REDMAN INDUSTRIES INC
10-Q, 1996-08-09
MOBILE HOMES
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<PAGE>
 
                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C.  20549



                                   FORM 10-Q


 X    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF       
- ---                                                                
      THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 28, 1996

                                       OR

      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF       
- ---
      THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from             to 
                              ------------    -------------

Commission file number    0-22386
                          --------


                            REDMAN INDUSTRIES, INC.
            (Exact name of registrant as specified in its charter)


               DELAWARE                            75-2246805
      (State or other jurisdiction of           (I.R.S. Employer
      incorporation or organization)           Identification No.)


                        2550 WALNUT HILL LN., STE. 200
                             DALLAS, TEXAS  75229
             (Address of principal executive offices)   (Zip Code)

                                (214) 353-3600
              Registrant's telephone number, including area code


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 periods 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
                                       ---   ---   

NUMBER OF SHARES OF COMMON STOCK OUTSTANDING AS OF AUGUST 2, 1996: 13,307,251

                                      -1-
<PAGE>
 
                                     INDEX

                            REDMAN INDUSTRIES, INC.


PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements:                                    Page
                                                                  ----
 
 Condensed Consolidated Balance Sheets - June 28, 1996 and           4
 March 29, 1996
 
 Condensed Consolidated Statements of Income - Three month           5
 periods ended June 28, 1996 and June 30, 1995
 
 Condensed Consolidated Statements of Cash Flows - Three month       6
 periods ended June 28, 1996 and June 30, 1995
 
 Notes to Condensed Consolidated Financial Statements -
 June 28, 1996                                                     7-8
 
Item 2.  Management's Discussion and Analysis of Financial        9-13
         Condition and Results of Operations

PART II.  OTHER INFORMATION AND SIGNATURES

Item 1.  Legal Proceedings
         None

Item 2.  Changes in Securities
         None

Item 3.  Defaults upon Senior Securities
         None

Item 4.  Submission of Matters to a Vote of Security Holders
         None

Item 5.  Other Information
         None

                                      -2-
<PAGE>
 
                                     INDEX

                            REDMAN INDUSTRIES, INC.


PART II.  OTHER INFORMATION AND SIGNATURES-CON'T

 
Item 6.  Exhibits and Reports on Form 8-K.

         Exhibit (10.1)-Amendment One to Executive Employment Agreement:
         Robert L. Linton
 
         Exhibit (10.2)-Amendment One to Executive Employment Agreement:
         Thomas W. Sturgess
 
         Exhibit (10.3)-Amendment One to Executive Employment Agreement:
         Fergus J. Walker

         Exhibit (11)-Statement Re:  Earnings Per Share
 
         Exhibit (27)-Financial Data Schedule
          Submitted in electronic format only.
 
         No reports on Form 8-K were filed during the quarter ending 
         June 28, 1996.
 

                                      -3-
<PAGE>

                            Redman Industries, Inc.
                     Condensed Consolidated Balance Sheets
                       (in thousands, except share data)

<TABLE>
<CAPTION>
                                                    June 28,        March 29,
                                                      1996            1996
                                                 --------------  --------------
             ASSETS                               (Unaudited)
<S>                                              <C>             <C>
Current assets:                              
  Cash and cash equivalents                         $ 17,726        $  8,841
  Short-term investments                               9,929           9,934
  Accounts and notes receivable                       44,755          41,985
  Inventories                                         23,989          22,587
  Prepaid expenses                                     1,400           1,080
  Deferred tax assets                                  8,905           8,905
                                                 --------------  --------------
      Total current assets                           106,704          93,332
                                                    
Property, plant and equipment, at cost                67,962          63,014
Accumulated depreciation and amortization            (25,636)        (24,720)
                                                 --------------  --------------
                                                      42,326          38,294
                                                    
Intangible assets, net                                20,954          21,138
Other assets                                           3,632           3,704
                                                 --------------  --------------
                                                    $173,616        $156,468
                                                 ==============  ==============
                                             
                                             
  LIABILITIES AND SHAREHOLDERS' EQUITY       
                                             
Current liabilities:                         
  Accounts payable                                   $26,341         $20,289
  Accrued expenses                                    55,857          49,645
  Current portion of long-term debt                      591             951
                                                 --------------  --------------
      Total current liabilities                       82,789          70,885
                                                      
Long-term debt                                         1,489           1,585
Deferred tax liabilities                               7,631           8,694
Other liabilities                                     11,732          12,265
                                                      
Shareholders' equity:                                 
  Preferred stock                                         --              --
  Common stock, $.01 par value                        
    Authorized shares - 20,000,000                    
    Issued shares-14,504,751                          
     and 14,502,400, respectively                        145             145
  Additional paid-in capital                          50,045          50,060
  Retained earnings                                   37,140          29,793
  Less treasury stock, at cost: 1,162,000             
     and 1,142,000 shares, respectively              (17,355)        (16,959)
                                                 --------------  --------------
      Total shareholders' equity                      69,975          63,039
                                                 --------------  --------------
                                                    $173,616        $156,468
                                                 ==============  ==============
</TABLE>

                                      -4-
<PAGE>

                            Redman Industries, Inc.
            Condensed Consolidated Statements of Income (Unaudited)
                       (in thousands, except share data)

<TABLE>
<CAPTION>
                                         Three Month Period Ended
                                         June 28,        June 30,
                                           1996            1995
                                       ------------- -------------
<S>                                   <C>             <C>         

Net sales                                 $172,000       $157,804

Cost of products sold                      135,297        126,026
                                      -------------- -------------
Gross margin                                36,703         31,778
 
Selling expenses                            14,858         12,238
General and administrative expenses          9,888          9,467
                                      -------------- -------------

Income from operations                      11,957         10,073

Interest income                                502            419
Interest expense                              (111)          (136)
                                      -------------- -------------

Income before income taxes                  12,348         10,356

Income tax expense                           5,001          4,298
                                      -------------- -------------

Net income                                  $7,347         $6,058
                                      ============== =============


Net earnings per common share                $0.54          $0.42 *
                                      ============== =============


Weighted average common shares              13,606         14,345 *
                                      ============== =============
</TABLE>

*Adjusted for 100% stock dividend.  See
Notes to Condensed Consolidated Financial Statements.

                                      -5-
<PAGE>

                            Redman Industries, Inc.
           Condensed Consolidated Statements of Cash Flows (Unaudited)
                                (in thousands)

<TABLE>
<CAPTION>
                                                                         Three Month Period Ended
                                                                          June 28,      June 30,
                                                                            1996          1995
                                                                         -----------   -----------
<S>                                                                      <C>           <C>
Operating Activities:
Net income                                                                  $7,347        $6,058
Adjustments to reconcile net income
           to net cash provided by operating activities:
           Depreciation and amortization                                     1,446         1,227
           Deferred income tax benefit                                      (1,063)       (1,028)
           Other noncash items                                                 (18)         (232)
                                                                         -----------   -----------
                                                                             7,712         6,025
           Change in operating working capital accounts:
                Accounts and notes receivable                               (2,761)       (3,260)
                Inventories                                                 (1,539)        2,288
                Prepaid expenses                                              (320)          432
                Accounts payable and accrued expenses                       11,615         5,876
                                                                         -----------   -----------
Net cash provided by operating activities                                   14,707        11,361

Investing Activities:
Purchases of property, plant and equipment                                  (5,358)       (1,892)
Purchase of short-term investments                                          (9,871)       (9,707)
Maturities of short-term investments                                        10,000         6,000
Other                                                                          259           (27)
                                                                         -----------   -----------
Net cash used in investing activities                                       (4,970)       (5,626)

Financing Activities:
Principal payments on borrowings                                              (456)         (424)
Purchase of treasury stock                                                    (396)         (477)
                                                                         -----------   -----------
Net cash used in financing activities                                         (852)         (901)
                                                                         -----------   -----------

Increase in cash and cash equivalents                                        8,885         4,834
Cash and cash equivalents at beginning of year                               8,841        13,111
                                                                         -----------   -----------

Cash and cash equivalents at end of period                                 $17,726       $17,945
                                                                         ===========   ===========

Supplemental Information:
           Cash payments for federal income taxes                             $-0-        $1,150
                                                                         ===========   ===========

</TABLE>

                                      -6-
<PAGE>
 
REDMAN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

JUNE 28, 1996


BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements of Redman
Industries, Inc. (the "Company") have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to form 10-Q and Article 10 of Regulation S-X.  Accordingly, they
do not include all the information and footnotes required by generally accepted
accounting principles for complete financial statements.  In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included.  Because of the seasonal
nature of the company's business, operating results for the three month period
ended June 28, 1996 are not necessarily indicative of the results that may be
expected for the fiscal year ending March 28, 1997.  For further information,
refer to the consolidated financial statements and footnotes thereto included in
the company's annual report on form 10-K for the fiscal year ended March 29,
1996.


<TABLE>
<CAPTION>
 
 
INVENTORIES (IN THOUSANDS)                 JUNE 28,   MARCH 29,
                                             1996        1996
                                          ---------   ---------
<S>                                       <C>        <C>
MATERIAL AND PURCHASED PARTS               $15,762     $16,055
FINISHED PRODUCTS AND WORK-IN PROGRESS       9,110       7,279
LIFO RESERVE                                  (883)       (747)
                                          ---------   ---------
                                           $23,989     $22,587
                                          =========   =========
</TABLE> 
 
 
<TABLE> 
<CAPTION> 
 
ACCRUED EXPENSES (IN THOUSANDS)            JUNE 28,   MARCH 29,
                                             1996        1996
                                          ---------   ---------
<S>                                        <C>        <C> 
PRODUCT WARRANTY                           $17,387     $16,017
SALES INCENTIVES                            17,514      11,852
EMPLOYEE COMPENSATION AND BENEFITS           9,929      11,305
INSURANCE                                    4,187       3,765
RESERVE FOR REPURCHASE LOSSES                2,566       2,473
OTHER                                        4,274       4,233
                                          ---------   ---------
                                           $55,857     $49,645
                                          =========   =========
</TABLE>

                                      -7-
<PAGE>
 
REDMAN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

JUNE 28, 1996



INCOME TAXES

The effective income tax rates of 40.5% and 41.5% for the three month periods
ended June 28, 1996 and June 30, 1995, respectively, differ from the federal
statutory rate primarily due to the nondeductibility of goodwill amortization
and state income taxes, net of federal benefit.



STOCK DIVIDEND

On February 6, 1996, the Board of Directors voted to declare a 100% stock
dividend to shareholders of record as of February 23, 1996.  Prior period per
common share and weighted average shares outstanding have been restated to
reflect the stock dividend.

                                      -8-
<PAGE>

Redman Industries, Inc.

Management's Discussion and Analysis of Financial Condition and Results of
Operations

Three Months Ended June 28, 1996 Compared to Three Months Ended June 30, 1995
(Hereinafter referred to as 1996 and 1995, respectively)

<TABLE>
<CAPTION>

                                                         THREE MONTH PERIOD ENDED
                                             June 28,       June 30,      DOLLAR        %
                                               1996           1995       INCREASE    INCREASE
                                         ------------------------------------------------------
<S>                                        <C>           <C>           <C>         <C>
NET SALES                                    $172,000      $157,804      $14,196       9.0%

GROSS MARGIN DOLLARS                           36,703        31,778        4,925      15.5%

GROSS MARGIN PERCENTAGE                          21.3%         20.1%

SELLING EXPENSES                               14,858        12,238        2,620      21.4%

SELLING EXPENSES AS
     A PERCENTAGE OF NET SALES                    8.6%          7.8%

G&A EXPENSES                                    9,888         9,467          421       4.4%

G&A EXPENSES AS
     A PERCENTAGE OF NET SALES                    5.7%          6.0%

OPERATING INCOME                               11,957        10,073        1,884      18.7%

OPERATING INCOME AS
     A PERCENTAGE OF NET SALES                    7.0%          6.4%

</TABLE>

                                      -9-
<PAGE>
 
REDMAN INDUSTRIES, INC.

Management's Discussion and Analysis of Financial Condition and Results of
Operations

Three Month Period Ended June 28, 1996 Compared to the Three Month Period Ended
June 30, 1995 (hereinafter referred to as 1996 and 1995, respectively) - Con't

NET SALES.  Net sales increased 9.0% on shipment of 6,764 homes in 1996 compared
to 6,440 homes shipped in 1995. The average sales price per home increased 4.8%
to $25,047 in 1996 from $23,898 in 1995, due to slight price increases and an
increase of multi-wide homes as a percent of total homes shipped (55% in 1996
compared to 50% in 1995).

GROSS MARGIN.  The increase in gross margin percentage is primarily due to
slight price increases, change in product mix to more multi-wide homes which
carry higher margin options and lower material prices.

SELLING EXPENSES.  The increase in selling expenses as a percentage of net sales
is due to increased service expense.  Service expense increased due to an
increase in number of homes serviced and average service cost per home.

GENERAL AND ADMINISTRATIVE EXPENSES. The increase in general and administrative
expenses was due primarily to formula-driven employee incentive bonus increases
related to improved operating results.  The decline in general and
administrative expenses as a percentage of net sales is due to higher sales
volume spread over a relatively fixed expense base, exclusive of bonuses.

OPERATING PROFIT.  The operating trends previously discussed accounted for the
$1.9 million increase in operating income.  Operating income as a percentage of
net sales increased 60 basis points primarily as a result of the increase in
gross margin percentage and improvement in the general and administrative
percentage offset by the increase in the selling expense percentage.

                                      -10-
<PAGE>
 
REDMAN INDUSTRIES, INC.

Management's Discussion and Analysis of Financial Condition and Results of
Operations

Three Month Period Ended June 28, 1996 Compared to the Three Month Period Ended
June 30, 1995 (hereinafter referred to as 1996 and 1995, respectively) - Con't

INTEREST INCOME.  Interest income earned on cash and short-term investments rose
$83,000 due to higher cash balances invested.

INCOME TAX EXPENSE.  The effective income tax rates of 40.5% and 41.5% in 1996
and 1995, respectively, differ from the federal statutory rate due to the
nondeductibility of goodwill amortization and state income taxes, net of federal
benefit.

LIQUIDITY AND CAPITAL RESOURCES

The Company's primary sources of funds are cash flows from operations and
borrowing capacity under its revolving credit facility.  The Company's primary
uses of cash are to fund its operating needs, capital expenditures, debt service
requirements and repurchase of its common stock.  Cash balances are typically at
their highest level at the end of a quarter.  However, cash balances decline in
the month following the end of a quarter due to payments of retailer volume and
employee incentive bonuses.

Cash flows provided by operating activities, excluding changes in working
capital accounts, increased by $1.7 million for the three month  period ended
June 28, 1996 compared to the same period of a year ago, primarily from improved
operations as discussed above.  The increase in accounts payable and accrued
expenses from 1995 to 1996 was due primarily to the related increase in
inventories and the increase in current federal income taxes payable.

                                      -11-
<PAGE>
 
REDMAN INDUSTRIES, INC.

Management's Discussion and Analysis of Financial Condition and Results of
Operations

Three Month Period Ended June 28, 1996 Compared to the Three Month Period Ended
June 30, 1995 (hereinafter referred to as 1996 and 1995, respectively) - Con't

LIQUIDITY AND CAPITAL RESOURCES - CONT.

Capital expenditures were $5.4 million and $1.9 million for the three month
periods ended June 28, 1996 and June 30, 1995, respectively.  The increase in
capital expenditures during 1996 is due to $3.2 million of spending for the new
Talladega, Alabama facility scheduled to begin production in August 1996.  The
Company also plans to begin to build a new plant in North Carolina in fiscal
1997. The Company plans to spend a total of approximately $19.0 million in the
fiscal year ending March 28, 1997 on capital improvements.

On February 6, 1996, the Board of Directors authorized the Company to repurchase
up to one million shares of its common stock in the open market.  There are
approximately 800,000 shares of common stock remaining to be repurchased as of
August 2, 1996.  The purchases will be funded from working capital and the
timing will be dictated by overall financial and market conditions.

The Company has an unsecured $50 million line of credit with three financial
institutions that expires August 28, 1998 (the "Revolver").  The Revolver
contains restrictive covenants which limits, among other things, cash dividends
and common stock repurchases and requires the Company to maintain certain
financial ratios.  As of June 28, 1996, $43.5 million was available for
additional borrowings under the Revolver, net of $6.5 million letters of credit
outstanding which are used primarily for insurance purposes. The Company
believes that cash flow from operations and its unused borrowing capacity under
its credit facility should be sufficient to fund its anticipated operating
needs, capital expenditures, debt service requirements and repurchases of its
common stock for the foreseeable future.

                                      -12-
<PAGE>
 
REDMAN INDUSTRIES, INC.

Management's Discussion and Analysis of Financial Condition and Results of
Operations

Three Month Period Ended June 28, 1996 Compared to the Three Month Period Ended
June 30, 1995 (hereinafter referred to as 1996 and 1995, respectively) - Con't

CYCLICALITY AND INFLATION

The manufactured housing industry is cyclical and is influenced by many of the
same national and regional economic forces that impact housing in the United
States, including inflation, availability of financing and regional population
and employment trends.  Inflation in recent years has been modest and has had a
nominal effect on the Company's manufacturing costs in the areas of labor,
manufacturing overhead and raw materials other than forestry products and gypsum
wallboard.

The price of these commodities are affected more by the interaction of supply
and demand than by inflation.  Historically, the Company believes it has been
able to minimize the effects of inflation by increasing the selling prices of
its homes, improving its manufacturing efficiency and increasing its employee
productivity.

BACKLOG

The Company builds a home after a specific order has been received from an
independent retailer or developer.  Accordingly, the Company generally does not
maintain an inventory of unsold homes. In accordance with industry practice,
retailers can cancel orders prior to production without penalty.  The Company's
backlog of orders for manufactured homes was approximately $26.5 million as of
August 2, 1996 as compared to approximately $36.2 million as of August 4, 1995.
Because of the seasonality of the market for manufactured homes, the level of
backlog at any point in time is not necessarily indicative of the expected level
of future orders.  The Company's backlog, as well as level of new orders,
generally drops during the late fall and winter months.

                                      -13-
<PAGE>
 
                                  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.




                                 REDMAN INDUSTRIES, INC.
                              ----------------------------- 
                                      (Registrant)


Date:  August 9, 1996                   /S/ Robert M. Linton
     ---------------------    -----------------------------------------------
                                        Robert M. Linton
                                        President and Chief Executive Officer

 
Date: August 9, 1996                    /S/ J. Mark Kirkpatrick
     --------------------     ----------------------------------------------
                                        J. Mark Kirkpatrick
                                        Principal Accounting Officer

                                      -14-

<PAGE>
 
                                                                    EXHIBIT 10.1

                                 AMENDMENT ONE
                                      TO
                        EXECUTIVE EMPLOYMENT AGREEMENT


          THIS AMENDMENT ("Amendment One") is made and entered into as of the
18th day of July 1996, by and between Redman Industries, Inc., a Delaware
Corporation ("RII"), Redman Management Services Business Trust, a Delaware
business trust and Redman Homes, Inc., a Delaware Corporation (hereinafter,
collectively with RII and their respective successors, referred to as the
"Company"), and Robert M. Linton (hereinafter referred to as the "Executive").

                                    RECITALS

          WHEREAS, as of January 1, 1995, the Company and Executive executed
that certain Executive Employment Agreement (the "Agreement"); and

          WHEREAS, the parties hereto wish to amend the Agreement pursuant to
the terms and conditions set forth herein..

                                   AGREEMENTS

          NOW, THEREFORE, in consideration of the premises, the parties hereby
covenant and agree as follows:

I.        Reaffirmation of the Agreement.
          ------------------------------ 

          Except as otherwise expressly provided herein, the Agreement shall
remain in full force and effect upon the same terms and provisions contained
therein.  In case of any conflict between the provisions of this Amendment One
and the Agreement, the provisions of this Amendment One shall apply.  Any
capitalized terms not defined in this Amendment One shall have the meanings
given those terms in the Agreement.  Upon and after the effectiveness of this
Amendment One, each reference in the Agreement to "this Agreement," "hereunder,"
"hereof," "herein" or words of like import shall mean and be a reference to the
Agreement as amended hereby.

II.       Amendment to the Agreement.
          -------------------------- 

          The Agreement shall be supplemented and amended as follows:

          1.   Subsection (d) of Section 1 is hereby deleted in its entirety;

          2.   Subsection (k) of Section 1 is hereby deleted in its entirety;

          3.   Section 3(a) is hereby amended and restated in its entirety as
               follows:

               "(a) commencing on the Compensation Start Date, the Executive
               shall receive an annual salary equal to $215,000, subject to
               adjustment as provided in subsection (c) below (as so adjusted
               from time to time, the "Base Salary"), payable monthly;"

          4.   Subsection (b) of Section 3 is hereby deleted in its entirety;

          5.   Section 3(c) is hereby amended and restated in its entirety as
               follows:

               "(c) the Base Salary shall be increased within thirty (30) days
               after completion of the Company's yearly audit and a report
               thereon by the Company's independent auditors to the Audit
               Committee each year during the Employment Period by an amount, if
               any, determined by the Compensation Committee in its sole
               discretion;"

          6.   Section 3(d) is hereby amended and restated in its entirety as
               follows:

               "(d) the Executive shall be eligible to receive an annual bonus
               in an amount determined by the Compensation Committee in its sole
               discretion, payable on or before thirty (30) days after
               completion of the Company's yearly audit and a report thereon by
               the Company's independent auditors to the Audit Committee each
               year during the Employment Period;"
<PAGE>
 
          IN WITNESS WHEREOF, this Amendment One has been executed and is
effective as of the date first above written.

REDMAN INDUSTRIES, INC.                          ROBERT M. LINTON


By: /S/ Fergus J. Walker                         /S/ Robert L. Linton
    ------------------------                         --------------------
    Fergus J. Walker
    Executive Vice President


REDMAN MANAGEMENT SERVICES REDMAN HOMES, INC.
BUSINESS TRUST


By: /S/Fergus J. Walker                          By: /S/Fergus J. Walker
    ---------------------                            --------------------
Name: Fergus J. Walker                           Name: Fergus J. Walker
      -------------------------                        -------------------------
Title: Executive Vice President                  Title: Executive Vice President
       ------------------------                         ------------------------

<PAGE>
 
                                                                    EXHIBIT 10.2

                                 AMENDMENT ONE
                                      TO
                        EXECUTIVE EMPLOYMENT AGREEMENT
          THIS AMENDMENT ("Amendment One") is made and entered into as of the
18th day of July 1996, by and between Redman Industries, Inc., a Delaware
Corporation ("RII"), Redman Management Services Business Trust, a Delaware
business trust and Redman Homes, Inc., a Delaware Corporation (hereinafter,
collectively with RII and their respective successors, referred to as the
"Company"), and Thomas W. Sturgess (hereinafter referred to as the "Executive").

                                   RECITALS

          WHEREAS, as of January 1, 1995, the Company and Executive executed
that certain Executive Employment Agreement (the "Agreement"); and

          WHEREAS, the parties hereto wish to amend the Agreement pursuant to
the terms and conditions set forth herein..

                                  AGREEMENTS

          NOW, THEREFORE, in consideration of the premises, the parties hereby
covenant and agree as follows:

I.        Reaffirmation of the Agreement.
          ------------------------------ 

          Except as otherwise expressly provided herein, the Agreement shall
remain in full force and effect upon the same terms and provisions contained
therein. In case of any conflict between the provisions of this Amendment One
and the Agreement, the provisions of this Amendment One shall apply. Any
capitalized terms not defined in this Amendment One shall have the meanings
given those terms in the Agreement. Upon and after the effectiveness of this
Amendment One, each reference in the Agreement to "this Agreement," "hereunder,"
"hereof," "herein" or words of like import shall mean and be a reference to the
Agreement as amended hereby.

II.       Amendment to the Agreement.
          -------------------------- 

          The Agreement shall be supplemented and amended as follows:

          1.   Subsection (d) of Section 1 is hereby deleted in its entirety;

          2.   Subsection (k) of Section 1 is hereby deleted in its entirety;

          3.   Section 2 is hereby amended and restated in its entirety as
               follows:
 
               2.   Duties. During the Employment Period, the Executive shall
                    ------
                    serve as the Chairman of the Board. The parties hereto
                    acknowledge that the Executive has other business interests
                    and will not, and will not be required to, devote his full
                    business time and attention to the Company.

          4.   Section 3(a) is hereby amended and restated in its entirety as
               follows:

               "(a) commencing on the Compensation Start Date, the Executive
               shall receive an annual salary equal to $125,000, subject to
               adjustment as provided in subsection (c) below (as so adjusted
               from time to time, the "Base Salary"), payable monthly;"

          5.   Subsection (b) of Section 3 is hereby deleted in its entirety;

          6.   Section 3(c) is hereby amended and restated in its entirety as
               follows:

               "(c) the Base Salary shall be increased within thirty (30) days
               after completion of the Company's yearly audit and a report
               thereon by the Company's independent auditors to the Audit
               Committee each year during the Employment Period by an amount, if
               any, determined by the Compensation Committee in its sole
               discretion;"
<PAGE>
 
          7.   Section 3(d) is hereby amended and restated in its entirety as
               follows:

               "(d) the Executive shall be eligible to receive an annual bonus
               in an amount determined by the Compensation Committee in its sole
               discretion, payable on or before thirty (30) days after
               completion of the Company's yearly audit and a report thereon by
               the Company's independent auditors to the Audit Committee each
               year during the Employment Period;"

          IN WITNESS WHEREOF, this Amendment One has been executed and is
effective as of the date first above written.

REDMAN INDUSTRIES, INC.                  THOMAS W. STURGESS


By: /S/ Robert M. Linton                 /S/ Thomas W. Sturgess
   ---------------------                 ----------------------
Name: Robert M. Linton
      ------------------
Title: President
       -----------------

REDMAN MANAGEMENT SERVICES               REDMAN HOMES, INC.
BUSINESS TRUST


By: /S/ Robert M. Linton                 By: /S/ Robert M. Linton
    --------------------                     --------------------
Name: Robert M. Linton                   Name: Robert M. Linton
      ------------------                       ------------------
Title: President                         Title: President
       -----------------                        -----------------
 

<PAGE>
 
                                                                    EXHIBIT 10.3

                                 AMENDMENT ONE
                                      TO
                        EXECUTIVE EMPLOYMENT AGREEMENT


     THIS AMENDMENT ("Amendment One") is made and entered into as of the 18th
day of July 1996, by and between Redman Industries, Inc., a Delaware Corporation
("RII"), Redman Management Services Business Trust, a Delaware business trust
and Redman Homes, Inc., a Delaware Corporation (hereinafter, collectively with
RII and their respective successors, referred to as the "Company"), and Fergus
J. Walker (hereinafter referred to as the "Executive").

                                     RECITALS

     WHEREAS, as of January 1, 1995, the Company and Executive executed that
certain Executive Employment Agreement (the "Agreement"); and

     WHEREAS,  the parties hereto wish to amend the Agreement pursuant to the
terms and conditions set forth herein..

                                   AGREEMENTS

     NOW, THEREFORE, in consideration of the premises, the parties hereby
covenant and agree as follows:

I.   Reaffirmation of the Agreement.
     ------------------------------ 

     Except as otherwise expressly provided herein, the Agreement shall remain
in full force and effect upon the same terms and provisions contained therein.
In case of any conflict between the provisions of this Amendment One and the
Agreement, the provisions of this Amendment One shall apply.  Any capitalized
terms not defined in this Amendment One shall have the meanings given those
terms in the Agreement.  Upon and after the effectiveness of this Amendment One,
each reference in the Agreement to "this Agreement," "hereunder," "hereof,"
"herein" or words of like import shall mean and be a reference to the Agreement
as amended hereby.

II.  Amendment to the Agreement.
     -------------------------- 

     The Agreement shall be supplemented and amended as follows:

     1.   Subsection (d) of Section 1 is hereby deleted in its entirety;

     2.   Subsection (k) of Section 1 is hereby deleted in its entirety;

     3.   Section 3(a) is hereby amended and restated in its entirety as
          follows:

          "(a)  commencing on the Compensation Start Date, the Executive shall
          receive an annual salary equal to $190,000, subject to adjustment as
          provided in subsection (c) below (as so adjusted from time to time,
          the "Base Salary"), payable monthly;"

     4.   Subsection (b) of Section 3 is hereby deleted in its entirety;

     5.   Section 3(c) is hereby amended and restated in its entirety as
          follows:

          "(c)  the Base Salary shall be increased within thirty (30) days after
          completion of the Company's yearly audit and a report thereon by the
          Company's independent auditors to the Audit Committee each year during
          the Employment Period by an amount, if any, determined by the
          Compensation Committee in its sole discretion;"

     6.   Section 3(d) is hereby amended and restated in its entirety as
          follows:

          "(d)  the Executive shall be eligible to receive an annual bonus in an
          amount determined by the Compensation Committee in its sole
          discretion, payable on or before thirty (30) days after completion of
          the Company's yearly audit and a report thereon by the Company's
          independent auditors to the Audit Committee each year during the
          Employment Period;"
<PAGE>
 
     IN WITNESS WHEREOF, this Amendment One has been executed and is effective
as of the date first above written.

REDMAN INDUSTRIES, INC.                 FERGUS J. WALKER


By: /S/Robert M. LInton                 /S/Fergus J. Walker
    -------------------                 -------------------
    Robert M. Linton
    President

REDMAN MANAGEMENT SERVICES              REDMAN HOMES, INC.
BUSINESS TRUST


By: /S/Robert M. Linton                 By: /S/Robert M. Linton
    -------------------                    --------------------

Name: Robert M. Linton                  Name: Robert M. Linton
      -----------------                       -----------------
Title: President                        Title: President
       ----------------                        ----------------

<PAGE>
 
                                                                      EXHIBIT 11


REDMAN INDUSTRIES, INC.
EXHIBIT (11)-STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE

<TABLE> 
<CAPTION> 

                                           THREE MONTHS ENDED
                                         JUNE 28,        JUNE 30,
                                           1996            1995
                                        --------------------------
<S>                                     <C>             <C> 
PRIMARY:

AVERAGE SHARES OUTSTANDING              13,359,862      14,188,570

NET EFFECT OF DILUTIVE 
  STOCK OPTIONS BASED
  ON THE TREASURY STOCK
  METHOD USING AVERAGE
  MARKET PRICE                             245,947         156,250
                                        --------------------------

TOTALS                                  13,605,809      14,344,820
                                        ==========================

NET INCOME                              $7,347,000      $6,058,000
                                        ==========================

PER SHARE AMOUNT                             $0.54           $0.42
                                        ==========================

FULLY DILUTED:

COMMON STOCK EQUIVALENTS ARE LESS THAN 3% DILUTIVE.
</TABLE> 


<TABLE> <S> <C>

<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
       
<S>                             <C>
<PERIOD-TYPE>                   3-MOS
<FISCAL-YEAR-END>                          MAR-29-1996
<PERIOD-START>                             MAR-30-1996
<PERIOD-END>                               JUN-30-1996
<CASH>                                          17,726
<SECURITIES>                                     9,929
<RECEIVABLES>                                   44,755
<ALLOWANCES>                                         0
<INVENTORY>                                     23,989
<CURRENT-ASSETS>                               106,704
<PP&E>                                          67,962
<DEPRECIATION>                                 (25,636)
<TOTAL-ASSETS>                                 173,616
<CURRENT-LIABILITIES>                           82,789
<BONDS>                                              0
                                0
                                          0
<COMMON>                                           145
<OTHER-SE>                                      69,830
<TOTAL-LIABILITY-AND-EQUITY>                   173,616
<SALES>                                        172,000
<TOTAL-REVENUES>                               172,000
<CGS>                                          135,297
<TOTAL-COSTS>                                  160,043
<OTHER-EXPENSES>                                     0
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                                (391)
<INCOME-PRETAX>                                 12,348
<INCOME-TAX>                                    (5,001)
<INCOME-CONTINUING>                              7,347
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                     7,347
<EPS-PRIMARY>                                     0.54
<EPS-DILUTED>                                     0.54
        

</TABLE>


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