-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KMh843+ng1WLkzmV/e9Lv82pOu5GerNHTO+2cbtB0St148aVw0yzSHyWcmkn00zO iQFPMic1+VfcXB41yulzqA== 0000910655-03-000010.txt : 20031113 0000910655-03-000010.hdr.sgml : 20031113 20031112174747 ACCESSION NUMBER: 0000910655-03-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20030930 FILED AS OF DATE: 20031113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NATIONAL RV HOLDINGS INC CENTRAL INDEX KEY: 0000910655 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR HOMES [3716] IRS NUMBER: 330371079 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-12085 FILM NUMBER: 03995160 BUSINESS ADDRESS: STREET 1: 3411 N PERRIS BLVD CITY: PERRIS STATE: CA ZIP: 92571 BUSINESS PHONE: 9099436007 MAIL ADDRESS: STREET 1: 3411 N PERRIS BLVD CITY: PERRIS STATE: CA ZIP: 92571 10-Q 1 a10q3q.txt 2003 Q3 10Q 22 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) {X} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2003 { } TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 0-22268 NATIONAL R.V. HOLDINGS, INC. (Exact name of registrant as specified in its charter) Delaware 33-0371079 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 3411 N. Perris Blvd., Perris, California 92571 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (909) 943-6007 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO __ Indicate by check mark wether the registrant is an accelerated filer. YES __ NO X Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at September 30, 2003 Common stock, par value 9,986,828 $.01 per share NATIONAL R.V. HOLDINGS, INC. INDEX PAGE PART I - FINANCIAL INFORMATION Item 1. Consolidated Balance Sheets - September 30, 2003 and December 31, 2002 3 Consolidated Statements of Operations - Three and Nine Months Ended September 30, 2003 and 2002 4 Consolidated Statements of Cash Flows - Nine Months Ended September 30, 2003 and 2002 5 Notes to Consolidated Financial Statements 6 - 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 - 16 Item 3. Quantitative and Qualitative Disclosures about Market Risk 17 Item 4. Controls and Procedures 18 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 19 Signature 20 2 NATIONAL R.V. HOLDINGS, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except share amounts) September 30, December 31, 2003 2002 ------- ------- (Unaudited) ASSETS Current assets: Cash and cash equivalents ....................... $ 11 $ 14 Trade receivables, less allowance for doubtful accounts ($308 and $276 respectively)............ 21,404 9,829 Inventories...................................... 63,910 72,532 Deferred income taxes............................ 6,152 6,005 Income taxes receivable.......................... - 7,015 Prepaid expenses................................. 1,506 2,134 ------------- ------------ Total current assets........................... 92,983 97,529 Property, plant, and equipment, net................ 41,461 43,230 Long-term deferred income taxes.................... 4,107 367 Other.............................................. 1,190 1,013 ------------- ------------ $139,741 $142,139 ============= ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Line of credit................................... $ 3,216 $ 4,943 Book overdraft................................... 1,442 943 Current portion of long-term debt................ 22 22 Accounts payable................................. 19,739 13,483 Accrued expenses................................. 20,496 22,291 ------------- ------------ Total current liabilities...................... 44,915 41,682 Long-term accrued expenses......................... 7,242 6,273 Long-term debt..................................... 2 19 ------------- ------------ Total Liabilities.................................. 52,159 47,974 ------------- ------------ Commitments and contingencies Stockholders' equity: Preferred stock - $.01 par value; 5000 shares authorized, 4000 issued and outstanding.......... - - Common stock - $.01 par value; 25,000,000 shares authorized, 9,986,828 and 9,832,161 issued and outstanding, respectively........................ 100 98 Additional paid-in capital......................... 34,817 34,302 Retained earnings.................................. 52,665 59,765 ------------- ------------ 87,582 94,165 ------------- ------------ Total stockholders' equity..................... $139,741 $142,139 ============= ============ See Notes to Consolidated Financial Statements. 3 NATIONAL R.V. HOLDINGS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) (Unaudited) Three Months Nine Months Ended September 30, Ended September 30, 2003 2002 2003 2002 ---- ---- ---- ---- Net sales........................... $ 91,314 $ 72,417 $ 242,886 $ 239,204 Cost of goods sold.................. 86,942 72,461 238,927 235,639 --------- --------- ---------- ---------- Gross profit (loss) 4,372 (44) 3,959 3,565 Selling expenses.................... 3,101 4,126 9,186 10,953 General and administrative expenses. 1,683 1,673 5,760 6,242 Impairment of goodwill.............. - 6,126 - 6,126 --------- --------- ---------- ---------- Operating loss.................... (412) (11,969) (10,987) (19,756) Interest expense.................... 85 51 309 142 Other (income) expense.............. (2) (45) (6) (444) --------- --------- ---------- ---------- Loss before income taxes.......... (495) (11,975) (11,290) (19,454) Benefit for income taxes............ (191) (2,164) (4,189) (4,931) --------- --------- ---------- ---------- Net Loss.......................... $ (304) $ (9,811) $ (7,101) $ (14,523) ========= ========= ========== ========== Loss per common share: Basic............................. $ (0.03) $ (1.00) $ (0.72) $ (1.49) Diluted........................... $ (0.03) $ (1.00) $ (0.72) $ (1.49) Weighted average number of shares Basic............................. 9,835 9,825 9,833 9,774 Diluted........................... 9,835 9,825 9,833 9,774 See Notes to Consolidated Financial Statements. 4 NATIONAL R.V. HOLDINGS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Nine Months Ended September 30, 2003 2002 ---- ---- Cash flows from operating activities: Net loss...................................... $(7,101) $(14,523) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation................................ 2,959 2,847 Impairment of goodwill...................... - 6,126 Loss (gain) on asset disposal............... 3 (359) Changes in assets and liabilities: (Increase) decrease in trade receivables.. (11,575) 2,525 Decrease in inventories................... 8,622 8,008 Decrease in income taxes receivables...... 7,015 1,990 Decrease (increase) in prepaid expenses... 628 (1,445) Increase in book overdraft................ 499 3,569 Increase (decrease) in accounts payable... 6,256 (10,044) (Decrease) increase in accrued expenses... (826) 2,861 Increase in deferred income taxes......... (3,887) (459) --------- --------- Net cash provided by operating activities.... 2,593 1,096 --------- --------- Cash flows from investing activities: (Increase) decrease in other assets........... (177) 216 Proceeds from the sale of assets.............. 3 2,424 Purchases of property, plant and equipment.... (1,196) (4,069) --------- --------- Net cash used in investing activities........ (1,370) (1,429) --------- --------- Cash flows from financing activities: Net (payments on) advances under line of credit....................................... (1,727) 1,114 Principal payments on long-term debt.......... (17) (16) Proceeds from issuance of common stock........ 518 1,170 --------- --------- Net cash (used in) provided by financing activities.................................. (1,226) 2,268 --------- --------- Net (decrease) increase in cash................. (3) 1,935 Cash, beginning of period....................... 14 22 --------- --------- Cash, end of period............................. $ 11 $ 1,957 ========= ========= See Notes to Consolidated Financial Statements. 5 NATIONAL R.V. HOLDINGS, INC. PART I, ITEM 1 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 1 - GENERAL In the opinion of National R.V. Holdings, Inc. (collectively, with its subsidiaries National R.V., Inc. (NRV) and Country Coach, Inc. (CCI) referred to herein as the "Company"), the accompanying unaudited consolidated financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation of the financial position, results of operations and cash flows for all periods presented. Results for the interim periods are not necessarily indicative of the results for an entire year and the financial statements do not include all of the information and footnotes required by generally accepted accounting principles. These financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company's latest annual report on Form 10-K. Certain reclassifications, none of which affected net loss or retained earnings, have been made to prior period amounts to conform to current period presentation. NOTE 2 - CONTINUATION OF LOSSES The Company experienced a net loss in the third quarter of 2003 totaling $0.3 million and a $7.1 million net loss for the nine months ended September 30, 2003. The Company had net losses totaling $21.4 million and $11.5 million for the years ended December 31, 2002 and 2001, respectively. Continued losses could reduce the Company's liquidity and cause the Company to reduce its expenditures on capital improvements, machinery and equipment, and research and development. This could have a negative effect on the Company's ability to maintain production schedules, manufacture products of high quality, and develop and manufacture new products that will achieve market acceptance. This could, in turn, have a negative impact on the Company's sales and earnings. If the Company continues to suffer losses, the Company could be unable to implement its business and financial strategies or meet its obligations when due. The Company's losses in 2002 and 2001 were mainly caused by (i) the recognition of the complete impairment of the Company's goodwill in 2002, (ii) continued significant discounting to wholesale distributors, (iii) continued high warranty costs, (iv) excess manufacturing capacity and related fixed costs caused by continued low volumes, and (v) a workers' compensation reserve increase in 2002. These factors were exacerbated by weaker general economic conditions and declining consumer confidence during the period. As of September 30, 2003, the Company has recorded a deferred tax asset of $10.3 million. Realization is dependent on generating sufficient taxable income prior to expiration of the loss carryforwards. Although realization is not assured, management believes it is more likely than not that all of the deferred tax asset will be realized. The amount of the deferred tax asset considered realizable however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced. 6 NOTE 3 - Supplemental Balance Sheet Information Inventories consist of the following (in thousands): September 30, December 31, 2003 2002 ---- ---- Finished goods................................ $ 12,910 $ 20,671 Work-in-process............................... 22,972 25,391 Raw materials................................. 21,437 16,309 Chassis....................................... 6,591 10,161 -------- -------- $ 63,910 $ 72,532 ======== ======== Accrued expenses consist of the following (in thousands): September 30, December 31, 2003 2002 ---- ---- Workers' compensation self insurance reserve.. $ 10,213 $ 7,794 Motorhome warranty reserve.................... 9,721 11,840 Payroll and other accrued expenses............ 7,804 8,930 -------- -------- $ 27,738 $ 28,564 ======== ======== NOTE 4 - RECENT ACCOUNTING PRONOUNCEMENTS In July 2002, the Financial Accounting Standards Board issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." SFAS No. 146 requires recognition of a liability for a cost associated with an exit or disposal activity when the liability is incurred, as opposed to when the entity commits to an exit plan under previous guidance. This statement is effective for exit or disposal activities initiated after December 31, 2002. The Company adopted SFAS No. 146 on January 1, 2003, which had no material impact on the Company's consolidated financial statements. NOTE 5 - CREDIT FACILITY The Company has an asset-based revolving credit facility of $15 million with UPS Capital Corporation ("UPSC"). This credit facility expires August 2005. The Company has reserved $0.3 from the line-of-credit for a contingent liability. The remaining $14.7 was available for general corporate and working capital needs and capital expenditures. The Company was able to provide alternative security, in the form of state workers' compensation fund insurance, for its NRV self-insured workers' compensation program starting in July 2003. This allowed for the removal of the letter-of-credit that secured the self-insured workers' compensation program and freeing up $5.3 of the line-of-credit. Amounts borrowed under the revolving credit facility bear interest at the prime rate listed in the Wall Street Journal plus 0.75 percentage points. The credit facility contains, among other provisions, certain financial covenants, including net worth requirements. At September 30, 2003, $11.5 was available for use under this facility and the Company was not in default with any covenants of its loan agreement with UPSC. 7 NOTE 6 - STOCK BASED COMPENSATION The Company has six fixed option plans that reserve shares of common stock for issuance to executives, key employees and directors. The Company has also issued fixed options outside of such plans pursuant to individual stock option agreements. Options granted to non-employee directors generally vest immediately upon grant and expire five to ten years from the date of grant. Options granted to employees generally vest in three equal annual installments and expire five years from the date of grant. The price of the options granted pursuant to these plans will not be less than 100 percent of the market value of the shares on the date of grant. There were no options granted during 2003 or 2002. No compensation cost has been recognized for these fixed options in the financial statements. The following table illustrates the effect on net loss and loss per share if the Company had applied the fair value recognition provisions of FASB Statement No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation: In thousands, except per share amounts Three Months Nine Months Ended September 30, Ended September 30, ------------------- ------------------- 2003 2002 2003 2002 ---- ---- ---- ---- Net loss As reported.................. $(304) $(9,811) $(7,101) $(14,523) Deduct total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects... 63 120 250 712 ------ -------- -------- --------- Pro forma.................... $(367) $(9,931) $(7,351) $(15,235) ====== ======== ======== ========= Basic Loss As reported.................. $(0.03) $ (1.00) $ (0.72) $ (1.49) per share Deduct total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects... 0.01 0.01 0.03 0.07 ------ -------- -------- --------- Pro forma.................... $(0.04) $(1.01) $ (0.75) $ (1.56) ======= ======== ======== ========= Diluted Loss As reported.................. $(0.03) $ (1.00) $ (0.72) $ (1.49) per share Deduct total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects... 0.01 0.01 0.03 0.07 ------- -------- -------- --------- Pro forma...................... $(0.04) $(1.01) $ (0.75) $ (1.56) ======= ======== ======== ========= The weighted average fair value of the options has been estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions used for grants in 2001 and 2000 respectively. There were two grants of 5 year and 10 year vesting in both 2001 and 2000 and the assumptions for those plans are as follows: For the 5 year plan in 2001 the volatility is 45.4%, the expected term of the grant is 4.3 years, and the risk-free interest rate is 4.4%. The 2001 10 year vesting assumptions are: The volatility is 45.4%, the expected term is 4.5 years and the risk free rate is 4.4%. The assumptions for the 5-year plan in 2000 are: volatility is 46.4%, the expected term is 4.3 years, and the risk-free rate is 6.12%. The assumptions for the 10-year plan in 2001 are: volatility is 46.4%, expected term is 4.5 years and the risk-free rate is 6.12%. 8 NOTE 7 - LOSS PER SHARE Basic loss per share is based upon the weighted average number of common shares outstanding during a period. Diluted loss per share is based upon the weighted average number of common shares plus the incremental dilutive effect of the securities convertible to common stock. The difference in the shares used to determine basic and diluted EPS is as follows: Three Months Nine Months Ended September 30, Ended September 30, ------------------- ------------------- 2003 2002 2003 2002 ---- ---- ---- ---- Net loss.............................. $(304) $(9,811) $(7,101) $(14,523) Basic weighted average common shares outstanding.......................... 9,835 9,825 9,833 9,774 Effect of dilutive stock options...... - - - - ------ -------- -------- -------- Diluted weighted average common shares outstanding.......................... 9,835 9,825 9,833 9,774 ======= ======== ======== ======== Basic loss per share.................. $(0.03) $ (1.00) $ (0.72) $ (1.49) ======= ======== ======== ======== Diluted loss per share................ $(0.03) $ (1.00) $ (0.72) $ (1.49) ======= ======== ======== ======== Outstanding options excluded as impact would be anti-dilutive............... 132 191 471 1,229 8 - COMMITMENTS AND GUARANTEES As is customary in the industry, the Company generally agrees with its dealers' lenders to repurchase any unsold RVs if the dealers become insolvent within one year of the purchase of such RVs. Although the total contingent liability under these agreements approximates $85.1 million at September 30, 2003, as with accounts receivable, the risk of loss is spread over numerous dealers and lenders and is further reduced by the resale value of the RVs which the Company would be required to repurchase. Losses under these agreements have not been material in the past and management does not believe that any future losses under such agreements will have a material adverse effect on the Company's consolidated financial position or results of operations. The Company's warranty reserve is established based on its best estimate of the amounts necessary to settle future and existing claims on products sold as of the balance sheet date. The Company records an estimate for future warranty-related costs based on recent actual warranty claims. Also, the Company's recall reserve is established, as necessary, based on management's estimate of the cost per unit to remedy the problem and the estimated number of units that will ultimately be brought in for the repair. Nine Months Ended September 30, 2003 Beginning Ending Balance as of Balance as of December 31, 2002 Additions Deductions September 30, 2003 ----------------- --------- ---------- ------------------ Warranty reserve September 30, 2003... $11,840 $3,700 $5,819 $9,721 9 NATIONAL R.V. HOLDINGS, INC. PART I, ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Disclosure Regarding Forward Looking Statements This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that forward-looking statements are inherently uncertain. Actual performance and results may differ materially from that projected or suggested herein due to certain risks and uncertainties including, without limitation, potential fluctuations in the Company's operating results; continuation of losses; seasonality and economic conditions; dependence on certain dealers and concentration of dealers in certain regions; dependence on chassis suppliers; potential liabilities under repurchase agreements; competition; government regulation; warranty claims; and product liability. Certain risks and uncertainties that could cause actual results to differ materially from that projected or suggested are set forth in the Company's filings with the Securities and Exchange Commission (the "SEC") and the Company's public announcements, copies of which are available from the SEC or from the Company upon request. Critical Accounting Policies Long-Lived Assets. The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset might not be recoverable. If indicators of impairment were present, the Company would evaluate the carrying value of property and equipment and intangibles, in relation to estimates of future undiscounted cash flows of the underlying business, which are based on judgment and assumptions. Warranty. The Company's warranty reserve is established based on its best estimate of the amounts necessary to settle future and existing claims on products sold as of the balance sheet date. The Company records an estimate for future warranty-related costs based on recent actual warranty claims. Also, the Company's recall reserve is established, as necessary, based on management's estimate of the cost per unit to remedy the problem and the estimated number of units that will ultimately be brought in for the repair. While the Company's warranty costs have historically been within its expectations and the provisions established, the Company cannot guarantee that it will continue to experience the same warranty costs that it has in the past. A significant increase in dealer shop rates, the cost of parts or the frequency of claims could have a material adverse impact on the Company's operating results for the period or periods in which such claims or additional costs materialize. Revenue Recognition. Motorhome and towables sales are recorded by the Company when accepted by the dealer rather than at the time of shipment as in earlier years. This change in accounting principle was made to implement SEC Staff Accounting Bulletin No. 101 (SAB 101), as amended. SAB 101 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services rendered; (3) the fee is fixed and determinable; and (4) collectibility is reasonably assured. Should changes in conditions cause management to determine these criteria are not met for certain future transactions, revenue recognized for any reporting period could be adversely affected. 10 Legal Proceedings. The Company is currently involved in certain legal proceedings and has accrued its estimate of the probable costs for the resolution of these claims. This estimate has been developed in consultation with counsel handling the Company's defense in these matters and is based upon an analysis of potential results, assuming a combination of litigation and settlement strategies. Deferred Tax Asset. As of September 30, 2003, the Company has recorded a deferred tax asset of $10.3 million. Realization is dependent on generating sufficient taxable income prior to expiration of the loss carryforwards. Although realization is not assured, management believes it is more likely than not that all of the deferred tax asset will be realized. The amount of the deferred tax asset considered realizable however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced. Liquidity and Capital Resources At September 30, 2003, the Company had working capital of $48.1 million compared to $55.8 million at December 31, 2002. The Company's primary sources of liquidity are internally generated cash from operations and available borrowings under its credit facility. During the first nine months of 2003, the Company provided cash from operations of $2.6 million, compared to $1.1 million of cash provided from operations during the first nine months of 2002. This increase was due primarily to a $8.6 million decrease in inventories, a $7.0 million receipt of income taxes receivable, and an increase of $6.3 million in accounts payable, partially offset by an increase of $11.6 million in trade receivables, a $3.9 million increase in deferred taxes and a $7.1 million net loss that includes $3.0 million of depreciation. The increase in accounts payable is primarily attributable to an increase in purchases due to increased production during the quarter. The decrease in inventories reflects the Company's continuing efforts to manage working capital. Net cash used in investing activities was $1.4 million for the nine months ended September 30, 2003. This represents primarily the purchase of property, plant and equipment totaling $1.2 million. Net cash used in financing activities was $1.2 million for the nine months ended September 30, 2003. This represents net advances on the line of credit totaling $1.7 million, partially offset by proceeds from the issuance of common stock related to the exercise of stock options totaling $0.5 million. The Company has an asset-based revolving credit facility of $15 million with UPS Capital Corporation ("UPSC"). This credit facility expires August 2005. The Company has reserved $0.3 million from the line-of-credit for a contingent liability. The remaining $14.7 million is available for general corporate and working capital needs and capital expenditures. The Company was able to provide alternative security, in the form of state workers' compensation fund insurance for its NRV self-insured workers' compensation program starting in July 2003. This allowed for the removal of the letter-of-credit that secured the self-insured workers' compensation program and freeing up $5.3 million of the line-of-credit. Amounts borrowed under the revolving credit facility bear interest at the prime rate listed in the Wall Street Journal plus 0.75 percentage points. The credit facility contains, among other provisions, certain financial covenants, including net worth requirements. At September 30, 2003, $11.5 million was available for use under this facility and the Company was not in default with any covenants of its loan agreement with UPSC. 11 The Company's consolidated financial statements have been presented on the basis that it will continue as a going-concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has recorded net losses of $21.4 million and $11.5 million and recorded net income of $10.0 million for the years ended December 31, 2002, 2001 and 2000, respectively. The Company has used cash from operating activities of $4.4 million, $12.6 million and provided cash from operating activities of $26.3 million for the years ended December 31, 2002, 2001 and 2000, respectively. The Company has funded its financial needs primarily through operations and its existing line of credit. At September 30, 2003, the Company had cash and cash equivalents of $11,000, working capital of $48.1 million, and $11.5 million available under the credit facility. The Company remains dependent upon its ability to obtain outside financing either through the issuance of additional shares of its common stock or through borrowings until it achieves sustained profitability through a combination of increased sales and improved product margins. Management intends to continue a variety of initiatives to improve its working capital position, including i) head count rebalancing to sustainable production levels, ii) an engineering review of material components for the removal of non-value added items to reduce both material costs and assembly steps, iii) continued focus on improving quality through comprehensive inspections and timely reporting of failures, iv) manufacturing efficiency improvements through longer lead times for production increases allowing better training of new hires to the direct work force, v) non-producing asset dispositions, vi) continued reduction in all categories of inventory, vii) pursuing the reduction of workers' compensation claims at NRV through the implementation of the "Dupont" system, viii) staggering of model year changes to facilitate more effective introductions of product changes to manufacturing and ix) continuing to seek improved manufacturing methods. The Company's success in the execution of these initiatives may have a significant impact on the Company's liquidity during the next 12 months. The Company believes the combination of internally generated funds, working capital, and unused borrowing availability will be sufficient to meet the Company's planned capital and operational requirements for at least the next 12 months. Should the Company require further capital resources during the next 12 months, it would most likely address such requirement through a combination of sales of its products, sales of equity securities, the sale of excess assets and/or additional debt financings. If circumstances changed and additional capital was needed, no assurance can be given that the Company would be able to obtain such additional capital resources. If unexpected events occur requiring the Company to obtain additional capital and it is unable to do so, it then might attempt to preserve its available resources by deferring the creation or satisfaction of various commitments, deferring the introduction of various products or entry into various markets, or otherwise scaling back its operations. If the Company were unable to raise such additional capital or defer certain costs as described above, such inability would have an adverse effect on the financial position, results of operations, cash flows and prospects of the Company. 12 Results of Operations Three Months Nine Months Ended September 30, Ended September 30, 2003 2002 2003 2002 ---- ---- ---- ---- Net sales........................... 100.0% 100.0% 100.0% 100.0% Cost of goods sold.................. 95.2 100.1 98.4 98.5 ------- ------- ------- ------- Gross profit (loss)........... 4.8 (0.1) 1.6 1.5 ------- ------- ------- ------- Selling expenses.................... 3.4 5.7 3.8 4.6 General and administrative expenses. 1.8 2.2 2.4 2.6 Impairment of goodwill.............. 0.0 8.5 0.0 2.6 ------- ------- ------- ------- Operating loss................ (0.4) (16.5) (4.6) (8.3) Interest expense.................... 0.1 0.0 0.1 0.1 Other (income) expense.............. 0.0 (0.1) 0.0 (0.2) ------- ------- ------- ------- Loss before taxes............. (0.5) (16.5) (4.7) (8.2) Benefit for income taxes............ (0.2) (3.0) (1.7) (2.1) ------- ------- ------- ------- Net loss...................... (0.3)% (13.5)% (3.0)% (6.1)% ======= ======= ======= ======= In thousands, except percentages Net sales Three Months Nine Months Ended September 30, Ended September 30, Percent Change Percent Change ---------------------- ---------------------- 2003 2002 2003 2002 ---- ---- ---- ---- Net sales................. $91,314 26.1% $72,417 $242,886 1.5% $239,204 Net sales of $91.3 million for the quarter ended September 30, 2003 represents an increase of $18.9 million or 26.1% from the same quarter last year. Third quarter wholesale unit shipments of diesel motorhomes were 297, up 41% from 211 units last year. Quarterly shipments of gas motorhomes were 321, up 38% from 232 units last year. Quarterly shipments of towable products were 355, down 7% from 383 units last year. Wholesale unit shipments of diesel motorhomes for the nine months were 752, down 2% from 765 units last year. Shipments of gas motorhomes for the nine months were 946, up 26% from 752 units last year. Year-to-date shipments of towable products were 1,220, down 4% from 1,266 units last year. Revenues in the quarter for the National RV division were $48.1 million, up 15% from $42.0 last year. Revenues in the quarter for the Country Coach division were $42.0 million, up 34% from $31.3 million last year. National RV revenues for the nine months were $149.9 million, up 4% from $144.2 million last year. Country Coach revenues for the nine months were $91.2 million, down 2% from $93.4 million last year. 13 Gross profit margin Three Months Nine Months Ended September 30, Ended September 30, Percent Change Percent Change ---------------------- ---------------------- 2003 2002 2003 2002 ---- ---- ---- ---- Gross profit margin....... 4.8% 580.0% (0.1)% 1.6% 6.7% 1.5% The primary factors that led to a 4.8% gross profit margin for the third quarter 2003 compared to a -0.1% gross margin for the same period last year, were higher production volumes, reduced warranty costs, and reduced discounting. Gross profit margin improved by 6.7% during the first nine months of 2003 compared to the same period last year. The primary reason for the improved margin is an increase in sales. The gross profit margin improvement at the Company's National RV division was driven by improved sales in the gas motorhome segment. The Company experienced an increase in gas unit shipments of 26% during the nine months ended September 30, 2003 compared to the same period last year. The Company's Country Coach division experienced gross profit margin improvement due to improved production efficiencies and improved sales due to the newly released Inspire. In thousands, except percentages Selling expenses Three Months Nine Months Ended September 30, Ended September 30, Percent Change Percent Change ---------------------- ---------------------- 2003 2002 2003 2002 ---- ---- ---- ---- Selling expenses.............. 3,101 (24.8)% 4,126 9,186 (16.1)% 10,953 as a percentage of net sales.. 3.4% 5.7% 3.8% 4.6% Selling expenses totaled $3.1 million or 3.4% of net sales for the third quarter 2003 compared to $4.1 million or 5.7% of net sales for the same quarter last year. Additionally, for the nine months ended September 30, 2003 selling expenses, as a percentage of net sales declined by 16.1% compared to the same period last year. Sales costs have decreased due to concerted efforts by management to reduce advertising, giveaways and sales commissions. 14 In thousands, except percentages General and administrative expenses Three Months Nine Months Ended September 30, Ended September 30, Percent Change Percent Change ---------------------- ---------------------- 2003 2002 2003 2002 ---- ---- ---- ---- General and administrative expenses...................... 1,683 0.6% 1,673 5,760 (7.7)% 6,242 as a percentage of net sales.. 1.8% 2.2% 2.4% 2.6% General and administrative expenses totaling $1.7 million for the quarter ended September 30, 2003 was flat compared to the same period last year. As a percentage of net sales, general and administrative expenses decreased to 1.8% from 2.2% for the same period last year as a result of improved sales during 2003. Additionally, for the nine months ended September 30, 2003 general and administrative expenses declined by 7.7% compared to the sames period last year, as a percentage of net sales decreased to 2.4% from 2.6% for the same period last year. The reduction in general and administrative expenses occurred primarily due to the reduction in expenses associated with the aircraft that was sold during 2002. In thousands, except percentages Impairment of goodwill Three Months Nine Months Ended September 30, Ended September 30, Percent Change Percent Change ---------------------- ---------------------- 2003 2002 2003 2002 ---- ---- ---- ---- Impairment of goodwill........ - (100.0)% 6,126 - (100.0)% 6,126 as a percentage of net sales.. 0.0% 8.5% 0.0% 2.6% The Company recognized the complete impairment of goodwill during the third quarter of 2002. In thousands, except percentages Interest expense Three Months Nine Months Ended September 30, Ended September 30, Percent Change Percent Change ---------------------- ---------------------- 2003 2002 2003 2002 ---- ---- ---- ---- Interest expense.............. 85 66.7% 51 309 117.6% 142 Interest expense for the three months ended September 30 2003 and 2002 was $0.09 million and $0.05 million, respectively. As a percentage of net sales, interest expense for these same periods was 0.1% and 0.1%, respectively. Additionally, for the nine months ended September 30 2003 and 2002, interest expense was $0.3 million and $0.1 million and as a percentage of net sales remained at 0.1%. Interest expense represents the interest and fees paid on the Company's credit facility. In thousands, except percentages Other (income) expense Three Months Nine Months Ended September 30, Ended September 30, Percent Change Percent Change ---------------------- ---------------------- 2003 2002 2003 2002 ---- ---- ---- ---- Other (income) expense........ (2) (95.5)% (45) (6) (98.6)% (444) Other income in 2003 is comprised of interest income earned on cash in the Company's general bank account. As a percentage of net sales the amount is not material. Other income during 2002 is primarily the result of the sale of the Company's airplane. 15 In thousands, except percentages Benefit for income taxes Three Months Nine Months Ended September 30, Ended September 30, Percent Change Percent Change ---------------------- ---------------------- 2003 2002 2003 2002 ---- ---- ---- ---- Benefit for income taxes...... (191) (91.2)% (2,164) (4,189) (15.0)% (4,931) as a percentage of net sales.. (0.2)% (3.0)% (1.7)% (2.1)% The benefit for income taxes for the three and nine months ended September 30, 2003 was $0.2 million and $4.2, million respectively. The benefit for income taxes on a percentage of sales basis for the three and nine months ended September 30, 2003 was (0.2)% and (1.7)% respectively. Compared to the same periods last year the tax benefits were $2.2 million and $4.9 million respectively. On a percentage of sales basis they were (3.0)% and (2.1)% respectively. The effective tax rate for the nine months ended September 30, 2003 was 37.0% and 25.3% for the same period last year. The lower effective tax rate in 2002 is due to the impairment of goodwill. 16 NATIONAL R.V. HOLDINGS, INC. PART I, ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK The Company is exposed to interest rate risk from borrowings under the revolving credit facility. As discussed in Note 5 to the unaudited Consolidated Financial Statements, amounts borrowed under this credit facility bear interest at the prime rate plus 0.75 percentage points. While changes in the prime rate may affect our financial results, we believe the effect, if any, will not be material. All other information about market risks for the nine months ended September 30, 2003 does not differ materially from that discussed under Item 7A of the Company's Annual Report on Form 10-K for the year ended December 31, 2002. A hypothetical 100 basis point increase in interest rates, based on the September 30, 2003 line-of-credit balance, would increase our net loss for the nine months ended September 30, 2003 by approximately $0.02 million. Any future gains or losses may differ materially from this hypothetical amount based on the timing and amount of actual interest rate changes and the actual term loan balance. 17 NATIONAL R.V. HOLDINGS, INC. PART I, ITEM 4 - CONTROLS AND PROCEDURES The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company's reports under the Securities Exchange Act of 1934 (the "Exchange Act") is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based closely on the definition of "disclosure controls and procedures" in Exchange Act Rule 13a-14(c). In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. As of the end of the quarter covered by this Report, the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and the Company's Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based on the foregoing, the Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective. There have been no significant changes in the Company's internal controls over financial reporting during the three months ended September 30, 2003 that have materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting. 18 NATIONAL R.V. HOLDINGS, INC. PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K A. Exhibits 31.1 Certification of Chief Executive Officer pursuant to Section 301 of the Sarbanes-Oxley Act of 2002. 31.2 Certification of Chief Financial Officer pursuant to Section 301 of the Sarbanes-Oxley Act of 2002. 32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. B. Form 8-K (1) On July 22, 2003, the Company filed a Current Report on Form 8-K furnishing under Item 9 the Company's financial results for the second quarter of 2003. (2) On August 06, 2003, the Company filed a Current Report on Form 8-K disclosing under Item 5 Other Events, that the Board of Directors of the Company had appointed Bradley C. Albrechtsen, the Company's President and Chief Executive Officer, as President of the Company's National RV, Inc. division, succeeding National RV, Inc. founder Wayne Mertes. (3) On August 19, 2003, the Company filed a Current Report on Form 8-K disclosing under Item 5 Other Events, that Wayne Mertes, 67, resigned from the Board of Directors of the Company. 19 SIGNATURE 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. NATIONAL R.V. HOLDINGS, INC. (Registrant) Date: November 13, 2003 By /s/ MARK D. ANDERSEN Mark D. Andersen Chief Financial Officer (Principal Accounting and Financial Officer) 20 EX-99.CERT 3 a302cert.txt 2003 Q3 10Q CEO/CFO CERT CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER Exhibit 31.1 I, Bradley C. Albrechtsen, certify that: 1. I have reviewed this quarterly report on Form 10-Q of NATIONAL R.V. HOLDINGS, INC.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonable likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 12, 2003 /s/ BRADLEY C. ALBRECHTSEN -------------------------- Bradley C. Albrechtsen Chief Executive Officer and President CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER Exhibit 31.2 I, Mark D. Andersen, certify that: 1. I have reviewed this quarterly report on Form 10-Q of NATIONAL R.V. HOLDINGS, INC.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonable likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 12, 2003 /s/ MARK D. ANDERSEN -------------------- Mark D. Andersen Chief Financial Officer (Principal Accounting and Financial Officer) EX-99.906 CERT 4 a321cert.txt 2003 Q3 10Q 906 CERT EXHIBIT 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of National R.V. Holdings, Inc. (the "Company") on Form 10-Q for the period ending September 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), we, Bradley C. Albrechtsen, Chief Executive Officer and President of the Company, and Mark D. Andersen, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ BRADLEY C. ALBRECHTSEN /s/ MARK D. ANDERSEN - -------------------------- -------------------- Bradley C. Albrechtsen Mark D. Andersen Chief Executive Officer Chief Financial Officer and President (Principal Accounting and November 12, 2003 Financial Officer) November 12, 2003 -----END PRIVACY-ENHANCED MESSAGE-----