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 27, 1997
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
incorporation or organization) Identification No.)
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
27, 1997 was 4,504,235.<PAGE>
SCHULT HOMES CORPORATION
FORM 10-Q
<PAGE>
PERIOD ENDED SEPTEMBER 27, 1997
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 27, 1997.
<PAGE>
<PAGE>
SCHULT HOMES CORPORATION and SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
September 27, 1997 and June 28, 1997
ASSETS
<TABLE>
<CAPTION>
Sept. 27, 1997 June 28, 1997
(unaudited) (audited)
(thousands of dollars)
<S> <C> <C>
Cash ........................................ $ 1,017 $ 4,735
Accounts receivable, net.............. ...... 17,844 18,304
Inventories (note 1)......................... 21,881 20,558
Deferred income taxes....................... 6,985 6,985
Total current assets...................... 47,727 50,582
Property, plant, and equipment............... 46,215 44,252
Loans receivable from Saturn Housing, LLC.... 2,862 2,691
Other assets................................. 2,722 2,631
Total assets.............................. $99,526 $100,156
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Trade accounts payable...................... $12,705 $ 17,427
Accrued liabilities............................... 34,447 32,369
Current portion of long-term debt................. 131 131
Total current liabilities...................... 47,283 49,927
Deferred income taxes............................. 2,884 2,884
Long-term debt.................................... 522 555
Total liabilities.............................. 50,689 53,366
Shareholders' equity:
Common shares, no par value, 10,000,000 shares
authorized, 4,504,235 shares issued and
outstanding in November 1997 and 4,505,741
in June 1997............................... 8,184 8,238
Retained earnings........................... 40,653 38,552
Total shareholders' equity................ 48,837 46,790
Total liabilities and shareholders' equity. $99,526 $100,156
======= =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
<PAGE>
SCHULT HOMES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
Sept. 27, 1997 Sept. 28, 1996
<S> <C> <C>
Net sales........................ $ 89,137 $ 93,027
Cost of goods sold............... 70,716 72,510
Gross profit.................. 18,421 20,517
Selling, general, and
administrative expenses......... 14,662 15,149
Operating income.............. 3,759 5,368
Interest income.................. 143 126
Other income..................... 13 5
Interest expense................. ( 10) ( 27)
Income before income taxes.... 3,905 5,472
Income taxes:
Federal......................... 1,226 1,672
State........................... 354 602
Net income.................... $ 2,325 $ 3,198
======== ========
PER SHARE DATA: (note 2)
Net income per common share...... $ 0.51 $ 0.71
Dividends paid per common share.. $ 0.05 $ 0.04
Average shares outstanding....... 4,545,692 4,492,729
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
<PAGE>
SCHULT HOMES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOW
(Dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
Sept. 27, Sept. 28,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net income..........................................$ 2,325 $ 3,198
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation of plant and equipment............... 1,110 943
Changes in assets and liabilities:
Decrease in accounts receivable.................. 460 2,790
Increase in inventories.......................... (1,323) ( 112)
(Increase) decrease in other assets.............. 61 ( 790)
Decrease in trade accounts payable............... (4,721) (6,242)
Increase in accrued liabilities.................. 2,077 4,507
Total adjustments.............................. (2,336) 1,096
Net cash provided by (used in) operating activities.. ( 11) 4,294
Cash flows from investing activities:
Capital expenditures, net of retirements........... (3,073) (1,639)
Loans to Saturn Housing, LLC....................... ( 322) ( 522)
Net cash used in investing activities................ (3,395) (2,161)
Cash flows from financing activities:
Repayment of long-term debt........................ ( 33) ( 321)
Proceeds from issuance of common shares............ 3 -
Payment for repurchased shares..................... ( 57) -
Dividends declared to common shareholders.......... ( 225) ( 187)
Net cash provided by (used in) financing activities.. ( 312) ( 508)
Net increase (decrease) in cash...................... (3,718) 1,625
Cash at beginning of the quarter..................... 4,735 9,033
Cash at end of the quarter...........................$ 1,017 $10,658
======= =======
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest...........................................$ 53 $ 27
Income taxes.......................................$ 799 $ 1,319
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
<PAGE>
SCHULT HOMES CORPORATION and SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(1) INVENTORIES
The components of inventories are as follows:
<TABLE>
<CAPTION>
Sept. 27, June 28,
1997 1997
(thousands of dollars)
<S> <C> <C>
Raw material........... $15,804 $16,195
Work in process........ 2,508 2,308
Finished goods......... 3,569 2,055
Total............... $21,881 $20,558
</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. Net earnings per common share have been
restated to reflect the Company's six-for-five stock split on
February 28, 1997.
(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. 27, Sept. 28,
1997 1996
<S> <C> <C>
Net sales................................... 100.0% 100.0%
Cost of goods sold.......................... 79.3 77.9
Gross profit............................. 20.7 22.1
Selling, general & administrative expenses.. 16.5 16.3
Operating income ........................ 4.2 5.8
Interest and other income................... 0.2 0.1
Interest expense............................ (0.0) (0.0)
Income before income taxes............... 4.4 5.9
Income taxes................................ 1.8 2.5
Net income .............................. 2.6 3.4
===== =====
</TABLE>
THREE MONTHS ENDED SEPTEMBER 27, 1997
COMPARED TO THREE MONTHS ENDED SEPTEMBER
28, 1996.
Net Sales in the first quarter of fiscal 1998 were
$89.1 million, an decrease of 4.2% from sales of $93.0 in
the first quarter of fiscal 1997. This decline is attributable
primarily to lower sales in the
Texas market, the nation's largest, where manufactured home
retailers have been engaged in aggressive expansion. Based
on their experience obtaining sufficient units to meet demand
in 1996,
<PAGE>
many Texas manufactured home retailers built up inventory
levels last winter to ensure they would have units available in
the spring and summer of 1997. However, while each dealer
was increasing inventory, the number of retail locations in
Texas also continued to proliferate. In the first quarter of
fiscal 1998, total inventory on retail dealer lots in Texas
reached a point where it was greater than demand was likely
to absorb in the immediate future. Dealers began to adjust
inventory by reducing their orders to manufacturers,
including the Company. As a result, our order volume from
the Texas market declined. While dealer inventory levels
have declined and new orders in Texas are increasing, there
may be some residual effect in the second quarter as the
phenomenon works its way through the system. The average
selling price per section decreased by 2.7% from the same
time a year earlier due to increased sales of lower priced
"package" multi-section homes. Total sections sold in the
first quarter of fiscal 1998 were 4,426, an increase of 8
sections (0.2%) from the prior year period. Multi-section
homes represented 73.2% of the homes sold during the first
quarter of fiscal 1998, compared to 68.5% in fiscal 1997.
The Company is uncertain whether the increased proportional
sales of multi-section homes will continue because it is
subject to regional preferences and economic conditions.
Cost of Goods Sold in the first quarter of fiscal 1998
was $70.7 million, which represented a decrease of 2.5%
from the first quarter of fiscal 1997, reflecting our decrease
in sales. Cost of goods sold as a percentage of net sales
increased from 77.9% in fiscal 1997 to 79.3% in fiscal 1998.
This percentage increase in cost of goods sold was primarily
due to increased labor and material costs. The percentage
increase in labor was due to retooling for the introduction of
new products at our Milton, Pennsylvania facility and the
startup of expanded capacity at our Buckeye, Arizona facility
which caused some disruption of productivity as the plant
came on line and new personnel were trained. Material costs
increased as a result of a shift in demand toward our lower
margin "package" products. The increase in material costs
will depend on market conditions by region, and labor costs
should stabilize.
Selling, General, and Administrative Expenses for the
first quarter of fiscal 1998 were $14.7 million, which
represented a decrease of $487,000 (3.2%) from fiscal 1997.
As a percentage of net sales, these expenses increased to
16.5% from 16.3% when compared to the prior year period.
This increase resulted from increased marketing costs
relating to the competitiveness in the market resulting from
softness in the Texas market.
The Company earned an operating income of $3.8
million in the first quarter of fiscal 1998 or 4.2% of net
sales. This compares to an operating income of $5.4 million
or 5.8% of net sales in the prior year period.
Interest and other income contributed $156,000 to
earnings in the first quarter of fiscal 1998, compared to
$131,000 in the first quarter of fiscal 1997. Interest expense
for the first quarter of fiscal 1998 was $10,000, compared to
$27,000 in the first quarter of fiscal 1997.
Net income in the current quarter was $2.3 million
($0.51 per common share), compared to a net income of
$3.2 million ($0.71 per common share) in the first quarter of
fiscal 1997. We expect to earn a return on our investments of
expanded capacity in Buckeye, Arizona and retooling of our
Milton, Pennsylvania facility. With those factors working in
or favor and an improvement in market conditions, we hope
we can exceed on the sales and earnings records we achieved
in fiscal 1997.
LIQUIDITY AND CAPITAL RESOURCES
During of the current quarter, the Company had no
borrowings under its credit facility which remained
unchanged from the balance at June 28, 1997. At the end of
the quarter, total long-term debt was $522,000, an increase
of $159,000 compared to the balance at June 28, 1997.
<PAGE>
The Company's has a bank commitment for an
unsecured credit facility which permits borrowings of up to
an aggregate of the lower of $15.0 million, or a borrowing
base computed by applying certain factors to the value of the
Company's receivables and inventories.
Capital expenditures for the first quarter of fiscal
1998 were $3,073,000, compared to $1,639,000 from the
prior year period. This increase was due to the completion of
our expansion in Buckeye, Arizona.
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. There are significant changes occurring in the market
for manufactured homes, with a few large competitors
announcing their intent to purchase or establish retail sales
centers owned by the manufacturer. We cannot predict the
effect this will have in the long run, but it may have a short-term adverse
effect on the Company's sales. We have
assumed that raw material prices will not increase
significantly, that employee relations continue to be
favorable, that weather conditions will not unusually 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. General economic conditions, rising 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. 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 significant adverse risks beyond our control.
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 11, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-27-1998
<PERIOD-END> SEP-27-1997
<CASH> 1,017
<SECURITIES> 0
<RECEIVABLES> 17,844
<ALLOWANCES> 0
<INVENTORY> 21,881
<CURRENT-ASSETS> 47,727
<PP&E> 46,215
<DEPRECIATION> 0
<TOTAL-ASSETS> 99,526
<CURRENT-LIABILITIES> 47,283
<BONDS> 522
0
0
<COMMON> 8,184
<OTHER-SE> 40,653
<TOTAL-LIABILITY-AND-EQUITY> 99,526
<SALES> 89,137
<TOTAL-REVENUES> 89,137
<CGS> 70,716
<TOTAL-COSTS> 14,662
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (10)
<INCOME-PRETAX> 3,905
<INCOME-TAX> 1,580
<INCOME-CONTINUING> 2,325
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,325
<EPS-PRIMARY> 0.51
<EPS-DILUTED> 0.51
</TABLE>
