CAVALIER HOMES INC
10-Q, 1996-05-13
MOBILE HOMES
Previous: MORGAN STANLEY GROUP INC /DE/, 8-K, 1996-05-13
Next: CARLISLE COMPANIES INC, 10-Q, 1996-05-13



                        SECURITIES & 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 29, 1996
                                         --------------

                                       OR

[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934
         For the transition period from                 to
                                         --------------     --------------

                          Commission File Number 1-9792

                              Cavalier Homes, Inc.
             (Exact name of Registrant as specified in its charter)


         Delaware                                          63-0949734
- -------------------------------                  -------------------------------
(State or other jurisdiction of                          (IRS Employer
 incorporation or organization)                      Identification Number)


            Highway 41 North & Cavalier Road, Addison, Alabama 35540
           ----------------------------------------------------------
                    (Address of principal executive offices)
                                   (Zip Code)

                                 (205) 747-1575
           ----------------------------------------------------------
              (Registrant's telephone number, including area code)

           ----------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last year)


         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes X No


         Indicate  the  number of  shares  outstanding  of each of the  issuer's
classes of common stock, as of the close of the latest practicable date.

            Class                                  Outstanding at May 10, 1996
- -------------------------------                  -------------------------------
Common Stock $.10 Par Value                              9,320,240 Shares






<PAGE>


                      CAVALIER HOMES, INC. AND SUBSIDIARIES


                                      INDEX

                                                                      Page No.

Part I.  Financial Information (Unaudited)

         Consolidated Condensed Balance Sheets -
         March 29, 1996 and December 31, 1995                               3

         Consolidated Condensed Statements of Income -
         Thirteen Weeks ended March 29, 1996 and
         March 31, 1995                                                     4

         Consolidated Condensed Statements of Cash
         Flows - Thirteen Weeks ended March 29, 1996 and
         March 31, 1995                                                     5

         Notes to Consolidated Condensed Financial Statements               6

         Management's Discussion and Analysis of
         Financial Condition and Results of Operations                      9

Part II. Other Information

         Item 6.  Exhibits                                                 12

         Signatures                                                        13









<PAGE>
CAVALIER HOMES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<S>                                                                             <C>            <C>

                                                                                   March 29,     December 31,
                                                                                      1996           1995
ASSETS                                                                            (Unaudited)     (Audited)
CURRENT ASSETS:
     Cash and cash equivalents                                                  $    5,627,000 $   21,005,084
     Marketable securities available for sale                                        3,328,000      3,583,129
     Accounts receivable, less allowance for
            losses of $750,000 (1996 and 1995)                                      21,239,000      1,893,400
     Installment contracts receivable - current                                        729,000        693,967
     Inventories                                                                    12,502,000      9,540,491
     Deferred income taxes                                                           3,648,000      3,647,984
     Other current assets                                                            1,168,000      1,954,350
                                                                                 -------------- --------------
            Total current assets                                                    48,241,000     42,318,405

PROPERTY, PLANT AND EQUIPMENT (Net)                                                 21,727,000     18,893,497

INSTALLMENT CONTRACTS RECEIVABLE, less
    allowance for credit loss of $578,000 (1996)
    and $551,188 (1995)                                                             21,049,000     17,964,038

GOODWILL, less accumulated amortization of
    $377,000 (1996) and $309,729 (1995)                                              3,658,000      2,213,000

OTHER ASSETS                                                                         1,287,000      1,236,958
                                                                                 -------------- --------------
                                                                                $   95,962,000 $   82,625,898
                                                                                 ============== ==============

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
     Current portion of long-term debt                                          $      776,000 $      666,467
     Accounts payable                                                               12,350,000      7,098,602
     Amounts payable under dealer incentive programs                                 6,454,000      6,997,496
     Accrued wages and related withholdings                                          2,860,000      1,219,891
     Accrued incentive compensation                                                  2,020,000      2,018,702
     Estimated warranties                                                            6,500,000      5,800,000
     Accrued insurance                                                               1,774,000      1,676,164
     Other accrued expenses                                                          4,725,000      4,923,839
     Accrued income taxes                                                            2,236,000        795,861
                                                                                 -------------- --------------
          Total current liabilities                                                 39,695,000     31,197,022

DEFERRED INCOME TAXES                                                                1,223,000      1,042,862

LONG-TERM DEBT                                                                       5,026,000      4,314,319

STOCKHOLDERS' EQUITY:
     Preferred stock, $.01 par value; authorized
        500,000 shares, none issued
     Common stock, $.10 par value; authorized
        15,000,000 shares; issued 9,159,104 (1996)
        and 8,993,951 (1995) shares                                                    916,000        899,395
     Additional paid-in capital                                                     24,134,000     22,804,129
     Retained earnings                                                              24,968,000     22,368,171
                                                                                 -------------- --------------
         Total stockholders' equity                                                 50,018,000     46,071,695
                                                                                 -------------- --------------
                                                                                $   95,962,000 $   82,625,898
                                                                                 ============== ==============

See Notes to Consolidated Condensed Financial Statements
</TABLE>



<PAGE>
CAVALIER HOMES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<S>                                                                             <C>            <C>
                                                                                     Thirteen Weeks Ended
                                                                                   March 29,      March 31,
                                                                                      1996           1995
REVENUES:
     Net sales                                                                  $   74,784,000 $   57,813,549
     Financial services                                                                620,000        333,638
                                                                                 -------------- --------------
                                                                                    75,404,000     58,147,187
                                                                                 -------------- --------------
COST OF SALES                                                                       61,813,000     48,842,637

SELLING, GENERAL AND ADMINISTRATIVE:
    Manufacturing                                                                    8,657,000      6,680,576
    Financial services                                                                 359,000        189,277
                                                                                 -------------- --------------
                                                                                    70,829,000     55,712,490
                                                                                 -------------- --------------
OPERATING PROFIT                                                                     4,575,000      2,434,697
                                                                                 -------------- --------------
OTHER INCOME(EXPENSE):
    Interest expense:
       Manufacturing                                                                   (16,000)        (1,406)
       Financial services                                                             (116,000)      (115,875)
    Other, net                                                                         335,000        209,184
                                                                                 -------------- --------------
                                                                                       203,000         91,903
                                                                                 -------------- --------------
INCOME BEFORE INCOME TAXES                                                           4,778,000      2,526,600
                                                                                 -------------- --------------
INCOME TAXES                                                                         1,907,000      1,009,000
                                                                                 -------------- --------------
NET INCOME                                                                      $    2,871,000 $    1,517,600
                                                                                 ============== ==============
NET INCOME PER SHARE                                                            $         0.30 $         0.17
                                                                                 ============== ==============
WEIGHTED AVERAGE SHARES OUTSTANDING                                                  9,594,526      8,944,562
                                                                                 ============== ==============


</TABLE>




















See Notes to Consolidated Condensed Financial Statements

<PAGE>
CAVALIER HOMES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<S>                                                                             <C>            <C>
                                                                                     Thirteen Weeks Ended
                                                                                   March 29,      March 31,
                                                                                      1996           1995
OPERATING ACTIVITIES:
  Net income                                                                    $    2,871,000 $    1,517,600
  Adjustments to reconcile net income to net cash used in operating activities:
       Depreciation and amortization                                                   860,000        580,917
       Provision for credit losses, repurchase commitments and other items              26,000         21,569
       (Gain)loss on sale of property, plant and equipment                              (4,000)        (9,711)
       Equity in undistributed earnings of partnership investment                     (142,000)       (46,159)
       Changes in assets and liabilities provided(used) cash, net of effects of
         acquisition in 1996:
            Accounts receivable                                                    (18,665,000)   (12,766,248)
            Inventories                                                             (2,032,000)    (1,638,255)
            Accounts payable                                                         4,547,000      3,070,776
            Amounts payable under dealer incentive programs                           (652,000)    (1,345,306)
            Estimated warranties                                                       330,000        400,000
            Other assets and liabilities                                             2,011,000      1,236,913
                                                                                 -------------- --------------
       Net cash used in operating activities                                       (10,850,000)    (8,977,904)
                                                                                 -------------- --------------
INVESTING ACTIVITIES:
  Proceeds from the sale of property, plant and equipment                               28,000         25,700
  Net cash paid in connection with acquisition of a subsidiary                        (478,000)          -   
  Capital expenditures                                                              (1,481,000)    (1,200,389)
  Distribution from partnership investment                                             194,000        138,356
  Purchases of marketable securities                                                      -          (991,246)
  Redemptions of marketable securities                                                 250,000           -   
  Purchases and originations of installment contracts                               (3,720,000)    (2,471,098)
  Principal collected on installment contracts                                         574,000        187,264
                                                                                 -------------- --------------
       Net cash used in investing activities                                        (4,633,000)    (4,311,413)
                                                                                 -------------- --------------
FINANCING ACTIVITIES:
  Long-term borrowings                                                                    -         2,000,000
  Payments on long-term debt                                                          (279,000)      (147,073)
  Cash dividends                                                                      (271,000)      (140,857)
  Net proceeds from issuance of common stock                                           655,000          3,999
  Other                                                                                   -            (9,404)
                                                                                 -------------- --------------
       Net cash provided by financing activities                                       105,000      1,706,665
                                                                                 -------------- --------------
NET DECREASE IN CASH                                                               (15,378,000)   (11,582,652)

CASH, BEGINNING OF PERIOD                                                           21,005,000     16,034,922
                                                                                 -------------- --------------
CASH, END OF PERIOD                                                             $    5,627,000 $    4,452,270
                                                                                 ============== ==============


</TABLE>






See Notes to Consolidated Condensed Financial Statements


<PAGE>
                                     PART I.
                      CAVALIER HOMES, INC. AND SUBSIDIARIES
              Notes to Consolidated Condensed Financial Statements
               For the Thirteen Week Periods Ended March 29, 1996
                               And March 31, 1995

1.   BASIS OF PRESENTATION

*    The  accompanying  consolidated  condensed  financial  statements have been
     prepared in compliance with Form 10-Q  instructions and thus do not include
     all of  the  information  and  footnotes  required  by  generally  accepted
     accounting principles for complete financial statements.  In the opinion of
     the Company,  these statements contain all adjustments necessary to present
     fairly the  Company's  financial  position  as of March 29,  1996,  and the
     results of its  operations  for the thirteen  week periods  ended March 29,
     1996 and March 31, 1995 and its cash flows for the  thirteen  week  periods
     ended March 29, 1996 and March 31, 1995.  All  adjustments  are of a normal
     recurring nature.

*    The results of operations  for the thirteen  weeks ended March 29, 1996 are
     not necessarily indicative of the results to be expected for the full year.

*    Inventories  consist primarily of raw materials and are stated at the lower
     of cost (first-in, first-out method) or market.

*    The Company  accounts for its  marketable  securities  in  accordance  with
     Statement of Financial  Accounting Standard No. 115, Accounting for Certain
     Investments in Debt and Equity  Securities,  which requires that marketable
     securities  be  classified  into  three  categories  -  held  to  maturity,
     available  for  sale,  and  trading,  each  having a  specified  accounting
     treatment as to carrying  value and  recognition  of  unrealized  gains and
     losses.

*    Certain  amounts from the 1995 period have been  reclassified to conform to
     the 1996  period  presentation.  These  reclassifications  had no effect on
     results of operations or stockholders' equity.

*    Net income per share is computed by dividing  net  earnings by the weighted
     average  number of shares of common stock  outstanding  during the thirteen
     week  periods  after  giving  effect  to the  equivalent  shares  which are
     issuable  upon the  exercise of stock  options  determined  by the treasury
     stock method.

2.   SUPPLEMENTAL CASH FLOW DISCLOSURES

                                                        Thirteen Weeks Ended
                                                     March 29,         March 31,
                                                        1996              1995

         Cash paid for:    Interest               $   121,000       $   117,281
                           Income taxes           $    45,000       $    72,258

3.   CREDIT ARRANGEMENTS

*    In February 1994, the Company executed a $13 million  revolving,  warehouse
     and term-loan  agreement (the "Credit  Facility")  with its primary lender.
     The Credit Facility  contains a revolving line of credit which provides for
     borrowings  (including  letters  of  credit)  of up to 80%  and  50% of the
     Company's  eligible  (as  defined)  accounts  receivable  and  inventories,
     respectively,  up to a maximum of $5 million. Interest is payable under the
     revolving  line of  credit at the  bank's  prime  rate  (8.25% at March 29,
     1996).

     The  warehouse and term-loan agreements  contained  in  the Credit Facility
     provide for  borrowings of up to 80% of the Company's eligible (as defined)
     installment sale contracts, up to a maximum of $8 million. Interest on term
     notes is fixed for a period of five years from  issuance at a rate based on
     the weekly average yield on five year treasury securities averaged over the
     preceding 13 weeks,  plus 2.4%, and floats for the remaining two years at a
     rate (subject to certain  limits) equal to the bank's prime rate plus .75%.
     The warehouse  component of the Credit Facility  provides for borrowings of
     up to $2 million  with  interest  payable at the bank's prime rate plus 1%.
     However,  in no event may the aggregate  outstanding  borrowings  under the
     warehouse and term-loan agreement exceed $8 million.


<PAGE>


                                     PART I.
                      CAVALIER HOMES, INC. AND SUBSIDIARIES
              Notes To Consolidated Condensed Financial Statements
               For The Thirteen Week Periods Ended March 29, 1996
                               And March 31, 1995

3.   CREDIT ARRANGEMENTS - Continued

     The Credit Facility contains certain restrictive  covenants which limit the
     aggregate of dividend  payments and  purchases of treasury  stock to 50% of
     consolidated net income for the two most recent years.  Amounts outstanding
     under the Credit  Facility  are  secured  by the  accounts  receivable  and
     inventories of the Company,  loans  purchased and originated by CAC and the
     capital stock of certain of the Company's consolidated subsidiaries.

     On March 14, 1996, the Company executed an amendment to the Credit Facility
     which increased the maximum  available  borrowings  under the warehouse and
     term-loan  agreements  contained in the Credit Facility to $18 million from
     the previous limit of $8 million.  The amendment increased the total amount
     of available  borrowings under the Credit Facility (including the revolving
     line of  credit)  to $23  million  from $13  million.  In  addition  to the
     increase in available  borrowings under the Credit  Facility,  the interest
     rate on prospective borrowings under the term-loan portion of the agreement
     was reduced by .40%. The bank's  commitment  under the Credit Facility will
     expire in April of 1998.  All other  major  terms  and  commitments  remain
     unchanged.

     As of March 29,  1996,  the   Company had  $4,701,000  borrowed  under  the
     Credit Facility.

4.   STOCKHOLDERS' EQUITY

*    A  three-for-two  stock  split of the  Company's  common  stock  which  was
     effected in the form of a 50% stock  dividend was  distributed  on February
     15, 1996 to  stockholders of record on January 31, 1996 and a five-for-four
     stock split effected in the form of a 25% stock dividend was distributed on
     August 15, 1995 to  stockholders of record on July 31, 1995. All historical
     dividends  and earnings per share  amounts have been adjusted for the stock
     splits.

*    Cash  dividends  were paid  during  this  quarter  and the  previous  three
     quarters as follows (all amounts are per share):

                                                                Split Adjusted
               Record Date              Payment Date            Dividend Paid

              January 31, 1996          February 15, 1996          $     .030
              October 31, 1995          November 15, 1995          $     .020
              July 31, 1995             August 15, 1995            $     .020
              April 30, 1995            May 16, 1995               $     .016

5.       COMMITMENTS AND CONTINGENCIES

*    It is a customary  practice in the  manufactured  housing industry to enter
     into  repurchase and other recourse  agreements  with lending  institutions
     which have  provided  wholesale  floor plan  financing  to  dealers.  These
     agreements  generally provide for repurchase of the Company's products from
     the  lending  institutions  for  the  balance  due  them  in the  event  of
     repossession upon a dealer's default.  Although the Company is contingently
     liable for approximately $68 million under these agreements as of March 29,
     1996,  such  contingency  is reduced by the resale value of the homes which
     are required to be  repurchased.  The Company has provided an allowance for
     losses of $750,000 at March 29, 1996, based on prior experience and current
     market  conditions.  Management  expects no material  loss in excess of the
     allowance.






<PAGE>


                                     PART I.
                      CAVALIER HOMES, INC. AND SUBSIDIARIES
              Notes to Consolidated Condensed Financial Statements
               For the Thirteen Week Periods Ended March 29, 1996
                               And March 31, 1995

5.   COMMITMENTS AND CONTINGENCIES - Continued

*    The  Company's  workmen's  compensation,   product  liability  and  general
     liability   insurance   coverages  are  provided   under   incurred   loss,
     retrospectively  rated premium plans. Under these plans, the Company incurs
     insurance  expenses  based upon various  rates  applied to current  payroll
     costs and sales.  Annually,  such  insurance  expenses  are adjusted by the
     carrier for loss experience  factors subject to minimum and maximum premium
     calculations.  At March 29, 1996,  the Company is  contingently  liable for
     future retrospective premium adjustments up to a maximum of $6.3 million in
     the event that additional losses are reported related to prior periods. The
     Company has recorded an estimated  liability of approximately $1.12 million
     related  to such  incurred  but not  reported  claims  at March  29,  1996.
     Management expects no material loss in excess of this allowance.

*    The Company and certain of its equity  partners  have jointly and severally
     guaranteed  certain  short-term  debt with a balance of $2,000,000 at March
     29, 1996, of a partnership in which the Company owns a 33% interest.

*    The Company is engaged in various litigation which is routine in nature and
     in  management's  opinion,  will  have no  material  adverse  effect on the
     Company's financial statements.


6.   ACQUISITIONS

     In August of 1995,  the Company  acquired an option to purchase the balance
     (73.5%)  of  the  outstanding   shares  of  common  stock  of  Wheel  House
     Structures,  Inc.  ("Wheel House") not already owned by the Company through
     the  reissuance  of treasury  stock and the issuance of common stock with a
     total value of  $464,000.  In January of 1996,  the Company  exercised  the
     option and acquired the  remaining  common stock of Wheel House through the
     issuance of common stock valued at $691,000.  The total  purchase  price of
     the  acquisition  was  $1,155,000  and has been  accounted  for  under  the
     purchase method.  The Company acquired the manufacturing  facility operated
     by Wheel House for $550,000  cash and an  assumption  of long-term  debt of
     $1,100,000,  a total  consideration  of  $1,650,000.  The  acquisition  was
     immaterial to the Company's consolidated financial statements.





<PAGE>
                                     PART I.
                      CAVALIER HOMES, INC. AND SUBSIDIARIES
                     Management's Discussion and Analysis of
                  Financial Condition and Results of Operations
                                 March 29, 1996

General

The  principal  business of the Company  since its inception has been the design
and production of  manufactured  homes.  Currently the Company  operates  eleven
facilities  engaged in the  manufacture  of homes and a component  manufacturing
facility engaged in the manufacture of laminated wallboards.  In early 1992, the
Company,  through its wholly owned subsidiary  Cavalier  Acceptance  Corporation
("CAC"),  commenced retail installment sale financing  operations.  During 1994,
the Company  formed  Cavalier  Insurance  Agency,  Inc.  ("CIA") to sell various
insurance  products.  The  operations  of CAC  and CIA are  reported  under  the
financial services business segment in the Company's annual report.

The Company's business is cyclical and seasonal and is influenced by many of the
same national and regional  demographic  factors that affect the general  United
States housing market. According to industry statistics, after a ten year low in
shipments of homes in 1991,  the industry has recovered  significantly,  posting
increases in shipments of 24%, 21%, 20% and 12% for 1992,  1993 , 1994 and 1995,
respectively,  as compared to the prior year.  Industry statistics for the first
quarter  of 1996  indicate  a  continued  trend in the  increase  of  shipments,
although at a slower pace than previous years. The Company attributes the upturn
in the manufactured  housing industry to increased  consumer  confidence,  wider
acceptance  of  manufactured   housing,  a  reduction  in  the  availability  of
alternative  housing,  increased  availability  of  consumer  financing  and  an
improvement in the overall economy.

Accordingly,  as business  conditions have improved the Company has expanded its
manufacturing  operations  to increase and improve its  capacity to  manufacture
homes.  During the last three years the  Company  has opened or  acquired  three
facilities in Alabama and one facility each in Georgia, Texas and Pennsylvania.

Results of Operations

The following  table sets forth,  for the periods and dates  indicated,  certain
financial,  operating,  and balance sheet data  including,  as  applicable,  the
percentage of net sales or total revenue:
<TABLE>
<S>                                     <C>              <C>     <C>               <C>     <C>              <C>
                                                                    Thirteen Weeks Ended
                                              March 29, 1996           March 31, 1995        Change over Prior Year
FINANCIAL DATA                                                     (dollars in thousands)

Net Sales                               $     74,784      100.0% $      57,814      100.0% $      16,970       29.4%
Cost of Sales                           $     61,813       82.7% $      48,843       84.5% $      12,970       26.6%
                                         ------------    -------  -------------    -------  -------------    -------
Gross Profit on Sales                   $     12,971       17.3% $       8,971       15.5% $       4,000       44.6%
                                         ============    =======  =============    =======  =============    =======
Net Sales                               $     74,784             $      57,814             $      16,970       29.4%
Financial Services                      $        620             $         334             $         286       85.6%
                                         ------------    -------  -------------    -------  -------------    -------
Total Revenue                           $     75,404      100.0% $      58,148      100.0% $      17,256       29.7%
                                         ============    =======  =============    =======  =============    =======
Selling, General and Administrative     $      9,016       12.0% $       6,870       11.8% $       2,146       31.2%

Net Income                              $      2,871        3.8% $       1,518        2.6% $       1,353       89.1%

OPERATING DATA

Home Shipments                                 3,139                     2,751                       388       14.1%

                                         Balances as of
                                              March 29, 1996           March 31, 1995        Change over Prior Year
BALANCE SHEET DATA                                                 (dollars in thousands)

Installment Loan Portfolio              $     22,356             $      12,109             $      10,247       84.6%


</TABLE>




<PAGE>
                                     PART I.
                      CAVALIER HOMES, INC. AND SUBSIDIARIES
                     Management's Discussion and Analysis of
                  Financial Condition and Results of Operations
                                 March 29, 1996

Net Sales.  The Company  believes  the  increase  in net sales of $17.0  million
during the current period over the comparable  period from the previous year was
primarily the result of the continuation of improving industry trends,  combined
with new and aggressive  marketing programs instituted by the Company during the
current and prior  periods,  including the exclusive  dealer  program and dealer
stock option plan and the increase in manufacturing  capacity during the current
period and the  previous  year.  The  increase  in homes sold during the current
period over the comparable  period in the previous year of 388 homes or 14.1% is
primarily  attributable  to  the  increase  in  production  capacity  previously
described.  The Company has been experiencing a slight shift in product mix from
single-section homes to multi-section homes.

Gross  Profit on Sales.  The  increase  in gross  profit  on sales  (derived  by
deducting  cost of sales from net  sales) of $4.0  million  during  the  current
period  over  the  comparable   period  from  the  previous  year  is  primarily
attributable to the increase in sales and improved  efficiency in  manufacturing
operations combined with a decline in raw materials prices.

Financial  Services Revenue.  The increase in current period financial  services
revenue (primarily interest income on retail installment  contracts) of $286,000
or  85.6%  from  the  comparable  period  in  the  previous  year  is  primarily
attributable to the growth of the Company's loan portfolio to $22.4 million,  an
increase of 84.6%.

Selling,  General  and  Administrative.  The  growth  in  selling,  general  and
administrative  expense of $2.1  million  over the  previous  year's  comparable
period  is  primarily  attributable  to the  increase  in  sales  combined  with
increased expenses due to the addition of personnel, the opening or expansion of
manufacturing  facilities and increased  administrative  expenses of CAC and CIA
consistent with their growth.

Net  Income.  The  increase  in net  income of $1.4  million  or 89.1%  over the
previous year's comparable  period is primarily  attributable to the increase in
sales volume.  Net Income per share during the current  period was $.30 compared
to $.17 from the previous year's  comparable  period.  (Net income per share has
been adjusted for all previous stock splits.)

Liquidity and Capital Resources

The  following  table sets forth certain items  relating to the  measurement  of
liquidity  and  capital  resources  from the  Company's  consolidated  condensed
financial statements for the dates indicated:
<TABLE>
<S>                                               <C>           <C>             <C>
                                                                  Balances as of
                                                     March 29,     December 31,     Increase
                                                        1996           1995        (Decrease)
                                                               (dollars in thousands)

Working Capital                                   $        8,546 $       11,121 $       (2,575)
Current Ratio                                              1.2:1          1.4:1          (.2:1)
Long-term Debt                                    $        5,802 $        4,981 $          821
Ratio of Long-term Debt to Equity                            1:9            1:9           -   
Installment Loan Portolio at end of period        $       22,356 $       19,209 $        3,147

</TABLE>

Although earnings for the period increased,  working capital decreased primarily
due to capital  expenditures  of $1.5 million plus an expenditure of $.6 million
in connection with an acquisition combined with loan originations by CAC of $3.7
million.  The increase in long-term  debt is  attributable  to the purchase of a
manufacturing facility in Haleyville,  Alabama (for further information relating
to  the  purchase  of  this  manufacturing  facility,  see  footnote  6  in  the
consolidated condensed financial statements included herein).

The  Company's   primary   business  segment  is  the  production  and  sale  of
manufactured  housing.  In 1992, the Company began the operations of CAC to fund
installment sale contracts to the retail customers of the Company's  Independent
Exclusive  Dealers.  As the  operations  of CAC  expanded,  in February 1994 the
Company  entered into a Credit  Facility with its primary lender (see footnote 3
to the consolidated  condensed financial  statements included herein) to provide
additional funds for CAC's growth. As of March 29, 1996, the Company's portfolio
of installment sale contracts had grown to  approximately  $22.4 million and had
been funded  primarily with internally  generated  working  capital,  borrowings
under the Credit  Facility and a portion of the net proceeds from an offering of
the Company's common stock during 1994.



<PAGE>
                                     PART I.
                      CAVALIER HOMES, INC. AND SUBSIDIARIES
                     Management's Discussion and Analysis of
                  Financial Condition and Results of Operations
                                 March 29, 1996

Since  entering  into  the  Credit  Facility,  the  Company  has  had  aggregate
borrowings  of $5.7 million in order to continue to fund the  operations  of CAC
and to minimize the interest  rate risk of the  Company's  loan  portfolio.  The
Company expects to continue to borrow funds under the Credit Facility to finance
the  continuing  operations  and growth of CAC. On March 14,  1996,  the Company
executed  an  amendment  to the Credit  Facility  which  increased  the  maximum
available  borrowings under the warehouse and term-loan  agreements contained in
the Credit  Facility to $18 million from the previous  limit of $8 million.  The
amendment  increased the total amount of available  borrowings  under the Credit
Facility  (including  the  revolving  line of  credit) to $23  million  from $13
million.  In addition to the increase in available  borrowings  under the Credit
Facility,  the  interest  rate on  prospective  borrowings  under the  term-loan
portion of the agreement was reduced by .40%. As the  operations of CAC continue
to  expand,  the  Company  anticipates  that it will  be  able to  increase  its
borrowing capacity.

The  Company's  capital  expenditures  were  approximately  $1.5 million for the
thirteen  weeks  ended  March  29,  1996 as  compared  to $1.2  million  for the
comparable period of 1995.  Capital  expenditures  during these periods included
normal  property,  plant  and  equipment  additions  and  replacements  and  the
continued expansion and modernization of certain of the Company's  manufacturing
facilities.

The Company  believes  that  existing  cash and  investment  balances  and funds
available under the Credit Facility,  together with cash provided by operations,
should be adequate to fund the Company's  operations and expansion plans for the
next twelve months.  In order to provide  additional funds for continued pursuit
of the Company's growth  strategies and for operations over the longer term, the
Company  may  incur,  from time to time,  additional  short and  long-term  bank
indebtedness  and may issue, in public or private  transactions,  its equity and
debt securities,  the availability and terms of which may depend upon market and
other  conditions.  There  can be no  assurance  that such  possible  additional
financing will be available on terms acceptable to the Company.



<PAGE>
                                    PART II.
                      CAVALIER HOMES, INC. AND SUBSIDIARIES
                                Other Information
                                 March 29, 1996



ITEM 6   EXHIBITS

The  exhibits  required  to  be  filed with  this report are listed  below.  The
Company will furnish upon request the exhibit  listed upon the receipt of $15.00
per exhibit,  plus $.50 per page,  to cover the cost to the Company of providing
the exhibit.


     (a)  (11)   Computation of Net Income per Common Share.

          (27)   Article 5 - Financial Data Schedule for  Form 10-Q submitted as
                 exhibit  27 as an EDGAR filing only.

     (b)  The Company did  not  file  a  Current  Report  on Form 8-K during the
          quarter for which this report was filed.




<PAGE>


                                    PART II.
                      CAVALIER HOMES, INC. AND SUBSIDIARIES
                                Other Information
                                 March 29, 1996



SIGNATURES

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.


                                                 Cavalier Homes, Inc.
                                                 -------------------------
                                                 Registrant




Date: May 10, 1996                                 /s/ Jerry F. Wilson
      ---------------                              ------------------------
                                                   Jerry F. Wilson - President



Date: May 10, 1996                                 /s/ David A. Roberson
      ---------------                              ------------------------
                                                   David A. Roberson -
                                                   Chief Financial Officer





<PAGE>
                              PART II. - EXHIBIT 11
                      CAVALIER HOMES, INC. AND SUBSIDIARIES
                   COMPUTATION OF NET INCOME PER COMMON SHARE

<TABLE>
<S>                                                                             <C>            <C>

                                                                                      Thirteen Weeks Ended
                                                                                   March 29,      March 31,
                                                                                      1996           1995

PRIMARY AND FULLY DILUTED
     Net Income                                                                 $    2,871,000 $    1,517,600
                                                                                 -------------- --------------
SHARES:

Primary
  Average common shares outstanding                                                  9,075,318      8,807,393

  Dilutive effect if stock options
    were exercised                                                                     519,208        137,169
                                                                                 -------------- --------------
  Average common shares outstanding
    as adjusted (primary)                                                            9,594,526      8,944,562
                                                                                 ============== ==============
Fully Diluted
  Average common shares outstanding                                                  9,594,526      8,944,562

  Additional dilutive effect if
    stock options were excercised
    (fully)                                                                             45,421           -   
                                                                                 -------------- --------------
  Average common shares outstanding
    as adjusted (fully diluted)                                                      9,639,947      8,944,562
                                                                                 ============== ==============

Primary and Fully Diluted Net
  Income per Common Share                                                       $         0.30 $         0.17
                                                                                 ============== ==============

</TABLE>







<TABLE> <S> <C>

<ARTICLE>                                                                     5
<CIK>                                                                0000789863
<NAME>                                                      CAVALIER HOMES, INC.
<MULTIPLIER>                                                                  1
<CURRENCY>                                                         U.S. DOLLARS
       
<S>                                                                <C>
<PERIOD-TYPE>                                                             3-MOS
<FISCAL-YEAR-END>                                                   DEC-31-1996
<PERIOD-START>                                                      JAN-01-1996
<PERIOD-END>                                                        MAR-29-1996
<EXCHANGE-RATE>                                                               1
<CASH>                                                                5,627,000
<SECURITIES>                                                          3,328,000 
<RECEIVABLES>                                                        21,989,000
<ALLOWANCES>                                                            750,000
<INVENTORY>                                                          12,502,000
<CURRENT-ASSETS>                                                     48,241,000
<PP&E>                                                               29,180,000
<DEPRECIATION>                                                        7,453,000
<TOTAL-ASSETS>                                                       95,962,000
<CURRENT-LIABILITIES>                                                39,695,000
<BONDS>                                                                       0
                                                         0
                                                                   0
<COMMON>                                                                916,000
<OTHER-SE>                                                           49,102,000
<TOTAL-LIABILITY-AND-EQUITY>                                         95,962,000
<SALES>                                                              74,784,000
<TOTAL-REVENUES>                                                     75,404,000
<CGS>                                                                61,813,000
<TOTAL-COSTS>                                                        61,813,000
<OTHER-EXPENSES>                                                      9,016,000
<LOSS-PROVISION>                                                              0
<INTEREST-EXPENSE>                                                      132,000
<INCOME-PRETAX>                                                       4,778,000
<INCOME-TAX>                                                          1,907,000
<INCOME-CONTINUING>                                                   2,871,000
<DISCONTINUED>                                                                0
<EXTRAORDINARY>                                                               0
<CHANGES>                                                                     0
<NET-INCOME>                                                          2,871,000
<EPS-PRIMARY>                                                             0.300
<EPS-DILUTED>                                                             0.300
        

</TABLE>


© 2022 IncJournal is not affiliated with or endorsed by the U.S. Securities and Exchange Commission