Item 1. BUSINESS
General Development of Business
Collins Industries, Inc. was founded in 1971 as a manufacturer of small school buses and ambulances built from modified cargo vans. The Company's initial product was the first "Type A" school bus, designed to carry 16 to 20 passengers. Today the Company manufactures specialty vehicles and accessories for various basic service niches of the transportation industry. The Company's products include ambulances, small school buses, shuttle and mid- size commercial buses, terminal trucks, wheelchair lifts and accessories and commercial bus chassis. From its inception, Collins' stated goal has been to become the largest manufacturer of specialty vehicles in the U.S. The Company has grown primarily through the internal development of new products and the acquisition of complementary product lines.
Collins manufactures products used in emergency medical transportation and the transportation of school children, business and leisure travelers and persons with disabilities, as well as in the transfer of freight. In the U.S., Collins is the largest manufacturer of ambulances, a leading manufacturer of small school buses, a manufacturer of shuttle and mid-size commercial buses and the second largest manufacturer of terminal trucks. The Company also manufactures wheelchair lifts and commercial bus chassis. The Company sells its products under several well-known trade names, including Wheeled Coach (ambulances), Collins Bus (small school buses), World Trans (commercial buses), Mobile-Tech (vehicle wheelchair lifts), Capacity (terminal trucks) and Transi-Corp (commercial bus chassis).
Most Collins products are built to customer specifications from a wide range of options offered by the Company. Collins sells to niche markets which demand manufacturing processes too sophisticated for small job shop assemblers, but is not the highly automated assembly line operations of mass production vehicle manufacturers. The Company emphasizes specialty engineering and product innovation. In the last few years, it has introduced new products and product improvements, which include the Moduvan ambulance, the first ambulance of its size with advanced life-support system capability, the Dura-Ride suspension system, the first frame-isolating suspension system for terminal trucks, and the innovation of a larger seating capacity, Type A Super Bantam school bus capable of carrying up to 24 passengers, the largest Type A in the industry.
In fiscal 1992, the Company also developed the World Trans 3000, an aluminum body bus built on a rear-engine, rail-type chassis built by the Company. This bus has a lower floor height and tighter turning radius than competitive models available in the industry.
A new wheelchair lift called the under-vehicle lift (UVL) was introduced in fiscal 1992. The UVL, suitable for installation on both vans and minivans, is the first platform wheelchair lift to be installed on the vehicle exterior so that it does not block vehicle doorway entrances. The UVL is the first Company product targeted to the consumer market, as well as to the commercial market.
Description of Business
The Company principally manufactures and markets Specialty Vehicles.
Ambulances. The Company manufactures both modular and van-type ambulances at its Hutchinson, Kansas and Orlando, Florida plants. Van ("Type II") ambulances are cargo vans modified to include a patient compartment and a raised fiberglass roof. Modular ambulances are produced by attaching an all-aluminum, box-type, patient compartment to either a dual rear-wheel cab chassis ("Type I") ambulance or a dual rear-wheel, van-type, cutaway chassis ("Type III") ambulance or to a single rear-wheel cutaway chassis ("Moduvan") ambulance. A cutaway chassis consists of only the front portion of the driver's compartment, engine, drive train, frame, axle and wheels. Type II ambulances are smaller and less expensive than modular ambulances.
The Company also produces a limited number of medical support vans designed to transport medical and life-support equipment. Medical support vans are modified commercial vehicles which do not have a patient compartment for advanced life support systems.
Buses. The Company manufactures small school buses, commercial and shuttle buses at its South Hutchinson, Kansas facility.
School Buses. The Company manufactures small Type A school buses which carry from 16 to 24 passengers. Prior to 1992, the Company built Type A school buses by extensively modifying vendor- supplied cargo vans. The majority of Type A school buses built by the Company are now produced by fabricating the body and mounting it on a vendor-supplied, dual rear-wheel or single rear- wheel, cutaway chassis. The Company was the first manufacturer to produce a Type A school bus on this type of chassis, which permits greater seating capacity than a van chassis. School buses are produced in compliance with Federal, state and local laws regarding school transportation vehicles.
Commercial and Shuttle Buses. The Company produces shuttle and transit buses for car rental agencies, transit authorities, hotels and resorts, retirement centers, nursing homes and similar users. These buses are built to customer specifications and are designed to transport 14 to 30 passengers over short distances.
Collins offers commercial bus products in various price ranges. The Diplomat is a steel body bus built on a vendor-supplied, cutaway chassis that carries 17 to 25 passengers and targets a low- to mid-price range market. The World Trans 1000 Series vehicles are aluminum body buses built on vendor-supplied, cutaway chassis that carry 17 to 23 passengers and target mid- to high-price range markets. The World Trans 3000, introduced in early 1993, is an aluminum body bus built on the Company's rear- engine, rail-type chassis. This product is designed for the medium duty segment of the transit and shuttle markets.
Terminal Trucks. The Company produces two basic models of terminal trucks at its Longview, Texas, facility, the Trailer Jockey and the Yardmaster. Terminal trucks are designed and built to withstand heavy-duty use by moving trailers and containers at warehouses, rail yards, rail terminals and shipping ports. Most terminal trucks manufactured by the Company are built to customer specifications. The Company manufactures the entire truck except for major drivetrain components which are purchased from outside suppliers. The Dura-Ride suspension system, an increasingly popular option on the Company's terminal trucks, was installed on over half of the terminal trucks built by the Company during fiscal 1996.
Transportation Equipment for Disabled Persons. The Company manufactures wheelchair lifts and accessories used in the transportation of disabled persons. These products are sold to commercial and school bus manufacturers and to dealers who install the lifts in existing buses. The Company's patented Step- Lift product is installed in the stepwell of buses. The Step- Lift can serve as a conventional two-step entryway into the bus and fold out as a lift to make the bus accessible to disabled persons. In 1992, the Company introduced the under-vehicle lift ("UVL") in North America. The UVL, suitable for installation on both vans and minivans, was the first platform wheelchair lift to be installed on the vehicle exterior so that it does not block the vehicle doorway entrances. The UVL was the first Company product targeted to the consumer market as well as to the commercial market.
Bus Chassis. The Company produces both forward- and rear-engine bus chassis for use by the Company and for sale to other manufacturers. These chassis are suitable for both commercial and large school buses. To date, the Company has produced and sold limited quantities of these chassis. The Company plans to continue manufacturing bus chassis suitable for its own products and for sale to other manufacturers.
Manufacturing
Manufacturing consists of the assembly of component parts either purchased from others or fabricated internally. With the exception of chassis, chassis components and certain terminal truck components which are purchased from outside suppliers, the Company fabricates the principal components of its products. Collins' internal capabilities include CNC punching and forming of sheet metal, metal stamping, tooling, molding of fiberglass components, mechanical and electrical component assembly, upholstery, painting and finishing and Computer-Aided-Design and Manufacturing (CAD/CAM) systems.
Collins intends to continue to improve its manufacturing facilities from time-to-time through the selective upgrading of equipment and the mechanization or automation of appropriate portions of the manufacturing process. Management believes the Company's manufacturing facilities are in good condition and are adequate for the purposes for which they currently are used. The capacity of the Company's current facilities, particularly if operated on a multiple shift basis, is considered adequate to meet current needs and anticipated sales volumes.
New Products
The Company is not presently engaged in activities which would require a significant amount of expenditures or use of material amounts of assets for development of products in the planning stage or otherwise for the foreseeable future.
Suppliers
In order to ensure that it has a readily available supply of chassis for ambulance and bus production, the Company has entered into consignment agreements with General Motors Corporation ("GMC") and Ford Motor Company ("Ford"). Under those agreements, chassis are kept at Company production facilities at no cost to the Company other than chassis storage costs. When an individual chassis is selected from the Company's consignment pool for use in vehicle production, title to the chassis passes to the Company and the Company becomes liable to the consignor for the cost of the chassis. Chassis currently in the consignment pool are supplied by Ford and GMC. While an interruption in supply from one source may cause a temporary slowdown in production, the Company believes that it could obtain adequate numbers of chassis from alternate sources of supply.
The Company uses substantial amounts of steel in the production of its terminal truck products and purchases certain other major components (primarily engines, transmissions and axles). Collins also uses large amounts of aluminum, steel, fiberglass and glass in the production of ambulances and buses. The principal raw materials and components used by the Company in the production of its wheelchair lifts and accessories are steel, aluminum, motors and batteries. There is substantial competition among suppliers of such raw materials and components, and the Company does not believe that a loss of a single source of supply would have a material adverse effect on its business.
Patents, Trademarks and Licenses
The Company owns federal registrations for most of the trademarks which it uses on its products. The Company also owns patents on certain of its wheelchair lift products and on its bus body design, ambulance design, Dura-Ride air suspension system, ambulance warning light system and air-activated bus door. The Company believes that its patents are helpful, because they may force competitors to do more extensive design work to produce a competitive product. The Company believes that its production techniques and skills are as important as product design, and, therefore, in management's opinion, any lack of patent protection would not adversely affect the Company's business.
Seasonality of Business
Historically a major portion of the Company's net income has been earned in the second and third fiscal quarters ending April 30 and July 31, respectively. The purchasing patterns of school districts are typically strongest in the spring and summer months which accounts for typically stronger sales of small school buses in the quarters ending April 30 and July 31. Generally, sales of Specialty Vehicles tend to be lower in the fall and winter months due to the purchasing patterns of the Company's customers in general and purchasing activities are normally lower near the end of the calendar year.
Sales Terms
The Company produces the majority of its products on an order- only basis. Most specialty vehicle products are delivered on a cash basis. Products sold on a direct basis (not through dealers) and products for the disabled are sold on trade terms common to each respective industry. Finished goods that are reflected on the financial statements are generally sold units that are ready for customer delivery. Since late in fiscal 1992, many sales to dealers have been financed through an unrelated third party for the dealers, resulting in payment generally within days of the sale.
Customer Concentration
The Company has no single customer whose loss would have a material adverse effect on an industry segment or the Company as a whole.
Sales Backlog
The sales backlog at October 31, 1996 was approximately $40.4 million. This compares to $29.2 million at October 31, 1995. In the opinion of management, the majority of this sales backlog will be shipped during the coming year.
Governmental Sales
The Company has, and will continue to, pursue opportunities in government sales as they occur. No material portion of the Company's business, however, is subject to renegotiation of profits or termination of contracts or subcontracts at the election of the government. In 1993, the Company was awarded a new contract with the General Services Administration to provide ambulances to all government sectors. The initial term of the contract was for one year with three one-year extension options. This contract does not contain specific quantities that will be ordered. During fiscal 1996 such orders were less than 10 percent of the Company's consolidated sales.
Marketing and Distribution
The Company, through its wholly owned subsidiaries, markets its products throughout the U.S. through independent dealers and distributors, Company-owned stores and the direct sales efforts of Company personnel and, to a limited extent, abroad. Each of the Company's product groups is responsible for its own marketing activities and maintains independent relationships with dealers and distributors. Support is provided to dealers and distributors in bidding specification writing and customer service.
The Company regularly advertises in consumer and trade magazines and other print media and actively participates in national, regional and local trade shows. In addition, Company representatives attend a number of national conventions and regional meetings of important constituent groups such as school boards and emergency medical groups.
Competition
The markets for most of the Company's product lines are very competitive, and the Company currently has several direct competitors in most markets. Some of these competitors may have greater relative resources. The Company believes it can compete successfully (i) in the ambulance market on the basis of the quality and price of its products, its design engineering and product innovation capabilities and the strength of the Wheeled Coach brand name, (ii) in the small school bus market on the basis of its product price and quality and favorable recognition of its Collins Bus brand name and (iii) in the commercial bus market on the basis of its various product models, product quality, price and distribution network.
The Company does not have numerous competitors in the market for wheelchair lifts and accessories; however, its primary competitors are well-established and may have greater relative resources. The Company believes it can compete successfully in the market on the basis of its innovative products, product quality and price.
In the terminal truck market, the Company competes primarily with one larger domestic competitor, Ottawa Truck Corporation which is owned by Sisu of Finland. Sisu has international distribution channels and is owned by the government of Finland and may have greater relative resources than the Company. The Company believes it can compete successfully in this market on the basis of its Capacity brand name, price, product quality and customer demand for its exclusive Dura-Ride suspension system.
Research and Development Costs
1996 1995 1994 Research and Development Expenses $215,313 $261,747 $72,236
This table cites the level of research and development costs the Company incurred the past three fiscal years. It should be noted the Company does significant research and development work on the production line and, therefore, the major costs of new programs are recorded as cost of sales and are expensed as prototypes.
Regulation
The Company is subject to various laws and regulations with respect to employees' health and safety and the protection of the environment. In addition, all of the Company's on-road vehicles must satisfy certain standards applicable to such vehicles established by the United States Department of Transportation. Certain of its products must also satisfy specifications established by other federal, state and local regulatory agencies, primarily dealing with safety and performance standards. In management's opinion, the Company and its products are in compliance in all material respects with all applicable governmental regulations. A substantial change in any such regulation could have a significant impact on the business of the Company.
Employees
The Company employs approximately 900 persons full time, including officers and administrative personnel. The Company has not experienced any strikes or work stoppages due to labor problems and considers its relations with its employees to be satisfactory.
Export Sales
The Company has no significant foreign or export sales.
Item 2.
Item 2. PROPERTIES
The following table sets forth certain information with respect to the Company's manufacturing and office facilities. The Company owns all properties listed below in fee simple, except as otherwise noted.
Approximate Location Use Size (sq ft)
Hutchinson, Kansas(1) Corporate headquarters 4,000
Hutchinson, Kansas(1),(2) Ambulance production; 300,000 Wheelchair lifts and accessories production; Office space
Hutchinson, Kansas(1) Building presently leased and 60,000 available for future production
South Hutchinson, Kansas(1),(3) Small school bus and commercial 160,000 bus production; Office space
Orlando, Florida(1) Ambulance production; 229,000 Office space
Longview, Texas(1) Terminal truck production; 120,000 Chassis production; Office space
Mansfield, Texas(1) Ambulance sales, service and 25,000 distribution center ___________________
(1) This property is pledged as collateral to secure payment of the Company's debt obligations. See "Notes 2 and 3 to Consolidated Financial Statements." (2) Approximately 80 percent of this facility, together with related machinery and equipment, is financed by industrial revenue bonds in the original principal amount of $3,500,000 issued by the city of Hutchinson under a lease purchase agreement providing for rental payments sufficient to amortize the bonds in accordance with their terms. (3) This facility and certain related equipment are financed by industrial revenue bonds in the original principal amount of $1,750,000 issued by the city of South Hutchinson under a lease purchase agreement similar to the one in effect for the Hutchinson production facility.
The Company leases several facilities throughout the U.S. for the sale and distribution of ambulances. Although the Company evaluates opportunities to acquire additional properties at favorable prices as they arise, it believes that its facilities are well maintained and will be adequate to serve its needs in the foreseeable future. Several Company facilities have room to expand in existing buildings and others have land upon which additional buildings can be constructed.
Item 3.
Item 3. LEGAL PROCEEDINGS
The Company has been named as a defendant in various law suits arising out of its normal business operations. Based upon the facts available to date, management believes that the Company has meritorious defenses to these claims, as well as adequate insurance coverage, and that their ultimate resolution should not have a material adverse effect on the Company's financial position.
Item 4.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company did not submit any matter to a vote of security holders during the fourth quarter of the fiscal year ended October 31, 1996.
PART II
Item 5.
Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Collins Industries, Inc. common stock is quoted on the Nasdaq Stock Market under the symbol COLL. The following table sets forth the high and low sales prices per share of the common stock as reported by the Nasdaq Stock Market. On October 31, 1996 there were approximately 3,500 shareholders of the Company's common stock.
FISCAL 1996
Volume Quarter High Low (000s) First 2-1/4 1-7/16 1,049 Second 3-7/8 1-9/16 2,561 Third 6 3-7/16 2,954 Fourth 6-1/2 4-7/16 1,392
FISCAL 1995
Volume Quarter High Low (000s) First 2-3/8 1-5/8 846 Second 2-7/8 1-5/8 1,043 Third 2-5/8 2 574 Fourth 2-5/8 1-7/8 689
Item 6.
Item 6. SELECTED FINANCIAL DATA
Operating History (In thousands except share and per-share data)
Fiscal years ended 1996 1995 1994 1993 1992 October 31,
Sales $151,879 $140,725 $143,763 $146,992 $143,502 Cost of sales 129,652 123,911 126,664 137,436 125,939 Gross profit 22,227 16,814 17,099 9,556 17,563 Selling, general and administrative (includes research & development) 15,236 13,925 13,661 14,992 13,806 Income (loss) from operations 6,991 2,889 3,438 (5,436) 3,757 Other income (expenses): Interest, net (2,241) (2,783) (3,410) (3,311) (3,827) Other, net (Note A) 262 (27) (999) (3,220) 29 Income (loss) from continuing operations before provision (benefit) for income taxes and extraordinary items 5,012 79 (971) (11,967) (41) Provision (benefit) for income taxes 0 0 0 (749) 0 Income (loss) before extraordinary items 5,012 79 (971) (11,218) (41) Discontinued operations (loss) 0 0 0 0 0 Extraordinary items 0 (420) 0 0 (1,059) Net income (loss) $ 5,012 $ (341) $ (971) $(11,218) $(1,100) Earnings (loss) per share: Continuing operations $ .66 $ .01 $ (.14) $ (1.59) $ 0 Discontinued operations 0 0 0 0 0 Extraordinary items 0 (.06) 0 0 (.20) Net income (loss) .66 (.05) (.14) (1.59) (.20) Dividends per share $ 0 $ 0 $ 0 $ .0625 $ .10 Weighted average shares outstanding 7,621,403 7,240,926 7,106,082 7,071,097 5,395,895 Non-cash charges $ 2,128 $ 3,040 $ 2,889 $ 3,117 $ 4,415
Note A: Includes non-recurring expenses of $1,010,761 and $3,115,531 in 1994 and 1993, respectively, associated with the restatement of the October 31, 1992 consolidated financial statements.
Financial Position (In thousands except share and per-share data)
Fiscal years ended October 31, 1996 1995 1994 1993 1992
Current assets 32,640 32,086 37,733 40,651 53,766 Current liabilities 18,436 18,670 23,769 25,376 47,526 Working capital 14,204 13,416 13,964 15,275 6,240 Total assets 45,744 46,881 54,794 59,309 72,879 Long-term debt (less current maturities) 12,827 17,660 18,401 20,003 1,094 Capitalized leases (less current maturities) 591 1,746 2,143 2,619 3,080 Shareholders' investment 13,891 8,805 8,994 9,811 21,179 Book value per share 1.91 1.21 1.26 1.38 3.00 Working capital per share 1.95 1.84 1.96 2.16 .88
Financial Comparisons
Gross profit margin 14.6% 11.9% 11.9% 6.5% 12.2% Net profit margin 3.3% NA NA NA NA SG&A (includes R&D) as % of sales 10.0% 9.9% 9.5% 10.2% 9.6% Current ratio 1.8:1 1.7:1 1.6:1 1.6:1 1.1:1 Long-term debt and capitalized leases to shareholders' investment 1.0:1 2.2:1 2.3:1 2.3:1 0.2:1 Manufacturing space (000's square feet) 898 978 978 978 1.035
Item 7.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis provides information which management believes is relevant to an assessment and understanding of the Company's consolidated results of operations and financial condition. The discussion should be read in conjunction with the consolidated financial statements and notes thereto.
RESULTS OF OPERATIONS
Fiscal 1996 Compared to Fiscal 1995. Sales for fiscal 1996 increased 8% to $151.9 million compared to $140.7 million in fiscal 1995. The sales increase for fiscal 1996 was principally due to improved sales of buses and ambulances. Sales related to school bus products increased in fiscal 1996, principally due to higher unit sales to major contractors operating large school bus fleets. Sales of ambulance products increased in fiscal 1996 principally due to improved sales of units carrying higher sales prices.
At October 31, 1996, the Company's consolidated sales backlog was $40.4 million compared to $29.2 million at October 31, 1995. The Company believes a majority of its consolidated sales backlog will be shipped in fiscal 1997.
In 1993, the Company was awarded a new contract with the General Services Administration (GSA). The initial term of the contract was one year with three (3) one-year extension options. The Company is currently in the fourth year of the contract which was originally estimated to be approximately $40 million with the exercise of all extension options.
Cost of sales for fiscal 1996 were 85.4% of sales compared to 88.1% of sales in fiscal 1995. The principal reasons for this improvement include: lower material costs associated with the Company's consolidation of certain purchasing operations; improved efficiencies in the operations of the bus product lines and change in sales mix in ambulance products to higher margin units.
Selling, general and administrative expenses for fiscal 1996 were $15.0 million or 9.9% of sales compared to $13.7 million or 9.7% of sales in fiscal 1995. The overall dollar increase was principally due to higher selling expenses and incentive payments and the impact of an unfavorable jury verdict of certain litigation.
Interest expense for fiscal 1996 decreased $.5 million over fiscal 1995. This decrease was principally due to reduced average borrowings during fiscal 1996. The Company's base interest rate with its lead Bank will decrease in fiscal 1997 by 1/4% (to prime + 1%) due to the Company meeting certain financial thresholds at October 31, 1996.
There was no provision for income taxes in fiscal 1996 due to the Company's utilization of its net operating loss carryforwards from prior years. As described in Note 4 to the consolidated financial statements, the Company has available net operating loss carryforwards of approximately $1.9 million for tax purposes to offset future taxable income. Additionally, the Company has general tax and alternative minimum tax credit carryforwards of approximately $.5 million available to offset future income taxes.
The Company's income before extraordinary items in fiscal 1996 was $5.0 million ($.66 per share) compared to $.1 million ($.01 per share) in fiscal 1995. Income before extraordinary items increased in fiscal 1996 principally as a result of improved sales of ambulance and bus products, lower material costs gained through the consolidation of certain purchasing operations and lower interest costs associated with an overall reduction of interest-bearing debt.
In fiscal 1995, the Company incurred extraordinary net charges of $.4 million associated with the early retirement of certain debt. No extraordinary expenses were incurred in fiscal 1996.
Fiscal 1995 Compared to Fiscal 1994. Sales for fiscal 1995 decreased $3.0 million (2.1%) to $140.7 million. Sales within the Specialty Vehicle product lines were mixed. Chassis sales decreased $3.1 million, principally due to the impact of lower unit sales in commercial and school bus products. Sales of school bus products declined in fiscal 1995, principally due to lower unit sales to major contractors operating large school bus fleets. The unit sales of commercial bus products also declined, primarily due to lower sales of single, rear-wheel buses. The sales declines in the commercial and school bus products were partially offset by an overall increase of 14% in the Company's ambulance product lines. The overall increase in ambulance sales principally resulted from a 10% increase in the volume of ambulances sold in fiscal 1995 compared to fiscal 1994. The unit sales decline in terminal truck products was partially offset by selling price increases and increased sales of spare parts. Cost of sales and selling, general and administrative expenses for both 1995 and 1994 were approximately the same. Cost of sales were 88.1% of sales in both fiscal 1995 and 1994 and selling general and administrative expenses in fiscal 1995 were 9.7% of sales compared to 9.5% of sales in fiscal 1994.
Research and development expenses increased to $.3 million in fiscal 1995 compared to $.1 million in fiscal 1994. The principal reason for this increase related to the development of new ambulance products and the development costs associated with a new commercial bus.
In fiscal 1994, the Company incurred $1.0 million in special, non- recurring expenses related to charges incurred for restatement of the 1992 financial statements.
Interest expense of $2.8 million decreased for fiscal 1995 by $.6 million from fiscal 1994. This decrease was primarily due to reduced average borrowings during fiscal 1995.
Income before extraordinary items in fiscal 1995 was $.1 million ($.01 per share) compared to a loss of $1.0 million ($.14 per share) in fiscal 1994. The income before extraordinary items in fiscal 1995 increased due to three principal factors: (1) improved sales and income from ambulance product lines, (2) lower interest costs and (3) elimination of the special charges incurred in 1994. These income improvements were principally offset by losses sustained in the commercial and school bus product lines in fiscal 1995.
In fiscal 1995, the Company incurred net extraordinary items of $420,444 associated with its new credit facility with NationsBank of Georgia N.A. and the retirement of certain subordinated debentures.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has principally relied on internally generated funds, supplier financing and bank borrowings to finance its operations and capital expenditures. The Company's working capital requirements vary from period to period depending on the production volume, the timing of vehicle deliveries and the payment terms offered to its customers.
Cash provided by operations was $5.8 million in fiscal 1996 compared to $5.3 million in fiscal 1995. Primary sources of the 1996 cash provided by operations related to the Company's improved profit levels. The sources of cash from operations were partially offset by increases in receivables and a reduction in accounts payable.
Cash provided by operations was $5.3 million in fiscal 1995 compared to $5.2 million in fiscal 1994. Primary sources of the 1995 cash provided by operations related to the profitable operations of the ambulance and terminal truck product lines and to reductions in receivables, inventories and prepaid expenses.
Cash provided by operations was $5.2 million in fiscal 1994. The primary sources of the 1994 cash provided by operations was the profitable operations of the ambulance, terminal truck and small school bus product lines; reductions in receivables and increases in accounts payable to suppliers. In 1994 these sources were used to reduce accrued expenses.
Cash used in investing activities was $.3 million in fiscal 1996 compared to $.2 million in fiscal 1995. In fiscal 1996, the principal use of cash for investing activities was for the acquisition of property and equipment ($.8 million) and certain other assets ($.2 million). In fiscal 1996, these uses of cash were partially offset by the proceeds from the sale of certain property ($.7 million). In fiscal 1995, the principal use of cash for investing activities was for the acquisition of property and equipment ($.6 million) and certain other assets ($.3 million). In fiscal 1995 these uses of cash were partially offset by the proceeds from the sale of vacant land ($.6 million). In fiscal 1994, the cash used in investing activities was for the acquisition of property and equipment.
Cash used in financing activities was $6.0 million in fiscal 1996 compared to $8.0 million in fiscal 1995. In fiscal 1996, the Company reduced its long-term borrowings $6.0 million compared to a net reduction of $3.7 million in fiscal 1995. As described in Note 2 to the consolidated financial statements, the Company obtained a $33.05 million credit facility from NationsBank in fiscal 1995. The proceeds of that financing were used to repay the Company's chassis floor plan notes (short-term) and to pay off Guaranteed Senior Notes of $17.5 million. The Company reduced its short-term borrowings by $4.3 million in fiscal 1995 and by $3.6 million in fiscal 1994. The Company reduced its long- term borrowings by $1.6 million in fiscal 1994.
The Company believes that its cash flows from operations and its credit facility with NationsBank will be sufficient to satisfy its future working capital and capital expenditure requirements.
At October 31, 1996 there were no significant or unusual contractual commitments or capital expenditure commitments.
IMPACT OF INFLATION AND FOREIGN CURRENCY EXCHANGE FLUCTUATIONS
The results of the Company's operations for the periods discussed have not been significantly affected by inflation or foreign currency fluctuations. Facility costs result primarily from interest and principal and are not affected by inflation. Further, although the Company often sells products on a fixed quote basis, the average time between the receipt of an order and delivery is generally a few months. Therefore, the Company generally is not adversely affected by increases in the cost of raw materials and components. This could change in situations in which the Company is producing against a substantial backlog and may not be able to pass on higher costs to customers. In addition, interest on the Company's debt is tied to the prime rate and therefore may increase with inflation.
Collins makes substantially all sales to foreign customers in U.S. dollars. Thus, notwithstanding fluctuation of foreign currency exchange rates, the Company's profit margin for any purchase order is not subject to change due to exchange rate fluctuations after the time the order is placed.
Item 8.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Collins Industries, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF INCOME For the years ended October 31,
1996 1995 1994
Sales $151,878,862 $140,725,065 $143,762,767 Cost of sales 129,651,654 123,910,694 126,664,018 Gross profit 22,227,208 16,814,371 17,098,749
Selling, general and administrative expenses 15,020,673 13,663,037 13,588,494 Research and development expenses 215,313 261,747 72,236
Income from operations 6,991,222 2,889,587 3,438,019
Other income (expense): Special non-recurring expenses 0 0 (1,010,761) Interest, net (2,241,575) (2,783,198) (3,410,334) Other, net 262,420 (26,704) 11,588 (1,979,155) (2,809,902) (4,409,507) Income (loss) before provision for income taxes and extraordinary items 5,012,067 79,685 (971,488)
Provision for income taxes (Note 4) 0 0 0
Income (loss) before extraordinary items 5,012,067 79,685 (971,488)
Extraordinary items - Early retirement of debt (Note 2) 0 (420,444) 0
Net income (loss) $ 5,012,067 $ (340,759) $ (971,488)
Earnings (loss) per share (Note 1): Before extraordinary items $ .66 $ .01 $ (.14) Extraordinary items 0 (.06) 0 Net income (loss) $ .66 $ (.05) $ (.14)
The accompanying notes are an integral part of these statements.
Collins Industries, Inc. and Subsidiaries CONSOLIDATED BALANCE SHEETS October 31,
ASSETS 1996 1995 Current assets: Cash (Note 1) $ 255,405 $ 842,953 Receivables, less allowance for doubtful accounts of $98,000 in 1996 and $82,000 in 1995 (Note 2) 8,310,009 7,375,492 Inventories, at the lower of cost (first-in, first-out) or market (Notes 1 & 2) 23,615,159 23,466,727 Prepaid expenses and other current assets 459,275 400,753
Total current assets 32,639,848 32,085,925
Property and equipment, at cost (Notes 1, 2 & 3): Land and improvements 2,332,717 2,313,339 Buildings and improvements 14,879,948 15,606,637 Machinery and equipment 14,661,124 15,103,215 Office furniture and fixtures 2,736,581 2,129,786 34,610,370 35,152,977 Less - accumulated depreciation 22,573,220 21,730,893 12,037,150 13,422,084 Other assets 1,067,454 1,373,042 $45,744,452 $46,881,051
LIABILITIES & SHAREHOLDERS' INVESTMENT
Current liabilities: Current maturities of long-term debt and capitalized leases (Notes 2 & 3) $ 1,125,842 $ 1,158,070 Accounts payable 13,729,044 14,154,891 Accrued expenses 3,580,731 3,357,210 Total current liabilities 18,435,617 18,670,171
Long-term debt (Note 2) 12,827,409 17,659,933 Long-term capitalized leases (Note 3) 590,601 1,745,797
Commitments and contingencies (Note 7)
Shareholders' investment (Notes 2, 5, & 6): Preferred stock, $.10 par value Authorized - 750,000 shares Outstanding - No shares outstanding Common stock, $.10 par value Authorized - 17,000,000 shares Issued - 7,274,110 shares in 1996; 7,286,887 in 1995 727,411 728,689 Capital stock, $.10 par value Authorized - 3,000,000 shares Outstanding - No shares outstanding Paid-in capital 19,701,491 19,593,605 Retained deficit (6,505,077) (11,517,144) 13,923,825 8,805,150 Less - Treasury stock, 6,000 shares, at cost (33,000) 0 Total shareholders' investment 13,890,825 8,805,150
$45,744,452 $46,881,051
The accompanying notes are an integral part of these balance sheets.
Collins Industries, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS For the years ended October 31,
1996 1995 1994 Cash flow from operations: Cash received from customers $150,944,345 $141,425,892 $144,853,031 Cash paid to suppliers and employees (142,919,078) (132,956,101) (137,273,728) Interest paid, net (2,265,324) (3,209,818) (3,167,373) Income taxes received 0 0 813,248 Cash provided by operations 5,759,943 5,259,973 5,225,178
Cash flow from investing activities: Capital expenditures (862,889) (551,528) (657,114) Sale of property and equipment 668,038 643,667 0 Expenditures for other assets (176,305) (237,519) 0 Other, net 43,613 (57,034) 0 Cash used in investing activities (327,543) (202,414) (657,114)
Cash flow from financing activities: Net (reduction) in short-term borrowings 0 (4,301,111) (3,560,084) Principal payments of long-term debt and capitalized leases (6,019,948) (19,783,293) (1,550,284) Addition to long-term debt 0 16,055,400 0 Cash used in financing activities (6,019,948) (8,029,004) (5,110,368)
Net decrease in cash (587,548) (2,971,445) (542,304) Cash at beginning of year 842,953 3,814,398 4,356,702
Cash at end of year $ 255,405 $ 842,953 $ 3,814,398
Reconciliation of net income (loss) to net cash provided by operations: Net income (loss) $ 5,012,067 $ (340,759) $ (971,488) Depreciation and amortization 2,019,938 2,513,541 2,756,470 Common stock issued for benefit of employees 108,170 106,365 132,252 Decrease (increase) in receivables, net (934,517) 700,827 1,903,512 Decrease (increase) in inventories (148,432) 1,614,442 157,656 Decrease (increase)in prepaid expenses (58,522) 329,517 97,757 Increase (decrease) in accounts payable (425,847) 276,782 2,315,358 Increase (decrease) in accrued expenses 223,521 (261,519) (889,330) Decrease in reserve for litigation settlement 0 0 (298,064) Gain on sale of property and equipment (36,435) (99,667) 0 Loss on early extinguishment of debt 0 420,444 0 Other, net 0 0 21,055 Cash provided by operations $ 5,759,943 $ 5,259,973 $ 5,225,178
The accompanying notes are an integral part of these statements.
Collins Industries, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT For the years ended October 31,
Common Stock Paid-In Shares Amount Capital Balance October 31, 1993 7,084,680 $708,468 $19,307,300
Stock issued to Tax Deferred Savings Plan and Trust (Note 6) 52,668 5,267 126,985 Amortization of deferred compensation 0 0 22,771 Net loss 0 0 0
Balance October 31, 1994 7,137,348 713,735 19,457,056
Stock issued under various discretionary arrangements (Note 5) 110,000 11,000 9,000 Stock issued to Tax Deferred Savings Plan and Trust (Note 6) 39,539 3,954 82,410 Amortization of deferred compensation 0 0 45,139 Net loss 0 0 0
Balance October 31, 1995 7,286,887 $728,689 $19,593,605
Stock issued (rescinded) under discretionary arrangements (Note 5) (54,500) (5,450) 18,451 Stock issued to Tax Deferred Savings Plan and Trust (Note 6) 31,723 3,172 71,685 Stock issued under Stock Option Plan (Note 5) 10,000 1,000 17,750 Net income 0 0 0 Purchase of treasury stock 0 0 0
Balance October 31, 1996 7,274,110 $727,411 $19,701,491
Collins Industries, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT (CON'T.) For the years ended October 31,
Retained Earnings Treasury Stock (Deficit) Shares Amount Balance October 31, 1993 $(10,204,897) 0 $ 0
Stock issued to Tax Deferred Savings Plan and Trust (Note 6) 0 0 0 Amortization of deferred compensation 0 0 0 Net loss (971,488) 0 0
Balance October 31, 1994 (11,176,385) 0 0
Stock issued under various discretionary arrangements (Note 5) 0 0 0 Stock issued to Tax Deferred Savings Plan and Trust (Note 6) 0 0 0 Amortization of deferred compensation 0 0 0 Net loss (340,759) 0 0
Balance October 31, 1995 (11,517,144) 0 0
Stock issued (rescinded) under discretionary arrangements (Note 5) 0 0 0 Stock issued to Tax Deferred Savings Plan and Trust (Note 6) 0 0 0 Stock issued under Stock Option Plan (Note 5) 0 0 0 Net income 5,012,067 0 0 Purchase of treasury stock 0 6,000 (33,000)
Balance October 31, 1996 $(6,505,077) 6,000 $(33,000)
The accompanying notes are an integral part of these statements.
Collins Industries, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the three years ended October 31, 1996
(1) Summary of Significant Accounting Policies
(a) Consolidation and Operations - The consolidated financial statements include the accounts of Collins Industries, Inc. (the Company) and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.
The Company primarily operates in the Specialty Vehicle Manufacturing segment and related vehicle accessories. Manufacturing activities are carried on solely in the United States. However, the Company does market its products in other countries. Revenues derived from export sales to unaffiliated customers were less than 10% of consolidated sales in fiscal 1996, 1995 and 1994.
(b) Cash and cash management - Cash includes in checking accounts and funds invested in overnight and other short-term, interest-bearing accounts.
The Company maintains controlled disbursement account with its lead bank under an arrangement whereby all cash receipts and checks are centralized and presented to the bank daily. All deposits are applied directly against the Company's revolving credit line and all checks presented for payment in the controlled disbursement accounts are funded through borrowings under the Company's revolving credit facility. At October 31, 1996 accounts payable included $1,698,208 in outstanding checks drawn on controlled disbursement accounts. No controlled disbursement accounts existed at October 31, 1995.
(c) Inventories - Major classes of inventories which include material, labor, and manufacturing overhead required in production of Company products as of October 31, 1996 and 1995:
1996 1995 Chassis $ 6,466,570 $ 6,545,808 Raw materials & components 8,867,477 8,294,483 Work in process 3,061,276 3,400,583 Finished goods 5,219,836 5,225,853 $23,615,159 $23,466,727
(d) Depreciation and Maintenance - Depreciation is provided using the straight-line method for financial reporting purposes and accelerated methods for income tax purposes. The estimated useful lives of property are as follows:
Land improvements 10 to 20 years Building and improvements 10 to 30 years Machinery and equipment 3 to 15 years Office furniture and fixtures 3 to 10 years
Maintenance and repairs are charged to expense as incurred. The cost of additions and betterments are capitalized. The cost and related depreciation of property retired or sold are removed from the applicable accounts and any gain or loss is taken into income.
(e) Revenue Recognition - The Company records vehicle sales at the earlier of completion of the vehicle and receipt of full payment or shipment or delivery to the customer as specified by the customer purchase order. Customer deposits for partial payment of vehicles are deferred and treated as current liabilities until the vehicle is completed and recognized as revenue.
(f) Earnings Per Share - The computation of earnings per share is based on the weighted average number of outstanding common shares during the period plus, when their effect is dilutive, common stock equivalents consisting of certain shares subject to stock options.
The weighted average number of shares used to calculate earnings (loss) per share was 7,621,403 in 1996, 7,240,926 in 1995, and 7,106,082 in 1994.
(g) Reclassification - Certain amounts in the prior year financial statements have been reclassified to conform with the 1996 presentation.
(2) Loan Agreements and Retirement of Debt
On May 9, 1995 the Company entered into a Loan Agreement with NationsBank of Georgia, N.A., Atlanta, Georgia (the "Bank"), for a $33.05 million credit facility. The Agreement provides for a revolving credit facility of $25.0 million and a long-term credit facility of $8.05 million. The proceeds of the new credit facility were used to repay the Company's Senior Notes and chassis floor plan notes.
The credit facility is collateralized by receivables, inventories, equipment and certain real property. Under the terms of the Agreement, the Company is required to maintain certain financial ratios and other financial conditions. The Agreement also prohibits the Company from incurring certain additional indebtedness, limits certain investments, advances or loans and restricts substantial asset sales, capital expenditures and cash dividends. At October 31, 1996 and 1995 the Company was in compliance with all loan covenants.
The revolving credit facility requires payment of interest (only) at 1.25% over the Bank's prime rate which was 8.25% at October 31, 1996. The revolving credit facility also provides for a maximum of $3.0 million in letters of credit, of which, $1.0 million were outstanding at October 31, 1996. The total amount of unused revolving credit available to the Company at October 31, 1996 was $9.4 million.
The long-term facility includes a $6.2 million term loan (Term Loan A) which is payable in monthly installments of $51,667 plus interest at 1.25% over the Bank's prime rate. Term Loan A matures upon the expiration of the Agreement in April, 1998. The long-term facility provides for an additional $1.85 million long-term credit line (Term Loan B) at 2.50% over the Bank's prime rate. At October 31, 1996 no borrowings were outstanding under Term Loan B which expires May 9, 1997.
On September 30, 1991, a $1,250,000 10-year loan with a fixed interest rate of 10.75% was obtained from an insurance company to refinance existing manufacturing facilities. The note matures in 2001 and is secured by the facilities which it finances. Interest and principal are paid monthly. At October 31, 1996, the facilities had a net book value of $1,245,000.
In December, 1994 the Company issued $1,201,936 in 8.75% subordinated debentures maturing January 11, 2000 in settlement of a class action lawsuit. Interest on the debentures is payable annually.
Long-term debt at October 31, 1996 and 1995 consists of the following:
1996 1995 Bank credit facility: Revolving credit borrowings $ 6,360,948 $10,447,630
Term Loan A, less current maturities of $620,000 4,701,667 5,321,667
10.75%, Term loan from insurance company less maturities of $125,842 in 1996 and $113,070 in 1995 662,500 788,342
8.75% subordinated debentures due 2000 1,102,294 1,102,294 $12,827,409 $17,659,933
The carrying amount of the Company's long-term obligations does not differ materially from fair value based on current market rates available to the Company.
In June, 1995 the Company retired at less than par value certain subordinated debentures which would have matured in 2000. A gain of $53,881 from the early retirement of these debentures and a charge of $474,325 for the unamortized debt issuance costs associated with the early retirement of the Senior Notes resulted in net extraordinary items of $420,444 ($.06 per share) for the year ended October 31, 1995.
(3) Capitalized Leases
Certain of the Company's manufacturing facilities were financed from the proceeds of industrial revenue bonds. Lease purchase agreements with the respective cities provide that the Company may purchase the manufacturing facilities at any time during the lease terms by paying the outstanding principal amount of the bonds plus a nominal amount.
The capitalized leases subject to these agreements follow:
1996 1995 City of Hutchinson, Kansas, 8.25% to 8.5%. Annual principal and sinking fund payments are approximately $200,000 from 1997 to 1999. 430,441 651,120
City of South Hutchinson, Kansas, 11.0%. Annual principal and sinking fund payments range from 180,000 in 1997 to $225,000 in 1999. 540,160 725,000
City of Newton, Kansas, 7.0% to 8.25%. 0 794,677
Total capitalized leases 970,601 2,170,797 Less - current maturities 380,000 425,000 $ 590,601 $1,745,797
During the third quarter of fiscal 1996, the Company deposited approximately $1,023,000 in cash and U.S. Government securities into an irrevocable trust to complete an in-substance defeasance of the Company's 1989 Industrial Revenue Bonds with the City of Newton, Kansas. The transaction did not result in any material gain or loss. At October 31, 1996 the principal balance of the defeased debt was approximately $875,000.
At October 31, 1996, the net book value of manufacturing facilities subject to these lease purchase agreements was approximately $2,512,000.
The aggregate maturities of capitalized leases and long-term debt for the five years subsequent to October 31, 1996 are as follows:
1997 $ 1,125,842 1998 11,602,672 1999 346,478 2000 1,275,779 2001 193,081
(4) Income Taxes
There is no current or deferred tax expense for the years ended October 31, 1996, 1995 and 1994. The Company in 1996 and 1995 utilized net operating loss carryforwards and in 1994 was in a loss position. The benefits of timing differences have not previously been recorded.
The deferred tax consequences of temporary differences in reporting items for financial statement and income tax purposes are recognized, if appropriate. Realization of the future tax benefits related to the deferred tax assets is dependent on many factors, including the Company's ability to generate taxable income within the net operating loss carryforward period. Management has considered these factors in reaching its conclusion as to the valuation allowance for financial reporting purposes. The income tax effect of temporary differences comprising the deferred tax assets and deferred tax liabilities on the accompanying consolidated balance sheets is a result of the following:
1996 1995 Deferred tax assets: Self-insurance reserves $ 292,000 $ 314,000 Vacation 158,000 115,000 Warranty 130,000 122,000 Doubtful accounts 38,000 31,000 Inventories 212,000 264,000 Subordinated debentures 420,000 420,000 Compensation 0 94,000 Revenue recognition 121,000 161,000 Federal tax operating loss and general tax credit carryforwards 1,233,000 2,994,000 Other 122,000 61,000 $2,726,000 $4,576,000
Deferred tax liabilities: Depreciation (708,000) (138,000)
Valuation allowance (2,018,000) (4,438,000) Net deferred tax assets $ 0 $ 0
A reconciliation between the statutory federal income tax rate (34%) and the effective rate of income tax expense for each of the three years during the period ended October 31, 1996 follows:
1996 1995 1994 Statutory federal income tax rate 34% (34%) (34%) Increase (decrease) in taxes resulting from: State tax, net of federal benefit 4 0 0 Increase in (utilization of) net operating loss carryforwards (38) 34 34 Effective tax rate 0 % 0 % 0 %
The Company has available net operating loss carryforwards of approximately $1,872,000 for tax purposes to offset future taxable income. The net operating loss carryforwards expire principally in 2009. General tax and alternative minimum tax credit carryforwards of approximately $521,000 expire principally in 1997 to 2006.
(5) Capital Stock
Common Stock - During fiscal 1996 and 1995, the Company awarded 20,500 and 110,000 shares, respectively, of unregistered common stock to senior management which was treated as compensation. During fiscal 1996, 75,000 shares awarded in fiscal 1995 were rescinded.
Warrants which were issued in connection with the 10.5% subordinated debentures (retired in fiscal 1992) are exercisable until February 28, 1997. There are 479,999 warrants outstanding and each warrant may be used to purchase 1.25 shares of common stock. The exercise price of $9.75 per warrant will be payable in cash. The warrants are redeemable by the Company at $3.00 per warrant at any time if the closing price for the Company's common stock has been at least 150% of the then prevailing exercise price of the warrants for 20 of 30 consecutive trading days.
Preferred Stock - On March 28, 1995 the Company's Board of Directors adopted a stockholders rights plan (Plan) and declared a dividend distribution of one right (Right) for each outstanding share of common stock to stockholders of record on April 20, 1995. Under the terms of the Plan each Right entitles the holder to purchase one one-hundredth of a share of Series A Participating Preferred Stock (Unit) at an exercise price of $7.44 per Unit. The Rights are exercisable a specified number of days following (I) the acquisition by a person or group of persons of 20% or more of the Company's common stock or (ii) the commencement of a tender offer or an exchange offer for 20% or more of the Company's common stock or (iii) when a majority of the Company's unaffiliated directors (as defined) declares that a person is deemed to be an adverse person (as defined) upon determination that such adverse person has become the beneficial owner of at least 10% of the Company's common stock. The Company has authorized and reserved 750,000 shares of preferred stock, $.10 par value, for issuance upon the exercise of the Rights. The Company may redeem the Rights in whole, but not in part, at a price of $.01 per Right in accordance with the provisions of the plan. Rights expire on April 1, 2005 unless redeemed by the Company.
Stock Option Plans - During 1995 the Company's shareholders approved new stock option plans limited to key employees, officers and directors of the Company. Options to purchase Company shares are granted at no less than the fair market value at the date of the grant.
As of October 31, stock options authorized, granted, outstanding and available for future grants are as follows:
1996 1995 1994 Authorized for grants 1,000,000 1,000,000 750,000 Granted & outstanding 814,500 745,000 600,000 Exercised 10,000 0 0 Exercise price $1.75-$2.13 0 0 Option issue price $1.88-$6.00 $1.75-$2.13 $2.00-$5.00 Available for future grants 175,500 255,000 141,875
In October 1995, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS 123). This statement defines a fair value based method of accounting for employee stock options or similar equity instruments and requires disclosures. The Company will adopt this standard on November 1, 1996 by making a pro-forma disclosure in the notes to its consolidated financial statements.
(6) Tax Deferred Savings Plan and Trust
In 1985 the Company made available to all eligible employees the opportunity to participate in Collins Industries, Inc. Tax Deferred Savings Plan and Trust. The Company provides a 50% matching contribution in the form of unregistered common stock of the Company on the eligible amount invested by participants in the plan to purchase common stock of the Company. The Company's contribution to this plan was $74,858 in 1996, $86,365 in 1995 and $132,252 in 1994. This plan held 458,588 shares of the Company's common stock at October 31, 1996 and 423,529 shares at October 31, 1995.
(7) Commitments and Contingencies
(a) General - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
(b) Repurchase Agreements - It is customary practice for companies in the specialty vehicle industry to enter into repurchase agreements with financing institutions to provide floor plan financing for dealers. Generally, these agreements provide for repurchase of products from the financing institution at the original invoice price in the event of dealer default.
Under these agreements, the Company's repurchase obligation is limited to vehicles which are in new condition and as to which the dealer still holds title. At October 31, 1996, the Company had repurchase agreements covering units with an aggregate invoice cost of approximately $1,261,000.
The risk of loss under the agreements is limited to the risk that market prices for these products may decline between the time of delivery to the dealer and time of repurchase by the Company. The risk is spread over numerous dealers and the Company has not incurred significant losses under these agreements. In the opinion of management, any future losses under these agreements will not have a material adverse effect on the Company's financial position or results of operations.
(c) Letters of Credit - The Company has outstanding letters of credit as more fully described in Note 2.
(d) Operating Leases - The Company has operating leases principally for certain vehicles and equipment. Lease payments required under these operating leases are as follows:
1997 $159,641 1998 99,723 1999 2,819 $262,183
Operating lease expense was $222,542 in 1996, $167,178 in 1995, and $146,018 in 1994.
(e) Litigation - At October 31, 1996 the Company has litigation pending which arose in the ordinary course of business. Litigation is subject to many uncertainties and the outcome of the individual matters is not presently determinable. It is management's opinion that this litigation will not result in liabilities that would have a material adverse effect on the Company's financial position or results of operations.
(f) Self-insurance Reserves - The Company is self-insured for workers compensation, health insurance, general liability and product liability claims, subject to specific retention and reinsurance levels.
(g) Chassis Contingent Liabilities - The Company obtains certain vehicle chassis from two automotive manufacturers under agreements that do not transfer the vehicle's certificate of origin to the Company and, accordingly, the Company accounts for the chassis as consigned inventory. Chassis are typically converted and delivered to customers within 90 days.
Report of Independent Public Accountants
To the Board of Directors and Shareholders of Collins Industries, Inc.
We have audited the accompanying consolidated balance sheets of Collins Industries, Inc. (a Missouri corporation) and Subsidiaries as of October 31, 1996 and 1995, and the related consolidated statements of income, shareholders' investment and cash flows for each of the three years in the period ended October 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Collins Industries, Inc. and Subsidiaries as of October 31, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended October 31, 1996, in conformity with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule listed in Part IV, Item 14(a)(2) is the responsibility of the Company's management and is presented for purposes of complying with Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Kansas City, Missouri, December 10, 1996
Item 9.
Item 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
Item 10.
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to Directors and Executive Officers is contained in the section entitled "Management" in the Proxy Statement for the Annual Meeting of Shareholders to be held February 28, 1997, and is incorporated herein by reference.
Item 11.
Item 11. EXECUTIVE COMPENSATION
Information with respect to executive compensation is contained in the section entitled "Executive Compensation" in the Company's Proxy Statement for the Annual Meeting of Shareholders to be held on February 28, 1997, and is incorporated herein by reference.
Item 12.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information with respect to security ownership of certain beneficial owners and management is contained in the section entitled "Security Ownership of Certain Beneficial Owners and Management" in the Company's Proxy Statement for the Annual Meeting of Shareholders to be held on February 28, 1997, and is incorporated herein by reference.
Item 13.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None
PART IV
Item 14.
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this Report:
(1) Financial Statements:
All financial statements and notes thereto as set forth under Item 8 of this Report on Form 10-K:
Report of Independent Public Accountants
Consolidated Statements of Income for the Three Years Ended October 31, 1996
Consolidated Statements of Shareholders' Investment for the Three Years Ended October 31, 1996
Consolidated Statements of Cash Flows for the Three Years Ended October 31, 1996
Consolidated Balance Sheets--October 31, 1996 and 1995
(2) Financial Statement Schedules:
Schedule II--Valuation and Qualifying Accounts
Schedules other than those referred to above have been omitted as not applicable or not required under the instructions contained in Regulation S-X or the information is included in the financial statements or notes thereto.
(3) Exhibits:
Exhibit Number Document
3.1 - Certificate of Incorporation of Registrant, as amended (included as Exhibit 3.1 of the Company's Amendment No. 2 to Form S-1, No. 2-93247 and incorporated herein by reference).
3.2 - Amendment to Certificate of Incorporation of Registrant (included as Exhibit 3.3 of the Company's Amendment No. 1 to Form S-1, No. 2-93247 and incorporated herein by reference).
3.3 - Amendment to Certificate of Incorporation of Registrant (included as Exhibit 3.3(c) of the Company's Amendment No. 1 to Form S-1, No. 33-48323 and incorporated herein by reference).
3.4 - By-Laws of the Registrant, as amended (included as Exhibit 3.4 of the Company's S-1, No. 33-48323 and incorporated herein by reference).
4.1 - Indenture, dated as of November 1, 1984, between the Company and Allied Bank of Texas, as Trustee (included as Exhibit 4.3 of the Company's Registration Statement on Form S-1, No. 2-93247 and incorporated herein by reference).
4.2 - Form of Representatives Warrants (included as Exhibit 4.8 on the Company's Registration Statement on Form S-1, No. 2-93247 and incorporated herein by reference).
4.3 - Warrant Agreement dated as of November 1, 1984, between the Company and Allied Bank of Texas, as Warrant Agent (included as Exhibit 4.5 on the Company's Registration Statement on Form S-1, No. 2-93247 and incorporated herein by reference).
4.4 - Extension Agreement as to Warrant Agreement between Registrant and First Interstate Bank of Texas, N.A., dated February 11, 1991 (included as Exhibit 4(d) to Registrant's Registration Statement on Form S-1, No. 33-40035 and incorporated herein by reference).
4.5 - Extension Agreement as to Warrant Agreement between Registrant and First Interstate Bank of Texas, N.A., dated February 12, 1992 (included as Exhibit 4.5 of the Company's Registration Statement on Form S-1, No. 33-48303 and incorporated herein by reference).
4.6 - Specimen Common Stock Certificate (included as Exhibit 4.1 to Company's Amendment to its Registration Statement on Form S-1, No. 2-81977 and incorporated herein by reference).
4.7 - Rights Agreement dated as of March 28, 1995 between the Registrant and Mellon Bank, N.A. (included as Exhibit 1 to Form 8-A filed with the SEC as of March 28, 1995).
4.8 - First Amendment to the Rights Agreement dated as of April 25, 1995 (included as Exhibit 4 to Form 8-A/A filed with the SEC as of May 8, 1995).
10.1 - Lease dated November 1, 1981, between the Registrant and Hutchinson Air Base Investors (included as Exhibit 10.1 to the Company's Registration Statement on Form S-1, No. 2-81977 and incorporated herein by reference).
10.2 - Lease dated August 14, 1979, by and between the Registrant and city of Hutchinson, Kansas (included as Exhibit 10.2 to the Company's Registration Statement on Form S-1, No. 2-81977 and incorporated herein by reference).
10.3 - Various bailment and consignment agreements between the Registrant and Automotive manufacturers (included as Exhibit 10.2 to the Company's Registration Statement on Form S-1, No. 33-48323 and incorporated herein by reference).
10.4 - Lease dated August 1, 1984 between the city of South Hutchinson, Kansas (included as Exhibit 10.11 of the Company's Registration Statement on Form S-1, No. 2-93247 and incorporated herein by reference).
10.5 - Lease Agreement dated October 1, 1989 between Registrant and the city of Newton, Kansas. (Incorporated herein by reference to Exhibit 10.17 to Registrant's Report on Form 10-K for the fiscal year ended October 31, 1989.)
10.6 - Promissory Note and Security Agreement between Capacity of Texas, Inc. and Metlife Capital Corporation dated September 30, 1991. (Incorporated herein by reference to Exhibit 10.20 to Registrant's Report on Form 10-K for the fiscal year ended October 31, 1991.)
10.7 - Form of Indemnification Agreement between Registrant and its directors. (Incorporated herein by reference to Exhibit 10.21 to the Registrant's Report on Form 10-K for the fiscal year ended October 31, 1991.)
10.8 - Loan and Security Agreement for 33.05 million credit facility dated May 9, 1995 between Registrant and NationsBank of Georgia, N.A. (Incorporated herein by reference to Exhibit 10.14 to Registrant's Report on Form 10-Q for the fiscal period ended July 31, 1995).
22.1 - The following are the names and jurisdiction of incorporation of the subsidiaries of the Company:
Jurisdiction Names of Incorporation
Collins Bus Corporation Kansas Capacity of Texas, Inc. Texas Wheeled Coach Industries, Inc. Florida Collins Ambulance Corporation Kansas Collins Financial Services, Inc. Kansas Global Captive Casualty and Surety Company Kansas Mobile-Tech Corporation Kansas Transi-Corp Alabama World Trans, Inc. Kansas
27.0 - EDGAR Financial Data Schedule
(b) Reports on Form 8-K
There were no reports filed on Form 8-K by the Company during the fourth quarter ended October 31, 1996.
COLLINS INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
Balance Charged Deductions Balance at Beginning to From End of Classification of Period Income Reserve Period
(In 000s)
ALLOWANCE FOR DOUBTFUL ACCOUNTS:
For the year ended October 31, 1996 $ 82 $ 54 $ 38 $ 98
For the year ended October 31, 1995 $ 95 $ 51 $ 64 $ 82
For the year ended October 31, 1994 $ 60 $156 $121 $ 95
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.
COLLINS INDUSTRIES, INC.
By /s/ Don L. Collins Don L. Collins, Chairman and Chief Executive Officer
Dated: January 27, 1997
By /s/Larry W. Sayre Larry W. Sayre, Vice President Finance and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant, in their capacities as Directors of the Registrant, and on the dates indicated.
Dated: January 27, 1997 /s/ Don L. Collins Don L. Collins
Dated: January 27, 1997 /s/ Donald Lynn Collins Donald Lynn Collins
Dated: January 27, 1997 /s/ Lewis W. Ediger Lewis W. Ediger
Dated: January 27, 1997 /s/ Robert E. Lind Robert E. Lind