Back to GetFilings.com
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2004
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________________ to ____________________
Commission File Number: 2-98277C
SPORTS RESORTS INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
MICHIGAN 38-3262264
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
951 AIKEN ROAD, OWOSSO, MICHIGAN 48867
(Address of principal executive offices) (Zip code)
(989) 725-8354
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(g) of the Act: Common Stock,
$0.01 Par Value
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 whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
Number of shares of the registrant's Common Stock, $0.01 par value, outstanding
as of October 4, 2004: 48,399,771
================================================================================
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The financial statements required under Item 1 of Part I are set forth in
Appendix A to this Report on Form 10-Q and are herein incorporated by reference.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
FORWARD-LOOKING STATEMENTS
Some of the statements in this report are forward-looking statements. These
forward-looking statements include statements relating to our performance. In
addition, we may make forward-looking statements in future filings with the
Securities and Exchange Commission and in written material, press releases and
oral statements issued by us or on our behalf. Forward-looking statements
include statements regarding the intent, belief or current expectations of us or
our officers, including statements preceded by, "should," "believe," "may,"
"will," "expect," "anticipate," "estimate," "continue," "predict," "propose," or
similar expressions.
It is important to note that our actual results could differ materially from
those anticipated in our forward-looking statements depending on various "risk
factors." Such risk factors include: concentration of stock ownership,
relationships with race sanctioning bodies, competition for leisure dollars,
reliance on key personnel, potential liabilities for personal injuries, need for
additional financing, limited trading market for our stock, dependence on the
North American new truck industry, variability of raw material and labor costs,
failure to manage mergers, acquisitions, dispositions and diversification into
other lines of business, the need to effectively manage a large sports and
entertainment development project and other factors discussed under the caption
"Risk Factors."
All forward-looking statements in this report are based on information available
to us on the date of this report. We do not undertake to update any
forward-looking statements that may be made by us or on our behalf in this
report or otherwise. In addition please note that the matters discussed under
the caption "Risk Factors" constitute cautionary statements identifying
important factors with respect to the forward-looking statements, including
certain risks and uncertainties, that could cause actual results to differ
materially from those in such forward-looking statements.
CRITICAL ACCOUNTING POLICIES
A summary of our critical accounting policies is incorporated by reference
beginning on page 10 of our 2003 Annual Report on Form 10-K filed with the
Securities and Exchange Commission on March 25, 2004. There have been no
material changes in the accounting policies followed by us during fiscal 2004.
BACKGROUND
We are a Michigan corporation and a holding company with three active wholly
owned subsidiaries. We have no independent operations of our own, however, we
provide various administrative functions for our operating subsidiaries.
2
RUGGED LINER, INC. ("RL") manufactures and sells pickup truck bedliners and
tailgate covers through a distributor network. Truck bedliners are plastic
inserts that are placed in the rear beds of pickup trucks to protect the paint
and structural integrity of the bed. RL manufactures approximately 90 different
bedliners.
BRAINERD INTERNATIONAL RACEWAY & RESORT, INC. ("BIR") operates a motor sports
facility located approximately nine miles northwest of Brainerd, Minnesota.
Substantially all of BIR's revenues are obtained from motor sports racing events
at the racetrack. BIR schedules racing and other events held at the racetrack
during weekends in May through October of each year.
RACEWAY 66, INC. ("Raceway 66") is a combined convenience store and gas station
adjacent to our BIR facility.
DEVELOPMENT OF SPORTS AND ENTERTAINMENT COMPLEX. During 2001, we proposed the
development of a new sports and entertainment complex (the "Complex") to be
located on approximately 340 acres northeast of I-75 and Mount Morris Road in
Mount Morris Township, Genesse County, Michigan. This project is in the
development stage. We have received zoning and site plan approval for
development of the site by the Mount Morris Township Planning Board. The Complex
could eventually include a coliseum, domed stadium, hotel, theme restaurant, and
a combined gas station, convenience and souvenir store, along with 130 acres of
parking. To date, we have not been able to obtain the necessary funding for this
project and are currently evaluating our options. If we cannot obtain sufficient
capital to develop the Complex we will need to consider an alternative plan.
LIQUIDITY AND CAPITAL RESOURCES
Our consolidated current assets increased from $5,101,000 at December 31, 2003
to $9,282,000 at September 30, 2004. This increase is primarily related to the
reclassification from long term to current, the majority of the balance owed on
a related party note-receivable. Our consolidated current liabilities remained
consistent and were $1,960,000 at December 31, 2003 and $1,879,000 at September
30, 2004.
Cash increased by approximately $1,034,000 from $482,000 at December 31, 2003 to
$1,516,000 at September 30,2004 primarily due to the receipt of Federal income
tax refunds of $1,570,000 and $414,000 received upon the disposal of an unused
warehouse building in the second quarter of 2004, offset by the purchase of 40
acres of vacant land in Mt. Morris Township, Michigan for $752,000. We exercised
options to purchase the land as part of our proposed sports and entertainment
complex.
Accounts receivable - trade increased by approximately $326,000 from $821,000 as
of December 31, 2003 to $1,147,000 at September 30, 2004, primarily due to
amounts owed relative to a major event held at BIR in the third quarter of 2004.
Note receivable - related party is comprised of a note, which is secured by a
subordinated mortgage and personal guarantee from our majority shareholder. The
note requires monthly principal and interest payments through February 2005, at
which time the unpaid balance is due. The current portion of the note increased
by $4,310,000, from $161,000 at December 31, 2003 to $4,471,000 at September 30,
2004 primarily due to the reclassification of amounts from long-term. The note
is being paid in accordance with terms.
Federal income taxes receivable of $1,570,000 at December 31, 2003 relates to
net operating losses available for carryback. During 2003, we completed a cost
segregation study during which we reclassified certain assets originally
classified as real property into other more appropriate asset
3
categories, which allowed for shorter more accelerated methods of depreciation
as allowed by the Internal Revenue Service. As a result of the cost segregation
study, we were able to accelerate our deductions for depreciation and increase
the carryback of net operating losses during the completion of our 2002
consolidated Federal income tax return. During the second quarter of 2004 we
received a refund of $1,570,000 from the amendment of certain prior year
returns.
Inventory levels increased by $266,000, from $1,535,000 at December 31, 2003 to
$1,801,000 at September 30, 2004 primarily due to softening in demand for our
bedliner products.
Other assets-current decreased $185,000 from $532,000 at December 31, 2003 to
$347,000 primarily due to the expense of prepaid sanction fees associated with
events held at BIR in the third quarter of 2004.
Net property, plant and equipment decreased by approximately $1,265,000 from
$11,673,000 at December 31, 2003 to $10,408,000 at September 30, 2004 due to
fixed asset additions of $289,000 offset by depreciation for the period of
$1,324,000 and the disposal of an unused warehouse building with a carrying
value of $230,000. Tooling comprised the majority of additions during the
period.
Other assets - long term increased from $1,294,000 at December 31, 2003 to
$2,036,000 at September 30, 2004 due to the purchase of 40 acres of vacant land
in connection with our proposed complex in Mt. Morris Township, Michigan
LIABILITIES AND EQUITY
Accounts payable increased by approximately $148,000 from $1,136,000 at December
31, 2003 to $1,284,000 at September 30, 2004 primarily due to amounts owed
relative to a major event held at BIR in the third quarter of 2004.
Accrued expenses decreased by $188,000 from $567,000 at December 31, 2003 to
$379,000 at September 30, 2004, primarily due to the payment of accrued amounts
provided for.
During the first six months of 2002, we paid certain expenses on behalf of
affiliated entities controlled by Donald J. Williamson, our majority
shareholder. These expenses were predominately for the use of a common payroll
processing service as well as a pro rata share of general insurance coverage.
Additionally, we had advanced $1,036,000 on behalf of Mr. Williamson for
construction costs related to a convenience store and gas station built adjacent
to our BIR facility in Brainerd, Minnesota. Construction of the convenience
store was completed in the second quarter of 2002. Effective September 1, 2002,
Mr. Williamson transferred the facility to us, at which time the construction
advances were offset based on net book value, which was determined using
historic cost data accumulated during the construction of the facility.
Additionally, in June of 2003, we received $711,000 from affiliated entities
toward amounts previously advanced. The total amount outstanding at September
30, 2004 and December 31, 2003 was $396,000, which is to be reimbursed to us by
the affiliated entities. In accordance with the Sarbanes-Oxley Act of 2002, we
discontinued making any additional advances to or on behalf of affiliated
entities effective September 30, 2002.
OUTSTANDING LOANS AND CONTRACTUAL COMMITMENTS
We entered into a term loan in August 1999 in the amount of $403,000. This loan
was secured by a permanent grandstand addition and required annual principal
payments of $100,675, plus 9% interest, through August 2003 at which time this
loan was paid in full. We also had a term loan, which was
4
secured by property and required quarterly interest payments at 2% above the
prime rate, subject to a minimum rate of 8%. In August of 2004 the loan was paid
in full.
In 1995, we leased $2,689,000 of equipment under a lease agreement that included
an option to purchase the equipment for $1.00 upon expiration of the lease term.
The payment amounts under the lease represented principal payments, with
interest at rates between 8.0% and 8.5%. In 1996, we leased additional equipment
in the amount of $3,744,000 structured in the same manner. In May of 2003, these
capital leases were paid in full.
In 2002 we entered into term loans in the amount of $595,237. These loans are
secured by transportation equipment and require monthly payments including
interest at rates approximating 8.0% through November 2007.
In February 2003, we entered into a note payable with a bank in the amount of
$500,000. This note was secured by a mortgage on BIR's facilities and required
monthly payments of interest at 7.5%. In October 2003, we extended this note
with monthly principal and interest payments at 2.5% above prime (effective rate
of 7.25% at September 30, 2004) through October 2008.
We lease our Owosso, Michigan facility from an affiliated entity controlled by
Donald J. and Patsy L. Williamson, our majority shareholders. We are also
responsible for all taxes, insurance and maintenance expenses related to the
facility.
Summarized below are our obligations and commitments to make future payments
under debt obligations and lease agreements as of September 30, 2004:
2005 2006 2007 2008 2009 2010
-------------- ------------- ------------- ------------- ------------ ---------------
Debt obligations $ 217,000 $ 229,000 $ 245,000 $ 136,000 $ 17,000 $ --
Lease agreements 610,000 610,000 607,000 603,000 600,000 100,000
-------------- ------------- ------------- ------------- ------------ ---------------
Total $ 827,000 $ 839,000 $ 852,000 $ 739,000 $ 617,000 $ 100,000
============== ============= ============= ============= ============ ===============
We believe that we will be able to satisfy our ongoing cash requirements for
operating activities in the next twelve months and thereafter with available
cash, cash flows from operations and the collection of advances and notes
receivable outstanding from our majority shareholder and related entities.
Borrowing arrangements or additional public capital will be necessary to fund
the proposed sports and entertainment complex, which we have been unable to
obtain to date.
5
RESULTS OF OPERATIONS
Nine Months Ending Three Months Ending
September 30 September 30
------------------ ---------------------
2004 2003 2004 2003
---- ---- ---- ----
Sales 100% 100% 100% 100%
Cost of Sales 85 82 87 82
Selling, General and
Administrative Expenses 19 18 15 14
Land Development Costs 1 2 1 1
Net Gain on Disposal of Assets 1 1 -- --
(Loss) Income from Operations (5) (1) (4) 3
Other Income 1 1 1 1
Income Tax Benefit -- 4 -- 8
Net (Loss) Income (4) 3 (3) 12
Our revenues were $7,078,000 in the three months ended September 30, 2004
compared to $8,018,000 in the same period of 2003. Revenues attributable to RL
were $3,649,000 and $4,881,000 for the quarters ended September 30, 2004 and
2003, respectively. The decrease in RL's sales is attributable to a softening in
customer demand for its bedliner products. BIR's revenues were $3,429,000 and
$3,137,000 for the quarters ended September 30, 2004 and 2003, respectively. The
increase in BIR's revenue from 2003 to 2004 is primarily due to additional
signage and sponsorship revenue received in 2004.
Revenues were $17,520,000 and $18,229,000 for the nine month periods ending
September 30, 2004 and 2003, respectively for the same reasons as above.
Revenues for RL were $13,161,000 and $14,207,000 for the nine month periods
ending September 30, 2004 and 2003, respectively. BIR's revenues were $4,359,000
and $4,022,000 for the same periods.
Cost of sales were $6,186,000 and $6,611,000 for the quarters ended September
30, 2004 and 2003 respectively or 87% and 82% of revenue. Cost of sales
attributable to RL were $3,151,000 and $3,630,000 for the quarters ended
September 30, 2004 and 2003 respectively or 86% and 74% of revenue. RL's cost of
sales increased as a percentage of sales due to the reduction in sales described
above and fixed manufacturing and overhead costs. Gross profit for RL was 14%
and 26% of sales for the third quarters of 2004 and 2003, respectively. Cost of
sales attributable to BIR remained consistent and were $3,035,000 and $2,981,000
for the quarters ended September 30, 2004 and 2003, respectively.
Cost of sales for the nine month periods ended September 30, 2004 and 2003 were
$14,961,000 and $14,995,000, respectively. Cost of sales attributable to RL were
$10,313,000 and $10,608,000 for the nine month periods ended September 30, 2004
and 2003, respectively or 78% and 75% of revenue for the same reasons as
described above. Cost of sales attributable to BIR for the nine month periods
ended September 30, 2004 and 2003 were $4,648,000 and $4,387,000, respectively.
The increase in BIR's cost of sales from 2003 to 2004 is primarily due to higher
costs for fuel sold at our Raceway 66 convenience store operation.
Selling, general and administrative expenses remained consistent and were
$1,092,000 and $1,090,000 for the quarters ended September 30, 2004 and 2003,
respectively, or 15% and 14% respectively, as a percentage of revenues. Selling,
general and administrative expenses attributed to RL were $841,000 and $819,000
for the quarters ended September 30, 2004 and 2003, respectively. Selling,
general and
6
administrative expenses for BIR were $251,000 and $271,000 for the quarters
ended September 30, 2004 and 2003 respectively.
Selling, general and administrative expenses were $3,389,000 and $3,286,000 for
the nine month periods ended September 30, 2004 and 2003, respectively or 19%
and 18% respectively, as a percentage of revenues. Selling, general and
administrative expenses attributed to RL were $2,692,000 and $2,557,000 for the
nine month periods ended September 30, 2004 and 2003, respectively. Selling,
general and administrative expenses for BIR were $697,000 and $729,000 for the
nine month periods ended September 30, 2004 and 2003, respectively.
Land development costs were $79,000 and $91,000 for the quarters ended September
30, 2004 and 2003, respectively and $249,000 and $291,000 for the nine month
periods ended September 30, 2004 and 2003, respectively. Land development costs
are comprised principally of professional fees and non-refundable deposits to
extend various agreements to purchase land in Mount Morris Township, Michigan in
connection with our proposed sports and entertainment complex. The extended
agreements are for periods of four to six months. Since financing for
development of the project was not in place at September 30, 2004 these amounts
have been expensed.
There was no significant net gain (loss) on disposal of fixed assets in the
quarters ended September 30, 2004 and 2003. Net gain on disposal of assets was
$198,000 for the nine month period ended September 30, 2004 and relates to the
sale of an unused warehouse facility. We recorded a net gain of $104,000 in the
same period of 2003, principally related to the sale of unused land at our BIR
facility.
Interest expense in the third quarter of 2004 decreased by $6,000 from the third
quarter of 2003 due to the reduction of outstanding debt. Interest expense in
the nine month period ending September 30, 2004 decreased by $27,000 from the
same period in 2003 for the same reason.
Interest income was $96,000 and $97,000 for the quarters ended September 30,
2004 and 2003, respectively, and $284,000 and $292,000 for the nine month
periods ended September 30, 2004 and 2003, respectively.
RISK FACTORS
GENERAL
OWNERSHIP OF OUR COMMON STOCK IS CONCENTRATED IN ONE SHAREHOLDER, WHO IS ABLE TO
EXERCISE CONTROL AND MAKE DECISIONS THAT MAY NOT BE IN THE BEST INTEREST OF ALL
OF OUR SHAREHOLDERS
Donald J. Williamson, our majority shareholder and his wife, Patsy Williamson,
own approximately 96% of our issued and outstanding shares of common stock.
Accordingly, Donald and Patsy Williamson are able to control the election of
directors and all other matters which are subject to a vote of shareholders.
This concentration of ownership may have the effect of delaying or preventing a
change of control of Sports Resorts International, Inc. even if this change of
control would benefit all shareholders.
OUR FUTURE SUCCESS WILL BE DEPENDENT ON THE SKILL OF OUR KEY PERSONNEL
Our success depends upon the availability and performance of our officers and
senior management and other key personnel. We rely heavily upon the expertise of
a relatively small core of executives. We do not have employment agreements with
any of our key personnel. The loss of the services of one or more of our key
executives could have a material adverse effect on our operations.
7
OUR COMMON STOCK HAS A LIMITED TRADING MARKET, WHICH MAY MAKE IT DIFFICULT TO
SELL OR OBTAIN AN ADEQUATE PRICE FOR YOUR SHARES
There is a limited public market for our common stock and there is no assurance
that an active trading market will develop or be sustained. Because of this lack
of liquidity, our stock price may be highly volatile.
FLUCTUATIONS IN INTEREST RATES COULD INCREASE OUR BORROWING COSTS AND ADVERSELY
AFFECT OUR FINANCIAL RESULTS
In the event we borrow money in the future, we may be exposed to changes in
interest rates. Our credit facilities are usually based on the prime rate of
interest and may not necessarily be the lowest rate of interest. If the interest
rates charged by our lenders increase, there could be an adverse effect on our
financial results.
TRUCK ACCESSORIES SEGMENT
OUR PROFITABILITY IS DEPENDENT ON CONTROL OF OUR COSTS, IN THE EVENT WE ARE
UNABLE TO CONTROL OUR COSTS, OUR FINANCIAL RESULTS COULD BE ADVERSELY AFFECTED
In order to manufacture our truck accessories we require plastic resin as a raw
material. The cost of plastic resin is directly dependent upon fluctuations in
natural gas feedstock prices. We do not have any long-term supply contracts and
do not use any hedging techniques to manage the costs of plastic resin. In the
event raw material prices increase, we may be unable to pass the increased costs
on to our customers which could adversely affect our results of operations. In
addition, we attempt to control our labor costs. In the event that the cost of
labor increases and we are unable to pass such increased labor costs to our
customers, our results of operations could be adversely affected.
OUR TRUCK ACCESSORIES BUSINESS FACES STRONG COMPETITION WHICH COULD AFFECT OUR
SALES AND PROFIT MARGINS
We compete for sales of bedliners and other truck accessories against a number
of companies. Many of these companies are larger, have greater market
recognition and substantially greater financial, technical, marketing,
distribution and other resources than we have. Additionally, new and alternative
product offerings are increasingly available. While product quality is an
important factor, price and features are also very important to our customers.
We attempt to manufacture high quality full-featured products, which are cost
competitive. We have faced and will continue to face additional competition from
new entrants and alternative products into our markets. We cannot be certain
that we will be able to compete successfully with existing or new competitors or
products.
THE EFFECTS OF INFLATION COULD ADVERSELY AFFECT OUR FINANCIAL RESULTS IF OUR
COSTS INCREASE FASTER THAN WE CAN PASS THEM ON TO OUR CUSTOMERS
The relatively moderate rate of inflation experienced during the last decade has
not had a significant impact on our results of operations. However, there can be
no assurance that a moderate rate of inflation will continue. In the event the
rate of inflation increases more dramatically in the future, our costs may
increase faster than we can pass them on to our customers which would have an
adverse effect on our financial results.
8
OUR TRUCK ACCESSORY BUSINESS IS TIED TO THE NORTH AMERICAN VEHICLE INDUSTRY,
WHICH IS HIGHLY CYCLICAL AND DEPENDENT ON CONSUMER SPENDING AND GENERAL ECONOMIC
CONDITIONS IN NORTH AMERICA
Sales of our truck accessories including bedliners is tied to the North American
vehicle industry. The truck industry is highly cyclical and dependent on
consumer spending and general economic conditions in North America. We primarily
sell our truck accessories in the United States and as result we are solely
dependent on the health and vitality of the U. S. economy for our success. There
can be no assurance that production of pickup trucks will not decline in the
future or that we will be able to fully utilize our manufacturing capacity.
Economic factors adversely affecting truck sales and production and consumer
spending could adversely impact our sales and operating results.
SPORTS AND ENTERTAINMENT SEGMENT
WE NEED TO MAINTAIN AND ENHANCE OUR WORKING RELATIONSHIP WITH THE NHRA
In order to be successful, our raceway operation needs to maintain a good
relationship with the primary sanctioning body of our racing events, The
National Hot Rod Association ("NHRA"). While we believe that we have a good
relationship with the NHRA, and the current term of our sanctioning agreement
has been extended to December 31, 2005, it is likely that the loss of the
national race with the NHRA would adversely affect the results of our
operations.
OUR RACEWAY OPERATIONS FACE COMPETITION FOR TICKET SALES AND MARKETING AND
ADVERTISING DOLLARS
We compete for marketing, advertising and ticket sales with other sports and
with other entertainment and recreational activities. In the event fan interest
in racing declines, it is likely that our results of operations would be
adversely affected. We compete with well-established raceway operations some of
which have greater market recognition and substantially greater financial,
technical, marketing, distribution and other resources than we have. Our ability
to compete successfully depends on a number of factors, which are primarily
outside our control including our ability to develop and maintain effective
marketing programs, the number and location of our competitors and general
market and economic conditions.
WE MAY INCUR LIABILITY FOR PERSONAL INJURIES
Racing events can be dangerous to participants and to spectators. We maintain
insurance policies that provide coverage within limits that in our judgement are
sufficient to protect us from material financial loss due to liability for
personal injuries sustained by, or death of, spectators in the ordinary course
of our business. Our insurance may not be adequate or available at all times and
in all circumstances. In the event damages for injuries sustained by our
spectators exceed our liability coverage or our insurance company denies
coverage, our financial condition, results of operations and cash flows could be
adversely affected to the extent claims and associated expenses exceed our
insurance recoveries.
WE WILL NEED ADDITIONAL FINANCING WHICH MAY OR MAY NOT BE AVAILABLE OR WHICH MAY
DILUTE THE OWNERSHIP INTEREST OF CURRENT SHAREHOLDERS
We have previously announced plans to develop a large sports and entertainment
complex in Mount Morris Township, Michigan. To date, we have been unable to
obtain the necessary funding for this project and are currently evaluating our
options. If we cannot obtain sufficient capital to develop the complex we will
need to consider an alternative plan.
9
OUR RACEWAY OPERATIONS ARE SEASONAL AND THEREFORE ADVERSE WEATHER CAN AFFECT OUR
RESULTS OF OPERATIONS
Our raceway operations primarily operate on the weekends from May through
October. In the event that adverse weather conditions curtail attendance at any
of our races, it could have a material adverse affect on our results of
operations.
OUR FAILURE TO PROPERLY MANAGE MERGERS, ACQUISITIONS, DISPOSITIONS AND
DIVERSIFICATION INTO OTHER LINES OF BUSINESS COULD ADVERSELY AFFECT OUR BUSINESS
Recently, we announced that we have decided to expand the sports and
entertainment aspects of our business. In the future we may expand or contract
our operations through mergers, acquisitions, dispositions and diversification.
These activities expose us to a number of special risks, including diversion of
management's attention, failure to retain key personnel or customers of an
acquired business, difficulties transitioning operations to accommodate new
businesses or activities and limited experience in managing a large sports and
entertainment enterprise. There can be no assurance that we will be able to
effectively manage these special risks.
NEW ACCOUNTING STANDARDS
In January 2003, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 46 ("FIN 46"), "Consolidation of Variable Interest Entities."
FIN 46 provides guidance on how to identify a variable interest entity ("VIE")
and determine when the assets, liabilities, noncontrolling interests, and
results of operations of a VIE are to be included in an entity's Consolidated
Financial Statements. A VIE exists when either the total equity investment at
risk is not sufficient to permit the entity to finance its activities by itself,
or the equity investors lack one of three characteristics associated with owning
a controlling financial interest. Those characteristics include the direct or
indirect ability to make decisions about an entity's activities through voting
rights or similar rights, the obligation to absorb the expected losses of an
entity if they occur, and the right to receive the expected residual returns of
the entity if they occur.
In December 2003, the FASB reissued Fin 46 ("FIN 46 (R)") with certain
modifications and clarifications. Application of this guidance was effective for
interests in certain VIE's commonly referred to as special-purpose entities
("SPEs") as of December 31, 2003. Application for all other types of entities is
required for periods ending after March 15, 2004, unless previously applied. The
provisions of FIN 46 (R) have not had an impact on our financial position or
results of operations.
SEGMENT REPORTING
For a discussion of our business segments, see Note 12 to the condensed
financial statements included in Appendix A.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
See the discussion under "Market Risk Disclosure" in Item 2 above.
ITEM 4. CONTROLS AND PROCEDURES
10
Disclosures Controls and Procedures
The Company maintains controls and procedures designed to ensure that it is able
to collect the information that is required to be disclosed in the reports it
files with the SEC, and to process, summarize and disclose this information
within the time period specified in the rules of the SEC. The Company's Chief
Executive and Chief Financial Officers are responsible for establishing,
maintaining and enhancing these procedures. They are also responsible, as
required by the rules established by the SEC, for the evaluation of the
effectiveness of these procedures.
Based on their evaluation of the Company's disclosure controls and procedures
which took place as of the end of the period covered by this report, the Chief
Executive Officer and the Chief Financial Officer believe that these procedures
are effective to ensure that the Company is able to collect, process and
disclose the information it is required to disclose in the reports it files with
the SEC within the required time period.
Internal Controls
The Company maintains a system of internal controls designed to provide
reasonable assurance that transactions are executed in accordance with
management's general or specific authorization; transactions are recorded as
necessary to (1) permit preparation of financial statements in conformity with
generally accepted accounting principles, and (2) maintain accountability for
assets. Access to assets is permitted only in accordance with management's
general or specific authorization.
Since the date of the most recent evaluation of the Company's internal controls
by the Chief Executive and Chief Financial Officers, there have been no
significant changes in such controls or in other factors that could have
significantly affected those controls, including any corrective actions with
regard to significant deficiencies and material weaknesses.
11
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
On October 12, 2004 a complaint filed by UBUY Holdings, Inc. and Steven Bazsuly
against the Company and Donald J. Williamson, our majority shareholder was
dismissed. The complaint, which was originally filed on June 16, 2003 in the
Untied States District Court for the Southern District of Florida (case No.
03-61165) involved the termination of a non-binding letter of intent entered
into in the first quarter of 2000, pursuant to which the Company was to invest
in UBUY Holdings, Inc. The complaint sought damages in excess of $75,000.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
31.1 Certification of Chief Executive Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002
31.2 Certification of Chief Financial Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002
32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K
We filed the following reports on Form 8-K during the period covered by
this report:
Form 8-K
Filing Date Description
- ----------- -----------
August 13, 2004 Press release dated August 13, 2004 announcing the Company's results for the
quarter ending June 30, 2004.
September 22, 2004 Press release dated September 20, 2004 announcing that buy out discussions between the
Company and its majority shareholder had been terminated.
12
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.
SPORTS RESORTS INTERNATIONAL, INC.
Dated: November 11, 2004 By: /s/ Gregory T. Strzynski
-------------------------------------------
Gregory T. Strzynski
Chief Financial Officer
(Duly Authorized Officer and Principal
Accounting and Financial Officer of the
Registrant)
13
APPENDIX A
A-1
SPORTS RESORTS INTERNATIONAL, INC.
CONDENSED BALANCE SHEETS
September 30, December 31,
2004 2003
(unaudited) (audited)
---------------- ----------------
ASSETS
CURRENT ASSETS:
Cash $ 1,516,328 $ 482,128
Accounts receivable:
Trade (net of allowance for doubtful accounts and cash
discounts of $193,000 at September 30, 2004 and $181,000
at December 31, 2003) 1,146,669 820,873
Note receivable - related party (Note 2) 4,470,996 160,538
Federal income taxes receivable (Note 9) -- 1,570,234
Inventories (Note 3) 1,800,781 1,534,779
Other (Note 4) 347,085 532,033
---------------- ----------------
Total current assets 9,281,859 5,100,585
PROPERTY, PLANT, AND EQUIPMENT - Net 10,407,722 11,673,250
(Notes 5 and 7)
OTHER ASSETS:
Note receivable - related party (Note 2) -- 4,429,654
Other (Note 6) 2,036,435 1,294,119
---------------- ----------------
Total other assets 2,036,435 5,723,773
---------------- ----------------
TOTAL ASSETS $ 21,726,016 $ 22,497,608
================ ================
A-2
SPORTS RESORTS INTERNATIONAL, INC.
CONDENSED BALANCE SHEETS
September 30, December 31,
2004 2003
(unaudited) (audited)
------------ ------------
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt (Note 7) $ 216,623 $ 256,578
Accounts payable 1,284,056 1,135,813
Accrued expenses (Note 8) 378,732 567,482
------------ ------------
Total current liabilities 1,879,411 1,959,873
LONG-TERM DEBT (Note 7) 627,626 791,194
SHAREHOLDERS' EQUITY
Common stock: 70,000,000 shares authorized
at $0.01 par value, 48,399,771 and 48,362,953
shares issued and outstanding at September 30,
2004 and December 31, 2003, respectively 483,997 483,629
Additional paid-in-capital 5,775,068 5,656,605
Net advances to related parties (Note 2) (396,292) (396,292)
Retained earnings 13,356,206 14,002,599
------------ ------------
Total shareholders' equity 19,218,979 19,746,541
------------ ------------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 21,726,016 $ 22,497,608
============ ============
A-3
SPORTS RESORTS INTERNATIONAL, INC.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
Nine Months Ending Three Months Ending
September 30 September 30
---------------------------- --------------------------
2004 2003 2004 2003
------------ ------------ ----------- -----------
SALES $ 17,520,302 $ 18,229,191 $ 7,078,487 $ 8,018,170
COST OF SALES 14,960,830 14,995,131 6,185,515 6,610,950
------------ ------------ ----------- -----------
GROSS PROFIT 2,559,472 3,234,060 892,972 1,407,220
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 3,388,972 3,286,457 1,092,463 1,089,653
LAND DEVELOPMENT
COSTS (Note 5) 248,842 290,512 79,069 90,920
NET GAIN (LOSS) ON DISPOSAL
OF ASSETS (Note 5) 198,282 104,296 (51) 6,315
------------ ------------ ----------- -----------
(LOSS) INCOME FROM OPERATIONS (880,060) (238,613) (278,611) 232,962
OTHER INCOME (EXPENSE):
Interest expense (51,322) (77,940) (18,810) (24,887)
Interest income 284,416 291,655 96,396 96,992
Other 573 3,567 1,256 477
------------ ------------ ----------- -----------
Other income, net 233,667 217,282 78,842 72,582
------------ ------------ ----------- -----------
(LOSS) INCOME BEFORE INCOME
TAX BENEFIT (646,393) (21,331) (199,769) 305,544
INCOME TAX BENEFIT (Note 9) -- 638,223 -- 638,223
------------ ------------ ----------- -----------
NET (LOSS) INCOME $ (646,393) $ 616,892 $ (199,769) $ 943,767
============ ============ =========== ===========
Continued
A-4
SPORTS RESORTS INTERNATIONAL, INC.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
Nine Months Ending Three Months Ending
September 30 September 30
----------------------- ------------------------
2004 2003 2004 2003
---------- ---------- ---------- -----------
BASIC AND DILUTED
(LOSS) EARNINGS PER SHARE
(Note 10)
Net (Loss) Income $ (0.01) $ 0.01 $ (0.00) $ 0.02
========== ========== ========== ===========
WEIGHTED AVERAGE COMMON SHARES
Basic 48,385,802 48,362,953 48,399,771 48,362,953
Effect of dilutive securities:
Common share equivalents,
common shares issuable upon
exercise of outstanding
stock options -- 88,479 -- 70,395
---------- ---------- ---------- -----------
Diluted 48,385,802 48,451,432 48,399,771 48,433,348
========== ========== ========== ==========
Concluded
A-5
SPORTS RESORTS INTERNATIONAL, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ending
September 30
--------------------------
2004 2003
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (646,393) $ 616,892
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 1,324,652 1,515,557
Gain on disposal of property and equipment (198,282) (104,296)
Changes in assets and liabilities that provided (used) cash:
Accounts receivable (325,796) (288,626)
Income taxes receivable/payable 1,570,234 (639,242)
Inventories (266,002) 169,141
Other 194,522 645,127
Accounts payable 148,243 (866,361)
Accrued expenses (188,750) (349,042)
----------- -----------
Net cash provided by operating activities 1,612,428 699,150
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (289,348) (1,246,161)
Purchase of land held for development (751,890) --
Proceeds from disposal of property and equipment 428,506 119,958
Payments received on notes receivable-related party 119,196 153,557
----------- -----------
Net cash used in investing activities (493,536) (972,646)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings -- 535,621
Principal payments on long-term debt (203,523) (231,602)
Principal payments on obligations under capital leases -- (407,326)
Proceeds from exercise of stock options 118,831 711,155
----------- -----------
Net cash (used in) provided by financing activities (84,692) 607,848
----------- -----------
INCREASE IN CASH 1,034,200 334,352
CASH, BEGINNING OF PERIOD 482,128 692,138
----------- -----------
CASH, END OF PERIOD $ 1,516,328 $ 1,026,490
=========== ===========
Continued
A-6
SPORTS RESORTS INTERNATIONAL, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ending
September 30
--------------------------
2004 2003
----------- -----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 52,303 $ 76,773
----------- -----------
Cash paid during the period for taxes $ -- $ --
=========== ===========
Concluded
A-7
SPORTS RESORTS INTERNATIONAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
Note 1 BASIS OF PRESENTATION
The Company is a Michigan corporation and a holding company with three
active wholly owned subsidiaries, Rugged Liner, Inc. ("RL") (formerly The
Colonel's Truck Accessories, Inc.), Brainerd International Raceway &
Resort, Inc., ("BIR") (formerly the Colonel's Brainerd International
Raceway, Inc.) and Raceway 66, Inc. ("Raceway 66"). The Colonel's, Inc.
("The Colonel's") is an inactive subsidiary, having sold all of its
assets except for certain land in December 1998. The Company's
subsidiaries operate in two segments, truck accessories and sports and
entertainment.
These financial statements should be read in conjunction with the audited
financial statements and notes to consolidated financial statements
included in the Company's 2003 Annual Report on Form 10-K, filed with the
Securities and Exchange Commission on March 25, 2004. A summary of
critical accounting policies is presented beginning on page 10 of the
Company's most recent Form 10-K. There have been no material changes in
the accounting policies followed by the Company during fiscal year 2004.
The financial information included herein is unaudited; however such
information reflects all adjustments (consisting solely of normal
recurring adjustments) that are, in the opinion of management, necessary
for a fair presentation of the results of operations, financial position
and cash flows for the periods presented.
Interim results of operations are not necessarily indicative of the
results expected for the full year.
Reclassifications - Certain amounts from prior periods have been
reclassified to conform to the current presentation.
NEW ACCOUNTING PRONOUNCEMENTS
In January 2003, the Financial Accounting Standards Board ("FASB") issued
FASB Interpretation No. 46 ("FIN 46"), "Consolidation of Variable
Interest Entities." FIN 46 provides guidance on how to identify a
variable interest entity ("VIE") and determine when the assets,
liabilities, noncontrolling interests, and results of operations of a VIE
are to be included in an entity's Consolidated Financial Statements. A
VIE exists when either the total equity investment at risk is not
sufficient to permit the entity to finance its activities by itself, or
the equity investors lack one of three characteristics associated with
owning a controlling financial interest. Those characteristics include
the direct or indirect ability to make decisions about an entity's
activities through voting rights or similar rights, the obligation to
absorb the expected losses of an entity if they occur, and the right to
receive the expected residual returns of the entity if they occur.
In December 2003, the FASB reissued Fin 46 ("FIN46 (R)") with certain
modifications and clarifications. Application of this guidance was
effective for interests in certain VIE's commonly referred to as
special-purpose entities ("SPEs") as of December 31, 2003. Application
for all other types of entities is required for periods ending after
March 15, 2004,
A-8
unless previously applied. The provisions of FIN 46 (R) have not had an
impact on the Company's financial position or results of operations.
Note 2 RELATED PARTY TRANSACTIONS
Note Receivable
During the first quarter of 1999, a note receivable from South Saginaw
LLC, a company owned by Donald J. Williamson, the Company's majority
shareholder, of $5,200,000 was established. The note requires monthly
payments of $43,496, including interest at 8.0%, through February 2005,
at which time the unpaid balance is due. The note is being paid in
accordance with terms and is secured by a subordinated mortgage and
personal guarantee.
Net Advances to Related Parties
From 1999 through the first six months of 2002, the Company paid certain
expenses on behalf of affiliated entities controlled by Donald J.
Williamson. These expenses were predominately for the use of a common
payroll processing service as well as a pro rata share of general
insurance coverage. Additionally, the Company had advanced $1,036,000 on
behalf of Mr. Williamson for construction costs related to a convenience
store and gas station being built adjacent to BIR's facility in Brainerd,
Minnesota. Construction of the convenience store was completed in the
second quarter of 2002. Effective September 1, 2002, Mr. Williamson
transferred the facility to the Company, at which time the advances were
offset based on net book value which was determined using historic cost
data accumulated during the construction of the facility. Additionally,
in June of 2003, the Company received $711,000 from affiliated entities
toward amounts previously advanced. The total amount outstanding at
September 30, 2004 and December 31, 2003 was $396,000, which is to be
reimbursed to the Company by the affiliated entities. These advances to
related parties are recorded as a reduction to shareholders' equity. In
accordance with the Sarbanes-Oxley Act of 2002, the Company discontinued
making any additional advances to or on behalf of affiliated entities
effective September 30, 2002.
Note 3 INVENTORIES
Inventories are summarized as follows:
September 30, December 31,
2004 2003
(unaudited) (audited)
------------- ------------
Finished products $ 1,018,534 $ 1,030,140
Raw materials 717,571 451,280
Other 64,676 53,359
------------- ------------
Total $ 1,800,781 $ 1,534,779
============= ============
A-9
Note 4 OTHER ASSETS, CURRENT
Other assets, current is summarized as follows:
September 30, December 31,
2004 2003
(unaudited) (audited)
------------- ------------
Prepaid sanction fees $ -- $ 250,000
Other prepaid expenses 347,085 282,033
------------- ------------
Total $ 347,085 $ 532,033
============= ============
Note 5 PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is summarized by major classification as
follows:
September 30, December 31,
2004 2003
(unaudited) (audited)
------------ ------------
Land and improvements $ 3,757,629 $ 3,760,857
Track 1,560,300 1,560,300
Buildings 2,928,442 3,278,442
Condominium units 466,000 466,000
Leasehold improvements 324,525 319,899
Bleachers & fencing 1,656,266 1,656,266
Equipment 7,468,566 7,451,805
Transportation equipment 2,028,204 2,078,672
Furniture & fixtures 704,536 695,372
Tooling 4,244,596 3,985,798
------------ ------------
Total 25,139,064 25,253,411
Less accumulated depreciation (14,731,342) (13,580,161)
------------ ------------
Net property, plant and equipment $ 10,407,722 $ 11,673,250
============ ============
The Company sold an unused warehouse building with a carrying value of
approximately $230,000 and recognized a gain of $184,000 in the second
quarter of 2004.
A-10
Note 6 OTHER ASSETS, LONG-TERM
Other assets, long-term is summarized as follows:
September 30, December 31,
2004 2003
(unaudited) (audited)
------------- -------------
Rental property $ 75,000 $ 75,000
Land held for development 1,889,350 1,137,460
Land contract receivable 67,885 77,458
Other 4,200 4,201
------------- -------------
Total $ 2,036,435 $ 1,294,119
============= =============
During the first nine months of 2004 and 2003, the Company made
non-refundable deposits and extended various agreements to purchase land
in Mount Morris Township, Michigan in connection with a proposed plan to
develop a sports and entertainment complex. The extended agreements are
for additional periods of four to six months. Since financing for
development of the project was not in place at September 30, 2004, these
deposits have been expensed and included in land development costs.
In the third quarter of 2004 the Company purchased approximately 40 acres
of land in Mount Morris Township which had been under agreement to
purchase for $752,000. Land owned which is part of the Company's proposed
sports and entertainment complex is included in land held for
development.
Note 7 LONG TERM DEBT
Long-term obligations consist of the following:
September 30, December 31,
2004 2003
(unaudited) (audited)
------------- ------------
Note payable to a bank, monthly installments of interest at 7.5%
through October 2003, and monthly payments of principal and interest
at 2.5% above prime (effective rate of 7.25% and 6.5% at
September 30, 2004 and December 31, 2003, respectively) through
October 2008; secured by a mortgage on related property $ 420,323 $ 485,770
Mortgage payable to a bank, interest at prime plus 2%, with a floor
of 8.0% (effective rate of 8.0% at December 31, 2003) annual principal
payments of $50,000 plus interest due quarterly, through September
2004; secured by underlying property (Paid in full in August 2004) -- 50,000
Term loans payable to finance companies, monthly installments
include interest approximating 8.0% through November 2007,
collateralized by the related transportation equipment 423,926 512,002
----------- -----------
Total 844,249 1,047,772
Less current portion (216,623) (256,578)
----------- -----------
Long-term $ 627,626 $ 791,194
=========== ===========
A-11
Note 8 ACCRUED EXPENSES
Accrued expenses consist of the following:
September 30, December 31,
2004 2003
(unaudited) (audited)
------------ -----------
Accrued settlements $ -- $ 78,329
Accrued interest 2,406 3,387
Royalties -- 151,053
Professional fees 110,315 180,000
Advance ticket sales/deferred revenue 12,590 --
Payroll and taxes 92,456 87,225
Other 160,965 67,488
--------- ---------
Total $ 378,732 $ 567,482
========= =========
Note 9 INCOME TAXES
The Company provides for deferred income taxes under the asset and
liability method, whereby deferred income taxes result from temporary
differences between the tax bases of assets and liabilities and their
reported amounts in the financial statements that will result in taxable
or deductible amounts in the future. Such deferred income tax asset and
liability computations are based on enacted tax laws and rates applicable
to periods in which the differences are expected to affect taxable
income. A valuation allowance is established to reduce deferred income
tax assets to the amount expected to be realized.
On March 9, 2002, the Job Creation and Worker Assistance Act of 2002 (the
"Act") was enacted which extends the carryback period for net operating
losses from two years to five years. Based on this new legislation, the
Company carried back net operating losses for which there was a valuation
allowance. In addition, the Company realized the tax benefit of certain
deferred taxes for which there was a valuation allowance. In 2003 the
Company performed a cost segregation study. A cost segregation study
reclassifies assets originally classified as real property into other
more appropriate asset categories which allow for shorter, more
accelerated methods of depreciation as allowed by the Internal Revenue
Service. Accordingly, the Company was able to accelerate its depreciation
deduction for Federal income tax reporting purposes and increase the
carry back allowed under the Act in connection with the completion of its
2002 consolidated Federal income tax return. As a result, the valuation
reserve on deferred tax assets was reduced by $1,098,800 during year
ending December 31, 2003. In connection with the passage of this
legislation and the performance of the cost segregation study, the
Company amended certain of its prior year returns. The Company received a
refund of $1,570,234 in the second quarter of 2004 from its amended
returns.
Note 10 (LOSS) EARNINGS PER SHARE
Basic (loss) earnings per share is based upon the weighted average number
of shares outstanding. Diluted earnings per share assumes the exercise of
common stock options when dilutive.
A-12
Note 11 STOCK OPTIONS
The Company has stock-based employee compensation plans, which are
described more fully in Note 13 in the Company's 2003 Annual Report. The
Company accounts for stock-based compensation consistent with SFAS No.
123, "Accounting for Stock-Based Compensation", and, as permitted by this
standard, will continue to apply the recognition and measurement
principles of Accounting Principles Board Opinion No. 25 to its
stock-based compensation awards. Since stock options are granted at
prices equal to fair market value, no compensation expense is recognized
in connection with stock options granted to employees. The following
illustrates the effect on net income (loss) and earnings (loss) per share
if the Company applied the fair value recognition provisions of SFAS 123:
Nine Months Ending Three Months Ending
September 30 September 30
(unaudited) (unaudited)
---------------------------------- -----------------------------
2004 2003 2004 2003
-------------- -------------- ------------- -----------
Net (loss) income as reported $ (646,393) $ 616,892 $ (199,769) $ 943,767
Deduct: Total stock-based employee
compensation expense determined
under fair value based method for all
awards, net of tax -- (9,014) -- --
-------------- -------------- ------------- -----------
Pro forma net (loss) income $ (646,393) $ 607,878 $ (199,769) $ 943,767
============== ============== ============= ===========
Basic and diluted (loss) income
per share:
As reported $ (0.01) $ 0.01 $ (0.00) $ 0.02
Pro forma $ (0.01) $ 0.01 $ (0.00) $ 0.02
No options were granted during the periods presented.
Note 12 SEGMENTS OF BUSINESS
The Company's reportable segments are strategic business units that offer
different products and services. The business units have been divided
into two reportable segments: the manufacturing and sale of bedliners and
other truck accessories ("Truck Accessories"), and operation of a
multi-purpose motor sports facility in Brainerd, Minnesota ("Raceway").
Operating segments are defined as components of an enterprise about which
separate financial information is available that is evaluated regularly
by the chief operating decision-maker, or decision making group, in
deciding how to allocate resources and assessing performance. The
Company's chief operating decision-maker is its Chief Executive Officer.
The Company evaluates performance based on stand-alone product segment
operating income. Intersegment sales and transfers, interest income and
expenses are not significant.
A-13
Financial information segregated by reportable product segment is as
follows:
Nine Months Ending Three Months Ending
September 30 September 30
(unaudited) (unaudited)
---------------------------- --------------------------
2004 2003 2004 2003
------------ ------------ ----------- -----------
Sales:
Truck Accessories $ 13,161,088 $ 14,206,913 $ 3,649,095 $ 4,880,927
Raceway 4,359,214 4,022,278 3,429,392 3,137,243
------------ ------------ ----------- -----------
Total $ 17,520,302 $ 18,229,191 $ 7,078,487 $ 8,018,170
============ ============ =========== ===========
(Loss) Income from Operations
Truck Accessories $ 99,260 $ 772,694 $ (421,404) $ 341,992
Raceway (979,320) (1,011,307) 142,793 (109,030)
------------ ------------ ----------- -----------
Total $ (880,060) $ (238,613) $ (278,611) $ 232,962
============ ============ =========== ===========
A-14
EXHIBIT INDEX
DESCRIPTION
EXHIBIT NO.
31.1 Certification of Chief Executive Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002
31.2 Certification of Chief Financial Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002
32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002