<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 March 30, 1997
[ ] 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 April 29, 1997: 4,091,136 shares at $.01 par value.
1 of 15
<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 7
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations 12
Part II. Other Information
Item 6(b) Reports on Form 8-K 14
Signatures 15
</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
March 30, 1997, December 31, 1996 and March 31, 1996
(Dollar amounts in thousands, except per share amounts)
<TABLE>
<CAPTION>
March 30, December 31, March 31,
1997 1996 1996
--------- ------------ ---------
Assets (unaudited) (unaudited)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 2,336 1,262 599
Short-term investments 590 2,776 1,084
Receivables:
Trade 2,435 2,102 2,278
Current installments of long-term notes receivable 228 203 93
Refundable income taxes 1,019 357 319
-------- ------ ------
3,682 2,662 2,690
Less allowance for doubtful receivables 419 394 244
-------- ------ ------
Net receivables 3,263 2,268 2,446
Inventories 11,325 10,689 9,808
Prepaid expenses 1,987 1,423 2,122
Deferred income taxes 314 314 141
-------- ------ ------
Total current assets 19,815 18,732 16,200
Long-term notes receivable, excluding current installments 1,022 927 647
Investment in affiliate -- -- 48
Property, plant and equipment, at cost, less accumulated
depreciation and amortization 9,231 9,829 10,669
Other assets, at cost, less accumulated amortization 504 546 659
-------- ------ ------
$ 30,572 30,034 28,223
======== ====== ======
Liabilities and Stockholders' Equity
Current liabilities:
Current installments of long-term debt 54 52 49
Accounts payable - trade 2,143 1,467 1,779
Accrued salaries and wages 189 759 162
Other accrued expenses 1,120 983 842
Customer deposits 5,850 4,657 5,748
-------- ------ ------
Total current liabilities 9,356 7,918 8,580
Long-term debt, excluding current installments 1,150 1,164 1,203
Deferred income taxes 387 210 103
Stockholders' equity:
Common stock of $.01 par value. Authorized 10,000,000 shares; issued and
outstanding 4,091,136 shares at March 30, 1997, 4,081,830 shares at
December 31, 1996 and 4,061,671 shares at March 31, 1996 41 41 41
Additional paid-in capital 15,946 15,916 15,862
Cumulative translation adjustment (849) (748) (702)
Retained earnings 4,541 5,533 3,136
-------- ------ ------
Total stockholders' equity 19,679 20,742 18,337
-------- ------ ------
$ 30,572 30,034 28,223
======== ====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
LINDAL CEDAR HOMES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Quarters ended March 30, 1997 and March 31, 1996
(Dollar amounts in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
March 30, March 31,
1997 1996
--------- ---------
<S> <C> <C>
Revenue $ 7,540 6,587
Cost of goods sold 7,252 5,645
------- -------
Gross profit 288 942
Operating expenses:
Selling, general and administrative expenses 2,183 2,289
Display court expenses 161 150
------- -------
Total operating expenses 2,344 2,439
------- -------
Operating loss (2,056) (1,497)
Other income (expense):
Rental income 90 62
Interest income 60 78
Interest expense (29) (31)
Other, net 466 --
------- -------
Other income, net 587 109
------- -------
Loss before income tax benefit (1,469) (1,388)
Income tax benefit 477 497
------- -------
Net loss $ (992) (891)
======= =======
Net loss per common share $ (.24) (.22)
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
LINDAL CEDAR HOMES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Quarters ended March 30, 1997 and March 31, 1996
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
March 30, March 31,
1997 1996
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (992) (891)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization of plant and equipment 244 224
Amortization of other assets 41 42
Amortization of display homes 50 58
Gain on disposal of property, plant, and furniture and fixtures (466) (1)
Deferred income tax expense 177 15
Compensation expense related to restricted stock -- 4
Change in certain assets and liabilities:
Increase in net receivables other than current portion of long-term notes (1,008) (223)
Increase in inventories (808) (1,349)
Increase in prepaid expenses (564) (192)
Increase in current liabilities other than current portion of long-term 1,440 1,184
debt
Notes receivable increase related to operating activities (135) (130)
------- -------
Net cash used in operating activities (2,021) (1,259)
Cash flows from investing activities:
Purchase of short-term investments (99) (629)
Liquidation of short-term investments 2,285 1,258
Cash received for repayment of notes (not related to the sale of homes) 21 12
Cash received from sale of property, plant, furniture and fixtures 1,460 7
Additions to property, plant and equipment (605) (413)
Disbursements for loans (not related to the sale of homes) (8) --
Additions to other assets -- (3)
------- -------
Net cash provided by investing activities 3,054 232
Cash flows from financing activities:
Proceeds from exercise of stock options 30 1
Repayment of long-term debt (12) (11)
------- -------
Net cash provided by (used in) financing activities 18 (10)
Effect of exchange rates on cash and cash equivalents 23 (25)
------- -------
Net increase (decrease) in cash and cash equivalents 1,074 (1,062)
Cash and cash equivalents at beginning of period 1,262 1,661
------- -------
Cash and cash equivalents at end of period $ 2,336 599
======= =======
Supplemental disclosures of cash flow information - cash paid during the year
for:
Interest $ 29 32
Income taxes paid (refunded) -- (3)
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE> 7
LINDAL CEDAR HOMES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 30, 1997, December 31, 1996 and March 31, 1996
(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, 1996.
(2) Loss Per Common Share
Loss per common share for 1997 and 1996 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 share was 4,085,016 for 1997 and 4,060,955 for 1996.
(3) Inventories
A summary of inventories follows (in thousands):
<TABLE>
<CAPTION>
March 30, December 31, March 31,
1997 1996 1996
----------------------------------------
<S> <C> <C> <C>
Raw materials $ 4,461 3,491 3,438
Work-in-process 2,686 2,234 2,096
Finished goods 3,423 4,056 3,177
Display homes 755 908 1,097
-------------------------------------
$11,325 10,689 9,808
=====================================
</TABLE>
(4) Investment in Affiliate
In 1994, the Company acquired a 50% interest in a corporate joint
venture (JV) which was accounted for in accordance with the equity
method. The remaining 50% interest was 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 were 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.
(Continued)
7
<PAGE> 8
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 (in thousands):
<TABLE>
<CAPTION>
March 30, December 31, March 31,
1997 1996 1996
--------- ------------ ---------
<S> <C> <C> <C>
Building and leasehold improvements $ 7,324 8,204 7,880
Equipment 5,084 4,834 4,644
Furniture and fixtures 3,742 3,463 3,173
------- ------ ------
16,150 16,501 15,697
Less accumulated depreciation and amortization 9,238 9,432 9,052
------- ------ ------
6,912 7,069 6,645
Land 2,319 2,760 4,024
------- ------ ------
Net property, plant and equipment $ 9,231 9,829 10,669
======= ====== ======
(6) LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
March 30, December 31, March 31,
1997 1996 1996
--------- ------------ ---------
First mortgage note payable, due in monthly
installments of $13, including interest at 9.5%;
final payment due 2009 $ 1,171 1,183 1,218
Other 33 33 34
------- ------- -------
Total long-term debt 1,204 1,216 1,252
Less current installments 54 52 49
------- ------- -------
Long-term debt, excluding current
installments $ 1,150 1,164 1,203
======= ====== ======
</TABLE>
At December 31, 1996, certain properties, having an aggregate net book
value of approximately $3,577, were pledged as collateral for the above
long-term debt.
At March 30, 1997, the Company had $2,864 of unsecured lines of credit
with banks to be drawn upon as needed, with interest at 1/2% above the
prime rate.
8
<PAGE> 9
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.
From January 1, 1997 to April 29, 1997, options to purchase
5,306 shares were exercised at a per share price of $2.94. No
options were granted in 1997.
(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 or exercised by non-employee
directors from January 1, 1997 through April 29, 1997.
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. From January 1, 1997 to April 29, 1997,
options to purchase 2,200 shares were granted at a per share
price of $4.13. Between January 1, 1997 and April 29, 1997,
options to purchase 4,000 shares were exercised at a per share
price of $3.75.
9
<PAGE> 10
LINDAL CEDAR HOMES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share amounts)
- --------------------------------------------------------------------------------
(8) INCOME TAXES
Income tax expense (benefit) was allocated as follows (in thousands):
<TABLE>
<CAPTION>
Quarters ended
------------------------------
March 30, 1997 March 31, 1996
------------------------------
<S> <C> <C>
Current
U.S. Federal $(708) (382)
Canadian 53 (128)
---------------------
(655) (510)
Deferred:
U.S. Federal 169 15
Canadian 9 (2)
---------------------
178 13
---------------------
$(477) (497)
=====================
</TABLE>
The Company's consolidated Canadian subsidiary had earnings before
income taxes of $137 for the first quarter of 1997 compared to a loss
before income taxes of $289 for the first quarter of 1996.
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>
March 30, December 31, March 31,
1997 1996 1996
------------------------------------------
<S> <C> <C> <C>
Deferred tax assets:
Receivables, due to the allowance for doubtful receivables $133 128 75
Uniform inventory capitalization for tax purposes 34 34 20
Accrued expenses deductible in different years for tax 147 152 46
------------------------------------
Deferred tax assets 314 314 141
Deferred tax liabilities - property, plant and equipment,
principally due to differences in basis of assets and
depreciation 387 210 103
------------------------------------
Net deferred tax assets (liability) $(73) 104 38
====================================
</TABLE>
(Continued)
10
<PAGE> 11
LINDAL CEDAR HOMES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share amounts)
- -------------------------------------------------------------------------------
(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>
1997
----
Revenue $7,540
1996
----
Revenue 6,587 14,173 14,632 11,243
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
</TABLE>
11
<PAGE> 12
LINDAL CEDAR HOMES, INC.
AND SUBSIDIARIES
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND THE RESULTS OF OPERATIONS
FIRST QUARTER
RESULTS OF OPERATIONS
Revenue increased $953,000 (14%) from 1996 to 1997.
Home and sunroom revenue increased $400,000 (8%) from $4.8 million in 1996 to
$5.2 million in 1997. The number of home units shipped increased 11% from 61
units in 1996 to 68 units in 1997. The average revenue per home unit shipped was
$71,700 in 1996 compared to $71,400 in 1997. The Access product, which sells for
approximately 30% less than the traditional Cedar Frame home, accounted for
approximately 33% of the home units shipped in both 1996 and 1997.
Material and chip sales increased $700,000 (95%) due primarily to the increased
production in the sawmill in 1997.
The dollar value and the number of new orders decreased 5% from 1996 to 1997.
The Access product represented 36% of the new orders in 1997 compared to 30% of
the new orders in 1996. The Cedar Frame home product represented 49% of the new
orders in 1997 compared to 56% in 1996. The Company expects that the Access
product will continue to represent an increasing percentage of home sales in
the future.
The gross profit percentage (gross profit/revenue) decreased from 14.3% in 1996
to 3.8% in 1997 due primarily to increased lumber prices.
Selling, general and administrative expenses decreased $106,000 (5%) from 1996
to 1997 due primarily to the effect of general cost cutting.
The Kent Washington facility was sold in the first quarter of 1997. The gain,
$466,000, is included in Other Income.
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 source of cash. The Company is
considering increasing one of its lines of credit in 1997.
The total of cash and cash equivalents and short-term investments at March 30,
1997 decreased $1.1 million (28%) from December 31, 1996 due largely to seasonal
factors. The total of cash and cash equivalents and short-term investments at
March 30, 1997 increased $1.2 million (74%) from March 31, 1996 due largely to
the $1.3 million that was realized from the sale of the Kent, Washington
facility. In late 1996, the Company realized $1.4 million from the sale of
undeveloped land located at Marysville, Washington.
At March 30, 1997, the proceeds from the sale of the Kent, Washington facility
were in an interest-bearing escrow account and were applied toward the purchase
of a facility in Skagit County, Washington in April 1997. This facility will be
used by the Lindal Building Products
12
<PAGE> 13
Division for the manufacture of windows and for administrative offices. It is
planned that sunrooms will be manufactured there later in 1997. The transaction
to acquire this facility was structured so that it qualified as a tax-free
exchange under section 1031 of the Internal Revenue Code.
At March 30, 1997, short-term investments were primarily composed of tax-exempt
bonds and commercial paper. Approximately 90% of the March 30, 1997 short-term
investments matures at planned intervals on or before July 1, 1997.
Cash and cash equivalents and investments are traditionally at their lowest
levels in the first quarter of the year. However, with the various major
projects currently being undertaken, this may not be true for 1997. If a large
strategic purchase of inventory is deemed advantageous, the Company may utilize
one of its lines of credit.
Inventories increased $636,000 (6%) from December 31, 1996 and $1.5 million
(15%) from March 31, 1996. The general increase in inventories is primarily due
to increased prices for lumber products and the strategy of holding larger than
normal quantities of certain lumber components for homes. This strategy is
designed to allow the Company to ship complete home packages even if short-term
supply disruptions occur in the lumber market.
Accounts payable-trade and customer deposits increased $676,000 (46%) and $1.2
million (26%), respectively, from December 31, 1996 to March 30, 1997 due to
seasonal factors.
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.
At March 30, 1997, the Company's 10-year labor agreement with the union that
represents the Canadian plant employees has not been ratified by the union.
Negotiations are continuing on this matter. Until this agreement is ratified,
the Company does not intend to finalize its negotiations regarding the land
lease for the Canadian plant expansion or expend significant amounts of cash on
the planned project.
OTHER MATTERS
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 (SFAS 128) which establishes accounting
standards for computing and presenting earnings per share (EPS). The
computations for determining EPS should be simplified under SFAS 128. The
Company must adopt SFAS 128 beginning December 31, 1997, and will be required to
restate all prior-period EPS data presented. Earlier adoption is not permitted.
Management believes adoption of SFAS 128 will not impact the Company's financial
position and results of operations.
13
<PAGE> 14
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 1997.
14
<PAGE> 15
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 14, 1997
15
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-30-1997
<CASH> 2,926
<SECURITIES> 0
<RECEIVABLES> 2,435
<ALLOWANCES> 419
<INVENTORY> 11,325
<CURRENT-ASSETS> 19,815
<PP&E> 18,469
<DEPRECIATION> 9,238
<TOTAL-ASSETS> 30,572
<CURRENT-LIABILITIES> 9,356
<BONDS> 1,150
0
0
<COMMON> 41
<OTHER-SE> 19,638
<TOTAL-LIABILITY-AND-EQUITY> 30,572
<SALES> 7,540
<TOTAL-REVENUES> 7,540
<CGS> 7,252
<TOTAL-COSTS> 7,252
<OTHER-EXPENSES> 2,344
<LOSS-PROVISION> 25
<INTEREST-EXPENSE> 29
<INCOME-PRETAX> (1,469)
<INCOME-TAX> (477)
<INCOME-CONTINUING> (992)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (992)
<EPS-PRIMARY> .24
<EPS-DILUTED> .24
</TABLE>
