<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10/K No. 1
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 28, 1997 Commission file number 0-15506
-------
SCHULT HOMES CORPORATION
------------------------
(Exact name of registration as specified in its charter)
<TABLE>
<S><C>
Indiana 35-1608892
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
P.O. Box 151, Middlebury, IN 46540 (219) 825-5881
------------------------------------ ------------------------------------
(Address of Principal Executive Offices) (Telephone Number)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on
which registered
Common Shares no par value per share AMERICAN
------------------------------------- ------------------------
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
None
-----------------------------------------------------------------------------
(Title of Class)
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 X No
--- ---
As of September 9, 1997, the aggregate market value of the registrant's common
shares held by non-affiliates was $65,781,412 (3,680,079 shares at the closing
price on AMERICAN of $17 7/8). The number of shares of common shares
outstanding at that date was 4,507,435 shares.
<TABLE>
<CAPTION>
Documents Incorporated by Reference: Part Item
---- ----
<S> <C> <C>
1. Schult Homes Corporation 1997 Annual Report to Shareholders II 6,7,8
2. Schult Homes Corporation Proxy Statement with respect to its
October 23, 1997 Annual Meeting III 10,11,12
</TABLE>
<PAGE> 2
CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
ITEM PAGE
<S> <C>
1. Business ............................................................................... 3
2. Properties.............................................................................. 9
3. Legal Proceedings....................................................................... 10
4. Submission of Matters to a Vote of Security Holders..................................... 10
5. Market for Registrant's Common Equity and Related Stockholder Matters................... 11
6. Selected Financial Data................................................................. 12
7. Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................................... 12
8. Financial Statements and Supplementary Data............................................. 12
9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.................................................................... 12
10. Directors and Executive Officers of the Registrant...................................... 12
11. Executive Compensation.................................................................. 12
12. Security Ownership of Certain Beneficial Owners and Management.......................... 12
13. Certain Relationships and Related Transactions.......................................... 13
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K........................ 13
</TABLE>
2
<PAGE> 3
PART I
SCHULT HOMES CORPORATION AND SUBSIDIARIES
ITEM 1. BUSINESS
GENERAL
Schult Homes Corporation, founded in 1934, is the country's oldest and
eighth largest producer of factory built homes. The Company's factory-built
homes include both homes manufactured to meet the national building code
administered by the U.S. Department of Housing and Urban Development
("manufactured homes") and homes produced to meet building codes, similar to
building codes applicable to site-built homes, administered by state and local
authorities ("modular homes"). At June 28, 1997, the Company operated ten
manufacturing facilities located in seven states. These facilities produce
manufactured homes sold in 42 states. The Company's modular homes are
currently produced in all ten of the Company's facilities and are sold in 29
states. The Company's manufactured homes are sold through 784 independent
dealers, 183 of which solely market the Company's modular homes. For the
fiscal year ended June 28, 1997, modular homes accounted for 14.4% of the
Company's net sales.
The Company focuses on the middle to higher price range of the
manufactured housing market and the lower to middle price range of the modular
housing market. Schult's factory-built homes range in size from approximately
547 to 4,400 square feet and sell at retail, excluding land, for prices ranging
from $25,000 to $250,000.
Schult concentrates its marketing efforts on maintaining and developing
consumer loyalty and dealer support by emphasizing design, quality and service.
In recent years, the Company has focused its product development efforts on
multi-section manufactured homes and modular homes which meet regional consumer
preferences and match site-built home specifications and features. The Company
has developed engineering and operating systems which permit it to customize
its products to meet the desires of individual home buyers, but has also
provided standard homes with few options, at lower prices. Schult believes
that its market assistance and after-sale assistance position it to appeal to
the over-45 age segment, a growing population with more discretionary financial
resources than the typical first-time home buyer.
Being in the right markets with the right products has produced strong
sales growth for the Company. To meet customer demand in the Midwest and
Southwest, the Company began expansions during fiscal 1997 at our Buckeye,
Arizona and Etna Green, Indiana facilities. Those additions should come on
line in fiscal 1998 and contribute to further growth.
INDUSTRY
The factory-built housing industry has historically served as a more
affordable alternative to the home buyer. Because of the relatively lower cost
of construction as compared to site-built homes, manufactured homes
traditionally have been one of the means for first-time home buyers to overcome
the obstacles of large down payments and higher monthly mortgage payments. The
Company believes that the cost advantages associated with the construction of
modular homes present a more affordable alternative to buyers seeking the
characteristics of site-built homes, and that modular homes offer better
control of costs for builders and developers with scattered lots or small
subdivisions. Factory-built homes also present an affordable alternative to
site-built homes for retirees and the over-45 age segment desiring a lifestyle
in which home ownership is less burdensome than is the case with site-built
homes. The Company believes that because of changing demographics, this market
segment should expand throughout the rest of the decade.
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<PAGE> 4
The factory-built housing industry is cyclical and affected by the
availability of alternative housing such as apartments, townhouses and
condominiums. In addition, interest rates, availability of financing, regional
population and employment trends and general and regional economic conditions
affect the sale of factory-built homes. Industry shipments during 1996 were up
by 7% following a 12% increase in 1995 and a 20% increase in 1994, although the
Manufactured Housing Institute reported that industry shipments during the
first six months of 1997 were down by 2.9%. There are several factors driving
industry growth. Mortgage interest rates, which have remained moderate over
the past three years, are enabling consumers to buy homes. The relative
scarcity of apartment housing makes manufactured housing an attractive
alternative. Finally, more empty-nesters are choosing manufactured homes
because they offer the quality and features empty-nesters require at prices
that are becoming increasingly favorable as the cost of site-built homes
escalates.
OPERATING STRATEGY
The Company believes its basic operating and competitive strategy is best
described as "product differentiation." Schult offers a broad range of
factory-built homes both in terms of price levels and in design and
specifications.
The Company's design and engineering personnel design homes in
consultation with divisional management, sales representatives and dealers, and
evaluate new materials and construction techniques in a continuing program of
development and enhancement. The Company uses computer-aided design technology
and has developed order-entry and engineering systems which permit customizing
of homes to meet the individual needs of prospective buyers. These systems
allow the Company to make modifications such as increasing the length of a
living room, moving a partition, changing the size and location of a window or
installing custom cabinets without excessive reductions in manufacturing
productivity. The Company believes that its ability to customize, along with
the Company's marketing assistance and after-sale service tailored to the needs
of individual consumers, and its development of standard homes with few
options, position it to appeal to the over-45 age segment, a growing population
with more discretionary financial resources than the typical first-time home
buyer.
In recent years, the Company has developed and marketed products which
compete in quality and appearance with site-built homes and which match
regional customer tastes and preferences. In part, the Company has
substantially increased the proportion of its production devoted to
multi-section manufactured homes. As another part of its long-term strategy,
the Company is implementing a detailed plan to increase the production and sale
of modular homes.
The following table sets forth information concerning the Company's sales
of multi-section homes as a percentage of the total number of factory-built
homes sold by the Company:
<TABLE>
<CAPTION>
- --------------------------------------------------------
FISCAL YEAR ENDED
- --------------------------------------------------------
June 27, June 26, July 2, July 1, June 29, June 28,
1992 1993 1994 1995 1996 1997
- --------------------------------------------------------
<S> <C> <C> <C> <C> <C>
61.4% 59.7% 64.1% 65.3% 62.7% 68.1%
- --------------------------------------------------------
</TABLE>
PRODUCTS
Schult offers both manufactured homes and modular homes in a total of 717
different floor plans. Included in the Company's modular homes are a limited
number of commercial structures, primarily school rooms, produced under modular
building codes. For the fiscal year ended June 28, 1997, the percentages of
the Company's net sales attributable to the sale of manufactured homes and
modular homes were 85.6% and 14.4%, respectively.
4
<PAGE> 5
The Company's factory-built homes typically include two or three bedrooms,
a family room, kitchen, dining room, living room, and two full bathrooms,
together with central heating, cooking range, refrigerator, hot water
heater, carpeting and draperies. Buyers may also choose optional items
including fireplaces; appliances such as dishwashers, washers, dryers, garbage
disposals, microwave ovens and stereo systems; energy conservation options such
as additional insulation and 2" x 6" wall systems; furniture, cabinets,
built-in millwork and specialty bay windows; extra baths and closets; and
upgrades to specified roofing, floor covering, sliding doors, trim moldings,
appliances, light fixtures and draperies.
Manufactured Homes. The Company's manufactured homes are built in
accordance with the national building code administered by the U.S. Department
of Housing and Urban Development. This code is a performance-based code which
allows any material or construction process to be used as long as the
performance criteria of the code are met. This differs from most state and
local building codes which specify types of materials and construction methods
that must be used in home construction.
The Company designs and manufactures a variety of manufactured homes, with
a wide selection of materials, floor plans and decors, primarily for the middle
to higher price segment of the market. Manufactured homes are marketed under
the "Schult" and "Marlette" brands with a variety of model names, including:
Desert Manor, Supreme Value, Supreme Value Elite, Concept 2001, Classic,
Horizon, Grand Villa II, Pacesetter, Chelsea II, Essex II, Premier,
Presidential, Heritage, Dynasty, Residential, Westview, Desert Villa, Imperial,
Smart Buy, Stanton, Value Edition, Pacifica, Lake Crest, New Generation, First
Edition, and others. Many of the Company's multi-section manufactured homes
have exterior design features, including asphalt shingle roofs and wood, vinyl
or aluminum siding which, when complemented by on-site customizing and
landscaping, result in homes similar in appearance to site-built homes.
The Company's single-section manufactured homes range in size from 547
square feet to 1,419 square feet and sell at retail, excluding land, from
$25,000 to $45,000. The Company's multi-section manufactured homes range in
size from 1,056 square feet to 2,331 square feet and sell at retail, excluding
land, from $30,000 to $110,000.
The Company's manufactured homes have some design limitations imposed by
the constraints of efficient production and over-the-road transit. Delivery
expense, borne by the dealer, limits the effective competitive shipping range
of the Company's manufactured homes to approximately 400 to 600 miles.
Production of standard homes, with few options, are expected to increase
efficiency and extend the market area.
Modular Homes. The Company's modular homes are built in accordance with
state or local building codes and therefore are similar in specifications and
design to site-built homes. The Company's "Crest" line of modular homes is
specifically designed to compete in design and appearance with site-built homes
and differs significantly from most manufactured homes. This line of modular
homes includes a variety of single-story ranch homes, one and a half story
homes, two-story homes, townhouses and duplex units, all of which can include
attached garages built at the site by others. A portion of the Company's
modular homes are sold under the "Schult" and "Marlette" brand names. These
modular homes are typically two-section, single-story ranch homes which are
based on manufactured home designs but are built to modular specifications.
The Company focuses on the lower to middle price segment of the modular
housing market. The Company's modular homes range in size from 960 square feet
to 3,355 square feet and sell at retail, excluding land, from $40,000 to
$250,000.
The Company's modular homes have design and transportation limitations
similar to manufactured homes.
5
<PAGE> 6
MANUFACTURING OPERATIONS
The Company operates ten manufacturing facilities ranging in size from
72,500 square feet to 210,115 square feet. These facilities are located in
Middlebury, Indiana (2 facilities); Etna Green, Indiana; Plainville, Kansas;
Navasota, Texas; Buckeye, Arizona; Redwood Falls, Minnesota; Lewistown,
Pennsylvania; Milton, Pennsylvania; and Hermiston, Oregon. Each facility
produces models designed for its regional market area, but no single
manufacturing facility produces all of the 717 models offered by the Company.
The Company's products are manufactured in sections, which are
individually transported to their destination by truck. The finished products
may consist of one or more sections. Multi-section products, including one or
two-story homes, are joined at their destination.
The Company's manufacturing facilities generally operate one shift per day
for a five-day week, and on that basis have the capacity to produce an
aggregate of approximately 382 sections per week. During fiscal 1997, the
average production was 322 sections per week compared to 295 during fiscal 1996
and 269 during fiscal 1995. The following table sets forth the total number of
sections sold by the Company for the periods indicated:
<TABLE>
<CAPTION>
- --------------------------------------------------------
Fiscal Year Ended
- --------------------------------------------------------
June 27, June 26, July 2, July 1, June 29, June 28,
1992 1993 1994 1995 1996 1997
- --------------------------------------------------------
<S> <C> <C> <C> <C> <C>
10,140 11,505 13,071 13,973 15,349 16,748
- --------------------------------------------------------
</TABLE>
The principal materials used in the production of the Company's homes
include steel, vinyl siding, wood, wood products, shingles, gypsum wallboard,
fiberglass, carpet, vinyl floor covering, fasteners and hardware items,
appliances, furniture, electrical items, windows and doors. In general,
materials are ordered so that they are received five days prior to the time
they are incorporated into the homes. Some of the Company's facilities are in
areas where a number of manufactured housing producers and suppliers are
located, and these materials generally are readily available from a number of
sources. No one supplier accounted for more than 5% of the Company's annual
purchases in fiscal 1997.
Since the cost of transporting a manufactured home is significant,
substantially all of the Company's homes are sold to independent dealers within
a 400 to 600 mile radius of the manufacturing facility, although that may be
extended by production of standard homes with few options. The Company
arranges, at the dealer's expense, for the transportation of finished homes to
dealer sales centers using independent trucking companies. Customary sales
terms are cash-on-delivery and guaranteed payment from a floor plan financing
source. Dealers or other independent installers are responsible for placing
the home on site, making utility hookups and providing and installing certain
trim items.
The Company does not maintain any inventory of unsold completed homes.
All production is initiated against specific orders. The Company's backlog of
orders for manufactured homes was $30.4 million at June 28, 1997, compared to
$47.4 million at June 29, 1996. Dealer orders are subject to delays and
cancellation for a variety of reasons, and the Company does not consider the
order backlog to be firm orders.
SALES
As of June 28, 1997, the Company's manufactured homes were being sold
through 784 independent dealers of which 601 are authorized to sell the
Company's "Schult" and "Marlette" brands of HUD code and modular homes. An
additional 183 of the Company's independent manufactured home dealers are
actively marketing the Company's "Crest" line of modular homes.
6
<PAGE> 7
The Company's largest dealer accounted for 5.99% of fiscal 1997 net sales
and the ten largest dealers accounted for 23.4% of such sales. Of the top 100
dealers, 56 have sold the Company's products for over ten years and 81 for over
five years.
The Company believes the close working relationship between its regional
management and the dealers they service has been an important factory in the
Company's success. In light of its commitment to its dealers, the Company,
unlike some of its competitors, does not operate Company-owned retail sales
centers to compete with its independent dealers. In order to enable dealers to
obtain retail market penetration and provide customer service and to promote
dealer loyalty, only one dealer within a given local market area distributes
the Company's homes. However, the Company does not have formal marketing
agreements with its dealers and substantially all of the Company's dealers also
sell homes of other manufacturers.
The Company employs 48 salespersons who, through extensive road travel,
maintain personal contact with the Company's independent dealers. The Company
also markets its homes through product promotions tailored to specific dealer
needs. In addition, the Company advertises in various media, and participates
in regional manufactured housing shows. There are separate sales forces for
manufactured and modular homes.
Independent dealers of manufactured homes sell from display centers,
rental developments, condominium developments and subdivisions. Some
independent manufactured housing dealers sell modular homes, but most modular
homes are sold by builder/dealers specializing in modular homes, who may
concentrate on scattered lot placements or small subdivision developments.
PRODUCT FINANCING
As is customary in the factory-built housing industry, substantially all
of the Company's dealers finance their purchases through floor plan
arrangements. A bank or finance company loans the dealer all of the purchase
price of the home (secured by the factory-built home) and requires the
manufacturer to agree to repurchase the home for the principal amount of the
floor plan loan outstanding, plus certain expenses, should the dealer default.
The contingent liability under these agreements approximates the amount
financed, reduced by the resale value of any homes which may be repurchased,
and the risk of loss is spread over numerous dealers and financial
institutions. Losses under these agreements have not been significant in the
recent past.
The Company's independent dealers make individual arrangements for the
retail financing of the homes they sell without assistance from the Company,
and the Company has no contingent liability for defaults on such consumer
financing.
WARRANTY, QUALITY CONTROL AND SERVICE
The Company believes the maintenance of quality in materials and
workmanship is an important factor in the market acceptance of its homes. The
Company maintains a rigorous quality control inspection program at each
production stage, and in addition, in accordance with government regulations
relating to construction and performance standards, an independent third party
performs compliance inspections. See "Regulation."
The Company provides the initial retail purchaser of its factory-built
homes with a one-year limited warranty covering manufacturing defects in
materials and workmanship. Manufacturers of appliances and other materials
installed in the Company's homes generally provide their own direct warranties
to the purchaser. The Company employs trained servicemen at each of its plants
who provide on-site warranty service to retail customers, as a backup to
warranty service provided by dealers.
7
<PAGE> 8
COMPETITION
The manufactured housing industry is highly competitive at both the
manufacturing and retail levels, with competition based on price (including
freight costs), product features, quality, warranty repair service and the
terms of dealer and retail customer financing. According to industry data, as
of June 28, 1997, there were 98 firms producing manufactured homes from 313
facilities. A number of these companies are larger than the Company and
possess greater financial resources. Some of these companies are strengthened
and partially insulated from competitive conditions in the manufactured housing
industry by virtue of substantial operations in related industries. The
capital requirements of entry into the manufactured housing industry are
relatively small, and both start-ups and failures are common.
The product differentiation strategy used by the Company has also been
successfully employed by some private regional firms. Among the large,
publicly-owned manufacturers of manufactured homes, two other competitive
strategies have enjoyed success. One of these is the "low-cost producer"
approach, based on delivering a good value at the lower end of the price range
through high volume, low margins and limited product offerings. Another
strategy has been vertical integration, in which firms control not only the
production of manufactured homes, but own some or all of their retail
distribution points, do some land development and have captive mortgage banking
and insurance operations.
Competition in the modular housing industry is fragmented with no dominant
manufacturer. While there are a number of small regional modular home
manufacturers, the Company's principal competition for modular housing is the
traditional site-builder. The Company believes it has a price advantage in
competing with builders in small subdivisions and on scattered lots and in
remote areas. Large tract-builders enjoy economies of scale which make their
products comparable in price to modular homes and large tract-builders
therefore have no incentive to buy modular homes.
Manufactured and modular homes compete with each other and also compete
directly with apartments, townhouses, condominiums, existing site-built homes
and existing manufactured homes.
REGULATION
Factory-built homes, like site-built homes, are subject to a number of
federal, state and local laws. The Company believes such regulations benefit
the industry and its customers by ensuring minimum quality standards, thereby
improving consumer trust and acceptance of manufactured and modular homes.
Construction of manufactured homes is governed by the National
Manufactured Housing Construction and Safety Standards Act of 1974. In 1975,
the Department of Housing and Urban Development ("HUD") issued regulations
under this act establishing comprehensive national construction standards
preempting conflicting state and local regulations. The HUD regulations cover
all aspects of manufactured home construction, including structural integrity,
fire safety, wind loads, thermal efficiency and ventilation. As required by
the HUD regulations, all plans and specifications for the Company's
manufactured homes are reviewed by a HUD-approved independent third party, and
each home is required to be inspected by a different HUD-approved third party
prior to its completion. These inspections are in addition to the Company's
own rigorous inspection program. Failure to comply with HUD regulations would
expose the Company to a wide variety of sanctions, ranging from repair or
repurchase of any home deemed defective or hazardous, to intensive inspection
of manufacturing facilities, or to closing the Company's plants. The Company
believes its manufactured homes meet or surpass all present HUD requirements.
Modular homes are subject to state or local building codes, similar to the
codes applicable to site-built homes, rather than the HUD regulations.
Legislation has been proposed, from time to time, which, if enacted, would
significantly affect the regulatory climate for manufactured and modular homes.
One proposal would turn regulation of manufactured homes
8
<PAGE> 9
back to state authority, and another would impose preemptive federal
legislation over modular homes. The outcome or effect of legislative action
cannot be predicted.
Certain components of manufactured and modular homes are subject to
regulation by the Consumer Product Safety Commission ("CPSC"), which is
empowered to ban the use of component materials believed to be hazardous to
health and to require the repair of defective components. The CPSC, the
Environmental Protection Agency and other governmental agencies are evaluating
the effects of formaldehyde. Manufactured, modular and site-built homes are
all built with particleboard, paneling and other products that contain
formaldehyde resins. Since February 1985, HUD has regulated the allowable
concentration of formaldehyde in certain products used in manufactured homes
and required manufacturers to warn purchasers concerning
formaldehyde-associated risks. The Company currently uses materials in its
manufactured homes that meet HUD standards for formaldehyde emissions and
otherwise comply with HUD regulations in this regard. See "Legal Proceedings."
A number of states require manufactured and modular home producers to post
bonds to ensure the satisfaction of consumer warranty claims. A number of
states have adopted procedures governing the installation of manufactured
homes. The location of manufactured homes is sometimes subject to
discriminatory local zoning ordinances. Utility connections are subject to
state and local regulation, and must be complied with by the builder/dealer or
other person installing the home.
The Company does not provide retail financing and is indirectly affected
by regulations on consumer finance. In particular, the Company cooperates with
dealers in assisting retail customers in obtaining Veterans Administration and
Federal Housing Administration guaranteed loans. In connection with such
transactions, the Company must make representations regarding certain aspects
of its wholesale pricing policies. If the Company were to engage in consumer
financing, the Company would be subject to additional regulatory requirements.
The Company is subject to the Magnuson-Moss Warranty Federal Trade
Commission Improvement Act, which regulates the description of warranties. The
description and substance of the Company's warranties are also subject to
various state laws and regulations.
EMPLOYEES
On June 28, 1997, the Company had 2,563 full-time employees, of which 197
were in management, 236 were in administrative and clerical areas, 2,082 were
in production, and 48 were in sales. The Company's personnel requirements are
primarily for semi-skilled production labor; these employees are typically
compensated on an incentive basis, based on the achievement of production
goals. There are no collective bargaining agreements covering any of the
Company's employees. The Company considers its employee relations to be good.
ITEM 2. PROPERTIES
The Company presently owns ten operating manufacturing facilities. In
addition, the Company owns a 112,000 square foot warehouse in Elkhart, Indiana,
and two idle manufacturing facilities. The Company's idle facility in
Ellaville, Georgia is for sale. The Company's idle facility in Elkton,
Maryland is currently used only as a sales and service office, but production
could resume there if economic conditions and markets so warrant.
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The Company's manufacturing facilities are as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
BUILDING Building
LOCATION ACRES SQUARE FEET Location Acres Square Feet
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Middlebury, IN #1 62.5 174,400 Milton, PA 13.0 86,800
- ------------------------------------------------------------------------------
Plainville, KS 29.3 149,700 Lewistown, PA 18.7 144,870
- ------------------------------------------------------------------------------
Navasota, TX 20.0 210,115 Hermiston, OR 40.3 206,464
- ------------------------------------------------------------------------------
Buckeye, AZ 44.0 72,500 Middlebury, IN #2 18.4 93,960
- ------------------------------------------------------------------------------
Redwood Falls, MN 19.2 119,320 Etna Green, IN 13.2 116,182
- ------------------------------------------------------------------------------
</TABLE>
The Company's corporate headquarters are located at the Middlebury,
Indiana #1 facility.
All of the properties described above are well maintained, generally in
good repair, adequately insured and suitable for the purposes for which they
are being used.
ITEM 3. LEGAL PROCEEDINGS
Since 1978, many producers of manufactured homes, including the Company,
have experienced a number of product liability claims based on the presence of
formaldehyde in components purchased from independent suppliers and used in the
manufacture of homes. Although the Company has experienced a decrease in the
number of formaldehyde claims initiated in recent years, such claims are
expected to continue for the foreseeable future. Schult is currently named as
a defendant in five lawsuits involving formaldehyde. While Schult believes it
has meritorious defenses to all of these actions, no prediction can be made as
to the outcome of these cases.
The Company carries product liability insurance but bears a substantial
portion of the cost of liability claims and settlements. The Company currently
has primary insurance coverage of $5.0 million per occurrence and in the
aggregate, after payment of $100,000 of damages or expenses per occurrence.
The Company has umbrella coverage of $20.0 million per occurrence and in the
aggregate, after payment by the Company of $10,000 per occurrence.
In late 1991, the Company was named by the Maryland Department of the
Environment, along with 50 other persons, as a potentially responsible person
for soil and water pollution at a site in which its Elkton, Maryland facility
is located. The affected site is 1,360 acres, and includes a former U.S. Navy
munitions factory. The U.S. Department of the Navy is one of the named
potentially responsible persons. Under the law, the Company and each of the
other persons named is potentially responsible for remediation of the site
without regard to determination of the source of pollution. The investigation
is in a preliminary stage, and the ultimate resolution cannot now be
determined. The Company has no reason to believe, however, that it has been a
major contributor to the pollution of soil or groundwater.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the shareholders of the Company
during the fourth quarter of fiscal 1997.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS
Stock prices reflect the Company's six-for-five stock split on February
28, 1997.
The following table sets forth the high and low closing sale price of the
Common Shares as reported on the American Stock Exchange:
<TABLE>
<CAPTION>
---------------------------
HIGH LOW
- --------------------------------------------------------------------
FISCAL YEAR ENDED JULY 1, 1995
- --------------------------------------------------------------------
<S> <C> <C>
First Quarter $ 12 5/8 $ 10 5/16
- --------------------------------------------------------------------
Second Quarter 11 7/8 8 7/8
- --------------------------------------------------------------------
Third Quarter 10 3/4 8 1/8
- --------------------------------------------------------------------
Fourth Quarter 9 13/16 8 5/16
====================================================================
FISCAL YEAR ENDED JUNE 29, 1996
- --------------------------------------------------------------------
First Quarter $ 12 3/16 $ 9 1/16
- --------------------------------------------------------------------
Second Quarter 14 13/16 11 11/16
- --------------------------------------------------------------------
Third Quarter 15 3/16 12 13/16
- --------------------------------------------------------------------
Fourth Quarter 17 3/16 13 7/16
- --------------------------------------------------------------------
FISCAL YEAR ENDED JUNE 28, 1997
- --------------------------------------------------------------------
First Quarter $ 17 3/8 $ 13 5/16
- --------------------------------------------------------------------
Second Quarter 20 15/16 16 3/4
- --------------------------------------------------------------------
Third Quarter 19 1/2 16 1/8
- --------------------------------------------------------------------
Fourth Quarter 18 1/2 15 1/2
====================================================================
</TABLE>
On June 28, 1997, there were more than 2,000 shareholders of record of the
Company's Common Shares.
On August 22, 1997, the Board of Directors authorized the purchase of up to
100,000 Common Shares on the open market, considering the sahres to be an
appropriate investment.
DIVIDEND POLICY
Historically, it has been the policy of the Company to reinvest earnings
in the Company's business. On June 10, 1992, the Company announced the
inception of a regular quarterly dividend. The first such dividend was paid on
September 14, 1992. The Company intends to continue to pay a regular quarterly
dividend. However, the payment of future cash dividends will depend upon the
Company's financial condition, capital requirements, results of operations and
other factors deemed relevant by the Company.
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<PAGE> 12
ITEM 6. SELECTED FINANCIAL DATA
Schult Homes Corporation incorporates by reference inside front cover of
the Schult Homes Corporation 1997 Annual Report to Shareholders under the
heading, "11 Year Financial Summary."
Schult Homes Corporation incorporates by reference page 24 of the Schult
Homes Corporation 1997 Annual Report to Shareholders under the heading,
"Summary of Quarterly Results."
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
Schult Homes Corporation incorporates by reference pages 14 through 16 of
the Schult Homes Corporation 1997 Annual Report to Shareholders under the
heading, "Management's Discussion and Analysis."
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Schult Homes Corporation incorporates by reference "Consolidated Financial
Statements and Notes" on pages 17 through 23 of the Schult Homes Corporation
1997 Annual Report to Shareholders.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Schult Homes Corporation incorporates by reference the information on
pages 4 and 5 of the Schult Homes Corporation Proxy Statement dated September
26, 1997, filed pursuant to Section 14(a) of the Securities Exchange Act of
1934, as amended, under the heading, "Election of Directors." Also, page 12 of
the above mentioned Proxy Statement under the heading, "Executive Officers."
ITEM 11. EXECUTIVE COMPENSATION
Schult Homes Corporation incorporates by reference the information on
pages 6 through 9, 11 and 12 of the Schult Homes Corporation Proxy Statement
dated September 26, 1997, filed pursuant to Section 14(a) of the Securities
Exchange Act of 1934, as amended, under the headings, "Report of the
Compensation Committee," "Executive Compensation" and "Employee Plans."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Schult Homes Corporation incorporates by reference the information on page
3 of the Schult Homes Corporation Proxy Statement dated September 26, 1997,
filed pursuant to Section 14(a) of the Securities Exchange Act of 1934, as
amended, under the heading, "Principal Shareholders."
12
<PAGE> 13
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
PART IV
ITEM 14. EXHIBITS, FINANCIAL RELATIONSHIPS AND RELATED TRANSACTIONS
(a) The following documents are filed as a part of this report:
1. Schult Homes Corporation incorporates herein by
reference from the fiscal year 1993 Form 10-K the
following exhibits:
Incentive Bonus Plan, Form S-2 dated 6/11/92;
Gain Sharing (401(k)) Plan, Form S-2 dated 6/11/92;
Incentive Stock Option Plan, Form S-2 dated 6/11/92;
Employee Share Purchase Plan, Form S-8 dated 3/8/90.
13. Schult Homes Corporation "Consolidated Financial Statements
and Notes" on pages 17 through 23 of the Schult Homes Corporation
1997 Annual Report to Shareholders.
(b) Through June 28, 1997, no reports on Form 8-K were
filed subsequent to the Registrant's Quarterly Report on Form
10-Q for the quarter ended March 29, 1997. On August 22,
1997, a Form 8-K was filed, disclosing a decision by the
Board of Directors to purchase up to 100,000 Common Shares on
the open market.
(c) Exhibits required by Item 601 of Regulation S-K
which are incorporated by reference from the fiscal year 1993
Form 10-K:
Amended and Restated Articles of Incorporation of the Company;
Bylaws of the Company;
Form of Common Share Certificate;
Revised Credit Facility with NBD Bank and NBD Bank, N.A.
(d) There are no financial statements to be filed under
Regulation S-X which are excluded from the annual report to
shareholders pursuant to Rule 14a-3(b).
13
<PAGE> 14
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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/ Walter E. Wells
-----------------------
Walter E. Wells
President, Chief
Executive Officer
Date: October 2, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ Walter E. Wells
- ---------------------------- President, Chief Executive October 2, 1997
Walter E. Wells Office and Director
/s/ Francis M. Kennard
- ---------------------------- Senior Vice President of October 2, 1997
Francis M. Kennard Product Group and Director
/s/ John P. Guequierre
- ---------------------------- President of Manufactured October 2, 1997
John P. Guequierre Housing Group and Director
/s/ Ervin L. Bontrager
- ---------------------------- Executive Vice President of October 2, 1997
Ervin L. Bontrager Manufactured Housing and Director
/s/ Frederick A. Greenawalt
- ---------------------------- Vice President of Finance and October 2, 1997
Frederick A. Greenawalt Chief Accounting Officer
/s/ Todd Goodwin
- ---------------------------- Director October 2, 1997
Todd Goodwin
/s/ Robert J. Deputy
- ---------------------------- Director October 2, 1997
Robert J. Deputy
/s/ Donald R. Pletcher
- ---------------------------- Director October 2, 1997
Donald R. Pletcher
</TABLE>
14
<PAGE> 15
SCHULT HOMES CORPORATION AND SUBSIDIARIES
FORM 10-K
FINANCIAL STATEMENTS SUBMITTED IN RESPONSE TO ITEM 14(a)
Year ended June 28, 1997
The consolidated financial
statements, together with the related notes and the report thereon of KPMG Peat
Marwick LLP, dated August 8, 1997, appearing on pages 17 to 23 of the
accompanying 1997 Annual Report to shareholders, are hereby incorporated by
reference and made a part hereof. With the exception of the aforementioned
items incorporated by reference and specific references made herein, the 1997
Annual Report to Shareholders is not deemed to be filed as a part of this
filing.
INDEPENDENT AUDITORS' CONSENT
The Board of Directors and Shareholders of
Schult Homes Corporation:
We consent to incorporation by
reference in Registration Statement No. 33-42434 on Form S-8 of Schult Homes
Corporation, of our report dated August 8, 1997, relating to the consolidated
balance sheets of Schult Homes Corporation and subsidiaries as of the end of
fiscal years 1997 and 1996, and the related consolidated statements of
operations, cash flows and shareholders' equity for each of the fiscal years
1997, 1996, and 1995 as contained in the Annual Report to Shareholders for the
fiscal year 1997. These consolidated financial statements and our report
thereon are incorporated by reference in the annual report on Form 10-K for the
fiscal year 1997.
KPMG Peat Marwick LLP
Chicago, Illinois
September 26, 1997
15
<PAGE> 1
Fiscal 1997 Highlights
- - NET SALES INCREASED 10.0% OVER LAST YEAR TO $347.8 MILLION, A NEW COMPANY
RECORD.
- - NET INCOME FOR THE YEAR ROSE 35.7% OVER LAST YEAR TO $9.2 MILLION, ALSO A NEW
RECORD.
- - OPERATING MARGIN AND NET MARGIN INCREASED SIGNIFICANTLY.
- - OPERATING INITIATIVES IMPROVED OPERATING EFFICIENCIES THROUGHOUT THE COMPANY.
- - NEW PRODUCTS FOR THE MODERATE AND ENTRY LEVEL MARKETS WERE SUCCESSFULLY
INTRODUCED.
11 Year Financial Summary
(Dollars in 000's except per share data)
<TABLE>
<CAPTION>
Five-Year Ten-Year
Compound Compound Fiscal Years
Growth Rate Growth Rate 1997 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA
Net sales 15.1% 11.7% $ 347,769 $ 316,267 $ 287,937 $ 259,616 $ 207,822 $172,037
Gross profit 15.8% 14.2% $ 72,246 $ 64,771 $ 53,947 $ 50,284 $ 39,351 $ 34,737
Operating income 14.0% 24.8% $ 15,121 $ 11,439 $ 7,706 $ 10,251 $ 7,497 $ 7,851
Pre-tax income 16.1% 33.7% $ 15,800 $ 11,759 $ 7,581 $ 10,373 $ 7,576 $ 7,508
Net income 15.5% 27.1% $ 9,191 $ 6,772 $ 4,375 $ 6,046 $ 4,317 $ 4,464
Number of employees 11.5% 8.8% 2,563 2,576 2,317 2,149 1,825 1,487
Floor sections 10.6% 7.7% 16,748 15,349 13,973 13,071 11,505 10,140
Effective tax rate 0.6% 28.9% 41.8% 42.4% 42.3% 41.7% 43.0% 40.5%
BALANCE SHEET DATA
Total assets 16.9% 12.3% $ 100,156 $ 89,733 $ 75,333 $ 67,378 $ 56,499 $ 45,849
Property, plant and equipment 17.2% 10.9% $ 44,252 $ 36,192 $ 34,235 $ 32,204 $ 25,039 $ 20,052
Long-term debt -32.4% -24.0% $ 555 $ 684 $ 3,695 $ 2,390 $ 3,385 $ 3,927
Shareholders' equity 24.0% 25.7% $ 46,790 $ 38,109 $ 31,961 $ 28,358 $ 22,708 $ 15,961
PER SHARE DATA*
Net earnings per common share 13.7% 23.3% $ 2.03 $ 1.51 $ 0.97 $ 1.34 $ 0.97 $ 1.07
Dividends paid - - $ 0.18 $ 0.15 $ 0.13 $ 0.12 $ 0.10 -
Book value 21.9% 24.3% $ 10.38 $ 8.48 $ 7.11 $ 6.27 $ 5.03 $ 3.85
Average shares (000's) 2.1% 3.2% 4,518 4,492 4,524 4,522 4,454 4,079
PERFORMANCE RATIOS
Gross margin 20.8% 20.5% 18.7% 19.4% 18.9% 20.2%
Operating margin 4.3% 3.6% 2.7% 3.9% 3.6% 4.6%
Net margin 2.6% 2.1% 1.5% 2.3% 2.1% 2.6%
Return on beginning shareholders' equity 24.1% 21.2% 15.4% 26.6% 27.0% 40.4%
* Restated to reflect 6-for-5 stock split on February 28, 1997.
</TABLE>
<TABLE>
<CAPTION>
1991 1990 1989 1988 1987
<S> <C> <C> <C> <C> <C>
OPERATING DATA
Net sales $ 162,011 $ 157,198 $ 125,400 $110,677 $ 115,481
Gross profit $ 31,636 $ 30,059 $ 22,233 17,651 $ 19,219
Operating income $ 6,451 $ 5,519 $ 3,213 (221) $ 1,651
Pre-tax income $ 5,822 $ 4,532 $ 2,283 (964) $ 863
Net income $ 3,514 $ 2,756 $ 1,545 (1,048) $ 834
Number of employees 1,446 1,420 1,280 865 1,104
Floor sections 9,830 9,813 8,015 7,165 7,991
Effective tax rate 39.7% 39.2% 32.3% (8.7)% 3.3%
BALANCE SHEET DATA
Total assets $ 43,656 $ 43,022 $ 42,546 $ 30,822 $ 31,346
Property, plant and equipment $ 21,118 $ 20,178 $ 20,468 $ 13,395 $ 15,724
Long-term debt $ 4,575 $ 6,320 $ 13,474 $ 8,503 $ 8,657
Shareholders' equity $ 11,041 $ 7,858 $ 5,080 $ 3,623 $ 4,736
PER SHARE DATA*
Net earnings per common share $ 0.79 $ 0.69 $ 0.39 $ (0.26) $ 0.25
Dividends paid - - - - -
Book value $ 2.77 $ 1.98 $ 1.28 $ .92 $ 1.18
Average shares (000's) 3,977 3,972 3,961 3,984 3,310
PERFORMANCE RATIOS
Gross margin 19.5% 19.1% 17.7% 15.9% 16.6%
Operating margin 4.0% 3.5% 2.6% (0.2)% 1.4%
Net margin 2.2% 1.8% 1.2% (0.9)% 0.7%
Return on beginning shareholders' equity 44.7% 54.2% 42.6% (22.1)% 206.5%
* Restated to reflect 6-for-5 stock split on February 28, 1997.
</TABLE>
<PAGE> 2
EXHIBIT 13
Management's Discussion & Analysis
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
General
On January 24, 1997, the Company's Board of Directors authorized a
six-for-five stock split payable February 28, 1997 to shareholders of record as
of February 14, 1997. Accordingly, historical per share and stock option data
have been restated to give effect to the stock split.
Results of Operations and
Three-Year Review
Net sales for fiscal 1997 were the highest in the Company's history. Net
sales for fiscal 1997 were $347.8 million, which represented an increase of
$31.5 million (10.0%) over fiscal 1996. This increase was due to two factors:
1) an increase in total sections sold during fiscal 1997 to 16,748 sections, a
1,399 sections increase (9.1%), which contributed $28.8 million and; 2) a 0.8%
increase in the average selling price per section, which added $2.7 million to
net sales. Fiscal 1996 sales were $316.3 million, which represented an increase
of $28.3 million (9.8%) over fiscal 1995. This increase was due to an increase
in total sections sold during fiscal 1996 to 15,349 sections, a 1,376 section
(9.8%) increase. Modular home sales accounted for $50.2 million (14.4%) of
fiscal 1997 net sales; this compares to $36.9 million (11.7%) of fiscal 1996
net sales and $34.1 million (11.8%) of fiscal 1995 sales.
Sales of multi-section homes increased, with these units representing
68.1% of the homes sold during fiscal 1997 as compared to 62.7% of the homes
sold during fiscal 1996. This increase in multi-section homes primarily came
from increased modular units and lower priced "package" homes. Multi-section
homes represented 65.3% of the homes sold during fiscal 1995. The decrease in
sales of multi-section homes in 1996 compared to 1995 was due to the entry of a
single-section product in the Texas market, which was particularly well
received. 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.
The cost of goods sold was $275.5 million in fiscal 1997, a 9.6% increase
over fiscal 1996. The cost of goods sold was $251.5 million in fiscal 1996, a
7.5% increase over fiscal 1995. Gross profit as a percentage of net sales
increased to 20.8% in fiscal 1997, compared to 20.5% in fiscal 1996 and 18.7%
in fiscal 1995. The increase in the gross profit as a percentage of sales in
fiscal year 1997 and 1996 was directly due to decreased material costs as a
result of a new centralized purchasing system. This system enabled us to take
advantage of quantity discounts on lumber and to take advantage of regional
price differences to a greater extent than ever before.
Selling, general and administrative expenses for fiscal 1997 were $57.2
million, as compared to $53.3 million in fiscal 1996, a 7.1% increase. Selling,
general and administrative expenses represented 16.5% of net sales in fiscal
1997, compared to 16.9% in fiscal 1996 and 16.0% in fiscal 1995. Warranty costs
decreased as response times have stabilized in fiscal 1997 as compared to
fiscal 1996. Due to operating losses of Saturn Housing, LLC the Company
established a $2,500,000 allowance for potential loss on the loans to Saturn
Housing during fiscal 1997. Fiscal 1996 and fiscal 1995 increases in selling,
general and administrative expenses were directly related to increased warranty
costs. The Company made a decision in fiscal 1995 to decrease warranty response
times.
Operating income increased $3.7 million to $15.1 million in fiscal 1997,
compared
<PAGE> 3
Consolidated Financial Summary
<TABLE>
<CAPTION>
Fiscal 1997 vs. Fiscal 1996 Fiscal 1996 vs. Fiscal 1995
$Amount %Sales $Change %Change $Amount %Sales $Change %Change
(Dollars in millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $347.8 100.0% $31.5 10.0% $ 316.3 100.0% $ 28.3 9.8%
Cost of sales 275.5 79.2 24.0 9.6 251.5 79.5 17.5 7.5
Gross profit 72.2 20.8 7.5 11.5 64.8 20.5 10.8 20.1
SG&A 57.2 16.5 3.9 7.5 53.3 16.9 7.1 15.3
Operating income 15.1 4.3 3.7 32.2 11.4 3.6 3.7 48.4
Pre-tax income 15.8 4.5 4.0 34.4 11.8 3.7 4.2 55.1
Income taxes 6.6 1.9 1.6 32.5 5.0 1.6 1.8 55.6
Net income 9.2 2.6 2.4 35.7 6.8 2.1 2.4 54.8
</TABLE>
to $11.4 million in fiscal 1996 and $7.7 million in fiscal 1995. Operating
income as a percentage of net sales was 4.3% for fiscal 1997 compared to 3.6%
in fiscal 1996 and 2.7% in fiscal 1995.
Pre-tax income for fiscal 1997 was $15.8 million compared to $11.8 million
in fiscal 1996 and $7.6 million in fiscal 1995. Net income for fiscal 1997 was
$9.2 million or $2.03 per common share, compared to $6.8 million or $1.51 per
common share for fiscal 1996, and $4.4 million or $0.97 per common share for
fiscal 1995.
Balance Sheet Review
As of the end of fiscal 1997, current assets increased to $50.6 million
from $49.1 million a year earlier, a 3.0% increase. This $1.5 million increase
in current assets was primarily due to increases in inventories, related to our
sales growth. Current liabilities were up $1.7 million (3.6%) to $49.9 million
from $48.2 million a year earlier, primarily due to a $3.5 million increase in
accrued liabilities which is related to our sales growth.
Long-term debt at the end of fiscal 1997 was $0.6 million, down $129,000
from the prior year, as a result of debt repayments.
Fiscal 1997 capital expenditures, net of retirements, totaled $12.0
million compared to $5.4 million in fiscal 1996 and $5.1 million in fiscal
1995. The Company spent $5.2 million in fiscal 1997 on a second manufacturing
line in Buckeye, AZ. Production on this line will begin in the first quarter of
fiscal 1998. Fiscal 1996 and fiscal 1995 capital expenditures mainly related to
our continued equipment replacement and improvement program.
Shareholders' equity totaled $46.8 million, or $10.38 per common share, at
the end of fiscal 1997 compared to $38.1 million, or $8.48 per common share, at
the end of fiscal 1996.
Outlook and Risk Factors
The outlook for Schult Homes remains strong. Industry shipments during
1996 were up by 7.0% following a 12% increase in 1995 and a 20% increase in
1994, according to statistics published by the Manufactured Housing Institute.
The Manufactured Housing Institute also reported that industry shipments during
the first six months of 1997 were down by 2.9%. Management is unsure whether
this trend of decreased industry shipments will continue.
To meet customer demand, we began an expansion program in 1997. An
additional manufacturing line and is near completion in Buckeye, AZ and when
mature will add approximately $32 million of production capability. Also,
construction has begun in Etna Green, IN to add an additional manufacturing
line, and when mature this line will also add $32 million to our production
capacity. Before the above mentioned expansions, annual sales capacity stood at
approximately $412 million, which is 18% greater than the $347.8 million
<PAGE> 4
sales level achieved in fiscal 1997.
Management's outlook assumes only modest changes in interest rates and
growth of the U.S. economy. Although dealers' orders can be canceled before
production begins without penalty, and unfilled orders are not necessarily an
indication of future business, the Company's backlog of orders for manufactured
homes was approximately $39.1 million as of August 23, 1997, compared to
approximately $49.5 million, a 21.0% decrease from one year earlier. This
backlog represents approximately 5 weeks of production time.
For the long-term, industry growth will be affected by, among other
factors, the availability and cost of financing, the relative cost of
manufactured housing versus other forms of housing, including rental housing,
general economic trends and changes in demographics including new household
formations and the number of Americans on fixed incomes. While the Company
believes that long-term demand for affordable manufactured housing will
continue to grow due to favorable demographic trends and financing factors,
changes in regional markets and weather conditions and the U.S. economy as a
whole will continue to affect overall housing industry cycles.
Forward looking statements are made, based upon factors known to us now.
We do not intend to update statements made in this report.
Liquidity and Capital Resources
As of the end of fiscal 1997, the Company had working capital of $0.7
million as compared to $0.9 million at the end of fiscal 1996 and $1.8 million
at the end of fiscal 1995. The Company has a bank commitment for an unsecured
credit facility which provides for both revolving and term loans at the
Company's option. The facility 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. As of the
end of fiscal 1997, the Company had no borrowings under the bank commitment.
Management believes that cash flow from operations, combined with funds
under its unsecured credit facility, will be adequate to support its general
operations, capital expenditure needs, required debt amortization, and the
payment of a regular quarterly dividend.
Management expects to continue to make regular quarterly dividend
payments. However, the payment of future cash dividends will depend upon the
Company's financial condition, capital requirements, results of operations and
other factors deemed relevant by the Company.
The Company's preliminary fiscal 1998 capital expenditures are estimated
at $15.8 million, comprised of $6.5 million for the completion of the expansion
project at Buckeye, Arizona and the expansion at Etna Green, Indiana, $7.5
million in normal equipment replacements and improvements, and $1.8 million for
a vehicle replacement program. In fiscal 1998, depreciation is expected to be
approximately $4.7 million. We expect to fund our capital expenditures through
normal operating profit.
<PAGE> 5
Consolidated Balance Sheets
SCHULT HOMES CORPORATION AND SUBSIDIARIES
(At end of fiscal years June 1997 and 1996)
<TABLE>
<CAPTION>
ASSETS 1997 1996
------------ -----------
<S> <C> <C>
Cash $4,735,000 $9,033,000
Accounts receivable, net 18,304,000 18,338,000
Inventories 20,558,000 16,315,000
Deferred income taxes 6,985,000 5,424,000
------------ -----------
Total current assets 50,582,000 49,110,000
Property, plant and equipment 44,252,000 36,192,000
Loans receivable from Saturn Housing, LLC 2,691,000 2,634,000
Other assets 2,631,000 1,797,000
------------ -----------
Total assets $100,156,000 $89,733,000
============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Trade accounts payable $17,427,000 $18,628,000
Accrued liabilities 32,369,000 28,851,000
Current portion of long-term debt 131,000 710,000
------------ -----------
Total current liabilities 49,927,000 48,189,000
Deferred income taxes 2,884,000 2,751,000
Long-term debt 555,000 684,000
------------ -----------
Total liabilities 53,366,000 51,624,000
Shareholders' equity:
Common shares, no par value 10,000,000 shares
authorized, 4,505,741 and 4,492,422 shares issued
and outstanding, respectively 8,238,000 7,921,000
Retained earnings 38,552,000 30,188,000
------------ -----------
Total shareholders' equity 46,790,000 38,109,000
Contingencies
Total liabilities and shareholders' equity $100,156,000 $89,733,000
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 6
Consolidated Statements of Operations
SHULT HOMES COPRORATION AND SUBSIDIARIES
(Fiscal years ended June 1997, 1996 and 1995)
<TABLE>
<CAPTION>
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Net sales $347,769,000 $316,267,000 $287,937,000
Cost of goods sold 275,523,000 251,496,000 233,990,000
------------ ------------ ------------
Gross profit 72,246,000 64,771,000 53,947,000
Selling, general and administrative expenses 57,125,000 53,332,000 46,241,000
------------ ------------ ------------
Operating income 15,121,000 11,439,000 7,706,000
Interest income 730,000 428,000 12,000
Other income 55,000 45,000 58,000
Interest expense (106,000) (153,000) (195,000)
------------ ------------ ------------
Income before income taxes 15,800,000 11,759,000 7,581,000
Income taxes:
Federal 4,976,000 3,915,000 2,358,000
State 1,633,000 1,072,000 848,000
------------ ------------ ------------
6,609,000 4,987,000 3,206,000
------------ ------------ ------------
Net income $ 9,191,000 $ 6,772,000 $ 4,375,000
============ =========== ============
Net earnings per common share $ 2.03 $ 1.51 $ 0.97
============ =========== ============
Average shares outstanding 4,517,575 4,491,566 4,524,095
============ =========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 7
Consolidated Statements of Cash Flows
SCHULT HOMES CORPORATION AND SUBSIDIARIES
(Fiscal years ended June 1997, 1996 and 1995)
<TABLE>
<CAPTION>
1997 1996 1995
------------ ------------ ------------
<C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 9,191,000 $ 6,772,000 $ 4,375,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation of plant and equipment 3,958,000 3,427,000 3,037,000
Change in deferred income taxes (1,428,000) (1,095,000) (791,000)
Changes in assets and liabilities:
(Increase) decrease in accounts receivable 34,000 (4,184,000) (437,000)
(Increase) in inventories (4,243,000) (1,220,000) (1,398,000)
Increase in allowance for loans
receivable from Saturn Housing, LLC 2,500,000 - -
(Increase) decrease in other assets (834,000) 269,000 367,000
Increase (decrease) in trade accounts payable (1,201,000) 3,964,000 1,051,000
Increase in accrued liabilities 3,518,000 7,874,000 1,720,000
------------ ------------- ------------
Total adjustments 2,304,000 9,035,000 3,549,000
------------ ------------ ------------
Net cash provided by operating activities 11,495,000 15,807,000 7,924,000
Cash flows from investing activities:
Capital expenditures, net of retirements (12,018,000) (5,384,000) (5,068,000)
Loans to Saturn Housing, LLC (2,557,000) (2,020,000) (614,000)
------------ ------------ ------------
Net cash used in investing activities (14,575,000) (7,404,000) (5,682,000)
Cash flows from financing activities:
Net borrowings (repayments) under line-of-credit - (2,300,000) 2,300,000
Repayment of long-term debt (708,000) (1,001,000) (989,000)
Dividends declared to common shareholders (827,000) (672,000) (603,000)
Payment for repurchased shares - (165,000) (485,000)
Proceeds from issuance of common shares 317,000 202,000 327,000
------------- ------------- ------------
Net cash provided by (used in) financing activities (1,218,000) (3,936,000) 550,000
Net increase (decrease) in cash (4,298,000) 4,467,000 2,792,000
Cash at beginning of year 9,033,000 4,566,000 1,774,000
------------- ------------- ------------
Cash at end of year $ 4,735,000 $ 9,033,000 $ 4,566,000
============= ============= ============
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest (net of amount capitalized) $ 67,000 $ 212,000 $ 138,000
Income taxes (net of refunds) 8,222,000 4,623,000 4,468,000
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 8
Consolidated Statements Of Shareholders' Equity
SCHULT HOMES CORPORATION AND SUBSIDIARIES
(Fiscal years ended June 1997, 1996 and 1995)
<TABLE>
<CAPTION>
Number of Retained
Shares Amount Earnings Total
----------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, end of fiscal year 1994 4,521,139 $ 8,042,000 $ 20,316,000 $28,358,000
Net proceeds from issuance of common shares 28,099 327,000 -- 327,000
Payment for repurchased shares (54,000) (485,000) -- (485,000)
Cash dividends declared ($.13 per share) -- -- (603,000) (603,000)
Net income -- -- 4,375,000 4,375,000
----------------------------------------------------------
Balance, end of fiscal year 1995 4,495,238 7,884,000 $ 24,088,000 $31,972,000
Net proceeds from issuance of common shares 15,184 202,000 -- 202,000
Payment for repurchased shares (18,000) (165,000) -- (165,000)
Cash dividends declared ($.15 per share) -- -- (672,000) (672,000)
Net income -- -- 6,772,000 6,772,000
----------------------------------------------------------
Balance, end of fiscal year 1996 4,492,422 $ 7,921,000 $ 30,188,000 $38,109,000
Net proceeds from issuance of common shares 13,319 317,000 -- 317,000
Cash dividends declared ($.18 per share) -- -- (827,000) (827,000)
Net income -- -- 9,191,000 9,191,000
----------------------------------------------------------
Balance, end of fiscal year 1997 4,505,741 $ 8,238,000 $ 38,552,000 $46,790,000
==========================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 9
Notes to Consolidated Financial Statements
SCHULT HOMES CORPORATION AND SUBSIDIARIES
(1) Summary of Significant Accounting Policies
(a) Description of Business
Schult Homes Corporation (the Company) is engaged in the production and
sale of manufactured and modular homes. The Company operates manufacturing
facilities in Indiana, Pennsylvania, Minnesota, Texas, Oregon, Kansas and
Arizona. Most of the Company's customers/dealers are located close to its
production facilities. No single customer/dealer accounted for more than 6% of
the Company's sales in fiscal years 1997, 1996 and 1995 and no account
receivable from any customer/dealer exceeded 6% of total common shareholders'
equity at the end of fiscal year 1997. The unplanned loss of any of these
customers/dealers would not have any materially adverse effect on the Company.
Supplies are purchased from a variety of domestic and foreign sources. The
unplanned loss of any of these sources of supply would not have any materially
adverse effect on the Company.
(b) Use of Estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities to prepare these financial
statements in accordance with generally accepted accounting principles. Actual
results could differ from those estimates.
(c) Fiscal Year
The Company's fiscal year ends on the Saturday nearest June 30, or June
28, 1997, June 29, 1996 and July 1, 1995.
(d) Principles of Consolidation
The consolidated financial statements include the financial statements of
Schult Homes Corporation and its wholly-owned subsidiaries. All significant
intercompany balances and transactions have been eliminated in consolidation.
(e) Inventories
All components of inventory are valued at cost which is not in excess of
net realizable value. The cost of inventory is calculated using the first-in,
first-out (FIFO) method.
(f) Property, Plant and Equipment
Property, plant and equipment is stated at cost. Depreciation of plant and
equipment is provided over the estimated useful lives of the respective assets
on the straight-line basis for financial reporting purposes.
(g) Loans Receivable from Saturn Housing, LLC
Loans receivable from Saturn Housing, LLC bear interest at prime lending
rate plus 1 1/2 percent per annum. A group of manufactured home dealers
established Saturn Housing in Texas for the purpose of producing moderately
priced homes. Saturn Housing, LLC has incurred operating losses and, in fiscal
1997, the Company determined that it is appropriate to established an allowance
for potential loss on the loan. At the end of fiscal 1997, this allowance was
$2,500,000.
(h) 401(k) Retirement Plan
The Company has a defined contribution 401(k) retirement plan for all
eligible employees. Company contributions are based on employee earnings and
are funded as accrued. Amounts contributed to the plan and charged to expense
were $1,307,000, $1,017,000 and $1,181,000 in fiscal 1997, 1996 and 1995,
respectively. Eligible employees can also make tax-deferred contributions to
the plan.
(i) Warranty Obligations
Estimated warranty costs are accrued at the time of sale.
(j) Revenue Recognition
Revenue is recognized when title is transferred upon shipment. Accounts
receivable are presented net of an allowance for doubtful accounts of $112,000
and $65,000 at the end of fiscal 1997 and 1996, respectively.
(k) 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 year. Net earnings per common share have been restated
to reflect the Company's six-for-five stock split on February 28, 1997.
(l) Income Taxes
Deferred tax assets and liabilities are recognized for the estimated
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates in effect for the year in which those temporary differences
are expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date.
(m) Interest Costs
The Company capitalizes interest incurred during periods of construction
as a component of the cost of the constructed asset. Interest costs capitalized
during fiscal year 1995 amount to $130,000. There was no interest capitalized
during fiscal years 1997 and 1996.
(n) Fair Value of Financial Instruments
The Company's financial instruments are cash, accounts receivable, loans
to Saturn Housing LLC, trade accounts payable, accrued liabilities, and the
current and noncurrent portions of long-term debt. The carrying values of these
financial instruments do not differ materially from their fair values, because
of the short-term nature of the financial instruments and the relative
insignificance of the noncurrent portion of long-term debt. It was not
practical to estimate the fair value of the loans to Saturn Housing, LLC. The
carrying value of these loans, net of the allowance for potential loss,
approximated the value of the underlying loan collateral.
<PAGE> 10
Notes (Continued)
(2) Inventories
The components of inventories at the end of fiscal years 1997 and 1996 are as
follows:
<TABLE>
<CAPTION>
1997 1996
- ---------------------------------------------------------
<S> <C> <C>
Raw materials $16,195,000 $12,524,000
- ---------------------------------------------------------
Work in process 2,308,000 2,247,000
- ---------------------------------------------------------
Finished goods 2,055,000 1,544,000
----------- -----------
- ---------------------------------------------------------
Total $20,558,000 $16,315,000
=========== ===========
- ---------------------------------------------------------
</TABLE>
(3) Property, Plant and Equipment
Property, plant and equipment at the end of fiscal years 1997 and 1996 are
summarized as follows:
<TABLE>
<CAPTION>
1997 1996
- ---------------------------------------------------------
<S> <C> <C>
Land $ 2,617,000 $ 1,960,000
- ---------------------------------------------------------
Land improvements 4,493,000 3,960,000
- ---------------------------------------------------------
Buildings 31,388,000 29,885,000
- ---------------------------------------------------------
Machinery and equipment 20,152,000 17,392,000
- ---------------------------------------------------------
Trucks and automobiles 4,748,000 3,576,000
- ---------------------------------------------------------
Construction in process 5,379,000 -
----------- -----------
- ---------------------------------------------------------
68,777,000 56,773,000
- ---------------------------------------------------------
Less accumulated depreciation 24,525,000 20,581,000
----------- -----------
- ---------------------------------------------------------
$44,252,000 $36,192,000
=========== ===========
- ---------------------------------------------------------
</TABLE>
(4) Accrued Liabilities
Accrued liabilities at the end of fiscal years 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
- ---------------------------------------------------------
<S> <C> <C>
Dealer incentives $ 8,009,000 $ 7,131,000
- ---------------------------------------------------------
Warranty costs 5,700,000 5,060,000
- ---------------------------------------------------------
Payroll 7,732,000 6,919,000
- ---------------------------------------------------------
Workers' compensation 2,931,000 2,440,000
- ---------------------------------------------------------
Income taxes 2,208,000 2,393,000
- ---------------------------------------------------------
Other 5,789,000 4,908,000
----------- -----------
- ---------------------------------------------------------
$32,369,000 $28,851,000
=========== ===========
- ---------------------------------------------------------
</TABLE>
(5) Long-term Debt
Long-term debt at the end of fiscal years 1997 and 1996 is summarized as
follows:
<TABLE>
<CAPTION>
1997 1996
- ---------------------------------------------------------
<S> <C> <C>
Other debt $ 686,000 $ 1,394,000
----------- -----------
- ---------------------------------------------------------
686,000 1,394,000
- ---------------------------------------------------------
Less current portion of
long-term debt 131,000 710,000
----------- -----------
- ---------------------------------------------------------
$ 555,000 $ 684,000
=========== ===========
- ---------------------------------------------------------
</TABLE>
Aggregate principal payments on long-term debt are due as follows:
<TABLE>
<CAPTION>
Fiscal Year Amount
<S> <C>
1999 119,000
- ---------------------------------------------------------
2000 114,000
- ---------------------------------------------------------
2001 116,000
- ---------------------------------------------------------
2002 118,000
- ---------------------------------------------------------
Thereafter 88,000
--------
- ---------------------------------------------------------
$555,000
========
- ---------------------------------------------------------
</TABLE>
The Company has a bank commitment for an unsecured credit facility
expiring January 1, 2000 which provides for both revolving and term loans at
the Company's option. The facility permits aggregate borrowings of up to the
lower of $15,000,000 or a borrowing base computed by applying certain factors
to the value of the Company's receivables and inventories. Revolving loans bear
interest at the bank's prime lending rate or, at the Company's option, certain
alternative rates. Interest on term loans is fixed at the time of borrowing at
the bank's posted rates then in effect. The Company pays a fee of 3/8 of one
percent per annum on the unused portion of the commitment. The commitment also
provides for the issuance of up to $4,000,000 in standby letters of credit.
(6) Income Taxes
Income tax expense (deferred benefit) is summarized as follows for fiscal years
1997, 1996 and 1995:
<TABLE>
<CAPTION>
1997 1996 1995
- ---------------------------------------------------------
<S> <C> <C> <C>
Federal:
- ---------------------------------------------------------
Current $6,060,000 $ 4,778,000 $2,911,000
- ---------------------------------------------------------
Deferred (1,084,000) (863,000) (553,000)
---------- ----------- ----------
- ---------------------------------------------------------
Total Federal
- ---------------------------------------------------------
income taxes 4,976,000 3,915,000 2,358,000
- ---------------------------------------------------------
State:
- ---------------------------------------------------------
Current 1,977,000 1,304,000 1,085,000
- ---------------------------------------------------------
Deferred (344,000) (232,000) (237,000)
---------- ----------- ----------
- ---------------------------------------------------------
Total state
- ---------------------------------------------------------
income taxes 1,633,000 1,072,000 848,000
---------- ----------- ----------
- ---------------------------------------------------------
Total income taxes $6,609,000 $4,987,000 $3,206,000
========== =========== ==========
- ---------------------------------------------------------
</TABLE>
The significant components of deferred income tax expense (benefit) are
summarized as follows for fiscal years 1997, 1996 and 1995:
<TABLE>
<CAPTION>
1997 1996 1995
- ---------------------------------------------------------
<S> <C> <C> <C>
Depreciation $ 78,000 $ 43,000 $ 194,000
- ---------------------------------------------------------
Accrued expenses (590,000) (1,391,000) (1,094,000)
- ---------------------------------------------------------
Inventories (66,000) (25,000) (12,000)
- ---------------------------------------------------------
Valuation allowance on
- ---------------------------------------------------------
loans receivable (1,125,000) - -
- ---------------------------------------------------------
Other, net 275,000 278,000 122,000
----------- ----------- ---------
- ---------------------------------------------------------
$(1,428,000) $(1,095,000) $(790,000)
=========== =========== =========
- ---------------------------------------------------------
</TABLE>
The differences between the U.S. Federal statutory tax rate of 34% and the
effective tax rates of 41.8%, 42.4%, and 42.3% for fiscal years 1997, 1996 and
1995 result from the following:
<TABLE>
<CAPTION>
1997 1996 1995
- ---------------------------------------------------------
<S> <C> <C> <C>
U.S. Federal
- ---------------------------------------------------------
statutory tax rate. 35.0% 34.0% 34.0%
- ---------------------------------------------------------
Increase in taxes resulting from:
- ---------------------------------------------------------
State income taxes, net of
- ---------------------------------------------------------
Federal benefit 6.5 6.5 7.1
- ---------------------------------------------------------
Other, net 0.3 1.9 1.2
---- ---- ----
- ---------------------------------------------------------
41.8% 42.4% 42.3%
==== ==== ====
- ---------------------------------------------------------
</TABLE>
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at the end of fiscal
years 1997 and 1996 are presented below:
<PAGE> 11
<TABLE>
<CAPTION>
1997 1996
- ----------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Accrued expenses $6,089,000 $5,534,000
Inventories 322,000 333,000
Valuation allowance on
loans receivable 1,125,000 -
Other 91,000 71,000
---------- ---------
Total gross deferred tax assets 7,627,000 5,938,000
Less: Valuation allowance - -
---------- ---------
Subtotal 7,627,000 5,938,000
========== =========
Deferred tax liabilities:
Property, plant and equipment,
principally due to differences
in depreciation 3,138,000 (2,998,000)
Other (388,000) (268,000)
---------- ----------
Total gross deferred tax
liabilities (3,526,000) (3,266,000)
---------- ----------
Net deferred tax asset $4,101,000 $2,672,000
========== ==========
</TABLE>
Management has determined, based on the Company's history of operating earnings
and its expectations for the future, that taxable income of the Company will
more likely than not be sufficient to realize fully the deferred tax assets.
(7) Repurchase Agreements and Credit Risk
As is customary in the manufactured housing industry, the Company is
contingently liable under the terms of repurchase agreements with financial
institutions providing inventory financing for dealers of the Company's homes
as of the end of fiscal year 1997. The contingent liability under these
agreements approximates the amount financed, reduced by the resale value of any
homes which may be repurchased, and the risk of loss is spread over numerous
dealers and financial institutions. Losses under these agreements have not been
significant in the recent past.
(8) Contingencies
There are a number of claims and pending legal proceedings against the Company
with respect to certain matters including product liability, warranties,
workers' compensation, and other matters arising in the ordinary conduct of the
business. The ultimate outcome of these claims and proceedings is not presently
determinable. But, in the opinion of management, anticipated costs are
adequately covered by insurance or accruals, or will not materially affect the
financial position or results of operations of the Company.
(9) Employee Stock Plans
The Company has an employee share purchase plan under which anyone who has been
a full-time employee for at least one year may purchase certain amounts of
common shares at current market price. As of the end of fiscal 1997, 120,000
common shares has been reserved, of which 1,616 shares and 1,585 shares were
issued in fiscal years 1997 and 1996, respectively.
The Company's Share Incentive Plan grants certain management personnel
options to purchase common shares. As of the end of fiscal 1997, an aggregate
of 360,000 common shares had been reserved for the plan and options to purchase
96,000 and 45,600 common shares had been granted at exercise prices of $12.71
and $19.75 per share, respectively. 4,800 options at $12.71 per share had been
terminated. No options related to this plan have been exercised as of the end
of fiscal 1997.
The Company has adopted the disclosure-only provision of SFAS No. 123
"Accounting for Stock-Based Compensation." Accordingly, no compensation cost
has been recognized for the Share Incentive Plan. Had compensation cost for the
Share Incentive Plan been determined based on the fair value at the grant date
for awards in fiscal 1997 and 1996 consistent with the provisions of SFAS No.
123, the resulting reduction in the Company's net income and earnings per share
would not have been significant.
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following assumptions
used for grants in 1997 and 1996, respectively: dividend yield of 1.3% for both
years, expected volatility of 37% and 27%, risk free interest rates of 6.58%
and 5.75%, and expected lives of 9 years.
The weighted average fair value of stock options granted for fiscal years
1997 and 1996 calculated using the Black-Scholes option-pricing model, was
$10.03 and $5.64, respectively.
Report of Independent Auditors
The Board of Directors and Shareholders--Schult Homes Corporation:
We have audited the accompanying consolidated balance sheets of Schult Homes
Corporation and Subsidiaries as of the end of fiscal years 1997 and 1996, and
the related consolidated statements of operations, cash flows and shareholders'
equity for each of the fiscal years 1997, 1996 and 1995. These consolidated
financial statements are the responsibility of Schult Homes Corporation
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Schult
Homes Corporation and Subsidiaries as of the end of fiscal years 1997 and 1996,
and the results of their operations and their cash flows for each of the fiscal
years 1997, 1996 and 1995 in conformity with generally accepted accounting
principles.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Chicago, Illinois
August 8, 1997
<PAGE> 12
Annual Meeting
Our annual meeting of shareholders will be held at 1:30 p.m. (EST) on Thurs.,
Oct. 23, 1997 at the Das Dutchmen Essenhaus, 240 U.S. 20 W., Middlebury,
Indiana.
Transfer Agent and Register
Harris Trust & Savings
600 Superior Ave. E., Suite 600
Cleveland, OH 44114-2650
10-K Offer
Shareholders who wish to obtain a free copy of our Annual Report to the
Securities and Exchange Commission on Form 10-K may do so by writing to:
Frederick A. Greenawalt, Vice President of Finance, P.O. Box 550, Elkhart, IN
46515, (219) 294-3574.
Quarterly Calendar
Schult Homes operates on a fiscal year ending on the Saturday closest to June
30th. Quarterly results are announced within 30 days after the end of each
quarter and audited results are announced within 60 days after year end.
<TABLE>
<CAPTION>
Fiscal 1998 Quarter-End Dates
----------------------------------
<S> <C>
1st Quarter September 27, 1997
2nd Quarter December 27, 1997
3rd Quarter March 28, 1998
4th Quarter June 27, 1998
</TABLE>
Dividends
Quarterly dividends are normally paid in September, November, February and May
of each fiscal year. Dividend payments are considered by the board of directors
at their quarterly meetings and declarations of dividends are announced through
the news media at the time of declaration.
Stock Market Information
Schult Homes Corporation common shares are traded on the American Stock
Exchange under the symbol SHC. The chart below shows the range of our common
share prices for the past two years: (Restated to reflect 6-for-5 stock split
on February 28, 1997.)
<TABLE>
<CAPTION>
Fiscal 1996 High Low
----------- ------- -------
<S> <C> <C>
1st Quarter 12-3/16 9-1/16
2nd Quarter 14-3/16 11-11/16
3rd Quarter 15-3/16 12-13/16
4th Quarter 17-3/16 13-7/16
Fiscal 1997
-----------
1st Quarter 17-3/8 13-5/16
2nd Quarter 20-15/16 16-3/4
3rd Quarter 19-1/2 16-1/8
4th Quarter 18-1/2 15-1/2
</TABLE>
Summary of Quarterly Results (unaudited - $000s, except per share amounts)
<TABLE>
<CAPTION>
Quarters First Second Third Fourth
----------------------------------------------------------------
<S> <C> <C> <C> <C>
1996
Net sales $80,482 $73,295 $71,656 $90,834
Gross profit 16,420 14,351 14,357 19,643
Net income 1,885 1,168 829 2,890
Net earnings per
common share .42 .26 .19 .64
</TABLE>
<TABLE>
<CAPTION>
Quarters First Second Third Fourth
----------------------------------------------------------------
<S> <C> <C> <C> <C>
1997
Net sales $93,027 $85,640 $75,109 $93,993
Gross profit 20,517 17,443 14,834 19,452
Net income 3,198 1,766 1,004 3,223
Net earnings per
common share .71 .39 .22 .71
</TABLE>
