SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Second Quarter Ended October 31, 1996
Commission File No. 1-9471
___________________________________________________________
CRUISE AMERICA, INC.
State of Florida I.R.S. No. 59-1403609
11 West Hampton Avenue
Mesa, Arizona 85210-5258
Telephone: (602) 464-7300
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 twelve (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 ninety (90) days.
YES X No
----- -----
Common Stock, $.01 Par Value
As of October 31, 1996, 5,753,468 shares of the registrants common stock were
outstanding of which 4,278,756 were held by non-affiliates of the registrant.
TABLE OF CONTENTS
CRUISE AMERICA, INC. AND SUBSIDIARIES
ITEM PAGE
- ---------------------------------------------------------------------------------------------------------------------------
PART I
FINANCIAL INFORMATION
1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets............................................................................1
Condensed Consolidated Statements of Operations..................................................................3
Condensed Consolidated Statements of Cash Flows..................................................................4
Notes to Condensed Consolidated Financial Statements.............................................................5
2. Management's Discussion and Analysis of Consolidated Financial Condition
and Results of Operations........................................................................................6
PART I. FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
CRUISE AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
A S S E T S
(In thousands)
Unaudited
-------------------------------------------
10/31/96 4/30/96
-------------------------------------------
Current Assets:
Cash and Cash Equivalents..................................................... $ 3,530 2,341
Accounts Receivable, Net...................................................... 3,989 4,056
Inventories................................................................... 11,449 11,752
Prepaid Expenses and Other Current Assets..................................... 1,502 889
--------------- ---------------
Total Current Assets................................................. 20,470 19,038
--------------- ---------------
Rental Vehicles............................................................... 111,317 79,094
Less Accumulated Depreciation................................................. 21,137 15,576
--------------- ---------------
Net Rental Vehicles.................................................. 90,180 63,518
--------------- ---------------
Property and Equipment........................................................ 17,673 17,426
Less Accumulated Depreciation................................................. 7,252 6,916
--------------- ---------------
Net Property and Equipment........................................... 10,421 10,510
--------------- ---------------
Deposits and Other Assets..................................................... 2,771 2,629
--------------- ---------------
$123,842 95,695
--------------- ---------------
See accompanying notes to condensed consolidated financial statements.
1
CRUISE AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
(In thousands except share data)
Unaudited
-------------------------------------------
10/31/96 4/30/96
-------------------------------------------
Current Liabilities:
Floor Plan Contracts.......................................................... $ 2,915 2,245
Current Installments of Rental Vehicle Financing.............................. 20,038 10,723
Current Installments of Long-Term Debt........................................ 4,523 3,023
Accounts Payable and Accrued Expenses......................................... 3,925 1,980
Customer Deposits............................................................. 779 4,605
--------------- ---------------
Total Current Liabilities............................................ 32,180 22,576
--------------- ---------------
Rental Vehicle Financing, Excluding Current Installments...................... 35,123 29,561
Long-Term Debt, Excluding Current Installments................................ 17,811 19,412
Deferred Income Taxes......................................................... 5,152 684
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,
5,753,000 and 5,740,000 issued and outstanding at October 31, 1996
and April 30, 1996 respectively............................................... 58 57
Additional Paid-in Capital.................................................... 24,992 24,953
Retained Earnings (Deficit)................................................... 9,015 (902)
Translation Adjustment........................................................ (489) (646)
--------------- ---------------
Total Net Stockholders' Equity....................................... 33,576 23,462
Contingencies.................................................................
--------------- ---------------
$123,842 95,695
--------------- ---------------
See accompanying notes to condensed consolidated financial statements.
2
CRUISE AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands except per share data)
Three Months Ended Six Months Ended
--------------------------------- -----------------------------------
10/31/96 10/31/95 10/31/96 10/31/95
--------------------------------- -----------------------------------
Rental Revenue......................................... $22,108 18,649 46,271 38,057
Sales.................................................. 11,485 15,018 18,318 24,166
------------- -------------- -------------- ---------------
Total Revenue................................. 33,593 33,667 64,589 62,223
------------- -------------- -------------- ---------------
Cost of Rentals........................................ 9,023 7,661 16,597 13,683
Cost of Sales.......................................... 10,978 13,866 16,784 21,595
------------- -------------- -------------- ---------------
Total Costs................................... 20,001 21,527 33,381 35,278
------------- -------------- -------------- ---------------
Gross Profit from Operations........................... 13,592 12,140 31,208 26,945
Interest Expense....................................... 2,076 2,009 3,967 3,778
Selling, General and Administrative Expenses........... 6,177 6,050 12,856 12,253
------------- -------------- -------------- ---------------
Earnings Before Income Taxes........................... 5,339 4,081 14,385 10,914
Income Tax Expense .................................... 1,658 952 4,468 2,546
------------- -------------- -------------- ---------------
Net Earnings........................................... $ 3,681 3,129 9,917 8,368
------------- -------------- -------------- ---------------
Earnings per Share (Primary and Fully Diluted)......... $ .62 .55 1.67 1.47
------------- -------------- -------------- ---------------
Shares Used in Calculation............................. 5,924 5,709 5,924 5,704
------------- -------------- -------------- ---------------
See accompanying notes to condensed consolidated financial statements.
3
CRUISE AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Six Months Ended
------------------------------------------
10/31/96 10/31/95
------------------------------------------
Cash Flows from Operating Activities:
Net Earnings......................................................... $ 9,917 8,368
Depreciation and Amortization........................................ 8,921 7,947
Increase in Deferred Income Taxes.................................... 4,468 2,562
Gain on Sale of Rental Vehicles...................................... (471) (737)
Decrease (Increase) in Accounts Receivable, Net...................... 67 (638)
Decrease in Inventories.............................................. 303 2,200
Increase in Accounts Payable and Accrued Expenses.................... 1,945 1,027
Increase in Floor Plan Contracts..................................... 670 1,767
Decrease in Customer Deposits........................................ (3,826) (5,759)
Other, Net........................................................... (711) (896)
-------------- ---------------
Net Cash Provided by Operating Activities............................ 21,283 15,841
-------------- ---------------
Cash Flows from Financing Activities:
Proceeds from Rental Vehicle Borrowing............................... 44,990 41,463
Repayment of Rental Vehicle Borrowing................................ (30,113) (26,515)
Repayment of Long-Term Borrowing..................................... (101) (116)
Exercise of Stock Options............................................ 40 66
-------------- ---------------
Net Cash Provided by Financing Activities............................ 14,816 14,898
-------------- ---------------
Cash Flows from Investing Activities:
Purchase of Rental Vehicles.......................................... (46,596) (40,463)
Proceeds from Rental Vehicle Sales................................... 11,933 14,114
Purchase of Property and Equipment................................... (247) (142)
-------------- ---------------
Net Cash Used in Investing Activities................................ (34,910) (26,491)
-------------- ---------------
Increase in Cash and Cash Equivalents...................................... 1,189 4,248
Cash and Cash Equivalents at April 30...................................... 2,341 3,091
-------------- ---------------
Cash and Cash Equivalents at October 31.................................... $ 3,530 7,339
-------------- ---------------
See accompanying notes to condensed consolidated financial statements.
4
CRUISE AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED OCTOBER 31, 1996
NOTE 1.
In the opinion of management, the accompanying unaudited condensed consolidated
financial statements contain all the adjustments (principally consisting of
normal recurring accruals) necessary to present fairly the financial position of
Cruise America, Inc. and Subsidiaries (the Company) as of October 31, 1996, and
the results of operations for the six month periods ended October 31, 1995 and
1996.
Certain items in the prior year financial statements have been reclassified to
conform with the current period presentations.
NOTE 2.
Supplemental Disclosures of Cash Flow Information (in thousands):
Six Months Ended
------------------------------------
10/31/96 10/31/95
-------------- --------------
Cash paid during the period for:
Interest on Borrowings $ 3,690 3,313
-------------- --------------
NOTE 3.
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 rose out of a claim for an alleged wrongful
termination by the Company of a sublease agreement. This case has been tried
twice. The first trial resulted in a judgement in the amount of approximately
$3.5 million. That judgement was reversed on appeal and remanded for retrial.
The second trial resulted in judgements for the plaintiffs in the amount of
$235,000 and a judgement for the Company of $634,000, which equaled a net
judgement for the Company of $399,000. On July 18, 1996 the Appellate Court
reduced the total amount due to the Company by approximately $400,000 and
remanded the case for retrial. The Company intends to pursue all means to defeat
the case.
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.
5
PART 1. FINANCIAL INFORMATION
ITEM 2
CRUISE AMERICA, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Consolidated
Financial Condition and Results of Operations
Six Months Ended October 31, 1996
This Quarterly Report on Form 10-Q contains forward-looking statements.
Additional written or oral forward- looking statements may be made by the
Company from time to time in filings with the Securities and Exchange Commission
or otherwise. Such forward looking statements are within the meaning of that
term in Section 27A of the Securities Act of 1933, as amended, and Section 21F
of the Securities Exchange Act of 1934, as amended. Such statements may include,
but not limited to, projections of revenues, income, or loss, capital
expenditures, plans for future operations, financing needs or plans, and plans
relating to products or services of the Company, as well as assumptions relating
to the foregoing.
Forward-looking statements are inherently subject to risks and uncertainties,
some of which cannot be predicted or quantified. Future events and actual
results could differ materially from those set forth in, contemplated by, or
underlying the forward-looking statements. Statements in the Quarterly Report,
including the Notes to the Condensed Consolidated Financial Statements and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," describe factors, among others, that could contribute to or cause
such differences. Additional factors that could cause actual results to differ
materially from those expressed in such forward looking statements are set forth
in Exhibit 99 to the Company's July 31, 1996 Quarterly Report on Form 10-Q.
SEASONALITY
The Company's business is seasonal. In the first and second fiscal quarters, the
Company historically records profits. In the third and fourth quarters, the
Company historically records losses. The Company's purchases of motorhomes for
the rental fleet are also seasonal, with the majority of purchases being made in
the first and fourth fiscal quarters. Due to the seasonality of rental and sales
operations, certain accounts fluctuate from quarter to quarter.
LIQUIDITY AND CAPITAL RESOURCES
As of October 31, 1996, the Company had current liabilities in excess of current
assets in the amount of $11,710,000. The Company's working capital, as
presented, includes a significant portion of Rental Vehicle Financing. The
Company's working capital does not, however, include any portion of the related
assets--Rental Vehicles, even though a significant portion of these vehicles are
expected to be sold during the year through the Company's normal fleet rotation.
The Company estimates that if these assets were classified as current assets,
the Company would not have a working capital deficit.
The Company believes that, during the next year, cash generated from operations
and financing available from banks and other financial institutions will be
sufficient for its capital and operating needs. At October 31, 1996, the Company
believes it is in compliance with all debt covenants associated with its various
financing agreements.
SIX MONTHS ENDED OCTOBER 31, 1996 AS COMPARED WITH
SIX MONTHS ENDED OCTOBER 31, 1995
Rental Revenue for the six months ended October 31, 1996 was $46,271,000
compared to $38,057,000 for the six months ended October 31, 1995. This 22%
increase was due primarily to a 24% increase in revenue days offset in part by a
2% decline in average revenue per day. The increase in revenue days was due to
an 18% increase in average fleet size as well as an increase in utilization to
72% in 1996 from 68% in 1995 due to strong demand.
6
Sales for the six months ended October 31, 1996, were $18,318,000, compared to
$24,166,000, for the same period a year ago. The Company's wholesale sales
declined in part due to the Company's conversion to a modular motorhome fleet,
which has the effect of extending the service life of the rental vehicle by
replacing the chassis. Sales at retail were affected by a continuing industry
wide slow down in sales as well as a limited inventory due to the Company's high
rental fleet utilization.
Cost of Rentals as a percentage of Rental Revenue was 36% in 1996 and 1995. A
slight reduction in rental rates offset economies achieved through higher
utilization.
Cost of Sales as a percentage of Sales was 92% for the six months ended October
31, 1996, compared to 89% for the same period a year earlier. A shift in mix was
primarily responsible for the increase, as lower margin Rental Vehicle Sales
increased to 65% of total sales in 1996 compared to 58% in 1995.
Interest Expense for the six months ended October 31, 1996, was $3,967,000
compared to $3,778,000 in 1995. Higher Rental Vehicle Financing was offset in
part by lower average interest rates.
Selling, General and Administrative Expenses as a percentage of Total Revenue
was 20% in both 1996 and 1995.
THREE MONTHS ENDED OCTOBER 31, 1996 AS COMPARED WITH
THREE MONTHS ENDED OCTOBER 31, 1995
Rental Revenue for the quarter ended October 31, 1996 was $22,108,000 compared
to $18,649,000 for the quarter ended October 31, 1995. This increase was due
primarily to a 19% increase in revenue days. Revenue days increased due to a 17%
increase in average fleet size as well as a modest increase in utilization.
Sales for the quarter ended October 31, 1996 were $11,485,000 compared to
$15,018,000 in 1995. The Company's conversion to a modular motorhome fleet, an
industry wide slowdown in retail sales as well as low inventories due to high
rental fleet demand all contributed to this decline.
Cost of Rentals as a percentage of Rental Revenue was 41% in both 1996 and 1995.
Economies generated by a slight increase in utilization were offset by a slight
decline in revenue per day.
Cost of Sales as a percentage of Sales was 96% in 1996 compared to 92% in 1995.
An increase in lower margin Rental Vehicle Sales as a percentage of total Sales
impacted the Cost of Sales percentage.
Interest Expense for the quarter ended October 31, 1996 was $2,076,000 compared
to $2,009,000 in 1995. Lower interest rates were offset by higher Rental Vehicle
Financing during the period.
Selling, General and Administrative Expenses as a percentage of Total Revenue
was 18% in both 1996 and 1995.
7
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CRUISE AMERICA, INC.
December 6, 1996 Eric R. Bensen
-------------------------------
Eric R. Bensen
Vice President
Chief Financial Officer
December 6, 1996 Randall Smalley
-------------------------------
Randall Smalley
President
Chief Executive Officer
8