<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 June 30, 1996.
[ ] 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)
Delaware 91-0508250
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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 August 5, 1996: 4,073,982 shares at $.01 par value.
1
<PAGE> 2
LINDAL CEDAR HOMES, INC.
AND SUBSIDIARIES
INDEX
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets 4
Consolidated Statements of Earnings 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 13
Part II. Other Information
Item 4 Results of Votes of Securities Holders 16
Item 6(b) Reports on Form 8-K 16
Signatures 17
</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
June 30, 1996, December 31, 1995 and July 2, 1995
(Dollar amounts in thousands, except per share amounts)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
June 30, December 31, July 2,
1996 1995 1995
- ---------------------------------------------------------------------------------------------------------------------------------
Assets (unaudited)) (unaudited)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 2,012 1,661 2,470
Short-term investments 2,848 1,714 1,606
Receivables:
Trade 2,872 2,342 2,474
Current installments of long-term notes receivable 78 106 87
---------------------------------------------
2,950 2,448 2,561
Less allowance for doubtful receivables 306 204 208
---------------------------------------------
Net receivables 2,644 2,244 2,353
Inventories 10,521 8,526 9,954
Prepaid expenses 1,907 1,930 2,255
Deferred income taxes 127 157 109
---------------------------------------------
Total current assets 20,059 16,232 18,747
Long-term notes receivable, excluding current installments 670 517 690
Investment in affiliate 47 45 --
Property, plant and equipment, at cost, less accumulated depreciation and
amortization 10,718 10,500 10,074
Other assets, at cost, less accumulated amortization 618 698 548
=============================================
$ 32,112 27,992 30,059
=============================================
Liabilities and Stockholders' Equity
Current liabilities:
Current installments of long-term debt 50 48 62
Accounts payable - trade 2,764 1,492 3,441
Accrued salaries and wages 393 617 431
Other accrued expenses 817 682 590
Income taxes payable 387 188 455
Customer deposits 6,642 4,365 4,552
---------------------------------------------
Total current liabilities 11,053 7,392 9,531
Long-term debt, excluding current installments 1,190 1,216 1,832
Deferred income taxes 118 104 90
Stockholders' equity:
Common stock of $.01 par value. Authorized 10,000,000 shares; issued and
outstanding 4,073,982 shares at June 30, 1996, 4,060,139 shares at
December 31, 1995 and 4,041,912 shares at July 2, 1995 41 41 40
Additional paid-in capital 15,888 15,856 15,799
Cumulative translation adjustment (696) (644) (702)
Retained earnings 4,518 4,027 3,469
---------------------------------------------
Total stockholders' equity 19,751 19,280 18,606
- ----------------------------------------------------------------------------------------------------------------------------
$ 32,112 27,992 30,059
============================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
LINDAL CEDAR HOMES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
For the periods ended June 30, 1996 and July 2, 1995
(Dollar amounts in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Six Months Ended Quarters Ended
------------------------- -----------------------
June 30, July 2, June 30, July 2,
1996 1995 1996 1995
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue $20,760 20,577 14,173 13,947
Cost of goods sold 15,389 15,411 9,744 9,636
-------------------------------------------------------
Gross profit 5,371 5,166 4,429 4,311
Operating expenses:
Selling, general and administrative expense 4,514 4,516 2,225 2,330
Display court expenses 317 352 167 175
-------------------------------------------------------
Total operating expenses 4,831 4,868 2,392 2,505
-------------------------------------------------------
Operating income 540 298 2,037 1,806
Other income (expense):
Equity in earnings of affiliate - 891 - 386
Rental income 157 145 95 81
Interest income 132 112 54 78
Interest expense (67) (96) (36) (48)
-------------------------------------------------------
Other income, net 222 1,052 113 497
-------------------------------------------------------
Earnings before income tax expense 762 1,350 2,150 2,303
Income tax expense 270 571 767 874
-------------------------------------------------------
Net earnings $ 492 779 1,383 1,429
=======================================================
Net earnings per common share $ .12 .19 .34 .35
==============================================================================================================
</TABLE>
See accompanying notes to financial statements.
5
<PAGE> 6
LINDAL CEDAR HOMES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the quarters ended June 30, 1996 and July 2, 1995
(In thousands)
(unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
June 30, July 2,
Increase (Decrease) in Cash and Cash Equivalents 1996 1995
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers $ 22,383 20,928
Cash paid to suppliers and employees (20,117) (20,730)
Interest received 111 103
Interest paid (69) (96)
Income taxes paid (28) 371
Cash paid for litigation settlement, including associated legal fees (90) (94)
---------------------------
Net cash provided by operating activities 2,190 482
Cash flows from investing activities:
Cash received for repayment of notes (not related to the sale of homes) 19 10
Additions to plant and equipment (701) (785)
Purchase of short-term cash investments (3,334) (1,424)
Liquidation of short-term cash investments 2,199 294
Disbursements for loans (not related to the sale of homes) - (136)
Proceeds from sale of plant and equipment 4 2
Additions to other assets (3) -
Investment in affiliate - 792
---------------------------
Net cash used in investing activities (1,816) (1,247)
Cash flows from financing activities:
Proceeds from exercise of stock options 28 21
Repayment of long-term debt (23) (27)
---------------------------
Net cash provided by (used in) financing activities 5 (6)
Effect of exchange rates on cash and cash equivalents (28) 22
---------------------------
Net increase (decrease) in cash and cash equivalents 351 (749)
Cash and cash equivalents at beginning of period 1,661 3,219
---------------------------
Cash and cash equivalents at end of period $ 2,012 2,470
===========================
</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>
- ----------------------------------------------------------------------------------------------------------------------
June 30, July 2,
1996 1995
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Reconciliation of net earnings to net cash provided by operating activities:
Net earnings $ 492 779
Adjustments to reconcile net earnings to net cash provided by operating
activities:
Depreciation and amortization of plant and equipment 464 426
Amortization of other assets 83 102
Amortization of display homes 116 139
Loss (gain) on disposal of plant and equipment 3 (5)
Compensation expense related to restricted stock 4 -
Changes in certain assets and liabilities:
Increase in net receivables (435) (414)
Increase in inventories exclusive of amortization of display models (2,111) (1,547)
(Increase) decrease in prepaid expenses related to operating
activities 23 (845)
Increase in current liabilities other than current portion of
long-term debt 3,651 1,876
Increase (decrease) in deferred income taxes 42 (22)
Notes receivable increase related to operating activities (142) (7)
---------------------------
Total adjustments 1,698 (297)
- ------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities $ 2,190 482
==================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
7
<PAGE> 8
LINDAL CEDAR HOMES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996, December 31, 1995 and July 2, 1995
(Dollar amounts in thousands, except per share amounts)
- --------------------------------------------------------------------------------
(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. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses and certain disclosures. Actual
results could differ from those estimates. 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, 1995.
(2) EARNINGS PER COMMON SHARE
There was no difference between primary and fully diluted earnings per
share for all periods presented. The number of shares used to compute
primary and fully diluted earnings per share was 4,088,094 and 4,108,562
for the second quarter of 1996, 4,078,790 for the second quarter of 1995,
4,095,939 and 4,107,337 for the first six months of 1996 and 4,073,777
and 4,080,594 for the first six months of 1995.
(3) INVENTORIES
A summary of inventories follows:
<TABLE>
<CAPTION>
June 30, December 31, July 2,
1996 1995 1995
-----------------------------------
<S> <C> <C> <C>
Raw materials $ 3,752 2,838 2,659
Work-in-process 2,184 1,581 2,241
Finished goods 3,546 2,938 3,521
Display homes 1,039 1,169 1,533
-----------------------------------
$10,521 8,526 9,954
===================================
</TABLE>
(4) INVESTMENT IN AFFILIATE
In 1994, the Company acquired a 50% interest in a corporate joint venture
(JV) which is accounted for in accordance with the equity method. The
remaining 50% interest is held by an unaffiliated company. Any
contributions to the JV, which were made for working capital
requirements, and asset or equity distributions from the JV are made in
accordance with the respective ownership interests. The JV was formed to
harvest timber in British Columbia, Canada. The harvesting of the timber
began in the fourth quarter of 1994. The sale of the harvested logs was
essentially completed in the second quarter of 1995.
8 (Continued)
<PAGE> 9
LINDAL CEDAR HOMES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share amounts)
- --------------------------------------------------------------------------------
(5) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
June 30, December 31, July 2,
1996 1995 1995
----------------------------------
<S> <C> <C> <C>
Building and leasehold improvements $ 7,982 7,634 7,520
Equipment 4,757 4,618 4,517
Furniture and fixtures 3,186 3,079 2,741
----------------------------------
15,925 15,331 14,778
Less accumulated depreciation and amortization 9,235 8,856 8,569
----------------------------------
6,690 6,475 6,209
Land 4,028 4,025 3,865
----------------------------------
Net property, plant and equipment $10,718 10,500 10,074
==================================
</TABLE>
(6) LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
June 30, December 31, July 2,
1996 1995 1995
---------------------------------
<S> <C> <C> <C>
First mortgage note payable, due in monthly
installments of $13, including interest at
9.5%; final payment due 2009 $1,206 1,230 1,251
First mortgage note payable, due in monthly
installments of $7, including interest at 11%;
final payment due 2010 - - 608
Other 34 34 35
---------------------------------
Total long-term debt 1,240 1,264 1,894
Less current installments 50 48 62
---------------------------------
Long-term debt, excluding current
installments
$1,190 1,216 1,832
=================================
</TABLE>
At December 31, 1995, certain properties, having an aggregate net book
value of approximately $3,511, were pledged as collateral on the above
long-term debt.
At June 30, 1996, the Company had $2,868 of unsecured lines of credit
with banks to be drawn upon as needed, with interest at 1/2% above the
prime rate.
9 (Continued)
<PAGE> 10
LINDAL CEDAR HOMES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share amounts)
- --------------------------------------------------------------------------------
(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 Compensation 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 were 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.
At August 5, 1996, there were options outstanding under both plans
to purchase 401,343 shares of common stock at per share prices
ranging from $2.94 to $5.38. Of these 401,343 options, 292,392 were
currently exercisable at an average exercise price of $4.14 per
share. From January 1, 1996, to August 5, 1996, options to purchase
100,500 shares were granted at prices ranging from $3.75 to $4.25.
Options to purchase 50,000 shares were non-qualified. Options to
purchase 50,500 were qualified. From January 1, 1996, to August 5,
1996, options to purchase 12,843 shares were exercised at a per
share price of $2.16 and options to purchase 9,382 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 Distributor
Advisory Council (Council).
Non-employee directors are granted options to purchase 10,000 shares
of common stock when first elected to the Board of Directors.
Additionally, each non-employee director in office each October 1 is
granted options to purchase 5,000 shares of the Company's common
stock. The exercise price of all options granted shall be the fair
market value on the date of grant. No options have been granted to
non-employee directors from January 1, 1996 through August 5, 1996.
At August 5, 1996, there were options outstanding to non-employee
directors to purchase 82,209 shares of common stock at per share
prices ranging from $3.75 to $6.36. Of these 82,209 options, 71,599
were currently exercisable at per share prices ranging from $3.75 to
$6.36. No options were exercised from January 1, 1996 through August
5, 1996.
All distributors who serve on the Council each February 1 are
granted options to purchase 100 shares of common stock for each year
of service on the Council. The exercise price of the options granted
is 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
August 5, 1996, there were options
10 (Continued)
<PAGE> 11
LINDAL CEDAR HOMES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share amounts)
- --------------------------------------------------------------------------------
outstanding to purchase 15,300 shares of common stock at per share
prices ranging from $3.50 to $6.36. Of these 15,300 options, 7,900
were currently exercisable at per share prices ranging from $3.50 to
$6.36. From January 1, 1996 to August 5, 1996, options to purchase
2,100 shares were granted at a per share price of $4.25. From
January 1, 1996, to August 5, 1996, no options were exercised and
options to purchase 710 were relinquished.
(c) ISSUANCE OF RESTRICTED STOCK
Non-employee directors are to be granted, on October 1 of each year,
1,000 shares of the Company's common stock at the fair market value
on the date of issuance. As this stock will not have been
registered, all certificates will bear the appropriate restrictive
legend. A charge equal to the fair market value on the date of
issuance will be recorded as compensation. Pursuant to the
pre-employment negotiations, in January 1996, 1,000 shares of common
stock were granted, at the fair market value at the date of
issuance, to the person who became the manager of the Company's
sunroom division. As the stock issued has not been registered, the
certificate bears the appropriate restrictive legend. A charge of $4
was recorded as compensation in 1996.
(8) INCOME TAXES
Income tax expense (benefit) was allocated as follows:
<TABLE>
<CAPTION>
Six Months Ended Quarters Ended
------------------ -------------------
June 30, July 2, June 30, July 2,
1996 1995 1996 1995
---------------------------------------------
<S> <C> <C> <C> <C>
Current:
U.S. Federal $ 346 184 728 591
Canadian (129) 398 (1) 311
State 10 10 10 10
--------------------------------------------
227 592 737 912
Deferred:
U.S. Federal 31 (16) 16 (35)
Canadian 12 (5) 14 (3)
--------------------------------------------
43 (21) 30 (38)
--------------------------------------------
$ 270 571 767 874
============================================
</TABLE>
The Company's consolidated Canadian subsidiary had a pretax loss of $299
in the first six months of 1996 and a pretax loss of $117, excluding the
earnings of the affiliate, in the first six months of 1995.
11 (Continued)
<PAGE> 12
LINDAL CEDAR HOMES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share amounts)
- --------------------------------------------------------------------------------
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities were as
follows:
<TABLE>
<CAPTION>
June 30, December 31, July 2,
1996 1995 1995
------------------------------------
<S> <C> <C> <C>
Deferred tax assets:
Receivables, due to the allowance for doubtful
receivables $ 95 64 72
Uniform inventory capitalization for tax purposes 20 20 16
Accrued expenses, deductible in different years for tax 12 73 21
Foreign tax credit carry forward - - 6
--------------------------------
Total gross deferred tax assets 127 157 115
Less valuation allowance - - 6
--------------------------------
Net deferred tax assets 127 157 109
Deferred tax liabilities - property, plant and equipment,
principally due to differences in basis of assets and
depreciation 118 104 90
--------------------------------
Net deferred tax assets $ 9 53 19
================================
</TABLE>
(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:
<TABLE>
<CAPTION>
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
-------------------------------------------------------
<S> <C> <C> <C> <C>
1996
Revenue $ 6,587 14,173
1995
Revenue 6,630 13,947 11,536 10,198
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
</TABLE>
12
<PAGE> 13
LINDAL CEDAR HOMES, INC.
AND SUBSIDIARIES
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND THE RESULTS OF OPERATIONS
SECOND QUARTER
RESULTS OF OPERATIONS
Revenue increased $226,000 (2%) from the second quarter of 1995 to the second
quarter of 1996 due to home and sunroom sales.
Home and sunroom revenue increased $400,000 (3%) from $12.1 million in the
second quarter of 1995 to $12.5 million in the second quarter of 1996. The
number of home units shipped increased 7% from 156 units in the second quarter
of 1995 to 167 units in the second quarter of 1996. The average revenue per home
unit shipped decreased 5% from $73,700 in the second quarter of 1995 to $69,700
in the second quarter of 1996 due primarily to the Access product. The Access
product sells for approximately 25% to 30% less than the traditional Cedar Frame
home. The Access product accounted for 28% of the home units shipped in the
second quarter of 1996 compared to 13% of the home units shipped in the second
quarter of 1995. It is believed that the Access product allows broader market
appeal in the custom home market.
The dollar value of new orders increased 36% from the second quarter of 1995 to
the second quarter of 1996. The number of new orders increased 32% from the
second quarter of 1995 to the second quarter of 1996. The Access product
represented 31% of the new orders in the second quarter of 1996 compared to 19%
of the new orders in the second quarter of 1995. The size and value of a home is
a function of customer preference and may change somewhat from period to period.
The gross profit percentage (gross profit/revenue) was 30.9% in the second
quarter of 1995 compared to 31.2% in the second quarter of 1996. The increased
cost to produce plans largely offset cost cutting in other areas of the cost of
goods sold.
Selling, general and administrative (SG&A) expenses decreased $105,000 (5%) from
the second quarter of 1995 to the second quarter of 1996. Advertising expense
decreased $55,000 (15%). Travel and entertainment decreased $29,000 (26%). Legal
expenses decreased $28,000 (44%). Bad debt expense increased $55,000. General
cost cutting is primarily responsible for the balance of the decline in SG&A
expenses. Salaries and related benefits decreased $7,000 (1%). In the second
quarter of 1996, the Company reduced its number of employees. Due to the timing
of the reduction and to termination packages, the full impact of the this
reduction will not be realized until the third quarter of 1996.
In 1994, the Company obtained the rights to harvest 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 second quarter of 1995, the
sale of the harvested timber was essentially complete. Against the $705,000 of
earnings of the affiliate in the second quarter of 1995, charges of $140,000 for
profit sharing and $179,000 for estimated additional expenses were recorded.
There was no such earnings in the second quarter of 1996.
13
<PAGE> 14
YEAR-TO-DATE
RESULTS OF OPERATIONS
Revenue increased $183,000 (1%) from 1995 to 1996.
Home and sunroom revenue increased $500,000 (3%) from $16.7 million in 1995 to
$17.2 million in 1996. The number of home units shipped increased 5% from 218 in
1995 to 228 in 1996. The average revenue per home unit shipped decreased 3% from
$72,000 in 1995 to $70,200 in 1996 due to the Access product. The Access product
accounted for 29% of the home units shipped in 1996 compared to 14% of the home
units shipped in 1995.
Material and chip sales revenue decreased $474,000 (22%) from 1995 to 1996.
The dollar value of new orders increased 21% from 1995 to 1996. The number of
new orders increased 16%. The Access product represented 29% of the new orders
in 1996 compared to 15% of the new orders in 1995.
Entering the third quarter of 1996, the total backlog, stated in dollars, was
24% higher than it was entering the third quarter of 1995.
The gross profit percentage was 25.1% in 1995 compared to 25.9% in 1996. The
increased cost to produce plans largely offset cost cutting in other areas of
the cost of goods sold.
Selling, general and administrative expenses decreased $2,000 (0%) from 1995 to
1996. Salaries and related benefits increased $85,000 (4%). Bad debt expense
increased $74,000 from $28,000 in 1995 to $102,000 in 1996. Commission expense
decreased $37,000 (16%). Cost cutting is primarily responsible for the remaining
general reductions in SG&A expenses.
Equity in earnings of the affiliate, which were generated by a 50% owned joint
venture, were $891,000 in 1995. There was no income from this venture in 1996.
LIQUIDITY
The Company's policy is that all home and sunroom orders be accompanied by a
cash deposit and that units be paid in full before shipment or be shipped on a
C.O.D. basis. The majority of home and sunroom sales are prepaid.
Lumber sales are made on terms common to the lumber industry.
The Company pays its vendors within stated terms and takes advantage of
discounts for early payment. Operations and customer deposits for home and
sunroom orders are the Company's primary sources of cash. The Company does not
foresee the need to increase its lines of credit in 1996.
As stated in the December 31, 1995 Form 10-K, the Company has begun the process
of consolidating its manufacturing and distribution operations and, in late
February 1996, notified the employees at the Kent Washington facility that the
home shipment operations would be moved to Surrey, British Columbia. All home
shipments are planned to originate from the Surrey, British Columbia facility
beginning on, or about, October 15, 1996. On August 9, 1996, negotiations with
the union that represents the 12 union employees effected were completed. The
Company will pay approximately $150,000 in severance to these employees. As of
June 30, 1996, no provision has been made in the consolidated financial
statements for this severance payment. It is expected that the Kent Washington
property will be sold at an amount in excess of its recorded value.
The Company is also in the process of consolidating its sunroom and window
operations in the Kirkland, Washington facility. It is expected that this
facility will manufacture the Company's sunrooms in addition to windows.
Currently, sunrooms are manufactured, on a contract basis, by a third party.
The Company does not expect any significant capital expenditures related to
consolidation in 1996.
Cash and cash equivalents, at June 30, 1996, increased $351,000 (21%) from
December 31, 1995 due largely to seasonal factors and decreased $458,000 (19%)
from July 2, 1995. Short-term investments, at June 30, 1996, increased $1.1
million (66%) from December 31, 1995 and $1.2 million (77%) from July 2, 1995.
At June 30, 1996, short-term investments were primarily composed of bankers'
acceptances and commercial paper. Approximately 90% of the June 30, 1996
short-term investments mature at planned intervals before December 31, 1996.
Although no need to borrow for operating needs is foreseen, should a
14
<PAGE> 15
need arise, the Company has available lines of credit totaling $2.9 million. The
Company did not use the available lines of credit, at any time, in 1996 or 1995.
Trade accounts receivable, inventories, accounts payable-trade and customer
deposits increased $530,000 (23%), $2.0 million (23%), $1.3 million (85%) and
$2.3 million (52%), respectively, from December 31, 1995 to June 30, 1996 due to
seasonal factors. Accounts payable-trade decreased $677,000 (20%) from July 2,
1995 to June 30, 1996 primarily due to the timing of certain payments.
Accrued salaries and wages decreased $224,000 (36%) from December 31, 1995 to
June 30, 1996 due to profit sharing that was accrued at December 31, 1995 and
was paid in March 1996. Customer deposits increased $2.1 million (46%) from July
2, 1995 to June 30, 1996, due primarily to increased new orders and backlog.
Long-term debt decreased $642,000 (35%) from July 2, 1995 to June 30, 1996
primarily to the September 1995 pay-off of a mortgage that was due in 2010 with
a rate of interest of 11%. The Company continues to hedge a portion of its
expected non-cedar lumber needs for its home packages using options and futures
contracts. The program's objective is to manage well defined commodity risks.
These derivative financial instruments are not being used for trading purposes.
15
<PAGE> 16
LINDAL CEDAR HOMES, INC.
AND SUBSIDIARIES
PART II: OTHER INFORMATION
ITEM 4 - RESULTS OF VOTES OF SECURITIES HOLDERS
The following matters were approved by the shareholders at the Company's annual
meeting of shareholders held on May 30, 1996:
<TABLE>
<CAPTION>
Authority
Withheld/
Description of Proposal For Against Abstain
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Election of Directors
Robert W. Lindal 3,122,119 2,950 -
Martin J. Lindal 3,122,119 2,950 -
Everett G. Martin 3,122,119 2,950 -
Charles R. Widman 3,122,119 2,950 -
2. To elect the independent auditors to examine the
consolidated financial statements of the Company
for the year ending December 31, 1996 3,123,885 1,040 144
</TABLE>
ITEM 6(B) - REPORTS ON FORM 8-K
There were no reports on Form 8-K filed during the second quarter of 1996.
16
<PAGE> 17
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:
August 14, 1996
17
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<ARTICLE> 5
<CIK>0000059591
<NAME>LINDAL CEDAR HOMES
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 4860
<SECURITIES> 0
<RECEIVABLES> 2872
<ALLOWANCES> 306
<INVENTORY> 10521
<CURRENT-ASSETS> 20059
<PP&E> 19953
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<BONDS> 1190
0
0
<COMMON> 41
<OTHER-SE> 19710
<TOTAL-LIABILITY-AND-EQUITY> 32112
<SALES> 20760
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<CGS> 15389
<TOTAL-COSTS> 15389
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<LOSS-PROVISION> 102
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