SECURITIES AND EXCHANGE COMMISSION
Washington DC 20549
(Mark One) | | |
ý | | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 2001. |
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or |
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o | | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Transition Period From ________ to _______. |
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Commission File Number 0-5555
LIBERTY HOMES, INC.
(Exact name of registrant as specified in its charter)
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Indiana | | 35-1174256 |
(State of Incorporation) | | (IRS Employer Identification No.) |
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PO Box 35, Goshen, Indiana | | 46527 |
(Address of principal executive offices) | | (ZIP Code) |
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(219) 533-0431
(Registrant's telephone number, including area code) |
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 ý No o
Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date.
Class | | Shares of Outstanding
at November 5, 2001 | |
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Class A Common Stock, $1.00 par value | | 2,087,945 | |
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Class B Common Stock, $1.00 par value | | 1,664,922 | |
INDEX
PART I – CONSOLIDATED FINANCIAL INFORMATION
General
The consolidated financial statements and footnotes thereto listed in the Index on page 2 of this report have been prepared using generally accepted accounting principles applied on a basis consistent with 2000. The results of operations for the interim period presented are not necessarily indicative of results to be expected for the year. The information furnished herein reflects all adjustments (consisting of normal recurring adjustments) which, in the opinion of management, are necessary for a fair presentation of the results for the interim periods.
LIBERTY HOMES, INC.
CONSOLIDATED BALANCE SHEET
as of September 30, 2001 and December 31, 2000
| | September 30, | | December 31, | |
ASSETS | | 2001 | | 2000 | |
Current assets: | | | | | |
Cash and cash equivalents | | $ | 6,407,000 | | $ | 4,896,000 | |
Short term investments | | 300,000 | | 350,000 | |
Receivables | | 11,567,000 | | 11,259,000 | |
Inventories | | 15,349,000 | | 17,422,000 | |
Deferred tax asset | | 2,655,000 | | 2,480,000 | |
Income taxes refundable | | 565,000 | | 3,643,000 | |
Prepayments and other | | 1,988,000 | | 2,026,000 | |
| | | | | |
Total current assets | | 38,831,000 | | 42,076,000 | |
| | | | | |
Property, plant and equipment: | | | | | |
| | | | | |
Land | | 2,422,000 | | 2,422,000 | |
Buildings and improvements | | 29,639,000 | | 29,678,000 | |
Machinery and equipment | | 21,795,000 | | 21,570,000 | |
| | | | | |
| | 53,856,000 | | 53,670,000 | |
| | | | | |
Less accumulated depreciation | | 27,732,000 | | 25,977,000 | |
| | | | | |
| | 26,124,000 | | 27,693,000 | |
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Total assets | | $ | 64,955,000 | | $ | 69,769,000 | |
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LIABILITIES | | | | | |
Current liabilities: | | | | | |
Accounts payable | | $ | 3,865,000 | | $ | 3,659,000 | |
Notes payable | | 2,646,000 | | 5,209,000 | |
Accrued compensation & payroll taxes | | 1,492,000 | | 1,416,000 | |
Other accrued liabilities | | 7,487,000 | | 8,353,000 | |
| | | | | |
Total current liabilities | | 15,490,000 | | 18,637,000 | |
Deferred income taxes | | 2,530,000 | | 2,530,000 | |
Minority interest in subsidiaries | | 1,064,000 | | 1,020,000 | |
Contingent liabilities (see notes) | | -- | | -- | |
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SHAREHOLDERS’ EQUITY | | | | | |
Capital Stock: | | | | | |
Class A, $1 par value | | | | | |
Authorized-7,500,000 Shares | | | | | |
Issued & outstanding-2,088,000 in 2001 & 2,083,000 in 2000 | | 2,088,000 | | 2,083,000 | |
Class B, $1 par value | | | | | |
Authorized-3,500,000 Shares | | | | | |
Issued & outstanding-1,665,000 in 2001 & 1,670,000 in 2000 | | 1,665,000 | | 1,670,000 | |
| | | | | |
Other capital | | 83,000 | | 83,000 | |
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Retained earnings | | 42,035,000 | | 43,746,000 | |
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| | 45,871,000 | | 47,582,000 | |
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Total liabilities and shareholders’ equity | | $ | 64,955,000 | | $ | 69,769,000 | |
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LIBERTY HOMES, INC.
CONSOLIDATED STATEMENT OF INCOME
for the three months ended September 30, 2001 and 2000
| | 2001 | | 2000 | |
| | | | | |
Net sales | | $ | 29,992,000 | | $ | 29,763,000 | |
| | | | | |
Cost of sales | | 25,350,000 | | 26,910,000 | |
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Gross profit | | 4,642,000 | | 2,853,000 | |
| | | | | |
Selling, delivery, general and administrative expenses | | 4,491,000 | | 5,483,000 | |
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Operating income (loss) | | 151,000 | | (2,630,000 | ) |
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Interest expense | | (61,000 | ) | (139,000 | ) |
Interest and other income | | 78,000 | | 77,000 | |
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Income (loss) before minority interest and income taxes | | 168,000 | | (2,692,000 | ) |
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Minority interest | | (21,000 | ) | 103,000 | |
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Income tax benefit (expense) | | (63,000 | ) | 1,077,000 | |
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Net income (loss) | | $ | 84,000 | | $ | (1,512,000 | ) |
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Net income (loss) per outstanding Common Share – basic and fully diluted | | $ | .02 | | $ | (.40 | ) |
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Weighted average shares outstanding | | 3,753,000 | | 3,811,000 | |
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Cash dividend per share: | | | | | |
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Class A Common Stock | | $ | .07 | | $ | .07 | |
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Class B Common Stock | | $ | .07 | | $ | .07 | |
LIBERTY HOMES, INC.
CONSOLIDATED STATEMENT OF INCOME
for the nine months ended September 30, 2001 and 2000
| | 2001 | | 2000 | |
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Net sales | | $ | 86,330,000 | | $ | 103,235,000 | |
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Cost of sales | | 73,761,000 | | 91,742,000 | |
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Gross profit | | 12,569,000 | | 11,493,000 | |
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Selling, delivery, general and administrative expenses | | 14,008,000 | | 16,555,000 | |
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Operating loss | | (1,439,000 | ) | (5,062,000 | ) |
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Interest expense | | (287,000 | ) | (228,000 | ) |
Interest and other income | | 316,000 | | 507,000 | |
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Loss before minority interest and income taxes | | (1,410,000 | ) | (4,783,000 | ) |
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Minority interest | | (44,000 | ) | 86,000 | |
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Income tax benefit | | 531,000 | | 1,913,000 | |
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Net loss | | $ | (923,000 | ) | $ | (2,784,000 | ) |
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Net loss per outstanding Common Share – basic and fully diluted | | $ | (.25 | ) | $ | (.72 | ) |
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Weighted average shares outstanding | | 3,753,000 | | 3,871,000 | |
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Cash dividend per share: | | | | | |
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Class A Common Stock | | $ | .21 | | $ | .21 | |
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Class B Common Stock | | $ | .21 | | $ | .21 | |
LIBERTY HOMES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
for the nine months ended September 30, 2001 and 2000
| | 2001 | | 2000 | |
Cash flows provided by (used in) operating activities: | | | | | |
Net loss | | $ | (923,000 | ) | $ | (2,784,000 | ) |
Adjustment to reconcile net loss | | | | | |
Depreciation | | 1,771,000 | | 2,076,000 | |
Minority interest in income | | 44,000 | | (86,000 | ) |
Net value of retail center assets written off | | 151,000 | | -- | |
Deferred income taxes | | (175,000 | ) | -- | |
| | | | | |
Changes in assets and liabilities: | | | | | |
Receivables | | (308,000 | ) | (5,197,000 | ) |
Inventories | | 2,073,000 | | (5,244,000 | ) |
Prepayments and other | | 38,000 | | 71,000 | |
Accounts payable | | 206,000 | | 2,365,000 | |
Accrued liabilities | | (790,000 | ) | (2,232,000 | ) |
Income taxes payable/receivable | | 3,078,000 | | (1,198,000 | ) |
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Net cash provided by (used in) operating activities | | 5,165,000 | | (12,229,000 | ) |
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Cash flows provided by (used in) investing activities | | | | | |
Additions to property, plant and equipment | | (353,000 | ) | (2,222,000 | ) |
Redemption of short-term investment | | 50,000 | | 6,185,000 | |
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Net cash provided by (used in) investing activities | | (303,000 | ) | 3,963,000 | |
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Cash flows provided by (used in) financing activities - | | | | | |
Cash dividends paid | | (788,000 | ) | (807,000 | ) |
Proceeds from notes payable | | 3,393,000 | | 5,825,000 | |
Payments of notes payable | | (5,956,000 | ) | -- | |
Retirement of common stock | | -- | | (685,000 | ) |
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Net cash provided by (used in) financing activities | | (3,351,000 | ) | 4,333,000 | |
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Net increase (decrease) in cash and cash equivalents | | 1,511,000 | | (3,933,000 | ) |
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Cash and cash equivalents at beginning of period | | 4,896,000 | | 10,555,000 | |
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Cash and cash equivalents at end of period | | $ | 6,407,000 | | $ | 6,622,000 | |
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Supplemental disclosures of cash flow information cash | | | | | |
cash paid (received) for income taxes | | $ | (3,428,000 | ) | $ | 83,000 | |
cash paid for interest expense | | 284,000 | | 219,000 | |
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OTHER INFORMATION
SHORT TERM INVESTMENTS:
Short-term investments consist primarily of certificates of deposits with original maturities greater than 90 days.
INVENTORIES:
Inventories are stated at the lower of cost or market, with cost determined on a first-in, first-out basis. Inventories at September 30, 2001 consist of:
Raw material | | $ | 6,547,000 | |
Work in Progress | | 2,147,000 | |
Finished Goods | | 6,665,000 | |
| | $ | 15,349,000 | |
NOTES PAYABLE:
At September 30, 2001, the Company had the following notes payable:
Revolving credit line of $10,000,000 secured by retail subsidiary inventory bearing interest at 1/2% over prime rate | | $ | 2,646,000 | |
Unsecured revolving credit line of $5,000,000 Bearing interest at 1/2% under prime | | | - - | |
| | $ | 2,646,000 | |
CONTINGENT LIABILITIES:
Repurchase Obligations
The Company is contingently liable under terms of repurchase agreements with various financial institutions which provide for the repurchase of its homes sold to dealers under floorplan financing arrangements upon dealer default. The Company's exposure to loss under such agreements is reduced by the resale of the repurchased home. The Company has established what it believes is an appropriate level of accruals to reflect current and anticipated repurchase activity. The Company believes any losses incurred under outstanding repurchase agreements in excess of the accruals established as of September 30, 2001 will not have a significant impact on the financial condition of the Company. However, any substantial increases in dealer defaults after September 30, 2001 may cause the Company to incur additional losses due to repurchase activity.
REVENUE RECOGNITION:
The Company recognizes revenue when the product is shipped to independent dealers.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Results of Operations
Net sales for the third quarter of 2001 were $29,992,000, an increase of $229,000 from the same quarter of 2000. The sales activity of the Company followed the industry trend during the quarter. Statistics comparing the third quarter of 2001 to the same period in 2000 and reported by the National Conference of States on Building Codes and Standards show the industry suffered a 16% drop in homes shipped and a 14% drop in floors shipped. Tightened credit at both the wholesale and retail levels continued to dampen the ability of the industry to rebound from its two year slump. Furthermore, retail and wholesale loan defaults continue to provide a supply of repossessed homes to be offered for resale, which has displaced some demand for newly manufactured homes.
During the third quarter of 2001, the Company’s gross profit was $4,642,000, a $1,789,000 improvement over the same quarter of 2000. This cost control improvement and improved expense control of selling, general and administrative expenses produced a net income of $84,000 for the quarter.
Liquidity and Capital Resources
Liquidity and capital resources improved from the Company’s position at December 31, 2000. Cash, cash equivalents and short term investments as of September 30, 2001 and December 31, 2000 were $6,707,000 and $5,246,000, respectively. Working capital as of September 30, 2001 and December 31, 2000 was $23,341,000 and $23,439,000, respectively. Expenditures for property, plant and equipment were minimal during the quarter. The Company anticipates that cash flow from operations and credit arrangements currently in place will be sufficient to meet the Company’s foreseeable requirements.
Outlook and Risk Factors
The dynamics that propelled the manufacturing component of the industry into its current slump, tight credit and competition with repossessed homes, will continue to affect near term performance. Although there was little indication of improvement, these conditions appeared to be stabilizing prior to September 11, 2001. A sense for how these factors will react since that date is difficult to judge at this time. Nevertheless, these factors continue to adversely affect new home orders resulting in lower sales. While these lower sales have created significant challenges to attain profitability, the resultant cost controls and reduction of the industry’s manufacturing capacity will bear favorable results in a market upturn.
Since the Company produces only to dealer orders and sales backlogs are traditionally short, the order activity at the Company is indicative of the day to day retail sales activity of its products. Changes affecting retail customer demand, such as cost, availability of credit and unemployment, may have an immediate effect on the Company's operations.
In a practice common to the industry, the Company participates in dealer financing programs which require it to repurchase homes which remain unsold and in dealer inventory for periods ranging from one to one and one-half years after delivery to the dealer, if the dealer defaults on its financing obligations.
Forward Looking Information
The discussion above contains forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include statements regarding industry and company outlooks and risk factors. The Company may make other forward looking statements orally or in writing from time to time. All such forward looking statements are not guaranties of future events or performance and involve risks and uncertainties. Actual results may differ materially from those in the forward looking statements as the result of a number of material factors. These factors include without limitation, the availability of financing credit at both the wholesale and retail level, the availability of a competent workforce, the regulation of the industry at the federal, state and local levels, changes in interest rates, unanticipated results in pending legal proceedings and the condition of the economy and its effect on consumer confidence.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8–K
No reports on Form 8-K for July, August or September, 2001 have been filed.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | | LIBERTY HOMES, INC. | |
| | | Registrant | |
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| | | BY: /s/ Marc A. Dosmann | |
| | | Marc A. Dosmann |
| | | Vice President – Chief Financial Officer |
| | | (Principal Financial and Accounting Officer) |
Dated | November 14, 2001 | | | |
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