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UNITED STATES 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, 1996
COMMISSION FILE NUMBER 0-26142
BELMONT HOMES, INC.
(Exact name of registrant as specified in its charter)
MISSISSIPPI 64-0834574
(State or other jurisdiction of incorporation or (I.R.S. Employer Identification Number)
organization)
HIGHWAY 25 SOUTH, INDUSTRIAL PARK DRIVE
BELMONT, MISSISSIPPI 38827 (601) 454-9217
(Address, including zip code of principal executive (Registrant's telephone number, including area code)
offices)
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
--- ---
At October 21, 1996, 9,458,000 shares of the Registrant's $.10 Par
Value Common Stock were outstanding.
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
BELMONT HOMES, INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED - IN THOUSANDS EXCEPT PER SHARE DATA)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------- ----------------------
1996 1995 1996 1995
Net sales $ 57,512 $ 36,739 $170,638 $ 97,273
Cost of sales 48,645 30,735 144,289 81,675
-------- -------- -------- --------
Gross profit 8,867 6,004 26,349 15,598
Selling, general and administrative 3,637 2,132 11,349 5,895
-------- -------- -------- --------
Income from operations 5,230 3,872 15,000 9,703
Interest income (expense), net 168 162 384 (401)
-------- -------- -------- --------
Income before taxes 5,398 4,034 15,384 9,302
Income tax expense 2,043 1,473 5,848 3,396
-------- -------- -------- --------
Net income 3,355 2,561 9,536 5,906
Preferred stock dividends -- -- -- (33)
-------- -------- -------- --------
Net income applicable to common stock $ 3,355 $ 2,561 $ 9,536 $ 5,873
-------- -------- -------- --------
Net income per common share $ .35 $ .31 $ 1.02 $ .89
-------- -------- -------- --------
Weighted average common shares
outstanding 9,551 8,207 9,378 6,560
-------- -------- -------- --------
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BELMONT HOMES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
UNAUDITED
SEPTEMBER 30, DECEMBER 31,
------------- ------------
1996 1995
-------- --------
ASSETS
Current assets:
Cash and cash equivalents $ 7,299 $ 2,055
Certificates of deposit 8,138 6,717
Accounts receivable, net 11,137 7,302
Inventories 11,256 7,425
Prepaid and other 1,526 1,355
-------- --------
Total current assets 39,356 24,854
Property, plant and equipment, net 18,781 14,812
Goodwill and other assets, net 12,541 10,402
-------- --------
$ 70,678 $ 50,068
-------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 2,403 $ 4,600
Accounts payable 6,820 3,665
Accrued expenses 9,821 5,552
-------- --------
Total current liabilities 19,044 13,817
Long-term debt 376 6,919
Deferred income taxes 284 284
-------- --------
Total liabilities 19,704 21,020
-------- --------
Shareholders' equity:
Common stock 947 545
Additional paid-in capital 27,076 15,088
Retained earnings 26,444 16,908
Adjustment to predecessor basis (3,493) (3,493)
-------- --------
Total shareholders' equity 50,974 29,048
-------- --------
$ 70,678 $ 50,068
-------- --------
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BELMONT HOMES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED - IN THOUSANDS)
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------
1996 1995
---- ----
Cash flows from operating activities:
Net income $ 9,536 $ 5,906
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 1,188 524
Changes in operating assets and liabilities:
Accounts receivable (3,835) (4,716)
Inventories (3,831) (833)
Prepaid and other (128) 586
Accounts payable 3,155 3,097
Accrued expenses 4,269 2,384
-------- --------
Net cash provided by operating activities 10,354 6,984
-------- --------
Cash flows from investing activities:
Additions to property, plant and equipment (4,834) (2,881)
Certificates of deposit (1,421) (8,655)
Investment in supply joint ventures (2,505) --
-------- --------
Net cash used by investing activities (8,760) (11,536)
-------- --------
Cash flows from financing activities:
Proceeds from notes 2,200
Repayment of long-term debt (10,940) (12,720)
Proceeds from sale of common stock net of
offering costs 12,390 15,283
Payment of preferred stock dividends -- (152)
Retirement of preferred stock -- (900)
-------- --------
Net cash provided by financing activities 3,650 1,511
-------- --------
Net increase (decrease) in cash and equivalents 5,244 (3,077)
Cash and equivalents at beginning of year 2,055 5,331
-------- --------
Cash and equivalents end of period $ 7,299 $ 2,254
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BELMONT HOMES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED QUARTERLY FINANCIAL
STATEMENTS
(UNAUDITED)
(1) BASIS OF PRESENTATION
In June 1993 Belmont Homes, Inc. ("Belmont"), which was 43% owned by
shareholders of BHI, Inc. (Predecessor) and 57% owned by new investors, acquired
through the issuance of debt and equity securities, substantially all of the
assets and liabilities of Predecessor for a purchase price of $15,541. This
transaction was accounted for using the purchase method of accounting including
the computational guidelines contained in EITF Issue No. 88-16.
In August 1995 Belmont incorporated Delta Homes, Inc., a wholly-owned
subsidiary and purchased for $450 a production facility in Clarksdale,
Mississippi.
In October 1995 Belmont acquired, in a transaction accounted for using
the purchase method of accounting, all the outstanding common stock of Spirit
Homes, Inc. ("Spirit") for $9,800 of cash and debt.
In January 1996 the Company completed the sale of 800 shares of its
common stock raising net proceeds of approximately $11,800 which were used to
retire substantially all long-term debt.
The condensed consolidated financial statements include the accounts of
Belmont Homes, Inc. and its wholly-owned subsidiaries from incorporation or
acquisition date (collectively, the "Company") and have been prepared without
audit pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with Generally Accepted Accounting
Principles have been omitted. The condensed financial statements should be read
in conjunction with the Company's audited financial statements and notes
thereto.
In the opinion of management, all adjustments, consisting only of
normal recurring adjustments that are necessary for a fair presentation, have
been included in the condensed consolidated financial statements for the interim
periods ended September 30, 1996 and 1995. The results of operations for the
three and nine month periods are not indicative of the results of
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operations to be expected for the full year ending December 31, 1996 or any
other interim period.
(2) INVENTORIES
SEPTEMBER 30, DECEMBER 31,
1996 1995
-------- --------
Raw materials $ 8,673 $ 4,670
Work-in-process 633 580
Finished homes 1,950 2,175
-------- --------
$ 11,256 $ 7,425
-------- --------
(3) SUBSEQUENT EVENT
On September 5, 1996 the Board of Directors authorized a three-for-two
stock split effected in the form of a 50% stock dividend which was distributed
November 1, 1996. Shareholders equity at September 30, 1996 as well as all share
and per share data have been adjusted to give effect to this split.
On October 25, 1996 the Company acquired 100% of the stock of Bellcrest
Homes, Inc., a producer and manufacturer of homes in Millen, Georgia for $9.5
million in cash at closing and $3.5 million in potential incentive payments over
the next three years based on certain performance criteria.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated information
derived from the Company's condensed financial statements expressed as a
percentage of net sales:
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------- --------------
1996 1995 1996 1995
-------- -------- -------- --------
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 84.6 83.7 84.6 84.0
-------- -------- -------- --------
Gross profit 15.4 16.3 15.4 16.0
Selling, general and administrative 6.3 5.8 6.7 6.0
-------- -------- -------- --------
Income from operations 9.1 10.5 8.8 10.0
Interest income (expense), net .3 .4 .2 (.4)
Income taxes 3.6 4.0 3.4 3.5
-------- -------- -------- --------
Net income 5.8 6.9 5.6 6.1
-------- -------- -------- --------
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THREE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1995
Net sales for the three months ended September 30, 1996 increased by
57% to $57.5 million from $36.7 million for the three months ended September 30,
1995. The number of homes sold during the quarter increased 44% to 2,741 homes
from 1,900 in the third quarter of 1995. Substantially all of the increase in
homes sold resulted from Spirit which was acquired in October 1995.
Multi-sectional homes increased to 22.9% of homes sold during the third quarter
of 1996 from 15.8% in the same quarter of 1995. The average price of a home sold
increased 8.4% to $20,967 in 1996 from $19,336 in 1995 due, in part, to the
higher mix of multi-sectional homes and the higher price for the Spirit
single-section homes.
Cost of sales includes costs of raw materials, direct labor, service
and warranty expense, insurance and payroll taxes. Cost of sales during the
third quarter of 1996 increased 58% to $48.6 million from $30.7 million for the
third quarter of 1995. Cost of raw materials and direct labor, which are two of
the largest components of cost of sales, increased to $37 million and $6.7
million, respectively, for the third quarter of 1996 from $24.2 million and $4.1
million, respectively, for the third quarter of 1995 primarily as a result of
increased sales volume. As a percentage of net sales, cost of sales for the
third quarter of 1996 increased to 84.6% from 83.7% in the third quarter of
1995, due to increases in direct labor, warranty and other overhead costs
including depreciation, repairs and supplies which were offset, in part, by
decreases in raw materials. A portion of the increase in direct labor and
certain of the overhead costs result from the opening of a new multi-sectional
plant at Spirit during the quarter and from the ramp up of production of a
second new single-section plant which started production in June 1996. As a
result of this expansion, Spirit has had to significantly increase the size of
its labor force which has resulted in approximately $300 thousand of costs as
employees are recruited, trained and production levels are increased.
Selling, general and administrative expenses for the third quarter of
1996 increased by 71% to $3.6 million from $2.1 million in the third quarter of
1995. As a percentage of net sales, selling, general and administrative expense
increased to 6.3% for the third quarter of 1996 from 5.8% for the third quarter
of 1995 as a result of higher selling and promotional costs, due in part to the
higher percentage of such costs for sales at Spirit Homes.
The Company expects that certain of the costs associated with the
training of employees and the ramp up of production at its two new Spirit plants
will continue into the fourth quarter of 1996. These costs coupled with
increasingly competitive conditions in its market at the retail or dealer level
will restrain future income growth. Accordingly, the Company anticipates that
its earnings per share for the fourth quarter of 1996 will be equal to or
slightly below the $.33 per share Belmont reported in the fourth quarter of
1995.
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NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1995
Net sales for the nine months ended September 30, 1996 increased 75% to
$170.6 million from $97.3 million for the nine months ended September 30, 1995.
The number of homes sold increased 62% to 8,198 in 1996 from 5,073 in 1995. Of
this increase, 72% was attributable to Spirit Homes which was acquired in
October 1995. Increases in the average home selling price due to price and mix
changes also contributed to the dollar increase in 1996 sales.
Costs of sales for the nine months ended September 30, 1996 increased
77% to $144.3 million from $81.7 million for the nine months ended September 30,
1995. Costs of raw materials and direct labor increased to $108.5 million and
$19.8 million, respectively, in 1996 from $63.9 million and $10.3 million,
respectively, in 1995 primarily as a result of increased sales volume. As a
percentage of net sales, cost of sales for the nine months ended September 30,
1996 increased to 84.6% from 84% due primarily to increased direct labor and
warranty costs which were offset in part through reduced raw material costs.
Selling, general and administrative expenses for the nine months ended
September 30, 1996 increased 92% to $11.3 million from $5.9 million in the
comparable period of the prior year. As a percentage of net sales, selling,
general and administrative expense increased to 6.7% for the nine months ended
September 30, 1996 from 6.0% for the nine months ended September 30, 1995 as a
result of higher selling and promotional costs, due in part to the higher
percentage of such costs at Spirit Homes, and to higher legal and professional
costs associated with the Company's acquisition program.
Net interest income was $384 thousand for the nine months ended
September 30, 1996 compared with net interest expense of $401 thousand for the
nine months ended September 30, 1995. In January 1996 the Company used a portion
of the proceeds of a secondary public stock offering to retire substantially all
outstanding interest bearing debt.
LIQUIDITY AND CAPITAL RESOURCES
Cash and equivalents including certificates of deposit were $15.4
million at September 30, 1996 compared to $8.8 million at year end December 31,
1995.
In January 1996 the Company raised approximately $11.8 million in net
cash proceeds from the secondary sale of 800 thousand shares of stock to the
public. Approximately $10.9 million of these proceeds were used to retire all
but $623 thousand of interest bearing debt. During the third quarter the Company
borrowed $2.2 million under a bank line of credit pursuant to the new plant
expansion at Spirit. In June 1995 the Company raised $15.3 million in net cash
proceeds from the initial sale of its stock to the public and used $13.8 million
for the retirement of debt and preferred stock. As a result of these
transactions, net cash provided by financing
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activities for the nine months ended September 30, 1996 was $3.7 million
compared with $1.5 million for the nine months ended September 30, 1995.
Net cash provided by operating activities was $10.4 million for the
nine months ended September 30, 1996 compared to $6.9 million for the nine
months ended September 30, 1995 primarily as a result of the increase in net
income to $9.5 million for the nine months ended September 30, 1996 from $5.9
million in the comparable period of 1995. Accounts receivable are funded by
approved dealer floor-plan financing and usually are collected within 15 days.
All homes are manufactured against orders, and currently, no homes are produced
for inventory.
The Company utilized $4.8 million for the purchase of property, plant
and equipment during the nine months ended September 30, 1996 compared with $2.9
million during the nine months ended September 30, 1995. Expenditures during
1996 were for the addition of two plants at Spirit Homes while the expenditures
in 1995 were for the completion of the Company's fourth plant at Belmont. In
addition, during 1996 the Company has utilized $2.5 million for investment in
two raw material supply joint ventures which will produce passage doors,
paneling and cabinet doors.
On October 1, 1996 the Company announced its intention to utilize
approximately $2.5 million for the construction of a new 100,000 square foot
plant for the production of a new line of multi-sectional homes. The Company
expects that this facility will be completed by March 1997 and will be financed
through existing cash resources.
On October 25, 1996 (subsequent to the condensed consolidated balance
sheets included herein) the Company acquired 100% of the stock of Bellcrest
Homes, Inc. a producer and manufacturer of homes in Millen, Georgia for $9.5
million in cash at closing and $3.5 million in potential incentive payments over
the next three years based on certain performance criteria. The Company financed
this purchase through existing cash resources including borrowing $5 million
under its bank credit lines.
The Company plans to continue its current growth strategy of entering
into supply joint ventures and acquiring or constructing new production
facilities when necessitated by consumer demand. In order to provide any
additional funds necessary for the continued pursuit of this growth strategy,
the Company may incur, from time to time, additional short- and long-term bank
indebtedness, including mortgage loans and industrial revenue bond financing,
and may issue, in public or private transactions, equity and debt securities,
the availability and terms of which will depend upon market and other
conditions.
The Company's backlog at September 30,1996 was approximately $23.5
million compared to $26.1 million at September 30, 1995. The Company considers
its order backlog to be firm orders and has had limited cancellation experience
to date.
Certain forward-looking statements in this Quarterly Report on Form
10-Q (including, without limitation,
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statements regarding the growth and financing strategies of the Company,
projections of revenues, income, earnings per share or other financial items)
involve known and unknown risks, uncertainties and other factors which may
cause the actual results, performance or achievements of the Company to be
materially different from any future results, performance, or achievements
expressed or implied by such forward-looking statements. Such factors include
general economic and business conditions; industry trends; demographic changes;
competition; raw material and labor costs and availability; import protection
and regulation; relationships with customers, distributors or dealers; changes
in the business strategy or development plans of the Company; the availability,
terms and development of capital; changes in or failure to identify or
consummate successful acquisitions or to assimilate the operations of any
acquired businesses with those of the Company.
PART II--OTHER INFORMATION
Item 6.
(a) Exhibits
Exhibit 27. Financial Data Schedule (for SEC use only).
(b) Reports on Form 8-K
(i) The Company filed a report on Form 8-K (Item 5) announcing its
agreement in principle with Bellcrest Homes, Inc. on
August 22, 1996.
(ii) The Company filed a report on Form 8-K (Items 2 and 5) on
November 12, 1996 announcing the closing of its acquisition
of Bellcrest Homes, Inc. and certain matters with respect to
its President and Chief Executive Officer, Jerold Kennedy.
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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.
BELMONT HOMES, INC.
Date: November 11, 1996 /s/ Jerold Kennedy
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President And CEO
Date: November 11, 1996 /s/ William A. Sheffield
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Chief Financial Officer
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