<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended December 31, 1994 Commission File Number 0-15506
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SCHULT HOMES CORPORATION
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(Exact name of registrant as specified in its charter)
Indiana 35-1608892
- - - --------------------------------- -------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
221 U.S. 20 West, Middlebury, Indiana 46540
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 219-825-5881
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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 XX NO
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The number of shares of common stock outstanding, as of December 31, 1994 was
3,768,527.
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SCHULT HOMES CORPORATION
FORM 10-Q
PERIOD ENDED DECEMBER 31, 1994
PART I. Financial Information
Item 1. Financial Statements
A. Schult Homes Corporation and Subsidiaries Condensed Consolidated
Financial Statements
B. Notes to the Condensed Consolidated Financial Statements
C. Exhibit 27
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
PART II. Other Information
Item 1. Legal Proceedings --- Inapplicable
Item 2. Changes in Securities --- Inapplicable
Item 3. Defaults upon Senior Securities --- Inapplicable
Item 4. Submission of Matters to a Vote of Security Holders ---
Inapplicable
Item 5. Other Information --- Inapplicable
Item 6. Exhibits and Reports on Form 8-K --- Inapplicable
(a) Inapplicable
(b) There were no reports on Form 8-K filed for the three month
period ended December 31, 1994.
2
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SCHULT HOMES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 AND JULY 2, 1994
ASSETS
<TABLE>
<CAPTION>
DEC. 31, 1994 JULY 2, 1994
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(unaudited) (audited)
(thousands of dollars)
<S> <C> <C>
Cash ...................................................... $ 376 $ 1,774
Accounts receivable, less allowance for doubtful accounts
of $37 in December 1994 and $64 in July 1994.............. 10,198 13,717
Inventories (note 1)....................................... 14,160 13,697
Deferred income taxes...................................... 4,218 3,553
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Total current assets.................................... 28,952 32,741
Property, plant, and equipment............................. 33,380 32,204
Goodwill, net.............................................. 831 882
Other assets............................................... 1,287 1,551
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Total assets............................................ $64,450 $67,378
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<CAPTION>
LIABILITIES AND COMMON SHAREHOLDERS' EQUITY
<S> <C> <C>
Trade accounts payable..................................... $ 8,340 $13,613
Accrued liabilities........................................ 19,626 19,257
Current portion of long-term debt.......................... 994 994
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Total current liabilities............................... 28,960 33,864
Deferred income taxes...................................... 2,766 2,766
Long-term debt............................................. 2,394 2,390
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Total liabilities....................................... 34,120 39,020
Common shareholders' equity:
Common shares, no par value, 10,000,000 shares authorized,
3,768,527 shares issued and outstanding in December 1994
and 3,767,616 in July 1994............................... 8,054 8,042
Retained earnings......................................... 22,276 20,316
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Total common shareholders' equity....................... 30,330 28,358
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Total liabilities and common shareholders' equity....... $64,450 $67,378
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</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
SCHULT HOMES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DEC. 31, 1994 JAN. 1, 1994 DEC. 31, 1994 JAN. 1, 1994
------------- ------------ ------------- ------------
(13 WEEKS) (13 WEEKS) (26 WEEKS) (27 WEEKS)
<S> <C> <C> <C> <C>
Net sales.......................... $ 70,526 $ 60,333 $142,434 $126,463
Cost of goods sold................. 57,783 49,265 116,367 102,002
-------- -------- -------- --------
Gross margin.................... 12,743 11,068 26,067 24,461
Selling, general, and
administrative expenses........... 11,391 9,194 22,032 19,446
-------- -------- -------- --------
Operating income................ 1,352 1,874 4,035 5,015
Interest income.................... 3 46 5 64
Other income....................... 15 19 26 13
Interest expense................... ( 69) - ( 160) -
-------- -------- -------- --------
Income before income taxes...... 1,301 1,939 3,906 5,092
Income taxes:
Federal........................... 411 598 1,214 1,564
State............................. 143 213 430 560
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Net income...................... $ 747 $ 1,128 $ 2,262 $ 2,968
-------- -------- -------- --------
-------- -------- -------- --------
<CAPTION>
PER SHARE DATA: (note 2)
- - - ----------------------------
<S> <C> <C> <C> <C>
Net income per common share........ $ 0.20 $ 0.30 $ 0.60 $ 0.79
-------- -------- -------- --------
-------- -------- -------- --------
Dividends paid per common share.... $ 0.04 $ 0.03 $ 0.08 $ 0.06
-------- -------- -------- --------
-------- -------- -------- --------
Average shares outstanding......... 3,773,198 3,765,911 3,773,003 3,765,765
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
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SCHULT HOMES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DEC. 31, JAN. 1, DEC. 31, JAN. 1,
1994 1994 1994 1994
-------- -------- -------- --------
(13 WEEKS) (13 WEEKS) (26 WEEKS) (27 WEEKS)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income.........................................$ 747 $ 1,128 $ 2,262 $ 2,968
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation of plant and equipment.............. 763 636 1,537 1,224
Amortization of goodwill......................... 26 26 51 51
Changes in assets and liabilities:
Decrease in accounts receivable................. 4,047 3,092 3,519 2,485
(Increase) decrease in inventories.............. ( 436) ( 307) ( 463) 481
(Increase) decrease in other assets............. ( 563) ( 24) ( 401) 70
Decrease in trade accounts payable.............. (3,491) ( 26) (5,273) (4,295)
Increase (decrease) in accrued liabilities...... ( 466) (2,590) 369 ( 838)
------- ------- ------- -------
Total adjustments.................................. ( 120) 807 ( 661) ( 822)
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Net cash provided by operating activities........ 627 1,935 1,601 2,146
Cash flows from investing activities:
Capital expenditures............................... ( 992) (3,987) (2,713) (4,671)
------- ------- ------- -------
Net cash used in investing activities............ ( 992) (3,987) (2,713) (4,671)
Cash flows from financing activities:
Proceeds from issuance of long term debt........... 500 - 500 100
Repayment of long-term debt........................ ( 248) ( 168) ( 497) ( 331)
Issuance of common stock........................... 12 12 12 12
Dividends paid to common shareholders.............. ( 151) ( 113) ( 301) ( 226)
------- ------- ------- -------
Net cash provided by (used in) financing activities 113 ( 269) ( 286) ( 445)
Net decrease in cash................................ ( 252) (2,321) (1,398) (2,970)
Cash at beginning of the quarter.................... 628 2,969 1,774 3,618
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Cash at end of the quarter..........................$ 376 $ 648 $ 376 $ 648
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Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest..........................................$ 42 $ 56 134 119
Capitalized interest.............................. - 56 - 98
Income taxes...................................... 2,218 2,858 3,242 4,491
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
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SCHULT HOMES CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) INVENTORIES
The components of inventories are as follows:
<TABLE>
<CAPTION>
DEC. 31, JULY 2,
1994 1994
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(thousands of dollars)
<S> <C> <C>
Raw material........... $10,906 $10,180
Work in process........ 2,328 2,120
Finished goods......... 926 1,397
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Total............... $14,160 $13,697
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</TABLE>
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NET INCOME PER COMMON SHARE
Net income per common share is calculated by dividing net income by the
weighted average number of common shares and common share equivalents
outstanding during the period.
(3) INTERIM FINANCIAL STATEMENTS
The Company's quarterly sales and operating results are principally
affected by the seasonal nature of the Company's business. Historically, the
Company's sales and operating results are at their lowest levels in the fiscal
third quarter, when weather conditions have an adverse impact on both orders and
shipments. In the opinion of Company management, the interim financial
statements reflect all adjustments, consisting only of normal recurring
accruals, which are necessary for a fair statement of the results for the
interim periods presented.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth selected items of the Company's statement
of operations as a percentage of net sales for the periods indicated.
<TABLE>
<CAPTION>
PERCENTAGE OF NET SALES
THREE MONTHS ENDED SIX MONTHS ENDED
------------------ ------------------
DEC. 31, JAN. 1, DEC. 31, JAN. 1,
1994 1994 1994 1994
-------- -------- -------- -------
<S> <C> <C> <C> <C>
Net sales............................. 100.0% 100.0% 100.0% 100.0%
Cost of goods sold.................... 81.9 81.7 81.7 80.7
----- ----- ----- -----
Gross margin....................... 18.1 18.3 18.3 19.3
Selling, general and administrative
expenses............................. 16.2 15.2 15.5 15.4
----- ----- ----- -----
Operating income .................. 1.9 3.1 2.8 3.9
Interest and other income............. 0.0 0.1 0.0 0.1
Interest expense...................... 0.1 0.0 0.1 0.0
----- ----- ----- -----
Income before income taxes......... 1.8 3.2 2.7 4.0
Income taxes.......................... 0.7 1.3 1.1 1.7
----- ----- ----- -----
Net income ........................ 1.1 1.9 1.6 2.3
----- ----- ----- -----
----- ----- ----- -----
</TABLE>
THREE MONTHS ENDED DECEMBER 31, 1994 COMPARED TO THREE MONTHS ENDED JANUARY
1, 1994. NET SALES in the second quarter of fiscal 1995 were $70.5 million,
which represented an increase of $10.2 million (16.9%) from the second quarter
of fiscal 1994. This increase in sales was due to utilization of our fiscal
1994 plant expansions and strong demand for housing nationwide. The average
selling price per section increased by 6.0% from the same time a year
6
<PAGE>
earlier, principally due to new HUD energy standards and general price
increases. Total sections sold in the second quarter of fiscal 1995 were 3,372,
an increase of 313 sections (10.2%) from the prior year period. Multi-section
homes represented 64.5% of the homes sold during the second quarter of fiscal
1995, compared to 62.5% in fiscal 1994.
COST OF GOODS SOLD in the second quarter of fiscal 1995 was $57.8 million,
which represented an increase of $8.5 million (17.3%) from the second quarter of
fiscal 1994. Cost of goods sold as a percentage of net sales increased from
81.7% in fiscal 1994 to 81.9% in fiscal 1995. This increase in cost of goods
sold was principally due to the startup of two new plants and the impact of
heavy rains in Texas during October. The new Etna Green, Indiana plant
continued to improve and performed better than in the prior quarter. Etna Green
builds the Company's most complex and demanding products -- all drywall homes.
The construction process is more difficult and requires more training than
construction using traditional manufactured home materials. The Navasota, Texas
plant experienced significant increased labor costs for the quarter in an
attempt to train a significant number of employees as a result of the expansion.
Efforts to train these new employees while maintaining quality has slowed the
process of reaching full production and has increased costs. Compounding the
problems at Navasota were unusually heavy rains in the area. Some materials
were lost; and the plant was forced to shut down briefly.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES for the second quarter of
fiscal 1995 were $11.4 million, which represented an increase of $2.2 million
(23.9%) from fiscal 1994. As a percentage of net sales, these expenses
increased to 16.2% from 15.2% in the prior year period. This was principally the
result of increased warranty and dealer volume rebate costs.
The Company earned an operating income of $1.4 million in the second
quarter of fiscal 1995 or 1.9% of net sales. This compares to an operating
income of $1.9 million or 3.1% of net sales in the prior year period.
Interest and other income contributed $18,000 to earnings in the second
quarter of fiscal 1995, compared to $65,000 in the second quarter of fiscal
1994. Interest expense for the second quarter of fiscal 1995 was $69,000.
There was no interest expense for the second quarter of fiscal 1994. This was
due to the capitalization of interest related to our capital expansion program.
Net income in the current quarter was $747,000 ($0.20 per common share),
compared to a net income of $1.1 million ($0.30 per common share) in the second
quarter of fiscal 1994.
SIX MONTHS ENDED DECEMBER 31, 1994 COMPARED TO SIX MONTHS ENDED JANUARY 1,
1994. NET SALES in the first half of fiscal 1995 were $142.4 million, which
represented an increase of $16.0 million (12.6%) from the first half of fiscal
1994. This increase in sales was due to utilization of our fiscal 1994 plant
expansions, strong market conditions and increased selling price. The average
selling price per section increased by 5.6% from the same time a year earlier,
principally due to new HUD energy standards and general price increases. Total
sections sold in the first half of fiscal 1995 were 6,899, an increase of 433
sections (6.7%) from the prior year period. Multi-section homes represented
66.3 % of the homes sold during the first half of fiscal 1995, compared to 63.2%
in fiscal 1994.
COST OF GOODS SOLD in the first half of fiscal 1995 was $116.4 million,
which represented an increase of $14.4 million (14.1%) from the first half of
fiscal 1994. Cost of goods as a percentage of net sales in fiscal 1995 was
81.7%, compared to 80.7% in fiscal 1994. This increase was primarily due to
start-up costs associated with three plant expansions and the impact of heavy
rains in Texas during October. Progress has been made in dealing with these
start-up problems and further progress is expected in the future.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES for the first half of fiscal
1995 were $22.0 million, which represented an increase of $2.6 million (13.3%)
from the first half of fiscal 1994.
7
<PAGE>
As a percentage of net sales, these expenses increased to 15.5% from 15.4% in
the prior year period. This was principally the result of increased dealer
volume rebate costs.
The Company earned an operating income of $4.0 million in the first half of
fiscal 1995 or 2.8% of net sales. This compares to an operating income of $5.0
million or 3.9% of net sales in the prior year period.
Interest and other income contributed $31,000 to earnings in the first half
of fiscal 1995, compared to $77,000 in the first half of fiscal 1994. Interest
expense for the first half of fiscal 1995 was $160,000. There was no interest
expense for the first half of fiscal 1994. This was due to capitalization of
interest related to our capital expansion program.
Net income for the first half of fiscal 1995 was $2.3 million ($0.60 per
common share), which compares to a net income of $3.0 million ($0.79 per common
share) for the first half of fiscal 1994.
LIQUIDITY AND CAPITAL RESOURCES
At the end of the current quarter, the Company had $0.5 million of
outstanding borrowings under its credit facility, which was an increase of $0.5
million from the balance at July 2, 1994. At the end of the quarter, total long-
term debt remained constant at $2.4 million compared to the balance at July 2,
1994.
The Company's unsecured credit facility expiring January 31, 1997 permits
borrowings of up to $10,000,000. The Company has access to additional bank
financing up to $3,000,000 for seasonal use, if needed.
Capital expenditures for the first six months of fiscal 1995 were
$2,713,000, compared to $4,671,000 from the prior year period.
The Company expects that funds generated from operations combined with
funds available under long-term secured financing arrangements and its revolving
credit facility will be adequate to support its capital expenditure needs and
required debt amortization.
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.
SCHULT HOMES CORPORATION
-------------------------------------
(Registrant)
By: ______________________________
Fred A. Greenawalt
Chief Accounting Officer
By: ______________________________
Walter E. Wells
Chief Executive Officer & President
Date: February 10, 1995
8
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-01-1995
<PERIOD-END> DEC-31-1994
<CASH> 376
<SECURITIES> 0
<RECEIVABLES> 10,198
<ALLOWANCES> 0
<INVENTORY> 14,160
<CURRENT-ASSETS> 28,952
<PP&E> 33,380
<DEPRECIATION> 0
<TOTAL-ASSETS> 64,450
<CURRENT-LIABILITIES> 28,960
<BONDS> 2,394
<COMMON> 8,054
0
0
<OTHER-SE> 22,276
<TOTAL-LIABILITY-AND-EQUITY> 64,450
<SALES> 142,434
<TOTAL-REVENUES> 142,434
<CGS> 116,367
<TOTAL-COSTS> 22,032
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 160
<INCOME-PRETAX> 3,906
<INCOME-TAX> 1,644
<INCOME-CONTINUING> 2,262
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,262
<EPS-PRIMARY> .60
<EPS-DILUTED> .60
</TABLE>
