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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark
One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
- --- OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998.
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
- --- OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
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.
PO Box 35, Goshen, Indiana 46527-0035
(Address of Principal Executive Offices) (ZIP Code)
Registrant's telephone number (219) 533-0431
Securities registered pursuant to Section 12 (g) of the Act:
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<CAPTION>
Name of Each Exchange
Title of Each Class on Which Registered
- ------------------- ---------------------
<S> <C>
Class A Common Stock NASDAQ
Class B Common Stock NASDAQ
</TABLE>
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this form 10-K [ X ]
As of March 15,1999, the aggregate market value of the voting Common Stock Class
B, held by nonaffiliated (based upon the average bid and ask prices on such
date) was approximately $3,184,000.
Number of shares outstanding of each of the registrant's classes of common stock
<TABLE>
<CAPTION>
Shares Outstanding
Class at March 15, 1999
----- --------------------
<S> <C>
Class A Common Stock, $1.00 par value 2,208,496
Class B Common Stock, $1.00 par value 1,727,559
The Exhibit Index is located on page 12.
</TABLE>
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PART I
ITEM 1. BUSINESS
Liberty Homes, Inc. (the "Company") was organized as an Indiana
corporation in 1970 as the successor to a business founded in 1941. The Company
designs, manufactures and sells at wholesale throughout most of the United
States a broad line of manufactured homes under various trade names. Constructed
on a wheel-mounted under-carriage, a manufactured home is a relocatable
factory-built dwelling which, when moved to a location, properly set up and
connected to utilities, provides permanent housing. A manufactured home may also
consist of two or more units which are moved separately and when securely joined
together are called multi-sectional housing.
A manufactured home is to be distinguished from a travel trailer,
motor home or other recreational vehicle which is generally used for living
accommodations during relatively short periods, primarily for vacation and
recreational purposes.
The Company's typical manufactured home contains a living room, dining
area, kitchen equipped with range and refrigerator, two, three, four or five
bedrooms, and one or more baths complete with tub and/or shower, flush toilet
and lavatory. The homes are equipped with central heating, carpeting, a choice
of coordinated colors and interior decoration, and a wide range of floor plans.
Single section homes are 12, 14, 15 or 16 feet wide and vary in overall length
from 36 to 80 feet (including about 4 feet for the hitch). Multi-section homes
are two or more 12, 14, 15 or 16 foot wide sections, with overall lengths
ranging from 36 to 80 feet (including about 4 feet for the hitch).
The Company utilizes assembly line techniques in the production of its
homes. Lumber for walls, roofs, ceilings and floors, steel, wood or vinyl
siding, ceiling materials, windows, furniture, electrical and plumbing fixtures,
and many other items are purchased from numerous suppliers for fabrication or
assembly. Sources of material are readily available and the Company is not
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dependent upon any particular supplier for its raw materials or component parts.
The Company sells its products to numerous independent dealers, most of
whom also sell competing products. In the year ended December 31, 1998, the
Company's largest dealer accounted for approximately three percent of the
Company's sales. The Company generally manufactures its homes only after receipt
of orders from its dealers, and sales backlogs in the manufactured housing
industry are traditionally short.
Retail prices for the Company's single section homes typically range
from approximately $29,000 to $50,000 and from approximately $35,000 to $85,000
for multi-sections. The Company's homes generally fall within the lower price
range of the industry.
Manufactured homes were sold by the Company during 1998 to dealers in
most of the continental United States. Transportation charges from the point of
manufacture to the dealer are an important factor in the cost of a manufactured
home and often influence a dealer's preference for similar products. In general,
most retail outlets are located within a 500 mile radius of the manufacturing
facility serving the dealer.
In each of the geographical areas in which the Company operates, it
faces direct competition from other manufacturers, some of whom are larger than
the Company and possess greater financial resources. This group of competitors
consists of manufacturers who compete with the Company on a national level as
well as many others who are only regional in scope. According to data from the
National Conference of States on Building Codes and Standards (NCSBCS) at the
end of 1998, there were 89 companies operating 330 facilities producing
manufactured housing in the United States. Due to transportation complexities,
none of the Company's products, and very little of the industry's product, is
shipped outside the United States. Since the manufactured homes sold by the
Company are a form of housing, changes in factors which influence the national
housing market usually affect the Company's business, either beneficially or
adversely.
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In addition, the quality and number of manufactured home parks with
space available for new homes sometimes affect the market for manufactured
homes. Manufactured home parks and placement of manufactured homes on
real-estate type scattered sites or subdivisions are generally subject to local
zoning ordinances and other local regulations. Any limitation of the
availability of space for manufactured homes due to any cause, including such
local ordinances, could adversely affect the Company's business.
In 1998, Statesville Housing Center, Inc. was formed as a wholly owned
subsidiary of the Company and began operations as a retail dealer of the
Company's homes. This retail center is located in Statesville, North Carolina
within a mile of one of the Company's manufacturing plants.
During 1997, the Company formed Gipper Development Company, LLC, a
majority owned entity, which is developing a manufactured housing community in
Northern Indiana. The development includes only homes manufactured by the
Company.
In 1994, the Company formed Waverlee Homes, Inc., a majority owned
subsidiary, which operates production facilities in Hamilton and Tuscumbia,
Alabama. This operation incorporates many state-of-the-art manufacturing
concepts and enhances the Company's ability to serve the market in the South
Central United States.
In 1988, the Company's wholly-owned subsidiary, Irish Homes, Inc.,
commenced operations to develop subdivisions using the Company's manufactured
homes. The homes located within subdivisions include a garage and are placed on
a foundation with landscaping, concrete and other work, performed on site by
independent contractors.
The Company's ability to sell to its dealers is dependent to a
considerable degree upon the availability and terms of financing both to its
dealers and to the retail customers of its dealers. Consequently, increases in
interest rates or tightening of credit through governmental action or otherwise,
could adversely affect the Company's business. Conversely, a lowering of
interest rates
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or relaxation of credit restraints could improve the Company's
business.
Because of their size and weight, manufactured homes are generally
transported by specially modified trucks. Most states require special permits
for the movement of such homes. Typically, these permits prescribe the roads to
be used, speed limits, hours during which travel is permitted, types of
signaling devices which must be used, and other such restrictions, primarily for
safety purposes. Seasonal weather conditions can also be a factor for
transportation.
The construction of manufactured homes, and the plumbing, heating and
electrical systems installed therein, are subject to the National Manufactured
Home Construction and Safety Standards promulgated by the U.S. Department of
Housing and Urban Development (HUD) pursuant to authority granted them by the
National Manufactured Home Construction and Safety Standards Act of 1974. HUD
has also promulgated lengthy and complex regulations to implement and enforce
the construction standards, and there are substantial penalties for deviations
from the regulations.
Dealers who purchase from the Company generally obtain inventory
financing from financial institutions (usually banks or finance companies) on a
"floor plan" basis whereby the financial institution obtains a lien upon, or
title to, all or part of a dealer's inventory. To assist dealers in obtaining
such financing, the Company, in accordance with trade practice, generally enters
into repurchase agreements with lending institutions whereby the Company, during
the period (generally not in excess of one year) pending sale to a retail
customer, agrees to repurchase a home so financed in the event of the dealer's
default and subsequent inability to repay the amount borrowed from the financial
institution. In the event of repurchase, the Company will experience a loss if
the repurchase price paid to the financial institution plus any related costs of
repossession (e.g., freight, repairs) exceed the proceeds received by the
Company from resale of the home repurchased. The Company's losses under these
dealer repurchase agreements have not been
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significant.
Retail customers often finance their purchases with funds borrowed from
banks, finance companies and savings and loan associations. Such retail finance
arrangements sometimes call for an effective interest rate slightly higher than
that imposed for conventional home mortgage financing.
In 1990, the Company formed a wholly-owned subsidiary, Arcadian
Financial Services, Inc., to operate as a mortgage loan broker. After six years
of operation, the Company decided to close Arcadian during 1996. All mortgages
written during the period of operation have been sold to secondary financial
markets, servicing released.
EMPLOYEES
As of March 13, 1999, the Company had approximately 1,400 full-time
employees.
ITEM 2. PROPERTIES.
<TABLE>
<CAPTION>
LOCATION
<S> <C>
Goshen, Indiana Leola, Pennsylvania
Syracuse, Indiana Sheridan, Oregon
Yoder, Kansas Ocala, Florida
Dorchester, Wisconsin Statesville, North Carolina
Plant #1 Hamilton, Alabama
Plant #2 Tuscumbia, Alabama
</TABLE>
All of the Company's facilities are manufacturing facilities, except for the
Goshen, Indiana location which is the Company's executive office and engineering
and design center.
The Company owns all of its properties in fee simple and believes that
its facilities and equipment contained therein are well maintained and in good
condition. All of the Company's manufacturing facilities are intended for the
manufacture of manufactured homes, and in the Company's judgment, all are
adequate for their current use.
The Company's plants currently in production are utilized during one
shift per day.
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ITEM 3. LEGAL PROCEEDINGS.
The Company is party to various legal proceedings from the normal
course of operations. The Company has provided for anticipated losses resulting
from the litigation. In management's opinion, the Company has adequate legal
defenses and does not believe these suits will materially affect the Company's
operations or financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted to a vote of security holders for the
three months ended December 31, 1998.
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's 1998 Annual Report to Shareholders is an exhibit of this
filing. The information under the caption "Capital Stock" of the report is
incorporated by reference as Item 5 of this filing.
ITEM 6. SELECTED FINANCIAL DATA.
The Company's 1998 Annual Report to Shareholders is an exhibit of this
filing. The information under the caption "Selected Financial Data" of the
report is incorporated by reference as Item 6 of this filing.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The Company's 1998 Annual Report to Stockholders is an exhibit of this
filing. The information contained in this report under the title Management's
Discussion and Analysis of Financial Condition and Results of Operations is
incorporated by reference as Item 7 of this filling.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Company's 1998 Annual Report to Stockholders is an exhibit of this
filing. The information contained in the 1998, 1997 and 1996 consolidated
financial statements and footnotes thereto, together with the report thereon of
Crowe, Chizek and Company LLP dated February 17, 1999, is incorporated by
reference as Item 8 of this filing.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Edward J. Hussey, age 81, has been President, Chairman of the Board and
a Director of the Company (or it predecessors) since 1960, and is the father of
Edward Joseph Hussey and Michael F. Hussey.
Edward Joseph Hussey, age 51, is an attorney and a son of Edward J.
Hussey. He has been a Director of the Company since 1981, Secretary of the
Company since 1985 and was named Vice President of the Company in 1990. In
September, 1987, he began employment with the Company on a full time basis.
Since 1975, he has been associated with the law firm of Hodges & Davis P.C.,
where he is still a shareholder.
Michael F. Hussey, age 42, has been employed by the Company since 1980.
He was named Vice President of Finance in 1984 and became a Director in 1988. He
is the son of Edward J. Hussey.
David M. Huffine, age 50, has been a Director of the Company since
1988. He has also held the position of President of I.M. Homes, Inc., Rocky
Ford, Colorado since 1997. Prior thereto, he was President of Sky View Homes,
Inc., Chairman of the Board of Rampart Investigations, and
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Vice President of Calumet Securities Corporation.
Mitchell Day, age 43, has been a Director since 1995. He has also been
President of Day Equipment Corporation, Goshen, Indiana since 1984.
Ralph D. Ray, age 66, has been employed in various management positions
with the Company for 30 years. He has been Treasurer of the Company since 1984.
Dorothy L. Peterson, age 87, has been employed with the Company since
1952. She was appointed Assistant Treasurer in 1985.
Marc A. Dosmann, age 46, joined the Company in February, 1995 as Vice
President and Chief Financial Officer. From January, 1990 to February, 1995, he
was Corporate Controller of Leer, Inc.
Bruce A. McMillan, age 47, has served the Company in various capacities
for 25 years. He was appointed to the position of Vice President of Sales in
1994.
Ronald Atkins, age 48, has served the Company in manufacturing and
purchasing functions since 1981. During 1996, he was appointed to the position
of Vice President of Purchasing.
Nader Tomasbi, age 39, joined the Company in July 1994. In 1998, he was
appointed as Vice President of Engineering and Design.
Brian L. Christner, age 39, joined the Company in December 1994 as
Controller. Previously he was Controller at Life Treatment Centers, Inc.
ITEM 11. EXECUTIVE COMPENSATION.
The Company's Proxy Statement for the Annual Meeting of Shareholders to
be held on April 29, 1999 includes information under the caption "Executive
Compensation (SUMMARY COMPENSATION TABLE) and under the caption "Shareholder
Return Performance" (PERFORMANCE GRAPHS). Those sections are exhibits of this
filing and are incorporated by reference as Item 11 of this filing.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The Company's Proxy Statement for the Annual Meeting of Shareholders to
be held on April 29, 1999 includes information regarding SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS. This section is an exhibit of this filing and is
incorporated by reference as Item 12 of this filing.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
In 1998, The Company sold its product to I.M. Homes, Inc., Rocky Ford,
Colorado. I.M. Homes is owned by David M. Huffine, a director of the Company.
Sales by the Company to I.M. Homes were arms length transactions and represent
less than one percent of the Company's sales.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) 3. EXHIBITS
The exhibits filed with this Form 10-K are listed in the exhibit index
located on page 12.
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the three months ended
December 31, 1998.
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SIGNATURES
Following the requirements of Section 13 or 15(d) 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)
March 29, 1999 By: /s/ Marc A. Dosmann
-------------------
Marc A. Dosmann
Vice President - CFO
(Principal Financial and Accounting Officer)
Following the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/ Edward J. Hussey President, Director, Chairman of the Board of
- ------------------- Directors (Principal Executive Officer)
Edward J. Hussey March 29, 1999
/s/ Edward Joseph Hussey Director, Vice President, Secretary & Assistant
- ------------------------ Treasurer
Edward Joseph Hussey March 29, 1999
/s/ Michael F. Hussey Director and Vice President - Finance
- -------------------- March 29, 1999
Michael F. Hussey
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EXHIBIT INDEX
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Page
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3(a) Articles of Incorporation of the Company. *
(File #0-5555, Form 10-K for the year ended December 31, 1984)
3(b) Amendment to Articles of Incorporation. * (File #0-5555, Form 10-Q for
the quarter ended March 31, 1985, Exhibit 4).
3(c) By-laws of the Company. *
(File #0-5555, Form 10-K for the year ended December 31, 1987)
10(a) Employment Agreement between the Company *
and Edward Joseph Hussey dated September 14, 1993
(File #0-5555, Form 10-K for the year ended December 31, 1993).
10(b) Employment Agreement between the Company and Michael F. Hussey *
dated September 14, 1993 (File #0-5555, Form 10-K for the year
ended December 31, 1993).
10(c) Split-Dollar Insurance Plan effective June 11, 1993 between the *
Company and Nancy A. Parrish and Michael F. Hussey, Trustees for
the Edward Joseph Hussey 1993 Irrevocable Trust (File #0-5555,
Form 10-K for the year ended December 31, 1993)
10(d) Split-Dollar Insurance Plan effective June 11, 1993 between *
the Company and Nancy A. Parrish and John P. Hussey, Trustees
for the Michael F. Hussey 1993 Irrevocable Trust
13 Annual Report to Shareholders for 1998 13
(Except for those portions of this report which are expressly incorporated
by reference in this Form 10-K, the information contained in such 1998
Annual Report to Shareholders is not deemed "filed" as part of this Form 10-K).
21 List of Subsidiaries 29
99(a) Executive Compensation - SUMMARY COMPENSATION TABLE 30
99(b) Shareholder Return Performance - PERFORMANCE GRAPH 31
99(c) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS 32
</TABLE>
* Incorporated by reference
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Exhibit 13
THE COMPANY
LIBERTY HOMES, INC. and Subsidiaries design, manufacture and sell a broad line
of single and multi-section manufactured homes to numerous independent dealers
throughout most of the United States. The Company currently operates
manufacturing plants in Syracuse, Indiana; Yoder, Kansas; Dorchester, Wisconsin;
Leola, Pennsylvania; Sheridan, Oregon; Ocala, Florida; Statesville, North
Carolina; Hamilton, Alabama; and Tuscumbia, Alabama. Corporate offices,
including engineering and design facilities, are located in Goshen, Indiana.
SELECTED FINANCIAL DATA
as of or for the year ending December 31,
(Amounts in Thousands Except per Share Data)
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<CAPTION>
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Sales $ 184,920 $ 167,837 $ 168,139 $ 164,753 $ 125,035
Net income $ 4,562 $ 3,034 $ 4,553 $ 6,356 $ 4,824
Net income per share $ 1.15 $ .74 $ 1.06 $ 1.42 $ 1.06
Total assets $ 77,219 $ 71,482 $ 72,166 $ 69,127 $ 61,013
Long term obligations -- -- -- -- --
Cash dividends per share:
Class A common stock $ .28 $ .28 $ .28 $ .28 $ .28
Class B common stock $ .28 $ .28 $ .28 $ .28 $ .28
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES - Cash and cash equivalents and short-term
investments as of December 31, 1998 and 1997 totaled $23,741,000 and
$21,047,000, respectively. Working capital was $31,075,000 at year end 1998 and
$28,163,000 at year end 1997. There was no debt at December 31, 1998 and 1997.
Historically, the Company's financing needs have been met through funds
generated internally.
The Company invested $3,282,000 in capital expenditure programs during 1998. The
most notable program was an expansion of the Yoder, Kansas facility. The
remaining projects were spread throughout the Company's other nine manufacturing
facilities and included improvements to production efficiency and replacement of
existing equipment.
Additionally, the Company continued its efforts to repurchase shares of its
Class A and Class B Common Stock under a program approved by its Board of
Directors in 1994 and amended in 1996 and 1997. At the end of 1998, a total of
604,000 Class A Common Shares and 15,000 Class B Common Shares had been
repurchased and cancelled. The Company plans to continue such repurchases on the
open market or in negotiated transactions at management's discretion.
Liberty Homes, Inc. Page 13 1998 Annual Report
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During 1999, the Company anticipates that cash flow from operations and cash
reserves will be sufficient to meet the requirements for capital expenditures,
working capital, stock repurchases and dividend payments.
RESULTS OF OPERATIONS - Net sales in 1998 were $184,920,000, a $17,083,000 or
10% increase from 1997 net sales of $167,837,000. Net sales in 1997 decreased
slightly by $302,000 from $168,139,000 in 1996. Comparing 1998 to 1997, the
Company experienced a 7% increase in the number of home sections shipped and a
4% increase in homes shipped. The Manufactured Housing Institute's report on
industry statistics for the states in which the Company produces homes shows a
7% increase of home sections shipped and a 5% increase in homes shipped.
The product mix continues to move from single-section homes to multi-section
homes. During 1998, 55% of the homes sold by the Company were homes comprised of
two or more sections. Multi-section shipments were 51% of 1997 home shipments.
Gross profit in 1998, 1997 and 1996 was $25,702,000, $20,246,000 and $21,527,000
respectively. Higher sales volume accounted for the increase in gross profit
during 1998.
Selling, general and administrative expenses have grown as a result of the
Company's increased operations and volume. These expenses amounted to
$19,024,000 in 1998, $16,366,000 in 1997 and $16,016,000 in 1996.
Interest and other income was $1,286,000 in 1998, $1,027,000 in 1997 and
$2,142,000 in 1996. During 1996, the Company sold its idle facilities in Georgia
and Pennsylvania for pre-tax gains totaling $903,000. The remaining amounts are
income from the investment of cash during the year and variances are due to
varying interest rates and the amount of cash available to invest.
The Company had net income of $4,562,000 in 1998 compared to $3,034,000 in 1997
and $4,553,000 in 1996. The net income for 1998 increased over 1997 for several
reasons. As mentioned above, increased unit volume provided greater revenue.
This along with the ability of the Company to spread manufacturing overhead over
a higher volume led to improved profits. Although, interest rates fell, higher
cash balances resulted in higher interest income which also increased net
income.
OUTLOOK AND RISK FACTORS - The Company believes consumer housing needs and
favorable retail financing for its homes has had a positive impact on the
Company. It should be noted, however, sales backlogs are traditionally short,
and dealer inventories do not fluctuate substantially. Order activity at the
Company is indicative of the day to day retail sales activity of its products.
Any changes affecting retail customer demand, such as cost, availability of
favorable credit and unemployment, have an immediate effect on the Company's
operations.
Liberty Homes, Inc. Page 14 1998 Annual Report
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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 a period of up to one year after delivery to the dealer,
if the dealer defaults on its financing obligations. Repurchased units are
resold, although some discounting may be necessary and some loss may occur.
Prior year losses on such repurchases have not been material nor are they
expected to be during 1999.
The U.S. Department of Housing and Urban Development (HUD) regulates the
manufactured housing industry. HUD has in the past issued regulations which
affected the content and therefore cost of manufactured homes. Such increases in
cost can have an adverse effect on the industry and the Company. However, the
Company is unable to quantify the direct impact on the Company's sales. The
likelihood of future regulatory activity by HUD is unknown and consequently
there can be no assessment of potential future adverse effects of new HUD
regulations if such regulations do occur.
YEAR 2000 - Liberty Homes employs several electronic data processing (EDP)
systems for administrative and reporting purposes. In 1995, the Company began a
process to analyze the need to enhance its systems to accommodate planned growth
of the Company and to meet additional management information needs. As the
Company determined the systems it wished to enhance, it also discovered the need
to ensure all of its systems were able to handle year 2000 dates. This Year 2000
(Y2K) compliance issue then became a part of the Company's EDP enhancement
program. In March of 1996, the Company contracted for an overall upgrade of its
EDP system which, among many things would provide Y2K compliance for a
substantial portion of its EDP systems. This project is well on the way to
completion.
Additionally, the Company has tested and upgraded all of its information and
communication systems hardware for Y2K compliance, installed software updates
containing Y2K compliance code and initiated projects to bring internally
developed systems into Y2K compliance. Overall, the Company plans to be done
with all of its Y2K compliance efforts by July 1, 1999. Because of the positive
results of its remediation efforts to date, the Company does not have a
contingency plan, nor does it intend to create one at this time.
The Company's manufacturing processes do not utilize systems that are materially
reliant on Y2K compliance. Therefore, the Company's ability to generate product
will not be adversely affected by any Y2K issues.
The Company sells its product to numerous independent dealers, none of which
account for a material portion of the Company's sales. The Company believes the
risk of Y2K noncompliance associated with its dealer group is not significant.
The Company's operations rely on a variety of suppliers, wholesale and retail
finance sources, transportation companies and utilities. The Company is not
aware of any material
Liberty Homes, Inc. Page 15 1998 Annual Report
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compliance problems with these vendors, however, it will continue to monitor the
sufficiency of this group's Y2K compliance efforts. Liberty Homes believes the
sole failure of any vendor would not have a material adverse effect on the
Company's business.
The total cost to date and expected future cost for Y2K remediation is not
material. Internally generated funds are the source of funding these compliance
costs.
The Company believes that its Y2K compliance efforts will significantly reduce
the risk of any material adverse business interruptions caused by noncompliance.
However, this statement should not be considered a guarantee of such a reduction
in risk.
FORWARD LOOKING INFORMATION - The discussion above contains forward looking
statements regarding industry and company outlooks and risk factors. All such
forward looking statements are subject to 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 and the
condition of the economy and its effect on consumer confidence.
CAPITAL STOCK
The Company's Class A and Class B Common Stock are traded on the NASDAQ National
Market System. As of March 2, 1999, there were approximately 322 holders of
record of the Company's Class A Common Stock and approximately 224 holders of
record of the Company's Class B Common Stock. The following table shows the high
and low closing price per share for the Company's Class A and Class B Common
Stock for each of the quarters in 1998 and 1997 as reported by the National
Association of Securities Dealers, Inc., as well as cash dividends declared in
each quarter in 1998 and 1997.
<TABLE>
<CAPTION>
Price Per Share ($) Cash Dividends
---------------------
1998 1997 Per Share
---- ---- ---------
High Low High Low 1998 1997
---- --- ---- --- ---- ----
<S> <C> <C> <C> <C> <C> <C>
First Quarter:
Class A Common 10-3/4 9 12-3/4 9-3/4 $.07 $.07
Class B Common 11 10 13-3/16 11-3/4 $.07 $.07
Second Quarter:
Class A Common 11-3/4 9-5/8 10-3/4 9-1/8 $.07 $.07
Class B Common 11-3/8 11 10-1/2 10 $.07 $.07
Third Quarter:
Class A Common 15-1/4 9-3/8 10-1/4 9 $.07 $.07
Class B Common 15 10-1/4 10-3/4 9-1/2 $.07 $.07
Fourth Quarter:
Class A Common 11-15/16 10-5/8 10-1/2 8-1/8 $.07 $.07
Class B Common 12 10-1/2 10 9 $.07 $.07
</TABLE>
Liberty Homes, Inc. Page 16 1998 Annual Report
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March 17, 1999
To Our Shareholders:
During 1998, Liberty Homes, Inc. generated net sales of $ 184,920,000. This
amount represents an increase of $17,083,000 from the prior year. The Company's
success in the markets it serves parallels the 1998 experience of the whole
industry. Net income for 1998 increased to $4,562,000 from $3,034,000 in 1997.
The Company aggressively expanded its production capacity by completing a new
manufacturing facility at the end of each of 1994, 1995 and 1996. This expansion
has provided the manufacturing base and market alignment to allow in part our
improved performance in 1998.
We realize our success is the result of many factors and we want to take this
opportunity to thank our shareholders, employees and suppliers for their efforts
and continuing support.
Very truly yours,
LIBERTY HOMES, INC.
Edward J. Hussey
President
Liberty Homes, Inc. Page 17 1998 Annual Report
<PAGE>
CONSOLIDATED BALANCE SHEET
December 31, 1998 and 1997 (Amounts in Thousands)
ASSETS
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $18,441 $15,797
Short term investments 5,300 5,250
Receivables 9,107 8,303
Inventories 13,171 11,982
Deferred tax asset 2,500 2,206
Prepayments and other 1,609 1,450
------- -------
Total current assets 50,128 44,988
------- -------
PROPERTY, PLANT AND EQUIPMENT:
Land 1,524 1,280
Buildings and improvements 26,662 24,921
Machinery and equipment 19,760 18,463
------- -------
47,946 44,664
Less accumulated depreciation 20,855 18,170
------- -------
27,091 26,494
------- -------
$77,219 $71,482
------- -------
------- -------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
Liberty Homes, Inc. Page 18 1998 Annual Report
<PAGE>
LIBERTY HOMES, INC.
LIABILITIES
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 2,699 $ 2,340
Dividends payable 277 279
Income taxes payable 1,136 170
Accrued compensation & payroll taxes 2,897 2,276
Other accrued liabilities 12,044 11,760
------- -------
Total current liabilities 19,053 16,825
------- -------
DEFERRED INCOME TAXES 2,270 2,154
------- -------
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES 969 542
------- -------
CONTINGENT LIABILITIES
SHAREHOLDERS' EQUITY
CAPITAL STOCK:
Class A, $1 par value, Authorized - 7,500,000 shares
Issued and outstanding -
2,224,000 in 1998 and 2,262,000 in 1997 2,224 2,262
Class B, $1 par value, convertible
to Class A, authorized - 3,500,000 shares
Issued and outstanding -
1,728,000 in 1998 and 1,731,000 in 1997 1,728 1,731
OTHER CAPITAL 83 83
RETAINED EARNINGS 50,892 47,885
------- -------
54,927 51,961
------- -------
$77,219 $71,482
------- -------
------- -------
</TABLE>
Liberty Homes, Inc. Page 19 1998 Annual Report
<PAGE>
CONSOLIDATED STATEMENT OF INCOME
For the Years Ended December 31, 1998, 1997 and 1996
(Amounts in Thousands, Except per Share Data)
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net sales $ 184,920 $ 167,837 $ 168,139
Cost of sales 159,218 147,591 146,612
--------- --------- ---------
Gross profit 25,702 20,246 21,527
Selling, general and
administrative expenses 19,024 16,366 16,016
--------- --------- ---------
Operating income 6,678 3,880 5,511
Interest and other income 1,286 1,027 2,142
--------- --------- ---------
Income before minority interest and income taxes 7,964 4,907 7,653
Minority interest (384) (86) (108)
Income tax expense (3,018) (1,787) (2,992)
--------- --------- ---------
Net income $ 4,562 $ 3,034 $ 4,553
--------- --------- ---------
--------- --------- ---------
Net income per outstanding common share
Class A - basic $ 1.15 $ 0.74 $ 1.06
Class A - fully diluted 1.15 0.74 1.06
Class B - basic 1.15 0.74 1.06
Class B - fully diluted 1.15 0.74 1.06
</TABLE>
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
For the Years Ended December 31, 1998, 1997 and 1996
(Amounts in Thousands)
<TABLE>
<CAPTION>
CLASS A CLASS B
COMMON COMMON OTHER RETAINED
STOCK STOCK CAPITAL EARNINGS TOTAL
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1996 $ 2,621 $ 1,757 $ 83 $ 46,457 $ 50,918
Conversion from Class B to Class A 11 (11)
Repurchase and cancellation
of Class A Shares (155) (1,697) (1,852)
Net income for the year 4,553 4,553
Cash dividends-$.28 per share (1,196) (1,196)
-------- -------- -------- -------- --------
Balance December 31, 1996 2,477 1,746 83 48,117 52,423
Repurchase and cancellation
of Class A & Class B Shares (215) (15) (2,133) (2,363)
Net income for the year 3,034 3,034
Cash dividends-$.28 per share (1,133) (1,133)
-------- -------- -------- -------- --------
Balance December 31, 1997 2,262 1,731 83 47,885 51,961
Conversion from Class B to A 3 (3)
Repurchase and cancellation
of Class A Shares (41) (445) (486)
Net income for the year 4,562 4,562
Cash dividends-$.28 per share (1,110) (1,110)
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Balance December 31, 1998 $ 2,224 $ 1,728 $ 83 $ 50,892 $ 54,927
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
Liberty Homes, Inc. Page 20 1998 Annual Report
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Years Ended December 31, 1998, 1997 and 1996
(Amounts in Thousands)
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 4,562 $ 3,034 $ 4,553
-------- -------- --------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 2,685 2,406 2,181
Deferred income taxes (178) 50 (541)
Gain on sale of property, plant & equipment -- -- (882)
Minority interest 384 86 108
Changes in assets and liabilities:
Receivables (804) 237 (1,212)
Inventories (1,189) (1,771) 407
Prepayments and other (159) (258) (183)
Accounts payable 359 (1,017) 784
Accrued liabilities 903 122 1,175
Accrued income taxes 966 281 (347)
-------- -------- --------
Total adjustments 2,967 136 1,490
-------- -------- --------
Net cash provided by operating activities 7,529 3,170 6,043
-------- -------- --------
Cash flows from (used) in investing activities:
Additions to property, plant & equipment (3,282) (2,697) (7,245)
Disposal of (investment in) short term investments (50) 7,400 2,950
Disposal of property, plant & equipment -- -- 2,217
-------- -------- --------
Net cash provided by (used in)
investing activities (3,332) 4,703 (2,078)
-------- -------- --------
Cash flows used in financing activities:
Cash dividends paid (1,110) (1,133) (1,196)
Minority interest contributed capital 43 246 --
Retirement of common stock (486) (2,363) (1,852)
-------- -------- --------
Net cash used in financing activities (1,553) (3,250) (3,048)
-------- -------- --------
Net increase in cash and cash equivalents 2,644 4,623 917
Cash and cash equivalents, beginning of year 15,797 11,174 10,257
-------- -------- --------
Cash and cash equivalents, end of year $ 18,441 $ 15,797 $ 11,174
-------- -------- --------
-------- -------- --------
Supplemental disclosures of cash flow
information - cash paid during
the year for income taxes $ 2,301 $ 1,503 $ 3,879
-------- -------- --------
-------- -------- --------
</TABLE>
Liberty Homes, Inc. Page 21 1998 Annual Report
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries Statesville Housing Center, Inc. and Irish Homes,
Inc., and its majority owned subsidiaries, Waverlee Homes, Inc., and Gipper
Development Company, LLC. Upon consolidation, all intercompany accounts,
transactions and profits have been eliminated.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform with current
presentation.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include highly liquid investments which are converted
to known amounts of cash on a daily basis. These investments are carried at cost
which approximates market value.
SHORT-TERM INVESTMENTS
At December 31, 1998 and 1997, short term investments consisted primarily of
certificates of deposit with original maturities of 90 days to 12 months and
readily convertible to cash. These investments are carried at cost which
approximate fair market value. The Company intends to hold the certificates of
deposit until maturity. The Company's investments were maintained in two
financial institutions at December 31, 1998.
INVENTORIES
Inventories, consisting principally of raw materials, are stated at the lower of
cost or market, with cost determined on a first-in, first-out basis.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is recorded at cost. Depreciation is taken over
the estimated useful life of the asset and is provided principally on the
straight-line method. When assets are retired or disposed, the related cost and
accumulated depreciation is removed from the accounts and any resulting gain or
loss is included in operations. Operations are charged with all maintenance,
repairs and rearrangement expenses, while betterments and renewals which
increase the productive capacity of assets are capitalized and depreciated.
PRODUCT WARRANTY COSTS
Estimated warranty obligations are provided at the time of sale.
INCOME TAXES
The Company accounts for income taxes using the asset and liability method.
Under this method, deferred income taxes are recognized for the tax consequences
of temporary differences by applying enacted statutory tax rates applicable to
future years to differences between the financial statement carrying amounts and
the tax bases of ending assets and liabilities. The effect on deferred taxes of
a change in tax rates is recognized in income in the period that includes the
enactment date.
Liberty Homes, Inc. Page 22 1998 Annual Report
<PAGE>
EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board (the "Board") adopted
Statement of Financial Accounting Standards No. 128, "Earnings Per Share" ("FAS
128"), which establishes standards for computing and presenting earnings per
share ("EPS") by replacing the presentation of primary EPS with a presentation
of basic EPS. In addition, FAS 128 requires dual presentation of basic and
diluted EPS on the face of the income statement and requires a reconciliation of
the numerator and denominator of the diluted EPS calculation.
REVENUE RECOGNITION
Revenue is recognized when title is transferred upon shipment.
DELIVERY COSTS
Revenues and expenses related to delivery of the Company's products are included
in cost of sales in the statement of operations.
2. NATURE OF BUSINESS, RISKS AND UNCERTAINTIES:
The Company designs, manufactures and sells at wholesale a broad line of single
and multi-section manufactured homes to numerous independent dealers in the
United States who utilize floorplan financing arrangements with lending
institutions. Continued availability of credit to these dealers is a vital part
of the Company's business.
The process of preparing financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions
regarding certain assets, liabilities, revenues and expenses. Such estimates
primarily relate to unsettled transactions and events as of the date of the
financial statements. Accordingly, upon settlement, actual amounts may differ
from estimated amounts. The most notable assumptions included in the financial
statements involve product warranty costs, potential repurchase obligations on
dealer floorplan financing arrangements and reserves set for the Company's
self-funded workers' compensation insurance program and group medical benefit
plan. The Company maintains excess loss coverage on the workers' compensation
and medical benefit programs through various insurance contracts.
3. CAPITAL STOCK:
The shares of Class A Common Stock have no voting rights and are not
convertible; the shares of Class B Common Stock have voting rights of one vote
per share and are convertible into Class A Common Stock on a one for one basis.
The Class A Shares may carry a preferential dividend rate. However, in no event
will the dividend rate be less than the Class B shares. The weighted average of
all shares outstanding in 1998, 1997 and 1996 was 3,972,000 shares, 4,085,000
shares and 4,300,000 shares, respectively. The Board of Directors has approved a
stock repurchase program authorizing the Company to repurchase up to 800,000
outstanding shares of its Class A and Class B Common Shares on the open market
or in negotiated transactions at management's discretion. At December 31, 1998,
604,000 shares of Class A Common Stock and 15,000 shares of Class B Common Stock
had been repurchased and canceled under this program.
Liberty Homes, Inc. Page 23 1998 Annual Report
<PAGE>
4. INCOME TAXES:
The deferred taxes in the accompanying balance sheet includes the following
amounts of deferred tax assets and liabilities:
<TABLE>
<CAPTION>
(Amounts in Thousands) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Deferred tax asset $ 2,500 $ 2,206 $ 2,054
Deferred tax (liability) $(2,270) $(2,154) $(1,952)
------- ------- -------
Net deferred tax asset $ 230 $ 52 $ 102
------- ------- -------
------- ------- -------
</TABLE>
The tax effects of principal temporary differences and carry forwards are shown
in the following table:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Nondeductible accruals & reserves $ 2,435 $ 2,152 $ 1,998
Accelerated tax depreciation $(2,205) $(2,100) $(1,896)
------- ------- -------
$ 230 $ 52 $ 102
------- ------- -------
------- ------- -------
</TABLE>
The components of income tax expense are as follows:
<TABLE>
<CAPTION>
(Amounts in Thousands) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Current:
Federal $ 2,795 $ 1,687 $ 2,915
State 401 50 618
Deferred:
Federal (148) 39 (454)
State (30) 11 (87)
------- ------- -------
$ 3,018 $ 1,787 $ 2,992
------- ------- -------
------- ------- -------
</TABLE>
Income tax expense results in effective tax rates of 37.9 percent in 1998, 36.4
percent in 1997 and 39.1 percent in 1996; and reconciles with the statutory
United States federal income tax rate in 1998, 1997 and 1996, of 34 percent, as
follows:
<TABLE>
<CAPTION>
% OF INCOME BEFORE MINORITY INTEREST
INCOME TAX EXPENSE AND INCOME TAXES
------------------ ----------------
1998 1997 1996 1998 1997 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Income taxes at statutory
federal rate $2,708 $1,668 $2,602 34.0 34.0 34.0
State income taxes, net of
federal tax effect 245 119 351 3.1 2.4 4.6
Other 65 -- 39 0.8 -- 0.5
------ ------ ------ ------ ------ ------
$3,018 $1,787 $2,992 37.9 36.4 39.1
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
</TABLE>
The state income tax rates for 1997 were lower than historical rates due to tax
credits recognized in 1997.
Liberty Homes, Inc. Page 24 1998 Annual Report
<PAGE>
5. OTHER ACCRUED LIABILITIES:
Other accrued liabilities at December 31, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
(Amounts in Thousands) 1998 1997
---- ----
<S> <C> <C>
Dealer Rebates $ 6,219 $ 6,601
Product Warranty 1,764 1,360
Insurance 1,828 2,218
Other 2,233 1,581
------- -------
$12,044 $11,760
------- -------
------- -------
</TABLE>
6. CONTINGENT LIABILITIES:
REPURCHASE OBLIGATIONS
The Company is contingently liable as of December 31, 1998 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 has provided for
losses on homes as of December 31, 1998 for which it has received or expects
notification of repurchase. The Company's repurchase losses for 1998, 1997 and
1996 were not material. The Company believes any additional losses incurred
under outstanding repurchase agreements in excess of the accrual established as
of December 31, 1998, will not have a significant impact on the financial
condition of the Company.
OTHER CONTINGENCIES
Letters of Credit totaling $2,325,000 have been issued in conjunction with the
Company's self-funded workers' compensation program.
The Company is party to various legal proceedings from the normal course of
operations. The Company has provided for anticipated losses resulting from the
litigation. In management's opinion, the Company has adequate legal defenses and
does not believe these suits will materially affect the Company's operations or
financial position.
7. RETIREMENT PLAN:
The Company has a 401(k) retirement plan which covers substantially all
employees. The Company has agreed to match a portion of the employee
contributions made to the plan. The expense for this plan for the year ended
December 31, 1998, 1997 and 1996 was $239,000, $222,000 and $227,000,
respectively.
Liberty Homes, Inc. Page 25 1998 Annual Report
<PAGE>
8. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED):
The Company's results of operations in 1998 and 1997 by quarter are as follows:
(Amounts in Thousands except per share data):
<TABLE>
<CAPTION>
Quarter Ended Year
Ended
Mar 31 Jun 30 Sep 30 Dec 31 Dec 31
------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
1998:
Net sales $ 42,886 $ 46,320 $ 48,897 $ 46,817 $184,920
Gross profit 5,340 6,816 6,433 7,113 25,702
Net Income 580 1,326 1,062 1,594 4,562
Net Income per Class A Share
Basic 0.14 0.34 0.27 0.40
Fully Diluted 0.14 0.34 0.27 0.40 1.15
Net Income per Class B Share
Basic 0.14 0.34 0.27 0.40
Fully Diluted 0.14 0.34 0.27 0.40 1.15
1997:
Net sales $ 35,131 $ 46,188 $ 43,861 $ 42,657 $167,837
Gross profit 3,807 5,807 4,800 5,832 20,246
Net income 244 1,068 534 1,188 3,034
Net Income per Class A Share
Basic 0.06 0.26 0.13 0.29 0.74
Fully Diluted 0.06 0.26 0.13 0.29 0.74
Net Income per Class B Share
Basic 0.06 0.26 0.13 0.29 0.74
Fully Diluted 0.06 0.26 0.13 0.29 0.74
</TABLE>
Liberty Homes, Inc. Page 28 1998 Annual Report
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
Liberty Homes, Inc.
Goshen, Indiana
We have audited the accompanying consolidated balance sheets of Liberty Homes,
Inc. and Subsidiaries as of December 31, 1998 and 1997 and the related
consolidated statements of income, changes in shareholders' equity and cash
flows for each of the three years in the period ended December 31, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Liberty Homes, Inc.
and Subsidiaries as of December 31, 1998 and 1997, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1998 in conformity with generally accepted accounting principles.
Crowe, Chizek and Company LLP
Elkhart, Indiana
February 17, 1999
Liberty Homes, Inc. Page 27 1998 Annual Report
<PAGE>
BOARD OF DIRECTORS
NAME PRINCIPAL OCCUPATION AND EMPLOYER
Edward J. Hussey Chairman of the Board and President of Liberty Homes,
Inc.
Edward Joseph Hussey Vice President, Secretary and Assistant Treasurer of
Liberty Homes, Inc. and Shareholder in the law firm
of Hodges & Davis PC, Merrillville, Indiana
Michael F. Hussey Vice President - Finance and Assistant Secretary of
Liberty Homes, Inc.
David M. Huffine President of I.M. Homes, Inc., Rocky Ford, Colorado
Mitchell Day President of Day Equipment Corporation, Goshen,
Indiana
OFFICERS
Edward J. Hussey, President
Edward Joseph Hussey, Vice President and Secretary
Michael F. Hussey, Vice President - Finance and Assistant Secretary
Marc A. Dosmann, Vice President and Chief Financial Officer
Bruce A. McMillan, Vice President - Sales
Ron Atkins, Vice President - Purchasing
Nader Tomasbi, Vice President - Engineering and Design
Ralph D. Ray, Treasurer
Brian L. Christner, Controller
Dorothy L. Peterson, Assistant Treasurer
REGISTRAR & TRANSFER AGENT
Harris Bank, Shareholder Services
Chicago, Illinois
(312) 461-3309
AUDITORS
Crowe, Chizek and Company LLP
Elkhart, Indiana
LEGAL COUNSEL
Hodges & Davis PC
Merrillville, Indiana
Barnes & Thornburg
Fort Wayne, Indiana
ANNUAL REPORT ON FORM 10-K
The Liberty Homes, Inc. Annual Report on Form 10-K filed with the
Securities and Exchange Commission is available to shareholders at no charge
upon written request to Liberty Homes, Inc., PO Box 35, Goshen, Indiana
46527-0035, Attention: Marc A. Dosmann.
Liberty Homes, Inc. Page 28 1998 Annual Report
<PAGE>
LIST OF SUBSIDIARIES
Waverlee Homes, Inc., incorporated in Alabama
Irish Homes, Inc., incorporated in Indiana
Gipper Development Company, LLC, organized in Indiana
Statesville Housing Center, Inc.
Liberty Homes, Inc. Page 29 1998 Annual Report
<PAGE>
ITEM 11 EXECUTIVE COMPENSATION
ITEM 402(a) (3)
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
-------------------------------------------------- -------------------------------------
OTHER STOCK LONG TERM ALL
NAME & PRINCIPAL ANNUAL OPTIONS INCENTIVE OTHER
POSITION YEAR SALARY BONUS(1) COMP. & AWARDS PAYOUTS COMP(2)
-------- ---- ------ -------- ----- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Edward J. 1998 $240,000 $442,000 -- -- -- --
Hussey 1997 240,000 344,000 -- -- -- --
Chairman 1996 240,000 442,000 -- -- -- --
& President
Edward Joseph 1998 124,800 299,840 -- -- -- $16,809
Hussey 1997 114,400 258,640 -- -- -- 17,341
VP & Sec 1996 104,000 273,200 -- -- -- 13,086
Michael F. 1998 124,800 299,840 -- -- -- $16,809
Hussey 1997 114,400 258,640 -- -- -- 17,341
VP - 1996 104,000 273,200 -- -- -- 13,086
Finance
Marc A. 1998 71,500 72,200 -- -- -- --
Dosmann 1997 68,900 56,340 -- -- -- --
VP & CFO 1996 66,300 68,040 -- -- -- --
Bruce A. 1998 71,500 72,200 -- -- -- --
McMillan 1997 68,900 51,340 -- -- -- --
VP - Sales 1996 66,300 63,040 -- -- -- --
</TABLE>
(1) Includes amounts awarded under the Company's key employee bonus plan for
the respective fiscal years even if deferred, as well as discretionary
bonuses.
(2) Amount represents the time value calculated on the annual life insurance
premiums paid by the Company for the respective trusts in accordance with
the split dollar insurance plan described below. The time value was
calculated using the effective interest rate method over 9 years, at a
discount rate of 7%. The premiums paid by the Company are to be repaid by
the trusts upon the death of the insureds or the termination of the
policies by the trusts.
30
<PAGE>
ITEM 11 - CONTINUED
ITEM 401(l)
PERFORMANCE GRAPH
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Class A Common Stock 100 102 140 153 101 129
Class B Common Stock 100 98 139 148 122 150
Dow Jones Equity Index 100 101 139 171 229 294
Dow Jones Home Construction Index 100 68 101 97 150 160
</TABLE>
Assuming that the value of the investment in Liberty Homes, Inc. Class A and
Class B Common Stock and each index was $100 on December 31, 1993 and all
dividends were reinvested.
31
<PAGE>
<PAGE>
ITEM 12
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
<TABLE>
<CAPTION>
Name & Address of Amount & Nature of
Title of Class Beneficial Owner Beneficial Ownership % of Class
- -------------- ------------------- --------------------- ----------
ITEM 403(a)
-----------
<S> <C> <C> <C>
Class B Hussey Investments LP 880,881 51.0%
Common Stock PO Box 35
Goshen IN 46527 (1) (2)
ITEM 403(b)
-----------
Class A Hussey Endeavors LP 1,253,219 56.7%
Common Stock PO Box 35
Goshen IN 46527 (1) (2)
Class A Edward Joseph Hussey 1,276,619 57.8%
Common Stock PO Box 35
Class B Goshen IN 46527 (2)
Common Stock 945,653 54.7%
Class A Michael F. Hussey 1,276,054 57.8%
Common Stock PO Box 35
Class B Goshen IN 46527 (2)
Common Stock 945,088 54.7%
Class A All Directors and 1,300,454 58.9%
Common Stock Officers as a Group
Class B 1,009,860 58.3%
Common Stock
</TABLE>
(1) Edward J. Hussey is a limited partner in both Hussey Investments LP and
Hussey Endeavors LP and accordingly has a pecuniary interest in the shares
of Class B Common Stock owned by Hussey Investments LP and Class A Common
Stock owned by Hussey Endeavors LP. Edward J. Hussey has no voting or
investment power over such shares and accordingly disclaims beneficial
ownership of such shares.
(2) Edward Joseph Hussey , Michael F. Hussey, John P. Hussey and Nancy A.
Parrish are the general partners of Hussey Investments LP and general
partners of Hussey Endeavors LP. Accordingly, they share voting and
investment control over the 880,881 shares of Class B Common Stock owned by
Hussey Investments LP and the 1,253,219 shares of Class A Common Stock
owned by Hussey Endeavors LP. Total shares listed for individuals includes
the beneficial ownership.
32
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 23,741
<SECURITIES> 0
<RECEIVABLES> 9,107
<ALLOWANCES> 0
<INVENTORY> 13,171
<CURRENT-ASSETS> 50,128
<PP&E> 47,946
<DEPRECIATION> 20,855
<TOTAL-ASSETS> 77,219
<CURRENT-LIABILITIES> 19,053
<BONDS> 0
0
0
<COMMON> 3,952
<OTHER-SE> 50,975
<TOTAL-LIABILITY-AND-EQUITY> 77,219
<SALES> 184,920
<TOTAL-REVENUES> 184,920
<CGS> 159,218
<TOTAL-COSTS> 19,024
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 7,964
<INCOME-TAX> 3,018
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,562
<EPS-PRIMARY> 1.15
<EPS-DILUTED> 1.15
</TABLE>
