<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 March 30, 1996 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
-----------------------------------------------------
(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 March 30, 1996 was 3,743,056.<PAGE>
<PAGE>
SCHULT HOMES CORPORATION
FORM 10-Q
PERIOD ENDED MARCH 30, 1996
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 --- A Form S-8 was filed March 19, 1995,
registering 300,000 Common Shares to be issued pursuant to the Schult Homes
Corporation 1995 Share Incentive Plan, approved by the shareholders on October
19, 1995. No shares have yet been issued pursuant to the Plan, although certain
options have been granted.
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
(a) Inapplicable
(b) There were no reports on Form 8-K filed for the three month
period ended March 30, 1996.
2
<PAGE>
SCHULT HOMES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 30, 1996 AND JULY 1, 1995
ASSETS
<TABLE>
<CAPTION>
MAR. 30, 1996 JULY 1, 1995
------------- ------------
(unaudited) (audited)
(thousands of dollars)
<S> <C> <C>
Cash ...................................................... $ 737 $ 4,566
Accounts receivable, less allowance for doubtful accounts
of $95 in March 1996 and $67 in July 1995................. 15,863 14,154
Inventories (note 1)....................................... 16,129 15,095
Other current assets....................................... 4,861 4,603
------------- ------------
Total current assets.................................... 37,590 38,418
Property, plant, and equipment............................. 34,402 34,235
Other investments.......................................... 3,633 614
Other assets............................................... 1,884 2,066
------------- ------------
Total assets............................................ $77,509 $75,333
------------- ------------
------------- ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Trade accounts payable..................................... $ 9,939 $14,664
Accrued liabilities........................................ 27,507 20,977
Current portion of long-term debt.......................... 1,000 1,000
------------- ------------
Total current liabilities............................... 38,446 36,641
Deferred income taxes...................................... 3,025 3,025
Long-term debt............................................. 644 3,695
------------- ------------
Total liabilities....................................... 42,115 43,361
Shareholders' equity:
Common shares, no par value, 10,000,000 shares authorized,
3,743,056 shares issued and outstanding in March 1996
and 3,746,032 in July 1995............................... 7,910 7,884
Retained earnings......................................... 27,484 24,088
------------- ------------
Total shareholders' equity.............................. 35,394 31,972
------------- ------------
Total liabilities and shareholders' equity.............. $77,509 $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 NINE MONTHS ENDED
--------------------------- --------------------------
MAR. 30, 1996 APR. 1, 1995 MAR.30, 1996 APR. 1, 1995
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales........................ $ 71,656 $ 69,707 $225,434 $212,141
Cost of goods sold............... 57,299 57,226 180,305 173,594
------------- ------------ ------------ ------------
Gross profit.................. 14,357 12,481 45,129 38,547
Selling, general, and
administrative expenses......... 13,030 11,780 38,604 33,812
------------- ------------ ------------ ------------
Operating income.............. 1,327 701 6,525 4,735
Interest income.................. 136 3 271 8
Other income..................... 7 11 18 38
Interest expense................. ( 37) ( 34) ( 126) ( 195)
------------- ------------ ------------ ------------
Income before income taxes.... 1,433 681 6,688 4,586
Income taxes:
Federal......................... 446 218 2,071 1,433
State........................... 158 75 736 504
------------- ------------ ------------ ------------
Net income.................... $ 829 $ 388 $ 3,881 $ 2,649
------------- ------------ ------------ ------------
------------- ------------ ------------ ------------
PER SHARE DATA: (NOTE 2)
Net income per common share...... $ 0.22 $ 0.10 $ 1.04 $ 0.70
Dividends paid per common share.. $ 0.05 $ 0.04 $ 0.13 $ 0.12
Average shares outstanding....... 3,746,424 3,781,019 3,742,163 3,776,145
</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 NINE MONTHS ENDED
------------------ ----------------
MAR. 30, APR. 1, MAR.30, APR. 1,
1996 1995 1996 1995
-------- ------- ------- -------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income..........................................$ 829 $ 388 $3,881 $ 2,649
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation of plant and equipment............... 864 726 2,580 2,263
Changes in assets and liabilities:
(Increase) decrease in accounts receivable....... (7,393) (2,980) (1,709) 539
Increase in inventories.......................... (594) (782) (1,034) (1,245)
(Increase) decrease in other assets.............. 893 5 2,854 (404)
Increase (decrease) in trade accounts payable.... 3,313 615 (4,725) (4,658)
Increase in accrued liabilities.................. 2,238 2,978 6,519 3,347
-------- ------- ------- -------
Total adjustments................................... (679) 562 4,485 (158)
-------- ------- ------- -------
Net cash provided by operating activities....... 150 950 8,366 2,491
Cash flows from investing activities:
Capital expenditures, net of retirements............ (1,058) (1,310) (2,747) (4,023)
Long-term investments............................... (1,248) 30 (2,929) 90
Other investments................................... (1,278) - (3,019) -
-------- ------- ------- -------
Net cash used in investing activities............. (3,584) (1,280) (8,695) (3,933)
Cash flows from financing activities:
Net borrowings (repayments) under line-of-credit.... - 1,500 (2,300) 2,000
Repayment of long-term debt......................... (253) (249) (751) (745)
Proceeds from issuance of common stock.............. 179 301 201 312
Payment for repurchased shares...................... - (385) (165) (385)
Dividends declared to common shareholders........... (187) (151) (485) (452)
-------- ------- ------- -------
Net cash provided by (used in) financing activities (261) 1,016 (3,500) 730
Net increase (decrease) in cash...................... (3,695) 686 (3,829) (712)
Cash at beginning of the quarter..................... 4,432 376 4,566 1,774
-------- ------- ------- -------
Cash at end of the quarter...........................$ 737 $ 1,062 $ 737 $ 1,062
-------- ------- ------- -------
-------- ------- ------- -------
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest...........................................$ 37 $ 68 $ 164 $ 202
Income taxes.......................................$ 989 $ 150 $2,992 $ 3,391
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
SCHULT HOMES CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) INVENTORIES
The components of inventories are as follows:
<TABLE>
<CAPTION>
MAR. 30, JULY 1,
1996 1995
------- --------
(thousands of dollars)
<S> <C> <C>
Raw material........... $11,178 $11,165
Work in process........ 2,170 2,352
Finished goods......... 2,781 1,578
------- --------
Total............... $16,129 $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 NINE MONTHS ENDED
------------------ -----------------
MAR 30, APR 1, MAR 30, APR 1,
------- ------ ------- ------
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net sales................................. 100.0% 100.0% 100.0% 100.0%
Cost of goods sold........................ 80.0 82.0 80.0 81.8
------- ------ ------- ------
Gross profit........................... 20.0 18.0 20.0 18.2
Selling, general & administrative expenses 18.2 16.9 17.1 15.9
------- ------ ------- ------
Operating income ...................... 1.8 1.1 2.9 2.3
Interest and other income................. 0.2 0.0 0.1 0.0
Interest expense.......................... (0.0) (0.1) (0.0) (0.1)
------- ------ ------- ------
Income before income taxes............. 2.0 1.0 3.0 2.2
Income taxes.............................. 0.8 0.4 1.3 1.0
------- ------ ------- ------
Net income ............................ 1.2 0.6 1.7 1.2
------- ------ ------- ------
------- ------ ------- ------
</TABLE>
6
<PAGE>
THREE MONTHS ENDED MARCH 30, 1996 COMPARED TO THREE MONTHS ENDED APRIL 1,
1995. NET SALES in the third quarter of fiscal 1996 were a third quarter record
of $71.7 million, which represented an increase of $1.9 million (2.8%) from the
third 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 0.8% 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 third quarter
of fiscal 1996 were 3,517, an increase of 123 sections (3.6%) from the prior
year period. Multi-section homes represented 57.9% of the homes sold during
the third quarter of fiscal 1996, compared to 65.7% in fiscal 1995. COST OF
GOODS SOLD in the third quarter of fiscal 1996 was $57.3 million, which
represented an increase of $73,000 (0.1%) from the third quarter of fiscal 1995.
Cost of goods sold as a percentage of net sales decreased from 82.0% in fiscal
1995 to 80.0% 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 and improved corporate
purchasing procedures.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES for the third quarter of
fiscal 1996 were $13.0 million, which represented an increase of $1.3 million
(10.6%) from fiscal 1995. As a percentage of net sales, these expenses
increased to 18.2% from 16.9% in the prior year period. This was the result of
increased warranty service costs and increased marketing incentives. The reason
for the increase was a more concentrated effort by management to reduce the
backlog of warranty service and to reduce the warranty service interval. During
the third quarter of fiscal 1996 warranty service backlogs decreased by 13.5%.
The Company earned an operating income of $1.3 million in the third quarter
of fiscal 1996 or 1.8% of net sales. This compares to an operating income of
$0.7 million or 1.1% of net sales in the prior year period.
Interest and other income contributed $143,000 to earnings in the third
quarter of fiscal 1996, compared to $14,000 in the third quarter of fiscal 1995.
This was due to the increase in cash flow available for investments. Interest
expense for the third quarter of fiscal 1996 was $37,000, compared to $34,000 in
the third quarter of fiscal 1995.
Net income in the current quarter was a record $829,000 ($0.22 per common
share), compared to a net income of $388,000 ($0.10 per common share) in the
third quarter of fiscal 1995.
NINE MONTHS ENDED MARCH 30, 1996 COMPARED TO NINE MONTHS ENDED APRIL 1,
1995. NET SALES in the first nine months of fiscal 1996 were a record $225.4
million, which represented an increase of $13.3 million (6.3%) from the first
nine months of fiscal 1995. Again, this increase was due to utilization of our
plant expansions and strong market conditions. The average selling price per
section remained constant from the same time a year earlier. Total sections
sold in the first nine months of fiscal 1996 were 10,928, an increase of 634
sections (6.2%) from the prior year period. Multi-section homes represented
61.5% of the homes sold during the first nine months of fiscal 1996, compared to
66.7% in fiscal 1995.
COST OF GOODS SOLD in the first nine months of fiscal 1996 was $180.3
million, which represented an increase of $6.7 million (3.9%) from the first
nine months of fiscal 1995. Cost of goods sold as a percentage of net sales
decreased from 81.8% 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 and improved corporate
purchasing procedures.
7
<PAGE>
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES for the first nine months of
fiscal 1996 were $38.6 million, which represented an increase of $4.8 million
(14.2%) from fiscal 1995. As a percentage of net sales, these expenses
increased to 17.1% from 15.9% 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.
The Company earned an operating income of $6.5 million in the first nine
months of fiscal 1996 or 2.9% of net sales. This compares to an operating
income of $4.7 million or 2.3% of net sales in the prior year period.
Interest and other income contributed $289,000 to earnings in the first
nine months of fiscal 1996, compared to $46,000 in the first nine months of
fiscal 1995. This was again due to the increase in cash flow available for
investments. Interest expense for the first nine months of fiscal 1996 was
$126,000, compared to $195,000 in the first half of fiscal 1995. This was
because the Company had lower borrowings under its line of credit and lower
long-term debt in fiscal 1996 than fiscal 1995.
Net income in the first nine months of fiscal 1996 was $3.9 million ($1.04
per common share), compared to a net income of $2.6 million ($0.70 per common
share) in the first nine months 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
$644,000, a decrease of $3.1 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 nine months of fiscal 1996 were
$2,747,000, compared to $4,023,000 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.
RISK FACTORS
Forward-looking statements are made only as of the date made, based upon
factors known to management at the time. These factors include the assumption
that raw material prices will not increase significantly, that employee
relations continue to be favorable, that weather conditions do not restrict
delivery of homes or adversely affect sales, that orders on hand are not
canceled by dealers, and that no unusual workers' compensation or other legal
claim adversely affects the corporation. Lumber prices have recently been
favorable, but prices may increase on short notice due to factors beyond the
Company's control. General economic conditions, interest rates, and consumer
uncertainty or lack of confidence may result in delayed purchases of homes. The
Company has assumed that the current generation of retirees and the emerging
generation of retirees will have the same interest in purchasing manufactured
homes, an assumption which has not yet been tested and may not be appropriate.
As of this date, we do not believe that there is a significant risk that any
such adverse condition or event will occur, but we are aware that unpredictable
events can and do occur and cannot assure anyone that adverse events will not
take place. The manufacture and sale of housing is a complex and difficult
business, with many unforeseen expenses and conditions beyond the control of
manufacturers. We do not intend to update statements made in this report.
8
<PAGE>
PART II. OTHER INFORMATION
None
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: May 14, 1996
9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-29-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> MAR-30-1996
<CASH> 737
<SECURITIES> 0
<RECEIVABLES> 15,863
<ALLOWANCES> 0
<INVENTORY> 16,129
<CURRENT-ASSETS> 37,590
<PP&E> 34,402
<DEPRECIATION> 0
<TOTAL-ASSETS> 77,509
<CURRENT-LIABILITIES> 38,446
<BONDS> 644
0
0
<COMMON> 7,910
<OTHER-SE> 27,484
<TOTAL-LIABILITY-AND-EQUITY> 77,509
<SALES> 225,434
<TOTAL-REVENUES> 225,434
<CGS> 180,305
<TOTAL-COSTS> 218,909
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 126
<INCOME-PRETAX> 6,688
<INCOME-TAX> 2,807
<INCOME-CONTINUING> 3,881
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,881
<EPS-PRIMARY> 1.04
<EPS-DILUTED> 1.04
</TABLE>
