in 2000.
Splash Travel Trailer. The Splash is an entry-level travel trailer with
both conventional and fifth-wheel floorplans. Suggested retail prices for the
Splash start at $12,000. This product line debuted in 2000.
Planned Product Introductions and Discontinuations
During 2002, the Company plans to introduce new floorplans and lounge
slides in its existing products to target certain market niches not previously
represented. Also, the Company plans to increase its paint capacity, to increase
its offering of NRV painted diesel products, as well as to expand its production
and use of DynoMax chassis for certain NRV products. In addition, the Company is
discontinuing its luxury Prevost bus conversion business in order to focus
additional Junction City facility resources on the manufacturing of entry-level
luxury motorcoaches. The limited profitability and declining volume of the bus
conversions, and the need to maximize limited manufacturing capacity to fulfill
the stronger demand for CCI's more profitable luxury coaches all contributed to
this decision.
9
Distribution and Marketing
The Company markets NRV products through a network of approximately 110
class A and 78 towable dealer locations in 39 states and Canada. These dealers
generally carry all or a portion of NRV's product lines along with competitors'
products. The Company markets CCI products through 21 dealer locations in 14
states. Overall, the Company markets its NRV and CCI products through a network
of approximately 172 distinct dealer locations in 40 states and Canada. CCI
utilizes a limited dealer network for its Highline motorhomes due to the selling
expertise required and the tendency of Highline customers to make
destination-type purchases, meaning show, rally and RV park purchases. The
Company believes that each of the CCI dealers has significant experience with
top-of-the-line products and has outstanding facilities and service programs.
The Company generally promotes its products through visits to dealers,
attendance at industry shows, direct mail promotions, corporate newsletters,
press releases, trade and consumer magazine advertising, RV owner rallies, and
its in-house magazine publication. From time to time, the Company also offers
dealer or consumer incentives. In addition, to help promote customer
satisfaction and brand loyalty, the Company sponsors Islanders and Country Coach
International clubs for owners of the Company's products. The clubs publish
newsletters on a monthly or quarterly basis and organize RV rallies and other
activities. The Company continually seeks consumer preference input from several
sources, including dealers, RV owners and the Company's sales representatives
and, in response, the Company implements changes in the design, decor and
features of its products.
Substantially all of the Company's motorhome sales are made on terms
requiring payment within 15 days or less of the dealer's receipt of the unit.
Most dealers finance all, or substantially all, of the purchase price of their
inventory under "floor plan" arrangements with banks or finance companies under
which the lender pays the Company directly. Dealers typically are not required
to commence loan repayments to such lenders for a period of at least six months.
The loan is collateralized by a lien on the vehicle. Consistent with industry
practice, the Company has entered into repurchase agreements with these lenders.
In general, the repurchase agreements provide that the Company is required to
repurchase a unit after the unit is financed and if the "floor plan" lender has
repossessed the unit. Certain of these agreements limit the Company's liability
to 12 to 18 months after the date of invoice of the unit. At December 31, 2001,
the Company's contingent liability under these agreements was approximately
$98.5 million. The risk of loss under such agreements is spread over numerous
dealers and lenders and is further reduced by the resale value of the motorhomes
the Company would be required to repurchase. The Company's losses under these
agreements have not been material in the past.
10
Many finance companies and banks provide retail financing to purchasers of
RVs. Certain provisions of the U.S. tax laws applicable to second residences,
including the deductibility of mortgage interest and the deferral of gain on a
qualifying sale, currently apply to motorhomes and travel trailers used as
qualifying residences.
Manufacturing Facilities and Production
The Company owns and operates manufacturing facilities in Perris,
California, and Junction City, Oregon. In January 2001, NRV completed the
acquisition of a 10-bay service and parts distribution center in Lakeland,
Florida. NRV products are designed and manufactured in facilities encompassing
607,000 square feet located on approximately 49 acres in Perris. CCI products
are designed and manufactured in facilities encompassing 409,000 square feet
located on approximately 69 acres in Junction City.
The Company's vehicles are built by integrating manufacturing and assembly
line processes. The Company has designed and built its own fabricating and
assembly equipment and molds for a substantial portion of its manufacturing
processes. The Company believes that its vertically integrated manufacturing
systems and processes, which it has developed, enable it to efficiently produce
high-quality products.
Among other items, the Company fabricates, molds and finishes fiberglass to
produce its front-end and rear-end fiberglass components, manufactures its own
walls and roofs, assembles sub-floors and molds plastic components. In addition
to assembling its vehicles and installing various options and accessories, the
Company manufactures the majority of the installed amenities such as cabinetry,
draperies, showers and bathtubs. After purchasing the basic chair and sofa
frames, the Company also manufactures most of the furniture used in its
motorhomes. The Company believes that by manufacturing these components on site,
rather than purchasing them from third parties, the Company achieves cost
savings, better quality control and timely supply of necessary components.
Chassis for certain of the Company's coaches, plumbing fixtures, floor
coverings, hardware and appliances are purchased in finished form from various
suppliers.
The Company generally operates one production shift for most assembly
activities. However, certain support activities operate multiple shifts.
The Company purchases the principal raw materials and certain other
components used in the production of its RVs from third parties. Other than the
chassis and chassis components, these components and raw materials typically
have short delivery lead times. With the exception of the chassis, these
materials, including plywood, lumber and plastic are generally available from
numerous sources, and the Company has not experienced any significant shortages
of raw materials or components.
11
Product Development
The Company utilizes research and development staff that concentrates on
product development and enhancements. New ideas are presented to the staff from
management and are derived from a variety of sources, including sales
representatives, dealers and consumers. The staff utilizes computer-aided design
equipment and techniques to assist in the development of new products and floor
plans and to analyze suggested modifications of existing products and features.
After the initial step of development, prototype models for new products are
constructed and refined. In the case of modifications to certain features, new
molds for various parts, such as front-end caps, storage doors, and dashes are
produced and tested. New product prototypes are produced both off-line as well
as directly on the production line. The Company believes that the maintenance of
an in-house research and development staff enables the Company to respond
rapidly to ongoing shifts in consumer tastes and demands. Total research,
development and engineering expenses were $6,195,000, $5,973,000, and $4,087,000
for the years ended December 31, 2001, 2000 and 1999, respectively, of which
research and development expenses alone were $1,721,000, $2,161,000, and
$1,603,000, respectively.
Arrangements with Chassis Suppliers
The Company's NRV subsidiary purchases gasoline-powered chassis that are
manufactured by Ford Motor Company and Workhorse Custom Chassis, and rear engine
diesel-powered chassis from Freightliner Custom Chassis Corporation, Spartan
Motor Corporation, and from the Junction City facility. The Company's CCI
subsidiary manufactures its own chassis, the DynoMax, which is used as the base
upon which all CCI motorhomes are built, except for the Prevost Conversions,
which utilize a Prevost bus shell. The Company's agreements with the chassis
suppliers generally provide that the Company must pay for a chassis in full
prior to making any alterations or additions to the chassis. The chassis
purchase agreements further provide that either party may terminate the
agreement at any time. In the event of such termination, the Company may incur
certain financing and other costs in order to maintain an adequate supply of
chassis. The Company generally maintains a one to two month production supply of
a chassis in inventory. If any of the Company's present chassis manufacturers
were to cease manufacturing or otherwise reduce the availability of their
chassis, the business of the Company could be adversely affected. The industry,
as a whole, from time to time experiences short-term shortages of chassis.
Backlog
The Company's backlog of orders was $80.1 million as of March 1, 2002 and
$62.3 million as of March 1, 2001. All backlog orders are subject to
cancellation or postponement. To the extent not canceled or postponed, the
Company expects that its backlog as of March 1, 2002 will be filled within 45 to
90 days.
Competition
The motorhome market is intensely competitive, with a number of other
manufacturers selling products that compete with those of the Company. According
to Statistical Surveys, Inc., the three leading manufacturers accounted for
approximately 55.9% and 52.7% of total retail units sold in the Class A
motorhome market during 2001 and 2000, respectively. These companies and certain
other competitors have substantially greater financial and other resources than
the Company. Sales of used motorhomes also compete with the Company's products.
The Company competes on the basis of value, quality, price and design. According
to Statistical Surveys, Inc., the Company's Class A retail market share of new
product sales increased from 1.9% in 1992 to 3.4% in 1993, 4.0% in 1994, 4.2% in
1995, 6.1% in 1996, 7.8% in 1997, 8.2% in 1998, 8.2% in 1999, and decreased to
7.4% in 2000 and 6.7% in 2001.
12
Regulation
The Company is subject to federal, state and local regulations governing
the manufacture and sale of their products, including the provisions of the
National Traffic and Motor Vehicle Safety Act (the "Motor Vehicle Act") and the
safety standards for RVs and components that have been promulgated thereunder by
the Department of Transportation. Certain states require approval of coach
designs and provide tags proving compliance before coaches can be sold into that
state. The Company complies with these reviews where needed. The Motor Vehicle
Act authorizes the National Highway Traffic Safety Administration ("NHTSA") to
require a manufacturer to recall and repair vehicles that contain certain
hazards or defects. The Company has from time to time instituted voluntary
recalls of certain motorhome units. Future recalls of the Company's vehicles,
voluntary or involuntary, could have a material adverse effect on the Company.
The Company is also subject to federal and numerous state consumer protection
and unfair trade practice laws and regulations relating to the sale,
transportation and marketing of motor vehicles, including so-called "Lemon
Laws." Federal and state laws and regulations also impose upon vehicle operators
various restrictions on the weight, length and width of motor vehicles,
including trucks and motorhomes, that may be operated in certain jurisdictions
or on certain roadways. Certain jurisdictions also prohibit the sale of vehicles
exceeding length restrictions. Amendments and changes in enforcement with
respect to these laws and regulations and the implementation of new laws and
regulations could significantly increase the costs of manufacturing, purchasing,
operating or selling the Company's products and could have a material adverse
effect on the Company's business, results of operations and financial condition.
The Company relies upon certifications from chassis manufacturers with
respect to compliance of the Company's vehicles with all applicable emission
control standards. The RVIA, of which the Company is a member, has promulgated
stringent standards for quality and safety. Each of the units manufactured by
the Company has a RVIA seal placed upon it to certify that such standards have
been met.
Federal and state authorities have various environmental control standards
relating to air, water, and noise pollution and hazardous waste generation and
disposal that affect the business and operations of the Company. The Company
believes that its facilities and products comply in all material respects with
applicable environmental regulations and standards. The Company is also subject
to the regulations promulgated by the Occupational Safety and Health
Administration ("OSHA"), which regulate workplace health and safety.
Representatives of OSHA and the RVIA periodically inspect the Company's plants.
13
Product Warranty
The Company provides retail purchasers of its motorhomes with a limited
warranty against defects in materials and workmanship. Excluded from the
Company's warranties are chassis manufactured by third parties and certain other
specified components that are warranted by the Company's suppliers of these
items. Service covered by warranty must be performed at either the Company's
in-house service facility or any of its dealers or other authorized service
centers. The warranty terms are as follows:
o CCI motorhomes - One year
o NRV motorhomes - One year or 18,000 miles
o DynoMax chassis - Two years
o Travel trailers - Two years
o Fifth wheels - Limited one-year/five-year
o CCI Structural welding - Five years or 50,000 miles
The Company's warranty reserve was $13.0 million at December 31, 2001,
which the Company believes is sufficient to cover warranty claims.
Intellectual Property
NRV's Dolphin, DuraFrame, Islander, Marlin, Palisades, Sea Breeze, Sea View
National R.V. (Logo), Sea View, Surf Side, Tradewinds, and Tropi-Cal trademarks,
and CCI's Affinity, Allure, Concept, Country Camper, Country Coach, Country
Coach Destinations, DynoMax, Great Room, Intrigue, Magna, and Max trademarks are
registered with the United States Patent and Trademark Office and are material
to the Company's business. In addition, the Company has two patents for RV
subfloors and exterior doors.
Product Liability and Insurance
From time to time, the Company is involved in certain litigation arising
out of its operations in the normal course of business. Accidents involving
personal injuries and property damage occur from time to time in the use of RVs.
The Company maintains product liability insurance in amounts deemed adequate by
management. To date, aggregate costs to the Company for product liability
actions have not been material.
Employees
As of February 25, 2002, the Company employed a total of 1,854 people, of
which 1,647 were involved in manufacturing, 54 in administration, 81 in
research, development and engineering, and 72 in sales and marketing. None of
the Company's personnel are represented by labor unions. The Company considers
its relations with its personnel to be good.
Item 2. Properties
The Company owns and operates manufacturing facilities in Perris,
California, and Junction City, Oregon. In January 2001, NRV completed the
acquisition of a 10-bay service and parts distribution center in Lakeland,
Florida. NRV products are designed and manufactured in facilities encompassing
607,000 square feet located on approximately 49 acres in Perris. CCI products
are designed and manufactured in facilities encompassing 409,000 square feet
located on approximately 69 acres in Junction City. A portion of CCI's
facilities representing 298,000 square feet is being leased under an agreement
expiring in October 2005 (currently in the second of three separate five-year
lease periods, all at fair market value).
14
The Company believes that present facilities are well maintained and in
good condition. The plants are currently operating at approximately 60%
capacity.
Item 3. Legal Proceedings
In addition to routine litigation and claims incidental to the Company's
business, on August 24, 1999, four former sales representatives of NRV sued NRV
in Riverside County, California Superior Court asserting age discrimination and
related claims arising out of their employment with NRV. The four plaintiffs
seek unspecified amounts for wages from the date of separation to an unspecified
future date, punitive damages and attorney's fees. On November 9, 1999, the
Company filed an answer denying the allegations and asserting various
affirmative defenses thereto. The Company intends to continue to defend this
matter vigorously. An ultimate adverse decision against the Company could have a
material adverse impact on the Company's financial condition.
Item 4. Submission of Matters to a Vote of Security Holders
None.
15
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The Company's Common Stock, par value $.01 per share (the "Common Stock"),
has been trading on the New York Stock Exchange under the symbol NVH since
December 14, 1998. From September 30, 1993 to December 13, 1998, the stock
traded on the Nasdaq National Market under the symbol NRVH. Prior to that time,
there was no public market for the Common Stock.
2001 High Low
---- ---- ---
First Quarter $ 13.78 $ 8.42
Second Quarter 15.10 7.94
Third Quarter 15.10 8.50
Fourth Quarter 10.14 7.80
2000 High Low
---- ---- ---
First Quarter $ 19.63 $ 12.63
Second Quarter 16.31 8.13
Third Quarter 10.75 8.00
Fourth Quarter 11.69 7.75
On March 1, 2002, the last reported sales price for the Common Stock quoted
on the New York Stock Exchange was $10.00 per share. As of March 1, 2002, there
were approximately 82 record holders of Common Stock. Such number does not
include persons whose shares are held of record by a bank, brokerage house or
clearing agency, but does include such banks, brokerage houses and clearing
agencies.
Dividends
The Company has not paid any cash dividends or distributions on its Common
Stock and has no intention to do so in the foreseeable future. The Company
presently intends to retain earnings for general corporate purposes, including
business expansion, capital expenditures and possible acquisitions. The
declaration and payment of future dividends will be at the sole discretion of
the Board of Directors and will depend on the Company's profitability, financial
condition, capital needs, future prospects and other factors deemed relevant by
the Board of Directors. The current agreement with Bank of America, N.A. does
not restrict the declaration and payment of dividends. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources." However, future credit facilities, which the
Company may enter into, may restrict the Company for declaring and paying
dividends.
Item 6. Selected Financial Data
The following selected consolidated financial data are qualified by
reference to, and should be read in conjunction with, the Company's Consolidated
Financial Statements and the notes thereto, and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" contained elsewhere
herein. The selected income statement data for the years ended December 31,
2001, 2000 and 1999 and the selected balance sheet data as of December 31, 2001
and 2000 are derived from the Company's audited consolidated financial
statements that are included elsewhere herein. The selected income statement
data for the years ended December 31, 1998 and 1997 along with the balance sheet
data as of December 31, 1999, 1998 and 1997 are derived from the audited
consolidated financial statements of the Company which are not included herein.
16
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(In thousands, except per share and unit amounts)
Years Ended December 31,
-----------------------------------------------------
2001 2000 1999 1998 1997
------ ------ ------ ------ ------
Operations Data:
Net sales ............. $ 280,015 $ 348,846 $419,421 $ 360,326 $ 285,951
Cost of sales ......... 275,648 308,216 348,592 302,098 245,763
Gross profit ........ 4,367 40,630 70,829 58,228 40,188
Selling expenses ...... 14,068 14,111 11,437 11,154 9,518
General and admin-
istrative expenses .. 8,765 9,138 7,214 6,586 5,649
Amortization of
intangibles ......... 413 413 413 413 413
Operating (loss)
income ............ (18,879) 16,968 51,765 40,075 24,608
Interest (income)
expense, net ........ (420) (1,200) (1,379) (280) 222
Other financing
related costs ....... - - - 213 113
Loss (gain) on
disposal of land
and equipment ....... (71) 135 (432) - -
(Loss) income before
income taxes and
cumulative effect
of change in
accounting
principle ......... (18,388) 18,033 53,576 40,142 24,273
(Benefit) provision
for income taxes .... (6,927) 6,864 20,625 16,033 9,767
(Loss) income before
cumulative effect
of accounting
change ............ (11,461) 11,169 32,951 24,109 14,506
Cumulative effect of
change in accounting
principle,
net of tax .......... - (1,213) - - -
Net (loss) income ... $ (11,461) $ 9,956 $ 32,951 $ 24,109 $ 14,506
Basic (loss) earnings
per common share:
(Loss) income before
cumulative effect
of accounting
change ............ $ (1.18) $ 1.14 $ 3.16 $ 2.35 $ 1.55
Cumulative effect of
accounting change . - (0.12) - - -
Net (loss) income . $ (1.18) $ 1.02 $ 3.16 $ 2.35 $ 1.55
Diluted (loss) earnings
per common share:
(Loss) income before
cumulative effect
of accounting
change ............ $ (1.18) $ 1.11 $ 2.95 $ 2.11 $ 1.40
Cumulative effect of
accounting change . - (0.12) - - -
Net (loss) income . $ (1.18) $ 0.99 $ 2.95 $ 2.11 $ 1.40
Weighted average number
of common shares
outstanding:
Basic ............... 9,683 9,743 10,430 10,263 9,365
Diluted ............. 9,683 10,086 11,178 11,423 10,390
Other Data:
Class A units sold .... 1,957 2,852 3,951 3,652 3,039
Travel Trailers sold .. 1,400 553 431 410 258
December 31,
2001 2000 1999 1998 1997
------ ------ ------ ------ ------
Balance Sheet Data:
Total assets .......... $ 163,094 $ 155,674 $159,214 $ 117,739 $ 87,204
Working capital ....... 65,529 76,063 91,916 63,480 39,271
Long-term debt ........ 43 64 84 1,700 6,703
Stockholders' equity .. 114,412 125,293 130,566 94,489 60,958
17
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This analysis of the Company's financial condition and operating results
should be read in conjunction with the accompanying consolidated financial
statements including the notes thereto.
Critical Accounting Policies
Financial Reporting Release No. 60, which was recently released by the
Securities and Exchange Commission, requires all companies to include a
discussion of critical accounting policies or methods used in the preparation of
financial statements. Note 1 of the Notes to the Consolidated Financial
Statements includes a summary of the significant accounting policies and methods
used in the preparation of the Company's Consolidated Financial Statements. The
following is a brief discussion of the more critical accounting policies and
methods used by the Company.
Long-Lived Assets. The Company reviews long-lived assets for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
might not be recoverable. If indicators of impairment were present, the Company
would evaluate the carrying value of property and equipment and intangibles,
including goodwill, in relation to estimates of future undiscounted cash flows
of the underlying business, which are based on judgment and assumptions.
Warranty. The Company's warranty reserve is established based on its best
estimate of the amounts necessary to settle future and existing claims on
products sold as of the balance sheet date. The Company records an estimate for
future warranty-related costs based on recent actual warranty claims. Also, the
Company's recall reserve is established, as necessary, based on management's
estimate of the cost per unit to remedy the problem and the estimated number of
units that will ultimately be brought in for the repair. While the Company's
warranty costs have historically been within its expectations and the provisions
established, the Company cannot guarantee that it will continue to experience
the same warranty costs that it has in the past. A significant increase in
dealer shop rates, the cost of parts or the frequency of claims could have a
material adverse impact on the Company's operating results for the period or
periods in which such claims or additional costs materialize.
Revenue Recognition. Beginning with the year 2000, motorhome and towables sales
are recorded by the Company when accepted by the dealer rather than at the time
of shipment as in prior years. This change in accounting principle was made to
implement SEC Staff Accounting Bulletin No. 101 (SAB 101), as amended. SAB 101
requires that four basic criteria must be met before revenue can be recognized:
(1) persuasive evidence of an arrangement exists; (2) delivery has occurred or
services rendered; (3) the fee is fixed and determinable; and (4) collectibility
is reasonably assured. Should changes in conditions cause management to
determine these criteria are not met for certain future transactions, revenue
recognized for any reporting period could be adversely affected.
18
Legal Proceedings. The Company is currently involved in certain legal
proceedings and has accrued its estimate of the probable costs for the
resolution of these claims. This estimate has been developed in consultation
with outside counsel handling the Company's defense in these matters and is
based upon an analysis of potential results, assuming a combination of
litigation and settlement strategies. In addition to routine litigation and
claims incidental to the Company's business, on August 24, 1999, four former
sales representatives of NRV sued NRV in Riverside County, California Superior
Court asserting age discrimination and related claims arising out of their
employment with NRV. The four plaintiffs seek unspecified amounts for wages from
the date of separation to an unspecified future date, punitive damages and
attorney's fees. On November 9, 1999, the Company filed an answer denying the
allegations and asserting various affirmative defenses thereto. The Company
intends to continue to defend this matter vigorously. An ultimate adverse
decision against the Company could have a material adverse impact on the
Company's financial condition.
Results of Operations
The following table sets forth for the periods indicated the percentage of
net sales represented by certain items reflected in the Company's Consolidated
Statement of Income:
Percentage of Net Sales
Years Ended December 31,
----------------------------
2001 2000 1999
-------- -------- --------
Net sales .................................. 100.0% 100.0% 100.0%
Cost of sales .............................. 98.5 88.4 83.1
----- ----- -----
Gross profit ............................... 1.5 11.6 16.9
Selling .................................... 5.0 4.0 2.8
General and administrative ................. 3.1 2.6 1.7
Amortization of intangibles ................ 0.1 0.1 0.1
----- ----- -----
Operating (loss) income .................... (6.7) 4.9 12.3
Interest (income) .......................... (0.2) (0.3) (0.3)
Other ...................................... 0.0 0.0 (0.2)
----- ----- -----
(Loss) income before income taxes and
cumulative effect of change in accounting
method ................................... (6.5) 5.2 12.8
(Benefit) provision for income taxes ....... (2.4) 2.0 4.9
----- ----- -----
(Loss) income before cumulative effect of
change in accounting method .............. (4.1) 3.2 7.9
Cumulative effect of change in accounting
method ................................... - (0.3) -
----- ----- -----
Net (loss) income .......................... (4.1) 2.9 7.9
----- ----- -----
Year Ended December 31, 2001 Compared to Year Ended December 31, 2000
Net sales in 2001 decreased by $68.8 million to $280.0 million, or 19.7%,
from $348.8 million in 2000. The decline in sales reflects an industry-wide
slowdown in consumer demand for recreational vehicles. NRV's sales of Class A
motorhomes decreased 792 units, or 34.7%, in 2001 to 1,489 units compared to
2,281 units in 2000, while the average sales price increased 4.0%. The decline
in unit sales during 2001 was partially due to the Company's inability to meet
demand for its painted diesel coaches due to restraints on paint capacity. CCI's
unit sales decreased 103 units, or 18.0%, in 2001 to 468 units compared to 571
units in 2000, while the average price of these units increased 5.5%. Sales of
travel trailers increased 847 units, or 153.2%, in 2001 to 1,400 units compared
to 553 units in 2000, while the average sales price of these travel trailers
decreased 33.9%. The increase in unit sales and decrease in average price
reflects NRV's offering of additional entry-level towable products in 2001.
19
Cost of goods sold in 2001 decreased by $32.6 million to $275.6 million, or
10.6%, from $308.2 million in 2000 resulting primarily from decreased net sales.
Gross profit margin was 1.6% in 2001 compared to 11.6% in 2000. The decrease was
due to: i) manufacturing inefficiencies attributable to operating at reduced
production levels and NRV's switch to paint on all diesel products, ii) high
discounts and rebates as manufacturers and dealers continued to adjust inventory
levels to lower sales levels, and iii) increased warranty expense including
expanded warranty reserves and recalls.
Selling expenses in 2001 and 2000 were relatively flat at $14.1 million. As
a percentage of net sales, selling expenses increased to 5.0% in 2001 from 4.0%
in 2000 due to lower sales over which to spread the fixed selling expenses.
General and administrative expenses in 2001 decreased by $0.3 million to
$8.8 million, or 3.3%, from $9.1 million in 2000. As a percentage of net sales,
general and administrative expenses increased to 3.1% in 2001 from 2.6% in 2000
due to lower sales over which to spread the fixed general and administrative
expenses.
Amortization of intangibles was $0.4 million in 2001 and 2000.
As a result of the foregoing, 2001 resulted in an operating loss of $18.9
million, compared to operating income of $17.0 million in 2000. As a percentage
of net sales, operating loss was (6.7)% in 2001 compared with 2000 operating
income, which represented 4.9% of 2000 net sales.
Other income, which includes net interest income, decreased by $0.6 million
to $0.5 million in 2001 from $1.1 million in 2000.
Benefit for income taxes in 2001 was $6.9 million, reflecting tax
recoveries from the carryback of current year losses, while provision for income
taxes in 2000 was $6.9 million, representing a $13.8 million decrease. The
effective tax rate in 2001 was 37.7% compared to 38.1% in 2000.
In 2000, the Company recorded a one-time adjustment for the cumulative
effect of change in accounting method on prior years' earnings related to the
timing of revenue recognition. The impact of this adjustment on 2000 earnings
was $1.2 million.
Based on the above, 2001 resulted in a net loss of $(11.5) million,
compared to net income of $10.0 million in 2000, a decrease of $21.5 million. As
a percentage of net sales, net loss was (4.1)% in 2001, compared with 2000 net
income, which represented 2.9% of 2000 net sales.
20
Year Ended December 31, 2000 Compared to Year Ended December 31, 1999
Net sales in 2000 decreased by $70.6 million to $348.8 million, or 16.8%,
from $419.4 million in 1999. The decline in sales reflects an industry-wide
slowdown in consumer demand for recreational vehicles. NRV's sales of Class A
motorhomes decreased 1,052 units, or 32%, in 2000 to 2,281 units compared to
3,333 units in 1999, and the average sales price increased 7% reflecting a shift
in demand to higher-priced motorhomes with slide-out rooms and more
diesel-pusher motorhome sales. CCI's unit sales decreased 47 units, or 8%, in
2000 to 571 units compared to 618 units in 1999, while the average price of
these units increased just 1%. Sales of travel trailers increased 122 units, or
28%, in 2000 to 553 units compared to 431 units in 1999, while the average sales
price of these travel trailers decreased 20%. The increase in unit sales and
decrease in average price reflects NRV's entry into the entry-level towable
market in 2000.
Cost of goods sold in 2000 decreased by $40.4 million to $308.2 million, or
11.6%, from $348.6 million in 1999 resulting primarily from decreased net sales.
Gross profit margin was 11.6% in 2000 compared to 16.9% in 1999. The decrease
was primarily due to a high discounts and rebates as manufacturers and dealers
endeavored to adjust inventory levels to lower levels of sales, and to
manufacturing inefficiencies attributable to operating at reduced production
levels.
Selling expenses in 2000 increased by $2.7 million to $14.1 million, or
24%, from $11.4 million in 1999 primarily due to the increased promotional
costs. As a percentage of net sales, selling expenses increased to 4.0% in 2000
from 2.8% in 1999.
General and administrative expenses in 2000 increased by $1.9 million to
$9.1 million, or 27%, from $7.2 million in 1999. The increase was primarily due
to an increase in administrative and technology costs. As a percentage of net
sales, general and administrative expenses increased to 2.6% in 2000 from 1.7%
in 1999.
Amortization of intangibles was $0.4 million in 2000 and 1999.
As a result of the foregoing, operating income in 2000 decreased by $34.8
million, or 67.2%, to $17.0 million from $51.8 million in 1999. As a percentage
of net sales, operating income decreased to 4.9% in 2000 from 12.3% in 1999.
Other income, which includes net interest income, decreased by $0.7 million
to $1.1 million in 2000 from $1.8 million in 1999.
Provision for income taxes in 2000 and 1999 was $6.9 million and $20.6
million, respectively, representing a $13.7 million decrease. The effective tax
rate in 2000 was 38.1% compared to 38.5% in 1999.
The Company recorded a one-time adjustment for the cumulative effect of
change in accounting method on prior years' earnings related to the timing of
revenue recognition. The impact of this adjustment on 2000 earnings was $1.2
million.
21
Based on the above, net income decreased $23.0 million, or 69.7%, to $10.0
million from $33.0 million in 1999. As a percentage of net sales, net income
decreased to 2.9% from 7.9% in 1999.
Liquidity and Capital Resources
During 2001, the Company financed its operations primarily through its
existing working capital. At December 31, 2001, the Company had working capital
of $65.5 million compared to $76.1 million at December 31, 2000. This decrease
of $10.6 million was primarily due to a $16.7 million decrease in cash, and a
$16.9 million increase in accounts payable, partially offset by a $21.7 million
increase in inventory. Net cash used in operating activities was $12.6 million
for the year ended December 31, 2001.
During the year ended December 31, 2001, net cash used in investing
activities was $4.5 million related almost entirely to capital expenditures,
with approximately $2.1 million of the total relating to the purchase of the new
service facility in Lakeland, Florida.
During the twelve months ended December 31, 2001, net cash provided by
financing activities was $0.5 million, mainly due to the proceeds from issuance
of common stock.
As of December 31, 2001, the Company had short-term debt of $20,000 and
long-term debt of $43,000.
For the year ended December 31, 2001, the Company incurred a net loss of
$(11.5) million resulting in negative cash flows from operating activities of
$(12.6) million and a reduction to working capital of $(10.5) million. The net
loss was mainly attributable to: i) restraints on paint capacity (which limited
the sales of National RV brand diesel motorhomes), ii) significant discounting
to wholesale distributors, iii) increased warranty costs and iv) excess
manufacturing capacity and related fixed costs caused by decreased volumes.
The Company has a revolving credit facility of $9,977,356 with Bank of
America, N.A. (BofA), of which $4,977,356 is reserved for a letter-of-credit,
required by the State of California, serving as security for NRV's self-insured
workers' compensation program. The remaining $5,000,000 is available for general
corporate and working capital needs and capital expenditures. Amounts borrowed
under the revolving credit facility bear interest at the bank's prime rate plus
4.0 percentage points. The credit facility contains, among other provisions,
certain financial covenants, including net worth and profitability. At December
31, 2001, no amounts were outstanding under this facility; however, the Company
was in default with certain covenants of its loan agreement with BofA. The
Company obtained a waiver of default from BofA as of December 31, 2001 which
cures all defaults as of such date. However, the Company expects that it will
not be in compliance with certain financial covenants contained in the credit
facility as of the next measurement date, March 31, 2002. As a result, BofA may
thereafter restrict the Company from borrowing any funds available under the
facility, and there can be no assurance that the Company will be able to utilize
the facility any longer. The Company is currently investigating other banks to
replace this revolving credit facility which expires on August 1, 2002.
22
Losses in the third quarter of 2001 caused the above referenced revolving
credit facility to be reduced from $15,000,000. The combination of restricted
credit availability, increases in certain categories of inventory and additional
losses in the fourth quarter of 2001 led to significant cash reductions in the
fourth quarter of 2001 and the first quarter of 2002. The Company has addressed
the liquidity issue by stretching accounts payable, aggressively pursuing
accounts receivable and reducing inventories. The Company has worked closely
with its vendors during this time and expects to normalize the age of accounts
payable within the second quarter. The Company is currently pursuing an
alternative credit facility in the amount of $15,000,000. However, the Company
expects to minimize its borrowing against any such new credit facility.
In 2002, in order to achieve its goals of positive cash flows from
operating activities, and a return to profitability, the Company intends to: i)
complete the installation of additional paint booths within the first six months
of 2002, ii) significantly reduce future price discounting, iii) ensure
heightened quality assurance procedures, now in place, are being followed to
lessen warranty costs and iv) normalize inventory levels. Even with the
Company's current cash situation, the Company believes that the combination of
internally generated funds and working capital will be sufficient to meet the
Company's planned capital and operational requirements for at least the next 12
months.
Effects of Inflation
Management does not believe that inflation has had a significant impact on
the Company's results of operations for the periods presented.
Recent Accounting Pronouncements
In July 2001, the Financial Accounting Standards Board issued SFAS 142,
"Goodwill and Other Intangible Assets." SFAS 142, which changes the accounting
for goodwill from an amortization method to an impairment-only approach, will be
effective for fiscal years beginning after December 15, 2001. The Company has
not determined the full impact that adoption of this Standard will have on its
consolidated financial statements. However, the Company does anticipate that
operating expenses will be reduced by approximately $413,000 per year due to the
discontinuance of goodwill amortization as required by the Standard.
In June 2001, the Financial Accounting Standards Board issued SFAS 143,
"Accounting for Asset Obligations." SFAS 143 requires that the fair value of a
liability for an asset retirement obligation be recognized in the period in
which it is incurred and that the associated asset retirement costs are
capitalized as part of the carrying amount of the long-lived asset. The
Statement is effective for fiscal years beginning after June 15, 2001. The
Company has not determined the impact that adoption of this standard will have
on its consolidated financial statements.
23
In August 2001, the Financial Accounting Standards Board issued SFAS 144,
"Accounting for the Impairment of Long-Lived Assets." SFAS 144 supercedes SFAS
121, "Accounting for the Impairment of Long-Lived Assets to be Disposed of", and
APB Opinion 30, "Reporting Extraordinary, Unusual and Infrequently Occurring
Events and Transactions" and amends APB Opinion 51, "Consolidated Financial
Statements." This Statement was issued to address the accounting for a segment
of a business accounted for as a discontinued operation under APB Opinion 30 and
to establish a single accounting model based on the framework established in
SFAS 121, for long-lived assets to be disposed of by sale. The Statement is
effective for financial statements issued for fiscal years beginning after
December 15, 2001. The Company has not determined the impact that adoption of
this standard will have on its consolidated financial statements.
Forward Looking Statements
Statements contained in this Form 10-K that are not historical facts are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Investors are cautioned that forward-looking
statements are inherently uncertain. Actual performance and results may differ
materially from that projected or suggested herein due to certain risks and
uncertainties including, without limitation, factors set forth below. Additional
information concerning risks and uncertainties may be identified from time to
time in the Company's filings with the Securities and Exchange Commission (SEC)
and the Company's public announcements, copies of which are available from the
SEC or from the Company upon request.
Factors that May Affect Future Operating Results
Potential Fluctuations in Operating Results. The Company's net sales, gross
margin and operating results may fluctuate significantly from period to period
due to factors such as the mix of products sold, the level of discounting
employed on the Company's products, the ability to utilize and expand
manufacturing resources efficiently, material shortages, the introduction and
consumer acceptance of new models offered by the Company, competition, the
addition or loss of dealers, the timing of trade shows and rallies, and factors
affecting the recreational vehicle industry as a whole, such as cyclicality and
seasonality. In addition, the Company's overall gross margin on its products may
decline in future periods to the extent the Company increases its sales of lower
gross margin towable products or if the mix of motor coaches sold shifts to
lower gross margin units. Due to the relatively high selling prices of the
Company's products (in particular, its Highline Class A motor coaches), a
relatively small variation in the number of recreational vehicles sold in any
quarter can have a significant effect on sales and operating results for that
quarter.
Cyclicality and Seasonality. The RV industry has been characterized by
cycles of growth and contraction in consumer demand, reflecting prevailing
economic conditions, which affect disposable income for leisure-time activities.
Concerns about the availability and price of gasoline, decreases in consumer
confidence, increases in interest rates and reductions in available financing
have had, and may in the future have, an adverse impact on RV sales. Seasonal
factors, over which the Company has no control, also have an effect on the
demand for the Company's products. Demand in the RV industry declines over the
winter season, while sales are generally highest during the spring and summer
months.
24
Dependence on Certain Dealers and Concentration of Dealers in Certain
Regions. For the year ended December 31, 2001, two dealers accounted for 13% and
11%, respectively, of the Company's annual net sales. Also, the Company's top
ten dealers accounted for approximately 53%, 44% and 43% of the Company's annual
net sales during the years ended December 31, 2001, 2000 and 1999, respectively.
The loss by the Company of one or more of these dealers could have a material
adverse effect on the Company's financial condition and results of operations.
In addition, a significant portion of the Company's sales is from dealers
located in states in the western part of the United States. Consequently, a
general downturn in economic conditions or other material events in such region
could materially adversely affect the Company's sales.
Dependence on Chassis Suppliers. One of the principal components used in
the manufacture of motorhomes is the chassis, which includes the engine, drive
train and other operating components. Although Country Coach manufactures
chassis used in its products, the Company obtains the required chassis for most
of its NRV Class A motorhomes from a limited number of manufacturers. As is
standard in the industry, arrangements with such suppliers permit them to
terminate their relationship with the Company at any time. Lead times for the
delivery of chassis frequently exceed five weeks and the RV industry as a whole
has from time to time experienced temporary shortages of chassis. If any of the
Company's suppliers were to discontinue the manufacture of chassis utilized by
the Company in the manufacture of its Class A motorhomes, materially reduce
their availability to the RV industry in general or limit or terminate their
availability to the Company in particular, the business and financial condition
of the Company could be materially and adversely affected.
Potential Liabilities Under Repurchase Agreements. As is common in the
industry, the Company enters into repurchase agreements with the financing
institutions used by its dealers to finance their purchases. These agreements
obligate the Company to purchase a dealer's inventory under certain
circumstances in the event of a default by the dealer to its lender. The risk of
loss, however, is spread over many dealers and is further reduced by the resale
value of the RVs that the Company would be required to repurchase. Although
losses under these agreements have not been significant in the past, if the
Company were obligated to repurchase a significant number of RVs in the future,
it could result in losses and a reduction in new RV sales. The Company's
contingent obligations under repurchase agreements vary from period to period
and totaled approximately $98.5 million as of December 31, 2001.
Competition. The Company competes with numerous manufacturers, many of
which have multiple product lines of RVs, are larger and have substantially
greater financial and other resources than the Company. According to Statistical
Surveys, Inc., the two largest motorhome manufacturers had sales aggregating
39.2% of industry-wide retail unit sales of Class A motorhomes for the year
ended December 31, 2001. In addition, sales of used RVs provide competition to
RV manufacturers.
25
Government Regulation. The Company is subject to federal, state and local
regulations governing the manufacture and sale of their products, including the
provisions of the National Traffic and Motor Vehicle Safety Act (the "Motor
Vehicle Act") and the safety standards for RVs and components that have been
promulgated thereunder by the Department of Transportation. The Motor Vehicle
Act authorizes the National Highway Traffic Safety Administration ("NHTSA") to
require a manufacturer to recall and repair vehicles that contain certain
hazards or defects. The Company has from time to time instituted voluntary
recalls of certain motorhome units. Future recalls of the Company's vehicles,
voluntary or involuntary, could have a material adverse effect on the Company.
The Company is also subject to federal and numerous state consumer protection
and unfair trade practice laws and regulations relating to the sale,
transportation and marketing of motor vehicles, including so-called "Lemon
Laws."
Federal and state laws and regulations also impose upon vehicle operators
various restrictions on the weight, length and width of motor vehicles,
including trucks and motorhomes, that may be operated in certain jurisdictions
or on certain roadways. As a result of these restrictions, certain models of
motorhomes manufactured by the Company's Country Coach subsidiary may not be
legally operated in certain jurisdictions or on certain roadways. Certain
jurisdictions also prohibit the sale of vehicles exceeding length restrictions.
Enforcement of these laws and related customer complaints to date has been
limited. The Company is unable to predict reliably the extent of future
enforcement of these laws, the extent future enforcement might lead to customer
complaints, or the extent to which Country Coach may choose or be required to
provide some customer remedy, such as repurchasing or exchanging motorhomes, as
a result of such complaints. If current enforcement efforts and related
complaints were to increase significantly from their current levels, the cost of
resolving such complaints, particularly should the resolution of complaints
require repurchasing, refurbishing, and reselling of motorhomes, could have a
material financial effect on the Company.
Amendments and changes in enforcement with respect to these laws and
regulations and the implementation of new laws and regulations could
significantly increase the costs of manufacturing, purchasing, operating or
selling the Company's products and could have a material adverse effect on the
Company's business, results of operations and financial condition. The failure
of the Company to comply with these present or future laws or regulations could
result in fines imposed on the Company, civil and criminal liability, or
suspension of operations, any of which could have a material adverse effect on
the Company.
The Company's manufacturing operations are subject to a variety of federal
and state environmental regulations relating to the use, generation, storage,
treatment, emissions, and disposal of hazardous materials and wastes and noise
pollution. Such laws and regulations are becoming more stringent, and it is
likely that future amendments to these environmental statutes and additional
regulations promulgated thereunder will be applicable to the Company, its
manufacturing operations and its products in the future. The failure of the
Company to comply with present or future regulations could result in fines being
imposed on the Company, civil and criminal liability, suspension of operations,
alterations to the manufacturing process or costly cleanup or capital
expenditures.
26
Warranty Claims. The Company is subject to warranty claims in the ordinary
course of its business. Although the Company maintains reserves for such claims,
which to date have been adequate, there can be no assurance that warranty
expense levels will remain at current levels or that such reserves will continue
to be adequate. A large number of warranty claims exceeding the Company's
current warranty expense levels could have a material adverse effect on the
Company's results of operations and financial condition.
Product Liability. The Company maintains product liability insurance with
coverage in amounts which management believes is reasonable. To date, the
Company has been successful in obtaining product liability insurance on terms
the Company considers acceptable. Given the nature of the Company's business,
product liability in excess of the Company's insurance coverage, if incurred,
could have a material adverse effect on the Company.
The California Energy Crisis. NRV's manufacturing facilities are located in
Southern California. California has been experiencing an energy crisis that has
resulted in disruptions in power supply and increases in utility costs to
consumers and businesses throughout the State. Should the energy crisis
continue, NRV may experience power interruptions and shortages and be subject to
costs and manufacturing inefficiencies associated with temporarily shutting down
production. Although NRV has not experienced any material disruption to its
business to date, if the energy crisis continues and power interruptions or
shortages occur in the future, they may adversely affect the Company's business.
Antitakeover Provisions. Certain provisions of the Company's Certificate of
Incorporation, as well as Delaware corporate law and the Company's Stockholder
Rights Plan (the "Rights Plan"), may be deemed to have anti-takeover effects and
may delay, defer or prevent a takeover attempt that a stockholder might consider
in its best interest. Such provisions also may adversely affect prevailing
market prices for the Common Stock. Certain of such provisions allow the
Company's Board of Directors to issue, without additional stockholder approval,
preferred stock having rights senior to those of the Common Stock. In addition,
the Company is subject to the anti-takeover provisions of Section 203 of the
Delaware General Corporation Law, which prohibits the Company from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed matter.
In August 1996, the Company adopted the Rights Plan, pursuant to which holders
of the Common Stock received a distribution of rights to purchase additional
shares of Common Stock, which rights become exercisable upon the occurrence of
certain events.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The Company has no significant financial instruments. The Company has not
entered into any derivative financial instruments. The Company does not have any
significant foreign currency exposure because it does not transact business in
foreign currencies.
27
Item 8. Financial Statements and Supplementary Data
The information required by this item is contained in the financial
statements listed in Item 14(a) under the caption "Consolidated Financial
Statements" and commencing on page F-1 of this Report.
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
Not applicable.
28
PART III
Item 10. Directors and Officers of the Registrant
The information required for this Item will be set forth in the Company's
definitive Proxy Statement for its 2002 Annual Meeting of Stockholders to be
filed with the Securities and Exchange Commission not later than 120 days after
December 31, 2001, which information is incorporated herein by reference.
Item 11. Executive Compensation
The information required for this Item will be set forth in the Company's
definitive Proxy Statement for its 2002 Annual Meeting of Stockholders to be
filed with the Securities and Exchange Commission not later than 120 days after
December 31, 2001, which information is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
The information required for this Item will be set forth in the Company's
definitive Proxy Statement for its 2002 Annual Meeting of Stockholders to be
filed with the Securities and Exchange Commission not later than 120 days after
December 31, 2001, which information is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
The information required for this Item will be set forth in the Company's
definitive Proxy Statement for its 2002 Annual Meeting of Stockholders to be
filed with the Securities and Exchange Commission not later than 120 days after
December 31, 2001, which information is incorporated herein by reference.
29
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) List of Documents filed as part of this Report
1. Financial statements:
Report of Independent Accountants................................32
Consolidated Balance Sheets......................................33
Consolidated Statements of Operations............................34
Consolidated Statements of Cash Flows............................35
Consolidated Statements of Stockholders' Equity..................36
Notes to Consolidated Financial Statements.......................37
2. Financial statement schedule
Schedule II - Valuation and Qualifying Accounts................. 46
All other schedules are omitted because they are not applicable or
the required information is shown in the financial statements or
notes thereto.
3. Exhibits and Exhibit Descriptions
3.1 The Company's Restated Certificate of Incorporation. (2)
3.2 The Company's By-laws. (2)
4.1 Specimen-Certificate of Common Stock. (1)
10.1 1993 Stock Option Plan. (1)
10.2 1993 Stock Option Plan. (2)
10.3 1995 Stock Option Plan. (3)
10.4 Rights Plan Agreement with Continental Stock Transfer & Trust
Company. (4)
10.5 1996 Stock Option Plan. (5)
10.6 1997 Stock Option Plan. (6)
10.7 1999 Stock Option Plan, as amended and restated.
21.1 List of Subsidiaries. (6)
23.1 Consent of PricewaterhouseCoopers LLP
---------------
(1) Previously filed as an exhibit to the Company's Registration
Statement on Form S-1 filed on August 16, 1993
(File No. 33-67414) as amended by Amendment No. 1 thereto filed
on September 22, 1993 and Amendment No. 2 thereto filed on
September 29, 1993.
(2) Previously filed as an exhibit to the Company's Registration
Statement on Form S-1 filed on December 15, 1993
(File No. 33-72954).
(3) Previously filed as an exhibit to the Company's Form 10-K for
the seven months ended December 31, 1995 filed on
March 27, 1996.
(4) Incorporated by reference from Form 8-A declared effective on
August 26, 1996.
(5) Incorporated by reference from the Company's Form 10-K for the
year ended December 31, 1996.
(6) Incorporated by reference from the Company's Form 10-K for the
year ended December 31, 1997.
(b) Reports on Form 8-K: None
30
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
NATIONAL R.V. HOLDINGS, INC.
Dated: March 22, 2002 By /s/ Mark D. Andersen
---------------------------
Mark D. Andersen,
Chief Financial Officer
(Principal Accounting and
Finance Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Capacity in Which Signed Date
/s/ Doy B. Henley Chairman of the Board March 25, 2002
- ---------------------------
Doy B. Henley
/s/ Bradley C. Albrechtsen Chief Executive Officer March 25, 2002
- --------------------------- and President (Principal
Bradley C. Albrechtsen Executive Officer)
/s/ Mark D. Andersen Chief Financial Officer March 22, 2002
- --------------------------- (Principal Accounting
Mark D. Andersen and Financial Officer)
/s/ Stephen M. Davis Director and Secretary March 26, 2002
- ---------------------------
Stephen M. Davis
/s/ Neil H. Koffler Director March 22, 2002
- ---------------------------
Neil H. Koffler
/s/ Robert B. Lee Director March 22, 2002
- ---------------------------
Robert B. Lee
/s/ Greg McCaffery Director March 25, 2002
- ---------------------------
Greg McCaffery
/s/ Wayne M. Mertes Director March 23, 2002
- ---------------------------
Wayne M. Mertes
31
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Shareholders of
National R.V. Holdings, Inc.
In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(1) on page 30 present fairly, in all material
respects, the financial position of National R.V. Holdings, Inc. and its
subsidiaries at December 31, 2001 and 2000, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 2001, in conformity with accounting principles generally accepted in the
United States of America. In addition, in our opinion, the financial statement
schedule listed in the index appearing under Item 14(a)(2) on page 30 presents
fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements. These financial
statements and financial statement schedule are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States of America, which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Irvine, California
February 1, 2002, except for Note 5,
as to which the date is March 26, 2002.
32
NATIONAL R.V. HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
December 31,
2001 2000
--------- ---------
ASSETS
Current assets:
Cash and cash equivalents .......................... $ 22 $ 16,696
Receivables, less allowance for doubtful
accounts ($224 and $321, respectively) ........... 16,378 15,109
Inventories ........................................ 85,385 63,639
Deferred income taxes .............................. 7,267 6,035
Income taxes receivable ............................ 6,688 1,964
Prepaid expenses ................................... 1,647 2,100
--------- ---------
Total current assets ............................. 117,387 105,543
Goodwill, net ........................................ 6,126 6,539
Property, plant and equipment, net ................... 45,257 44,460
Other ................................................ 1,012 1,096
--------- ---------
$ 169,782 $ 157,638
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Book overdraft ..................................... $ 608 $ -
Current portion of long-term debt .................. 20 20
Accounts payable ................................... 29,480 12,550
Accrued expenses ................................... 21,750 16,910
--------- ---------
Total current liabilities ........................ 51,858 29,480
Deferred income taxes ................................ 3,469 2,801
Long-term debt ....................................... 43 64
--------- ---------
Total liabilities .................................... 55,370 32,345
--------- ---------
Commitments and contingencies
Stockholders' equity:
Preferred Stock, $.01 par value, 5,000 shares
authorized, 4,000 issued and outstanding ......... - -
Common Stock, $.01 par value, 25,000,000 shares
authorized, 9,718,025 and 10,595,536 issued
and outstanding, respectively .................... 97 106
Additional paid-in capital ....................... 33,128 47,800
Retained earnings ................................ 81,187 92,648
Less cost of treasury stock - 932,900 shares ..... - (15,261)
--------- ---------
Total stockholders' equity ..................... 114,412 125,293
--------- ---------
$ 169,782 $ 157,638
========= =========
See Notes to Consolidated Financial Statements
33
NATIONAL R.V. HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
Year Ended December 31,
-----------------------------------
2001 2000 1999
--------- --------- ---------
Net sales ................................ $ 280,015 $ 348,846 $ 419,421
Cost of goods sold ....................... 275,648 308,216 348,592
--------- --------- ---------
Gross profit ........................... 4,367 40,630 70,829
--------- --------- ---------
Selling expenses ......................... 14,068 14,111 11,437
General and administrative expenses ...... 8,765 9,138 7,214
Amortization of intangibles .............. 413 413 413
--------- --------- ---------
Total operating expenses ............... 23,246 23,662 19,064
--------- --------- ---------
Operating (loss) income ................ (18,879) 16,968 51,765
Interest income and other expense, net ... (491) (1,065) (1,811)
--------- --------- ---------
(Loss) income before income taxes and
cumulative effect of change in
accounting principle ................. (18,388) 18,033 53,576
(Benefit) provision for income taxes ..... (6,927) 6,864 20,625
--------- --------- ---------
(Loss) income before cumulative effect
of accounting change ................. (11,461) 11,169 32,951
Cumulative effect of change in
accounting principle, net of tax ..... - (1,213) -
--------- --------- ---------
Net (loss) income .................... $ (11,461) $ 9,956 $ 32,951
========= ========= =========
Earnings per common share:
Basic:
(Loss) income before cumulative effect
of accounting change ................. $ (1.18) $ 1.14 $ 3.16
Cumulative effect of accounting change . - (0.12) -
--------- --------- ---------
Net (loss) income ...................... $ (1.18) $ 1.02 $ 3.16
========= ========= =========
Weighted average number of shares ...... 9,683 9,743 10,430
========= ========= =========
Diluted:
(Loss) income before cumulative effect
of accounting change ................. $ (1.18) $ 1.11 $ 2.95
Cumulative effect of accounting change . - (0.12) -
--------- --------- ---------
Net (loss) income ...................... $ (1.18) $ 0.99 $ 2.95
========= ========= =========
Weighted average number of shares ...... 9,683 10,086 11,178
========= ========= =========
See Notes to Consolidated Financial Statements
34
NATIONAL R.V. HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year Ended December 31,
-----------------------------------
2001 2000 1999
--------- --------- ---------
Cash flows from operating activities:
Net (loss) income ...................... $ (11,461) $ 9,956 $ 32,951
Adjustments to reconcile net (loss)
income to net cash (used in)
provided by operating activities:
Depreciation ......................... 3,889 3,247 2,463
Amortization of intangibles .......... 413 413 413
(Gain) loss on asset disposal ........ (71) 136 (463)
Tax benefit related to exercise of
stock options ...................... 73 - 1,263
Changes in assets and liabilities:
(Increase) decrease in trade
receivables ...................... (1,269) 7,364 (1,754)
(Increase) decrease in inventories . (21,746) 4,548 (21,355)
Increase in income taxes receivable (4,724) (1,964) -
Decrease (increase) in prepaid
expenses ......................... 453 (661) (630)
Increase in book overdraft ......... 608 - -
Increase in accounts payable ....... 16,930 1,383 2,395
Increase in accrued expenses ....... 4,839 2,002 4,636
Increase in net deferred income
taxes ............................ (564) (94) (1,598)
--------- --------- ---------
Net cash (used in) provided by
operating activities ............... (12,630) 26,330 18,321
--------- --------- ---------
Cash flows from investing activities:
Decrease (increase) in other assets .... 84 (11) (292)
Capital expenditures ................... (4,615) (14,675) (11,260)
Return of investment in Dune Jet
Services, LLP ........................ - - 2,985
--------- --------- ---------
Net cash used in investing activities (4,531) (14,686) (8,567)
--------- --------- ---------
Cash flows from financing activities:
Principal payments on long-term debt ... (21) (20) (1,762)
Proceeds from issuance of common stock . 508 32 1,863
Purchase of treasury stock ............. - (15,261) -
--------- --------- ---------
Net cash provided by (used in)
financing activities ............... 487 (15,249) 101
--------- --------- ---------
Net (decrease) increase in cash ........ (16,674) (3,605) 9,855
Cash, beginning of year ................ 16,696 20,301 10,446
--------- --------- ---------
Cash, end of year ...................... $ 22 $ 16,696 $ 20,301
========= ========= =========
See Notes to Consolidated Financial Statements
35
NATIONAL R.V. HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands)
Common Stock Treasury Stock
Preferred ----------------------- Paid-In Retained -----------------------
Stock Shares Amount Capital Earnings Shares Amount Total
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Balance, Dec. 31, 1998 $ - 10,323 $ 103 $ 44,645 $ 49,741 - $ - $ 94,489
Common stock issued
under option plan .. 266 3 1,857 1,860
Common stock issued
upon exercise of
warrants ........... - - 3 3
Tax benefit related
to exercise of
stock options ...... 1,263 1,263
Net income ........... 32,951 32,951
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Balance, Dec. 31, 1999 - 10,589 106 47,768 82,692 - - 130,566
Common stock issued
under option plan .. 7 - 32 32
Purchase of treasury
stock .............. - (933) (15,261) (15,261)
Net income ........... 9,956 9,956
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Balance, Dec. 31, 2000 - 10,596 106 47,800 92,648 (933) (15,261) 125,293
Common stock issued
under option plan .. 55 1 507 508
Cancellation of
treasury stock ..... (933) (9) (15,252) 933 15,261 -
Tax benefit related
to exercise of
stock options ...... 73 73
Net loss ............. (11,461) (11,461)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Balance, Dec. 31, 2001 $ - 9,718 $ 97 $ 33,128 $ 81,187 - $ - $114,412
========== ========== ========== ========== ========== ========== ========== ==========
See Notes to Consolidated Financial Statements
36
NATIONAL R.V. HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
National R.V. Holdings, Inc. (the Company) manufactures recreational vehicles
("RVs") through its wholly-owned subsidiaries, National R.V., Inc. (NRV) and
Country Coach, Inc. (CCI). The RVs are marketed primarily in the United States
by NRV under the Tradewinds, Dolphin, Sea Breeze, Islander, Palisades, Splash,
Rage'n and Blaze'n brand names and by CCI under brand names including Affinity,
Allure, Intrigue, Lexa, Magna and Prevost by Country Coach.
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts and disclosures in the
financial statements. Actual results could differ from those estimates.
Management believes that the estimates included in the financial statements are
reasonable based on the facts and circumstances known to them at the time of
preparation.
CONSOLIDATION
The consolidated financial statements of the Company include the accounts of
National R.V Holdings, Inc., NRV, and CCI. All significant intercompany
transactions have been eliminated in consolidation.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include deposits in banks and short-term investments
with original maturities of three months or less.
INVENTORIES
Inventories are stated at the lower of cost or market, with cost generally
determined by the first-in, first-out (FIFO) method.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost, less accumulated depreciation.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets ranging from 31 to 39 years for buildings and 5 to 7
years for machinery and equipment.
CONCENTRATION OF CREDIT RISK
Financial instruments, which subject the Company to credit risk, consist
primarily of trade receivables from dealerships. The Company generally does not
require collateral from its customers. Such credit risk is considered by
management to be limited due to the Company's broad customer base. For the year
ended December 31, 2001, two dealers accounted for 13% and 11%, respectively, of
the Company's net sales. In addition, the Company's top ten dealers accounted
for approximately 53%, 44% and 43% of net sales for the years ended December 31,
2001, 2000 and 1999, respectively. At December 31, 2001, two dealers accounted
for 19% and 12%, respectively, of the Company's trade receivables.
LIQUIDITY AND CAPITAL RESOURCES
For the year ended December 31, 2001, the Company incurred a net loss of $(11.5)
million resulting in negative cash flows from operating activities of $(12.6)
million and a reduction to working capital of $(10.5) million. The net loss was
mainly attributable to: i) restraints on paint capacity (which limited the sales
of National RV brand diesel motorhomes), ii) significant discounting to
wholesales distributors, iii) increased warranty costs and iv) excess
manufacturing capacity and related fixed costs caused by decreased volumes.
37
The combination of restricted credit availability, increases in certain
categories of inventory and additional losses in the fourth quarter of 2001 led
to significant cash reductions in the fourth quarter of 2001 and the first
quarter of 2002. The Company has addressed the liquidity issue by stretching
accounts payable, aggressively pursuing accounts receivable and reducing
inventories. The Company has worked closely with its vendors during this time
and expects to normalize the age of accounts payable within the second quarter.
In addition, the Company is currently pursuing an alternative credit facility in
the amount of $15,000,000 (see Note 5). However, the Company expects to minimize
its borrowing against that credit facility.
In 2002, in order to achieve its goals of positive cash flows from operating
activities, and a return to profitability, the Company intends to: i) complete
the installation of additional paint booths within the first six months of 2002,
ii) significantly reduce future price discounting, iii) ensure heightened
quality assurance procedures, now in place, are being followed to lessen
warranty costs and iv) normalize inventory levels. Even with the Company's
current cash situation, the Company believes that the combination of internally
generated funds and working capital will be sufficient to meet the Company's
planned capital and operational requirements for at least the next 12 months.
REVENUE RECOGNITION
Beginning with the year 2000, sales are recognized by the Company upon the
delivery and acceptance by dealers, provided the Company has received a purchase
order, the price is fixed or determinable, collectibility of the resulting
receivable is reasonably assured and not contingent on subsequent resale,
returns are reasonably estimable and there are no remaining obligations.
AMORTIZATION OF INTANGIBLE ASSETS
Goodwill related to the acquisition of CCI during 1996 is being amortized on the
straight-line basis over a twenty-year period.
LONG-LIVED ASSETS
The Company accounts for the impairment and disposition of long-lived assets,
such as goodwill, in accordance with Statement of Financial Accounting Standards
(SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and
Long-Lived Assets to Be Disposed Of". In accordance with SFAS No. 121,
long-lived assets to be held are reviewed for events or changes in circumstances
that indicate that their carrying value may not be recoverable. There was no
impairment of the value of such assets for the year ended December 31, 2001.
RESEARCH, DEVELOPMENT AND ENGINEERING EXPENSES
Research, development and engineering expenses are charged to operations as
incurred and are included in cost of goods sold. Total research, development and
engineering expenses were $6,195,000, $5,973,000, and $4,087,000 for the years
ended December 31, 2001, 2000 and 1999, respectively, of which research and
development expenses alone were $1,721,000, $2,161,000, and $1,603,000,
respectively.
INCOME TAXES
The Company provides for income taxes using an asset and liability approach.
Under this method deferred tax assets and liabilities are computed using
statutory rates for the expected future tax consequences of events that have
been recognized in the Company's financial statements or tax returns.
SEGMENTS
The Company operates in one reportable segment: the manufacturing, wholesale
distribution, and service of recreational vehicles. The Company does not have
operations outside the United States.
38
RECENT ACCOUNTING PRONOUNCEMENTS In July 2001, the Financial Accounting
Standards Board issued SFAS 142, "Goodwill and Other Intangible Assets." SFAS
142, which changes the accounting for goodwill from an amortization method to an
impairment-only approach, will be effective for fiscal years beginning after
December 15, 2001. The Company has not determined the full impact that adoption
of this Standard will have on its consolidated financial statements. However,
the Company does anticipate that operating expenses will be reduced by
approximately $413,000 per year due to the discontinuance of goodwill
amortization as required by the Standard.
In June 2001, the Financial Accounting Standards Board issued SFAS 143,
"Accounting for Asset Obligations." SFAS 143 requires that the fair value of a
liability for an asset retirement obligation be recognized in the period in
which it is incurred and that the associated asset retirement costs are
capitalized as part of the carrying amount of the long-lived asset. The
Statement is effective for fiscal years beginning after June 15, 2001. The
Company has not determined the impact that adoption of this standard will have
on its consolidated financial statements.
In August 2001, the Financial Accounting Standards Board issued SFAS 144,
"Accounting for the Impairment of Long-Lived Assets." SFAS 144 supercedes SFAS
121, "Accounting for the Impairment of Long-Lived Assets to be Disposed of", and
APB Opinion 30, "Reporting Extraordinary, Unusual and Infrequently Occurring
Events and Transactions" and amends APB Opinion 51, "Consolidated Financial
Statements." This Statement was issued to address the accounting for a segment
of a business accounted for as a discontinued operation under APB Opinion 30 and
to establish a single accounting model based on the framework established in
SFAS 121, for long-lived assets to be disposed of by sale. The Statement is
effective for financial statements issued for fiscal years beginning after
December 15, 2001. The Company has not determined the impact that adoption of
this standard will have on its consolidated financial statements.
INCOME (LOSS) PER SHARE
Basic earnings per share is based upon the weighted average number of common
shares outstanding during a period. Diluted earnings per share is based upon the
weighted average number of common shares plus the incremental dilutive effect of
the securities convertible to Common Stock.
The difference in the shares used to determine basic and diluted EPS is as
follows:
December 31, (in thousands)
------------------------------
2001 2000 1999
-------- -------- --------
Shares used for basic ....... 9,683 9,743 10,430
Dilutive effect of:
Stock options ............. - 342 743
Warrants .................. - 1 5
-------- -------- --------
Shares used for diluted ..... 9,683 10,086 11,178
======== ======== ========
Stock options and warrants to purchase 297,851 common shares for the year ended
December 31, 2001 are not included in the computation of diluted loss per share
for the year because the Company reported a loss, and therefore, the effect of
exercise would have been anti-dilutive.
39
2. Inventories
Inventories consist of the following:
December 31,
(in thousands)
----------------------
2001 2000
---------- ----------
Finished goods .............. $ 21,525 $ 15,989
Work-in-process ............. 32,415 19,233
Raw materials ............... 18,353 12,927
Chassis ..................... 13,092 15,490
---------- ----------
$ 85,385 $ 63,639
========== ==========
3. Property, Plant and Equipment
Major classes of property, plant and equipment consist of the following:
December 31,
(in thousands)
----------------------
2001 2000
---------- ----------
Land ........................ $ 10,447 $ 6,885
Buildings ................... 25,409 26,593
Machinery and equipment ..... 17,264 15,529
Office equipment ............ 7,589 7,144
---------- ----------
60,709 56,151
Less accumulated depreciation (15,452) (11,691)
---------- ----------
Property, plant and
equipment, net .......... $ 45,257 $ 44,460
========== ==========
4. Accrued Expenses
Accrued expenses consist of the following:
December 31,
(in thousands)
----------------------
2001 2000
---------- ----------
Workers' compensation
self-insurance reserve .... $ 3,428 $ 3,128
Motorhome warranty reserve .. 13,016 9,861
Payroll and other accrued
expenses .................. 5,306 3,921
---------- ----------
$ 21,750 $ 16,910
========== ==========
5. Debt and Credit Agreements
Debt consists of the following:
December 31,
(in thousands)
----------------------
2001 2000
---------- ----------
Note payable - City of
Junction City, Oregon, 3%
paid monthly through
October 2004 .............. $ 63 $ 83
Less payments due within
one year .................. (20) (20)
---------- ----------
$ 43 $ 63
========== ==========
Debt maturities over the remaining term of the note payable are $20,000 in 2002,
$22,000 in 2003 and $21,000 in 2004.
The Company has a revolving credit facility of $9,977,356 with Bank of America,
N.A. (BofA), of which $4,977,356 is reserved for a letter-of-credit, required by
the State of California, serving as security for NRV's self-insured workman's
compensation program. The remaining $5,000,000 is available for general
corporate and working capital needs and capital expenditures. Amounts borrowed
under the revolving credit facility bear interest at the bank's prime rate plus
4.0 percentage points. The credit facility contains, among other provisions,
certain financial covenants, including net worth and profitability. At December
31, 2001, no amounts were outstanding under this facility; however, the Company
was in default with certain covenants of its loan agreement with BofA. On March
26, 2002, the Company obtained a waiver of default from BofA as of December 31,
2001 which cures all defaults as of such date. However, the Company expects that
it will not be in compliance with certain financial covenants contained in the
credit facility as of the next measurement date, March 31, 2002. As a result,
BofA may thereafter restrict the Company from borrowing any funds available
under the facility, and there can be no assurance that the Company will be able
to utilize the facility any longer. The Company is currently investigating other
banks to replace this revolving credit facility which expires on August 1, 2002.
40
6. Income Taxes
The components of the (benefit) provision for income taxes were as follows:
December 31, (in thousands)
------------------------------
2001 2000 1999
-------- -------- --------
Currently (Refundable) Payable:
Federal ...................... $ (5,263) $ 5,155 $ 18,942
State ........................ (1,100) 1,803 3,281
-------- -------- --------
(6,363) 6,958 22,223
Deferred:
Federal ...................... (182) (216) (1,456)
State ........................ (382) 122 (142)
-------- -------- --------
(564) (94) (1,598)
-------- -------- --------
Total (benefit) provision
for income taxes ............. $ (6,927) $ 6,864 $ 20,625
======== ======== ========
Deferred income taxes are recorded based upon differences between the financial
statement and tax basis of assets and liabilities. Temporary differences that
give rise to deferred income tax assets and liabilities at December 31, 2001 and
2000 were as follows:
December 31,
(in thousands)
----------------------
2001 2000
---------- ----------
Accrued expenses ............ $ 6,755 $ 5,583
State income taxes .......... 512 452
---------- ----------
Deferred income
tax assets .............. $ 7,267 $ 6,035
========== ==========
Fixed assets ................ $ 2,455 $ 2,272
Other ....................... 1,014 529
---------- ----------
Deferred income
tax liabilities ......... $ 3,469 $ 2,801
========== ==========
A reconciliation of the statutory U.S. federal income tax rate to the Company's
effective income tax rate is as follows:
December 31, (in thousands)
------------------------------
2001 2000 1999
-------- -------- --------
Statutory rate ................. (35.0)% 35.0% 35.0%
State taxes, net of federal
benefit ...................... (4.6) 2.3 3.8
Amortization of intangibles
not deductible for
income tax purposes .......... 0.8 2.3 0.7
Disallowed state loss
carryforwards ................ 1.1 - -
Other .......................... - (1.5) (1.0)
-------- -------- --------
(37.7)% 38.1% 38.5%
======== ======== ========
41
7. Consolidated Statements of Cash Flows
The Company follows the indirect method of reporting net cash flows from
operating activities. The Company paid interest of $0.1 million in 2001 and no
interest in 2000 and 1999. The Company paid income taxes of $1.5 million, $8.9
million and $20.1 million in 2001, 2000 and 1999, respectively.
8. Recourse on Dealer Financing
As is customary in the industry, the Company generally agrees with its dealers'
lenders to repurchase any unsold RVs if the dealers become insolvent within one
year of the purchase of such RVs. Although the total contingent liability under
these agreements approximates $98.5 million at December 31, 2001, as with
accounts receivable, the risk of loss is spread over numerous dealers and
lenders and is further reduced by the resale value of the RVs which the Company
would be required to repurchase. Losses under these agreements have been
negligible in the past and management believes that any future losses under such
agreements will not have a significant effect on the consolidated financial
position or results of operations of the Company.
9. Commitments and Contingencies
In addition to routine litigation and claims incidental to the Company's
business, on August 24, 1999, four former sales representatives of NRV sued NRV
in Riverside County, California Superior Court asserting age discrimination and
related claims arising out of their employment with NRV. The four plaintiffs
seek unspecified amounts for wages from the date of separation to an unspecified
future date, punitive damages and attorney's fees. On November 9, 1999, the
Company filed an answer denying the allegations and asserting various
affirmative defenses thereto. The Company intends to continue to defend this
matter vigorously. An ultimate adverse decision against the Company could have a
material adverse impact on the Company's financial condition.
The Company has commitments under certain non-cancelable operating leases as
follows (in thousands):
2002 ................... $ 1,448
2003 ................... 1,440
2004 ................... 1,454
2005 ................... 1,256
2006 and thereafter .... 16
--------
$ 5,614
========
10. Stock Options and Warrants
The Company has six fixed option plans that reserve shares of common stock for
issuance to executives, key employees and directors. The Company has also issued
fixed options outside of such plans pursuant to individual stock option
agreements. Options granted to non-employee and employee directors generally
vest immediately upon grant and expire five to ten years from the date of grant.
Options granted to employees vest in three equal annual installments and expire
five years from the date of grant. The price of the options granted pursuant to
these plans will not be less than 100 percent of the market value of the shares
on the date of grant. The exercise of certain of these stock options represents
a tax benefit for the Company which has been reflected as a reduction of income
taxes payable and an increase to additional paid-in-capital amounting to $0.1
million in 2001 and $1.3 million in 1999.
42
No compensation cost has been recognized for these fixed options in the
financial statements. Had compensation cost for the Company's stock option plans
and individual option agreements been determined based on the fair value rather
than market value at the grant date for awards under those plans and agreements,
the Company's net (loss) and earnings per share would have been reduced to the
pro forma amounts indicated below:
Year Ended December 31,
(in thousands, except per share)
--------------------------------
2001 2000 1999
-------- -------- --------
Net (loss) income
As reported ................. $(11,461) $ 9,956 $ 32,951
Pro forma ................... (12,984) 8,597 32,309
Basic earnings per share
As reported ................. (1.18) 1.02 3.16
Pro forma ................... (1.34) 0.88 3.10
Diluted earnings per share
As reported ................. (1.18) 0.99 2.95
Pro forma ................... (1.34) 0.85 2.89
The fair value of options granted during 2001 and 2000 were estimated on the
date of grant using Black-Scholes option-pricing model with the following
weighted-average assumptions used for grants:
Year Ended December 31,
--------------------------------
2001 2000 1999
-------- -------- --------
Dividend yield ................ 0% 0% 0%
Expected volatility ........... 46.0% 44.3% 44.3%
Risk-free interest rate ....... 4.6% 6.1% 5.6%
Expected lives ................ 4 years 4 years 5 years
Information regarding these option plans and option agreements for 2001, 2000
and 1999 is as follows:
Options Weighted
Outstanding Average
(in thousands) Exercise Price
-------------- --------------
Outstanding at December 31, 1998 1,837 $ 8.16
Granted ...................... 442 24.94
Expired or canceled .......... (26) 9.33
Exercised .................... (266) 8.61
-------------- --------------
Outstanding at December 31, 1999 1,987 11.85
Granted ...................... 403 8.50
Expired or canceled .......... (26) 21.11
Exercised .................... (7) 4.67
-------------- --------------
Outstanding at December 31, 2000 2,357 11.17
Granted ...................... 325 12.83
Expired or canceled .......... (272) 11.70
Exercised .................... (55) 9.67
-------------- --------------
Outstanding at December 31, 2001 2,355 $ 11.39
============== ==============
43
The following table summarizes information concerning outstanding and
exercisable stock options as of December 31, 2001:
Options Outstanding Options Exercisable
------------------------------------ ---------------------
Weighted
Number Average Weighted Number Weighted
Outstanding Remaining Average Exercisable Average
Range of (in Contractual Exercise (in Exercise
Exercise Prices thousands) Life Price thousands) Price
--------------------------------------------------------------------------
$ 2.67 - $ 4.61 446 2.47 $ 3.47 446 $ 3.47
$ 8.50 - $ 9.33 593 4.16 8.86 365 9.08
$10.08 - $10.08 608 4.22 10.08 608 10.08
$12.83 - $12.83 314 4.70 12.83 8 12.83
$24.94 - $26.81 394 2.56 24.99 267 25.02
------ ------
2,355 3.66 $ 11.39 1,694 $ 10.49
====== ======
The weighted average fair value of options granted during 2001, 2000, and 1999
was $12.83, $3.57, and $10.04, respectively.
11. Related Party Transactions
Mr. Robert B. Lee, a director of the Company, is a partner in a joint venture
that is a party to a lease agreement with the Company. Pursuant to the
agreement, The Company leases from the joint venture a parcel of property
constituting a majority of CCI's manufacturing facilities. During the years
ended December 31, 2001, 2000, and 1999, the Company paid $1.27 million, $1.20
million, and $1.16 million, respectively, under the lease agreement. The lease
agreement calls for future payments totaling approximately $5.0 million through
October 31, 2005.
In September 1998, the Company acquired, for $2.75 million, a limited
partnership interest in Dune Jet Services, L.P. (the "Partnership"), a Delaware
limited partnership formed for the purposes of acquiring and operating an
airplane for the partners' business uses and for third-party charter flights
(the "Aircraft"). The general partner of the Partnership was Dune Jet Services,
Inc. ("DJ Services"), a Delaware corporation, the sole stockholder of which is
the Company's former Chairman, Mr. Gary Siegler. DJ Services contributed $1.55
million for its general partnership interest and an additional $3.25 million for
a separate limited partnership interest. During 1999 the Aircraft was sold and
the Partnership was liquidated. The Company received $2,985,000 in the aggregate
from the Partnership representing a return of its capital plus its share of the
gain on the sale of the Aircraft, after expenses of the Partnership were
allocated.
Heller Ehrman White & McAuliffe, a law firm in which Mr. Stephen M. Davis, the
Secretary and a director of the Company, is a partner, performed legal services
for the Company. Fees paid the law firm were $199,000, $112,000, and $127,000
during the years ended December 31, 2001, 2000, and 1999, respectively.
44
12. Cancellation of Treasury Stock
On October 11, 2001, the Company cancelled all 932,900 shares of its common
stock held as treasury stock. The cancellation of the treasury stock, totaling
$15,261,050, reduced common stock and additional paid-in capital, by $9,329 and
$15,251,721, respectively.
13. Quarterly Consolidated Financial Data (unaudited)
2001 Quarter ended
--------------------------------------
(in thousands except share data)
--------------------------------------
March 31 June 30 Sept. 30 Dec. 31
-------- -------- -------- --------
Net sales ......................... $ 62,380 $ 81,021 $ 66,901 $ 69,713
Gross profit (loss) ............... 2,193 5,548 (3,494) 120
Net (loss) income ................. (1,895) 126 (6,104) (3,589)
(Loss) earnings per common share
- basic ......................... $ (0.20) $ 0.01 $ (0.63) $ (0.37)
(Loss) earnings per common share
- diluted ....................... $ (0.20) $ 0.01 $ (0.63) $ (0.37)
Weighted average number of shares:
Basic ........................... 9,663 9,663 9,688 9,718
Diluted ......................... 9,663 9,948 9,688 9,718
2000 Quarter ended
--------------------------------------
(in thousands except share data)
--------------------------------------
March 31 June 30 Sept. 30 Dec. 31
-------- -------- -------- --------
Net sales ......................... $106,840 $ 77,726 $ 83,962 $ 80,318
Gross profit ...................... 16,267 8,236 9,764 6,363
Income before cumulative effect
of accounting change ............ 6,682 1,663 2,473 351
Cumulative effect of accounting
change .......................... (1,213) - - -
-------- -------- -------- --------
Net income ........................ $ 5,469 $ 1,663 $ 2,473 $ 351
======== ======== ======== ========
Earnings per common share - basic:
Income before cumulative effect
of accounting change ............ $ 0.67 $ 0.17 $ 0.26 $ 0.04
Cumulative effect of accounting
change .......................... (0.12) - - -
-------- -------- -------- --------
Net income ........................ $ 0.55 $ 0.17 $ 0.26 $ 0.04
======== ======== ======== ========
Earnings per common share - diluted:
Income before cumulative effect
of accounting change ............ $ 0.63 $ 0.17 $ 0.25 $ 0.04
Cumulative effect of accounting
change .......................... (0.11) - - -
-------- -------- -------- --------
Net income ........................ $ 0.52 $ 0.17 $ 0.25 $ 0.04
======== ======== ======== ========
Weighted average number of shares:
Basic ........................... 10,034 9,657 9,585 9,663
Diluted ......................... 10,544 10,044 9,847 9,859
45
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
For the years ended December 31, 2001, 2000 and 1999
Additions
Balance at charged to Balance at
beginning costs end of
of period and expenses Deductions period
----------- ----------- ----------- -----------
Twelve months ended December 31, 2001
Allowance for
doubtful accounts ..... $ 321,000 $ 28,000 $ 125,000 $ 224,000
Workers' compensation
self-insurance reserve 3,128,000 2,970,000 2,670,000 3,428,000
Motorhome warranty
reserve ............... 9,861,000 18,459,000 15,304,000 13,016,000
----------- ----------- ----------- -----------
$13,310,000 $21,457,000 $18,849,000 $15,918,000
=========== =========== =========== ===========
Twelve months ended December 31, 2000
Allowance for
doubtful accounts ..... $ 199,000 $ 265,000 $ 143,000 $ 321,000
Workers' compensation
self-insurance reserve 2,428,000 3,259,000 2,559,000 3,128,000
Motorhome warranty
reserve ............... 7,754,000 17,521,000 15,414,000 9,861,000
----------- ----------- ----------- -----------
$10,381,000 $21,045,000 $18,116,000 $13,310,000
=========== =========== =========== ===========
Twelve months ended December 31, 1999
Allowance for
doubtful accounts ..... $ 188,000 $ 24,689 $ 13,689 $ 199,000
Workers' compensation
self-insurance reserve 1,494,000 3,394,969 2,460,969 2,428,000
Motorhome warranty
reserve ............... 5,824,000 13,325,525 11,395,525 7,754,000
----------- ----------- ----------- -----------
$ 7,506,000 $16,745,183 $13,870,183 $10,381,000
=========== =========== =========== ===========
46