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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
F O R M 10 - K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED OCTOBER 31, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-16448
HOLIDAY RV SUPERSTORES, INCORPORATED
IRS Employer Id No. Sand Lake West Executive Park State of Incorporation:
59-1834763 7851 Greenbriar Parkway Florida
Orlando, Florida 32819
(407) 363-9211
Securities registered pursuant to Section 12(b) of the Act:
- None -
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK
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. X Yes 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. [ ]
The aggregate market value of voting stock held by non-affiliates as of January
16, 1998, was approximately $ 6,014,000. .
As of January 16, 1998, Holiday RV Superstores, Incorporated had outstanding
7,433,700 shares of Common Stock.
(See page 37 for index of exhibits)
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TABLE OF CONTENTS
Item Page
- ---- ----
PART I
------
1. Business ................................................................ 3
2. Properties .............................................................. 9
3. Legal Proceedings ....................................................... 11
4. Submission of Matters to a Vote of
Security Holders ........................................................ 11
PART II
-------
5. Market for Registrant's Common Equity and
Related Stockholder Matters ......................................... 12
6. Selected Financial Data ............................................. 13
7. Management's Discussion and Analysis of Financial
Condition and Results of Operation .................................. 15
8. Financial Statements and Supplementary Data ......................... 23
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure ................................. 24
PART III
--------
10. Directors and Executive Officers of the Registrant .................. 25
11. Executive Compensation .............................................. 28
12. Security Ownership of Certain Beneficial Owners
and Management ...................................................... 34
13. Certain Relationships and Related Party Transactions ................ 36
PART IV
-------
14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K.................................................. 37
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PART I
ITEM 1. BUSINESS
GENERAL
The Registrant ("Company") is a multi-store retail chain engaged in the
retail sales and service of recreation vehicles ("RVs) and recreation boats. The
Company currently operates eight sales and service retail centers, one in the
heart of the Walt Disney World tourist area in Orlando, Florida, two in the Gulf
Coast tourist areas of Tampa and Ft. Myers, Florida, one in Atlanta, Georgia
adjacent to Interstate 75, one in Greer, South Carolina adjacent to Interstate
85, two in California's central valley cities of Sacramento and Bakersfield
and one adjacent to Interstate 10 in Las Cruces, New Mexico.
All centers offer a full line of both new and used recreation vehicles and
maintain full parts and service facilities, body repair shops and are equipped
to repair virtually any type of recreational vehicle. The Greer and Las Cruces
centers sell and service boats and related marine products. The Atlanta
center sells a limited line of boats.
RECREATIONAL VEHICLE INDUSTRY
The recreation vehicle industry is approximately a $16 billion dollar a year
industry in the United States (Recreational Vehicle Industry Association,
"RVIA", Reston, Virginia), catering to the travel and leisure-time needs of the
an estimated 25 million RV enthusiasts through the sale and service of
recreation vehicles. According to the RVIA, (RV NEWS, December 1997) 466,800
new RVs were shipped by manufacturers to dealers in 1996 compared to 475,200
RVs in 1995, 518,800 in 1994, and 420,200 in 1993. Industry shipment peaked in
1976 through 1978 with 526,000 to 534,000 units.
One in ten American families own a recreation vehicle in the United States,
and over 20,000 public and privately owned campgrounds operate nationwide,
according to the RVIA, (RV TRADE DIGEST, October, 1992). There are over 9
million RVs on the road and an estimated 25 million Americans travel in RVs
(RVIA). There are approximately 170 vehicle manufacturers, 295 suppliers and
in excess of 3,000 RV dealers (RVIA).
The types of recreation vehicles sold by the company consist primarily of
travel trailers and fifth wheels (towables), designed to be towed by another
vehicle, and motorized self-propelled units, built on automotive chassis
(motorized vehicles).
Towable recreation vehicles consist of travel trailers, including fifth wheel
travel trailers, folding camping trailers and truck campers (a recreation
camping unit designed to be loaded on to, or affixed to, the bed or chassis of
a truck). Motorized recreation vehicles consist of conventional motor homes
(Class "A"), van campers (Class "B"), mini motor homes, low profile
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motor homes and compact motor homes (all referred to as Class "C") and van
conversions. Class "A" motor homes are constructed by the recreation vehicle
manufacturer on chassis that already have the engine and drive components. Van
campers (Class "B") are panel type vans to which the recreation vehicle
manufacturer adds sleeping facilities, kitchen and toilet facilities, fresh
water storage, 110 volt hook up and other items. Class "C" units are built on
an automotive manufactured van frame with an attached cab section, or on an
automotive manufactured cab and chassis. The recreation vehicle manufacturer
completes the body section containing the living area and attaches it to the cab
section. For the van conversion, the recreation vehicle manufacturer modifies a
completed van chassis aesthetically or decoratively in appearance for
transportation and recreational purposes.
Currently, there are many manufacturers of both towable and motorized
recreation vehicles. Although there are several sources for manufactured
conventional vans including Ford, GMC, and Chrysler, and other foreign
manufacturers, there are only four major manufacturers in the United States
supplying chassis with engine and drive components to the recreational vehicle
manufacturers: General Motors Company, Ford Motor Company, Oshkosh Truck
Corporation and Spartan Motors Corporation. General Motors Company is the
largest supplier of chassis to RV manufacturers.
Fuel consumption for motorized recreation vehicles has improved substantially
over the last several years. Diesel engines are growing in popularity over
gasoline engines, primarily in the larger bus type vehicles.
INDUSTRY OUTLOOK
The long term prospects for the recreation vehicle industry appear to be
bright, according to the Third Annual Recreation Vehicle Outlook (October,
1997), published by the CIT Group Economic Research Department (CIT).
"Assuming a constant RV ownership rate among households (roughly 1 in 10
households own an RV), current demographic trends alone will add over one
million households annually to the RV lifestyle." CIT's rationale for this is
the sheer number of baby boomers who are the most educated generation in
American history and collectively hold significant earning potential. CIT
adds, "coupled with the robust financial markets and the growing 401k
retirement plans, many baby boomers will have sizable nest eggs from which to
draw upon, and when added to the wealth that they should inherit, the boomers
seem to be in a strong financial position".
The CIT Outlook concludes they are a bit guarded in their optimistic
outlook for a myriad of reasons, among them being; formidable education
expenses, low savings rate, other leisure pursuits vying for the same dollars
and prospect of parental or elder care.
The RV industry recognized the baby boomers opportunity and embarked, in the
spring of 1997, on a highly publicized $15.5 million national market expansion
program, over a three year period, aimed at showing the lifestyle appeal of
RVing to the baby boomers. The campaign slogan "Go RVing" accurately portrays
the industry in a very favorable light, offering solitude, family time and the
opportunity to slow down and reconnect with the world around us.
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MARKETING
ADVERTISING AND PROMOTIONS. The Company has a year around advertising
campaign utilizing newspaper, direct mail, billboards, yellow pages, Internet
and consumer magazine advertising. The advertising program is supplemented by
on-lot promotions and off-lot consumer shows, organized by trade groups and
private companies, primarily during the peak selling season. The Company
participates in 35 to 40 consumer RV shows and rallys annually, attended by up
to 40,000 consumers each. Smaller product shows are also promoted by the
company at RV parks whereby existing RV owners are targeted for "trade-ups"
selling opportunities. The Company also promotes off-site "bargain sales"
product shows in connection with well known mass merchandisers in most of its
markets. The Company utilizes the services of professional marketing and
public relations firms to assist in implementing the advertising promotion and
public relations campaigns.
The Company's management believes that the Company was the first recreation
vehicle retailer to promote sales through a national tele-marketing sales
program. The Company promotes several recreation vehicle clubs and rallies for
owners and prospective owners of recreation vehicles.
PRICING. The Company's management believes that pricing is an important
element of its marketing strategy and occasionally makes volume purchases at
reduced prices from some manufacturers. These purchases enable the Company to
advertise and achieve a competitive pricing position over many of its
competitors and presents a key element in the marketing plan.
CUSTOMER BASE. The Company's customer base demographic characteristics vary
from dealership to dealership but primarily are represented as the following.
The age group of 35 years and older represent 82% of the customers, with ages
45 and older representing 58%. Eighty six percent (86%) are married, 49% are
retired, 21% have "blue collar" occupations, and 30% are "white collar" and
professionals. The primary income group is $20,000 to $40,000 comprising 53%.
Twenty six percent (26%) earn $40,000 to $60,000, and 10% earn over $60,000.
Sixty two percent (62%) of the customers are prior owners of RVs, and 63% need
to trade their RV, automobile or boat to make a purchase.
In summary, the Company's primary customer base is 45 years old or older,
retired, earns between $20,000 and $40,000 annually, is a previous owner of an
RV needing to trade to make a purchase.
RETAIL OPERATIONS
The Company, previously Holiday of Orlando, Inc., was incorporated in July
1978, in the State of Florida. In 1984, a second retail center was opened in
Tampa, Florida. In 1988, the Company opened three new sales and service
retail centers, one in Ft. Myers, Florida, one in Jacksonville, Florida and the
third in Atlanta, Georgia. The Atlanta retail center operates as Holiday RV
Superstores of South Atlanta, Inc.
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In February 1990, the Company formed Holiday RV Superstores of South
Carolina, Inc. which acquired an existing retail center in Greer, South
Carolina formally, operating as Ledford's RV and Marine World.
From October, 1992 through January 1993 the Company operated a temporary
sales location in Homestead, Florida, marketing travel trailers to the victims
of Hurricane Andrew needing temporary housing. In December of 1992, the
Jacksonville, Florida dealership was closed.
In January 1994, the Company formed Holiday RV Superstores West, Inc. which
acquired two existing retail centers located in Bakersfield and Roseville
(Sacramento), California, formerly operating as Venture Out, and an office
location in Campbell, California. The Campbell office closed in November,
1995.
In September 1995, the Company formed Holiday RV Superstores of New Mexico,
Inc. which acquired a vacant RV retail facility in Las Cruces, New Mexico. The
retail center began operations in November 1995.
The Company currently markets approximately 50 brands of recreational
vehicles and 10 brands of recreational boats. The Company purchases 78% or
more of its new recreational vehicles from Fleetwood Enterprises Inc., Thor
Industries, Inc. and Winnebago Industries. In addition, the Company sells new
recreational vehicles and recreational boats purchased from a number of other
manufacturers including Forest River, Inc., Rexall Industries, Inc., Bayliner
Marine Corporation and Sea Ray Boats, Inc.. In the opinion of management, the
loss of any one brand of new recreational vehicle would not materially affect
the Company. However, the loss of all the brands sold by either of the two
largest manufacturers, i.e. Fleetwood Enterprises, Inc., or Thor Industries,
Inc., would have a material effect on the Company's sales. The Company's
management feels the loss of all brands from either of these two manufacturers
to be highly unlikely. Dealer representation decisions for Fleetwood
Enterprises, Inc. and Thor Industries, Inc. manufactured brands are made at the
manufacturer's plants on a brand-by-brand basis, rather than centrally at each
respective company's corporate headquarters.
Detailed information on all vehicles, boats and parts inventory at each
retail center, is maintained in the Company's computerized database.
Management at each retail center has "real time" access to this information at
anytime for any dealership owned by the Company.
MANUFACTURERS REPURCHASE AGREEMENTS TO COMPANY'S FLOOR PLAN CREDITORS
Substantially all new vehicles and boats held in inventory for sale are
pledged as security under floor plan contracts with financial institutions.
Under such contracts, the sale of a pledged vehicle to a consumer requires
payment to the lender of the amount attributable to such vehicle under the
floor plan contract. Manufacturers have their respective repurchase agreements
in force with the financial institutions with limited repurchase
indemnification to the lenders against any Company default under the floor plan
contracts.
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SERVICE AND PARTS
The Company maintains fully equipped service facilities equipped to handle
virtually any type of recreation vehicle. The Company is a factory designated
chassis warranty service center for Gillig, Chevrolet Division of General
Motors, Freightliner Motors and Spartan Motors, who reimburse the Company for
such warranty services. The Greer and Las Cruces facilities are fully equipped
to repair all brands of boats and motors it sells.
The Company's service facilities are equipped to make engine and drive train
repairs, as well as repairs to refrigerators, ovens and ranges, air
conditioning systems, plumbing and electrical systems of each recreation
vehicle it sells. In addition, the Company is an authorized service center for
most manufacturers of recreation vehicle components, including generators, roof
air conditioners, refrigerators, heaters, ovens and ranges (including microwave
ovens), hot water heaters, toilets, furnaces, furniture, ice makers, awnings,
TV antennas, satellite dishes, metal framing, water pumps, hitches, suspension
systems, brakes, windows and axles used in recreational vehicles.
The Company maintains service agreements with most companies whose new
recreational vehicles and marine products it sells. These service agreements
allow the Company to purchase parts and obtain technical assistance needed to
repair and service vehicles, boats and equipment manufactured by these
companies. The Company also has a supply of propane gas for resale at all
locations, and provides sewage dump stations for RV waste evacuation.
The parts departments of each retail center supports the Company's sales and
service functions. In addition, each retail center stocks accessory items,
usually sold to recreation vehicle owners, and maintains a computerized
point-of-purchase inventory control and customer tracking system. The Greer
and Las Cruces centers maintain inventories of marine parts and accessories
for marine products sold.
PRINCIPAL PRODUCTS AND SERVICES
The Company's principal products and services for the last three years are
listed below, by major revenue source, as a percentage of total revenue.
Principal Products or Services as a Percentage of Total Revenue
Fiscal Year
-----------
Principal Product or Service 1997 1996 1995
---------------------------- ---- ---- ----
New and used Vehicles and Boats 85.7% 86.9% 86.4%
Service, Parts and Accessories 10.5 9.3 9.5
Other, Net 3.8 3.8 4.1
----- ----- -----
Total Revenue 100.0% 100.0% 100.0%
===== ===== =====
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EMPLOYEE RELATIONS
As of October 31, 1997 and 1996, the Company had 206 and 202 full time
employees, respectively. The Company has no contracts or collective bargaining
agreements with labor unions and has never experienced work stoppages. The
Company's management considers its relations with employees to be good. The
Company maintains internal training programs at every level and has a well
developed internal quality control program and customer satisfaction feedback
system for all its dealerships. The Company maintains a nation-wide
recruitment program for sales, service and management personnel. Support
personnel are usually hired from the local labor force. Factory training
programs are available to the employees of the Company and the Company
generally takes full advantage of these programs by sending its employees to
manufacturer supervised schools. Most full time employees are provided with
paid annual vacations, medical and hospitalization insurance premium
reimbursement, sick leave, paid holidays, stock grants and other fringe
benefits. After one year of employment, employees are eligible to participate
in the profit sharing and 401(k) investment plan.
BUSINESS EXPANSION AND DIVERSIFICATION
The Company intends to continue its primary expansion by acquisition of
existing compatible businesses. Existing RV retail centers with a minimum
annual revenue of $5 million will be considered for acquisition. The
Company's primarily focus is the Sunbelt areas of the U.S. and the western
states. Availability of key product lines and dealership locations on major
interstate highways are two of the primary criteria for screening potential
acquisitions.
SEASONALITY
Although the recreation vehicle business is a year round business in the
Company's markets, the recreation vehicle industry is seasonal. The Company has
significantly higher sales in the second quarter of its fiscal year, and
significantly lower sales in its first and fourth quarters. During slack
seasons at a particular retail center, the Company reduces inventory of both new
and used RVs and introduces other cutbacks in operations minimizing the impact
of the seasonality on the results of operations. Because a substantial portion
of the Company's expenses are fixed, operating income tends to be lower in the
first quarter and fourth quarter of the Company's Fiscal Year and higher in the
second and third quarters.
COMPETITION AND BUSINESS RISK
Based upon statistics supplied by the Recreation Vehicle Industry
Association, the recreation vehicle industry in North America includes
approximately 3,000 RV dealers and 170 Vehicle manufacturers. Competition in
the sale of new and used recreational vehicles is intense. The Company competes
with a large number of firms, some of which operate in more than one location,
although most of the Company's competitors operate from a single location. The
Company believes it is one of the most competitive RV dealers in the nation
offering approximately 60 brands of new recreation vehicles and new boats,
supported by extensive service facilities.
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Significant competitive factors in the recreation vehicle sales and service
industry include: vehicle availability, price, service, reliability, quality
of service and convenience. The Company's management is of the opinion that it
is competitive in all factors listed above. Nevertheless, the Company's
management anticipates it will continue to face strong competition in the
future.
The recreation vehicle business is heavily dependent upon the availability and
terms of financing for the retail purchase of its products. Consequently,
changes in interest rates and the tightening or loosening of credit by
government agencies and financial institutions have dramatically affected the
Company's business in the past and are likely to do so in the future.
INSURANCE COVERAGE
The Company has had little difficulty in obtaining insurance coverage for its
dealership operations. Such insurance has been obtained by the Company
annually on a competitive bid basis, at what it believes to be reasonable
premium rates. The applicable premium rates have been increasing slightly,
however, Management does not believe that such increases will have a material
adverse effect on the business of the Company for the foreseeable future.
GOVERNMENT REGULATIONS
The Company's service facilities are subject to federal, state and local laws
and regulations concerning environmental matters. These laws and regulations
affect the storing, dispensing and discharge of petroleum based products and
other waste, and affect the Company in the securing of permits for its full
service dealership operations and in the ongoing conduct of such operations.
The securing of permits and compliance with all laws and regulations can be
costly, and could affect the Company's earnings. Further, each dealership of
the Company must comply with the requirements of local governmental bodies
concerning zoning, land use, and environmental factors. State and local laws
and regulations also require each dealership to obtain licenses to operate as a
dealer in recreational vehicles. The Company has obtained all necessary
licenses and permits and Management believes the Company is in full compliance
with all federal, state and local laws and regulations. Furthermore,
Management is not aware of any material capital expenditures necessary for
compliance with any federal, state or local laws and regulations.
ITEM 2. PROPERTIES
The Company leases the Orlando, Florida center from its principal
stockholders, officers, and directors, Newton C. Kindlund and Joanne M.
Kindlund. The Orlando dealership is located one half mile from Interstate 4,
on Sand Lake Road and is approximately 2.5 miles from the Interstate 4 entrance
to Walt Disney World. These facilities include 30,000 square feet of buildings
on approximately 4 acres of land.
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The Tampa, Florida center is owned by the Company and is approximately 3.5
miles from the intersection of Interstate 4 and Interstate 75, on Highway 301.
These facilities include 5.2 acres of land with a 13,000 square foot building.
The Ft. Myers, Florida center is located on Highway 41, approximately 3 miles
North of the City, and includes 17,300 square feet of building on 3.6 acres of
land. The property is leased from a property trust for which the beneficiaries
are Mr. Kindlund's heirs.
The Atlanta, Georgia center is owned by the Company and is located adjacent
to Interstate 75, south of Interstate 285 in Forest Park, Georgia. The
facility includes 13,600 square feet of buildings and was expanded in 1995 from
2.2 acres to 5 acres.
The Greer, South Carolina center is leased from a non-affiliated party. The
facility is located adjacent to Interstate 85 between Greenville and
Spartanburg, South Carolina. The facility includes a 31,000 square foot
building on 9 acres of land.
The Roseville, California center is subleased from a non-affiliated party.
The facility is located adjacent to Interstate 80 and includes 24,000 square
feet of buildings on 3.6 acres of land.
The Bakersfield, California center is owned by the Company and is located
adjacent to State Road 99 and includes 17,400 square feet of building on 5.9
acres of land. The dealership was expanded in December, 1996 by one acre.
The Las Cruces, New Mexico center is owned by the Company and is located
adjacent to Interstate 10. The facility includes 14,000 square feet of
building on 7 acres of land.
The corporate office is leased from a non-affiliated party and is located
approximately one quarter of a mile from the Orlando center on Sand Lake Road.
The facilities include 3,750 square feet of office and conference room
accommodations.
FACILITY AND LOCATION
Approximate Approximate
Building Premise Size
Retail Operations Square Feet Acres
- ------------------ ----------- ------------
Owned by Company
Tampa, Florida 13,000 5.2
Atlanta, Georgia 13,600 5.0
Bakersfield, California 17,400 5.9
Las Cruces, New Mexico 14,000 7.0
Leased
Orlando, Florida 30,000 4.0
Ft. Myers, Florida 17,300 3.6
Greer, South Carolina 31,000 9.0
Roseville, California 24,000 3.6
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Executive Offices
- -----------------
Leased
Orlando, Florida 3,750 ---
The Company believes that its facilities are adequate for the foreseeable
future for the business carried on at these locations. Properties at Orlando,
Tampa, Fort Myers, and Roseville are being fully utilized. Properties at
Atlanta, Greer, Bakersfield and Las Cruces are not being fully utilized and
have area for limited expansion.
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to various legal proceedings arising from its ordinary
course of operations. The Company's management believes, based upon the
opinion of the Company's legal counsel, none of these proceedings, individually
or in the aggregate, will result in a material adverse effect on the Company's
consolidated financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted during the fourth quarter of the fiscal year
covered by this report to a vote of security holders, through the solicitation
of proxies or otherwise.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION ON COMMON STOCK
The Company's common stock trades on National Market tier of "The Nasdaq
Stock Market", under the symbol RVEE. "The Nasdaq Stock Market" or Nasdaq" is
highly-regulated electronic securities market comprised of competing Market
Makers whose trading is supported by a communications network linking them to
quotation dissemination, trade reporting, and order execution systems. This
market also provides specialized automation services for screen-based
negotiations of transactions, on-line comparison of transactions, and a range
of informational services tailored to the needs of the securities industry,
investors and issuers. The Nasdaq National Market and The Nasdaq SmallCap
Market. The Nasdaq Stock Market is operated by The Nasdaq Stock Market, Inc.,
a wholly-owned subsidiary of the National Association of Securities Dealers,
Inc.
The table below gives the market high and low sales prices of the Company's
common stock for the quarters in the fiscal years ended October 31, 1997 and
1996. The prices were furnished by the Nasdaq Stock Market.
MARKET PRICE
------------
1997 1996
Quarter ---------------- ------------------
Ended High Low High Low
------ ---- --- ---- ---
January 31......................... 2 1/8 1 17/32 3 3/4 2
April 30 .......................... 2 1/16 1 3/4 2 3/8 1 3/4
July 31 ........................... 1 31/32 1 25/32 2 3/16 1 3/4
October 31 ........................ 1 13/16 1 1/2 2 1/8 1 1/2
DIVIDENDS
No cash dividends have been paid by the Company nor does the Company
anticipate paying cash dividends in the near future.
HOLDERS OF RECORD
As of January 16, 1998, there were 540 holders of record and approximately
2,700 beneficial shareholders of the Company's Common Stock.
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ITEM 6. SELECTED FINANCIAL DATA:
Fiscal Year Ended October 31 (1)
(in thousands, except earnings per share)
SELECTED STATEMENT --------------------------------------------------------------
OF INCOME DATA 1997 1996(3) 1995(2) 1994 1993
---- ------- ------- ---- ----
Revenue ............................ $67,988 $74,764 $70,029 $53,205 $45,767
Cost of sales ....................... 55,260 61,562 56,872 44,650 38,152
------- ------- ------- ------- -------
Gross profit ........................ 12,728 13,202 13,157 8,555 7,615
Selling, general and
administrative expenses ........... 9,548 9,929 9,758 6,866 5,744
------- ------- ------- ------- -------
Income from operations .............. 3,180 3,273 3,399 1,689 1,871
Interest income ..................... 480 393 376 265 247
Interest expense .................... (1,381) (1,505) (1,336) (717) (548)
------- ------- ------- ------- -------
Income before income taxes .......... 2,279 2,161 2,439 1,237 1,570
Income taxes ........................ 892 829 980 480 600
------- ------- ------- ------- -------
Income before cumulative
effect(4) ......................... 1,387 1,332 1,459 757 970
Cumulative effect(4) ................ -- -- -- -- 77
------- ------- ------- ------- -------
Net income .......................... $ 1,387 $ 1,332 $ 1,459 $ 757 $ 1,047
======= ======= ======= ======= =======
Earnings per share of common stock
before cumulative effect(5) ...... $ .19 $ .18 $ .20 $ .10 $ .13
Cumulative effect(4)................. -- -- -- -- .01
------- ------- ------- ------- -------
Earnings per share of common
stock............................ $ .19 $ .18 $ .20 $ .10 $ .14
======= ======= ======= ======= =======
Weighted average number of common
shares outstanding .............. 7,439 7,524 7,437 7,325 7,280
Cash dividends paid per common
share ........................... $ -- $ -- $ -- $ -- $ --
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As of October 31 (1)
(in thousands, except per share and operating data)
SELECTED BALANCE -------------------------------------------------------------------
SHEET DATA: 1997 1996(3)(5) 1995(2) 1994 1993
---- ---------- ------- ---- ----
Working capital ..................... $11,932 $10,449 $ 9,408 $ 9,322 $ 8,718
Inventories .......................... 20,713 23,171 19,396 17,194 11,351
Total assets ......................... 33,979 34,411 29,717 26,925 19,568
Floor Plan Contracts.................. 15,805 17,504 13,967 13,170 7,193
Long term debt (capital leases) ...... 286 346 343 -- 11
Total liabilities .................... 17,796 19,639 16,301 14,975 8,570
Total stockholder's equity ........... 16,183 14,773 13,416 11,950 10,998
Tangible net worth .................. 15,925 14,446 13,020 11,467 10,928
Book value per common share ......... 2.17 1.99 1.80 1.62 1.51
OPERATING DATA:
Number of dealerships ............... 8 8 8 7 5
Number of RVs and Boats sold ........ 2,565 2,954 2,714 2,002 1,836
- -------------
(1) See Management's Discussion and Analysis of Financial Condition and
Results of Operations.
(2) Includes first full year of operating results from two dealerships
acquired in August, 1994 in California.
(3) Includes first full year of operating results from new dealership
acquired in October, 1995 in New Mexico.
(4) Cumulative effect of change in accounting for income taxes.
(5) Certain amounts have been reclassified from previous presentations to
conform to the 1997 presentation.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Company continued to maintain a strong financial position and high
liquidity throughout Fiscal 1997. Two million one hundred thousand dollars
($2.1 million) cash was generated from operations primarily from net income
($1.39 million), non cash expenses of depreciation and amortization ($432,000)
and decreases in inventories, net of floor plan payoffs (net of $759,000).
These increases were offset by increases in the use of cash to fund
increased accounts receivables ($362,000) primarily contacts in transit from
retail finance companies funding customer purchases, and decreased accrued
expenses ($107,000).
The Company used $253,000 cash for investing activities primarily to
purchase and improve property in Bakersfield ($131,000) and for leasehold
improvements in the new leased facility in Ft. Myers ($45,000).
The net result of all operating, investing and financing activities was an
increase in the Company's cash position by $1.8 million, to $7.4 million as of
October 31, 1997.
Net working capital increased to $11.9 million as of the end of Fiscal 97
compared to $10.4 million as of the end of Fiscal 96.
The Company's liquidity ratios continue to compare favorably to the
recreational vehicle dealers industry averages, as reported by 1996 Annual
Statement Studies, Robert Morris Associates, Philadelphia, PA. ("RMA"). The
Company's current ratio as of the end of Fiscal 1997 and Fiscal 1996, was 1.68
and 1.54 with the industry average of 1.2 and 1.3 respectively.
The Company's quick ratio, as of the end of Fiscal 1997, and Fiscal 1996, was
0.50 and 0.34. The Company's quick ratio at the end of Fiscal 1997, a measure
of the ability to pay off current liabilities without relying on the sale of
inventories, was approximately 5 times greater than the industry average (RMA)
of 0.1 as of the end of Fiscal 1997.
The Company's debt to worth ratio, a measure of the financing provided by the
Company's creditors as compared to the contribution by shareholders, as of the
end of Fiscal 1997 was 1.1. The industry average (RMA) was 4.1 for 1996.
The Company's principal long term commitments, as of the end of Fiscal 1997,
consist of obligations under operating leases. The Company also has a
contingent liability to repay a portion of agency commission (referral fees)
received principally from some lending institutions whereby the Company
referred customers to one or more third party financing sources and earned
referral fees (agency commissions) if the lender consummated a loan
contract with the customer. In some cases, the Company could be required to
pay back (chargeback) the referral fee to the lender if the loan is paid off
or foreclosed in a specific period of time, usually limited to
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the first six months of the term, if the charge back amount exceeds reserves
retained by the lender. The Company records commission income based upon the
amount earned less allowances for chargebacks. In determining the allowance,
the Company takes into consideration the total customer loans outstanding and
estimates the exposure for potential chargebacks associated with these loans.
The Company estimates the probability for loan payoffs and the potential
chargebacks to the Company related thereto. The Company also considers the
current and predicted future economic conditions, the effects of changes in
consumer interest rates and the aging of all it's customer loans outstanding
representing potential chargebacks to the Company.
The Company's chargeback allowance was $106,000, $135,000 and $152,000 as of
the end of Fiscal 1997, Fiscal 1996 and Fiscal 1995 respectively. Chargebacks
were $57,000, $58,000 and $40,000 for Fiscal 1997, Fiscal 1996 and Fiscal 1995,
respectively. Management expects the current allowance for chargebacks to be
sufficient to repay this contingency and does not expect the ultimate liability
to have a significant impact on the liquidity of the Company.
The Company's Board of Directors, in Fiscal 1993, set specific strategic
targets for the expansion and/or diversification of the Company's operations,
primarily through acquisition, with the ultimate goal of increasing the
Company's value to its shareholders. These targets, if obtained, could
require the Company to seek additional capital. Since its initial public
offering in 1987 the Company has funded it's expansion plan with internally
generated cash, debt from financial institutions for purchasing RVs, and the
issuance of a limited amount of common stock.
The Company's management is currently evaluating alternative sources of
capital, its cost and its ultimate effect on the capitalization of the Company.
The Company had $47 million maximum borrowing under floor plan contracts of
which $31 million was not used as of the end of Fiscal 1997. Currently, the
Company has $30 million maximum borrowing available under floor plan contracts.
The reduction in maximum borrowing available from Fiscal 1997 year end is the
result of a change in the Company's floor plan sources to obtain more
favorable terms and conditions for the Company, eliminating one flooring
company.
The Company's management feels it can obtain additional debt financing at
reasonable interest rates for expansion and/or diversification of its
operations. None of the Company's real properties are mortgaged. In the
opinion of management mortgage financing could be obtained at reasonable
interest rates, for which the proceeds could be used for expansion and the
diversification of the Company's operations.
Currently Management has no expansion or diversification prospects
requiring a secondary stock offering or a conversion of the financing debt to
common stock. Management does intend to continue to issue common stock and/or
options on common stock as a partial payment for acquisitions when cost
effective. However, management expects the dilutive effect on the common
stockholders of the Company resulting from issuing such common stock or options
to be minimal.
Management believes that during the next twelve months cash generated by
operating activities, cash and cash equivalents on deposit with financial
institutions and financing
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currently available from floor plan financing companies will be sufficient for
its capital and operating needs for its existing operations.
The Company has signed a non-binding letter of intent to acquire an RV
dealership in Southern California to increase it's market share of this
lucrative market, the largest market in the United States for RVs. If the
Company is successful in negotiating the purchase agreement, management expects
to complete the acquisition by March, 1998.
In January, 1998, the Company began to repurchase shares of its common stock
through open market purchases and by the repurchase of a block of 125,000
shares of Rule 144 letter stock, no longer subject to Rule 144 restrictions.
The repurchase period could continue up to one year from January 1998 and would
be limited to $1 million in total value at the time of purchase. Prudential
Securities is being used exclusively for the open market repurchases.
ENGAGEMENT OF FINANCIAL ADVISOR TO EXPLORE STRATEGIC ALTERNATIVES TO ENHANCE
SHAREHOLDER VALUE
In December, 1996, the Company engaged Prudential Securities Incorporated to
act as the Company's exclusive financial advisor to explore strategic
alternatives to enhance shareholder value, including possible acquisitions,
mergers or the sale of the Company. The engagement terminated in December,
1997. However, the Company maintains an ongoing relationship with Prudential
Securities.
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR FISCAL 1997 COMPARED TO FISCAL 1996.
Sales and service revenue decreased 9.1% to $68.0 million for Fiscal 1997
from $74.8 million in Fiscal 1996 reflecting the national trend. According to
the Recreation Vehicle Industry Association (RV Trade Digest, December 1997)
recreation vehicle deliveries to retailers from manufacturers for the nine
months ended September, 1997 were down 5.6%, as compared to the same period last
year.
Sales and service revenue in the eastern dealerships declined 21% due to a
decrease in the number of units sold, accounting for all the decrease in
revenue for the Company. This decrease was due to two primary factors, the
decline in overall sales for the RV Industry nationwide, and increased
competition in the Southeastern states. Consequently the Company's management
is continuing to make a number of strategical changes in store management and
marketing strategy in the Southeastern stores. The Western dealership's revenue
increased 12% due to additional units sold.
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Management expects the Company's same store revenue to increase in Fiscal
1998, and follow the forecast for the recreation vehicle industry. According
to the CIT Group Economic Research Department's Third Annual Recreation Vehicle
Outlook (October 1997), "We look for growth to return in 1998 and 1999 with
deliveries increasing 3.7% and 3.4% respectively".
Cost of sales and service, as a percentage of revenue, decreased to 81.3% in
Fiscal1997 from 82.3% in Fiscal 1996.
Gross profit decreased 3.6% to $12.73 million in Fiscal 97 from $13.2
million in Fiscal 1996. As a percentage of revenue, gross profit increased
to 18.7% in Fiscal 97 from 17.7% in Fiscal 1996. This increase was primarily
the result of increased gross margins on the sale of used RVs. Margins in the
other major sources of revenue remained approximately the same in Fiscal 97, an
improvement from decreasing margins experienced in Fiscal 1996.
Selling, general and administrative expenses (SG&A) decreased 3.8% to $9.55
million in Fiscal 1997 from $9.93 million in Fiscal 1996. This decrease
resulted primarily from decreased personnel expenses. As a percentage of
revenue, SG&A increased to 14% in Fiscal 1997 from 13.3% in Fiscal 1996, due
to the fixed cost components of the Company's expenses.
Income from operations decreased 2.8% to $3.18 million in Fiscal 1997 from
$3.27 million in Fiscal 1996. As a percentage of revenue, income from
operations increased to 4.7% in Fiscal 1997 from 4.4% in Fiscal 1996.
Interest income increased 22% to $480,000 in Fiscal 1997 from $393,000 in
Fiscal 1996 due to more cash available to invest. Interest expense decreased
8.2% to $1.38 million in Fiscal 1997 from $1.50 million in Fiscal 1996
primarily due to a 38 basis points reduction in the weighted average interest
rate for Fiscal 97 compared to Fiscal 96.
Income before income taxes increased 5.5% to $2.28 million in Fiscal 1997,
from $2.16 million in Fiscal 96. As a percentage of revenue, income before
income taxes increased to 3.4% in Fiscal 1997 from 2.9% in Fiscal 1996.
The combined Federal and State effective income tax rate was 39.2% in
Fiscal 1997 compared to 38.3% in Fiscal 1996. Income tax rates varied from
statutory rates due to state income taxes. See Note 9 of the notes to the
consolidated financial statements for components of the income taxes and the
reconciliation of the provision for income taxes to the federal statutory
rates.
Net income increased 4.1% to $1,386,597 in Fiscal 1997 from $1,331,932 in
Fiscal 1996. As a percentage of revenue, net income increased to 2.0% in
Fiscal 1997 compared to 1.8% in Fiscal 1996.
Earnings per share were 19 cents in Fiscal 1997 compared to 18 cents in
Fiscal 1996.
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RESULTS OF OPERATIONS FOR FISCAL 1996 COMPARED TO FISCAL 1995.
Sales and service revenue increased 6.8% to $74.8 million in Fiscal 1996
from $70 million in Fiscal 1995 due to revenue from the Las Cruces, New
Mexico center acquired in October, 1995. On a same store basis, revenue
decreased 6% reflecting the national trend. According to the Recreation
Vehicle Industry Association (RV Trade Digest, December, 1996) recreation
vehicle deliveries to retailers were down 0.5% for the nine months ended
August, 1996, as compared to the same period last year. Even though this data
is not totally comparable, it does indicate the Company's change on RV sales
reflected the national trend.
Cost of sales and service, as a percentage of revenue, decreased to 82.3% in
Fiscal 1996 from 81.2% in Fiscal 1995.
Gross profit remained the same at $13.2 million. On a same store basis,
gross profit decreased 13%. As a percentage of revenue, gross profit
decreased to 17.7% in Fiscal 96 compared to 18.8% in Fiscal 1995. This decrease
resulted in decreases in every major revenue category due to increased pressure
on gross margins from competitors resulting from an oversupply of product
generally found throughout the industry.
Selling, general and administrative expenses (SG&A) increased slightly to
$9.9 million in Fiscal 1996 from $9.8 million in Fiscal 1995. As a percentage
of revenue, SG&A decreased to 13.3% in Fiscal 1996 from 13.9% in Fiscal 1995.
On a same store basis, SG&A decreased 13% in Fiscal 1996. These decreases are
primarily due to decreased sales ad personnel expense resulting from decreased
revenue.
Income from operations decreased 3.7% to $3.27 million in Fiscal 1996 from
$3.40 million in Fiscal 1995. As a percentage of revenue, income from
operations decreased to 4.4% from 4.9%.
Interest income increased slightly to $393,000 in Fiscal 1996 from $376,000
in Fiscal 1995 due to a higher average balance of invested cash. Interest
expense increased 13% to $1.50 million in Fiscal 1996 from $1.34 million in
Fiscal 1995 primarily due to higher floor plan balances resulting from new
vehicle inventories at the new Las Cruces center.
Income before income taxes decreased 11.4% to $2.16 million in Fiscal 1996,
compared to $2.44 million in Fiscal 1995. As a percentage of revenue, income
before income taxes decreased to 2.9% in Fiscal 1996 compared to 3.4% in Fiscal
1995.
The combined Federal and State income tax rate was 38.3% in Fiscal 1996
compared to 40.2% in Fiscal 1995. Income tax rates varied from Federal
statutory rates due to state income taxes. See Note 9 of the notes to the
consolidated financial statements for components of the income taxes and the
reconciliation of the provision for income taxes to the federal statutory
rates.
Net income decreased 8.7% to $1,331,932 in Fiscal 1996 from $1,458,993 in
Fiscal 1995. As a percentage of revenue, net income decreased to 1.8% in
Fiscal 1996 from 2.1% in Fiscal 1995.
Earnings per share was 18 cents in Fiscal 1996 compared to 20 cents in
Fiscal 1995.
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INFLATION
The Company's management believes that increases in the cost of new vehicles
and boats that may result from increases in cost of products purchased from
manufacturers can be offset by higher resale prices for used retail vehicles
and boats as well as higher retail prices for new vehicles and boats although
there may be a lag in the ability of the Company to pass such increases on to
its customers.
Historically, increases in operating costs are passed on to the consumer when
the market allows. The Company's management believes that its business has not
been significantly affected by inflation despite increased chassis and
manufacture conversion costs experienced.
RECENT ACCOUNTING PRONOUNCEMENTS
In February, 1997, the Financial Accounting Standards Board issued
SFAS No. 128, Earnings per Share, which is effective for interim and annual
periods ending after December 15, 1997. The overall objective of SFAS No. 128 is
to simplify the calculation of earnings per share (EPS) and achieve
comparability with the International Accounting Standards. The Company will be
required to adopt SFAS No. 128 in the first quarter of 1998, but does not expect
the adoption to have a material effect on earnings per share. Basic and diluted
EPS under SFAS No. 128 would not differ more than $.01 per share from the EPS
presented for 1997, 1996 and 1995.
Also during 1997, the FASB issued SFAS No. 130, Reporting of Comprehensive
Income, which is effective for fiscal years beginning after December 15, 1997.
This statement requires the reporting of net income and all other changes in
equity during the period, except those resulting from investments by owners and
distributions to owners, in a separate statement that begins with net income or
in the consolidated statement of operations below net income. This
pronouncement will not be effective for the Company until the fiscal year
ending October 31, 1999. For the fiscal years ended October 31, 1997, 1996 and
1995, comprehensive income and net income would not differ materially.
IMPACT OF THE YEAR 2000 ISSUE ON THE COMPANY
The Year 2000 Issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Based on a recent
assessment, the Company has determined that it's principle management
information system software, the ERA Advantage, provided by the Reynolds &
Reynolds Company, Dayton OH, will be year 2000 qualified by mid-year, 1998.
The Company also uses various "off the shelf" software applications
throughout the Company for the storage and analysis of various types of data
that management is dependent upon for day to day operations.
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Management's preliminary assessment is, little or no modifications or
replacement will be necessary to the Company's existing software to achieve
Year 2000 Qualification.
However, the Company has not communicated with all of its significant
suppliers to determine the extent to which the Company is vulnerable to those
third party failures to remediate their own Year 2000 Issue. The Company does
not anticipate the suppliers cost to obtain Year 2000 compliance to be passed
on to the Company. However, there is no guarantee that these systems of other
Companies on which the Company's systems rely will timely converted, or that
failure to convert by another Company, or the conversion that is compatible to
Company systems, would not have a material, adverse effect on the Company.
The Company has determined that it has no exposure to contingencies related
to the Year 2000 Issue, for products it has sold.
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS
The Company wishes to take advantage of the new "safe harbor" provisions of
the Private Securities Litigation Reform Act of 1995 and is filing this
cautionary statement in connection with such safe harbor legislation. The
Company's Form 10-Q, this Form 10-K, any Form 8-K, or any other written or oral
statements made by or on behalf of the Company may include forward looking
statements which reflect the Company's current views with respect to future
events and financial performance. The words "believe", "project",
"anticipates", "estimates", "expects", "most likely", "intends" and similar
expressions identify forward looking statements.
The Company wishes to caution investors that any forward looking statements
made by or on behalf of the Company are subject to uncertainties and other
factors that could cause actual results to differ materially from such
statements. The uncertainties and other factors include, but are not limited
to, the factors listed below (many of which have been discussed in prior SEC
filings by the Company.) Though the Company has attempted to list the factors
it believes to be important to its business, the Company wishes to caution
investors that other factors may prove to be important in affecting the
Company's results of operations. New factors emerge from time to time and it
is not possible for management to predict all of such factors, nor can it
assess the impact of each such factor on the business or the extent to which
any factor, or combination of factors, may cause actual results to differ
materially from forward looking statements.
Investors are further cautioned not to place undue reliance on any forward
looking statements as they speak only of the Company's view as of the date the
statement was made. The Company undertakes no obligation to publicly update or
revise any forward looking statements, whether as a result of new information,
future events, or otherwise.
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FACTORS
GENERAL ECONOMIC CONDITIONS
The Company's sales are affected by general economic conditions, including
employment rates, prevailing interest rates, inflation, and other economic
conditions affecting disposable consumer income generally. Weakness in the
economy could have a material adverse effect on the Company's business. The
majority of the Company's customers purchasing vehicles and boats finance their
purchase. Increases in consumer interest rates could have an adverse effect on
the Company's ability to sell vehicles and boats. Furthermore, a general
increase in commercial interest rates would increase the rates paid by the
Company on its floor plan contracts, thereby adversely effecting the Company's
operating income.
COMPETITION
The Company competes with a large number of dealers, some of which operate in
more than one location, although most of the competitors operate from a single
location. Significant competitive factors include price, service, reliability,
quality of service and convenience. Among other things, increased competition
could cause downward pressure on sales prices and lower margins.
SATELLITE OPERATIONS
The Company depends on all of its revenue and most of its income from
satellite retail sales and service centers. These centers are geographically
widespread throughout the continental U.S. making it difficult for the
Company's top management to have a presence in all the centers on a regular
basis. As a result, the Company is highly dependent upon each center's
management for the on-going operation of each respective center. Turnover of
managerial personnel at any center usually has an adverse effect on the sales
and profitability of the center. Turnover of managerial personnel at several
of the same Company's centers could have a material adverse effect on the
Company's sales and profitability.
DEPENDENCE UPON MANUFACTURERS FOR SUPPLY OF PRODUCT
The Company markets approximately 50 brands of vehicles and 10 brands of
boats. The Company maintains "dealer agreements" with most of the
manufacturers of the vehicles and boats specifying certain terms and conditions
necessary for the Company to continue representation of the specific brand in a
specified geographic market area. The loss of any one brand would not
materially affect the Company, however, the loss of all brands of anyone of the
two largest manufacturers, i.e. Fleetwood Enterprises, Inc. or Thor Industries,
Inc., would have a material, adverse effect on the Company's sales.
FUEL PRICING AND AVAILABILITY
The Company's business is automotive in nature and as such is dependent upon
the availability of fuel. A decrease in the availability of gasoline and the
inability of the Company to convert its
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vehicles to alternative fuels could have a material adverse effect on the
Company's business. Historically, increases in the price of gasoline have not
had a material impact on the Company's business, as long as there was no
concurrent decline in availability. However, future significant increases in
the price of gasoline or decreases in availability would have a material effect
on the Company's business.
REGULATION, SUPERVISION, AND LICENSING
The Company's operations are subject to ongoing regulation, supervision and
licensing under various federal, state, and local statutes, ordinances and
regulations. The adoption of more stringent statutes and regulations, changes
in the interpretation of existing statutes and regulations, or the Company's
entrance into jurisdictions with more stringent regulatory requirements could
curtail some of the Company's operations, deny the Company the opportunity to
operate in certain locations, or restrict products or services offered by the
Company.
The Company's customers and potential customers are subject to federal, state
and local statutes, ordinances and regulations regarding the ownership of
recreation vehicles and boats. The adoption of more stringent statutes,
ordinances and regulations effecting the consumer ownership of recreation
vehicles or boats, could have an adverse effect on the Company's ability to
sell its products.
ENVIRONMENTAL RISKS
The nature of any automotive business involves the handling of hazardous
wastes such as motor oil, fuel, paint and other chemicals. Noncompliance with
or changes to environmental regulations could adversely affect the Company's
business.
CONTINUING GROWTH
The Company's growth has been fueled principally by the acquisition of retail
RV sales and service centers similar to those currently operated by the
Company. The Company's continued growth materially depends on it's ability to
continue to expand its operations through acquiring retail RV sales and service
centers. The Company's expansion is subject to a number of factors, including
but not limited to, the adequacy of the Company's capital resources, the
Company's ability to locate suitable acquisition candidates and negotiate
acceptable purchase terms, to hire, train and integrate employees, and to
adapt its selling system and other operations systems.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to Part II, Item 8, is submitted as a separate section of this
Form 10-K.
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Effective August 18, 1997, the Company dismissed it's prior certifying
accountant, BDO Seidman, LLP ("BDO") and retained as its new certifying
accountant, Coopers & Lybrand, LLP, ("Coopers"). BDO's report on the
Company's financial statements during the two most recent fiscal years
preceding the date hereof contained no adverse opinion or disclaimer of
opinions, and was not qualified as to uncertainty, audit scope or accounting
principles. The decision to change accountants was approved by the Company's
Board of Directors.
During the last two fiscal years and the subsequent interim periods to the
date hereof, there were no disagreements between the Company and BDO on any
matters of accounting principles or practices, financial statement disclosure,
or auditing scope or procedure, which disagreements, if not resolved to the
satisfaction of BDO, would have caused it to make a reference to the subject
matter of the disagreements in connection with its reports.
None of the "reportable events" described in Item 304(1) (1) (ii) of
Regulation S-K of the Securities Exchange Act of 1934 occurred with respect to
the Company within the last two fiscal years, and the subsequent interim period
to the date hereof.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The directors and executive officers of the Company as of January 16,
1998 were as follows:
Officer
and/or
Name Age Position Director since
- ---- --- -------- --------------
Newton C. Kindlund 57 President, Chairman of the Board, 1978
Chief Executive Officer
Joanne M. Kindlund 48 Executive Vice President- 1978
Administration, Secretary/
Treasurer and Director
W. Hardee McAlhaney 50 Vice President, 1988
Chief Financial Officer
and Director
James P. Williams 58 Director 1987
Paul G. Clubbe 55 Director 1987
Roy W. Parker 53 Director 1993
Harvey M. Alper 51 Director 1996
All Directors hold office until the next annual meeting of the Company's
shareholders and until their successors are elected and qualified. Executive
officers serve at the discretion of the Board of Directors.
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DIRECTORS AND EXECUTIVE OFFICERS' BUSINESS EXPERIENCE
The following is a brief account of the educational and business experience of
each Director and Officer of the Company:
NEWTON C. KINDLUND
Mr. Kindlund and his wife, Joanne M. Kindlund, are co-founders of the
Company. He has served as President and Chairman since its inception in July
1978, and is a graduate of Michigan State University having received his BA in
1963. He has done postgraduate studies at the Wharton School of the University
of Pennsylvania, Boston College and Indiana University. From 1975 to 1977 he
was a regional Vice President of Recreation Vehicle Industry Association,
Elkhart, Indiana. He was a founder of the Florida RV Trade Association and
served on the Board of Directors of the National Recreation Vehicle Rental
Dealers Association and the Central Florida World Trade Council. Recently Mr.
Kindlund has served a four year term as an Executive Board member and on the
Executive Committee of the Greater Orlando Florida Chamber of Commerce.
Currently Mr. Kindlund is a member of the National Dealer Advisory Council for
Airstream, Inc., Spartan Motors, Inc., and is a past Chairman of the Board of
Directors of the Recreation Vehicle Rental Dealers Association. Mr. Kindlund
was recognized as the RV News RV Executive of the Year for 1995.
JOANNE M. KINDLUND
Mrs. Kindlund, a co-founder of the Company, has served as Executive
Vice President, Secretary and Treasurer and as a Director since its inception
in July, 1978. She graduated from the University of Florida in 1971 with a
B.S. Degree in Advertising and has done postgraduate work at the University of
Florida in accounting and finance. From 1984 to 1985, she assisted Gorman
Planning and Associates, Virginia Beach, Virginia with the creation of software
managerial systems including accounting systems and inventory control systems
for retail recreational vehicle sales dealerships.
W. HARDEE MCALHANEY
Mr. McAlhaney joined the Company as Corporate Comptroller in 1988 and
is currently a Vice President and Chief Financial Officer of the Company. He
graduated from the University of Tennessee in 1970 with a B.S.B.A. Degree, and
from the University of Florida in 1972 with an M.B.A. Mr. McAlhaney served as
Chief Financial Officer for two national retail chains; The Athletic Attic and
The Athlete's Foot, prior to joining Drexel, Burnham, Lambert as an investment
consultant.
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JAMES P. WILLIAMS
Mr. Williams has served on the Board of Directors of the Company since
August of 1987. He received his Bachelor of Science Degree in Business in 1961
from Stetson University. Mr. Williams, since graduation from college has been a
practicing accountant having become a Certified Public Accountant in 1967. He
is the owner of Williams and Company, CPA's and Consultants.
PAUL G. CLUBBE
Mr. Clubbe attended St. Dunstans College, England, Lisgar Collegiate,
Ottawa, Ontario Canada and Pickering College, Toronto, Ontario Canada. From
1982 to 1995 Mr. Clubbe served as Executive Officer of Rotex Canada, Inc. From
1964 to 1982 Mr. Clubbe was the Senor partner in Poly-Converters Limited,
Oakville, Ontario, Canada. He presently is is President of P.C.M. Limited,
Toronto, Canada, an outsourcing Company with manufacturing facilities in
Dongoing, China. He also serves as a member of the Board of Directors of
Flesherton Concrete Products, Inc., Paulaurier Sales, Inc., Rocan Office
Products, Inc. and Dongoing Shahowez Mfg. LTD. China.
ROY W. PARKER
Mr. Parker is Chief Executive Officer and Owner of Parker Boat
Company, Incorporated, the Sea Ray boat dealer for Orlando, Florida. Parker
Boats was founded in 1927. Mr. Parker joined the business in 1964, and became
the sole owner in 1980. Parker Boats has ranked consistently as a top 25
dealer in sales nationally for Sea Ray. Mr. Parker received the Hall of Fame
Award in 1993, presented by the Marine Retailers Association of America. Mr.
Parker also is past President of the Central Florida Marine Trade Association,
and is on the Lakes and Advisory Board for the City of Maitland, Florida.
HARVEY M. ALPER
Mr. Alper is a partner of the law firm, Alper, Walden, Crichton and
Miller, Altamonte Springs, Florida. He earned his B.S.J.M. degree (1968) and
his JD (1971) from the University of Florida and has continued his professional
education with several certifications including a certificate in "Comparative
Law" from Oxford University in 1979. Mr. Alper has been engaged in the
private practice of law since 1971, after serving as Assistant General Counsel
for the City of Jacksonville, Florida. Mr. Alper serves as general counsel to
the Company as a partner of the law firm, Alper, Walden, Crichton and Miller.
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ITEM 11. EXECUTIVE COMPENSATION
The table below sets forth the cash compensation including salaries, bonuses,
contributions to retirement plans, premium paid on health and dental insurance
plans and disability insurance plans, paid by the Company for the years ended
October 31, 1997, 1996, and 1995, to, or for the benefit of, each executive
officer whose total annual salary and bonus exceeded $100,000, and the CEO
regardless of compensation level.
Summary Compensation Table
- -----------------------------------------------------------------------------------------------------------------------------------
Long-Term
Annual Compensation
Compensation Awards
Awards ---------------------
Name and ----------------------------------------------- Restricted Stock
Principal Position Year Salary (1) Bonus (2) Other Stock Options Other (3)
-----------------------------------------------------------------------------------------------------------------------------------
Newton C. Kindlund 1997 $107,581 --- --- --- --- ---
Chairman, President 1996 $107,564 --- --- --- --- ---
and Chief Executive 1995 $108,364 --- --- --- --- ---
Officer
W. Hardee McAlhaney 1997 $ 81,437 $52,477 --- --- --- $ 597
Vice President and 1996 $ 80,850 $53,785 --- --- --- $ 597
Chief Financial Officer 1995 $ 83,204 $63,617 --- --- --- $ 597
(1) Includes contributions by the Company pursuant to an employee benefit plan
established under Section 401(k) of the Internal Revenue Code in the
amounts of $3,181, $3,167, and $3,964 for Mr. Kindlund for 1997, 1996 and
1995 respectively, and $4,027, $3,450, and $5,803, for Mr. McAlhaney
for 1997, 1996 and 1995 respectively. Also includes $2,400 for health
insurance reimbursement each year for both Mr. Kindlund and Mr. McAlhaney.
(2) Mr. McAlhaney's bonus is based on the Company's net income before taxes.
(3) The Company pays a part of the premium on a term life insurance policy
for Mr. McAlhaney whose sole beneficiary is designated by the insured. The
policy has no cash surrender value provision.
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OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning stock option grants
made in the fiscal year ended October 31, 1997, to the individuals named in the
Summary Compensation Table. There were no grants of options or SARs to said
individuals during the year.
Individual Grants
--------------------------------------------------------------------------- Potential Realizable Value at
Number of % of Total Assume Annual Rates of Stock
Securities Options Exercise Price Appreciation for Option
Underlying Granted to or Base Term
Options Employee Price Expiration -----------------------------
Name Granted (#) In FY ($/sh) Date 5% ($) 10%
- ---- ----------- ---------- --------- ---------- ------- -----
Newton C. Kindlund --- --- --- --- --- ---
W. Hardee McAlhaney --- --- --- --- --- ---
- -----------------------------------------------------------------------------------------------------------------------------------
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
The following table sets forth information concerning the number and value
realized as to options exercised during Fiscal 1997 and options held at October
31, 1997, by the individuals named in the Summary Compensation Table and the
value of those options held at such date. There were no options exercised
during Fiscal 1997 and no SARs were held at year end.
Number of Securities Value of unexercised
Underlying Unexercised In-The-Money Options
Shares Value Options at FY-End (#) FY-End ($) (1)
Acquired on Realized ------------------------- -------------------------
Name Exercise (#) $ Exercisable Unexercisable Exercisable Unexercisable
- ---- ------------ -------- ----------- ------------- ----------- -------------
Newton C. Kindlund -- -- -- -- -- --
W. Hardee McAlhaney -- -- 125,000 -- 3,900 --
- ----------------------------------------------------------------------------------------------------------------------------
(1) Based on a price of $1.531 per share, being the closing price of Common
Stock on October 31, 1997.
DISCRETIONARY AND INCENTIVE BONUSES
The Board of Directors awards discretionary cash bonuses to executive
officers and other employees each year. Bonuses have been paid under various
informal arrangements that have provided for the payment of stipulated amounts
to certain executive officers ratably during the fiscal year, fiscal year end
bonuses to certain executive officers and to marketing and sales support
personnel.
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The Company has established an incentive bonus program for its employees with
bonuses generally paid monthly or annually. Bonuses are primarily based upon
net pre-tax profits from the various profit centers within each retail center
and is contingent upon continued employment with the company.
DIRECTORS FEES
Directors, who are not salaried employees of the Company, receive $500 for
their attendance at each meeting of the Board of Directors, Annual Shareholders
Meeting and $175 for each committee meeting. The Directors are reimbursed for
their travel, lodging and food expense incurred when attending such meetings, if
such meetings are held in a location in excess of twenty five (25) miles from
the principal place of business of the Company in Orlando, Florida. Directors
are also reimbursed for their travel, lodging and food expenses incurred when
traveling on behalf of the Company when requested to do so by an officer of the
Company or by the Board of Directors.
DIRECTORS OPTIONS
Each outside Director, serving on the board as of February 20, 1993, was
granted an option for 10,000 shares of common stock of the Company, exercisable
after February 20, 1995. The exercise price is $1.81 per share, the price of
the Company's common stock at the time of the grant. A total of five options
were granted, one to each of the then serving outside Directors (total of
50,000 shares).
EMPLOYEE BENEFIT PLANS
The Company maintains a tax qualified, Profit Sharing and 401(k) Employee
Investment Plan ("Plan"). All employees who have attained 21 years of age and
complete one year of service are eligible to participate in the Plan. Plan
participants must complete at least eighteen (18) months of service to begin
partial vesting with total vesting occurring when a Plan participant has
completed five and one half (5 1/2) years of service to the Company. Normal
retirement age under the retirement Plan is 65 years. The Plan fiscal year
ends October 31st.
In Fiscal 1997, $86,349 was contributed to the Plan for the benefit of 115
Plan participants. In Fiscal 1996, $94,719 was contributed to the Plan for
the benefit of 163 Plan participants.
Prudential Bank and Trust Company (One Ravinia Drive, Ste. 1000, Atlanta, GA
30346, 770-551-6700), is the trustee. The Company is the plan administrator.
The Plan document provide for contributions at the discretion of the Board of
Directors, to be allocated to each Plan participant in an amount not greater
than 10% of each participant's compensation subject to the annual contribution
(1) limitation of the top heavy rules and; (2) matching 25% of each
participants 401(k) contribution up to 6% of the participants compensation.
Under the Plan, compensation is broadly defined to include wages, salaries,
bonuses, overtime, stock grants and commissions. Amounts contributed to the
Plan by the
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Company for the 1997, 1996 and 1995 Plan years on behalf of the named
individuals are included in the Executive Compensation Table, of this report
are included in said table.
1987 INCENTIVE STOCK OPTION PLAN
In August 1987, the Board of Directors of the Company adopted the 1987
Incentive Stock Option Plan (the "ISO Plan") which provides that the Company
may grant to officers and managerial employees of the Company and its
subsidiaries incentive stock options. The purpose of the ISO Plan is to
provide the Company with a means of attracting, retaining and increasing the
incentive of officers and managerial employees by offering them the opportunity
to invest in, or increase their investment in, the Company. Options under the
ISO Plan are designed to qualify under Section 422A of the Internal Revenue
Code of 1986.
The ISO Plan is administered by the Compensation Advisory Committee of the
Board of Directors (the "Committee") which may grant options to purchase up to
an aggregate of 280,000 shares of Common Stock. The option exercise price must
be at least 100% of the fair market value per share of Common Stock on the date
of grant, except that such price must be at least 110% of the fair market value
per share for employees who own more than 10% of the outstanding Shares of the
Company. The options are exercisable, as determined by the Committee, over a
period of time, but not more than ten years from the date of grant and will be
subject to such other terms and conditions as the Committee may determine. Any
option granted to an employee shall lapse following his termination of
employment; provided, however, that in the discretion of the Committee, the
employee shall have up to three (3) months following his termination of
employment to exercise his options and provided, further, that upon the
employee's permanent and total disability, any option granted to him may be
exercised within twelve months following his termination of employment because
of such disability. The ISO Plan provides for certain anti-dilution
adjustments upon the occurrence of certain events.
Five separate options for 25,000 shares each have been granted to an Officer
of the Company, the Vice President and Chief Financial Officer, Mr. McAlhaney.
The options were approved by the Board of Directors on the following dates and
at the following option exercise prices:
Date Shares Exercise Price
----- ------ --------------
May 23, 1994 25,000 $1.819
February 20, 1993 25,000 $1.813
March 24, 1992 25,000 $1.375
November 17, 1990 25,000 $1.625
May 14, 1990 25,000 $2.500
-------
125,000
=======
BONUS STOCK
In September 1987, the Company issued 250,000 Shares of Common Stock to
various individuals including officers, directors and employees of the Company
for services rendered. These shares have certain restrictions and forfeiture
provisions attached to them. Since
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September 1987, a number of recipients of such shares have terminated their
employment with the Company resulting in their bonus shares of Common Stock
being forfeited to the Company. After September 1987, the Company made
additional awards of bonus shares to employees; however, no shares in excess of
the initial 250,000 shares have been issued since forfeited shares equaled or
exceeded the number of bonus shares issued by the Company to employees
subsequent to such date. Beginning with the year ended October 31, 1987, and
over a period of two to five years the value of these shares have been changed
against the earnings of the Company. The Company valued the shares initially
issued at 50% of the initial public offering price of its shares of common stock
or $1.25. Shares issued subsequent to September 1987 were valued at 100% of the
market value on the day of issue.
The amount of shares awarded and fair market value assigned to the shares for
the last three Fiscal years are as follows:
Bonus Stock
--------------------------------------------------------------------------------
Number Shares Fair Market Value
Fiscal Year Awarded at time of Award
--------------------------------------------------------------------------------
1997 5,000 $11,250
1996 7,500 $14,063
1995 54,000 $91,125
--------------------------------------------------------------------------------
The bonus stock awards listed above require a two (2) year vesting and
employment period. As of October 31, 1997, 218,700 shares had been granted
pursuant to the plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Board of Directors Compensation Advisory Committee membership
for Fiscal 1997 included Messrs. W. Hardee McAlhaney, James P. Williams and Roy
W. Parker. Mr. McAlhaney is the Vice President and Chief Financial Officer of
the Company.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent
(10%) of the registered class of the Company's equity securities, to file
reports of ownership on Form 3 and changes in ownership on Form 4 or 5 with the
Securities and Exchange Commission (Section 16(a)) and the exchange on which
the Company's securities trade. Such officers and directors and ten percent
(10%) shareholders are also required by SEC rules to furnish the Company with
copies of all Section 16(a) forms they file.
32
33
Based solely on its review of copies of such reports received from certain
reporting persons, the Company believes that it's directors, executive officers
and ten percent (10%) stockholders complied with all Section 16(a) filing
requirements during the fiscal year ended October 31, 1997, except for the
following filings:
# of Late # of Transactions Reason for
Insiders' Name Reports Not Reported Failure to File
-------------- -------- ----------------- ----------------
Newton C. Kindlund 1 1 Oversight
Joanne M. Kindlund 1 1 Oversight
BOARD COMPENSATION ADVISORY COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Advisory Committee of the Board of Directors of Holiday RV
Superstores, Inc. consists of two outside Directors and the Chief Financial
Officer of the Company. The Committee has the responsibility to recommend to
the Board how to administer the Company's Incentive Stock Option Plan, awarding
the Company's bonus shares of Common Stock and determining the compensation of
the Company's three executive officers. This report focuses primarily on the
Company's philosophy with respect to the executive officers compensation and
approach the Committee has taken thus far and intends to take in the future
with respect to relating compensation to performance of the Company.
From the inception of the Company, its corporate philosophy concerning
compensation has been to minimize guaranteed fixed compensation in favor of
incentive compensation which increases when the Company's performance is strong
and declines when it is poor. Incentive compensation, or bonuses tied to
prescribed formulas, is pervasive throughout the Company's managerial
structure. Such bonuses can be as much as 100% or more of any employee's base
salary. Dealership general managers and departmental managers receive an
incentive bonus based on the profitability of their respective dealerships or
departments. In addition, dealership general managers are paid a year end
bonus based on their respective stores achieving a pre determined agreed upon
annual income target, usually the budgeted net pretax income for their
dealership.
The corporate officers receive a base salary which is expected to be
sufficient to support a reasonable minimal managerial lifestyle. The President
has a guarantee base annual salary of $102,000. The other two executive
officers being the Secretary, and the Vice President and CFO, each receive a
base guaranteed annual salary of $75,000. There is also an incentive quarterly
bonus for the Vice President and CFO, based on the Company's net pretax income.
The President and Secretary elected not to accept any incentive compensation
offered by the Committee being the two principal shareholders of the Company's
common stock and their desire to minimize the Company's executive officers
compensation expense.
33
34
The Board of Directors has viewed its incentive stock option program as
providing its executive officers, who have the greatest degree of control over
the Company's marketing cost control and long range planning, with the
opportunity to received additional compensation if the price of the Company's
common stock appreciates significantly over the long term.
To date, the Board of Directors has awarded only the Vice President and CFO
of the Company five (5) incentive stock options under the Company's Incentive
Stock Option Plan. Each option exercise price was at 100% of the fair market
value per share of the common stock on the date of grant. These awards are at
the discretion of the Board of Directors based upon the recommendation of the
Committee and are determined on an annual basis.
The Board of Directors has viewed its awarding of the Company's bonus stock as
a means to help recipients of the stock to focus on the performance of its
common stock and afford it's bonus stock recipients the opportunity for
financial rewards as the stock appreciates. To date, the Committee has awarded
in excess of 200,000 shares of bonus stock to more than ninety recipients.
The Committee's role will be to continue to recommend to the Board how to
administer both the Incentive Stock Option Plan and the Bonus Stock Plan, to
determined participants and recommend to the Board of Directors awards, in all
cases based on recommendations from the executive management of the Company. The
Committee will periodically review the various compensation plans to insure the
plans are consistent with the Company's overall philosophy and to continue to
make recommendations to the Board of Directors on such plans. The Committee
will focus primarily on the Company's executive officers compensation plans,
leaving the compensation of the store managerial personnel to the executive
officers of the Company.
James P. Williams November 15, 1997
Roy W. Parker
W. Hardee McAlhaney
CUMULATIVE TOTAL SHAREHOLDER RETURN
The cumulative total shareholder return performance graph as of October 31,
1993, 1994, 1995, 1996, and 1997, for the Company, the S&P 500 Index, and for
the Company's peer group, is submitted as a separate section at the end of this
Form 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of January 16, 1998, the number of shares,
of Common Stock of the Company, owned and the percent so owned (i) each person
known to the Company to be the beneficial owner of more than 5% of the
outstanding Common Stock, (ii) each director and/or officer of the Company, and
(iii) all directors and officers of the Company as a group. The number of
shares owned are those "beneficially owned" as determined under the rules of
the Securities and Exchange Commission, including any shares of Common Stock as
to which a person has sole or shared voting power or investment power and any
shares of Common Stock
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which the person has the right to acquire within 60 days through the exercise of
any option, warrant or right.
Amount and
Name and Address Nature of Beneficial Percentage
of Beneficial Owner Ownership of Class
- ------------------- ------------------- ----------
Newton C. Kindlund (1) 2,232,302 29.5%
7851 Greenbriar Parkway
Orlando, Florida 32819
Joanne M. Kindlund (1) 2,232,302 29.5%
7851 Greenbriar Parkway
Orlando, Florida 32819
W. Hardee McAlhaney 135,000 (2) 1.8%
3701 Sedgewick Place
Orlando, Florida 32806
James P. Williams 11,500 (3) *
615 North Wymore Road
Winter Park, Florida 32789
Paul G. Clubbe 50,000 (3) *
R.R. #4, Stouffville
Ontario, Canada L4A 7X5
Roy W. Parker - 0 - *
455 South Lake Destiny Road
Orlando, Florida 32810
Harvey M. Alper 1,500 *
112 W. Citrus Street
Altamonte Springs, Florida 32714
--------- ----
All Directors and Officers
as a group (7 persons) 4,662,604 61.5%
(1) Newton C. Kindlund and Joanne M. Kindlund, husband and wife, each
disclaims any right to control the others exercise of shareholders'
rights, with respect to the Shares, including voting the shares of the
Common Stock of the Company set out in the above Table.
(2) Includes options exercisable for 125,000 shares of Common Stock granted
pursuant to the 1987 Incentive Stock Option Plan.
(3) Includes an option exercisable for 10,000 shares of Common Stock,
granted February 20, 1993.
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In November 1994, the Company renewed a five year lease agreement with Newton
C. Kindlund and Joanne M. Kindlund, husband and wife, whereby the Company leases
the real property upon which its retail center is located in Orlando, Florida.
The annual rent is currently $144,000 and, in addition thereto, the Company pays
the real estate taxes, insures the interest of Mr. and Mrs. Kindlund against
casualty loss, pays for all repairs to the property and names Mr. and Mrs.
Kindlund as co-insureds under its general liability insurance policy. The lease
provides for a cost of living increase for each year of the lease beginning with
the second lease year. The term of the lease agreement expires on October 31,
1999. In fiscal year 1997, the Company paid to or for the benefit of Mr. and
Mrs. Kindlund $144,000 for the use of these premises.
In May 1997, the Company signed a five year lease agreement with a property
trust for which the beneficiaries are Mr. Kindlund's heirs, whereby the Company
leases the real property upon which its retail center is located in Ft. Myers,
Florida. The annual rent is $59,375 and, in addition thereto, the Company pays
the real estate taxes, insures the interest of the trust against casualty loss,
pays for all repairs to the property and names the property trust as the insured
under its general liability insurance policy. The term of the lease expires on
April 30, 2002. In Fiscal 1997, the Company paid to or for the benefit of the
property trust $34,635 for the use of the premises.
Based on current market rates for properties similar to those listed above,
transactions with Mr. and Mrs. Kindlund's related to the lease for the Orlando
property and transactions with the property trust related to the lease for the
Ft. Myers property, were on terms comparable to those which would have been
reached with unaffiliated parties.
Harvey M. Alper, a director of the company serves as general counsel of the
Company as a partner of the law firm, Alper, Walden, Crichton and Miller. In
1997 the Company paid $25,800 to Mr. Alper's firm for legal services.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8 K
INDEX TO EXHIBITS
Exhibit
Number Description of Exhibit
- ------ ----------------------
a(1) and The financial statements are filed as a separate section of this Form 10-K.
a(2)
a(3) Exhibits required to be filed by Item 601 of Regulation S-K.
1(a) Form of Underwriting Agreement.
1(b) Form of Seller's Agreement.
3(a) Articles of Incorporation.
3(b) Amendment to Articles of Incorporation.
3(c) Amendment to Articles of Incorporation.
3(d) By-Laws.
3(e) Amendment in the Entirety of By-Laws.
3(f) Amendment to By-Laws.
4(a) Form of Common Stock Certificate of the Company.
4(b) Underwriter's Warrant of Thomas James Associates, Inc. dated November 10, 1987.
10(a) Material contracts numbers 10(a) through 10(bbbbb), were filed with Registrants' 10-K Annual
Report for the year October 31, 1996, and by this reference is incorporated herein.
10(ccccc) Lease agreement between Newton C. Kindlund Revocable Property Trust and the Registrant,
dated May 1, 1997, for the lease of real property in Ft. Myers, Florida.
21 Holiday R.V. Rental/Leasing, Inc. is a subsidiary of the Registrant. This subsidiary, which
is wholly owned by Registrant, was incorporated under the Laws of the State of Florida and is in good
standing. The
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Subsidiary does business only under the name of Holiday R.V. Rental/Leasing, Inc. Holiday RV Superstores
of South Atlanta, Inc. is a subsidiary of the Registrant. This subsidiary, which is wholly owned by
Registrant, was incorporated under the Laws of the State of Georgia and is in good standing. The
subsidiary does business under the name of Holiday RV Superstores and Holiday RV Superstores of South
Atlanta, Inc. Holiday RV Superstores of South Carolina, Inc.is a subsidiary of the Registrant. This
subsidiary, which is wholly owned by Registrant, was incorporated under the Laws of the State of
South Carolina and is in good standing. The subsidiary does business under the name of Holiday RV
Superstores and Holiday RV Superstores of South Carolina, Inc. Holiday RV Superstores West, Inc. is a
wholly-owned subsidiary of the Registrant, incorporated in the State of California and is in good
standing. The Subsidiary does business under the names of Holiday RV Superstores and Holiday RV
Superstores West, Inc. Holiday RV Superstores of New Mexico, Inc., is a wholly owned subsidiary of the
Registrant. This subsidiary was incorporated under the laws of the State of New Mexico and is in good
standing. This subsidiary does business under the name of Holiday RV Superstores and Holiday RV
Superstores of New Mexico, Inc. Holiday RV Assurance Service, Inc., is a wholly owned subsidiary of the
Registrant and is incorporated under the laws of Arizona as an insurance agency.
b The Company filed a report on Form 8-K, dated August 21, 1997 reporting under item 4. the dismissal
of it's prior certifying accountant, BDO Seidman, LLP. The response letter from BDO Seidman, LLP
was included as an exhibit.
The Company filed a report on Form 8-K, dated September 9, 1997 reporting under item 4. the
engagement of Coopers and Lybrand, LLP as its new certifying accountant.
c(1) Exhibits Numbering a(3)1(a) through and including a(3)10(llll), are contained in the Exhibits to
the Registration Statement on Form S-18 filed by the Company on September 14, 1987, and which became
effective on October 27, 1987, (SEC Registration No. 33-17190-A) which Exhibits to said Registration
Statement are incorporated by reference herein. Exhibits a(3)3(c) and a(3)3(f) are contained in the
Exhibits to Form 8-A Registration Statement pursuant to Section 12(g) of the Securities Exchange Act filed
by the Company on December 22, 1987, and which became effective December 28, 1987, which Exhibits to said
Registration Statement are incorporated by reference herein.
c(2) Exhibit 10 (ccccc) is attached hereto. Exhibit 27, Financial Data Schedule, filed electronically via
EDGAR, deleted from this copy of the Form.
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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, thereto duly authorized.
HOLIDAY RV SUPERSTORES, INCORPORATED
Registrant
By: /s/ NEWTON C. KINDLUND, PRESIDENT
-------------------------------------
Newton C. Kindlund, President
and Chairman
DATED: JANUARY 23, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
Signature Title Date
- --------- ------ -----
/s/ Newton C. Kindlund President, Chairman of January 23, 1998
- -------------------------------- the Board of Directors
President and Chairman Chief Executive Officer
Principal Executive Officer
Newton C. Kindlund
/s/ Joanne M. Kindlund Executive Vice President- January 23, 1998
- -------------------------------- Administration, Secretary/
Principal Administrative Officer Treasurer and Director
Joanne M. Kindlund
/s/ W. Hardee McAlhaney Vice President, January 23, 1998
- -------------------------------- Chief Financial Officer and
Principal Financial Director
and Accounting Officer
W. Hardee McAlhaney
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Signature Title Date
- --------- ------ -----
/s/ James P. Williams Director January 23, 1998
- -------------------------
James P. Williams
/s/ Roy W. Parker Director January 23, 1998
- -------------------------
Roy W. Parker
/s/ Harvey M. Alper Director January 23, 1998
- -------------------------
Harvey M. Alper
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ANNUAL REPORT ON FORM 10-K
ITEM 8, ITEM 14(a)(1) and (2)
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
LIST OF FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
AS OF OCTOBER 31, 1997 AND 1996
AND FOR THE YEARS ENDED OCTOBER 31, 1997, 1996 AND 1995
HOLIDAY RV SUPERSTORES, INCORPORATED
AND SUBSIDIARIES
ORLANDO, FLORIDA
42
HOLIDAY RV SUPERSTORES, INCORPORATED AND SUBSIDIARIES
CONTENTS
Page
----
Report of Independent Accountants F-2
Report of Independent Certified Public Accountants F-3
Consolidated Financial Statements:
Balance Sheets F-4
Statements of Income F-5
Statements of Stockholders' Equity F-6
Statements of Cash Flows F-7
Notes to Consolidated Financial Statements F-9
F-1
43
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of
Holiday RV Superstores, Incorporated
Orlando, Florida
We have audited the accompanying consolidated balance sheet of Holiday RV
Superstores, Incorporated and Subsidiaries as of October 31, 1997, and the
related consolidated statements of income, stockholders' equity and cash flows
for the year then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Holiday RV
Superstores, Incorporated and Subsidiaries as of October 31, 1997 and the
consolidated results of their operations and their cash flows for the year then
ended in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Orlando, Florida
December 18, 1997
F-2
44
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders of
Holiday RV Superstores, Incorporated
Orlando, Florida
We have audited the consolidated balance sheet of Holiday RV Superstores,
Incorporated and subsidiaries as of October 31, 1996, and the related
consolidated statements of income, stockholders' equity, and cash flows for
each of the two years in the period ended October 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Holiday RV
Superstores, Incorporated and subsidiaries as of October 31, 1996 and the
consolidated results of their operations and their cash flows for each of the
two years in the period ended October 31, 1996 in conformity with generally
accepted accounting principles.
BDO SEIDMAN, LLP
Orlando, Florida
December 20, 1996
F-3
45
HOLIDAY RV SUPERSTORES, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
October 31,
1997 1996
----------- ----------
ASSETS
Current Assets:
Cash and cash equivalents $ 7,431,318 $ 5,617,707
Accounts receivable:
Trade and contracts in transit 841,212 506,804
Other 307,530 279,846
Inventories 20,712,744 23,171,022
Refundable income taxes - 7,919
Deferred income taxes 149,000 147,000
-------------- --------------
Total current assets 29,441,804 29,730,298
Property and Equipment, less accumulated depreciation 4,209,371 4,350,649
Other Assets, principally covenant not to compete 261,090 330,200
Noncurrent Deferred Income Taxes 67,000 -
--------------- --------------
$ 33,979,265 $ 34,411,147
=============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Floor plan contracts $ 15,805,446 $ 17,504,302
Accounts payable 511,323 547,375
Customer deposits 141,586 76,405
Accrued expenses 898,639 1,089,556
Current portion of capital lease obligation 55,514 49,737
Income tax payable 97,693 14,173
-------------- --------------
Total current liabilities 17,510,201 19,281,548
Long-Term Capital Lease Obligation, less current portion 286,051 345,962
Deferred Income Taxes - 11,000
-------------- --------------
Total liabilities 17,796,252 19,638,510
-------------- --------------
Stockholders' Equity:
Common stock, $.01 par; shares authorized 10,000,000;
issued 7,465,000 74,650 74,650
Additional paid-in capital 5,112,271 5,109,071
Retained earnings 11,058,706 9,672,109
Treasury stock, at cost, 31,300 and 29,300 shares, respectively (50,193) (46,430)
Deferred compensation (12,421) (36,763)
-------------- --------------
Total stockholders' equity 16,183,013 14,772,637
-------------- --------------
$ 33,979,265 $ 34,411,147
============== ==============
See accompanying notes to consolidated financial statements.
F-4
46
HOLIDAY RV SUPERSTORES, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Year Ended October 31,
1997 1996 1995
------------ ------------ ------------
Sales and Service Revenue:
Vehicle and marine $ 58,235,084 $ 64,949,268 $ 60,495,414
Service, parts and accessories 7,140,752 6,964,895 6,678,911
Other, net 2,612,434 2,849,817 2,855,033
-------------- -------------- --------------
Total sales and service revenue 67,988,270 74,763,980 70,029,358
-------------- -------------- --------------
Cost of Sales and Service:
Vehicle and marine 51,441,813 57,776,518 53,365,133
Service, parts and accessories 3,818,515 3,785,152 3,506,668
-------------- -------------- --------------
Total cost of sales and service 55,260,328 61,561,670 56,871,801
-------------- -------------- --------------
Gross Profit 12,727,942 13,202,310 13,157,557
Selling, General and Administrative Expenses 9,547,758 9,929,170 9,758,414
------------- ------------- -------------
Income from Operations 3,180,184 3,273,140 3,399,143
Interest Income 479,644 392,652 375,847
Interest Expense (1,381,231) (1,504,860) (1,335,997)
------------- -------------- --------------
Income Before Income Taxes 2,278,597 2,160,932 2,438,993
Income Taxes 892,000 829,000 980,000
-------------- ------------- --------------
Net Income $ 1,386,597 $ 1,331,932 $ 1,458,993
============== ============== ==============
Earnings Per Share of Common Stock $ 0.19 $ 0.18 $ 0.20
============== ============== =============
Weighted Average Number of Common Stock and
Common Stock Equivalents Outstanding 7,439,316 7,524,290 7,436,804
============== ============== =============
See accompanying notes to consolidated financial statements.
F-5
47
HOLIDAY RV SUPERSTORES, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended October 31, 1997, 1996 and 1995
Common Stock Additional Treasury Stock
---------------- Paid-In Retained ----------------- Deferred
Shares Amount Capital Earnings Shares Amount Compensation
------ ------ ------- -------- ------ ------ ------------
Balance, October 31, 1994 7,465,000 $ 74,650 $5,069,842 $ 6,881,184 69,300 $(76,108) $ -
Net income for the year - - - 1,458,993 - - -
Restricted bonus stock
Issued from treasury - - 33,210 - (54,000) 57,915 (91,127)
Amortization of deferred
compensation - - - - - - 7,450
--------- -------- ---------- ----------- ------ -------- ---------
Balance, October 31, 1995 7,465,000 74,650 5,103,052 8,340,177 15,300 (18,193) (83,677)
Net income for the year - - - 1,331,932 - - -
Restricted bonus stock
issued from treasury - - 6,019 - (7,500) 8,044 (14,063)
Return of unvested
restricted bonus stock - - - - 21,500 (36,281) 36,281
Amortization of deferred
compensation - - - - - - 24,696
--------- -------- ---------- ----------- ------ -------- ---------
Balance, October 31, 1996 7,465,000 74,650 5,109,071 9,672,109 29,300 (46,430) (36,763)
Net income for the year - - - 1,386,597 - - -
Restricted bonus stock
issued from treasury - - 3,200 - (5,000) 8,050 (11,250)
Return of unvested
restricted bonus stock - - - - 7,000 (11,813) 11,813
Amortization of deferred
compensation - - - - - - 23,779
--------- -------- ---------- ----------- ------ -------- ---------
Balance, October 31, 1997 7,465,000 $ 74,650 $5,112,271 $11,058,706 31,300 $(50,193) $ (12,421)
========= ======== ========== =========== ====== ======== =========
See accompanying notes to consolidated financial statements.
F-6
48
HOLIDAY RV SUPERSTORES, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended October 31,
1997 1996 1995
------------- ------------- --------------
Cash Flows from Operating Activities:
Cash received from customers $ 70,333,325 $ 75,888,882 $ 69,672,230
Cash paid to suppliers and employees (66,430,978) (71,513,828) (67,646,691)
Interest received 479,644 392,652 375,847
Interest paid (1,392,926) (1,493,695) (1,324,757)
Income taxes paid (880,561) (977,904) (960,269)
-------------- -------------- --------------
Net cash provided by operating activities 2,108,504 2,296,107 116,360
-------------- -------------- --------------
Cash Flows from Investing Activities:
Purchase of property, plant and equipment (252,569) (668,133) (1,802,392)
Proceeds from the sale of rental fleet and equipment 11,810 16,230 472,364
-------------- -------------- --------------
Net cash used in investing activities (240,759) (651,903) (1,330,028)
-------------- -------------- --------------
Cash Flows from Financing Activities:
Repayment of capital lease obligations (54,134) (39,357) (13,173)
-------------- -------------- --------------
Net cash used in financing activities (54,134) (39,357) (13,173)
-------------- -------------- --------------
Net Increase (Decrease) in Cash and Cash Equivalents 1,813,611 1,604,847 (1,226,841)
Cash and Cash Equivalents, beginning of year 5,617,707 4,012,860 5,239,701
-------------- -------------- --------------
Cash and Cash Equivalents, end of year $ 7,431,318 $ 5,617,707 $ 4,012,860
============== ============== ==============
See accompanying notes to consolidated financial statements.
F-7
49
HOLIDAY RV SUPERSTORES, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
Year Ended October 31,
1997 1996 1995
-------------- ---------------- --------------
Reconciliation of Net Income to Net Cash Provided by
Operating Activities:
Net income $ 1,386,597 $ 1,331,932 $ 1,458,993
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 431,696 351,271 295,643
Amortization of deferred compensation 23,779 24,696 7,450
Deferred income taxes (80,000) (92,000) (78,000)
(Gain) loss on disposal of property and
equipment and rental fleet 19,221 22,913 (49,951)
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable (362,092) 1,101,989 (307,177)
Refundable income taxes 7,919 31,414 (39,333)
Inventories 2,458,278 (3,799,938) (2,112,596)
Prepaid expenses - - 146,854
Other assets 230 9,400 (10,910)
Increase (decrease) in:
Floor plan contracts (1,698,856) 3,537,379 797,302
Accounts payable (36,051) (354,536) (14,912)
Customer deposits 65,181 (25,256) (109,532)
Accrued expenses and income tax payable (107,398) 156,843 132,529
-------------- -------------- -------------
Net Cash Provided by Operating Activities $ 2,108,504 $ 2,296,107 $ 116,360
============== ============== =============
See accompanying notes to consolidated financial statements.
F-8
50
HOLIDAY RV SUPERSTORES, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended October 31, 1997, 1996 and 1995
1. ORGANIZATION AND NATURE OF BUSINESS:
The Company is a multi-state retail chain of dealerships engaged in the
retail sales and service of recreational vehicles and recreational boats
in the Southeastern United States, New Mexico and California. Each
dealership offers a full line of new and used recreational vehicles, and
each dealership maintains a parts, service and body repair facility.
Recreational boat sales are carried at selected dealerships. The Company
also has a subsidiary, Holiday RV Assurance Corporation, an insurance
agency that will receive commissions on the sale of insurance policies to
recreational vehicle owners from a variety of insurance companies.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation - The consolidated financial statements
include the accounts of Holiday RV Superstores, Incorporated and its
Subsidiaries (the "Company"), which include Holiday RV Rental/Leasing,
Inc.; Holiday RV Superstores of South Atlanta, Inc.; Holiday RV
Superstores of South Carolina, Inc.; Holiday RV Superstores West, Inc.;
Holiday RV Superstores of New Mexico, Inc.; and Holiday RV Assurance
Corporation. All material intercompany accounts and transactions have
been eliminated.
Cash and Cash Equivalents - The Company considers all highly liquid debt
instruments with a maturity of three months or less at time of purchase to
be cash equivalents. Cash and cash equivalents consist of checking
accounts, money market funds and overnight repurchase agreements.
Inventories - Inventories are valued at the lower of cost or market. New
and used vehicles are accounted for using specific identification. Cost
of parts and accessory inventories is determined by the first-in,
first-out (FIFO) method.
Property and Equipment - Property and equipment are stated at cost.
Depreciation is computed over the estimated useful lives of the assets by
the straight-line method for financial reporting and by accelerated
methods for income tax purposes. Amortization of leasehold
improvements is computed by the straight-line method over the estimated
useful lives of the assets. The estimated useful lives of the property
and equipment range from 3 to 31 years. Maintenance and repairs are
charged to expense as incurred. The carrying amount and accumulated
depreciation of assets which are sold or retired are removed from the
accounts in the year of disposal and any resulting gain or loss is
included in the results of operations.
F-9
51
HOLIDAY RV SUPERSTORES, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Years Ended October 31, 1997, 1996 and 1995
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED:
Covenant Not to Compete - The covenant not to compete is being amortized
over its contractual life using the straight-line method. At each balance
sheet date, management assesses whether there has been any permanent
impairment in the value of the agreement. Accumulated amortization
totalled $224,000 and $155,000 as of October 31, 1997 and 1996,
respectively.
Revenue Recognition - Retail sales and related costs of vehicles, parts
and service are recognized in operations upon delivery of products or
services to customers or, in the case of recreational vehicles, when
title passes to the customer.
Earnings Per Share - Earnings per share is based upon the weighted average
shares of common stock and common stock equivalents outstanding during the
respective periods.
Advertising - Advertising costs, included in selling, general and
administrative expenses, are expensed as incurred.
Fair Value of Financial Instruments - Statement of Financial Accounting
Standards (SFAS) No. 107, Disclosures About Fair Value of Financial
Instruments, requires disclosure of fair value information about financial
instruments. Fair value estimates discussed herein are based upon
certain market assumptions and pertinent information available to
management as of October 31, 1997.
The respective carrying value of certain on-balance-sheet financial
instruments approximated their fair values. These financial instruments
include cash, trade receivables, accounts payable, floor plan payables and
accrued expenses. Fair values were assumed to approximate carrying values
for these financial instruments since they are relatively short term in
nature and their carrying amounts approximate fair values or they are
receivable or payable on demand.
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting7 principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
Reclassifications - Certain prior year amounts have been
reclassified from previous presentations to conform to 1997 presentation.
F-10
52
HOLIDAY RV SUPERSTORES, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Years Ended October 31, 1997, 1996 and 1995
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED:
Recent Accounting Pronouncements - In February, 1997, the Financial
Accounting Standards Board issued SFAS No. 128, Earnings per Share, which
is effective for interim and annual periods ending after December 15,
1997. The overall objective of SFAS No. 128 is to simplify the
calculation of earnings per share (EPS) and achieve comparability with
the International Accounting Standards. The Company will be required to
adopt SFAS No. 128 in the first quarter of 1998, but does not
expect the adoption to have a material effect on earnings per share.
Basic and diluted EPS under SFAS No. 128 would not differ more than $.01
per share from the EPS presented for 1997, 1996 and 1995.
Also during 1997, the FASB issued SFAS No. 130, Reporting of
Comprehensive Income, which is effective for fiscal years beginning after
December 15, 1997. This statement requires the reporting of net income
and all other changes in equity during the period, except those resulting
from investments by owners and distributions to owners, in a separate
statement that begins with net income or in the consolidated statement of
operations below net income. This pronouncement will not be
effective for the Company until the fiscal year ending October 31, 1999.
For the fiscal years ended October 31, 1997, 1996 and 1995, comprehensive
income and net income would not differ materially.
3. SUPPLEMENTAL CASH FLOW INFORMATION:
The following table summarizes the Company's noncash investing and
financing transactions:
October 31,
1997 1996 1995
-------- ---------- ----------
Capital lease incurred to purchase
equipment $ - $ 56,649 $ 391,580
Increase in deferred compensation
from stock issuance 11,250 14,063 91,127
Decrease in deferred compensation
from return of unvested restricted
bonus stock 11,813 36,281 -
Transfer of rental vehicles to
inventory - - 495,020
Accounts payable incurred to
purchase construction in progress - - 233,754
F-11
53
HOLIDAY RV SUPERSTORES, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Years Ended October 31, 1997, 1996 and 1995
4. INVENTORIES:
Inventories are summarized as follows:
October 31,
1997 1996
--------------- --------------
New vehicles $ 15,276,085 $ 17,581,630
New marine 617,067 750,147
Used vehicles 3,214,149 3,295,416
Used marine 135,377 117,164
Parts and accessories 1,470,066 1,426,665
--------------- --------------
$ 20,712,744 $ 23,171,022
=============== ==============
5. PROPERTY AND EQUIPMENT:
Property and equipment are summarized as follows:
October 31,
1997 1996
--------------- --------------
Land $ 1,955,948 $ 1,856,981
Buildings and leasehold improvements 2,287,644 2,234,497
Machinery and shop equipment 197,226 191,614
Office equipment and furniture 925,376 974,129
Vehicles 178,488 154,132
--------------- --------------
5,544,682 5,411,353
Less accumulated depreciation and
amortization (1,335,311) (1,060,704)
--------------- --------------
$ 4,209,371 $ 4,350,649
=============== ==============
Depreciation expense for the years ended October 31, 1997, 1996 and 1995
was $362,816, $282,391 and $210,182, respectively.
F-12
54
HOLIDAY RV SUPERSTORES, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Years Ended October 31, 1997, 1996 and 1995
6. FLOOR PLAN CONTRACTS:
Substantially all inventories, accounts receivable and equipment are
pledged as security under floor plan contracts. Floor plan
contracts are due upon sale of the related vehicle.
Interest rates and interest expense are as follows for the years ended
October 31:
Interest
Interest Rate Expense
------------- ------------
1997 7.69 - 9.25% $ 1,381,231
1996 8.25 - 9.00% $ 1,504,860
1995 7.75 - 10.00% $ 1,335,997
Maximum borrowings available under the contracts were $47,000,000 as of
October 31, 1997. The following summarizes certain information about
the borrowings under the floor plan contracts:
October 31,
1997 1996
--------------- --------------
Maximum amount outstanding at
any month end $ 19,893,081 $ 17,740,533
Average amount outstanding during the period $ 16,977,374 $ 16,808,584
Weighted average interest rate during the period 8.12% 8.50%
Weighted average interest rate at the
end of the period 8.05% 8.42%
F-13
55
HOLIDAY RV SUPERSTORES, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Years Ended October 31, 1997, 1996 and 1995
7. STOCK OPTION PLANS:
The Company has an Incentive Stock Option Plan (the "Plan") which provides
for the issuance of up to 280,000 shares of common stock. The option
exercise price must be at least 100% of the fair market value per share of
common stock on the date of grant, except that such price must be at least
110% of the fair market value per share for employees who own more than
10% of the outstanding shares of the Company. The options are
exercisable, as determined by the Compensation Committee, over a period of
time, but not more than ten years from the date of grant, and will be
subject to such other terms and conditions as the Committee may determine.
There have been no additional options issued under this plan for the
fiscal years ended 1995 through 1997. At October 31, 1997, there are
155,000 shares available for future issuances under the Plan.
During 1993, under a separate plan, the Company made available and granted
50,000 shares to certain directors to purchase shares of its common stock
at the market price on the date of the grant.
In August, 1994, as part of the California acquisition, the Company
granted options for 125,000 shares at an exercise price equal to the
average closing price of the Company's common stock for the 30 days prior
to the acquisition, $1.70 per share. These options expire on
September 30, 2004. Of these options, 100,000 are exercisable as of
October 31, 1997. The remaining 25,000 options become exercisable August
1, 1998.
The following table summarizes the combined stock options activity
for the years ended October 31, 1997, 1996 and 1995:
Number of Weighted
Shares Average
Under Option Option Price
------------ ------------
Balance, November 1, 1994 300,000 $ 1.77
=======
Balance, October 31, 1995 300,000 $ 1.77
=======
Balance, October 31, 1996 300,000 $ 1.77
=======
Balance, October 31, 1997 300,000 $ 1.77
=======
F-14
56
HOLIDAY RV SUPERSTORES, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Years Ended October 31, 1997, 1996 and 1995
7. STOCK OPTION PLANS - CONTINUED:
At October 31, 1997, the 300,000 options outstanding under all stock
option plans are summarized in the following table:
Option Range of Weighted Average Weighted Average
Shares Exercise Prices Exercise Price Remaining Life
-------- --------------- ---------------- ----------------
275,000 $1.38 - $2.05 $1.71 5.2
25,000 $2.50 $2.50 2.6
In addition, at October 31, 1997, 275,000 options were exercisable.
These options and their weighted average exercise price are summarized
below:
Option Weighted Average
Shares Exercise Price
------ ---------------
250,000 $1.55
25,000 $2.50
The Company applies the disclosure-only provisions of Statement of
Financial Standards (SFAS) No. 123, but applies Accounting Principles
Board Opinion No. 25 and related interpretations in accounting for its
plans. No compensation expense has been recorded as there have been no
options granted during the last three fiscal years. Thus, there is no
proforma effects to calculate on net income or earnings per share during
that period.
8. DEFERRED COMPENSATION:
The Company has a restrictive stock bonus plan in place, whereby, at the
Board of Directors discretion, shares of the Company's stock are
awarded to certain individuals, including employees of the Company. The
stock awards vest upon the meeting of all the restrictions of the
agreement. Deferred compensation consists of the unamortized portion of
the value of shares of common stock which have been awarded to various
individuals. The awards provide for vesting of the shares over the
two-year restriction period. Amortization of the deferred compensation is
computed by the straight-line method over the vesting periods. Unvested
shares forfeited to the Company are recorded as treasury stock based on
the value of the shares at their original issuance date.
F-15
57
HOLIDAY RV SUPERSTORES, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Years Ended October 31, 1997, 1996 and 1995
8. DEFERRED COMPENSATION - CONTINUED:
Consistent with the Company's stock option plans, the Company applies the
disclosure-only provisions of SFAS No. 123, but applies APB No. 25 and
related interpretations in accounting for its deferred compensation plan.
The Company has recorded compensation expense of $23,779, $24,696 and
$7,450 for the fiscal years ended October 31, 1997, 1996 and 1995,
respectively. If the Company had elected to recognize compensation
expense consistent with the methods prescribed by SFAS No. 123, there
would have been an immaterial effect on the reported net income and
earnings per share.
9. INCOME TAXES:
The components of income taxes are as follows:
October 31,
1997 1996 1995
------------ -------------- -------------
Current:
Federal $ 790,000 $ 775,000 $ 883,000
State 186,000 146,000 175,000
------------- ------------- -------------
976,000 921,000 1,058,000
------------- ------------- -------------
Deferred:
Federal (70,000) (78,000) (73,000)
State (14,000) (14,000) (5,000)
------------- ------------- -------------
(84,000) (92,000) (78,000)
------------- ------------- -------------
Total income taxes $ 892,000 $ 829,000 $ 980,000
============= ============= =============
F-16
58
HOLIDAY RV SUPERSTORES, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Years Ended October 31, 1997, 1996 and 1995
9. INCOME TAXES - CONTINUED:
The components of deferred tax assets and liabilities consist of the
following:
October 31,
1997 1996
------------- -------------
Deferred tax assets:
Property and equipment $ 22,000 $ -
Deferred compensation 19,000 12,000
Noncompete agreement 43,000 31,000
Inventory 71,000 64,000
Deferred finance income 39,000 45,000
Accrued vacation 21,000 -
Other 8,000 9,000
------------- -------------
Gross deferred income tax assets 223,000 161,000
Valuation allowance - -
------------- -------------
Total deferred tax assets 223,000 161,000
------------- -------------
Deferred tax liabilities:
Property and equipment - (13,000)
Rental fleet (7,000) (12,000)
------------- -------------
Total deferred tax liabilities (7,000) (25,000)
------------- -------------
Total net deferred tax assets 216,000 136,000
Less current deferred tax assets (149,000) (147,000)
------------- -------------
Long-term deferred tax assets (liabilities) $ 67,000 $ (11,000)
============= =============
The following summary reconciles differences from taxes at the federal
statutory rate with the effective rate:
1997 1996 1995
------------------- ------------------- -------------------
Amount Percent Amount Percent Amount Percent
--------- ------- --------- ------- --------- -------
Income taxes at
statutory rate $ 774,000 34.0 % $ 735,000 34.0 % $ 829,000 34.0 %
State income taxes,
net of federal benefit 114,000 5.0 104,000 4.8 112,000 4.6
Other 4,000 0.2 (10,000) (0.5) 39,000 1.6
--------- ------- --------- ------- --------- -------
Income taxes at
effective rates $ 892,000 39.2 % $ 829,000 38.3 % $ 980,000 40.2 %
========= ======= ========= ======= ========= =======
At October 31, 1997, the Company has net operating loss carryforwards of
approximately $226,000 for state income tax purposes that expire beginning
in 2004.
F-17
59
HOLIDAY RV SUPERSTORES, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Years Ended October 31, 1997, 1996 and 1995
10. EMPLOYEE BENEFIT PLANS:
The Company has a Profit-Sharing and Employee Investment Plan which covers
substantially all employees meeting certain minimum age and service
requirements. Employee contributions to the investment plan may, at the
Company's discretion, be matched 25% up to a maximum employee
contribution of 6%. Also at the Company's discretion, a profit-sharing
contribution may be made. Company contributions to the plan, included in
selling, general and administrative expenses, were approximately $86,000,
$95,000 and $94,000 for the years ended October 31, 1997, 1996 and 1995,
respectively.
11. CAPITAL AND OPERATING LEASE COMMITMENTS:
Capital Lease - The Company leases computer equipment under an agreement
which is classified as a capital lease. The lease expires in 2002, at
which time the Company will have an option to purchase the computer
equipment for a nominal amount. The equipment is included in property and
equipment in the amount of approximately $448,000 with related accumulated
amortization of $233,000 and $130,000 at October 31, 1997 and 1996,
respectively.
Operating Leases - The Company conducts its operations from leased
facilities including land and buildings in Orlando and Fort Myers,
Florida; Greer, South Carolina; and Roseville, California. The Florida
facilities (with the exception of the corporate office) are leased from
related parties (see Note 12). The leases expire on various dates from
1998 through 2002, with some including renewal options.
F-18
60
HOLIDAY RV SUPERSTORES, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Years Ended October 31, 1997, 1996 and 1995
11. CAPITAL AND OPERATING LEASE COMMITMENTS - CONTINUED:
As of October 31, 1997, future minimum lease payments under
noncancellable capital and operating leases with initial or remaining
terms of one year or more are as follows:
Capital Operating
Lease Leases
--------------- -------------
1998 $ 90,558 $ 503,237
1999 90,558 367,375
2000 90,558 94,375
2001 90,558 59,375
2002 82,211 29,688
-------------- -------------
Total minimum lease payments 444,443 $ 1,054,050
==============
Less amount representing interest (102,878)
--------------
Present value of minimum lease payments 341,565
Less current portion (55,514)
--------------
Long-term capital lease obligation $ 286,051
==============
The Company's rental expense under operating leases for the fiscal years
ended October 31, 1997, 1996 and 1995 was $529,307, $570,470 and $615,800,
respectively.
12. RELATED-PARTY TRANSACTIONS:
As noted in Note 11, the Company currently leases the Orlando, Florida
facility from the principal stockholders and the Fort Myers, Florida
facility from a trust whose beneficiaries are the heirs of one of the
principal stockholders. The Company paid $178,635, $144,000 and $144,000
to these related parties for the years ended October 31, 1997, 1996 and
1995, respectively.
The Company also paid legal fees of approximately $25,000 and
$78,000 to a law firm owned in part by a member of the Company's Board of
Directors during the years ended October 31, 1997 and 1996, respectively.
F-19
61
HOLIDAY RV SUPERSTORES, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Years Ended October 31, 1997, 1996 and 1995
13. ADVERTISING COSTS:
The Company promotes its product lines through various advertising
sources. Advertising expenses were approximately $1,035,000, $1,034,000
and $1,106,000 for the years ended October 31, 1997, 1996 and 1995,
respectively.
14. COMMITMENTS AND CONTINGENCIES:
Concentration of Risk - The Company's financial instruments that are
exposed to concentrations of credit risk consist primarily of cash and
cash equivalents and accounts receivable. The Company places its funds
with high credit quality institutions. At times, such monies may be in
excess of the FDIC or other insurance limits. With regard to receivables,
the Company routinely assesses the financial strength and collectibility
of its customers and, as a consequence, believes that its accounts
receivable credit risk is limited.
The Company relies on several manufacturers as suppliers for its product
lines. Approximately 69%, 76% and 79% of the Company's new vehicle sales
for the years ended October 31, 1997, 1996 and 1995, respectively,
consists of vehicles purchased from the same two manufacturers. In the
opinion of management, the loss of any one brand of new recreational
vehicle would not materially affect the Company. However, the loss of all
the brands sold by either of the two largest manufacturers would have a
material effect on the Company's sales. The Company's management feels
the loss of all brands from either of these two manufacturers to be highly
unlikely.
Third-Party Financing - The Company uses third-party banks and/or finance
companies to assist its customers in locating financing for vehicle
purchases. The Company refers customers to one or more of these
third-party financing sources and earns a referral fee if the third-party
lender consummates a loan contract with the customer. These contracts
represent third-party financing, and the Company provides no underwriting
or credit approval services for the lender. The Company's referral fees
are in fact a commission and are typically based upon the difference
between the interest rate the customer pays under the contract with the
lender and an interest rate designated by the lender. At no time does the
Company service or guarantee the collection of these loans or receivables.
The Company could be charged back the commission by the lender if the loan
is paid off or foreclosed in a specified period of time, usually limited
to the first six months of the term, and if the chargeback exceeds
reserves retained by the lender.
F-20
62
HOLIDAY RV SUPERSTORES, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Years Ended October 31, 1997, 1996 and 1995
14. COMMITMENTS AND CONTINGENCIES - CONTINUED:
Third-Party Financing - Continued - The Company records this commission
income based upon the amount earned less allowances for chargebacks. In
determining the allowances for chargebacks, the Company takes into
consideration total customer loans outstanding and estimates the exposure
for potential chargebacks associated with foreclosure and early payoffs of
these loans. The Company also considers current and future economic
conditions, the effects of the change in consumer interest rates and the
aging of all loans outstanding. The chargeback allowance was
approximately $105,700, $135,000 and $152,000 at October 31, 1997, 1996
and 1995, respectively. Finance chargebacks were approximately $57,000,
$58,000 and $40,000 for 1997, 1996 and 1995, respectively.
15. SUBSEQUENT EVENTS:
On November 15, 1997, the Company's Board of Directors approved a plan to
repurchase up to $1,000,000 of common stock of the Company.
F-21
63
REPORT OF INDEPENDENT ACCOUNTANTS
Holiday RV Superstores, Incorporated
Orlando, Florida
Our report on the consolidated financial statements of Holiday RV Superstores,
Incorporated and Subsidiaries is included on page F-2 of this Form 10-K. In
connection with our audit of such financial statements, we have also audited
the related financial statement schedule for the fiscal year ended October 31,
1997 included at page S-1 of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
Orlando, Florida
December 18, 1997
64
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Holiday RV Superstores, Incorporated
Orlando, Florida
The audits referred to in our report dated December 20, 1996 relating to the
consolidated financial statements of Holiday RV Superstores, Incorporated,
which is contained in Item 8 of this Form 10-K, included the audit of the
financial statement Schedule II. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express
an opinion on this financial statement based upon our audits.
In our opinion, such financial statement schedule presents fairly, in all
material respects, information set forth therein.
BDO Seidman, LLP
Orlando, Florida
December 20, 1996
65
SCHEDULE II
HOLIDAY RV SUPERSTORES, INCORPORATED AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE FISCAL YEARS ENDED OCTOBER 31, 1997, 1996, 1995
- --------------------------------------------------------------------------------
Charges Other
Balance at to cost Charges charges- Balance
Beginning and to other additions at end of
Year Description of Period expenses Accounts (deductions) period
(a)
- --------------------------------------------------------------------------------
1997 Finance Commissions $ 135,260 $ 57,362 $--- $(86,773) $105,849
Chargeback Reserves
1996 Finance Commissions
Chargeback Reserves 152,092 58,425 --- (75,257) 135,260
1995 Finance Commissions
Chargeback Reserves 193,374 39,858 --- (81,140) 152,092
- --------------------------------------------------------------------------------
(a) Finance income chargebacks paid.
S-1
66
ANNUAL REPORT ON FORM 10-K
ITEM 11
CUMULATIVE TOTAL SHAREHOLDER RETURN
PERFORMANCE GRAPH AS OF OCTOBER 31,
1993,1994,1995,1996, AND 1997
FOR
HOLIDAY RV SUPERSTORES, INC., THE S&P 500 INDEX, AND
INDEX OF HOLIDAY RV SUPERSTORES, INC.'S PEER GROUP
67
DISCLOSURE REQUIRED FOR
ITEM 402(1) FOR FORM 10-K (ANNUAL REPORT)
PERFORMANCE GRAPH
Here in displays a line graph plotting three (3) series of points,
whereby the Y axis is the total cumulative shareholder return,
and the x axis is the year, being 1992 thru 1997. The plotted
points (cumulative shareholder return by year) are listed in the
table below.
1992 1993 1994 1995 1996 1997
RVEE 100.00 181.02 114.33 228.66 138.11 116.69
S&P 500 100.00 114.94 119.39 150.96 187.33 247.48
PEER GROUP 100.00 296.29 292.81 231.60 238.71 225.11
The performance graph above illustrates the cumulative yearly shareholder
return for the past five years, assuming a $100 investment on October 31, 1992,
in (1) the Company; (RVEE) (2) The Standard and Poor's 500 composite index,
assuming reinvestment of dividends; (3) a Company determined Market
Capitalization Peer Group composite index, assuming reinvestment of dividends.
The Peer Group consist of twenty publicly owned retail companies with similar
market capitalization as Holiday RV Superstores, Inc., whose common stocks are
traded on exchanges. The market capitalization criteria in determining a peer
group was selected by the Company for shareholder return comparative purposes,
as there is no published industry or line-of-business index comparable to the
industry or line-of-business as that of the Company.
The peer group consist of the following companies:
Audio King Corp., Brendles Inc., Chariot Entertainment Inc. (no longer files as
of 9/18/95), Evans Inc., FFP Partners LP-CL,A., Foodarama Supermarkets,
Harold's Stores Inc., Hills Department Stores Inc., Holiday RV Superstores,
Inc., Huffman Koos Inc., (acquired by Bruener's Home Furn Co., Oct. '95), Pubco
Corp., Seaway Food Town Inc., Siebert Financial Corp., Sound Advice Inc.,
Spec's Music Inc., Strober Organization Inc. (acquired by Hamilton NY, March
'97), Sunshine-Jr Stores (acquired by E-Z Serve Corp. July '95), Uni-Marts Inc.
CL A, Village Super Market CL A, Warehouse Club Inc. (no longer files as of
3/18/96)