<PAGE> 1
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 September 28, 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 September 28, 1996 was
3,743,685.
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SCHULT HOMES CORPORATION
FORM 10-Q
PERIOD ENDED SEPTEMBER 28, 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 --- 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
(a) Inapplicable
(b) There were no reports on Form 8-K filed for the
three month period ended September 28, 1996.
2
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SCHULT HOMES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 28, 1996 AND JUNE 29, 1996
ASSETS
<TABLE>
<CAPTION>
SEPT. 28, 1996 JUNE 29, 1996
-------------- -------------
(unaudited) (audited)
(thousands of dollars)
<S> <C>
Cash ...................................................... $10,658 $ 9,033
Accounts receivable, less allowance for doubtful accounts
of $65 in September and June 1996......................... 15,548 18,338
Inventories (note 1)....................................... 16,427 16,315
Deferred income taxes...................................... 5,424 5,424
------- -------
Total current assets.................................... 48,057 49,110
Property, plant, and equipment............................. 36,888 36,192
Loans receivable from Saturn Housing, LLC.................. 3,156 2,634
Other assets............................................... 2,587 1,797
------- -------
Total assets............................................ $90,688 $89,733
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Trade accounts payable..................................... $12,386 $18,628
Accrued liabilities........................................ 33,358 28,851
Current portion of long-term debt.......................... 710 710
------- -------
Total current liabilities............................... 46,454 48,189
Deferred income taxes...................................... 2,751 2,751
Long-term debt............................................. 363 684
------- -------
Total liabilities....................................... 49,568 51,624
Shareholders' equity:
Common shares, no par value, 10,000,000 shares authorized,
3,743,685 shares issued and outstanding in September
and June 1996............................................ 7,921 7,921
Retained earnings......................................... 33,199 30,188
------- -------
Total shareholders' equity.............................. 41,120 38,109
------- -------
Total liabilities and shareholders' equity.............. $90,688 $89,733
======= =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 4
SCHULT HOMES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPT. 28, 1996 SEPT. 30, 1995
-------------- --------------
<S> <C> <C>
Net sales........................ $ 93,027 $ 80,482
Cost of goods sold............... 72,510 64,062
---------- ----------
Gross profit.................. 20,517 16,420
Selling, general, and
administrative expenses......... 15,149 13,144
---------- ----------
Operating income.............. 5,368 3,276
Interest income.................. 126 7
Other income..................... 5 6
Interest expense................. (27) (54)
---------- ----------
Income before income taxes.... 5,472 3,235
Income taxes:
Federal......................... 1,672 994
State........................... 602 356
---------- ----------
Net income.................... $ 3,198 $ 1,885
========== ==========
PER SHARE DATA: (note 2)
- ----------------------------
Net income per common share...... $ 0.85 $ 0.50
Dividends paid per common share.. $ 0.05 $ 0.04
Average shares outstanding....... 3,748,812 3,740,905
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE> 5
SCHULT HOMES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPT. 28, SEPT. 30,
1996 1995
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income.......................................... $ 3,198 $ 1,885
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation of plant and equipment............... 943 858
Changes in assets and liabilities:
(Increase) decrease in accounts receivable....... 2,790 (981)
(Increase) decrease in inventories............... (112) 1,314
(Increase) decrease in other assets.............. (790) 332
Increase (decrease) in trade accounts payable.... (6,242) (2,923)
Increase in accrued liabilities.................. 4,507 2,782
------- -------
Total adjustments.............................. 1,096 1,382
------- -------
Net cash provided by operating activities............ 4,294 3,267
Cash flows from investing activities:
Capital expenditures, net of retirements........... (1,639) (641)
Loans to Saturn Housing, LLC....................... (522) (28)
------- -------
Net cash used in investing activities................ (2,161) (669)
------- -------
Cash flows from financing activities:
Net borrowings (repayments) under line-of-credit... - (2,300)
Repayment of long-term debt........................ (321) (253)
Payment for repurchased shares..................... - (165)
Dividends declared to common shareholders.......... (187) (149)
------- -------
Net cash provided by (used in) financing activities.. (508) (2,867)
------- -------
Net increase (decrease) in cash...................... 1,625 (269)
Cash at beginning of the quarter..................... 9,033 4,566
------- -------
Cash at end of the quarter........................... $10,658 $ 4,297
======= =======
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest........................................... $ 27 $ 94
Income taxes....................................... $ 1,319 $ 569
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE> 6
SCHULT HOMES CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) INVENTORIES
The components of inventories are as follows:
<TABLE>
<CAPTION>
SEPT. 28, JUNE 29,
1996 1996
-------- --------
(thousands of dollars)
<S> <C> <C>
Raw material........... $12,069 $12,524
Work in process........ 2,360 2,247
Finished goods......... 1,998 1,544
------- -------
Total............... $16,427 $16,315
======= =======
</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
SEPT. 28, SEPT. 30,
1996 1995
--------- ---------
<S> <C> <C>
Net sales................................... 100.0% 100.0%
Cost of goods sold.......................... 77.9 79.6
----- -----
Gross profit............................. 22.1 20.4
Selling, general & administrative expenses.. 16.3 16.3
----- -----
Operating income ........................ 5.8 4.1
Interest and other income................... 0.1 0.0
Interest expense............................ (0.0) (0.1)
----- -----
Income before income taxes............... 5.9 4.0
Income taxes................................ 2.5 1.7
----- -----
Net income .............................. 3.4 2.3
===== =====
</TABLE>
6
<PAGE> 7
THREE MONTHS ENDED SEPTEMBER 28, 1996 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1995. Net Sales in the first quarter of fiscal 1997 were $93.0
million, an increase of 15.6% from sales of $80.5 in the first quarter of
fiscal 1996. This was a record sales quarter for the Company. This increase was
due to utilization of our plant expansions and strong market conditions,
combined with a broader product line offering in certain regions. We believe we
can continue to increase our sales during the second quarter compared to last
year, if strong market conditions continue. The average selling price per
section increased by 0.8% from the same time a year earlier. Total sections
sold in the first quarter of fiscal 1997 were 4,418, an increase of 567
sections (14.7%) from the prior year period. Multi-section homes represented
68.5% of the homes sold during the first quarter of fiscal 1997, compared to
60.8% in fiscal 1996.
Cost of Goods Sold in the first quarter of fiscal 1997 was $72.5
million, which represented an increase of 13.2% from the first quarter of
fiscal 1996, reflecting our increase in sales. Cost of goods sold as a
percentage of net sales decreased from 79.6% in fiscal 1996 to 77.9% in fiscal
1997. This percentage decrease in cost of goods sold was due primarily to
decreased labor and material costs. The percentage decrease in labor was due
to plant expansions becoming more efficient, along with results from the
Company's margin improvement initiatives. Material costs decreased as a result
of improved corporate purchasing procedures. The decrease in material costs
will depend on market conditions by region, and labor costs will stabilize.
Selling, General, and Administrative Expenses for the first quarter of
fiscal 1997 were $15.1 million, which represented an increase of $2.0 million
(15.3%) from fiscal 1996. As a percentage of net sales, these expenses remained
the same at 16.3% of net sales when compared to the prior year period.
The Company earned an operating income of $5.4 million in the first
quarter of fiscal 1997 or 5.8% of net sales. This compares to an operating
income of $3.3 million or 4.1% of net sales in the prior year period.
Interest and other income contributed $131,000 to earnings in the
first quarter of fiscal 1997, compared to $13,000 in the first quarter of
fiscal 1996. This was due to the increase in cash flow available for
investments. Interest expense for the first quarter of fiscal 1997 was
$27,000, compared to $54,000 in the first quarter of fiscal 1996.
Net income in the current quarter was a record $3.2 million ($0.85 per
common share), compared to a net income of $1.9 million ($0.50 per common
share) in the first quarter of fiscal 1996. We believe our earnings for the
second quarter will be greater than second quarter of fiscal 1996.
LIQUIDITY AND CAPITAL RESOURCES
At the end of the current quarter, the Company had no outstanding
borrowings under its credit facility which remained unchanged from the balance
at June 29, 1996. At the end of the quarter, total long-term debt was $363,000,
a decrease of $321,000 compared to the balance at June 29, 1996.
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 $4,000,000 for seasonal use, if needed.
Capital expenditures for the first quarter of fiscal 1997 were
$1,639,000, compared to $641,000 from the prior year period. The announced
$6,000,000 expansion in Buckeye, Arizona should bring capital expenditures for
fiscal 1997 to $12,800,000.
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.
7
<PAGE> 8
RISK FACTORS
Forward-looking statements are made only as of the date made, based
upon factors known to management at the time. We are aware that material prices
may increase, and have assumed that we will have no undue difficulty passing on
those costs without adversely affecting sales. We have also assumed that
employee relations continue to be favorable, that orders on hand are not
canceled by dealers, and that no unusual workers' compensation or other legal
claim adversely affects the corporation. In the short term, weather factors are
often more significant in winter, and may severely restrict shipment and
manufacture of houses. General economic conditions and consumer uncertainty or
lack of confidence may result in delayed purchases of homes. A number of
economists have predicted rising interest rates after the elections, which may
adversely affect financing and sales. 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. We are aware that unpredictable events
can and do occur and cannot assure anyone that adverse events will not take
place. The manufacture and sales of housing is a complex and difficult
business, with many unforeseen events and conditions beyond the control of
manufacturers. We do not intend to update statements made in this report.
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:
-------------------------------
Fred A. Greenawalt
Chief Accounting Officer
By:
-------------------------------
Walter E. Wells
Chief Executive Officer & President
Date: November 8, 1996
8
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-28-1997
<PERIOD-START> JUN-29-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 10,658
<SECURITIES> 0
<RECEIVABLES> 15,548
<ALLOWANCES> 0
<INVENTORY> 16,427
<CURRENT-ASSETS> 48,057
<PP&E> 36,888
<DEPRECIATION> 0
<TOTAL-ASSETS> 90,688
<CURRENT-LIABILITIES> 46,454
<BONDS> 363
<COMMON> 7,921
0
0
<OTHER-SE> 33,199
<TOTAL-LIABILITY-AND-EQUITY> 90,688
<SALES> 93,027
<TOTAL-REVENUES> 93,027
<CGS> 72,510
<TOTAL-COSTS> 15,149
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 27
<INCOME-PRETAX> 5,472
<INCOME-TAX> 2,274
<INCOME-CONTINUING> 3,198
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,198
<EPS-PRIMARY> .85
<EPS-DILUTED> .85
</TABLE>
