<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended ____April 2, 1995____
[ ] 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 0-6087
LINDAL CEDAR HOMES, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 91-0508250
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
4300 South 104th Place, Seattle, Washington 98178
--------------------------------------------------
(Address of principal executive offices)
(Zip code)
(206) 725-0900
----------------------------------------------------
(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
-----
Common stock outstanding at May 1, 1995: 4,039,522 shares at $.01 par value.
<PAGE> 2
LINDAL CEDAR HOMES, INC.
AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page
Number
------
<S> <C> <C>
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets 4
Consolidated Statements of Operations 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 14
Part II. Other Information
Item 6(b) Reports on Form 8-K 15
Signatures 16
</TABLE>
2
<PAGE> 3
LINDAL CEDAR HOMES, INC.
AND SUBSIDIARIES
PART I: FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
3
<PAGE> 4
LINDAL CEDAR HOMES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
April 2, 1995 and December 31, 1994
(Dollar amounts in thousands, except per share amounts)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
1995 1994
- --------------------------------------------------------------------------------------------------------
Assets (unaudited)
<S> <C> <C>
Current assets:
Cash $ 616 3,219
Short-term investments 279 475
Receivables:
Trade 2,306 2,042
Current installments of long-term notes receivable 67 46
Refundable income taxes 661 59
---------------------
3,034 2,147
Less allowance for doubtful receivables 208 203
---------------------
Net receivables 2,826 1,944
Inventories 9,389 8,488
Prepaid expenses 1,487 1,415
Deferred income taxes 78 103
---------------------
Total current assets 14,675 15,644
Long-term notes receivable, excluding current installments 608 601
Investment in and advances to affiliate 702 340
Property, plant and equipment, at cost, less accumulated depreciation
and amortization 9,807 9,679
Other assets, at cost, less accumulated amortization 598 650
---------------------
$26,390 26,914
=====================
Liabilities and Stockholders' Equity
Current liabilities:
Current installments of long-term debt 61 59
Accounts payable - trade 1,706 2,255
Accrued salaries and wages 145 472
Other accrued expenses 692 577
Customer deposits 4,777 3,882
---------------------
Total current liabilities 7,381 7,245
Long-term debt, excluding current installments 1,848 1,864
Deferred income taxes 100 107
Stockholders' equity:
Common stock of $.01 par value. Authorized 10,000,000 shares; issued and
outstanding 4,039,522 shares in 1995 and 4,030,873 shares in 1994 40 40
Additional paid-in capital 15,797 15,778
Cumulative translation adjustment (816) (810)
Retained earnings 2,040 2,690
---------------------
Total stockholders' equity 17,061 17,698
- --------------------------------------------------------------------------------------------------------
$26,390 26,914
========================================================================================================
</TABLE>
See accompany notes to consolidated financial statements.
4
<PAGE> 5
LINDAL CEDAR HOMES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the quarters ended April 2, 1995 and April 3, 1994
(Dollar amounts in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
1995 1994
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Revenue $ 6,630 7,076
Cost of goods sold 5,775 5,909
-----------------------
Gross profit 855 1,167
Operating expenses:
Selling, general and administrative expenses 2,186 1,989
Display court expenses 177 87
-----------------------
Total operating expenses 2,363 2,076
-----------------------
Operating loss (1,508) (909)
Other income (expense):
Equity in earnings of affiliate 505 -
Rental income 64 50
Interest income 34 13
Interest expense (48) (50)
-----------------------
Other income, net 555 13
-----------------------
Loss before income tax benefit (953) (896)
Income tax benefit 303 306
-----------------------
Net loss $ (650) (590)
=======================
Net loss per common share $ (.16) (.15)
==========================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
LINDAL CEDAR HOMES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the quarters ended April 2, 1995 and April 3, 1994
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
1995 1994
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (Decrease) in Cash and Cash Equivalents
Cash flows from operating activities:
Cash received from customers $ 7,193 7,918
Cash paid to suppliers and employees (9,467) (9,412)
Interest received 30 9
Interest paid (48) (51)
Income taxes paid (74) (298)
Cash paid for litigation settlement, including associated legal fees (23) (36)
-------------------------
Net cash used in operating activities (2,389) (1,870)
Cash flows from investing activities:
Liquidation of short-term investments 196 1,676
Additions to other assets - (87)
Cash received for repayment of notes (not related to the sale of homes) - 59
Additions to property, plant and equipment (313) (108)
Disbursements for loans (not related to the sale of homes) (40) (30)
Investment in affiliate (65) -
-------------------------
Net cash provided by (used in) investing activities (222) 1,510
Cash flows from financing activities:
Repayment of long-term debt (13) (21)
Proceeds from exercise of stock options 19 7
-------------------------
Net cash provided by (used in) financing activities 6 (14)
Effect of exchange rates on cash and cash equivalents 2 114
-------------------------
Net decrease in cash and cash equivalents (2,603) (260)
Cash and cash equivalents at beginning of period 3,219 1,362
-------------------------
Cash and cash equivalents at end of period $ 616 1,102
=========================
(Continued)
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE> 7
LINDAL CEDAR HOMES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
1995 1994
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Reconciliation of net loss to net cash used in operating activities:
Net loss $ (650) (590)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization of plant and equipment 185 196
Amortization of other assets 52 -
Amortization of display homes 65 40
Undistributed net earnings of affiliate (297) -
Deferred income tax expense 18 47
Change in certain assets and liabilities:
Increase in net receivables (862) (513)
Increase in inventories (970) (2,430)
Increase in prepaid expenses related to operating activities (73) (76)
Increase in current liabilities other than current portion
of long-term debt 131 1,446
Decrease in notes receivable related to operating activities 12 10
-------------------------
Total adjustments (1,739) (1,280)
- ---------------------------------------------------------------------------------------------------------------
Net cash used in operating activities $ (2,389) (1,870)
===============================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
7
<PAGE> 8
LINDAL CEDAR HOMES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 2, 1995, December 31, 1994 and April 3, 1994
- --------------------------------------------------------------------------------
(1) BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles,
except as noted below, and include all recurring adjustments that are
considered necessary by management to fairly state the results of the
interim periods. These consolidated financial statements and related
notes have been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission. Accordingly, certain information and
footnote disclosures normally included in the consolidated financial
statements prepared in accordance with generally accepted accounting
principles have been omitted. Due to the seasonality of the Company's
business, the accompanying consolidated financial statements may not
necessarily be indicative of the results to be obtained for the full
year. This report should be read in conjunction with the Company's
Annual Report to the Securities and Exchange Commission on Form 10-K for
the year ended December 31, 1994.
(2) LOSS PER COMMON SHARE
Loss per common share for 1995 and 1994 are computed based on the
weighted average number of shares outstanding. The impact of common
share equivalents have been excluded from the computation since their
effect would be antidilutive. The number of shares used to compute loss
per common share was 4,033,766 for 1995 and 4,022,319 for 1994.
(3) INVENTORIES
A summary of inventories follows (in thousands):
<TABLE>
<CAPTION>
April 2, December 31,
1995 1994
------------------------
<S> <C> <C>
Raw materials $ 2,826 2,634
Work-in-process 1,595 1,389
Finished goods 3,518 2,886
Display homes 1,450 1,579
---------------------
$ 9,389 8,488
=====================
</TABLE>
(Continued)
8
<PAGE> 9
LINDAL CEDAR HOMES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(4) INVESTMENT IN AFFILIATE
As discussed in the Company's December 31, 1994 Form 10-K, the British
Columbia Ministry of Forests awarded the Company the rights to harvest
and sell approximately 50,000 cubic meters of timber between 1994 and
1997. The Company entered into an agreement with an unaffiliated company
who is providing services related to planning, management of timber
harvesting and marketing of the logs. A new corporation, in which the
Company and the unaffiliated company each own 50%, was formed in 1994.
The investment in this affiliate is accounted for under the equity
method. Any asset or equity distributions from the affiliate will be
made in accordance with the respective ownership interests.
Contributions to the affiliate have been for working capital
requirements. The harvesting of the timber began during the third
quarter of 1994. The sale of harvested logs began in the first quarter
of 1995 and is expected to be completed in the second quarter of 1995.
Summarized financial information of the equity affiliate was as follows
(in thousands):
Condensed Statement of Operations
Three months ended April 2, 1995
<TABLE>
<S> <C>
Revenue $ 3,431
Earnings before income taxes 1,011
Net earnings 594
</TABLE>
Condensed Balance Sheet Information
April 2, 1995
<TABLE>
<S> <C>
Total assets $ 2,537
Total liabilities 1,542
</TABLE>
(5) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
April 2, December 31,
1995 1994
--------------------------
<S> <C> <C>
Building and leasehold improvements $ 7,452 7,445
Equipment 4,364 4,192
Furniture and fixtures 2,467 2,383
-------------------------
14,283 14,020
Less accumulated depreciation and amortization 8,270 8,135
------------------------
6,013 5,885
Land 3,794 3,794
------------------------
Net property, plant and equipment $ 9,807 9,679
========================
(Continued)
</TABLE>
9
<PAGE> 10
LINDAL CEDAR HOMES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(6) LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
April 2, December 31,
1995 1994
----------------------
<S> <C> <C>
First mortgage note payable, due in monthly installments of
$13, including interest at 9.5%; final payment due 2009 $ 1,262 1,272
First mortgage note payable, due in monthly installments of $7,
including interest at 11%; final payment due 2010 612 616
Other 35 35
---------------------
Total long-term debt 1,909 1,923
Less current installments 61 59
---------------------
Long-term debt, excluding current installments $ 1,848 1,864
=====================
</TABLE>
At December 31, 1994, certain properties, having an aggregate net book
value of approximately $4,552, are pledged as collateral on the above
long-term debt.
At April 2, 1995, the Company had $1,856 of unsecured lines of credit
with banks to be drawn upon as needed, with interest at 1/2% above the
prime rate.
(7) OUTSTANDING STOCK OPTIONS
(A) EMPLOYEE STOCK OPTION PLANS
The Company has provided for the granting of stock options to key
employees under two plans: the 1984 Incentive Stock Option Plan
(the 1984 Plan) and the 1988 Combined Incentive Stock Option and
Nonqualified Stock Option Plan (the 1988 Plan). Both plans are
administered by the Stock Option Committee of the Board of
Directors (Committee).
Under the terms of the 1984 Plan, incentive options to purchase
shares of the Company's common stock are granted at a price equal
to the market price of the stock at the date of grant. The 1984
Plan expired on December 21, 1994 and no future options will be
granted under this plan.
Under the terms of the 1988 Plan, both incentive and nonqualified
options to purchase shares of the Company's common stock may be
granted. Options granted under this plan may be designated as
incentive or nonqualified at the discretion of the Committee. The
exercise price of the options granted under this plan is set at the
time of grant, but may not be less than the fair market value of
the Company's stock at the date of grant.
(Continued)
10
<PAGE> 11
LINDAL CEDAR HOMES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
At May 1, 1995, there were options outstanding under both plans to
purchase 330,452 shares of stock at per share prices ranging from
$.92 to $5.38. Of these 330,452 options, 244,852 were currently
exercisable at an average exercise price of $4.04 per share. From
January 1, 1995 to May 1, 1995, options to purchase 8,649 shares
were exercised at per share prices ranging from $.92 to $2.94 and
options to purchase 1,894 shares were relinquished.
(B) DIRECTORS AND DISTRIBUTORS STOCK OPTION PLAN
The Company has provided for the granting of stock options to
nonemployee directors and distributors who serve on the Top
Distributor Advisory Council (Council).
At the upcoming annual meeting of shareholders, there is a proposal
to amend the Directors and Distributors Stock Option Plan. This
proposal, among other things, amends the formula for the granting
of options to nonemployee directors. Please refer to the 1995
Proxy Statement for additional details. Currently, the nonemployee
directors are granted options to purchase one share of common stock
for each $1,000 of net after-tax earnings of the Company. Unless
the aforementioned proposal is adopted, the exercise price for
options granted for 1995 will be $3.50 per share (the market price
on October 3, 1994). At May 1, 1995, there were options
outstanding to purchase 8,934 shares of stock at per share prices
of $6.36 and $6.00. Of these 8,934 shares, 2,407 were currently
exercisable at a per share price of $6.36.
Each distributor who serves on the Council on February 1 is granted
options to purchase 100 shares of common stock for each year of
service on the Council. Pursuant to an amendment to the plan
ratified by the shareholders on May 26, 1994, the exercise price of
the options granted for 1995 and future years will be the market
price of the Company's stock on the first business day of October
preceding the year in which the options are granted. At May 1,
1995, there were options outstanding to purchase 13,910 shares of
stock at per share prices of $6.36, $5.00 and $3.50. Of these
13,910 options, 4,706 were currently exercisable at per share
prices of $6.36 and $5.00. From January 1, 1995 to May 1, 1995,
options to purchase 4,400 shares were granted at a per share price
of $3.50.
(Continued)
11
<PAGE> 12
LINDAL CEDAR HOMES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(8) INCOME TAXES
Income tax expense (benefit) was allocated as follows (in thousands):
<TABLE>
<CAPTION>
Quarters ended
----------------------------------
April 2, 1995 April 3, 1994
----------------------------------
<S> <C> <C>
Current
U.S. Federal $ (407) (351)
Canadian 87 (2)
-----------------------------
(320) (353)
Deferred:
U.S. Federal 19 51
Canadian (2) (4)
-----------------------------
17 47
-----------------------------
$ (303) (306)
=============================
</TABLE>
The Company's consolidated Canadian subsidiary had a pretax loss,
excluding the earnings of the affiliate, of approximately $265,000 in the
first three months of 1995 compared to a pretax loss of approximately
$11,000 in the first three months of 1994.
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities were as
follows (in thousands):
<TABLE>
<CAPTION>
April 2, December 31,
1995 1994
--------------------------
<S> <C> <C>
Deferred tax assets:
Receivables, due to the allowance for doubtful receivables $ 72 68
Uniform inventory capitalization for tax purposes 15 15
Accrued expenses, deductible in different years for tax (9) 20
Foreign tax credit carryforward available through 1995 6 6
--------------------
Total gross deferred tax assets 84 109
Less valuation allowance 6 6
--------------------
Net deferred tax assets 78 103
Deferred tax liabilities - property, plant and equipment,
principally due to differences in basis of assets and
depreciation 100 107
--------------------
Net deferred tax liabilities $ (22) (4)
====================
(Continued)
</TABLE>
12
<PAGE> 13
LINDAL CEDAR HOMES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(9) OTHER FINANCIAL INFORMATION
The Company's business is seasonal in that most deliveries have
historically been made during the period from April to October. To
illustrate this, revenue by quarter is presented below (in thousands of
dollars):
<TABLE>
<CAPTION>
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
---------------------------------------------------------------
<S> <C> <C> <C> <C>
1995
----
Revenue $ 6,630
1994
----
Revenue 7,076 11,521 10,979 9,957
1993
----
Revenue 7,171 12,776 12,965 9,084
1992
----
Revenue 5,565 12,478 11,738 8,802
1991
----
Revenue 7,201 9,910 10,361 9,814
</TABLE>
13
<PAGE> 14
LINDAL CEDAR HOMES, INC.
AND SUBSIDIARIES
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FIRST QUARTER
RESULTS OF OPERATIONS
Revenue decreased $446,000 (6%) from 1994 to 1995 primarily due to reduced home
and sunroom sales. Material sales increased $243,000 (34%).
Home and sunroom revenue decreased $700,000 (13%) from $5.4 million in 1994 to
$4.7 million in 1995. The number of home units shipped decreased 17% from 75
in 1994 to 62 in 1995. It is management's belief that the decline in home
sales was due to the customers' preference on the timing of when their homes
were delivered. The average revenue per home unit shipped was $68,200 in 1994
compared to $67,600 in 1995. The size and value of a home unit is a function
of customer preference and may change somewhat from period to period.
The dollar value of new orders increased 15% from 1994 to 1995. The number of
new orders increased 6% when the same two periods were compared. Entering the
second quarter of 1995, the Company's total backlog, stated in dollars is 63%
higher than it was entering the second quarter of 1994.
The gross profit percentage (gross profit/revenue) decreased from 16% in 1994
to 13% in 1995. The decline in home sales was primarily responsible for the
decrease in the gross profit percentage.
Selling, general and administrative expenses increased $197,000 (10%) from 1994
to 1995. Salaries and related benefits increased $105,000 (12%). In the first
quarter of 1994, the Company capitalized $36,000 in costs associated with the
planbook that was printed later in 1994. There was no such capitalization in
the first quarter of 1995. Amortization of deferred marketing expenses related
to the current planbook totaled $52,000 in 1995. There was no such
amortization in 1994. Travel and entertainment increased $36,000 (52%)
primarily due to the expanded regional management structure.
Display court expenses increased $90,000 (103%) primarily due to the growth in
the number of display models.
In March 1994, the Company obtained the rights to harvest, between 1994 and
1997, approximately 50,000 cubic meters of timber in the Province of British
Columbia. The harvesting of the timber began in the fourth quarter of 1994.
In the first quarter of 1995, the sale of the harvested timber began. The
equity in the earnings of this affiliate was $505,000 in the first quarter of
1995. The Company expects that the sales of the harvested timber will conclude
in the second quarter of 1995.
LIQUIDITY
Receivables-trade, inventories and customer deposits increased $264,000 (13%),
$901,000 (11%) and $895,000 (23%), respectively, from December 31, 1994 to
April 2, 1995 due to seasonal factors.
From December 31, 1994 to April 2, 1995, accounts payable-trade decreased
$549,000 (24%) and other accrued expenses increased $115,000 (20%) due to the
timing of certain payments.
Accrued salaries and wages decreased $327,000 (69%) from December 31, 1994 to
April 2, 1995 due to profit sharing that was accrued at December 31, 1994 and
was paid in March 1995.
14
<PAGE> 15
LINDAL CEDAR HOMES, INC.
AND SUBSIDIARIES
PART II: OTHER INFORMATION
ITEM 6(B) - REPORTS ON FORM 8-K
There were no reports on Form 8-K filed during the first quarter of 1995.
15
<PAGE> 16
LINDAL CEDAR HOMES, INC.
AND SUBSIDIARIES
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.
LINDAL CEDAR HOMES, INC.
By: /S/ Robert W. Lindal
------------------------------------------
Robert W. Lindal
Chairman and Chief Executive Officer
By: /S/ John F. Dacy
--------------------------------------------
John F. Dacy
Vice President Finance & Treasurer
(Chief Accounting Officer)
DATE:
May 16, 1995
16
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> APR-02-1995
<CASH> 895
<SECURITIES> 0
<RECEIVABLES> 2,306
<ALLOWANCES> 208
<INVENTORY> 9,389
<CURRENT-ASSETS> 14,675
<PP&E> 18,077
<DEPRECIATION> 8,270
<TOTAL-ASSETS> 26,390
<CURRENT-LIABILITIES> 7,381
<BONDS> 1,848
<COMMON> 40
0
0
<OTHER-SE> 17,021
<TOTAL-LIABILITY-AND-EQUITY> 26,390
<SALES> 6,630
<TOTAL-REVENUES> 6,630
<CGS> 5,775
<TOTAL-COSTS> 5,775
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 23
<INTEREST-EXPENSE> 48
<INCOME-PRETAX> (953)
<INCOME-TAX> (303)
<INCOME-CONTINUING> (650)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (650)
<EPS-PRIMARY> (.16)
<EPS-DILUTED> (.16)
</TABLE>
