<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 30, 1995 Commission File Number 0-15506
--------
SCHULT HOMES CORPORATION
-----------------------------------------------------
(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
------------
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
------- --------
The number of common shares outstanding, as of December 30, 1995 was 3,731,724.
<PAGE>
SCHULT HOMES CORPORATION
FORM 10-Q
PERIOD ENDED DECEMBER 30, 1995
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
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
Item 5. Other Information --- Inapplicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(1) Amended and Restated Articles of Incorporation of the
Company incorporated by reference from fiscal year 1995
Form 10-K
(2) Bylaws of the Company incorporated by reference from
fiscal year 1995 Form 10-K
(3) Net Earnings per Share of the Company incorporated by
reference from fiscal year 1995 Form 10-K
(b) There were no reports on Form 8-K filed for the three month
period ended December 30, 1995.
2
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SCHULT HOMES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
DECEMBER 30, 1995 AND JULY 1, 1995
ASSETS
<TABLE>
<CAPTION>
DEC. 30, 1995 JULY 1, 1995
------------- ------------
(unaudited) (audited)
(thousands of dollars)
<S> <C> <C>
Cash ...................................................... $ 4,432 $ 4,566
Accounts receivable, less allowance for doubtful accounts
of $100 in December 1995 and $67 in July 1995............. 8,470 14,154
Inventories (note 1)....................................... 15,535 15,095
Other current assets....................................... 4,502 4,603
------- -------
Total current assets.................................... 32,939 38,418
Property, plant, and equipment............................. 34,208 34,235
Other assets............................................... 4,243 2,680
------- -------
Total assets............................................ $71,390 $75,333
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Trade accounts payable..................................... $ 6,626 $14,664
Accrued liabilities........................................ 25,269 20,977
Current portion of long-term debt.......................... 1,000 1,000
------- -------
Total current liabilities............................... 32,895 36,641
Deferred income taxes...................................... 3,025 3,025
Long-term debt............................................. 897 3,695
------- -------
Total liabilities....................................... 36,817 43,361
Shareholders' equity:
Common shares, no par value, 10,000,000 shares authorized,
3,731,724 shares issued and outstanding in December 1995
and 3,746,032 in July 1995............................... 7,730 7,884
Retained earnings......................................... 26,843 24,088
------- -------
Total shareholders' equity.............................. 34,573 31,972
------- -------
Total liabilities and shareholders' equity.............. $71,390 $75,333
======= =======
</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. 30, 1995 DEC. 31, 1994 DEC. 30, 1995 DEC. 31, 1994
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales........................ $ 73,295 $ 70,526 $153,777 $142,434
Cost of goods sold............... 58,944 57,783 123,006 116,367
-------- -------- -------- --------
Gross profit.................. 14,351 12,743 30,771 26,067
Selling, general, and
administrative expenses......... 12,429 11,391 25,573 22,032
-------- -------- -------- --------
Operating income.............. 1,922 1,352 5,198 4,035
Interest income.................. 128 3 135 5
Other income..................... 6 15 12 26
Interest expense................. (35) (69) (89) (160)
-------- -------- -------- --------
Income before income taxes.... 2,021 1,301 5,256 3,906
Income taxes:
Federal......................... 631 411 1,625 1,214
State........................... 222 143 578 430
-------- -------- -------- --------
Net income.................... $ 1,168 $ 747 $ 3,053 $ 2,262
======== ======== ======== ========
PER SHARE DATA: (note 2)
- --------------------------
Net income per common share...... $ 0.31 $ 0.20 $ 0.81 $ 0.60
Dividends paid per common share.. $ 0.04 $ 0.04 $ 0.08 $ 0.08
Average shares outstanding....... 3,736,332 3,773,198 3,738,970 3,773,003
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
SCHULT HOMES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DEC. 30, DEC. 31, DEC. 30, DEC. 31,
1995 1994 1995 1994
------ ------ ------ ------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income..........................................$ 1,168 $ 747 $3,053 $ 2,262
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation of plant and equipment............... 858 763 1,716 1,537
Changes in assets and liabilities:
Decrease in accounts receivable.................. 6,665 4,047 5,684 3,519
Increase in inventories.......................... (1,755) (436) (40) (463)
Increase in other assets......................... (1,716) (537) (1,462) (350)
Decrease in trade accounts payable............... (5,114) (3,491) (8,038) (5,273)
Increase (decrease) in accrued liabilities....... 1,460 (466) 4,281 369
------- ------- ------- -------
Total adjustments................................... 398 (120) 1,741 (661)
------- ------- ------- -------
Net cash provided by operating activities......... 1,566 627 4,794 1,601
Cash flows from investing activities:
Capital expenditures, net of retirements............ (1,048) (992) (1,689) (2,713)
------- ------- ------- -------
Net cash used in investing activities............. (1,048) (992) (1,689) (2,713)
Cash flows from financing activities:
Proceeds from issuance of long-term debt............ - 500 - 500
Repayment of long-term debt......................... (245) (248) (2,798) (497)
Proceeds from issuance of common stock.............. 11 12 22 12
Payment for repurchased shares...................... - - (165) -
Dividends declared to common shareholders........... (149) (51) (298) (301)
------- ------- ------- -------
Net cash provided by (used in) financing activities (383) 113 (3,239) (286)
Net increase (decrease) in cash...................... 135 (252) (134) (1,398)
Cash at beginning of the quarter..................... 4,297 628 4,566 1,774
------- ------- ------- -------
Cash at end of the quarter...........................$ 4,432 $ 376 $4,432 $ 376
======= ======= ======= =======
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest...........................................$ 44 $ 42 $ 138 $ 134
Income taxes.......................................$ 2,409 $ 2,218 $2,978 $ 3,242
</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. 30, JULY 1,
1995 1995
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(thousands of dollars)
<S> <C> <C>
Raw material........... $11,625 $11,165
Work in process........ 2,250 2,352
Finished goods......... 1,660 1,578
------- -------
Total............... $15,535 $15,095
======= =======
</TABLE>
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NET EARNINGS PER COMMON SHARE
Net earnings 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 30, DEC 31, DEC 30, DEC 31,
1995 1994 1995 1994
----- ----- ------ -----
<S> <C> <C> <C> <C>
Net sales................................. 100.0% 100.0% 100.0% 100.0%
Cost of goods sold........................ 80.4 81.9 80.0 81.7
----- ----- ------ -----
Gross profit........................... 19.6 18.1 20.0 18.3
Selling, general & administrative expenses 17.0 16.2 16.6 15.5
----- ----- ------ -----
Operating income ...................... 2.6 1.9 3.4 2.8
Interest and other income................. 0.2 0.0 0.1 0.0
Interest expense.......................... (0.0) (0.1) (0.1) (0.1)
----- ----- ------ -----
Income before income taxes............. 2.8 1.8 3.4 2.7
Income taxes.............................. 1.2 0.7 1.4 1.1
----- ----- ------ -----
Net income ............................ 1.6 1.1 2.0 1.6
===== ===== ===== =====
</TABLE>
6
<PAGE>
THREE MONTHS ENDED DECEMBER 30, 1995 COMPARED TO THREE MONTHS ENDED
DECEMBER 31, 1994. NET SALES in the second quarter of fiscal 1996 were a
record $73.3 million, which represented an increase of $2.8 million (3.9%)
from the second quarter of fiscal 1995. This increase was due to
utilization of our plant expansions and strong market conditions. The
average selling price per section decreased by 1.6% from the same time a
year earlier due to an increase in the sale of lower priced single wide
units . Total sections sold in the second quarter of fiscal 1996 were
3,560, an increase of 188 sections (5.6%) from the prior year period.
Multi-section homes represented 62.8% of the homes sold during the second
quarter of fiscal 1996, compared to 64.5% in fiscal 1995.
COST OF GOODS SOLD in the second quarter of fiscal 1996 was $58.9
million, which represented an increase of $1.2 million (2.0%) from the
second quarter of fiscal 1995. Cost of goods sold as a percentage of net
sales decreased from 81.9% in fiscal 1995 to 80.4% in fiscal 1996. This
decrease in cost of goods sold was due primarily to decreased labor and
material costs. The decrease in labor was due to last years plant
expansions becoming more efficient, along with early results from the
Company's margin improvement initiatives. Material costs decreased as a
result of the decrease in the price of lumber.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES for the second quarter
of fiscal 1996 were $12.4 million, which represented an increase of $1.0
million (9.1%) from fiscal 1995. As a percentage of net sales, these
expenses increased to 17.0% from 16.2% in the prior year period. This was
the result of increased warranty service costs. The reason for this
increase was a more concentrated effort by management to reduce the backlog
of warranty service and to reduce the warranty service interval. During
the second quarter of fiscal 1996 backlogs decreased by over 8%. We expect
to further reduce the warranty backlog during the next quarter.
The Company earned an operating income of $1.9 million in the second
quarter of fiscal 1996 or 2.6% of net sales. This compares to an operating
income of $1.4 million or 1.9% of net sales in the prior year period.
Interest and other income contributed $134,000 to earnings in the
second quarter of fiscal 1996, compared to $18,000 in the second quarter of
fiscal 1995. This was due to the increase in cash flow available for
investments. Interest expense for the second quarter of fiscal 1996 was
$35,000, compared to $69,000 in the second quarter of fiscal 1995. This
was due to the decrease in borrowings of the Company's available line of
credit.
Net income in the current quarter was a record $1.2 million ($0.31 per
common share), compared to a net income of $747,000 ($0.20 per common
share) in the second quarter of fiscal 1995.
SIX MONTHS ENDED DECEMBER 30, 1995 COMPARED TO SIX MONTHS ENDED
DECEMBER 31, 1994. NET SALES in the first half of fiscal 1996 were a
record $153.8 million, which represented an increase of $11.3 million
(8.0%) from the first half of fiscal 1995. Again, this increase was due to
utilization of our plant expansions and strong market conditions. The
average selling price per section decreased by 0.5% from the same time a
year earlier. Total sections sold in the first half of fiscal 1996 were
7,411, an increase of 512 sections (7.4%) from the prior year period.
Multi-section homes represented 61.7% of the homes sold during the first
half of fiscal 1996, compared
7
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to 66.3% in fiscal 1995.
COST OF GOODS SOLD in the first half of fiscal 1996 was $123.0
million, which represented an increase of $6.6 million (5.7%) from the
first half of fiscal 1995. Cost of goods sold as a percentage of net sales
decreased from 81.7% in fiscal 1995 to 80.0% in fiscal 1996. This decrease
was due primarily to decreased labor and material costs. Again, the
decrease in labor was due to last years plant expansions becoming more
efficient, along with early results from the Company's margin improvement
initiatives. The decrease in material costs was a result of lower lumber
prices.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES for the first half of
fiscal 1996 were $25.6 million, which represented an increase of $3.5
million (16.1%) from fiscal 1995. As a percentage of net sales, these
expenses increased to 16.6% from 15.5% in the prior year period. This
again was the result of increased warranty costs, due to a more
concentrated effort of management to reduce the backlog of warranty and to
reduce the warranty service interval. During the first half of fiscal 1996
backlogs decreased by over 20% from the high level at each division during
the last half of fiscal 1995. We expect to further reduce the warranty
backlog during the next quarter.
The Company earned an operating income of $5.2 million in the first
half of fiscal 1996 or 3.4% of net sales. This compares to an operating
income of $4.0 million or 2.8% of net sales in the prior year period.
Interest and other income contributed $147,000 to earnings in the
first half of fiscal 1996, compared to $31,000 in the first half of fiscal
1995. This was again due to the increase in cash flow available for
investments. Interest expense for the first half of fiscal 1996 was
$89,000, compared to $160,000 in the first half of fiscal 1995. This was
because the Company had lower borrowings under its line of credit in fiscal
1995 than fiscal 1994.
Net income in the first half of fiscal 1996 was a record $3.1 million
($0.81 per common share), compared to a net income of $2.3 million ($0.60
per common share) in the first half of fiscal 1995.
LIQUIDITY AND CAPITAL RESOURCES
At the end of the current quarter, the Company had no outstanding
borrowings under its credit facility, which was a decrease of $2.3 million
from the balance at July 1, 1995. At the end of the quarter, total
long-term debt was $897,000, a decrease of $2.8 million compared to the
balance at July 1, 1995.
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 half of fiscal 1996 were
$1,689,000, compared to $2,713,000 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.
8
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of matters to a Vote of Security Holders
On October 19, 1995, the annual meeting of shareholders was
held. Directors elected were W.O. Wells, W.E. Wells, J.P. Guequierre, F.
Kennard, T. Goodwin, D, Pletcher, and R. Deputy. The shareholders also
approved the 1995 Incentive Share Option Plan. The Common Shares voted in
favor of election of each of the directors were 3,564,930 and 1,700 Common
Shares voted against, with 2,500 Common Shares abstaining. There were
3,312,355 Common Shares voting in favor of the 1995 Incentive Share Option
Plan, and 41,278 Common Shares voted against, with 206,586 abstaining.
9
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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: /s/ Fred A. Greenawalt
------------------------------
Fred A. Greenawalt
Chief Accounting Officer
By: /s/ Walter E. Wells
------------------------------
Walter E. Wells
Chief Executive Officer & President
Date: February 9, 1996
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-29-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> DEC-30-1995
<CASH> 4,432
<SECURITIES> 0
<RECEIVABLES> 8,470
<ALLOWANCES> 100
<INVENTORY> 15,535
<CURRENT-ASSETS> 4,502
<PP&E> 34,208
<DEPRECIATION> 0
<TOTAL-ASSETS> 71,390
<CURRENT-LIABILITIES> 32,895
<BONDS> 897
0
0
<COMMON> 7,730
<OTHER-SE> 26,843
<TOTAL-LIABILITY-AND-EQUITY> 71,390
<SALES> 153,777
<TOTAL-REVENUES> 153,777
<CGS> 123,006
<TOTAL-COSTS> 25,573
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 89
<INCOME-PRETAX> 5,256
<INCOME-TAX> 2,203
<INCOME-CONTINUING> 3,053
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,053
<EPS-PRIMARY> .81
<EPS-DILUTED> .81
</TABLE>
