<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended December 27, 1997 Commission File Number 0-15506
--------
Schult Homes Corporation
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Indiana 35-1608892
- ------------------------------- ----------------------------------
(State or other jurisdiction of (I.R.S. Employer 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 December 27, 1997 was 4,475,875.
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SCHULT HOMES CORPORATION
FORM 10-Q/A
PERIOD ENDED DECEMBER 27, 1997
PART I. Financial Information
Item 1. Financial Statements
A. Schult Homes Corporation and Subsidiaries Condensed Consolidated
Financial Statements
B. Notes to the Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
PART II. Other Information
Item 1. Legal Proceedings --- Inapplicable
Item 2. Changes in Securities --- Inapplicable
Item 3. Defaults upon Senior Securities --- Inapplicable
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
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 December 27, 1997.
(c) Amended Exhibit 27 filed in electronic format only.
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SCHULT HOMES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
DECEMBER 27, 1997 AND JUNE 28, 1997
ASSETS
<TABLE>
<CAPTION>
DEC. 27, 1997 JUNE 28, 1997
--------------- ---------------
(unaudited) (audited)
(thousands of dollars)
<S> <C> <C>
Cash .............................................. $ 291 $ 4,735
Accounts receivable, net........................... 16,747 18,304
Inventories (note 1)............................... 20,628 20,558
Deferred income taxes.............................. 6,985 6,985
------ -------
Total current assets............................ 44,651 50,582
Property, plant, and equipment..................... 50,245 44,252
Loans receivable from Saturn Housing, LLC.......... 2,691 2,691
Other assets....................................... 3,004 2,631
------ -------
Total assets.................................... $100,591 $100,156
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Trade accounts payable............................. $ 10,202 $ 17,427
Accrued liabilities................................ 34,860 32,369
Current portion of long-term debt.................. 131 131
------ -------
Total current liabilities....................... 45,193 49,927
Deferred income taxes.............................. 2,884 2,884
Long-term debt..................................... 3,494 555
------ -------
Total liabilities............................... 51,571 53,366
Shareholders' equity:
Common shares, no par value, 10,000,000 shares authorized,
4,475,875 and 4,505,741 shares issued and outstanding,
respectively..................................... 7,625 8,238
Retained earnings................................. 41,395 38,552
------ -------
Total shareholders' equity...................... 49,020 46,790
------ -------
Total liabilities and shareholders' equity...... $100,591 $100,156
======= =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
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SCHULT HOMES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DEC. 27, 1997 DEC. 28, 1996 DEC. 27, 1997 DEC. 28, 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales...................... $ 86,489 $ 85,640 $175,626 $178,667
Cost of goods sold............. 70,534 68,197 141,250 140,707
-------- -------- -------- --------
Gross profit................ 15,955 17,443 34,376 37,960
Selling, general, and
administrative expenses....... 14,496 14,626 29,158 29,775
-------- -------- -------- --------
Operating income............ 1,459 2,817 5,218 8,185
Interest income................ 176 225 319 352
Other income................... 14 15 27 20
Interest expense............... (11) (14) (21) (41)
-------- -------- -------- --------
Income before income taxes.. 1,638 3,043 5,543 8,516
Income taxes:
Federal...................... 524 942 1,750 2,615
State........................ 147 335 501 937
-------- -------- -------- --------
Net income.................. $ 967 $ 1,766 $ 3,292 $ 4,964
======== ======== ======== ========
PER SHARE DATA: (note 2)
- --------------------------
Basic earnings per share....... $ 0.21 $ 0.39 $ 0.72 $ 1.10
Diluted earnings per share..... $ 0.21 $ 0.39 $ 0.72 $ 1.10
Basic average shares
outstanding................... 4,491,143 4,487,876 4,498,694 4,487,758
Diluted average shares
outstanding................... 4,520,659 4,515,794 4,525,764 4,511,782
Dividends paid per common
share......................... $ 0.05 $ 0.04 $ 0.10 $ 0.08
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
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SCHULT HOMES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(Dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DEC. 27, DEC. 28, DEC. 27, DEC. 28,
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income........................................................$ 967 $ 1,766 $ 3,292 $ 4,964
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation of plant and equipment............................. 1,263 933 2,387 1,876
Changes in assets and liabilities:
Decrease in accounts receivable............................... 1,097 2,404 1,557 5,194
(Increase) decrease in inventories............................ 1,253 (1,854) (70) (1,966)
(Increase) in allowance for loans receivable from
Saturn Housing LLC........................................... 880 250 1,005 250
(Increase) decrease in other assets........................... (282) 389 (221) (401)
(Decrease) in trade accounts payable.......................... (2,503) (4,381) (7,224) (10,623)
Increase in accrued liabilities............................... 413 2,076 2,490 6,583
-------- -------- -------- --------
Total adjustments........................................... 2,121 (183) (227) 913
-------- -------- -------- --------
Net cash provided by operating activities.......................... 3,088 1,583 3,065 5,877
Cash flows from investing activities:
Capital expenditures, net of retirements.......................... (5,293) (1,982) (8,380) (3,621)
Loans to Saturn Housing, LLC...................................... (709) (1,143) (1,005) (1,665)
-------- -------- -------- --------
Net cash used in investing activities.............................. (6,002) (3,125) (9,385) (5,286)
Cash flows from financing activities:
Net borrowings under line-of-credit............................... 1,500 - 1,500 -
Proceeds from issuance of long-term debt.......................... 1,500 - 1,500 -
Repayment of long-term debt....................................... (29) (174) (61) (495)
Proceeds from issuance of common stock............................ 20 13 23 13
Payment for repurchased shares.................................... (578) - (636) -
Dividends declared to common shareholders......................... (225) (187) (450) (374)
-------- -------- -------- --------
Net cash provided by (used in) financing activities................ 2,188 (348) 1,876 (856)
Net decrease in cash............................................... (726) (1,890) (4,444) (265)
Cash at beginning of the quarter................................... 1,017 10,658 4,735 9,033
-------- -------- -------- --------
Cash at end of the quarter.........................................$ 291 $ 8,768 $ 291 $ 8,768
======== ======== ======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest.........................................................$ 8 $ 14 $ 61 $ 41
Income taxes.....................................................$ 3,312 $ 3,648 $ 4,112 $ 4,967
</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>
DEC. 27, JUNE 28,
1997 1997
-------- --------
(thousands of dollars)
<S> <C> <C>
Raw material........... $16,785 $16,195
Work in process........ 2,280 2,308
Finished goods......... 1,563 2,055
------- -------
Total............... $20,628 $20,558
======= =======
</TABLE>
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NET EARNINGS PER COMMON SHARE
Basic earnings per share is calculated by dividing net income by the
weighted average number of common shares outstanding during the period.
Diluted earnings per share is calculated by dividing net income by the weighted
average number of common shares and common share equivalents outstanding during
the period. 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 SIX MONTHS ENDED
------------------ ----------------
DEC 27, DEC 28, DEC 27, DEC 28,
1997 1996 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net sales........................ 100.0% 100.0% 100.0% 100.0%
Cost of goods sold............... 81.5 79.6 80.4 78.7
------ ------ ------ ------
Gross profit.................. 18.5 20.4 19.6 21.3
Selling, general & administrative
expenses........................ 16.8 17.1 16.6 16.7
------ ------ ------ ------
Operating income.............. 1.7 3.3 3.0 4.6
Interest and other income........ 0.2 0.3 0.2 0.2
Interest expense................. (0.0) (0.0) (0.0) (0.0)
------ ------ ------ ------
Pre-tax income................ 1.9 3.6 3.2 4.8
Income taxes..................... 0.8 1.5 1.3 2.0
------ ------ ------ ------
Net income.................... 1.1 2.1 1.9 2.8
====== ====== ====== ======
</TABLE>
6
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THREE MONTHS ENDED DECEMBER 27, 1997 COMPARED TO THREE MONTHS ENDED
DECEMBER 28, 1996. Net Sales in the second quarter of fiscal 1998 were $86.5
million, an increase of 1.0% from sales of $85.6 million in the second quarter
of fiscal 1997. The company recorded this modest increase in second quarter
sales due to increased demand from our Hermiston, Oregon facility despite lower
than expected consumer demand for manufactured homes in the Southwest and
portions of the Great Plains States, principally, the areas served by our
Buckeye, Arizona; Navasota, Texas; and Plainville, Kansas, facilities. The
average selling price per section decreased by 4.1% from the same time a year
earlier due to increased sales of lower priced "package" multi-section homes.
Total sections sold in the second quarter of fiscal 1998 were 4,345, an
increase of 217 sections (5.3%) from the prior year period. Modular home sales
accounted for $15.1 million (17.5%) of the second quarter fiscal 1998 net
sales; this compares to $13.5 million (15.8%) of the second quarter fiscal 1997
net sales.
Multi-section homes represented 71.9% of the homes sold during the second
quarter of fiscal 1998, compared to 69.4% in fiscal 1997. The Company is
uncertain whether the increased proportional sales of multi-section homes will
continue because it is subject to regional preferences and economic conditions.
Cost of Goods Sold in the second quarter of fiscal 1998 was $70.5 million,
which represented an increase of $2.3 million (3.4%) from the second quarter of
fiscal 1997. Cost of goods sold as a percentage of net sales increased from
79.6% in fiscal 1997 to 81.5% in fiscal 1998. This increase in cost of goods
sold as a percent of sales was due primarily to increased labor costs due to
some facilities operating at less than optimal levels.
Selling, General, and Administrative Expenses for the second quarter of
fiscal 1998 were $14.5 million, which represented a decrease of $130,000 (0.9%)
from fiscal 1997. As a percentage of net sales, these expenses decreased to
16.8% from 17.1% in the prior year period. This decrease was due to decreased
warranty reserve expenses.
The Company earned an operating income of $1.5 million in the second
quarter of fiscal 1998 or 1.7% of net sales. This compares to an operating
income of $2.8 million or 3.3% of net sales in the prior year period.
Interest and other income contributed $190,000 to earnings in the second
quarter of fiscal 1998, compared to $240,000 in the prior year period due to a
lower amount of funds available for investing activity. Interest expense for
the second quarter of fiscal 1998 was $11,000, compared to $14,000 in the
second quarter of fiscal 1997.
Pre-tax income for the second quarter of fiscal 1998 was $1.6 million
compared to $3.0 million in the prior year period. Net income in the second
quarter of fiscal 1998 was $1.0 million ($0.21 per common share), compared to a
net income of $1.8 million ($0.39 per common share) in the second quarter of
fiscal 1997.
SIX MONTHS ENDED DECEMBER 27, 1997 COMPARED TO SIX MONTHS ENDED DECEMBER
28, 1996. Net Sales in the first six months of fiscal 1998 were $175.6 million,
which represented a decrease of $3.0 million (1.7%) from the first six months
of fiscal 1997. Again, this decrease was due to lower than expected demand for
manufactured homes in the Southwest and portions of the Great Plains States,
principally, the areas served by our Navasota, Texas and Plainville, Kansas
facilities. The average selling price per section decreased by 4.2% from the
same time a year earlier due to increased sales of lower priced "package"
multi-section homes. Total sections sold in the first six months of fiscal 1998
were 8,772, an increase of 226 sections (2.6%) from the prior year period.
Modular home sales accounted for $28.2 million (16.1%) of the first six months
of fiscal 1998 net sales; this compares to $26.4 million (14.8%) of the first
six months of fiscal 1997 net sales.
Multi-section homes represented 72.5% of the homes sold during the first
six months of fiscal 1998, compared to 68.9% in fiscal 1997. The Company is
uncertain whether the increased proportional sales of multi-section homes will
continue because it is subject to regional preferences and economic conditions.
Cost of Goods Sold in the first six months of fiscal 1998 was $141.3
million, which represented an increase of $543,000 (0.4%) from the first six
months of fiscal 1997. Cost of goods sold as a percentage of net sales
increased from 78.7% in fiscal 1997 to 80.4% in fiscal 1998. Again,
7
<PAGE> 8
this increase was due primarily to increased labor costs due to some
facilities operating at less than optimal levels.
Selling, General, and Administrative Expenses for the first six months of
fiscal 1998 were $29.2 million, which represented an decrease of $617,000
(2.1%) from fiscal 1997. As a percentage of net sales, these expenses decreased
to 16.6% from 16.7% in the prior year period. Again, warranty reserve costs
decreased from the prior year period, however this was offset by higher
marketing costs associated with the competitiveness in certain markets.
The Company earned an operating income of $5.2 million in the first six
months of fiscal 1998 or 3.0% of net sales. This compares to an operating
income of $8.2 million or 4.6% of net sales in the prior year period.
Interest and other income contributed $346,000 to earnings in the first
six months of fiscal 1998, compared to $372,000 in the prior year period due to
a lower amount of funds available for investing activity.
Pre-tax income for the first six months of fiscal 1998 was $5.5 million
compared to $8.5 million in the prior year period. Net income in the first six
months of fiscal 1998 was $3.3 million ($0.72 per common share), compared to a
net income of $5.0 million ($1.10 per common share) in the first six months of
fiscal 1997.
LIQUIDITY AND CAPITAL RESOURCES
At the end of the current quarter, the Company had $1.5 million of
outstanding borrowings under its credit facility, compared to zero borrowing at
June 28, 1997. At the end of the quarter, total long-term debt was $3,494,000,
an increase of $2,939,000 compared to the balance at June 28, 1997.
The Company has a bank commitment eventually for an unsecured credit
facility which permits borrowings of up to an aggregate of the lower of $15.0
million, or a borrowing base computed by applying certain factors to the
value of the Company's receivables and inventories. The company loaned to
Saturn Housing LLC $1 million during the first six months of fiscal 1998. The
funds were needed by Saturn to cover its operating losses during this period
and the allowance for loan losses was increased by the same amount. The
Company has continued and intends to continue to advance funds with the
expectation that Saturn would eventually become profitable. Schult has the
option, under its loan agreement with Saturn, to convert up to $1.4 million
from debt to units of membership in Saturn, which it has not exercised. Schult
is providing management services to Saturn pursuant to a management contract.
Capital expenditures for the first six months of fiscal 1998 were
$8,380,000, compared to $3,621,000 from the prior year period. This increase
was due to the completion of our expansion in Buckeye, Arizona and expansions
costs for our Etna Green, Indiana second manufacturing line.
In the opinion of management, there are no material environmental or legal
contingent liabilities.
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 current capital
expenditure needs and required debt amortization.
RISK FACTORS
Forward-looking statements are made only as of the date made, based upon
factors known to management at the time. There are significant changes
occurring in the market for manufactured homes, with a few large competitors
announcing their intent to purchase or establish retail sales centers owned by
the manufacturer. We cannot predict the effect this will have in the long run,
but it may have a short-term adverse effect on Schult's sales. We have assumed
that raw material prices will not increase significantly, that employee
relations continue to be favorable, that weather conditions will not unusually
restrict delivery of homes or adversely affect sales, that orders on hand are
not canceled by dealers, and that no unusual workers' compensation or other
legal claim adversely affects the corporation. General economic conditions,
rising interest rates and consumer uncertainty or lack of confidence may result
in delayed purchases of homes. Schult has also 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 proven. We are aware that unpredictable events can and do occur and cannot
assure anyone that adverse events will not take
8
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place. The manufacture and sale of housing is a complex and difficult
business, with significant adverse risks beyond our control. We do not intend
to update statements made in this report.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On October 23, 1997, the annual meeting of shareholders was held.
Directors elected were Walter E. Wells, Ervin L. Bontrager, Francis M. Kennard,
Robert J. Deputy, John P. Guequierre, Todd Goodwin and Donald R. Pletcher. The
number of votes cast was 3,261,869, of which 3,213,808 were for the election of
all directors, 360 against. There were 47,701 abstentions.
ITEM 5. OTHER INFORMATION.
The year 2000 issues have been addressed and will be resolved by the end
of calendar year 1998. The costs to resolve these issues will be under
$100,000.
On January 5, 1998, Schult Homes entered into a merger agreement with
Oakwood Homes Corporation, in which holders of Schult Homes common stock will
receive $22.50 for each share held. Form 8-K filed January 6, 1998 is
incorporated herein by reference.
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: February 25, 1998
9
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-27-1998
<PERIOD-START> SEP-27-1997
<PERIOD-END> DEC-27-1997
<CASH> 291
<SECURITIES> 0
<RECEIVABLES> 16,747
<ALLOWANCES> 0
<INVENTORY> 20,628
<CURRENT-ASSETS> 44,651
<PP&E> 50,245
<DEPRECIATION> 0
<TOTAL-ASSETS> 100,591
<CURRENT-LIABILITIES> 45,193
<BONDS> 3,494
0
0
<COMMON> 7,625
<OTHER-SE> 41,395
<TOTAL-LIABILITY-AND-EQUITY> 100,591
<SALES> 175,626
<TOTAL-REVENUES> 175,626
<CGS> 141,250
<TOTAL-COSTS> 29,158
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (21)
<INCOME-PRETAX> 5,543
<INCOME-TAX> 2,251
<INCOME-CONTINUING> 3,292
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,292
<EPS-PRIMARY> .72
<EPS-DILUTED> .72
</TABLE>
