<PAGE>
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 September 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) (I.R.S. 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.
<TABLE>
<CAPTION>
Shares of Outstanding
Class at November 5, 1998
----- ---------------------
<S> <C>
Class A Common Stock, $1.00 par value 2,224,496
Class B Common Stock, $1.00 par value 1,727,559
</TABLE>
1 of 11
<PAGE>
INDEX
PART I - CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED) PAGES
General 3
Item 1. Consolidated Financial Statements - Liberty Homes, Inc.
Consolidated Balance Sheet, as of September 30, 1998 and
December 31, 1997 4
Consolidated Statement of Income, for the
three months ended September 30, 1998
and 1997 5
Consolidated Statement of Income, for the
nine months ended September 30, 1998
and 1997 6
Consolidated Statement of Cash Flows for the
nine months ended September 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
<PAGE>
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
<PAGE>
LIBERTY HOMES, INC.
CONSOLIDATED BALANCE SHEET
as of September 30, 1998 and December 31, 1997
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
---- ----
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $11,829,000 $15,797,000
Short term investments 5,300,000 5,250,000
Receivables 16,696,000 8,303,000
Inventories 15,166,000 11,982,000
Deferred tax asset 2,206,000 2,206,000
Prepayments and other 1,552,000 1,450,000
----------- -----------
Total current assets 52,749,000 44,988,000
----------- -----------
Property, plant and equipment:
Land 1,524,000 1,280,000
Buildings and improvements 26,064,000 24,921,000
Machinery and equipment 19,384,000 18,463,000
----------- -----------
46,972,000 44,664,000
----------- -----------
Less accumulated depreciation 20,233,000 18,170,000
----------- -----------
26,739,000 26,494,000
----------- -----------
$79,488,000 $71,482,000
----------- -----------
----------- -----------
September 30, December 31,
1998 1997
---- ----
<S> <C> <C>
LIABILITIES
Current liabilities:
Accounts payable $7,653,000 $2,340,000
Dividend payable 277,000 279,000
Accrued compensation
and payroll taxes 4,043,000 2,276,000
Income taxes payable 386,000 170,000
Other accrued liabilities 11,418,000 12,302,000
----------- -----------
Total current liabilities 23,777,000 17,367,000
----------- -----------
Deferred income taxes 2,102,000 2,154,000
----------- -----------
Contingent liabilities (see notes)
SHAREHOLDER'S EQUITY
Capital Stock:
Class A, $1 par value
Authorized-7,500,000 Shares
Issued & outstanding-2,224,000
in 1998 & 2,262,000 in 1997 2,224,000 2,262,000
Class B, $1 par value
Authorized-3,500,000 Shares
Issued & outstanding-1,728,000
in 1998 & 1,731,000 in 1997 1,728,000 1,731,000
Other capital 83,000 83,000
Retained earnings 49,574,000 47,885,000
----------- -----------
53,609,000 51,961,000
----------- -----------
$79,488,000 $71,482,000
----------- -----------
----------- -----------
</TABLE>
4
<PAGE>
LIBERTY HOMES, INC.
CONSOLIDATED STATEMENT OF INCOME
for the three months ended September 30, 1998 and 1997
------------
<TABLE>
<CAPTION>
1998 1997
---- ----
<C> <C> <C>
Net sales $48,897,000 $43,861,000
Cost of sales 42,464,000 39,061,000
----------- -----------
Gross profit 6,433,000 4,800,000
Selling, general and administrative
expenses 4,849,000 4,012,000
----------- -----------
Operating income 1,584,000 788,000
Interest and other income
and expense 180,000 148,000
----------- -----------
Income before income taxes 1,764,000 936,000
Income tax expense 702,000 402,000
----------- -----------
Net income $1,062,000 $534,000
----------- -----------
----------- -----------
Share income per outstanding Common
Share $.27 $.13
----------- -----------
----------- -----------
Weighted average shares
outstanding 3,963,000 3,998,000
----------- -----------
----------- -----------
Cash dividend per share:
Class A Common Stock $.07 $.07
----------- -----------
----------- -----------
Class B Common Stock $.07 $.07
----------- -----------
----------- -----------
</TABLE>
5
<PAGE>
LIBERTY HOMES, INC.
CONSOLIDATED STATEMENT OF INCOME
for the nine months ended September 30, 1998 and 1997
------------
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Net sales $138,103,000 $125,180,000
Cost of sales 119,514,000 110,766,000
------------ ------------
Gross profit 18,589,000 14,414,000
Selling, general and
administrative expenses 14,115,000 11,933,000
------------ ------------
Operating income & expense 4,474,000 2,481,000
Interest and other income
and expense 533,000 613,000
------------ ------------
Income before income taxes 5,007,000 3,094,000
Income tax expense 2,039,000 1,248,000
------------ ------------
Net income $2,968,000 $1,846,000
------------ ------------
------------ ------------
Share income per outstanding Common
Share $.75 $.45
Weighted average shares
outstanding 3,979,000 4,115,000
------------ ------------
------------ ------------
Cash dividend per share:
Class A Common Stock $.21 $.21
------------ ------------
------------ ------------
Class B Common Stock $.21 $.21
------------ ------------
------------ ------------
</TABLE>
6
<PAGE>
LIBERTY HOMES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
for the nine months ended September 30, 1998 and 1997
---------------
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $2,968,000 $1,846,000
Adjustment to reconcile net income
to net cash used in operating activities -
Depreciation 2,063,000 1,809,000
Deferred income taxes (52,000) 27,000
Changes in assets and liabilities:
Receivables (8,393,000) (7,512,000)
Inventories (3,184,000) (3,977,000)
Prepayments and other (102,000) (19,000)
Accounts payable 5,313,000 3,949,000
Accrued liabilities 883,000 88,000
Income taxes payable 216,000 (31,000)
Dividends payable (2,000) (15,000)
------------ ------------
Net cash used in operating activities (290,000) (3,835,000)
------------ ------------
Cash flows provided by (used in) investing activities
Additions to property, plant and equipment (2,308,000) (1,276,000)
Redemption (purchase) of short-term investment (50,000) 10,695,000
------------ ------------
Net cash provided by (used in) investing activities (2,358,000) 9,419,000
------------ ------------
Cash flows used in financing activities -
Cash dividends paid (833,000) (853,000)
Retirement of common stock (487,000) (2,314,000)
------------ ------------
Net cash used in financing activities (1,320,000) (3,167,000)
------------ ------------
Net increase (decrease)in cash and cash equivalents (3,968,000) 2,417,000
Cash and cash equivalents at beginning of period 15,797,000 11,174,000
------------ ------------
Cash and cash equivalents at end of period $11,829,000 $13,591,000
------------ ------------
------------ ------------
Supplemental disclosures of cash flow information
cash paid during the period for income taxes $1,925,000 $1,170,000
------------ ------------
------------ ------------
</TABLE>
7
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 September 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.
REVENUE RECOGNITION:
The Company recognizes revenue when the product is shipped to independent
dealers.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Cash, cash equivalents and short term investments as of September 30,
1998 and December 31, 1997 were $17,129,000 and $21,047,000, respectively.
Working capital as of September 30, 1998 and December 31, 1997 was $28,972,000
and $27,621,000, respectively. The decrease of these items 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 nine months ended September 30, 1998, the
Company repurchased a total of 41,000 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 third quarter of 1998 were $48,897,000, an increase
of $5,036,000 over the same quarter of 1997. The product mix sold by the Company
follows the industry trend. Multi-section home sales increased during the
quarter, while at the same time, single-section home volume declined. Total unit
volume was higher. Net income for the quarter ended September 30, 1998 was
$1,062,000 which was a $528,000 increase from the same quarter of 1997. Net
income improved primarily as a result of increased gross profit. The gains in
gross profit reflect the Company's higher volume of sales and improved
production efficiency. 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,
9
<PAGE>
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 July, August or September, 1998 have been
filed.
10
<PAGE>
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: November 13, 1998
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 17,129,000
<SECURITIES> 0
<RECEIVABLES> 16,696,000
<ALLOWANCES> 0
<INVENTORY> 15,169,000
<CURRENT-ASSETS> 52,749,000
<PP&E> 46,972,000
<DEPRECIATION> 20,233,000
<TOTAL-ASSETS> 79,488,000
<CURRENT-LIABILITIES> 23,777,000
<BONDS> 0
0
0
<COMMON> 3,952,000
<OTHER-SE> 49,657,000
<TOTAL-LIABILITY-AND-EQUITY> 79,488,000
<SALES> 138,103,000
<TOTAL-REVENUES> 138,103,000
<CGS> 119,514,000
<TOTAL-COSTS> 14,115,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 5,007,000
<INCOME-TAX> 2,039,000
<INCOME-CONTINUING> 2,968,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,468,000
<EPS-PRIMARY> .75
<EPS-DILUTED> .75
</TABLE>
