<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 29, 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 Identification No.)
incorporation or organization)
221 U.S. 20 West, Middlebury, Indiana 46540
-----------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 219-825-5881
------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES XX NO
------ ------
The number of common shares outstanding, as of March 29, 1997 was 4,488,149.
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SCHULT HOMES CORPORATION
FORM 10-Q
PERIOD ENDED MARCH 29, 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
Item 3. Defaults upon Senior Securities --- Inapplicable
Item 4. Submission of Matters to a Vote of Security Holders ---
Inapplicable
Item 5. Other Information --- Inapplicable
Item 6. Exhibits and Reports on Form 8-K
(a) Inapplicable
(b) There were no reports on Form 8-K filed for the three month
period ended March 29, 1997.
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SCHULT HOMES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 29, 1997 AND JUNE 29, 1996
ASSETS
<TABLE>
<CAPTION>
MAR. 29, 1997 JUNE 29, 1996
------------- -------------
(unaudited) (audited)
(thousands of dollars)
<S> <C> <C>
Cash .................................................. $ 1,708 $ 9,033
Accounts receivable, less allowance for doubtful
accounts of $125 in March 1997 and $65 in June 1996... 16,767 18,338
Inventories (note 1)................................... 21,660 16,315
Deferred income taxes.................................. 5,424 5,424
------- -------
Total current assets.............................. 45,559 49,110
Property, plant, and equipment......................... 40,780 36,192
Loans recievable from Saturn Housing, LLC.............. 4,075 2,634
Other assets........................................... 2,451 1,797
------- -------
Total assets...................................... $92,865 $89,733
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Trade accounts payable................................. $10,239 $18,628
Accrued liabilities.................................... 35,252 28,851
Current portion of long-term debt...................... 145 710
------- -------
Total current liabilities......................... 45,636 48,189
Deferred income taxes.................................. 2,751 2,751
Long-term debt......................................... 577 684
------- -------
Total liabilities................................. 48,964 51,624
Shareholders' equity:
Common shares, no par value, 10,000,000 shares
authorized, 4,488,149 shares issued and outstanding in
March 1997 and 3,743,685 in June 1996................. 8,347 7,921
Retained earnings...................................... 35,554 30,188
------- -------
Total shareholders' equity........................ 43,901 38,109
------- -------
Total liabilities and shareholders' equity........ $92,865 $89,733
======= =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 4
SCHULT HOMES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE)
(UNAUDITED)
<TABLE>
<CAPTIOM>
THREE MONTHS ENDED NINE MONTHS ENDED
MAR. 29, 1997 MAR. 30, 1996 MAR. 29, 1997 MAR. 30, 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales................... $75,109 $71,656 $253,776 $225,434
Cost of goods sold.......... 60,275 57,299 200,982 180,305
------- ------- -------- --------
Gross profit............... 14,834 14,357 52,794 45,129
Selling, general, and
administrative expenses.... 13,310 13,030 43,085 38,604
------- ------- -------- --------
Operating income.......... 1,524 1,327 9,709 6,525
Interest income............. 212 136 563 271
Other income................ 7 7 27 18
Interest expense............ (9) (37) (50) (126)
------- ------- -------- --------
Income before income taxes 1,734 1,433 10,249 6,688
Income taxes:
Federal................... 539 446 3,154 2,071
State..................... 191 158 1,127 736
------- ------- -------- --------
Net income............... $1,004 $829 $5,968 $3,881
======= ======= ====== ======
PER SHARE DATA: (note 2)
Net income per common share. $0.22 $0.18 $1.32 $0.86
Dividends paid per common
share..................... $0.06 $0.05 $0.16 $0.13
Average shares outstanding.. 4,548,633 4,495,941 4,508,916 4,491,680
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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SCHULT HOMES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(Dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MAR. 29, MAR. 30, MAR. 29, MAR. 30,
1997 1996 1997 1996
---------- --------- ---------- --------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income.......................................... $ 1,004 $ 829 $ 5,968 $ 3,881
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation of plant and equipment............... 991 864 2,867 2,580
Changes in assets and liabilities:
(Increase) decrease in accounts receivable....... (3,623) (7,393) 1,572 (1,709)
(Increase) in inventories........................ (3,379) (594) (5,345) (1,034)
(Increase) in other assets....................... (252) (355) (655) (75)
Increase (decrease) in trade accounts payable.... 2,233 3,313 (8,389) (4,725)
Increase (decrease) in accrued liabilities....... (182) 2,238 6,401 6,519
------ ------ ------ ------
Total adjustments.............................. (4,212) (1,927) (3,549) 1,556
------ ------ ------ ------
Net cash (used in) provided by operating activities.. (3,208) (1,098) 2,419 5,437
Cash flows from investing activities:
Capital expenditures, net of retirements............ (3,834) (1,058) (7,455) (2,747)
Loans to Saturn Housing, LLC....................... (26) (1,278) (1,441) (3,019)
------ ------ ------ ------
Net cash used in investing activities................ (3,860) (2,336) (8,896) (5,766)
Cash flows from financing activities:
Net repayments under line-of-credit................. - - - (2,300)
Repayment of long-term debt......................... (177) (253) (672) (751)
Proceeds from issuance of common stock.............. 413 179 426 201
Payment for repurchased shares...................... - - - (165)
Dividends declared to common shareholders........... (228) (187) (602) (485)
------ ------ ------ ------
Net cash provided by (used in) financing activities.. 8 (261) (848) (3,500)
Net (decrease) in cash............................... (7,060) (3,695) (7,325) (3,829)
Cash at beginning of the quarter..................... 8,768 4,432 9,033 4,566
------ ------ ------ ------
Cash at end of the quarter........................... $ 1,708 $737 $ 1,708 $ 737
======= ====== ======= =======
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest........................................... $ 14 $ 37 $ 54 $ 164
Income taxes....................................... $ 1,557 $ 989 $ 6,524 $ 2,992
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
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SCHULT HOMES CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) INVENTORIES
The components of inventories are as follows:
<TABLE>
<CAPTION>
MAR. 29, JUNE 29,
1997 1996
-------- --------
(thousands of dollars)
<S> <C> <C>
Raw material........... $14,892 $12,524
Work in process........ 2,280 2,247
Finished goods......... 4,488 1,544
------- -------
Total............... $21,660 $16,315
======= =======
</TABLE>
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NET EARNINGS PER COMMON SHARE
Net earnings per common share is calculated by dividing net income by the
weighted average number of common shares and common share equivalents
outstanding during the period. 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 NINE MONTHS ENDED
MAR 29, MAR 30, MAR 29, MAR 30,
1997 1996 1997 1996
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Net sales................................. 100.0% 100.0% 100.0% 100.0%
Cost of goods sold........................ 80.3 80.0 79.2 80.0
-------- ------- -------- -------
Gross profit........................... 19.7 20.0 20.8 20.0
Selling, general & administrative expenses 17.7 18.2 17.0 17.1
-------- ------- -------- -------
Operating income ...................... 2.0 1.8 3.8 2.9
Interest and other income................. 0.3 0.2 0.2 0.1
Interest expense.......................... (0.0) (0.0) (0.0) (0.1)
-------- ------- -------- -------
Pre-tax income......................... 2.3 2.0 4.0 2.9
Income taxes.............................. 1.0 0.8 1.6 1.2
-------- ------- -------- -------
Net income ............................ 1.3 1.2 2.4 1.7
======== ======= ======== =======
</TABLE>
THREE MONTHS ENDED MARCH 29, 1997 COMPARED TO THREE MONTHS ENDED MARCH 30,
1996. Net Sales in the third quarter of fiscal 1997 were $75.1 million, an
increase of 4.8% from sales of $71.7 million in the third quarter of fiscal
1996. This was a record third quarter for the
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Company. This increase was due to utilization of our plant expansions and
continued strong demand for manufactured housing nationwide. We believe we can
increase our sales during the fourth quarter compared to last year, if strong
market conditions continue. The average selling price per section increased by
1.6% from the same time a year earlier. Total sections sold in the third
quarter of fiscal 1997 were 3,630, an increase of 113 sections (3.2%) from the
prior year period. Multi-section homes represented 64.7% of the homes sold
during the third quarter of fiscal 1997, compared to 60.9% in fiscal 1996. 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 third quarter of fiscal 1997 was $60.3 million,
which represented an increase of $3.0 million (5.2%) from the third quarter of
fiscal 1996, reflecting our increase in sales. Cost of goods sold as a
percentage of net sales remained relatively unchanged at 80.3% in fiscal 1997
compared to 80.0% in fiscal 1996.
Selling, General, and Administrative Expenses for the third quarter of
fiscal 1997 were $13.3 million, which represented an increase of $0.3 million
(2.1%) from fiscal 1996. As a percentage of net sales, these expenses decreased
to 17.7% from 18.2% in the prior year period. This decrease was due to
decreased warranty costs and dealer volume rebates as a percent of sales from
the prior year period. We believe warranty costs as a percent of sales will
remain at its reduced level for the next quarter as we improve our quality and
efficiency at our operation divisions.
The Company earned an operating income of $1.5 million in the third
quarter of fiscal 1997 or 2.0% of net sales. This compares to an operating
income of $1.3 million or 1.8% of net sales in the prior year period.
Interest and other income contributed $219,000 to earnings in the third
quarter of fiscal 1997, compared to $143,000 in the prior year period. This
53.1% increase is the result of larger earnings available for investment. We
don't expect this to continue due to utilization of cash for capital
expenditures.
Pre-tax income for the third quarter of fiscal 1997 was $1.7 million
compared to $1.4 million in the prior year period. Net income in the third
quarter of fiscal 1997 was a record third quarter of $1.0 million ($0.22 per
common share), compared to a net income of $0.8 million ($0.18 per common
share) in the third quarter of fiscal 1996. Assuming demand for manufactured
housing remains strong, we expect profits in the fourth quarter to be at least
as favorable as the prior year's quarter.
NINE MONTHS ENDED MARCH 29, 1997 COMPARED TO NINE MONTHS ENDED MARCH 30,
1996. Net Sales in the first nine months of fiscal 1997 were $253.8 million,
which represented an increase of $28.3 million (12.6%) from the first nine
months of fiscal 1996. Again, this increase was due to utilization of our plant
expansions and strong market conditions, combined with a broader product line
offering in certain regions. The average selling price per section increased by
1.0% from the same time a year earlier. Total sections sold in the first nine
months of fiscal 1997 were 12,176, an increase of 1,248 sections (11.4%) from
the prior year period. Multi-section homes represented 67.7% of the homes sold
during the first nine months of fiscal 1997, compared to 61.5% in fiscal 1996.
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 nine months of fiscal 1997 was $201.0
million, which represented an increase of $20.7 million (11.5%) from the first
nine months of fiscal 1996. Cost of goods sold as a percentage of net sales
decreased from 80.0% in fiscal 1996 to 79.2% in fiscal 1997. This decrease was
due primarily to decreased material costs. The decrease in material costs as a
percent of sales was a result of improved corporate purchasing procedures.
Future material costs as a percent of sales will depend on market conditions by
region.
7
<PAGE> 8
Selling, General, and Administrative Expenses for the first nine months of
fiscal 1997 were $43.1 million, which represented an increase of $4.5 million
(11.6%) from fiscal 1996. As a percentage of net sales, these expenses remained
relatively unchanged at 17.0% compared to 17.1% in the prior year period.
Warranty costs as a percent of sales decreased from the prior year period,
however this was offset by higher corporate expenses including training and
Total Quality Management costs.
The Company earned an operating income of $9.7 million in the first nine
months of fiscal 1997 or 3.8% of net sales. This compares to an operating
income of $6.5 million or 2.9% of net sales in the prior year period.
Interest and other income contributed $590,000 to earnings in the first
nine months of fiscal 1997, compared to $289,000 in the prior year period. This
increase is the result of larger earnings available for investment. We don't
expect this to continue at such a high rate due to utilization of cash for
capital expenditures.
Pre-tax income for the first nine months of fiscal 1997 was $10.2 million
compared to $6.7 million in the prior year period. Net income in the first nine
months of fiscal 1997 was $6.0 million ($1.32 per common share), compared to a
net income of $3.9 million ($0.86 per common share) in the first nine months of
fiscal 1996.
LIQUIDITY AND CAPITAL RESOURCES
At the end of the current quarter, the Company had no outstanding
borrowings under its credit facility, which remained unchanged from the balance
at June 29, 1996. At the end of the quarter, total long-term debt was $577,000,
a decrease of $107,000 compared to the balance at June 29, 1996. The Company's
unsecured credit facility expiring January 31, 2000 permits borrowings of up to
$10,000,000.
Capital expenditures for the first nine months of fiscal 1997 were
$7,455,000, compared to $2,747,000 from the prior year period. This increase is
due to a plant expansion at our Buckeye, Arizona facility. In addition, plant
expansions have been approved for our Navasota, Texas and Etna Green, Indiana
facilities. When fully utilized, these expansions should give us $90 million of
additional manufacturing capacity annually.
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, based upon factors known to us now.
We are aware that materials prices may increase, but we have assumed that we
will have no undue difficulty passing on those costs without adversely
affecting sales. We have also assumed that employee relations will continue to
be favorable, and that no unusual workers' compensation or other legal claim
adversely affects the corporation. The Company is engaged in significant
capacity expansion, and if the market declines, the fixed costs will adversely
affect earnings. Rising interest rates may adversely affect financing and
sales, and uncertainty about rates continues. Uncertainty in the equity
markets may affect consumer confidence and home purchase plans. 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. The
manufacture and sale of housing is a complex and difficult business, with
unforeseen events and conditions beyond our control. We do not intend to update
statements made in this report.
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PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
On February 28, 1997, the Company distributed a six-for-five stock split.
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: May 13, 1997
9
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-28-1997
<PERIOD-START> JUN-29-1996
<PERIOD-END> MAR-29-1997
<EXCHANGE-RATE> 1
<CASH> 1,708
<SECURITIES> 0
<RECEIVABLES> 16,892
<ALLOWANCES> 125
<INVENTORY> 21,660
<CURRENT-ASSETS> 45,559
<PP&E> 40,780
<DEPRECIATION> 0
<TOTAL-ASSETS> 92,865
<CURRENT-LIABILITIES> 45,636
<BONDS> 577
0
0
<COMMON> 8,347
<OTHER-SE> 35,554
<TOTAL-LIABILITY-AND-EQUITY> 92,865
<SALES> 253,776
<TOTAL-REVENUES> 253,776
<CGS> 200,982
<TOTAL-COSTS> 43,085
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (50)
<INCOME-PRETAX> 10,249
<INCOME-TAX> 4,281
<INCOME-CONTINUING> 5,968
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,968
<EPS-PRIMARY> 1.32
<EPS-DILUTED> 1.32
</TABLE>