<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 June 28, 1998.
[ ] 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
requirement for the past 90 days.
Yes [X] No [ ]
Common stock outstanding at June 28, 1998: 4,118,446 shares at $.01 par value.
1 of 22
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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 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 10
Part II Other Information
Item 4 Results of Votes of Securities Holders 21
Item 6(a) Exhibits 21
Item 6(b) Reports on Form 8-K 21
Signatures 22
</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 28, 1998, December 31, 1997 and June 29, 1997
(Dollar amounts in thousands, except per share amounts)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
JUNE 28, DECEMBER 31, JUNE 29,
1998 1997 1997
(unaudited) (audited) (unaudited)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 1,095 2,286 1,990
Short-term investments 75 77 39
Receivables:
Trade 2,250 2,536 2,593
Current installments of long-term notes receivable 236 229 208
Refundable income taxes 1,886 1,198 625
--------------------------------------
4,372 3,963 3,426
Less allowance for doubtful receivables 333 461 437
--------------------------------------
Net receivables 4,039 3,502 2,989
Inventories 9,548 10,078 11,460
Prepaid expenses 2,427 2,294 2,815
Deferred income taxes 270 335 348
--------------------------------------
Total current assets 17,454 18,572 19,641
Long-term notes receivable, excluding current installments 826 1,190 994
Property, plant and equipment, net 11,947 12,029 11,163
Other assets, at cost , less accumulation amortization 516 396 223
- -----------------------------------------------------------------------------------------------------------
$ 30,743 32,187 32,021
===========================================================================================================
Liabilities and Stockholders' Equity
Current liabilities
Current installments of long-term debt $ 184 180 54
Accounts payable trade 2,021 2,841 3,234
Accrued salaries and wages 122 285 181
Other accrued expenses 866 864 981
Income taxes payable 91 -- --
Customer deposits 5,300 4,430 5,763
--------------------------------------
Total current liabilities 8,584 8,600 10,213
Long-term debt, excluding current installments 4,753 4,787 1,137
Deferred income taxes 346 352 387
Stockholders' equity:
Common stock, $.01 par value. Authorized 10,000,000
shares; issued and outstanding 4,118,446 shares at
June 28, 1998, 4,118,446 shares at December 31, 1997
and 4,109,649 shares at June 29, 1997 41 41 41
Additional paid-in capital 16,033 16,033 16,002
Cumulative translation adjustment (939) (712) (932)
Retained earnings 1,925 3,086 5,173
--------------------------------------
Total stockholders' equity 17,060 18,448 20,284
- -----------------------------------------------------------------------------------------------------------
$ 30,743 32,187 32,021
===========================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE> 5
LINDAL CEDAR HOMES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the periods ended June 28, 1998 and June 29, 1997
(Dollar amounts in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED QUARTERS ENDED
JUNE 28, JUNE 29, JUNE 28, JUNE 29,
1998 1997 1998 1997
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue $ 17,122 22,453 11,477 14,913
Cost of goods sold 14,616 18,783 8,649 11,531
-----------------------------------------------------
Gross profit 2,506 3,670 2,828 3,382
Operating expenses:
Selling, general and administrative expenses 4,235 4,474 2,150 2,291
Display court expenses 230 331 100 170
-----------------------------------------------------
Total operating expenses 4,465 4,805 2,250 2,461
-----------------------------------------------------
Operating income (loss) (1,959) (1,135) 578 921
Other income (expense):
Rental income 127 165 60 75
Interest income 75 94 43 34
Interest expense (170) (60) (83) (31)
Other, net 165 457 72 (9)
-----------------------------------------------------
Other income, net 197 656 92 69
-----------------------------------------------------
Earnings (loss) before income tax expense (benefit) (1,762) (479) 670 990
Income tax expense (benefit) (601) (119) 120 358
-----------------------------------------------------
Net earnings (loss) $ (1,161) (360) 550 632
=====================================================
Basic and diluted - net earnings (loss) per common share $ (.28) (.09) .13 .15
===========================================================================================================================
</TABLE>
5
<PAGE> 6
LINDAL CEDAR HOMES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended June 28, 1998 and June 29, 1997
(Dollar amounts in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
JUNE 28, 1998 JUNE 29, 1997
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,161) (360)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization of plant and equipment 480 504
Amortization of other assets 82 82
Amortization of display homes 59 94
Gain on disposal of property, plant and equipment -- (463)
Deferred income tax benefit 59 144
Allowance for doubtful notes 61 --
Change in operating assets and liabilities:
Increase in net receivables other than current notes (400) (536)
Decrease(increase) in inventories other than amortization 471 (1,065)
Increase in prepaid expenses other than amortization (363) (1,151)
Increase (decrease) in current liabilities other than
current installments of long-term debt and notes payable (20) 2,061
Notes receivable decrease (increase) related to operating
activities 70 (128)
Addition to other assets (7) --
---------------------
Net cash used in operating activities (669) (818)
Cash flows from investing activities:
Purchase of short-term investments (38) (99)
Liquidation of short-term investments 38 2,835
Cash received for repayment of notes (not related to sale of homes) 138 60
Cash received from the sale of property, plant and equipment -- 1,460
Additions to property, plant and equipment (424) (2,834)
Disbursements for loans (not related to sale of homes) (41) (8)
---------------------
Net cash provided by (used in) in investing activities (327) 1,414
Cash flows from financing activities:
Proceeds from exercise of stock options -- 86
Additions to long-term debt 10 --
Repayment of long-term debt (41) (26)
Additions to notes payable 1,798 --
Repayment of notes payable (1,798) --
---------------------
Net cash provided by (used in) financing activities (31) 60
Effect of exchange rates on cash and cash equivalents (164) 72
---------------------
Net increase (decrease) in cash and cash equivalents (1,191) 728
Cash and cash equivalents beginning of period 2,286 1,262
---------------------
Cash and cash equivalents at end of period $ 1,095 1,990
=====================
Supplemental disclosures of cash flow information - cash paid during
period for:
Interest $ 163 59
Income taxes paid(refund) (61) 3
=======================================================================================================
</TABLE>
6
<PAGE> 7
LINDAL CEDAR HOMES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 28, 1998, December 31, 1997 and June 29, 1997
(Dollar amounts in thousands, except per share amounts)
(Unaudited)
- --------------------------------------------------------------------------------
(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 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, 1997.
(2) EARNINGS (LOSS) PER COMMON SHARE
The following tables present basic and diluted earnings (loss) per share
and reconcile the numerator and denominator of the basic and diluted per
share computations:
<TABLE>
<CAPTION>
Net Earnings Weighted Net Earnings
(Loss) Average Shares (Loss)
(Numerator) (Denominator) Per Share
---------- -------------- ---------
<S> <C> <C> <C>
Quarter ended June 28, 1998:
Basic earnings per share $ 550 4,118 $ 0.13
Effect of dilutive options -- -- --
------- ------ ------
Diluted earnings per share $ 550 4,118 $ 0.13
------- ------ ------
Quarter ended June 29, 1997:
Basic earnings per share $ 632 4,102 $ 0.15
Effect of dilutive options -- 25 --
------- ------ ------
Diluted earnings per share $ 632 4,127 $ 0.15
------- ------ ------
Six months ended June 28, 1998:
Basic earnings per share $(1,161) 4,118 $(0.28)
Effect of dilutive options -- -- --
------- ------ ------
Diluted earnings per share $(1,161) 4,118 $(0.28)
------- ------ ------
Six months ended June 29, 1997:
Basic earnings per share $ (360) 4,094 $(0.09)
Effect of dilutive options -- -- --
------- ------ ------
Diluted earnings per share $ (360) 4,094 $(0.09)
------- ------ ------
</TABLE>
7
<PAGE> 8
LINDAL CEDAR HOMES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 28, 1998, December 31, 1997 and June 29, 1997
(Dollar amounts in thousands, except per share amounts)
(Unaudited)
- --------------------------------------------------------------------------------
Options to purchase shares of common stock where the exercise price
exceeds the average market price were excluded from the computations for
1998 and 1997 because they would be anti-dilutive. Anti-dilutive options
excluded from the computations are as follows:
<TABLE>
<CAPTION>
Anti-dilutive
Options
--------------------------------------------------
<S> <C>
Quarter ended June 28, 1998 508
Quarter ended June 29, 1997 303
Six months ended June 28, 1998 508
Six months ended June 29, 1997 570
</TABLE>
(3) FINANCIAL ACCOUNTING STANDARDS ADOPTED
SFAS No. 130, "Reporting Comprehensive Income" is effective for fiscal
years beginning after December 15, 1997. SFAS No. 130 establishes
standards for the reporting and display of comprehensive income and its
components (revenues, expenses, gains, losses) in a full set of general
purose financial statements. The Statement requires that all items
required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements. The
Company is evaluating the Statement's provisions to determine how it will
present comprehensive income in its financial statements. Comprehensive
income is as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED QUARTERS ENDED
---------------------------------------------
JUNE 28, JUNE 29, JUNE 28, JUNE 29,
1998 1997 1998 1997
---------------------------------------------
<S> <C> <C> <C> <C>
Net income (loss) (1,161) (360) 550 632
Loss from foreign currency
translation (227) (184) (336) (83)
---------------------------------------------
Comprehensive income (loss) (1,388) (544) 214 549
=============================================
</TABLE>
(4) INVENTORIES
A summary of inventories follows:
<TABLE>
<CAPTION>
JUNE 28, DECEMBER 31, JUNE 29,
1998 1997 1997
---------------------------------------
<S> <C> <C> <C>
Raw materials $ 2,854 2,992 5,074
Work-in-process 3,274 3,092 2,257
Finished goods 2,969 3,495 3,456
Display models 451 499 673
---------------------------------------
$ 9,548 10,078 11,460
=======================================
</TABLE>
8
<PAGE> 9
LINDAL CEDAR HOMES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 28, 1998, December 31, 1997 and June 29, 1997
(Dollar amounts in thousands, except per share amounts)
(Unaudited)
- --------------------------------------------------------------------------------
(5) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
JUNE 28, DECEMBER 31, JUNE 29,
1998 1997 1997
---------------------------------------
<S> <C> <C> <C>
Building and leasehold improvements $10,816 10,823 9,445
Equipment 5,347 5,195 4,906
Furniture and fixtures 4,219 4,091 3,927
---------------------------------------
20,382 20,109 18,278
Less accumulated depreciation and amortization 10,615 10,265 9,429
---------------------------------------
9,767 9,844 8,849
Land 2,180 2,185 2,314
---------------------------------------
Net property, plant and equipment $11,947 12,029 11,163
=======================================
</TABLE>
(6) IMPAIRMENT OF LONG-LIVED ASSETS
Because of the unfavorable cedar market conditions that existed in 1997,
management temporarily closed its Surrey, British Columbia, Canada sawmill
operations in the fourth quarter of 1997 and after opening briefly in the
first quarter of 1998, decided to temporarily close the sawmill until the
market for cedar logs and green and finished cedar lumber improved.
However, management expects these market conditions to continue for some
indefinite time period and believes that 1997 sawmill operating losses are
indicative of expected future operating results. In the event that market
conditions do not improve, management may decide to permanently close the
sawmill operations. Such a decision could subject the Company to certain
closure costs which could range from an immaterial amount to approximately
$500.
(7) LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
JUNE 28, DECEMBER 31, JUNE 29,
1998 1997 1997
---------------------------------------
<S> <C> <C> <C>
Industrial revenue bonds $3,725 3,725 --
First mortgage note payable, due in monthly
installments of $13, including interest at 9.5%,
final payment due 2009 1,104 1,131 1,158
Other 108 111 33
---------------------------------------
Total long-term debt 4,937 4,967 1,191
Less current installments 184 180 54
---------------------------------------
Long-term debt, excluding current installments $4,753 4,787 1,137
=======================================
</TABLE>
9
<PAGE> 10
LINDAL CEDAR HOMES, INC.
AND SUBSIDIARIES
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
Lindal Cedar Homes, Inc. (the "Company") is primarily engaged in the manufacture
and distribution of custom cedar homes, windows and sunrooms. The Company
manufactures standard dimensional cedar lumber. Cedar lumber, that meets the
Company's quality standards, is combined with windows, sunrooms, and other
purchased forest products and building materials into home packages which can be
shipped nationally and internationally to the home buyer's construction site.
The Company has three home products: Cedar Frame, Cedar: Solid, and Access.
The Cedar Frame home utilizes a cavity wall. The Cedar: Solid utilizes,
predominantly, a solid cedar wall. The Access home retains many of the features
of the Cedar Frame home, including a cavity wall. However, the base price of the
Access product is approximately 25% to 30% less than the traditional Cedar Frame
home due to a less extensive package of materials and less expensive package
components.
The Company's revenues tend to be seasonal. Most home shipments traditionally
occur between April and October. Besides being seasonal, the housing industry is
cyclical. The Company follows industry patterns, but believes that it is
somewhat better positioned to weather industry downturns than other
manufacturers or builders with lower cost products that appeal to a larger but
less affluent market. This belief is based upon the Lindal products' traditional
appeal to middle and upper income customers who historically have been less
affected by economic downturns.
The majority of the Company's home sales are made through independent dealers.
The Company's dealers are subject to the economic conditions, weather
conditions, housing trends, and demographic influences existing in their locale.
As such, individual dealer sales may vary from year to year.
As non-exclusive independent businesses, the dealers may sell products or
services that complement the products and services sold by the Company. The
Company continually recruits new dealers to expand sales into previously
unserved locations and to replace dealers that have retired or otherwise
discontinued their dealership operations.
The Company recognizes revenue from orders when the home package is shipped.
Entering the third quarter of 1998, the total backlog, stated in dollars,
decreased $2 million (7%) to approximately $27 million in 1998 from
approximately $29 million in 1997. Because the Company's business is seasonal,
the backlog data does not necessarily reflect the level of the Company's
business on an annual basis. While the Company expects the majority of the
current backlog will ship within the next 12 months, factors beyond the control
of the Company, such as weather conditions, customer financing, building permits
or customer requested delays, may affect the actual delivery date of some
portion of backlog orders beyond the twelve month period.
The Company's Surrey, British Columbia location currently includes a sawmill
which has historically produced the majority of the Company's cedar lumber
needs. Previously, (see following paragraph) most of the sawmill's output that
met quality standards was remanufactured into the cedar components of homes.
Preferably, the higher grades of lumber were used in home packages, where the
margins were better. Sawmill production that was not of a grade suitable for use
in homes, or was in excess of requirements for home sales was sold on the
commodity lumber market.
As discussed in the Company's 1997 Form 10-K, in 1997 the Company experienced a
loss from the sawmill operations and, during the last half of 1997, the market
value of green and finished cedar lumber did not keep pace with the escalating
cost of cedar logs. Also, during the fourth quarter of 1997, the Company
experienced a shortage of cedar logs resulting from the curtailment of log
harvesting in British Columbia, Canada. The operating loss, combined with the
shortage of and escalating cost of cedar logs, caused the Company to temporarily
close the sawmill in November 1997. After resuming operations for a brief period
of time in the first quarter of 1998, the Company, in March 1998, decided to
again temporarily
10
<PAGE> 11
close the sawmill until the market for cedar logs and green and finished cedar
lumber improve and the sawmill can be operated on a profitable basis. The
sawmill remained closed throughout the second quarter of 1998. Until the sawmill
resumes operations, the Company will fill its needs for cedar lumber from
existing inventory, and purchase commodity cedar lumber on the open market at
more favorable prices than it can produce internally.
Management believes that, as long as the market conditions existing in the last
half of 1997 and the first six months of 1998 continue, the 1997 sawmill
operating results are indicative of expected future sawmill operating results.
The primary raw material used by the Company in its manufacturing is western red
cedar, available in quantity only in British Columbia, Canada, Alaska and the
Pacific Northwest United States. Pressures continue to be placed on the log
market in general by harvesting restrictions in the United States and Canada. In
1997, the price of cedar logs escalated dramatically. Management believes that
cedar log prices will generally continue at this elevated level. The Company is
aware of the potential for shortages and/or fluctuations in the price of cedar
logs.
The Company is working to secure its cedar raw material needs on a long term
basis. The Province of British Columbia established a program which sets aside a
portion of the allowable annual harvesting of timber for smaller companies. The
harvesting rights are sold, through timber sales, to companies which can
demonstrate the highest value being added to the raw lumber through efforts made
in British Columbia. In 1994, the Company was first granted rights to harvest
approximately 50,000 cubic meters of timber between 1994 and 1997. On September
30, 1996, the Company was granted a second timber sale. The grant is for 327,000
cubic meters of timber to be harvested within a five year period. As of June 28,
1998, it is expected that this timber sale will allow the Company to secure a
cedar supply for a minimum of the next three years.
The Company believes that this timber sale agreement will be moderately
profitable, however it is not expected that this contract will be as profitable,
on a relative basis, as the previously awarded timber sale. However, management
believes obtaining this timber sale will greatly facilitate the procurement of
cedar logs and/or lumber.
As a condition of the grant of the second timber sale, the Company committed to
consolidating its home shipment operations in, and transferring a considerable
amount of its lumber remanufacturing to, Surrey, British Columbia. To satisfy
this condition will require the Company to invest $5 to $6 million in new plant
and equipment and lease an additional seven to eight acres of land adjacent to
the current Surrey, British Columbia facility. The Company has negotiated the
required leases.
In 1996, the Company began the process of consolidating its distribution
operations into the Surrey, British Columbia facility, and the consolidation was
completed in the first quarter of 1997. All home shipments originate from the
Surrey facility.
Also, in response to receiving the second timber sale grant described above, a
10-year labor agreement was signed with the union for the Canadian plant
employees in the second quarter of 1997. This agreement
11
<PAGE> 12
provides that the new jobs created/moved to British Columbia will be at wage
rates starting at 60% of the present British Columbia Coast Master Agreement and
increasing, over the next 10 years, to a maximum of 80% of that agreement.
Prior to being able to harvest any timber granted in the second timber sale, the
Company is required to "substantially complete" the items it has committed to
under the terms of the timber sale. The consolidation of the shipping operation
has occurred, the ground lease commitments have been secured, and the
ground/soil preparation for the construction of the new lumber remanufacturing
plant and home distribution facility began in 1997. It is anticipated that
construction of the new facilities will begin in late 1998 or early 1999.
In recognition of the progress completed, the Province of British Columbia has
given the Company authorization to begin limited harvesting of timber.
Management expects that timber harvesting will begin in late 1998 or early 1999.
Until construction of the new Surrey, British Columbia remanufacturing facility
is complete, cedar lumber will continue to be remanufactured by the Company in
Tacoma, Washington. When the remanufacturing of lumber is performed at the
Surrey, British Columbia facility, the Tacoma, Washington facility will provide
most of its services to third parties.
The Company reached agreement with MacMillan Bloedel who will provide services
related to the planning, management of timber harvesting, and marketing
of the logs. As the majority of the timber to be harvested is not western red
cedar, or not suitable for processing in the Company's sawmill, the timber
harvested will be sold on the log market in Canada. By having these logs
available for sale, the purchase of western red cedar logs for the Company's
sawmill or the purchase of green or finished cedar lumber will be greatly
facilitated during the term of the timber sale.
Prior to investing the required $5 to $6 million, management is re-evaluating
the economics of expanding the Surrey, British Columbia facility in relation to
current wood market conditions, its internal manufacturing costs, operation of
its sawmill, the availability of cedar lumber on the open market, and the
Company's ability to finance the project. The Company is considering several
financing methods, including sale of existing facilities, debt financing, equity
financing, leasing, sale/leaseback or a combination of alternatives. There is no
assurance that the Company can finance the required expansion of the Surrey,
British Columbia facility.
Management is also evaluating the feasibility of establishing a joint venture or
other partnering agreement with a third party to obtain a portion of the capital
required for the Surrey expansion. Such an arrangement would include the third
party assuming responsibility for providing the services presently to be
performed by MacMillan Bloedel. There is no assurance that the Company will be
successful in establishing a joint venture or other partnering agreement.
Although cedar logs are the primary raw material used in manufacturing, the
Company purchases substantial quantities of forest products on the commodity
market to ship in its home packages. Since 1993, the Company has experienced the
extreme volatility and record price levels that have been present throughout the
forest products industry. Presently, the Company does not anticipate any serious
long-term problems in securing the needed forest products in the foreseeable
future. The Company does expect that there may be occasional, temporary
shortages of cedar logs or green cedar lumber and that price volatility of cedar
logs, green cedar lumber, other species of lumber and other forest products may
occur for some time. The Company is vulnerable to market price fluctuations in
the price of wood and forest products, especially cedar, and is limited in its
ability to adjust prices upwards to compensate for such increases. For this
reason, the Company hedges a portion of its non-cedar lumber needs using
options and futures contracts. The Company may also make selected strategic
purchases, when relatively favorable prices exist in the market, of larger
quantities than it has historically. These purchases are not expected to be in
excess of anticipated needs.
As discussed in the Company's 1997 10-K, the consolidation of the Lindal
Building Products Division into the Burlington, Washington facility was
completed in the fourth quarter of 1997. Prior to this
12
<PAGE> 13
consolidation, all sunrooms were manufactured on contract basis by a third
party. In the fourth quarter of 1997, Lindal Building Products began the
internal manufacturing of aluminum sunrooms and began the internal manufacturing
of cedar sunrooms in the second quarter of 1998. In addition, Lindal Building
Products Division began the manufacture of a new line of vinyl window products
in the second quarter of 1998.
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> <C>
1998 $5,645 11,477
1997 7,540 14,913 14,298 12,097
1996 6,587 14,173 14,632 11,243
1995 6,630 13,947 11,536 10,198
1994 7,076 11,521 10,979 9,957
</TABLE>
YEAR 2000
As discussed in the Company's 1997 10-K, management believes that with upgrades
to existing software, the Year 2000 problem will not pose significant problems
for the Company's computer systems. Further, management believes that the cost
of the software upgrades and the redeployment of internal staff time to
implement the upgrades will not have a material effect on the Company's
financial position or results of operations.
SECOND QUARTER
NEW ORDERS
The dollar value of new orders taken increased 8% from the second quarter of
1997 to the second quarter of 1998. The number of new order units decreased 6%
for the same time period. The following table illustrates the percentage change
in the number and dollar value of new orders for the second quarter of each of
the last 3 years:
<TABLE>
<CAPTION>
% CHANGE IN 1998 1997 1996
-------------------------------------------------------
<S> <C> <C> <C>
Units -6% -19% 32%
Dollar Value 8% -23% 36%
</TABLE>
The Access product represented 54% of new order units in the second quarter of
1998 compared to 52% of new order units in the second quarter of 1997, while the
dollar value of the Access product new orders were 48% of the total dollar value
of new orders in the second quarter of 1998 compared to 42% of the total dollar
value of new orders in the second quarter of 1997. Size and value of a home is a
function of customer preference and may change somewhat from period to period.
Management believes the decrease in the number of new orders is primarily
related to the cumulative effect of recent price increases necessary to offset
the escalating wood costs experienced in 1997 and the unseasonable weather
experienced in many parts of the country during the winter and early spring of
1998.
Management is evaluating all aspects of the cost of its products, including
materials, design and construction in order to develop alternatives or options
that would lower the overall price of its products to the end consumer, without
sacrificing the quality of it products. Additionally, the Company is test
marketing, on a limited basis, a line of conventional framed homes.
REVENUE
13
<PAGE> 14
Revenue decreased $3.43 million (23%) to $11.48 million in the second quarter of
1998 from $14.91 million in the second quarter of 1997, primarily due to the
decreases in house revenue and revenue from other sales.
Revenue from houses decreased $2.71 million (23%) to $9.12 million in the second
quarter of 1998 from $11.83 million in the second quarter of 1997. This is
primarily due to the decrease in the number of houses shipped which decreased
26% to 122 in the second quarter of 1998 from 165 in the second quarter of 1997.
Management believes the reduction in the number of units shipped is primarily
related to the decrease in new orders resulting from the cumulative effect of
recent price increases and the unseasonable weather experienced in many parts of
the country.
The Access home (the base price of which is 25%-30% less than the traditional
Cedar Frame home) accounted for approximately 45% of home sales revenue and 52%
of home units shipped in the second quarter of 1998 compared to 33% of home
sales revenue and 42% of the house units shipped in the second quarter of 1997.
Revenue from sunrooms decreased $100,000 (16%) to $520,000 in the second quarter
of 1998 from $620,000 in the second quarter of 1997.
Revenue from other sales decreased $630,000 (26%) to $1.84 million in second
quarter of 1998 from $2.47 million in the second quarter of 1997. This reduction
is primarily due to decreased lumber sales resulting from temporary closure of
the sawmill. The sawmill did not operate during the second quarter of 1998
compared to full time operation in the second quarter of 1997. Since most of the
sawmill output is sold on the open lumber market, there was less lumber sold
during the second quarter of 1998 than in the second quarter of 1997.
MATERIAL COSTS
While there has been softening of prices in specific areas of the wood supply
market, the Company continues to experience increased costs for lumber and wood
products, especially for cedar which is the primary material used in the
Company's homes, in the second quarter of 1998 compared to the second quarter of
1997. The increased lumber and wood products costs, including the cost of cedar,
have not been fully offset by the price increases implemented in 1997 and the
first half of 1998.
In dollars, material costs decreased $2.24 million (27%) to $5.91 million in
the second quarter of 1998 from $8.15 million in the second quarter of 1997 on
43 fewer home shipments and, due to the temporary closure of the sawmill,
decrease in the amount of cedar lumber sold.
As a percent of revenue, material costs were 52% in the second quarter of 1998
compared to 55% in the second quarter of 1997. This decrease in material costs
as a percentage of revenue is due to decreased lumber sales and the cumulative
effect of the price increases implemented in 1997 and the first six months of
1998. The effect of the price increases have been partially offset by increased
material costs, especially cedar, from the year ago period.
Material costs, as a percentage of revenue, improved over the fourth quarter of
1997 when material costs reached a peak of 61% of revenue.
14
<PAGE> 15
To further offset the increased cost of lumber and wood products, the Company
announced a price increase combined with a decrease in the specifications of
its homes. The net effect of these changes was a 3% price increase. These
changes became fully effective in the third quarter of 1998.
OTHER COSTS OF GOODS SOLD
Non material costs, included in the cost of goods sold, decreased $650,000 (19%)
to $2.74 million in the second quarter of 1998 from $3.39 million in the second
quarter of 1997. This is primarily due to a decrease in manufacturing labor and
labor related costs of $490,000, and net decreases in other manufacturing costs
of $160,000. These decreases are primarily due to cost reductions from the
temporary closure of the sawmill, decreased sales volume, and aggressive
containment of other manufacturing costs.
GROSS PROFIT
The cumulative effect of the price increases, and the softening of costs in
specific areas of the wood supply market increased gross profit to 24.6% of
revenue in the second quarter of 1998 compared to 22.7% of revenue in the second
quarter of 1997.
The mix of home units sold also impacts gross profit. As a percent of total
units sold, home units sold for Cedar Frame, Access and Cedar: Solid for the
second quarter of each of the current and two preceding years is presented in
the table below.
<TABLE>
<CAPTION>
HOME PRODUCT 1998 1997 1996
- ---------------------------------------------------------
<S> <C> <C> <C>
Cedar Frame 43% 41% 59%
Access 51% 43% 28%
Cedar: Solid 6% 16% 13%
</TABLE>
Although the Access home (the base price of which is 25% - 30% less than the
Cedar Frame home) has lower material costs than the Cedar Frame home, the gross
profit is lower as well.
OPERATING EXPENSES
Total operating expenses, including display court expenses, decreased $210,000
(9%) to $2.25 million in the second quarter of 1998 from $2.46 million in the
second quarter of 1997.
Selling, and general and administrative expenses decreased $140,000 (6%) to
$2.15 million in the second quarter of 1998 from $2.29 million in the second
quarter of 1997. Selling expenses increased slightly by $40,000 (4%), while
general and administrative expenses decreased $180,000 (15%) to $1.04 million in
the second quarter of 1998 from $1.22 million in the second quarter of 1997.
This is primarily due to general cost cutting measures implemented by the
Company.
OTHER INCOME (NET)
Other income was virtually unchanged from the second quarter of 1997.
INCOME TAX EXPENSE (BENEFIT)
The Company recognized an income tax expense of $120,000 in the second quarter
of 1998 compared to an income tax expense of $360,000 in the second quarter of
1997. The overall income tax expense recognized in the second quarter of 1998
was reduced due to recognition of the income tax benefit from Canadian
operations not recognized in the first quarter of 1998.
15
<PAGE> 16
YEAR-TO-DATE
NEW ORDERS
The dollar value of new orders taken decreased 12% in the first six months of
1998 from the first six months of 1997. The number of new order units decreased
23% for the same time period. The following table illustrates the percentage
change in the number and dollar value of new orders for the first six months of
each of the last 3 years:
<TABLE>
<CAPTION>
% CHANGE IN 1998 1997 1996
------------------------------------------------------
<S> <C> <C> <C>
Units -23% -12% 16%
Dollar Value -12% -13% 22%
</TABLE>
The Access product represented 50% of new order units in the first six months of
1998 compared to 44% of new order units in 1997, while the dollar value of the
Access product new orders were 44% of the total dollar value of new orders in
the first six months of 1998 and 1997. Size and value of a home is a function of
customer preference and may change somewhat from period to period.
Management believes the decrease in the number of new orders is primarily
related to the cumulative effect of recent price increases necessary to offset
the escalating wood costs experienced in 1997 and the unseasonable weather
experienced in many parts of the country.
REVENUE
Revenue decreased $5.33 million (24%) to $17.12 million in the first six months
of 1998 from $22.45 million in the first six months of 1997, primarily due to
the decreases in house revenue and revenue from other sales.
Revenue from houses decreased $3.88 million (23%) to $12.87 million in the first
six months of 1998 from $16.75 million in the first six months of 1997. This is
primarily due to the decrease in the number of houses shipped which decreased
28% to 168 in the first six months of 1998 from 233 in the first six months of
1997. Management believes the reduction in the number of units shipped is
primarily related to the decrease in new orders resulting from the cumulative
effect of recent price increases and the unseasonable weather experienced in
many parts of the country.
During 1997, the Company announced two graduated price increases. The first was
an increase of 4.5% which became fully effective in the third quarter of 1997
and the second was a 3.5% price increase which became fully effective in the
first quarter of 1998. In the first quarter of 1998 the Company announced
another price increase, combined with a decrease in house specifications, of
approximately 3% which became fully effective in the third quarter of 1998.
These price increases and specification decreases were necessary to offset the
escalation of wood costs experienced in 1997, especially for cedar lumber.
The Access home (the base price of which is 25%-30% less than the traditional
Cedar Frame home) accounted for approximately 45% of home sales revenue and 52%
of home units shipped in the first six months of 1998 compared to 31% of home
sales revenue and 40% of the house units shipped in the first six months of
1997.
Revenue from sunrooms decreased $20,000 (2%) to $850,000 in the first six months
of 1998 from $870,000 in the first six months of 1997.
Revenue from other sales decreased $1.43 million (30%) to $3.40 million in the
first six months of 1998 from $4.83 million in the first six months of 1997.
This reduction is primarily due to decreased lumber sales resulting from
temporary closure of the sawmill. The sawmill operated for a brief period of
time in
16
<PAGE> 17
March 1998 compared to full time operation in the first six months of 1997.
Since most of the sawmill output is sold on the open lumber market, there was
less lumber sold during the first six months of 1998 than in the first six
months of 1997.
MATERIAL COSTS
During 1997, the Company experienced escalating costs for many of the forest
products included in its home packages, especially for cedar. While there has
been softening of prices in specific areas of the wood supply market, the
Company continues to experience increased costs for lumber and wood products,
especially for cedar which is the primary material used in the Company's homes.
These increased lumber and wood products costs, including the cost of cedar,
have not been fully offset by the price increases implemented in 1997 and the
first half of 1998.
In dollars, material costs decreased $3.04 million (25%) to $8.99 million in the
first six months of 1998 from $12.03 million in the first six months of 1997 on
65 fewer home shipments. In addition there was a decrease in the amount of
cedar lumber sold due to the temporary closure of the sawmill.
As a percent of revenue, material costs were 53% in the first six months of
1998 compared to 54% in the first six months of 1997. This decrease in
material costs as a percentage of revenue is due to decreased lumber sales and
the cumulative effect of the price increases implemented in 1997 and the first
six months of 1998. The effect of the price increases have been partially
offset by increased materials costs, especially cedar, from the year ago
period. Again, the reduction in the amount of lumber being sold at cost reduced
material costs as a percent of revenue.
OTHER COSTS OF GOODS SOLD
Non material costs, included in the cost of goods sold, decreased $1.13 million
(17%) to $5.62 million in the first six months of 1998 from $6.75 million in the
first six months of 1997. This is primarily due to a decrease in manufacturing
labor and labor related costs of $700,000, and net decreases in other
manufacturing costs of $430,000. These decreases are primarily due to cost
reductions from the temporary closure of the sawmill, decreased sales volume,
and aggressive containment of other manufacturing costs.
GROSS PROFIT
Despite the cumulative effect of the price increases, gross profit decreased to
14.6% of revenue in the first six months of 1998 from 16.3% of revenue in the
first six months of 1997, due primarily to increased material costs, the
decrease in the number of home units shipped, the change in mix of homes sold,
and the fixed nature of certain manufacturing costs.
The mix of home units sold also impacts gross profit. As a percent of total
units sold, home units sold for Cedar Frame, Access and Cedar: Solid for the
first six months of each of the current and two preceding years is presented in
the table below.
<TABLE>
<CAPTION>
HOME PRODUCT 1998 1997 1996
- ------------------------------------------------------------------
<S> <C> <C> <C>
Cedar Frame 42% 45% 59%
Access 52% 40% 29%
Cedar: Solid 6% 15% 12%
</TABLE>
Although the Access home (the base price of which is 25% - 30% less than the
Cedar Frame home) has lower material costs than the Cedar Frame home, the gross
profit is lower as well.
OPERATING EXPENSES
17
<PAGE> 18
Total operating expenses, including display court expenses, decreased $340,000
(7%) to $4.47 million in the first six months of 1998 from $4.81 million in the
first six months of 1997.
Selling, and general and administrative expenses decreased $230,000 (5%) to
$4.24 million in the first six months of 1998 from $4.47 million in the first
six months of 1997. Selling expenses increased $80,000 (4%) to $2.18 million in
the first six months of 1998 from $2.10 million in the first six months of 1997.
General and administrative expenses decreased $320,000 (14%) to $2.05 million in
the first six months of 1998 from $2.37 million in the first six months of 1997.
This is primarily due to general cost cutting measures implemented by the
Company.
OTHER INCOME (NET)
Other income decreased $460,000 (70%) to $200,000 in the first six months of
1998 from $660,000 in the first six months of 1997. This is primarily due to the
pre-tax gain recognized ($470,000) on the sale of the Company's Kent, Washington
facility in the first quarter of 1997, and the increase in interest expense
related to the Industrial Revenue Bonds issued in November 1997.
INCOME TAX EXPENSE (BENEFIT)
In the first six months of 1998 the Company recognized a tax benefit of
$600,000 compared to a tax benefit of $120,000 in the first six months of 1997.
The Company did not and has not recognized the income tax benefits from the 1997
Canadian net operating loss due to the uncertainty of utilizing the net
operating loss against future taxable Canadian 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 industry.
The Company primarily pays its vendors within stated terms and takes advantage
of discounts for early payments whenever available. Operations and customer
deposits for home and sunroom orders are the Company's primary source of cash.
CASH
Cash and cash equivalents decreased by $1.14 million (52%) to $1.10 million at
June 28, 1998 from $2.29 million at December 31, 1997. This decrease is largely
due to cash used in operating activities of $670,000 and $420,000 in capital
expenditures.
Cash and cash equivalents traditionally increase in the second and third
quarters of the year. However, with the decrease in number and dollar value of
new orders, combined with the decrease in the number and value of home units
shipped, the Company may occasionally borrow on its line of credit, for short
term cash needs, throughout the remainder of 1998.
18
<PAGE> 19
ACCOUNTS RECEIVABLE
Net receivables increased $540,000 (15%) to $4.04 million at June 28, 1998 from
$3.50 million at December 31, 1997. This is primarily due to refundable income
taxes which increased $690,000 to $1.89 million at June 28, 1998 from $1.20
million at December 31, 1997, primarily due to the refund available from
carryback of net operating losses from U.S. operations incurred in the first six
months of 1998. Net receivables increased $1.05 million from June 29, 1997,
primarily due to refundable income taxes, which increased $1.26 million.
INVENTORY
Production inventories (raw materials, work-in-process, and finished goods)
decreased $480,000 (5%) to $9.10 million at June 28, 1998 from $9.58 million at
December 31, 1997. This decrease reflects the softening of the cost of some wood
and wood products, and improved inventory management. In terms of quantity,
actual inventories of wood and wood products have decreased from December 31,
1997 levels.
Production inventories decreased $1.69 million (16%) to $9.10 million at June
28, 1998 from $10.79 million at June 29, 1997. When combined with the cost
increases of wood and wood products the Company has experienced since the year
ago period, this represents a significant reduction in the quantities of wood
and wood products. This is largely due to improved inventory management, reduced
log inventory due to the temporary closure of the sawmill, and reduced inventory
requirements for house and sunroom shipments.
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.
LIABILITIES
Accounts payable trade decreased $820,000 (29%) to $2.02 million at June 28,
1998 from $2.84 million at December 31, 1997. This reduction is primarily due to
overall cost cutting measures, lower inventory purchases due to improved
inventory management and decreased sales.
Customer deposits increased $870,000 (20%) to $5.30 million at June 28, 1998
from $4.43 million at December 31, 1997. This increase is due to seasonal
factors. Customer deposits decreased $460,000 (8%) from year ago levels. This is
primarily due to the decrease in the number of house units orders in the first
six months of 1998 from year ago levels
Long-term debt, including current installments, increased $3.75 million from
year ago levels due primarily to $3.73 million of Industrial Revenue Bonds the
Company issued in November 1997, through the Washington Economic Development
Finance Authority, to finance the acquisition and expansion of the Burlington,
Washington facility.
CAPITAL EXPENDITURE FINANCING
As stated earlier, in connection with the granting of a second timber sale, the
Company is required to invest $5 to $6 million dollars to expand its Surrey,
British Columbia, Canada facility. This expansion will include improvements to
the existing shipping facility, and the construction and equipping of a new wood
re-manufacturing facility.
The Company is considering a variety of financing methods, including the sale of
existing facilities, traditional debt financing, equity financing,
sale/leaseback or a combination of alternatives. There is no assurance that the
Company can finance the required expansion of the Surrey, British Columbia
facility.
19
<PAGE> 20
Management is also evaluating the feasibility of establishing a joint venture or
other partnering agreement with a third party to obtain a portion of the capital
required for the Surrey expansion. Such an arrangement would include the third
party assuming responsibility for providing the services presently to be
performed by MacMillan Bloedel. There is no assurance that the Company will be
successful in establishing a joint venture or other partnering agreement.
Other capital expenditures will be financed from cash flow generated from
operations, leasing or debt financing.
OTHER MATTERS
Statements contained in this report that are not based on historical facts are
forward looking statements subject to uncertainties and risks including but not
limited to: the consolidation of operations, trade and government actions,
changing economic conditions, trends in the housing industry, raw material and
labor costs, availability of raw materials, the ability to obtain orders and
recruit dealers, demographic influences and continued acceptance of products and
services.
20
<PAGE> 21
LINDAL CEDAR HOMES, INC.
AND SUBSIDIARIES
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 June 4, 1998:
<TABLE>
<CAPTION>
Authority
Withheld/
Description of Proposal For Against Abstain
-------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Election of Directors
Robert W. Lindal 2,756,842 63,396
Charles T. Collins 2,761,497 60,741
Martin J. Lindal 2,760,497 61,741
William R. Monkman 2,761,497 60,741
Charles R. Widman 2,761,497 60,741
2. To elect the KPMG Peat Marwick LLP
as the Company's independent auditors
for the year ending December 31, 1998 2,757,242 57,639 7,357
</TABLE>
PART II: OTHER INFORMATION
ITEM 6(a) - EXHIBITS
The following exhibits are being filed:
27 Financial Data Schedule for the period ended June 28, 1998
27.1 Restated Financial Data Schedule for the year ended
December 31, 1996
ITEM 6(b) - REPORTS ON FORM 8-K
There were no reports on Form 8-K filed during the second quarter of 1998.
21
<PAGE> 22
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/ Dennis Gregg
______________________________________
Dennis Gregg
Chief Financial Officer
DATE:
______
August 12, 1998
22
<PAGE> 23
INDEX TO EXHIBIT
-----------------------
Exhibits are numbered in accordance with
Item 601 of Regulation S-B
EXHIBIT
NO. DESCRIPTION
--------- ---------------------------------------
27 Financial Data Schedule for period ended June 28, 1998
27.1 Restated Financial Data Schedule for the year ended
December 31, 1998
Copies of the above exhibits may be obtained from the Securites and
Exchange Commission or the registrant by request.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-28-1998
<CASH> 1,170
<SECURITIES> 0
<RECEIVABLES> 2,250
<ALLOWANCES> 333
<INVENTORY> 9,548
<CURRENT-ASSETS> 17,454
<PP&E> 22,562
<DEPRECIATION> 10,615
<TOTAL-ASSETS> 30,743
<CURRENT-LIABILITIES> 8,584
<BONDS> 4,753
0
0
<COMMON> 41
<OTHER-SE> 17,019
<TOTAL-LIABILITY-AND-EQUITY> 30,743
<SALES> 17,122
<TOTAL-REVENUES> 17,122
<CGS> 14,616
<TOTAL-COSTS> 14,616
<OTHER-EXPENSES> 4,465
<LOSS-PROVISION> 47
<INTEREST-EXPENSE> 170
<INCOME-PRETAX> (1,762)
<INCOME-TAX> 601
<INCOME-CONTINUING> (1,161)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,161)
<EPS-PRIMARY> (.28)
<EPS-DILUTED> (.28)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 4,038
<SECURITIES> 0
<RECEIVABLES> 2,102
<ALLOWANCES> 394
<INVENTORY> 10,689
<CURRENT-ASSETS> 18,732
<PP&E> 19,261
<DEPRECIATION> 9,432
<TOTAL-ASSETS> 30,043
<CURRENT-LIABILITIES> 7,918
<BONDS> 1,164
0
0
<COMMON> 41
<OTHER-SE> 20,701
<TOTAL-LIABILITY-AND-EQUITY> 30,034
<SALES> 46,635
<TOTAL-REVENUES> 46,635
<CGS> 35,755
<TOTAL-COSTS> 35,755
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 205
<INTEREST-EXPENSE> 133
<INCOME-PRETAX> 2,168
<INCOME-TAX> 662
<INCOME-CONTINUING> 1,506
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,506
<EPS-PRIMARY> .37
<EPS-DILUTED> .37
</TABLE>
