<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 March 31, 1999.
- 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.
<TABLE>
<CAPTION>
<S> <C>
Shares of Outstanding
Class at May 1, 1999
- ----- ----------------------
Class A Common Stock, $1.00 par value 2,191,496
Class B Common Stock, $1.00 par value 1,718,759
</TABLE>
<PAGE>
INDEX
<TABLE>
<CAPTION>
PART I - CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED)
Pages
-----
<S> <C>
General 3
Item 1. Consolidated Financial Statements -
Liberty Homes, Inc.
Consolidated Balance Sheet, as of
March 31, 1999 and December 31, 1998 4
Consolidated Statement of Income, for the
three months ended March 31, 1999 and 1998 5
Consolidated Statement of Cash Flows for the
three months ended March 31, 1999 and 1998 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis
of Financial Condition and
Results of Operations 8-10
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
Signature 12
</TABLE>
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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 1998. 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 March 31, 1999 and December 31, 1998
<TABLE>
<CAPTION>
March 31, December 31, March 31, December 31,
ASSETS 1999 1998 LIABILITIES 1999 1998
- ------ ---- ---- ----------- ---- ----
<S> <C> <C> <C> <C> <C>
Current assets: Current liabilities:
Cash and cash equivalents $3,942,000 $18,441,000 Accounts payable $7,052,000 $2,699,000
Short term investments 6,300,000 5,300,000 Dividend payable 275,000 277,000
Receivables 19,059,000 9,107,000 Accrued compensation
Inventories 15,770,000 13,171,000 and payroll taxes 3,568,000 2,897,000
Deferred tax asset 2,500,000 2,500,000 Income taxes payable -- 1,136,000
Prepayments and other 2,082,000 1,609,000 Other accrued liabilities 8,176,000 12,044,000
------------ ----------- -------------- -----------
Total current assets 49,653,000 50,128,000 Total current liabilities 19,071,000 19,053,000
------------ ----------- -------------- -----------
Deferred income taxes 2,237,000 2,270,000
-------------- -----------
Minority interest in subsidiaries 1,113,000 969,000
-------------- -----------
Contingent liabilities (see notes)
SHAREHOLDER'S EQUITY
Capital Stock:
Class A, $1 par value
Authorized-7,500,000 Shares
Issued & outstanding-2,200,000
Property, plant and equipment: in 1999 & 2,224,000 in 1998 2,200,000 2,224,000
Class B, $1 par value
Land 1,794,000 1,524,000 Authorized-3,500,000 Shares
Buildings and improvements 27,496,000 26,662,000 Issued & outstanding-1,728,000
Machinery and equipment 19,983,000 19,760,000 in 1999 & 1,728,000 in 1998 1,728,000 1,728,000
------------ -----------
49,273,000 47,946,000 Other capital 83,000 83,000
Less accumulated depreciation 21,511,000 20,855,000 Retained earnings 50,983,000 50,892,000
------------ ----------- -------------- -----------
27,762,000 27,091,000 54,994,000 54,927,000
------------ ----------- -------------- -----------
Total assets $ 77,415,000 $77,219,000 Total liabilities and stockholder's equity $ 77,415,000 $77,219,000
============ =========== ============== ===========
</TABLE>
4
<PAGE>
LIBERTY HOMES, INC.
CONSOLIDATED STATEMENT OF INCOME
for the three months ended March 31, 1999 and 1998
<TABLE>
<CAPTION>
------------
1999 1998
---- ----
<S> <C> <C>
Net sales $ 44,350,000 $ 42,886,000
Cost of sales 38,541,000 37,546,000
------------- -------------
Gross profit 5,809,000 5,340,000
Selling, general and administrative
expenses 4,919,000 4,542,000
------------- -------------
Operating income 890,000 798,000
Interest and other income 291,000 241,000
------------- -------------
Income before minority interest and 1,181,000 1,039,000
income taxes
Minority interest (133,000) (48,000)
Income tax expense (449,000) (411,000)
------------- -------------
Net income $ 599,000 $ 580,000
============= =============
Share income per outstanding Common
Share - basic and fully diluted $0.15 $0.15
====== =====
Weighted average shares outstanding 3,937,000 3,990,000
============= =============
Cash dividend per share:
Class A Common Stock $0.07 $0.07
====== =====
Class B Common Stock $0.07 $0.07
====== =====
</TABLE>
5
<PAGE>
LIBERTY HOMES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
for the three months ended March 31, 1999 and 1998
_______________
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 599,000 $ 580,000
Adjustment to reconcile net income
to net cash used in operating activities -
Depreciation 656,000 628,000
Deferred income taxes (33,000) (52,000)
Minority interest 133,000 --
Changes in assets and liabilities:
Receivables (9,952,000) (7,180,000)
Inventories (2,599,000) (2,656,000)
Prepayments and other (473,000) (103,000)
Accounts payable 4,353,000 4,683,000
Other current liabilities (3,199,000) (4,227,000)
Income taxes payable (1,136,000) (170,000)
--------------- -------------------
Net cash used in operating activities (11,651,000) (8,497,000)
--------------- -------------------
Cash flows provided by (used in) investing activities --
Additions to property, plant and equipment (1,327,000) (827,000)
Redemption of (investment in) short-term investments (1,000,000) 4,950,000
--------------- -------------------
Net cash provided by investing activities (2,327,000) 4,123,000
--------------- -------------------
Cash flows used in financing activities --
Cash dividends paid (274,000) (279,000)
Minority interest contributed capital 11,000 --
Retirement of common stock (258,000) (51,000)
--------------- -------------------
Net cash used in financing activities (521,000) (330,000)
--------------- -------------------
Net decrease in cash and cash equivalents (14,499,000) (4,704,000)
--------------- -------------------
Cash and cash equivalents at beginning of period 18,441,000 15,797,000
--------------- -------------------
Cash and cash equivalents at end of period $ 3,942,000 $ 11,093,000
--------------- -------------------
--------------- -------------------
Supplemental disclosures of cash flow information -- cash
paid during the period for income taxes $ 1,822,000 $ 700,000
=============== ===================
</TABLE>
6
<PAGE>
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 March 31, 1999 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 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.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Liquidity and Capital Resources
Cash, cash equivalents and short term investments as of March 31, 1999 and
December 31, 1998 were $10,242,000 and $23,741,000, respectively. Working
capital as of March 31, 1999 and December 31, 1998 was $30,582,000 and
$31,075,000, 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 three months ended March 31, 1999, the
Company repurchased a total of 24,000 shares of common stock under the program
initiated in 1994 and subsequently amended to acquire up to 700,000 shares of
its common stock.
Results of Operations
Net sales for the first quarter of 1999 were $44,350,000, an increase of
$1,464,000 over the same quarter of 1998. The product mix sold by the Company
follows the industry trend. Multi-section and single-section home sales
increased during the 1999 quarter, when compared to 1998. Net income for the
first quarter of 1999 was $599,000, a $19,000 increase over the same quarter of
1998. Higher operating income and higher interest income during 1999 were
offset in part by a higher minority interest in the operating income.
8
<PAGE>
Outlook and Risk Factors
As sales backlogs in the manufactured housing industry are traditionally
short and as dealer inventories do not normally fluctuate substantially, the
orders that the Company receives are indicative of the day-to-day retail
sales activity of its products. Any changes affecting the desire or ability
of retail customers to purchase, such as cost, availability of credit and
unemployment, have an immediate effect on the Company's operations.
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
9
<PAGE>
compliance efforts by July 31, 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 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.
10
<PAGE>
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 January, February or March, 1999 have been
filed.
11
<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 May 14, 1999
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 10,242,000
<SECURITIES> 0
<RECEIVABLES> 19,059,000
<ALLOWANCES> 0
<INVENTORY> 15,770,000
<CURRENT-ASSETS> 49,653,000
<PP&E> 49,273,000
<DEPRECIATION> 21,511,000
<TOTAL-ASSETS> 77,415,000
<CURRENT-LIABILITIES> 19,071,000
<BONDS> 0
0
0
<COMMON> 3,928,000
<OTHER-SE> 51,066,000
<TOTAL-LIABILITY-AND-EQUITY> 77,415,000
<SALES> 44,350,000
<TOTAL-REVENUES> 44,350,000
<CGS> 38,541,000
<TOTAL-COSTS> 4,919,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,048,000
<INCOME-TAX> 449,000
<INCOME-CONTINUING> 599,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 599,000
<EPS-PRIMARY> .15
<EPS-DILUTED> .15
</TABLE>
