FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON DC 20549
(Mark One)
X Quarterly Report Pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 2000.
- or -
_____ 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 0-5555
LIBERTY HOMES, INC.
(Exact name of registrant as specified in its charter)
INDIANA 35-1174256
(State of Incorporation) (IRS Employer Identification No.)
P.O. BOX 35, GOSHEN, INDIANA 46527
(Address of principal executive offices) (ZIP Code)
(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 X No____
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
Shares of Outstanding
Class at August 2, 2000
- ----- -----------------
Class A Common Stock, $1.00 par value 2,135,613
Class B Common Stock, $1.00 par value 1,674,247
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INDEX
Pages
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PART I - CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED)
General 3
Item 1. Consolidated Financial Statements -
Liberty Homes, Inc.
Consolidated Balance Sheet, as of 4
June 30, 2000 and December 31, 1999
Consolidated Statement of Income, for the 5
three months ended June 30, 2000 and 1999
Consolidated Statement of Income, for the 6
six months ended June 30, 2000 and 1999
Consolidated Statement of Cash Flows for the 7
six months ended June 30, 2000 and 1999
Notes to Consolidated Financial Statements 8 - 9
Item 2. Management's Discussion and Analysis of Financial 9 - 11
Condition and Results of Operations
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
Signature 12
2
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 wi h 1999. 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.
3
LIBERTY HOMES, INC.
CONSOLIDATED BALANCE SHEET
as of June 30, 2000 and December 31, 1999
June 30, December 31, June 30, December 31,
ASSETS 2000 1999 LIABILITIES 2000 1999
- ------ ---- ---- ----------- ---- ----
Current assets: Current liabilities:
Cash and cash equivalents $ 7,549,000 $10,555,000 Accounts payable $ 4,662,000 $ 2,216,000
Short term investments 385,000 6,535,000 Dividend payable 271,000 273,000
Receivables 15,406,000 10,248,000 Accrued compensation & payroll 1,954,000 2,479,000
taxes
Inventories 19,798,000 15,327,000 Other accrued liabilities 8,138,000 10,837,000
Deferred tax asset 2,240,000 2,240,000 Floor plan financing payable 4,651,000 --
----------- -----------
Income taxes refundable 1,620,000 715,000 Total current liabilities 19,676,000 15,805,000
----------- -----------
Prepayments and other 1,950,000 1,988,000 Deferred income taxes 2,420,000 2,420,000
----------- ---------- ----------- -----------
Minority interest in subsidiaries 1,358,000 1,341,000
------------ -----------
Total current assets 48,948,000 47,608,000 Contingent liabilities (see notes)
----------- -----------
SHAREHOLDER'S EQUITY
--------------------
Capital Stock:
Class A, $1 par value
Authorized-7,500,000 Shares
Issued & outstanding-2,184,000
in 2000 & 2,198,000 in 1999 2,184,000 2,198,000
Property, plant and equipment: Class B, $1 par value
Authorized-3,500,000 Shares
Land 1,928,000 1,926,000 Issued & outstanding-1,684,000
Buildings and improvements 29,384,000 28,241,000 in 2000 & 1,706,000 in 1999 1,684,000 1,706,000
Machinery and equipment 21,462,000 20,742,000
----------- -----------
52,774,000 50,909,000 Other capital 83,000 83,000
Less accumulated depreciation 24,809,000 23,429,000 Retained earnings 49,508,000 51,535,000
----------- ---------- ----------- -----------
27,965,000 27,480,000 53,459,000 55,522,000
----------- ----------- ----------- -----------
Total assets $76,913,000 $75,088,000 Total liabilities and
=========== =========== stockholder's equity $76,913,000 $75,088,000
=========== ===========
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LIBERTY HOMES, INC.
CONSOLIDATED STATEMENT OF INCOME
for the three months ended June 30, 2000 and 1999
------------
2000 1999
---- ----
Net sales $ 34,773,000 $ 49,133,000
Cost of sales 31,680,000 42,081,000
------------ ------------
Gross profit 3,093,000 7,052,000
Selling, general and administrative
expenses 4,361,000 4,840,000
------------ ------------
Operating income (loss) (1,268,000) 2,212,000
Interest and other income 169,000 266,000
------------ ------------
Income (loss) minority interest and (1,099,000) 2,478,000
income taxes
Minority interest 31,000 (158,000)
Income tax benefit (expense) 439,000 (959,000)
------------ ------------
Net income (loss) $ (629,000) $ 1,361,000
============ ============
Share income (loss) per outstanding Common
Share - basic and fully diluted $ (.16) $ .35
============ ============
Weighted average shares outstanding 3,899,000 3,913,000
============ ============
Cash dividend per share:
Class A Common Stock $ .07 $ .07
============ ============
Class B Common Stock $ .07 $ .07
============ ============
5
LIBERTY HOMES, INC.
CONSOLIDATED STATEMENT OF INCOME
for the six months ended June 30, 2000 and 1999
------------
2000 1999
---- ----
Net sales $ 71,049,000 $ 93,483,000
Cost of sales 64,832,000 80,622,000
------------ ------------
Gross profit 6,217,000 12,861,000
Selling, general and administrative
expenses 8,711,000 9,759,000
------------ ------------
Operating income (loss) (2,494,000) 3,102,000
Interest and other income 403,000 557,000
------------ ------------
Income (loss) before minority interest and income (2,091,000) 3,659,000
taxes
Minority interest (17,000) (291,000)
Income tax benefit (expense) 836,000 (1,408,000)
------------ ------------
Net income (loss) $ (1,272,000) $ 1,960,000
============ ============
Share income (loss) per outstanding Common
Share - basic and fully diluted $ (.33) $ .50
============ ============
Weighted average shares outstanding 3,902,000 3,925,000
============ ============
Cash dividend per share:
Class A Common Stock $ .14 $ .14
============ ============
Class B Common Stock $ .14 $ .14
============ ============
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LIBERTY HOMES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
for the six months ended June 30, 2000 and 1999
---------------
2000 1999
---- ----
Cash flows from operating activities:
Net income (loss) $ (1,272,000) $ 1,960,000
Adjustment to reconcile net income
to net cash used in operating activities -
Depreciation 1,380,000 1,326,000
Deferred income taxes -- (70,000)
Minority interest 17,000 291,000
Changes in assets and liabilities:
Receivables (5,158,000) (13,825,000)
Income taxes payable/receivable (905,000) (757,000)
Inventories (4,471,000) (2,303,000)
Prepayments and other 38,000 (296,000)
Accounts payable 2,446,000 5,189,000
Other current liabilities (3,226,000) (1,119,000)
------------ ------------
Net cash used in operating activities (11,151,000) (9,604,000)
------------ ------------
Cash flows provided by (used in) investing activities --
Additions to property, plant and equipment (1,865,000) (1,919,000)
Redemption of (investment in) short-term investments 6,150,000 765,000
------------ ------------
Net cash provided by (used in) investing activities 4,285,000 (1,154,000)
------------ ------------
Cash flows provided by (used in) financing activities -
Cash dividends paid (545,000) (548,000)
Floor plan financing 4,651,000 --
Minority interest contributed capital -- 10,000
Retirement of common stock (246,000) (421,000)
------------ ------------
Net cash provided by (used in) financing activities 3,860,000 (959,000)
------------ ------------
Net decrease in cash and cash equivalents (3,006,000) (11,717,000)
------------ ------------
Cash and cash equivalents at beginning of period 10,555,000 18,441,000
------------ ------------
Cash and cash equivalents at end of period $ 7,549,000 $ 6,724,000
============ ============
Supplemental disclosures of cash flow information - cash
paid during the period for income taxes and interest expense $ 144,000 $ 2,164,000
============ ============
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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.
FLOOR PLAN FINANCING PAYABLE:
The Company has made arrangements with certain finance companies to
provide lines of credit to support the Company's expansion into retail
distribution of its manufactured homes. The lines of credit are used to finance
inventory held at the Company's Retail Centers. Advances are made from the line
of credit when a home is delivered to a Retail Center. The terms of these
arrangements require monthly interest at rates that vary from 1/2% to 1% over
prime. The principal is repaid at the earlier of the time the home is sold to a
retail customer or one year from delivery of the home to the retail center.
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
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under floor plan 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 believes any losses incurred under outstanding
repurchase agreements in excess of the accruals established as of June 30, 2000
will not have a significant impact on the financial condition of the Company.
Other Contingencies
Letters of Credit totaling $500,000 have been issued to the Company's
insurance carriers who have underwritten the Company's insurance programs.
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.
Liquidity and Capital Resources
Cash, cash equivalents and short term investments as of June 30, 2000
and December 31, 1999 were $7,934,000 and $17,090,000, respectively. Working
capital as of June 30, 2000 and December 31, 1999 was $29,272,000 and
$31,803,000, respectively. Establishment of two retail centers in Florida and
two in Texas, the funding of various manufacturing facility projects and the
seasonal expansion of trade receivables had the main effects on reduced
liquidity during the current period. Also during the six months ended June 30,
2000, the Company repurchased a total of 36,000 shares of common
9
stock under the program initiated in 1994 and subsequently amended to acquire up
to 900,000 shares of its common stock.
Results of Operations
Net sales for the second quarter of 2000 were $34,773,000, a decrease
of $14,360,000 from the same quarter of 1999. The sales activity of the Company
followed the industry trend during the quarter. Statistics comparing April and
May of 2000 (the latest figures available) to the same period in 1999 and
reported by the National Conference of States on Building Codes and Standards
show the industry suffered a 26% drop in homes shipped and a 24% drop in floors
shipped. This downturn in sales was caused, in part, by an overproduction of
homes in prior periods by the industry relative to retail sales in prior
periods. Also, the industry has seen a tightening of credit on both the
wholesale and retail financing of homes. This tightening has been caused by the
decision of several major financing companies to cease doing business in the
manufactured housing industry along with a reluctance by the secondary market to
purchase retail contracts of the finance companies thus causing a sharp increase
in interest rates for our retail customers. Furthermore, increased retail and
wholesale loan defaults have caused a corresponding increase of repossessed
homes to be offered for resale, which has displaced some demand for newly
manufactured homes. Comparatively, the Company experienced a 34% drop in homes
shipped, a 30% drop in floors shipped and a 29% decline in net sales. The
reduction in sales had an adverse effect on net income for the second quarter of
2000. The Company had a net loss of $629,000 for the second quarter of 2000
compared to net income of $1,361,000 for the same quarter in 1999.
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Outlook and Risk Factors
As sales backlogs in the manufactured housing industry are
traditionally short and as dealer inventories do not normally fluctuate
substantially, the orders that the Company receives are indicative of the
day-to-day retail sales activity of its products. Any changes affecting the
desire or ability of retail customers to purchase, such as cost, availability of
credit and unemployment, have an immediate effect on the Company's operations.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit 27 - Financial Data Schedule
No reports on Form 8-K for April, May or June, 2000 have been filed.
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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
BY: /s/ MARC A. DOSMANN
------------------------
Marc A. Dosmann
Vice President - Chief Financial Officer
(Principal Financial and Accounting Officer)
Dated August 14, 2000
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