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 June 28, 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 August 12, 1996
- ------------------------------ ------------------------------
Common Stock $.10 Par Value 9,695,241 Shares
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<PAGE>
CAVALIER HOMES, INC. AND SUBSIDIARIES
INDEX
Page No.
Part I. Financial Information (Unaudited)
Consolidated Condensed Balance Sheets -
June 28, 1996 and December 31, 1995 3
Consolidated Condensed Statements of Income -
Thirteen and Twenty-Six Weeks ended June 28, 1996 and
June 30, 1995 4
Consolidated Condensed Statements of Cash
Flows - Twenty-Six Weeks ended June 28, 1996 and
June 30, 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 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Matters 12
Item 6. Exhibits 13
Signatures 14
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<PAGE>
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<CAPTION>
CAVALIER HOMES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<S> <C> <C>
June 28, December 31,
1996 1995
ASSETS (Unaudited) (Audited)
CURRENT ASSETS:
Cash and cash equivalents $ 11,910,000 $ 21,005,084
Marketable securities available for sale 2,101,000 3,583,129
Accounts receivable, less allowance for
losses of $800,000 (1996) and $750,000 (1995) 20,511,000 1,893,400
Installment contracts receivable - current 786,000 693,967
Inventories 12,828,000 9,540,491
Deferred income taxes 3,911,000 3,647,984
Income tax deposit 2,307,000 -
Other current assets 927,000 1,954,350
------------- -------------
Total current assets 55,281,000 42,318,405
------------- -------------
PROPERTY, PLANT AND EQUIPMENT (Net) 23,503,000 18,893,497
------------- -------------
INSTALLMENT CONTRACTS RECEIVABLE, less
allowance for credit loss of $634,426 (1996)
and $551,188 (1995) 25,272,000 17,964,038
------------- -------------
GOODWILL, less accumulated amortization of
$446,923 (1996) and $309,729 (1995) 3,781,000 2,213,000
------------- -------------
OTHER ASSETS 1,881,000 1,236,958
------------- -------------
$ 109,718,000 $ 82,625,898
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 882,000 $ 666,467
Accounts payable 13,138,000 7,098,602
Amounts payable under dealer incentive programs 8,723,000 6,997,496
Accrued wages and related withholdings 3,078,000 1,219,891
Accrued incentive compensation 2,774,000 2,018,702
Estimated warranties 6,800,000 5,800,000
Accrued insurance 1,652,000 1,676,164
Other accrued expenses 5,301,000 4,923,839
Accrued income taxes 476,000 795,861
------------- -------------
Total current liabilities 42,824,000 31,197,022
------------- -------------
DEFERRED INCOME TAXES 1,422,000 1,042,862
------------- -------------
LONG-TERM DEBT 5,738,000 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 9,680,327 (1996)
and 8,993,951 (1995) shares 968,000 899,395
Additional paid-in capital 30,550,000 22,804,129
Retained earnings 28,216,000 22,368,171
------------- -------------
Total stockholders' equity 59,734,000 46,071,695
------------- -------------
$ 109,718,000 $ 82,625,898
============= =============
See Notes to Consolidated Condensed Financial Statements
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</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CAVALIER HOMES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
<S> <C> <C> <C> <C>
Thirteen Weeks Ended Twenty-Six Weeks Ended
June 28, June 30, June 28, June 30,
1996 1995 1996 1995
REVENUES: ------------- ------------- ------------- -------------
Net sales $ 90,838,000 $ 70,754,688 $ 165,622,000 $ 128,568,237
Financial services 772,000 396,384 1,392,000 730,022
------------- ------------- ------------- -------------
91,610,000 71,151,072 167,014,000 129,298,259
------------- ------------- ------------- -------------
COST OF SALES 74,643,000 59,488,538 136,456,000 108,331,175
SELLING, GENERAL AND ADMINISTRATIVE:
Manufacturing 10,675,000 7,434,275 19,332,000 14,114,851
Financial services 508,000 240,606 867,000 429,883
------------- ------------- ------------- -------------
85,826,000 67,163,419 156,655,000 122,875,909
------------- ------------- ------------- -------------
OPERATING PROFIT 5,784,000 3,987,653 10,359,000 6,422,350
------------- ------------- ------------- -------------
OTHER INCOME(EXPENSE):
Interest expense:
Manufacturing (4,000) (4,483) (20,000) (5,889)
Financial services (127,000) (133,250) (243,000) (249,125)
Other, net 229,000 177,624 564,000 386,808
------------- ------------- ------------- -------------
98,000 39,891 301,000 131,794
------------- ------------- ------------- -------------
INCOME BEFORE INCOME TAXES 5,882,000 4,027,544 10,660,000 6,554,144
INCOME TAXES 2,357,000 1,616,000 4,264,000 2,625,000
------------- ------------- ------------- -------------
NET INCOME $ 3,525,000 $ 2,411,544 $ 6,396,000 $ 3,929,144
============= ============= ============= =============
NET INCOME PER SHARE $ 0.36 $ 0.27 $ 0.66 $ 0.44
============= ============= ============= =============
WEIGHTED AVERAGE SHARES OUTSTANDING 9,811,197 8,987,510 9,702,862 8,966,036
============= ============= ============= =============
See Notes to Consolidated Condensed Financial Statements
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</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CAVALIER HOMES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<S> <C> <C>
Twenty-Six Weeks Ended
June 28, June 30,
1996 1995
OPERATING ACTIVITIES:
Net income $ 6,396,000 $ 3,929,144
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization 1,763,000 1,142,895
Provision for credit losses, repurchase commitments and
other 133,000 65,467
(Gain)loss on sale of property, plant and equipment (12,000) (10,340)
Equity in undistributed earnings of investments (200,000) (110,818)
Compensation related to issuance of stock options 55,000 -
Changes in assets and liabilities provided(used) cash,
net of effects of acquisitions in 1996:
Accounts receivable (17,954,000) (14,631,867)
Inventories (2,357,000) 34,267
Accounts payable 5,229,000 4,291,709
Amounts payable under dealer incentive programs 1,617,000 609,957
Estimated warranties 629,000 900,000
Income tax deposit (2,307,000) -
Other assets and liabilities 4,748,000 1,724,676
------------- -------------
Net cash used in operating activities (2,260,000) (2,054,910)
------------- -------------
INVESTING ACTIVITIES:
Proceeds from the sale of property, plant and equipment 54,000 33,000
Net cash paid in connection with acquisition of subsidiaries (370,000) -
Capital expenditures (4,155,000) (2,006,184)
Distribution from partnership investment 194,000 138,356
Purchases of marketable securities - (991,246)
Redemptions of marketable securities 1,475,000 -
Purchases and originations of installment contracts (8,825,000) (5,020,514)
Principal collected on installment contracts 1,348,000 419,168
------------- -------------
Net cash used in investing activities (10,279,000) (7,427,420)
------------- -------------
FINANCING ACTIVITIES:
Long-term borrowings 1,005,000 2,000,000
Payments on long-term debt (465,000) (295,586)
Cash dividends (549,000) (281,807)
Net proceeds from exercise of stock options 3,453,000 3,999
Other - (9,404)
------------- -------------
Net cash provided by financing activities 3,444,000 1,417,202
------------- -------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (9,095,000) (8,065,128)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 21,005,000 16,034,922
------------- -------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 11,910,000 $ 7,969,794
============= =============
See Notes to Consolidated Condensed Financial Statements
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</TABLE>
<PAGE>
PART I.
CAVALIER HOMES, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
For the Thirteen and Twenty-Six Week Periods Ended June 28, 1996
And June 30, 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 June 28, 1996,
and the results of its operations for the thirteen and
twenty-six week periods ended June 28, 1996 and June 30, 1995
and its cash flows for the twenty-six week periods ended June
28, 1996 and June 30, 1995. All adjustments are of a normal
recurring nature.
* The results of operations for the thirteen and twenty-six
weeks ended June 28, 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 periods 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 and twenty-six 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
Twenty-Six Weeks Ended
--------------------------
June 28, June 30,
1996 1995
--------------------------
Cash paid for: Interest $ 284,000 $ 255,014
Income taxes $ 2,845,000 $ 1,836,337
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 June 28, 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.
-6-
<PAGE>
PART I.
CAVALIER HOMES, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
For the Thirteen and Twenty-Six Week Periods Ended June 28, 1996
And June 30, 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 June 28, 1996, the Company had $4,534,000 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
April 30, 1996 May 15, 1996 $ .03
January 31, 1996 February 15, 1996 $ .03
October 31, 1995 November 15, 1995 $ .02
July 31, 1995 August 15, 1995 $ .02
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 $75
million under these agreements as of June 28, 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 $800,000 at June 28,
1996, based on prior experience and current market
conditions. Management expects no material loss in excess of
the allowance.
-7-
<PAGE>
PART I.
CAVALIER HOMES, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
For the Thirteen and Twenty-Six Week Periods Ended June 28, 1996
And June 30, 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 June 28, 1996, the Company was
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 June 28, 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 $1,800,000 at June 28, 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 $464,063. 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 $690,937. 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.
In April of 1996, Company acquired all of the outstanding shares of an
insurance agency in exchange for common stock with a total value of
$200,000. The acquisition was immaterial to the Company's consolidated
financial statements.
-8-
<PAGE>
PART I.
CAVALIER HOMES, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
June 28, 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
six months of 1996 show an increase of 9% and indicate a continued trend in the
increase of shipments. 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, two facilities in Texas and one facility each in Georgia
and Pennsylvania.
Results of Operations
The following tables set 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>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL DATA
Thirteen Weeks Ended
------------------------------------------------------------------------
June 28, 1996 June 30, 1995 Change over Prior Period
------------------------------------------------------------------------
(dollars in thousands)
Net Sales $ 90,838 100.0% $ 70,755 100.0% $ 20,083 28.4%
Cost of Sales $ 74,643 82.2% $ 59,489 84.1% $ 15,154 25.5%
----------- ------- ----------- ------- ----------- -------
Gross Profit on Sales $ 16,195 17.8% $ 11,266 15.9% $ 4,929 43.8%
=========== ======= =========== ======= =========== =======
Net Sales $ 90,838 $ 70,755 $ 20,083 28.4%
Financial Services $ 772 $ 396 $ 376 94.9%
----------- ----------- ----------- -------
Total Revenue $ 91,610 100.0% $ 71,151 100.0% $ 20,459 28.8%
=========== =========== ===========
Selling, General and
Administration $ 11,183 12.2% $ 7,675 10.8% $ 3,508 45.7%
Net Income $ 3,525 3.8% $ 2,412 3.4% $ 1,113 46.1%
Twenty-Six Weeks Ended
June 28, 1996 June 30, 1995 Change over Prior Period
(dollars in thousands)
Net Sales $ 165,622 100.0% $ 128,568 100.0% $ 37,054 28.8%
Cost of Sales $ 136,456 82.4% $ 108,331 84.3% $ 28,125 26.0%
----------- ------- ----------- ------- ----------- -------
Gross Profit on Sales $ 29,166 17.6% $ 20,237 15.7% $ 8,929 44.1%
=========== ======= =========== ======= =========== =======
Net Sales $ 165,622 $ 128,568 $ 37,054 28.8%
Financial Services $ 1,392 $ 730 $ 662 90.7%
----------- ------- ----------- ------- ----------- -------
Total Revenue $ 167,014 100.0% $ 129,298 100.0% $ 37,716 29.2%
=========== =========== ===========
Selling, General and
Administration $ 20,199 12.1% $ 14,545 11.2% $ 5,654 38.9%
Net Income $ 6,396 3.8% $ 3,929 3.0% $ 2,467 62.8%
-9-
</TABLE>
<PAGE>
PART I.
CAVALIER HOMES, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
June 28, 1996
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA
Thirteen Weeks Ended
------------------------------------------------------------------------
June 28, 1996 June 30, 1995 Change over Prior Period
------------------------------------------------------------------------
House Shipments 3,826 2,957 869 29.4%
Twenty-Six Weeks Ended
------------------------------------------------------------------------
June 28, 1996 June 30, 1995 Change over Prior Period
------------------------------------------------------------------------
House Shipments 6,965 5,708 1,257 22.0%
BALANCE SHEET DATA
Balances as of
------------------------------------------------------------------------
June 28, 1996 June 30, 1995 Change over Prior Period
------------------------------------------------------------------------
(dollars in thousands)
Installment Loan Portfolio $ 26,692 $ 14,427 $ 12,265 85.0%
</TABLE>
Net Sales. The Company believes the increases in net sales of $20.1 and $37.1
million for the thirteen and twenty-six weeks ended June 28, 1996, respectively,
over the comparable periods 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 thirteen and twenty-six
week periods ended June 28, 1996 over the comparable periods in the previous
year of 869 and 1,257 homes respectively, or 29.4% and 22.0%, respectively are
primarily attributable to the increase in production capacity previously
described. During the current twenty-six week period the Company has experienced
a shift in product mix from single-section homes to multi-section homes. During
the twenty-six weeks ended June 28, 1996 42% of the Company's homes sold were
multi-section homes as compared to 37% for the comparable period in the previous
year.
Gross Profit on Sales. The increases in gross profit on sales (derived by
deducting cost of sales from net sales) of $4.9 and $8.9 million during the
current thirteen and twenty-six week periods over the comparable periods from
the previous year are primarily attributable to the increase in sales and
improved efficiency in manufacturing operations.
Financial Services Revenue. The increases in current period financial services
revenue (primarily interest income on retail installment contracts) during the
current thirteen and twenty-six week periods of $376,000 and $662,000, or 94.9%
and 90.7%, respectively, over the comparable periods in the previous year are
primarily attributable to the growth of the Company's loan portfolio to $26.7
million, an increase of 85.0%.
Selling, General and Administrative. The growth in selling, general and
administrative expense during the current thirteen and twenty-six week periods
of $3.5 and $5.7 million, respectively, over the previous year's comparable
periods 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 increases in net income during the current thirteen and
twenty-six week periods of $1.1 and $2.5 million, or 46.1% and 62.8%,
respectively, over the previous year's comparable periods are primarily
attributable to the increase in sales volume. Net Income per share during the
current thirteen and twenty-six week periods was $.36 and $.66, respectively,
compared to $.27 and $.44 from the previous year's comparable periods. (Net
income per share has been adjusted for all previous stock splits.)
-10-
<PAGE>
PART I.
CAVALIER HOMES, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
June 28, 1996
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:
Balances as of
----------------------------------
June 28, December 31, Increase
1996 1995 (Decrease)
----------------------------------
(dollars in thousands)
Working Capital $ 12,457 $ 11,121 $ 1,336
Current Ratio 1.3:1 1.4:1 (.1:1)
Long-term Debt $ 6,620 $ 4,981 $ 1,639
Ratio of Long-term Debt to Equity 1:9 1:9 0
Installment Loan Portolio at end of period $ 26,692 $ 19,209 $ 7,483
Although earnings for the period increased, working capital increased primarily
due to exercise of stock options and long-term debt borrowings. The increase in
long-term debt is attributable to borrowings by CAC to finance loan
origninations and 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 June 28, 1996, the Company's portfolio
of installment sale contracts had grown to approximately $26.7 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.
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 $4.2 million for the
tweny-six weeks ended June 28, 1996 as compared to $2.0 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.
-11-
<PAGE>
PART II.
CAVALIER HOMES, INC. AND SUBSIDIARIES
Other Information
June 28,1996
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Annual Meeting of Stockholders was held on May
15, 1996. Each person who was then serving as a member of the
Board of Directors was re-elected for another year. The votes
for each nominee were cast as follows:
Shares Voting
---------------------------
For Against Withheld
--------- -------- --------
Barry B. Donnell 7,568,725 -0- 66,827
Jerry F. Wilson 7,568,725 -0- 66,827
Thomas A. Broughton, III 7,568,725 -0- 66,827
John W Lowe 7,568,725 -0- 66,827
Lee Roy Jordan 7,568,725 -0- 66,827
The stockholders ratified the Board of Directors' appointment
of Deloitte & Touche LLP as Independent Certified Public
Accountants for the Company. The appointment was ratified by a
vote of 7,474,648 shares for and 5,287 shares against or
withheld, with 155,617 abstentions or broker nonvotes.
The stockholders voted to approve the Cavalier Homes Employee
Stock Purchase Plan. The plan was approved by a vote of
5,532,665 shares for and 38,777 shares against, with 49,723
abstentions and 2,003,441 broker nonvotes.
The stockholders voted to approve the Cavalier Homes Key
Employee Stock Incentive Plan. The plan was approved by a vote
of 4,373,980 shares for and 1,190,599 shares against, with
56,685 abstentions and 2,014,288 broker nonvotes.
The stockholders voted to approve the Cavalier Homes Executive
Incentive Stock Plan. The plan was approved by a vote of
7,147,164 shares for and 278,516 shares against, with 75,312
abstentions and 134,560 broker nonvotes.
The stockholders voted to approve the amendments to the
Cavalier Homes, Inc. Amended and Restated Nonemployee
Directors Stock Option Plan. The plan was approved by a vote
of 4,191,321 shares for and 1,352,264 shares against, with
78,838 abstentions and 2,013,129 broker nonvotes.
ITME 5 OTHER MATTERS
On July 16, 1996 the Board of Directors of the Company created
two additional positions on the Board and elected Gerald W.
Moore (an independent tax consultant in Birmingham, Alabama)
and David A. Roberson (currently Chief Financial Officer of
the Company) to fill the positions until the next annual
meeting of stockholders.
In addition, the Board of Directors declared its regular
quarterly cash dividend of $.03 per share payable on August
15, 1996 to stockholders of record on July 31, 1996.
-12-
<PAGE>
PART II.
CAVALIER HOMES, INC. AND SUBSIDIARIES
Other Information
June 28, 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.
-13-
<PAGE>
PART II.
CAVALIER HOMES, INC. AND SUBSIDIARIES
Other Information
June 28, 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: August 12, 1996 /s/ Jerry F. Wilson
------------------ -----------------------------
Jerry F. Wilson - President
Date: August 12, 1996 /s/ David A. Roberson
------------------ -----------------------------
David A. Roberson -
Chief Financial Officer
-14-
<PAGE>
<TABLE>
<CAPTION>
PART II. - EXHIBIT 11
CAVALIER HOMES, INC. AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER COMMON SHARE
<S> <C> <C> <C> <C>
Thirteen Weeks Ended Twenty-Six Weeks Ended
June 28, June 30, June 28, June 30,
1996 1995 1996 1995
------------- ------------- ------------- -------------
PRIMARY AND FULLY DILUTED
Net Income $ 3,525,000 $ 2,411,544 $ 6,396,000 $ 3,929,144
============= ============= ============= =============
SHARES:
Primary
Average common shares outstanding 9,385,176 8,809,410 9,230,247 8,808,401
Dilutive effect if stock options
were exercised 426,021 178,100 472,615 157,635
------------- ------------- ------------- -------------
Average common shares outstanding
as adjusted (primary) 9,811,197 8,987,510 9,702,862 8,966,036
============= ============= ============= =============
Fully Diluted
Average common shares outstanding 9,811,197 8,987,510 9,702,862 8,966,036
Additional dilutive effect if
stock options were excercised
(fully) 62,358 - 53,889 -
------------- ------------- ------------- -------------
Average common shares outstanding
as adjusted (fully diluted) 9,873,555 8,987,510 9,756,751 8,966,036
============= ============= ============= =============
Primary and Fully Diluted Net
Income per Common Share $ 0.36 $ 0.27 $ 0.66 $ 0.44
============= ============= ============= =============
-15-
</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> MAR-30-1996
<PERIOD-END> JUN-28-1996
<EXCHANGE-RATE> 1
<CASH> 11,910,000
<SECURITIES> 2,101,000
<RECEIVABLES> 20,511,000
<ALLOWANCES> 800,000
<INVENTORY> 12,828,000
<CURRENT-ASSETS> 55,281,000
<PP&E> 23,503,000
<DEPRECIATION> 8,016,000
<TOTAL-ASSETS> 109,718,000
<CURRENT-LIABILITIES> 42,824,000
<BONDS> 0
0
0
<COMMON> 968,000
<OTHER-SE> 58,766,000
<TOTAL-LIABILITY-AND-EQUITY> 109,718,000
<SALES> 90,838,000
<TOTAL-REVENUES> 91,610,000
<CGS> 74,643,000
<TOTAL-COSTS> 74,643,000
<OTHER-EXPENSES> 11,183,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 131,000
<INCOME-PRETAX> 5,882,000
<INCOME-TAX> 2,357,000
<INCOME-CONTINUING> 3,525,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,525,000
<EPS-PRIMARY> 0.360
<EPS-DILUTED> 0.360
</TABLE>
