SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
For the fiscal year ended April 30, 1995
SUBMITTED PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
---------------------------------------------
Cruise America, Inc.
11 West Hampton Avenue
Mesa, Arizona 85210-5258
Telephone: (602) 464-7300
Commission File No. 1-9471
I.R.S. No. 59-1403609
State of Incorporation: Florida
---------------------------------------------
Securities registered pursuant to Section
12(b) of the Act:
Title of each class Name of each exchange on which registered
COMMON STOCK AMERICAN STOCK EXCHANGE
Securities registered pursuant to Section (g) of the Act
-NONE-
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
-----
The aggregate market value of voting stock held by non-affiliates as of July 19,
1995, was approximately $20,597,735. As of July 19, 1995, 5,703,159 shares of
the registrant's Common Stock were outstanding of which 4,119,547 were held by
non-affiliates of the registrant.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
DOCUMENTS INCORPORATED BY REFERENCE
Information contained in the Registrant's proxy materials to be filed with the
Securities and Exchange Commission has been incorporated by reference in Part
III of this Annual Report on Form 10-K.
TABLE OF CONTENTS
ITEM PART I PAGE
1. Business ............................................................... 3
2. Properties ............................................................. 6
3. Legal Proceedings ...................................................... 6
4. Submission of Matters to a Vote of Security Holders .................... 7
PART II
5. Market for Registrant's Common Stock and Related Stock-
holder Matters ........................................................ 7
6. Selected Financial and Operating Data .................................. 8
7. Management's Discussion and Analysis of
Financial Condition and Results of Operations ......................... 9
8. Financial Statements and Supplementary Data ............................ 13
9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure ................................... 30
PART III
10. Directors and Executive Officers of the Registrant ..................... 30
11. Executive Compensation ................................................. 30
12. Security Ownership of Certain Beneficial Owners
and Management ........................................................ 30
13. Certain Relationships and Related Party Transactions ................... 30
PART IV
14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K ................................................... 31
PART I
ITEM 1. BUSINESS
General
Cruise America, Inc. is the largest company in North America specializing in the
rental and sale of Recreational Vehicles (RV's). The Company began sales and
rental operations in Miami, Florida in 1972, with an initial strategy to locate
rental centers in metropolitan gateway cities which are destinations for large
numbers of domestic and international travelers. Since that time, the Company
has established 80 additional rental and/or sales locations across the United
States. In 1988, the Company started Canadian operations and opened rental and
sales centers in Montreal, Toronto, Vancouver and Calgary. At April 30, 1995,
the Company operated a total of 15 Hub offices, 69 Satellite offices, and a
rental fleet of 1,884 recreational vehicles across North America.
Recreational Vehicle rentals provide the consumer with the benefits of use
without the burdens of ownership, and make Recreational Vehicle vacations
available to a broad range of consumers. Motorhomes combine transportation,
lodging, and cooking facilities at a cost which the Company believes provides an
economical alternative to automobile travel and related hotel and restaurant
expenses. Additionally, recent technological advances, including more
aerodynamic design, lighter weight construction and fuel-efficient engines, have
substantially increased the fuel-efficiency of Recreational Vehicles.
Besides rentals, the Company sells new and used RV's (including vehicles retired
from the rental fleet) from all its Hub offices. The sales effort is marketed
under the name RV DEPOT and currently represents approximately 57% of total
revenue.
The amounts of revenues, income and identifiable assets attributable to the
Company's foreign operations is set forth in Note 11 to Consolidated Financial
Statements included elsewhere in this Form 10-K.
Cruise America Rental System
Cruise America rents a wide variety of Recreational Vehicles at each of its 15
Hub and 69 Satellite offices across North America. The Company's peak rental
fleet in the year ended April 30, 1995 consisted of 2,710 Recreational Vehicles,
of which 1,817 were motorhomes, 840 were truck campers, 22 were motorcycles and
31 were vans and trailers. The majority of vehicles available for rent were
current model, one or two year old vehicles.
Cruise America's Recreational Vehicles include a wide range of sizes from 18 to
31 feet. Cruise America motorhomes and camperhomes are fully self contained with
kitchen and bath facilities, heat and air conditioning as well as comfortable
sleeping arrangements. Most motorhomes have electric generators and many have
microwave ovens. Cruise America Recreational Vehicles are as easy to drive as a
car with no special license requirements. All vehicles are equipped with
automatic transmission, power steering and power brakes. Most vehicles also have
cruise control.
Over the past three years, the Company's use of rental vehicles that can easily
be disposed of after the peak summer rental season has increased to 30% of the
rental fleet. The Company also began in the Spring of 1993 to purchase
motorhomes that are designed such that the coach portion can be easily removed
from the old chassis and placed on a new chassis. These two changes in the
rental fleet are designed to reduce maintenance and holding costs and increase
the service life of the vehicles. Virtually the entire rental fleet is now made
up of these specially designed recreational vehicles.
The Company purchases its rental fleet from several manufacturers, including
Chevrolet, Fleetwood, Damon, Four Winds, Holiday Rambler, Coachmen and
Winnebago. The Company believes it enjoys excellent relationships with its
suppliers, most of which have been suppliers to the Company for many years. The
Company believes, if the need arose, that it could equip its fleet with
Recreational Vehicles from other suppliers without any material adverse effect
on its operations. Most of the Company's rental vehicles are pledged as security
under financing agreements with banks and other financial institutions.
Subject to certain deductible amounts and retention limits, the Company
maintains coverage to insure against claims based upon personal injury, property
damage and loss of Company property in connection with its business and
operations. In light of current insurance costs and the Company's experience,
the Company believes that its policy limits provide sufficient coverage and the
deductible amounts are reasonable.
Hub Offices
At April 30, 1995, the Company operated Hub offices from 15 locations in the
United States and Canada. Each office consists of full service rental
operations, new, used and fleet RV sales, fleet maintenance, and vehicle
storage. In addition, each Hub office provides management and marketing support
and other services to the Satellite offices within its respective service area.
Among the factors which the Company considers significant in the selection of
locations for Hub offices are population, demographics, proximity to major
airports, vacation destinations and favorable economic conditions within the
potential service area for the rental and sale of Recreational Vehicles.
Satellite Offices
At April 30, 1995, the Company operated 69 Satellite offices. Satellite offices
are independently owned and operated businesses that contract to rent the
Company's Recreational Vehicles. Typically, the Satellite office operator also
is engaged in a complementary business such as car, truck or equipment rentals,
or RV sales. The Satellite office operator provides the facilities and all
personnel for the rental operation and is paid a commission on the rental
revenue generated. The Company provides each Satellite office with vehicles,
maintenance, service, forms, supplies, advertising and management support.
Fleet Planning and Management
Fleet management is accomplished through the coordination of reservations, fleet
purchasing, fleet distribution, fleet sales, marketing and the motorhome
rechassis/refurbish operation. Information derived from each of these areas is
used to establish a fleet plan designed to maximize vehicle utilization.
Reservation information from local, central and international reservations is
used to schedule vehicle requirements and demands. This information is also used
to schedule routine maintenance and to establish pricing and one-way surcharges
in order to control vehicle utilization and availability. Expansion of the
rental fleet and the timing of vehicle purchases, as well as the distribution of
rental vehicles among rental centers, are determined in part by historical
reservation demand and anticipated demand as expressed to management by tour
operators and travel agents.
Vehicle purchases are generally scheduled so that new vehicles are delivered
according to anticipated rental demand. The Company encourages one-way vehicle
flow into the sunbelt locations in the fall and into the snowbelt locations in
the spring.
Vehicles from the fleet are sold at all Hub locations. Fleet sales are
controlled at the Company's headquarters. Because fleet sales are seasonal and
regionalized, the Company maintains a wide selection of Recreational Vehicles
during the peak selling months in order to maximize sales.
Customer Service
The Company believes strongly in familiarizing the customer in all aspects of
Recreational Vehicle usage. Each customer is given a full demonstration prior to
rental as well as extensive written instructions. Multi-lingual personnel are
retained at major gateway markets to assist foreign customers. On the road,
customers have access to twenty-four hour toll-free lines for assistance.
All vehicles are cleaned, inspected and serviced prior to pickup, and detailed
quality control procedures are used to assure that vehicles are properly
prepared and maintained. The Company makes available to rental customers luggage
storage, kitchen supplies and utensils, linens, airport pickup and maps.
Advertising and Promotion
The Company's objective is to provide quality rental services at competitive
prices to both domestic and international customers. Rental services are
marketed directly to the consumer and through tour operators and travel agents.
The Company's rental marketing program is designed to level out rental demand
throughout the year in order to maximize vehicle utilization.
The Company's rental services are marketed internationally by commissioned
general sales agents and by approximately 200 tour operators in their brochures
and related travel media in approximately 25 countries. The Company also engages
in direct advertisement in several foreign markets. Currently, the Company's
rental programs are featured in North American destination travel brochures
published in many countries throughout the world.
The Company also promotes its rental programs through travel agents, airlines,
automobile clubs and other targeted marketing groups. The Company has been a
participating sponsor in various fund raising and sporting events. In addition,
the Company offers special motorhome vacations and discounted rates designed to
stimulate business in the off-season.
The Company also conducts a balanced domestic advertising program for sales and
rentals, which includes advertisements in telephone directories, print media,
industry trade media, local newspaper displays, classified advertising and other
select publications. To a lesser extent, the Company advertises on radio and
television and through direct mail promotions. The Company also promotes its
products and services at Recreational Vehicle shows, travel trade and consumer
shows and other special events.
Reservations
The Company's reservations department maintains toll-free customer telephone
service across the United States and Canada. The international reservations
department receives, confirms, processes and invoices international
reservations. Computer terminals have been installed at approximately 20 major
tour operators in Europe, vastly speeding up the reservation process.
Domestically, the reservations department also performs customer credit
qualification procedures and processes travel agent requests and bookings.
Vehicle Service and Parts
The Company maintains or has access to fully-equipped service facilities at each
office to support its rental fleet. In addition, the Company's Miami, Florida
and Mesa, Arizona offices maintain retail service departments, which are
equipped to handle the repair of virtually any type of Recreational Vehicle. The
parts department supports the rental, sales and service functions of the
Company, and also provides support to the Hub and Satellite rental centers by
stocking parts that are not readily available. In addition, the parts department
stocks accessory items usually sold to Recreational Vehicle owners. The parts
department conducts mail order sales, both foreign and domestic, for scarce or
specialized Recreational Vehicle parts. Parts are sold at both wholesale and
retail.
Competition
The Company is the largest company in North America that specializes in the
rental and sale of Recreational Vehicles. The Company competes with other
leisure and vacation activities, many of which are more visible and familiar
than the Company's product. The Company competes in the rental and sale of
Recreational Vehicles with several firms, some of which operate in multiple
locations. In addition, there are local competitors that operate in single
locations. Significant competitive factors in the Recreational Vehicle rental
and sales industry include price, service, reliability, quality of product and
convenience one-way rentals, and vehicle availability. The Company believes that
it is competitive in all of these categories.
Employees
As of April 30, 1995, the Company had 258 full-time employees. 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 excellent.
ITEM 2. PROPERTIES
The Company's principal executive offices are located in Mesa, Arizona. The
Company owns facilities in Mesa, Miami, Denver, Los Angeles and Oakland. The
Company leases its facilities at each of its other Hub rental centers pursuant
to operating leases expiring at various times through the year 2004.
ITEM 3. LEGAL PROCEEDINGS
On May 14, 1987, one of the Company's concession operators commenced a lawsuit
entitled Altman's America, et. al. v. American Land Cruisers of California,
Incorporated, et. al. in the Superior Court of the State of California for the
County of Los Angeles. The action arose out of a claim for an alleged wrongful
termination by the Company of a sublease agreement. After the trial jury
returned verdicts adverse to the Company, the Company incurred a charge in the
fourth quarter of 1988 in the amount of $4,300,000 for damages and fees pending
appeal. On February 1, 1991, the appellate court reversed the judgement against
the Company. In overturning the trial court judgement, the appeals court set
aside jury verdicts for compensatory and punitive damages and awarded Cruise
America, Inc. its costs of appeal. Subsequently, both the appeals court and the
Supreme Court of California denied a petition brought by plaintiff to rehear the
case. The reversal of the lawsuit resulted in the elimination of the related
contested liability in the amount of $4,094,000 for the year ended April 30,
1991. On September 3, 1991, Plaintiff refiled the lawsuit. On January 14, 1993,
the Trial Court upheld the Company's right to terminate the sublease agreement
but awarded plaintiff $120,000 in pretermination damages. On March 11, 1993, the
Trial Court awarded plaintiff $115,000 in attorney's fees and costs. However,
the Trial Court ruled that Cruise America was the prevailing party and as such,
awarded the Company $634,000 in attorney's fees and costs. On March 12, 1993,
plaintiff filed a notice of appeal which is currently pending. The Company
believes, after reviewing the case with counsel, that the latest rulings will be
upheld.
The Company is a party to various other claims, legal actions and complaints
arising in the ordinary course of business. In the opinion of management, the
disposition of these matters will not have a material adverse effect on the
financial condition of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
There were no matters which were brought to a vote of security holders during
the fourth quarter of fiscal 1995.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND
RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded on the American Stock Exchange under the
symbol RVR. The following table sets forth, for the periods indicated, the high
and low sales prices as reported by the American Stock Exchange.
1994 1995
--------------------- -------------------
Quarter Ended High Low High Low
July 31, 1993 and 1994..................... 7 4 5/8 3 3/4 2 3/8
October 31, 1993 and 1994.................. 5 7/8 4 5/8 3 1/2 2 3/8
January 31, 1994 and 1995.................. 5 1/2 4 3/8 3 13/16 2 7/16
April 30, 1994 and 1995.................... 5 1/4 3 1/2 4 11/16 3 3/8
As of April 30, 1995, there were 245 holders of record, not including security
position listings.
The Company has not paid cash dividends since 1982. The Company anticipates that
for the foreseeable future its earnings will be retained for use in its business
and no cash dividends will be paid on its Common Stock. Declaration of dividends
in the future will remain within the discretion of the Company's Board of
Directors, which will review its dividend policy from time to time on the basis
of the Company's financial condition, capital requirements, cash flow,
profitability, business outlook and other factors. The Company currently is
restricted from paying cash dividends under the terms of some of it's financing
agreements. See Note 8 to the Consolidated Financial Statements.
ITEM 6. SELECTED FINANCIAL AND OPERATING DATA
(In thousands except per share data and Selected Operating Data)
The selected consolidated financial data presented below under the captions
"Selected Statement of Operations Data" and "Selected Balance Sheet Data" has
been derived from the consolidated financial statements of the Company, which
have been audited by KPMG Peat Marwick LLP, independent certified public
accountants. The information below should be read in conjunction with
"Management's Discussion and Analysis of Consolidated Financial Condition and
Results of Operations" and the Consolidated Financial Statements of the Company
(including the notes thereto).
Year Ended
April 30,
----------------------------------------------------------
1991 1992 1993 1994 1995
---- ---- ---- ---- ----
Selected Statement of
Operations Data:
Rental Revenue $ 42,984 44,562 45,686 40,537 36,842
Sales 26,924 30,901 61,077 55,540 48,476
-------- ------- -------- ------- --------
Total Revenue 69,908 75,463 106,763 96,077 85,318
-------- ------- -------- ------- --------
Gross Profit from
Operations 25,939 24,765 26,273 21,108 27,037
-------- ------- -------- ------- --------
Unusual Item:
Contested Liability 4,094 0 0 0 0
Net Earnings (Loss) $ 3,521 (512) (800) (3,101) 185
-------- ------- -------- -------- --------
Earnings (Loss) Per
Share $ .64 (.09) (.14) (.55) .03
-------- ------- -------- -------- --------
Average Common
Shares Outstanding 5,531 5,539 5,543 5,630 5,694
-------- ------- -------- -------- --------
Selected Balance Sheet
Data (end of period):
Rental Vehicles, Net 78,414 80,020 70,755 46,474 51,315
Total Assets 109,270 110,163 105,372 89,762 89,378
Total Rental Vehicle
Financing 59,602 60,803 50,950 25,356 30,622
Long-Term Debt, excluding
current installments 13,173 10,218 8,937 28,432 23,892
Stockholders' Equity $ 26,459 25,914 24,761 22,064 22,329
Selected Operating Data:
Rental Fleet - Peak 3,411 3,544 4,019 4,015 2,710
Rental Fleet - End of Period 3,115 3,430 3,158 1,790 1,884
Total Rental Centers 113 108 86 95 84
Rental Vehicles Sold 946 977 2,111 1,807 1,494
Revenue Days (1) 455,735 471,045 477,745 456,256 370,144
(1) Revenue days is calculated as the total number of days that all fleet
vehicles were rented during the period.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CONSOLIDATED FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The Company's gross profits are derived principally from its rental business.
For the years ended April 30, 1994 and 1995, 75% and 78%, respectively, of the
Company's gross profit from operations was from rentals. The Company's sales
business also contributes to its gross profits, but the gross margins in the
sales business are substantially less than in the rental business. The Company
augments its rental vehicle sales at retail with wholesale sales and has
developed fleet repurchase arrangements with fleet manufacturers. The Company
has also developed the ability to replace the chassis portion of the motorhome
fleet which extends the vehicle's life and reduces the Company's reliance on
sales to achieve fleet turnover. The rental business is seasonal, with
recreational travel and tourism being highest in the summer months. Rental
revenue in the summer months (May through October) represents the majority of
rental revenue for the 12 month operating cycle. Certain rental costs are
variable such as depreciation, but many rental costs are fixed such as interest,
licenses and insurance. Because of these seasonal characteristics the Company
historically reports net losses in the months from November through April and
reports net earnings during the period from May through October. Owing to the
seasonality of its rental business, the results of any interim period are not
necessarily indicative of the results which might be expected for a full year.
Results of Operations
For the year ended April 30, 1995 compared to the year ended April 30, 1994.
Rental Revenue decreased to $36,842,000 in 1995, from $40,537,000 in 1994, a 9%
decline. An 11% increase in revenue per day was more than offset by a 19%
reduction in revenue days. The volume decline was primarily due to severe
discounting by competitors at a time when the Company was raising rates.
Sales in 1995 were $48,476,000 compared to $55,540,000 in 1994, a decrease of
13%, primarily as a result of lower rental vehicle sales. The Company's ability
to extend the service life of rental vehicles by replacing the chassis has
impacted sales volume by limiting the need to turn the fleet as often. New
vehicle sales also declined as a result of an industry-wide slowdown from the
prior year.
Cost of Rentals as a percentage of Rental Revenue was 42% in 1995 compared to
61% in 1994. Included in Cost of Rentals in 1994 is a one time charge of
$3,452,000 to revalue vehicles retired from the fleet. Without this charge, cost
of rentals would have been 52% in 1994. The improvement in 1995 was mainly due
to lower costs of maintenance and other variable costs associated with the 19%
reduction in rental volume at the same time the Company raised rates by 11%.
Cost of Sales as a percentage of Sales was 88% compared to 91% in 1994.
Improvements were seen in Rental Vehicle, New and Used Vehicle Sales as the
Company's reduced need to sell fleet vehicles resulted in a significant shift
away from lower margin sales at wholesale.
Gross Profit from Operations as a percentage of Total Revenue was 32% in 1995 up
from 22% in 1994. Excluding the one time charge to cost of rentals of $3,452,000
in 1994 to revalue vehicles retired from the fleet, the percentage would have
been 26% in 1994. Gross profit percentage improvements were seen in rentals and
sales.
Interest Expense in 1995 was $6,035,000 compared to $5,031,000 in 1994,
primarily as a result of higher interest rates.
Selling, General and Administrative Expenses increased to $20,779,000 in 1995
from $19,826,000 in 1994. This was mainly as a result of increased advertising
expenditures as well as a slight increase in personnel costs related to the
Company's headquarters operations.
Income tax expense in 1995 represented a 17% effective tax rate compared to a
benefit of 17% in 1994. See note 7 to the consolidated financial statements.
For the year ended April 30, 1994 compared to the year ended April 30, 1993.
Rental Revenue decreased to $40,537,000 in 1994, from $45,686,000 in 1993, an
11% decline. This decrease was primarily the result of negative year-to-year
comparisons in the last two fiscal quarters in the Florida market. In the last
two quarters of 1993, rental revenues were above normal levels due to business
activity relating to Hurricane Andrew. In the last two quarters of 1994, rental
revenue in Florida was depressed well below normal levels due to a reduction in
tourism resulting from publicity surrounding attacks on tourists.
Sales in 1994 were $55,540,000 compared to $61,077,000 in 1993, a decline of 9%.
This decrease is due to the large number of sales made during 1993 in the
aftermath of Hurricane Andrew that were absent in 1994.
Cost of Rentals as a percentage of Rental Revenue was 61% in 1994 compared to
53% in 1993. Included in cost of Rentals in 1994 is a one time charge of
$3,452,000 to revalue vehicles retired from the rental fleet (See Note 2 to the
Consolidated Financial Statements). Without this charge, cost of rentals would
have been 52% of Rental Revenue in 1994, comparable to the prior year.
Cost of Sales as a percentage of Sales was 91% in 1994 compared to 92% in 1993.
This improvement is related to a change in sales mix toward higher profit margin
new vehicles versus lower margin rental vehicles.
Rental vehicles represented 50% of sales in 1994, down from 57% in 1993.
Gross Profit from Operations as a percentage of Total Revenue was 22% in 1994
compared to 25% in 1993. The one time charge to cost of rentals of $3,452,000 to
revalue vehicles retired from the rental fleet reduced the percentage in 1994
from 26% to 22%.
Selling, General and Administrative Expenses as a percentage of Total Revenue
was 21% in 1994 compared to 20% in 1993. A decrease of 7% in expenses was offset
by a decrease in revenues of 10%. Savings resulting from a restructuring of the
Company's California operations were offset in part by one time moving and
severance costs associated with relocating the Company's headquarters from
Miami, Florida, to Mesa, Arizona.
Interest Expense in 1994 was $5,031,000 compared to $6,043,000 in 1993 as a
result of lower average interest rates and lower debt levels.
Income tax benefit in 1994 represented an effective tax rate of 17% compared to
income tax benefit in 1993 of 20%. See Note 7 to the Consolidated Financial
Statements.
Liquidity and Capital Resources
As of April 30, 1995, the Company had working capital in the amount of
$5,107,000. The Company believes that, during fiscal 1996, cash generated from
operations and financing available from banks and vehicle manufacturers will be
sufficient for its working capital and operating needs. The Company currently
has lines of credit totaling $87,000,000 to finance rental vehicle purchases, of
which approximately $56,000,000 is unused. Interest rates on these lines range
from U.S. prime to U.S. prime plus 2% for U.S. based vehicles and Canadian prime
plus 1% for Canadian based vehicles. The Company is required to make monthly
principal curtailments of 1.5% of the outstanding balances of its lines of
credit. It is anticipated that borrowings under current financing arrangements
will increase to finance the purchase of additional rental vehicles during the
first quarter of fiscal year ended April 30, 1996 as the Company prepares for
the peak summer rental season. The Company presently anticipates that future
purchases of new rental vehicles will be financed primarily with funds available
under lines of credit from financial institutions and manufacturers, but the
Company may seek additional debt or equity financing in the future.
Other Matters
The Company believes that its business has not been significantly affected by
inflation. The Company believes that increases in the cost of new rental
vehicles resulting from inflation will be offset by higher resale values for
used rental vehicles. Historically, increases in operating costs are passed on
to the consumer. Higher interest rates and construction costs would increase the
cost of acquiring and opening new locations.
The Company's wholly owned subsidiary, Cruise Canada, Inc. was incorporated in
October 1987 and began operations in 1988. Cruise Canada, Inc. operated a peak
fleet of approximately 777 vehicles for the year ended April 30, 1995 from four
hub locations and one satellite location in Canada. Financial information
regarding Canadian operations is included in Note 11 to the Consolidated
Financial Statements.
Independent Auditors' Report
The Board of Directors and Stockholders
Cruise America, Inc.:
We have audited the accompanying consolidated balance sheets of Cruise America,
Inc. and subsidiaries as of April 30, 1995 and 1994, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the years in the three-year period ended April 30, 1995. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Cruise America, Inc.
and subsidiaries as of April 30, 1995 and 1994, and the results of their
operations and their cash flows for each of the years in the three-year period
ended April 30, 1995, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Phoenix, Arizona
July 25, 1995
CRUISE AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
A S S E T S
April 30,
1994 1995
Current assets:
Cash and Cash Equivalents .......................... $ 4,261 3,091
Accounts Receivable, Net ........................... 2,864 3,561
Inventories ........................................ 21,600 17,235
Prepaid Expenses and Other Current Assets .......... 1,051 837
-------- --------
Total Current Assets .......................... 29,776 24,724
-------- --------
Rental Vehicles .................................... 55,303 63,713
Less Accumulated Depreciation ................. 8,829 12,398
-------- --------
Net Rental Vehicles ......................... 46,474 51,315
-------- --------
Property and Equipment ............................. 16,867 16,795
Less Accumulated Depreciation ................. 5,736 6,274
-------- --------
Net Property and Equipment .................. 11,131 10,521
-------- --------
Deposits and Other Assets .......................... 2,381 2,818
-------- --------
$ 89,762 89,378
-------- --------
See accompanying notes to consolidated financial statements.
CRUISE AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands except per share data)
LIABILITIES AND STOCKHOLDERS' EQUITY
April 30,
1994 1995
---- ----
Current Liabilities:
Floor Plan Contracts ......................... $ 5,331 709
Current Installments of Rental
Vehicle Financing .......................... 8,705 7,394
Current Installments of Long-Term Debt ....... 1,727 3,072
Accounts Payable and Accrued Expenses ........ 2,191 2,042
Customer Deposits ............................ 4,368 6,380
Income Taxes Payable ......................... 25 20
-------- --------
Total Current Liabilities ............... 22,347 19,617
-------- --------
Rental Vehicle Financing, Excluding Current
Installments ............................... 16,651 23,228
Long-Term Debt, Excluding Current
Installments ............................... 28,432 23,892
Deferred Income Taxes ........................ 268 312
Stockholders' Equity:
Preferred Stock $1.00 par value;
1,000,000 shares authorized, none
issued or outstanding ...................... -- --
Common Stock $.01 par value; 15,000,000 shares
authorized, 5,694,000 issued and
outstanding ................................ 57 57
Additional Paid-in Capital ................... 24,815 24,815
Accumulated Deficit .......................... (2,093) (1,908)
Translation Adjustment ....................... (715) (635)
------- --------
Total Stockholders' Equity .............. 22,064 22,329
Contingencies.................................
$ 89,762 89,378
-------- --------
See accompanying notes to consolidated financial statements.
CRUISE AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share data)
Year Ended April 30,
--------------------
1993 1994 1995
---- ---- ----
Rental Revenue............................... $ 45,686 40,537 36,842
Sales ....................................... 61,077 55,540 48,476
-------- -------- --------
Total Revenue .......................... 106,763 96,077 85,318
-------- -------- --------
Cost of Rentals ............................. 24,296 24,608 15,623
Cost of Sales ............................... 56,194 50,361 42,658
-------- -------- --------
Total Costs ............................ 80,490 74,969 58,281
-------- -------- --------
Gross Profit from Operations ................ 26,273 21,108 27,037
Interest Expense ............................ 6,043 5,031 6,035
Selling, General and Administrative
Expenses .................................. 21,224 19,826 20,779
-------- -------- --------
Earnings (Loss)Before Income Taxes .......... (994) (3,749) 223
Income Tax Expense (Benefit) ................ (194) (648) 38
-------- -------- --------
Net Earnings (Loss).......................... $ (800) (3,101) 185
-------- -------- --------
Net Earnings (Loss) Per Share ............... $ (.14) (.55) .03
-------- -------- --------
Average Common Shares
Outstanding ............................... 5,543 5,630 5,694
-------- -------- --------
See accompanying notes to consolidated financial statements.
CRUISE AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In thousands)
YEARS ENDED APRIL 30, 1993, 1994 AND 1995
Common Stock Additional Retained
Number Paid-in Earnings Translation
of Shares Amount Capital (Deficit) Adjustment Total
--------- ------ ---------- --------- ----------- -----
Balance April 30, 1992 ... 5,541 $ 55 23,814 1,808 237 $ 25,914
--------- --------- --------- --------- --------- ---------
Exercise of Stock Options 4 -- 20 -- -- 20
Translation Adjustment for
Foreign Operations ... -- -- -- -- (373) (373)
Net Loss ................. -- -- -- (800) -- (800)
--------- --------- --------- --------- --------- ---------
Balance April 30, 1993 ... 5,545 55 23,834 1,008 (136) 24,761
--------- --------- --------- --------- --------- ---------
Stock issuance ........... 149 2 706 -- -- 708
Warrants ................. -- -- 275 -- -- 275
Translation Adjustment for
Foreign Operations ... -- -- -- -- (579) (579)
Net Loss ................. -- -- -- (3,101) -- (3,101)
--------- --------- --------- --------- --------- ---------
Balance April 30, 1994 ... 5,694 57 24,815 (2,093) (715) 22,064
--------- --------- --------- --------- --------- ---------
Translation Adjustment for
Foreign Operations ....... -- -- -- -- 80 80
Net Earnings ............. -- -- -- 185 -- 185
--------- --------- --------- --------- --------- ---------
Balance April 30, 1995 ... 5,694 $ 57 24,815 (1,908) (635) $ 22,329
========= ========= ========= ========= ========= =========
See accompanying notes to consolidated financial statements.
CRUISE AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Year Ended April 30,
--------------------
1993 1994 1995
---- ---- ----
Cash Flows from Operating Activities:
Net Earnings (Loss)............................................. $ (800) (3,101) 185
Depreciation and Amortization .................................. 12,944 10,523 9,453
Deferred Income Taxes (Benefit) ................................ (203) (664) 44
One Time Revaluation Charge .................................... -- 3,452 --
Gain on Sale of Rental Vehicles ................................ (231) (1,288) (1,122)
Gain on Sale of Property and Equipment ......................... (6) (3) (108)
Decrease (Increase) in Accounts
Receivable ................................................... (1,113) 1,538 (697)
Decrease (Increase) in Inventories ............................. (2,648) 6,926 4,365
Increase (Decrease) in Floor Plan Contract ..................... 5,060 (1,717) (4,622)
(Decrease) in Accounts Payable and
Accrued Expenses ............................................. (1,283) (1,208) (149)
Increase (Decrease) in Income Taxes Payable .................... 9 16 (5)
Increase (Decrease) in Customer Deposits ....................... 4,270 (2,370) 2,012
Other, Net ..................................................... (282) (511) 51
------- ------- -------
Net Cash Provided by Operating Activities ................... 15,717 11,593 9,407
------- ------- -------
Cash Flows From Financing Activities:
Proceeds From Rental Vehicle Borrowing.......................... 39,830 40,586 41,628
Repayment of Rental Vehicle Borrowing .......................... (49,683) (66,180) (36,362)
Proceeds from Long Term Borrowing .............................. -- 21,549 --
Repayment of Long Term Borrowing ............................... (1,638) (2,649) (3,195)
Exercise of Stock Options ...................................... 20 -- --
------- ------- -------
Net Cash Provded by (used in) Financing Activities ............. (11,471) (6,694) 2,071
------- ------- -------
Cash Flows From Investing Activities:
Purchase of Rental Vehicles..................................... (37,382) (33,716) (34,058)
Proceeds from Rental Vehicle Sales ............................. 34,872 27,825 21,797
Purchase of Property and Equipment ............................. (438) (1,751) (195)
Proceeds from Sale of Property and
Equipment .................................................... 11 4 245
(Increase) Decrease in Deposits and
Other Assets ................................................. 30 (1,302) (437)
------- ------- -------
Net Cash used in Investing Activities......................... (2,907) (8,940) (12,648)
------- ------- -------
Increase (Decrease) in Cash and
Cash Equivalents................................................ 1,339 (4,041) (1,170)
Cash and Cash Equivalents
beginning of year ............................................ $ 6,963 8,302 4,261
------- ------- -------
Cas$ and Cash Equivalents end of year ........................... $ 8,302 4,261 3,091
------- ------- -------
Noncash Investing and Financing Activities:
Issuance of Common Stock in connection
with $roperty Acquisition .................................. $ -- 708 --
------- ------- -------
Issuance of Warrants in connection with
Senior Notes ............................................... $ -- 275 --
------- ------- -------
Transfer of Vehicles from Rental
Vehicles to Inventory ...................................... $ -- 22,075 --
------- ------- -------
See Accompanying Notes to Consolidated Financial Statements
CRUISE AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 1993, 1994 AND 1995
1. Summary of Significant Accounting Policies
(a) Organization and Principles of Consolidation
The consolidated financial statements include the accounts of Cruise
America, Inc. (the "Company") and its wholly owned subsidiaries which operate
Recreational Vehicle rental and sales centers throughout North America.
All significant intercompany transactions have been eliminated in
consolidation.
(b) Inventories
Inventories of new and used vehicles held for sale are valued at the
lower of cost or market using specific identification. Parts and accessories are
valued at the lower of cost (first-in, first-out basis) or market.
(c) Rental Vehicles, Property and Equipment and Depreciation
Rental Vehicles are stated at cost, net of volume purchase discounts.
Depreciation of rental vehicles is based on either mileage or the straight line
method depending on the category of vehicle. Repairs and maintenance on rental
vehicles are charged to operations as costs are incurred and are included in
Cost of Rentals.
Property and Equipment are stated at cost. Depreciation of property
and equipment is provided using the straight-line method over the estimated
useful lives of the assets. Repairs and maintenance on property and equipment
are charged to operations as costs are incurred. Costs incurred for major
renewals and betterments are capitalized. Gains and losses on sales of property
and equipment are recorded in Selling, General and Administrative expenses.
(d) Income Taxes
The Company and its Subsidiaries file consolidated U.S. Federal and
State income tax returns. Cruise Canada, Inc., a foreign corporation, files
Canadian Federal and Provincial income tax returns.
Effective May 1, 1992, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes". No cumulative
effect adjustment was required. Under the asset and liability method of
Statement 109, deferred tax assets and liabilities are recognized for the
estimated future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates in effect for the year in which those temporary
differences are expected to be recovered or settled. Under Statement 109, the
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
Investment tax credits are accounted for by the flow-through method which
records the benefit in the year the qualifying asset is placed in service.
(e) Cash Equivalents
The Company considers all highly liquid debt instruments with original
maturities of three months or less to be cash equivalents.
(f) Reclassifications
For comparative purposes, certain amounts have been reclassified to
conform with April 30, 1995 financial statement presentation.
(g) Revenue Recognition
Rental Revenue is recognized as earned, on an accrual basis. Revenue
from sales operations is recognized as earned at the time of delivery of a
vehicle or at the time service is performed.
(h) Vendor Allowances
In addition to volume purchase discounts received from motorhome
manufacturers which are recorded as a reduction to vehicle cost, the Company
receives advertising subsidies and marketing allowances from certain vendors.
These subsidies and allowances are recorded as earned as a reduction to the
related costs.
(i) Finance Commissions
The Company discounts retail installment receivables related to the
sale of new, used and rental vehicles with financial institutions on a
nonrecourse basis. Finance income is recorded on an accrual basis and is
included in Sales revenue. Under the terms of the arrangements with some of
these financial institutions, the Company is contingently liable to repay a
portion of such finance income in the event of prepayment or repossession.
(j) Foreign Currency
The Company's foreign operation uses the local currency as its
functional currency. The impact of currency fluctuation is included in
stockholders' equity as a translation adjustment. The Company recognizes
transaction gains and losses on intercompany loans and debt arrangements
denominated in currencies other than the Subsidiary's functional currency. These
gains and losses are reported in Selling, General and Administrative expenses.
(k) Concentrations of Credit Risk
Financial instruments which potentially subject the Company to
concentrations of credit risk consisted primarily of trade receivables. Credit
risk on trade receivables is minimized as a result of the large and diversified
nature of the Company's customer base. Although the Company receives significant
vendor allowances from manufacturers, there have been no credit losses related
to these suppliers.
(l) Self Insurance
The Company participates in insurance programs that contain a
self-insured retention. The Company estimates its liability for the self-insured
portions of the risks covered by such programs and accrues appropriate amounts.
2. Inventories and Floor Plan Contracts
Inventories consist of the following (in thousands):
April 30,
------------------------
1994 1995
---- ----
New Vehicles............................ $ 6,634 $ 7,522
Used Vehicles........................... 12,763 7,058
Parts, Accessories, Kits and Other...... 2,203 2,655
---------- ---------
$ 21,600 $ 17,235
---------- ---------
All new vehicles that are financed, are pledged as security under floor
plan contracts with banks and other financial institutions. Floor plan contracts
are due upon the sale of the related vehicle or one year. Interest rates on
floor plan contracts are at U.S. prime at April 30, 1994 and 1995, respectively.
Interest expense on floor plan contracts amounted to $484,000, $483,000 and
$483,000 for the years ended April 30, 1993, 1994 and 1995, respectively.
Unused floor plan contracts as of April 30, 1995 were approximately
$5,700,000.
During the third quarter of fiscal 1994, the Company made a strategic
decision to permanently retire a segment of older vehicles from its rental
fleet. This decision is consistent with the Company's ongoing goal to maintain
its position as the industry leader by operating the newest rental fleet in the
industry. The retired vehicles have been transferred to the Company's R.V. DEPOT
sales division for refurbishing where needed and for sale at retail and at
wholesale. In conjunction with this retirement, the Company has transferred
vehicles having a net book value of $22,075,000 into sales inventory and has
taken a one time charge of $3,452,000 to adjust the carrying value of the
vehicles for disposition and to cover any refurbishing costs needed. The one
time charge is included in Cost of Rentals. The decrease in inventories for the
year ended April 30, 1994 in the Consolidated Statements of Cash Flows is net of
the transfer in of vehicles.
3. Rental Vehicles
The following is a summary of Rental Vehicles and the related accumulated
depreciation (in thousands).
CRUISE AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
RENTAL VEHICLES
Balance at Balance
Beginning Additions at End
of Year at cost Retirements of Year
---------- --------- ----------- -------
Year Ended:
April 30, 1993 $100,103 37,382 45,675 91,810
April 30, 1994 $ 91,810 33,716 70,223 55,303
April 30, 1995 $ 55,303 34,058 25,648 63,713
ACCUMULATED DEPRECIATION
Balance at Additions Balance
Beginning Charged to at End
of Year Cost of Rentals Retirements of Year
---------- --------------- ----------- -------
Year Ended:
April 30, 1993 $ 20,083 12,006 11,034 21,055
April 30, 1994 $ 21,055 9,768 21,994 8,829
April 30, 1995 $ 8,829 8,542 4,973 12,398
4. Rental Vehicle Financing
Most rental vehicles are pledged as security under financing agreements with
banks and other financial institutions. The following is a summary of rental
vehicle financing (in thousands):
April 30,
-----------------------
1994 1995
---- ----
Various Notes; interest rates ranging from
U.S. prime to U.S. prime plus 2%,
to Canadian prime plus 1%;
due in monthly installments, expiring at
various times through April 1997 or at the
time of sale of the related vehicle............ $ 25,356 30,622
Less Current Installments........................ 8,705 7,394
---------- ---------
Rental Vehicle Financing, Excluding
Current Installments........................... $ 16,651 23,228
---------- ---------
Interest expense on rental vehicle financing was $4,402,000, $3,576,000 and
$2,807,000 for the years ended April 30, 1993, 1994 and 1995, respectively.
The Company's rental vehicle lines of credit are renewed annually. Unused rental
vehicle lines of credit as of April 30, 1995 were approximately $56,000,000.
5. Property and Equipment
A summary of property and equipment, at cost, less accumulated depreciation and
amortization, follows (in thousands):
April 30, Estimated
1994 1995 Useful Lives
---- ---- ------------
Land........................................ $ 5,987 5,952
Buildings and Improvements.................. 5,851 5,721 15-20 years
Service Vehicles............................ 111 96 3-5 years
Shop Equipment.............................. 735 769 5 years
Office Furniture and Equipment.............. 3,606 3,667 5-10 years
Leasehold Improvements...................... 577 590 Amortized over life of lease
--- ---
16,867 16,795
Less Accumulated Depreciation
and Amortization.......................... 5,736 6,274
----- --------
Net Property and Equipment.................. 11,131 10,521
------ -------
Depreciation and amortization expense on property and equipment is charged to
selling, general and administrative expenses and amounted to $933,000,
$755,000 and $668,000 for the years ended April 30, 1993, 1994 and 1995,
respectively.
CRUISE AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. Long Term Debt
Long-term debt consists of the following (in thousands):
April 30,
-------------------
1994 1995
---- ----
9.9% Unsecured Senior Notes due in annual
installments of $1,500,000 through May 15, 1998,
plus interest, payable semi-annually...........$ 7,500 4,500
9.0% Senior Notes due in annual installments of
$2,857,143 beginning March 15, 1996 through
March 15, 2002, plus interest, payable
semi-annually (effective interest rate 9.375%
net of discount).............................. 20,000 20,000
Various notes ranging from 9% to 10.94% due in
monthly installments expiring at various times
through February, 2004 (a)..................... 2,933 2,686
------ ------
Total long-term debt.................................. 30,433 27,186
Less unamortized discount on 9.0% Senior Notes........ 274 222
Less current installments............................. 1,727 3,072
------ ------
Long-term debt, excluding current
installments.................................. $ 28,432 23,892
------- ------
(a) Secured by property having a net book value of approximately $9,279,000 and
$9,079,000 at April 30, 1994 and 1995, respectively.
Aggregate maturities on long-term debt are as follows (in thousands):
1996............................... 3,072
1997............................... 4,594
1998............................... 5,622
1999............................... 4,522
2000............................... 3,024
Thereafter......................... 6,352
Total...........................$ 27,186
------
Interest expense on long-term debt amounted to $1,157,000, $972,000 and
$2,745,00 for the years ended April 30, 1993, 1994 and 1995, respectively.
At April 30, 1995, the Company believes it is in compliance with all debt
covenants associated with the various financing agreements outstanding.
7. Income Taxes
Income tax expense (benefit) is composed of the following (in
thousands):
Years Ended April 30,
1993 1994 1995
---- ---- ----
Current Tax Expense:
Federal $ 9 25 20
State and Foreign -- -- --
---- ---- ----
9 25 20
---- ---- ----
Deferred Tax Expense (Benefit):
Federal $ (153) (818) 228
State and Foreign (50) 145 (210)
------ ---- -----
(203) (673) 18
------ ---- -----
Total Income Tax Expense
(Benefit): $ (194) (648) 38
------ ----- -----
Income tax expense (benefit) attributable to earnings (loss) before income taxes
for the years ended April 30, 1993, 1994 and 1995, differed from the amounts
computed by applying the U.S. Federal Income Tax rate of 34 percent as a result
of the following:
Year Ended April 30,
---------------------------------
1993 1994 1995
---- ---- ----
Computed "expected" tax
expense (benefit) ..................... $ (337) (1,275) 76
State taxes, net of Federal
benefit (expense) ..................... (46) (176) 10
Alternative Minimum Tax ................. 9 25 307
Foreign taxes in excess of
expected tax rate ..................... (4) 28 (21)
Dislodged (utilized) ITC ................ 89 292 (54)
Operating loss and tax credit
carryforwards (utilized) .............. 28 440 (265)
Amortization of goodwill and
life insurance ........................ 45 43 (11)
Other, net .............................. 22 (25) (4)
------ ------ ------
$ (194) (648) 38
------ ------ ------
At April 30, 1993, 1994 and 1995, the deferred income tax liability reflects the
impact of temporary differences between the amount of assets and liabilities for
financial reporting purposes and such amounts for tax purposes. The most
significant type of temporary difference that gives rise to a deferred tax
liability is tax over book depreciation, offset partially by tax over book gains
on the sale of assets.
The tax effects of temporary differences and carryforwards which give rise to a
significant portion of deferred tax assets and liabilities are as follows (in
thousands):
April 30,
----------------------------
1993 1994 1995
---- ---- ----
Deferred Tax Assets:
Net Operating Loss Carryforwards .. $ 10,676 9,175 7,990
Investment Tax Credit Carryforwards 540 540 540
Alternative Minimum Tax Credit
Carryforwards ................ 67 92 106
-------- -------- --------
Total Gross Deferred Tax Assets ... 11,283 9,807 8,636
Less Valuation Allowance .......... (343) (1,074) (1,098)
-------- -------- --------
Net Deferred Tax Assets ........... 10,940 8,733 7,538
-------- -------- --------
Deferred Tax Liability:
Depreciation ...................... 11,872 9,001 7,850
-------- -------- --------
Total Gross Deferred Tax Liability 11,872 9,001 7,850
-------- -------- --------
Net Deferred Tax Liability ........ $ 932 268 312
-------- -------- --------
The valuation allowance for deferred tax assets as of May 1, 1994 was
$1,074,000. The net change in the total valuation allowance for the year ended
April 30, 1995 was an increase of $24,000.
At April 30, 1995, the Company has net operating loss carryforwards for U.S.
Federal income tax purposes of $16,695,000 which are available to offset future
U.S. Federal taxable income, if any, through 2010. Cruise Canada has net
operating loss carryforwards for Canadian Federal income tax purposes of
$3,707,000 which are available to offset taxable income in Canada, if any,
through 2002.
The Company also has investment tax credit carryforwards for Federal income tax
purposes of approximately $485,000 which are available to reduce future Federal
income taxes, if any, through 2001. In addition, the Company has alternative
minimum tax credit carryforwards of approximately $413,000 which are available
to reduce future Federal regular income taxes, if any, over an indefinite
period.
8. Common and Preferred Stock
(a) Common Stock
The Company's 1987 Stock Option Plan has 500,000 shares of common stock
reserved, and as of April 30, 1995, 388,500 options are outstanding at exercise
prices of $3.00 per share, expiring at various times through October 2004.
Options may be granted through October 27, 1997, the date of the Plan's
expiration. The following table summarizes the status of the Plan:
Number of Options Option Price
----------------- ------------
Outstanding at April 30, 1992 421,000 $4.75 - 8.00
(including 385,800 exercisable)
Granted -- --
Exercised 4,000 6.50
Terminated 6,500 4.75 - 8.00
-------
Outstanding at April 30, 1993 410,500 $4.75 - 8.00
(all exercisable)
Granted --
Exercised --
Terminated 15,500 4.75 - 8.00
-------
Outstanding at April 30, 1994 395,000 $4.75 - 8.00
(all exercisable)
Granted --
Exercised --
Terminated 6,500 3.00
-------
Outstanding at April 30, 1995 388,500 $3.00
(all exercisable) -------
On October 6, 1994, the Company repriced options granted pursuant to the
Company's 1987 Stock Option Plan, at $3.00 per share, the fair value at the date
of repricing.
Currently, the Company is restricted from issuing cash dividends and making
certain other investments by a covenant to the 9.9% Unsecured Senior Notes and
the 9% Senior Notes. In conjunction with the issuance of the $20 million 9.0%
senior notes in the fourth quarter of fiscal 1994, the Company issued to the
note holders immediately exercisable warrants to purchase 166,000 shares of
common stock at a per share price of $5.75.
Earnings (loss) per share was calculated based on the weighted average common
shares outstanding during the period. The effect of outstanding options was not
dilutive for all years presented.
On March 8, 1989, the Board of Directors of the Company declared a dividend of
one preferred stock purchase right for each share of common stock outstanding on
March 23, 1989. The rights become exercisable only after a person or group
acquires 20 percent or more, or makes a tender or exchange offer for 30 percent
or more, of the Company's common stock or is declared adverse to the Company by
the Board of Directors. When exercisable, each right entitles the holder to
purchase, at an exercise price of $20, one one-hundredth of a share of Series A
Junior Participating Preferred Stock or, under certain circumstances, securities
of the Company or the acquiring entity having a market value of twice the
exercise price. The rights expire on March 8, 1999, if not previously redeemed
by the Company at a redemption price of $.01 per right.
During 1994, the Company relocated its corporate offices from leased space in
Miami, Florida to an owned operating facility in Mesa, Arizona. The relocation
moves the corporate staff closer geographically to where the majority of the
Company's business is derived. The new Mesa facility was purchased for
approximately $2,200,000. The cost was funded with a $1,500,000 loan and
$700,000 in common stock of the Company. The land and building were recorded at
cost which was considered equal to the value of the cash received plus the fair
market value of the stock on the transaction date.
(b) Preferred Stock
Pursuant to the Company's Articles of Incorporation, the Board of Directors of
the Company is authorized to issue in series, without further shareholder
approval, 1,000,000 shares of $1.00 par value preferred stock. The Board of
Directors is authorized to fix the particular designations, powers, preferences,
rights (including voting rights), qualifications and restrictions of each
series. The Board of Directors designated 200,000 shares of the preferred stock
as Series A Junior Participating Preferred Stock for issuance upon exercise of
the rights described in paragraph (a), above.
9. Sales
The following is a summary of sales and cost of (in thousands):
Year Ended April 30,
---------------------------
1993 1994 1995
---- ---- ----
Sales:
Rental Vehicle Sales ...................... $ 34,872 27,825 21,797
New Vehicles ............................... 21,385 15,780 13,826
Used Vehicles .............................. 3,099 10,465 10,977
Parts, service, accessories and other ...... 1,721 1,470 1,876
-------- -------- --------
$ 61,077 55,540 48,476
-------- -------- --------
Cost of Sales:
Rental Vehicle Sales ...................... $ 34,641 26,537 20,674
New Vehicles ............................... 18,072 13,817 11,686
Used Vehicles .............................. 2,504 9,282 9,031
Parts, service, accessories and other ..... 977 725 1,267
-------- -------- --------
$ 56,194 50,361 42,658
-------- -------- --------
Gross Profit ............................... $ 4,883 5,179 5,818
-------- -------- --------
10. Commitments
The Company leases its facilities at ten of its locations under operating leases
expiring at various times through 2004. Rent expense, included in Selling,
General and Administrative expenses, was $1,961,000, $1,592,000 and $1,263,000
for the years ended April 30, 1993, 1994 and 1995, respectively.
Minimum annual rental commitments under these leases as of April 30, 1995 are as
follows (in thousands):
1996............................. 880
1997............................. 683
1998............................. 366
1999............................. 289
2000............................. 200
Thereafter....................... 426
-------
Total......................... $ 2,844
-------
11. Other Matters
(a) During 1984, the Company entered into a redemption agreement with Robert A.
Smalley (Chairman), which provides that upon the death of Robert A. Smalley, the
Company, upon the request of his personal representative will purchase up to
$1,000,000 of the common stock of the Company from his estate at the average bid
price for a period of 60 days prior to his death. The obligation has been funded
by an insurance policy on the life of Robert A. Smalley in the amount of
$1,000,000. The policy has been paid for by the Company and the premiums were
approximately $40,000, $43,000, and $40,000 for the policy years ended October
1993, 1994 and 1995, respectively.
(b) On May 14, 1987, one of the Company's concession operators commenced a
lawsuit entitled Altman's America, et. al. v. American Land Cruisers of
California, Incorporated, et.al. in the Superior Court of the State of
California for the County of Los Angeles. The action arose out of a claim for an
alleged wrongful termination by the Company of a sublease agreement. After the
trial jury returned verdicts adverse to the Company, the Company incurred a
charge in the fourth quarter of 1988 in the amount of $4,300,000 for damages and
fees pending appeal. On February 1, 1991, the appellate court reversed the
judgement against the Company. In overturning the trial court judgement, the
appeals court set aside jury verdicts for compensatory and punitive damages and
awarded Cruise America, Inc. its costs of appeal. Subsequently, both the appeals
court and the Supreme Court of California denied a petition brought by plaintiff
to rehear the case. The reversal of the lawsuit resulted in the elimination of
the related contested liability in the amount of $4,094,000 for the year ended
April 30, 1991. On September 3, 1991, Plaintiff refiled the lawsuit. On January
14, 1993, the Trial Court upheld the Company's right to terminate the sublease
agreement but awarded plaintiff $120,000 in pretermination damages. On March 11,
1993, the Trial Court awarded plaintiff $115,000 in attorney's fees and costs.
However, the Trial Court ruled that Cruise America was the prevailing party and
as such, awarded the Company $634,000 in attorney's fees and costs. On March 12,
1993, plaintiff filed a notice of appeal which is currently pending. The Company
believes, after reviewing the case with counsel, that the latest rulings will be
upheld.
The Company is a party to various claims, legal actions and complaints arising
in the ordinary course of business. In the opinion of management, the
disposition of these matters will not have a material adverse effect on the
financial condition of the Company.
(c) Foreign Operations
Included in the consolidated financial statements are the following amounts
related to the Company's operations in Canada (in thousands):
Year Ended April 30,
----------------------------------
1993 1994 1995
------- ------- -------
Identifiable Assets$ 15,284 12,391 12,644
Total Revenue 19,086 16,991 15,486
Earnings (Loss) Before Income Taxes (95) 714 (493)
Foreign Currency Transaction (Loss) (80) (28) (54)
12. Quarterly Financial Data (Unaudited)
Summarized quarterly financial data for the years ended April 30, 1994 and 1995
are as follows (in thousands, except for per share data):
Quarter Ended
-----------------------------------
7/31/93 10/31/93 1/31/94 4/30/94
------- -------- ------- -------
Total Revenue ........................... $ 29,700 35,065 15,401 15,911
Gross Profit (Loss) from Operations ...... 12,664 9,910 (2,507) 1,041
Net Earnings (Loss) ..................... 4,828 2,249 (6,426) (3,752)
Earnings (Loss) Per Share ................ .87 .40 (1.13) (.66)
7/31/94 10/31/94 1/31/95 4/30/95
------- -------- ------- -------
Total Revenue ......................... $ 25,820 34,963 10,325 14,210
Gross Profit from Operations .......... 12,301 9,566 1,857 3,313
Net Earnings (Loss) ................... 4,026 2,403 (3,581) (2,663)
Earnings (Loss) Per Share ............. .71 42 (.63) (.47)
13. Supplemental Disclosures of Cash Flow Information (in thousands):
Year Ended April 30,
-------------------------------------
1993 1994 1995
---- ---- ----
Cash paid during the year for:
Interest on Borrowings $ 6,179 5,136 6,304
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There has been no change of accountants or reported disagreements on any
matter of accounting principles or procedures or financial statement
disclosure in fiscal 1995.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT
The Executive officers of the Company are as follows:
Name Age Title
Robert A. Smalley 71 Chairman of the Board of Directors
Randall Smalley 45 President and Chief Executive officer
Robert A. Smalley 46 Executive Vice President and Chief
Operating Officer
Eric Bensen 40 Chief Financial Officer and Secretary
The information regarding directors as required by Item 401 of Regulation
S-K is set forth in the Company's proxy statement which will be filed with the
Securities and Exchange Commission not later than 120 days after April 30, 1995,
and is incorporated herein by this reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 402 of Regulation S-K is set forth in the
Company's proxy statement which will be filed with the Securities and Exchange
Commission not later than 120 days after April 30, 1995, and is incorporated
herein by this reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The information required by Item 403 of Regulation S-K is set forth in the
Company's proxy statement which will be filed with the Securities and Exchange
Commission not later than 120 days after April 30, 1995, and is incorporated
herein by this reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY
TRANSACTIONS
The information regarding certain relationships and related transactions as
required by Item 404 of Regulation S-K is set forth in the Company's proxy
statement which will be filed with the Securities and Exchange Commission not
later than 120 days after April 30, 1995, and is incorporated herein by this
reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K
(a) Documents filed as part of this Report.
1. The following financial statements are incorporated by reference in Item 8:
Financial Statement Page in this Report
------------------- -------------------
Independent Auditors' Report 12
Consolidated Balance Sheets as of April 30, 1994
and 1995 13, 14
Consolidated Statements of Operations for each
of the years in the three-year period ended
April 30, 1995 15
Consolidated Statements of Changes in Stockholders'
Equity for each of the years in the three-year period
ended April 30, 1995 16
Consolidated Statements of Cash Flows
for each of the years in the three-year period ended
April 30, 1995 17
Notes to Consolidated Financial Statements 18 - 29
Information required by other schedules has either been incorporated in
the financial statements and accompanying notes, or is not applicable
to the Company.
3. The following exhibits are filed with this Report or incorporated by
reference:
Page Number or Incorporation
by Reference to the Document
Exhibit DescriptListed Below
------- ----------------------------
3.1 - Articles of Incorporation Registration Statement No.33- 36643
3.2 - Amended and Restated Bylaws Current Report on Form 8-K, event
of March 8, 1989
4.1 - Note Agreement, dated May 1, 1988, December 31, 1988 Form 10-K
between the Company and various holders
4.2 - Rights Agreement dated as of March 8, 1989, Current Report on Form 8-K, event
between the Company and Mellon Securities of March 8, 1989
Trust Company
4.3 - Note and Warrant Purchase Agreement dated April 30, 1994 Form 10-K
as of April 26, 1994 between the Company and Teachers
Insurance and Annuity Association of America (includes
forms of Note and Warrant Agreement)
10.1 - Section 303 Stock Redemption Agreement,
dated October 25, 1984, between the Registration Statement No. 33-6848,
Company and Robert A. Smalley effective August 13, 1986
10.2 - Form of Indemnification Agreement
between the Company and its
Directors and Executive Officers March 31, 1989 Form 10-Q
10.3 - Executive Compensation Plans and Arrangements;
10.3(a) - Form of Amended and Restated Employment 35
Agreements between the Company and Robert A.
Smalley, Robert A. Smalley, Jr., Randall S.
Smalley and Eric R. Bensen
10.3(b) - 1987 Stock Option Plan December 31, 1988 Form 10-K
22 - Subsidiaries of the Registrant April 30, 1993 Form 10-K
24 - Consent of KPMG Peat Marwick LLP 34
(b) Reports on Form 8-K filed during the quarter ended April 30, 1994. NONE
(c) The exhibits to this Report are listed in Item 14 (a) 3.
(d) The financial statement schedules required by Regulation S-X which are excluded from
the Annual Report to Stockholders by Rule 14a-3(b) (1). NONE
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act
of 1934, Cruise America, Inc. has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Cruise America, Inc.
Randall Smalley
By: Randall Smalley (President)
July 27, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed on July 27, 1995, by the following persons on behalf
of the registrant and in the capacities indicated.
---------------------------------------------------------------------------
Signature Title
--------- -----
Robert A. Smalley
------------------------
Robert A. Smalley Chairman
Randall Smalley
------------------------
Randall Smalley Director, President and Chief
Executive Officer
Robert A. Smalley, Jr.
------------------------
Robert A. Smalley, Jr. Director, Executive Vice President
and Chief Operating Officer
Eric R. Bensen
------------------------
Eric R. Bensen Director, Vice President
and Chief Financial Officer
Fred A. Mudgett
------------------------
Fred A. Mudgett Director
Dr. Edward R. Annis
------------------------
Dr. Edward R. Annis Director