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, 1998.
- 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 July 24, 1998
----------------------
Class A Common Stock, $1.00 par value 2,233,896
Class B Common Stock, $1.00 par value 1,730,759
Page 1 of 11
INDEX
PART I - CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED) PAGES
General 3
Item 1. Consolidated Financial Statements -
Liberty Homes, Inc.
Consolidated Balance Sheet, as of
June 30, 1998 and December 31, 1997 4
Consolidated Statement of Income, for the
three months ended June 30, 1998
and 1997 5
Consolidated Statement of Income, for the
six months ended June 30, 1998
and 1997 6
Consolidated Statement of Cash Flows for the
six months ended June 30, 1998 and 1997 7
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis
of Financial Condition and
Results of Operations 9-10
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
Signature 11
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 with 1997. The results of
operations for the interim period presented are not necessarily indicative of
results to be expected for the year. The information included in this report
has not been examined prior to filing by an independent public accountant, and
is therefore, subject to any adjustments which may result from the year-end
examination of the Company's financial statements. 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, 1998 and December 31, 1997
June 30, December 31,
ASSETS 1998 1997
---- ----
Current assets:
Cash and cash equivalents $10,213,000 $15,797,000
Short term investments 5,300,000 5,250,000
Receivables 14,341,000 8,303,000
Inventories 14,237,000 11,982,000
Deferred tax asset 2,206,000 2,206,000
Prepayments and other 1,566,000 1,450,000
----------- -----------
Total current assets 47,863,000 44,988,000
Property, plant and equipment:
Land 1,524,000 1,280,000
Buildings and improvements 25,788,000 24,921,000
Machinery and equipment 19,264,000 18,463,000
----------- -----------
46,576,000 44,664,000
----------- -----------
Less accumulated depreciation 19,524,000 18,170,000
----------- -----------
27,052,000 26,494,000
----------- -----------
$74,915,000 $71,482,000
----------- -----------
----------- -----------
LIABILITIES
Current liabilities:
Accounts payable $ 5,681,000 $ 2,340,000
Dividend payable 279,000 279,000
Accrued compensation
and payroll taxes 2,989,000 2,276,000
Income taxes payable 517,000 170,000
Other accrued liabilities 10,363,000 12,302,000
----------- -----------
Total current liabilities 19,829,000 17,367,000
----------- -----------
Deferred income taxes 2,102,000 2,154,000
----------- -----------
Contingent liabilities (see notes)
SHAREHOLDERS' EQUITY
Capital Stock:
Class A, $1 par value
Authorized - 7,500,000 Shares
issued & outstanding - 2,234,000
in 1998 & 2,262,000 in 1997 2,234,000 2,262,000
Class B, $1 par value
Authorized - 3,500,000 Shares
issued & outstanding - 1,731,000
in 1998 & 1,731,000 in 1997 1,731,000 1,731,000
Other capital 83,000 83,000
Retained earnings 48,936,000 47,885,000
----------- -----------
52,984,000 51,961,000
----------- -----------
$74,915,000 $71,482,000
----------- -----------
----------- -----------
4
LIBERTY HOMES, INC.
CONSOLIDATED STATEMENT OF INCOME
for the three months ended June 30, 1998 and 1997
1998 1997
---- ----
Net sales $46,320,000 $46,188,000
Cost of sales 39,504,000 40,381,000
----------- -----------
Gross profit 6,816,000 5,807,000
Selling, general and administrative
expenses 4,724,000 4,195,000
----------- -----------
Operating income 2,092,000 1,612,000
Interest and other income 160,000 175,000
----------- -----------
Income before income taxes 2,252,000 1,787,000
Income tax expense 926,000 719,000
----------- -----------
Net income $ 1,326,000 $ 1,068,000
----------- -----------
----------- -----------
Share income per outstanding Common
Share $.34 $.26
----------- -----------
----------- -----------
Weighted average shares outstanding 3,946,000 4,138,000
----------- -----------
----------- -----------
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, 1998 and 1997
1998 1997
---- ----
Net sales $89,206,000 $81,319,000
Cost of sales 77,050,000 71,705,000
----------- -----------
Gross profit 12,156,000 9,614,000
Selling, general and administrative
expenses 9,266,000 7,921,000
----------- -----------
Operating income 2,890,000 1,693,000
Interest and other income 353,000 465,000
----------- -----------
Income before income taxes 3,243,000 2,158,000
Income tax expense 1,337,000 846,000
----------- -----------
Net income $ 1,906,000 $ 1,312,000
----------- -----------
----------- -----------
Share income per outstanding Common
Share $.48 $.31
----------- -----------
----------- -----------
Weighted average shares outstanding 3,988,000 4,175,000
----------- -----------
----------- -----------
Cash dividend per share:
Class A Common Stock $.14 $.14
----------- -----------
----------- -----------
Class B Common Stock $.14 $.14
----------- -----------
----------- -----------
6
LIBERTY HOMES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
for the six months ended June 30, 1998 and 1997
1998 1997
---- ----
Cash flows from operating activities:
Net income $ 1,906,000 $ 1,312,000
Adjustment to reconcile net income
to net cash used in operating activities -
Depreciation 1,354,000 1,143,000
Deferred income taxes (52,000) 18,000
Changes in assets and liabilities:
Receivables (6,038,000) (6,256,000)
Income taxes payable 347,000 (31,000)
Inventories (2,255,000) (2,032,000)
Prepayments and other (116,000) (107,000)
Trade accounts payable 3,341,000 2,765,000
Other liabilities (1,226,000) (2,953,000)
Dividends payable -- (15,000)
----------- -----------
Net cash used in operating activities (2,739,000) (6,156,000)
----------- -----------
Cash flows provided by (used in) investing activities -
Additions to property, plant and equipment (1,912,000) (1,056,000)
Redemption of (invested in) short-term investments (50,000) 11,900,000
----------- -----------
Net cash provided by (used in) investing activities (1,962,000) 10,844,000
----------- -----------
Cash flows used in financing activities -
Cash dividends paid (558,000) (573,000)
Retirement of common stock (325,000) (2,314,000)
----------- -----------
Net cash used in financing activities (883,000) (2,887,000)
----------- -----------
Net increase (decrease) in cash and
cash equivalents (5,584,000) 1,801,000
Cash and cash equivalents at beginning
of period 15,797,000 11,174,000
----------- -----------
Cash and cash equivalents at
end of period $10,213,000 $12,975,000
----------- -----------
----------- -----------
Supplemental disclosures of cash flow
information - cash paid during
the period for income taxes $ 1,070,000 $ 831,000
----------- -----------
----------- -----------
7
OTHER INFORMATION
SHORT TERM INVESTMENTS:
Short-term investments consist primarily of certificates of
deposits with original maturities greater than 90 days.
INVENTORIES:
Inventories, consisting primarily of raw materials, are stated at the
lower of cost or market, with cost determined on a first-in, first-out basis.
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 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, 1998 will not have a significant impact on the financial condition of
the Company.
Other Contingencies
Letters of Credit totaling $3,325,000 have been issued to the
Company's insurance carriers who have underwritten the Company's insurance
programs.
8
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
Cash, cash equivalents and short term investments as of June 30, 1998
and December 31, 1997 were $15,513,000 and $21,047,000, respectively. Working
capital as of June 30, 1998 and December 31, 1997 was $28,034,000 and
$27,621,000, respectively. The decrease of cash, cash equivalents and short
term investments has been caused by accounts receivable and inventory increases
as the Company's operations expand over the normal year end base, and by the
funding of various property, plant and equipment projects. Also during the six
months ended June 30, 1998, the Company repurchased a total of 28,000 shares of
common stock under the program initiated in 1994 and subsequently amended to
acquire up to 700,000 shares of its common stock.
Net sales for the second quarter of 1998 were $46,320,000, an increase
of $132,000 from the same quarter of 1997. The Company continues to increase
the number of multi-section homes it produces and sells. At the same time,
single-section home volume has declined. Net income for the quarter ended June
30, 1998 was $1,326,000 which was an increase of $258,000 from the second
quarter of 1997. Part of the net income improvement for 1998 results from the
elimination of start-up costs incurred during 1997 at the Company's newest plant
in Tuscumbia, Alabama. The increase in net income was further aided by
manufacturing cost improvements at the Company's other facilities.
9
These improvements were partially offset by increased selling, general and
administrative expenses.
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 product. Any changes affecting the
desire or ability of retail customers to purchase, such as cost, credit
availability and employment, 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 and June 1998 have been filed.
10
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 -
(Principal Financial and
Accounting Officer)
Dated August 14, 1998
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