<PAGE> 1
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
Commission file number 0-26188
PALM HARBOR HOMES, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Florida 59-1036634
- --------------------------------------------- ---------------------------------------
(State or other jurisdiction of incorporation (I.R.S. Employer Identification Number)
or organization)
</TABLE>
15303 Dallas Parkway, Suite 800, Dallas, Texas 75248
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(Address of principal executive offices) (Zip code)
214-991-2422
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(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 of 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) Yes X No and (2) has
--- ---
been subject to such filing requirements for the past 90 days. Yes X No .
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Shares of common stock $.01 par value, outstanding on August 8, 1996 -
15,096,825.
<PAGE> 2
PALM HARBOR HOMES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
JUNE 28, MARCH 29,
1996 1996
----------- -----------
Unaudited
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 32,030 $ 23,441
Investments 6,592 5,087
Due from affiliate 4,636 3,848
Receivables 39,242 33,052
Inventories 25,128 18,863
Other current assets 4,358 4,693
--------- ---------
Total current assets 111,986 88,984
Other assets 20,304 19,535
Property, plant and equipment, net 39,947 35,193
--------- ---------
TOTAL ASSETS $ 172,237 $ 143,712
======== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $ 50,710 $ 34,748
Accrued liabilities 36,855 31,323
Current portion of long-term debt 190 186
--------- ---------
Total current liabilities 87,755 66,257
Long-term debt, less current portion 3,735 3,784
Deferred income taxes 4,723 4,689
Shareholders' equity:
Common stock, $.01 par value 109 109
Additional paid-in capital 24,520 23,012
Retained earnings 51,736 46,272
--------- ---------
76,365 69,393
Less treasury shares (183) (205)
Notes receivable from shareholders (158) (206)
--------- ---------
Total shareholders' equity 76,024 68,982
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 172,237 $ 143,712
========= =========
</TABLE>
See accompanying notes.
1
<PAGE> 3
PALM HARBOR HOMES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 28, JUNE 30,
1996 1995
------------ -----------
Unaudited
<S> <C> <C>
Net sales $120,735 $98,766
Cost of products sold 98,080 82,432
Selling, general and administrative
expenses 15,932 12,101
-------- -------
Income from operations 6,723 4,233
Interest expense (77) (262)
Other income 365 233
-------- -------
Income before income from affiliate
and income taxes 7,011 4,204
Income from affiliate 1,049 817
-------- -------
Income before income taxes 8,060 5,021
Income tax expense 2,596 1,585
-------- -------
Net income $ 5,464 $ 3,436
======== =======
Income per common share $ 0.50 $ 0.36
======== =======
Weighted average common shares
outstanding 10,925 9,561
====== =====
</TABLE>
See accompanying notes.
2
<PAGE> 4
PALM HARBOR HOMES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
JUNE 28, JUNE 30,
1996 1995
------------ -------------
Unaudited
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 5,464 $ 3,436
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 942 862
Deferred income taxes 1 (18)
Income from affiliate (1,049) (817)
Gain on disposition of assets (6) (4)
Changes in operating assets and liabilities:
Trade accounts receivable (2,545) (2,673)
Due from affiliate (788) (1,195)
Inventories 115 (1,821)
Other current assets 569 364
Other assets 3,186 (426)
Accounts payable and accrued expenses 8,683 6,162
------- -------
Net cash provided by operating activities 14,572 3,870
INVESTING ACTIVITIES
Purchases of property, plant and equipment (4,960) (1,816)
Purchase of Energy Efficient Housing, Inc. and
Standard Casualty Company (net of cash acquired) (2,229) --
Purchases of short-term investments (3,371) --
Sales of short-term investments 4,520 140
Proceeds from disposition of assets 6 4
------- -------
Net cash used in investing activities (6,034) (1,672)
FINANCING ACTIVITIES
Principal payments on debt (45) (2,000)
Net sales (purchases) of treasury stock 48 --
Notes receivable from shareholders, net 48 --
------- -------
Net cash provided by (used in) financing activities 51 (2,000)
------- -------
Net increase in cash and cash equivalents 8,589 198
Cash and cash equivalents at beginning of period 23,441 11,421
------- -------
Cash and cash equivalents at end of period $32,030 $11,619
======= =======
Supplemental schedule of non-cash investing activities:
Common Stock issuance for acquisition of
Energy Efficient Housing, Inc. $1,482 --
</TABLE>
See accompanying notes.
3
<PAGE> 5
PALM HARBOR HOMES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The condensed consolidated financial statements reflect all
adjustments, which included only normal recurring adjustments, which
are, in the opinion of management, necessary for a fair and accurate
presentation. Certain footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been omitted. The condensed financial
statements should be read in conjunction with the audited financial
statements for the year ended March 29, 1996. Results of operations
for any interim period are not necessarily indicative of results to be
expected for a full year.
2. Inventories
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
JUNE 28, MARCH 29,
1996 1996
---------- -----------
Unaudited
<S> <C> <C>
Raw materials $ 6,215 $ 7,014
Work in progress 2,550 2,405
Finished goods - manufacturing 823 1,062
- retail 15,540 8,382
------- -------
$25,128 $18,863
======= =======
</TABLE>
4. Investments
Summarized financial information with respect to Newco, a Texas-based
retailer of which the Company owns 41.6%, is as follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30, JUNE 30,
1996 1995
---------- ----------
Unaudited
<S> <C> <C>
Net sales $52,317 $47,214
Net income 2,331 1,985
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
1996 1996
---------- ----------
Unaudited
<S> <C> <C>
Total assets $52,428 $45,246
Shareholders' equity 25,813 23,482
</TABLE>
4
<PAGE> 6
The Company's equity investment in Newco totaled $10,363,000 and
$9,315,000 at June 28,1996 and March 29, 1996, respectively, and is
included in other noncurrent assets. See note 5.
5. Acquisitions
On April 12, 1996, the Company acquired Energy Efficient Housing,
Inc., a retailer consisting of eight superstores in North Carolina,
for a combination of cash and 68,301 common shares of the Company.
On May 31, 1996, the Company acquired Standard Casualty Company, a
property and casualty insurer of manufactured homes headquartered in
Texas.
On August 1, 1996, the Company acquired the remaining 58.4% of Newco
Homes, Inc., a Texas-based retailer of manufactured homes. The
Company had previously owned 41.6% of Newco's outstanding shares. The
Company's purchase price for the remaining 58.4% of Newco's
outstanding shares was valued at approximately $52 million, consisting
of $17.3 million cash and 1,444,445 common shares of the Company
(after giving effect of the stock dividend below).
6. Stock Dividend
On July 12, 1996, the Board of Directors of the Company declared a
5-for-4 stock split to be effected in the form of a 25% stock dividend
to shareholders of record on July 26, 1996. The stock dividend is
payable on August 2, 1996. Earnings per share for the three months
ended June 28, 1996 and June 30, 1995 do not reflect the 25% stock
dividend.
5
<PAGE> 7
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
See pages 1 through 5.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
The following table sets forth certain items of the Company's statement of
income as a percentage of net sales for the period indicated.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 28, JUNE 30,
1996 1995
-------- -------
<S> <C> <C>
Net sales 100.0% 100.0%
Cost of products sold 81.2 83.5
------ ------
Gross profit 18.8 16.5
Selling, general and administrative
expenses 13.2 12.2
------ ------
Income from operations 5.6 4.3
Interest expense (0.1) (0.3)
Other income 0.3 0.3
------- -------
Income before income from
affiliate and income taxes 5.8 4.3
Income from affiliate 0.9 0.8
Income tax expense 2.2 1.6
------- -------
Net income 4.5% 3.5%
======= =======
</TABLE>
THREE MONTHS ENDED JUNE 28, 1996 COMPARED TO THREE MONTHS ENDED JUNE 30, 1995
NET SALES. Net sales increased 22.2% to $120.7 million in the first
quarter of fiscal 1997 from $98.8 million in the first quarter of fiscal 1996.
The 22.2% increase in net sales reflects a 12.9% increase in the volume of
homes sold and an 8.3% increase in selling prices. The increase in volume and
average selling prices is due to the growth in the Company's retail operations
and the continued maturation of manufacturing facilities. The number of
Company-owned or affiliated retail superstores (excluding the 21 operated by
Newco) increased from 21 in the first quarter of fiscal 1996 to 30 in the first
quarter of fiscal 1997 and the volume of homes sold increased 28%.
GROSS PROFIT. Increased sales volume contributed to an increase in gross
profit of 38.7% to $22.7 million in the quarter ended June 28, 1996 compared to
$16.3 million in the quarter ended June 30,1995. During the same period gross
profit margin as a percentage of net sales
6
<PAGE> 8
increased to 18.8% compared to 16.5%. The gross profit percentage for the
first quarter of fiscal 1997 increased largely due to the expansion of the
Company's retail operations.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Primarily due to start-up
expenses for seven retail superstores, as well as increased sales and increased
provisions for management bonuses, selling, general and administrative expenses
increased 31.7% to $15.9 million in the quarter ended June 28, 1996 from $12.1
million in the quarter ended June 30, 1995. Selling, general and
administrative expenses as a percentage of net sales increased to 13.2% in the
first quarter of fiscal 1997 from 12.2% in the first quarter of fiscal 1996.
INCOME FROM OPERATIONS. As a result of the foregoing factors, income
from operations increased 58.8% to $6.7 million in the quarter ended June 28,
1996 compared to $4.2 million in the quarter ended June 30, 1995.
INCOME FROM AFFILIATE. Income from affiliate, which consists of the
Company's 41.6% equity interest in the net earnings of Newco, increased 28.4%
to $1.05 million in the quarter ended June 28, 1996 from $0.82 million in the
quarter ended June 30, 1995. Newco's volume of homes sold increased 1.2% and
average selling prices increased 9.5%.
LIQUIDITY AND CAPITAL RESOURCES. On August 1, 1996, the Company acquired
the remaining 58.4% of Newco Homes, Inc., a Texas-based retailer of
manufactured homes. The Company had previously owned 41.6% of Newco's
outstanding shares. The purchase price of the remaining 58.4% of Newco's
shares was valued at approximately $52 million, consisting of $17.3 million in
cash and the balance in common shares of the Company.
The Company believes that cash flow from operations and the increase in
floor plan financing for its retail inventories will be adequate to support its
working capital and currently planned capital expenditures needs in the
foreseeable future. However, because future cash flows and the availability of
financing will depend on a number of factors, including prevailing economic and
financial conditions, business and other factors beyond the Company's control,
no assurances can be given in this regard.
FORWARD-LOOKING INFORMATION
Certain statements contained in this report are forward-looking
statements within the meaning of Section 17A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Management is unaware of any
trends or conditions that could have a material adverse effect on the Company's
consolidated financial position, future results of operations or liquidity.
However, investors should also be aware of factors which could have a negative
impact on prospects and the consistency of progress. These include political,
economic or other factors such as inflation rates, recessionary or expansive
trends, taxes and regulations and laws affecting the business in each of the
Company's markets; competitive product, advertising, promotional and pricing
activity; dependence on the rate of development and degree of acceptance of new
product introductions in the marketplace; and the difficulty of forecasting
sales at certain times in certain markets.
7
<PAGE> 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - Not applicable
Item 2. Changes in Securities - Not applicable
Item 3. Defaults upon Senior Securities - Not applicable
Item 4. Submission of Matters to a Vote by Security Holders - Not
applicable
Item 5. Other Information - Not applicable
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit 27 -- Financial Data Schedule (EDGAR filing only).
(b) A report on Form 8-K, dated July 5, 1996, was filed by
the registrant subsequent to the quarter ended for which
this Report is filed; such Report contained information
under Item 5 (Other Events) and included as an Exhibit
under Item 7 a copy of a press release issued by the
registrant.
A report on Form 8-K, dated August 1, 1996, was filed by
the registrant subsequent to the quarter ended for which
this Report is filed; such Report contained information
under Item 2 (Acquisition or Disposition of Assets) and
included under Item 7 financial statements of businesses
acquired and as Exhibits a copy of the merger documents
and a press release issued by the registrant.
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 thereto duly authorized.
Date: August 8, 1996
Palm Harbor Homes, Inc.
---------------------------------
(Registrant)
By: /s/ KELLY TACKE
---------------------------------
Kelly Tacke
Chief Financial and Accounting
Officer
By: /s/ LEE POSEY
---------------------------------
Lee Posey
Chairman & Chief Executive
Officer
8
<PAGE> 10
Index to Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
Ex. 27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED BALANCE SHEET AS OF JUNE 28, 1996 AND CONSOLIDATED
STATEMENT OF INCOME FOR THE THREE MONTHS ENDED JUNE 28, 1996 LOCATED IN THE
COMPANY'S 10Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS AND THE NOTES THERETO.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-28-1997
<PERIOD-START> MAR-30-1996
<PERIOD-END> JUN-28-1996
<CASH> 32,030
<SECURITIES> 6,592
<RECEIVABLES> 39,242
<ALLOWANCES> 0
<INVENTORY> 25,128
<CURRENT-ASSETS> 111,986
<PP&E> 39,947
<DEPRECIATION> 0
<TOTAL-ASSETS> 172,237
<CURRENT-LIABILITIES> 87,755
<BONDS> 3,735
<COMMON> 109
0
0
<OTHER-SE> 76,256
<TOTAL-LIABILITY-AND-EQUITY> 172,237
<SALES> 120,735
<TOTAL-REVENUES> 120,735
<CGS> 98,080
<TOTAL-COSTS> 98,080
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (77)
<INCOME-PRETAX> 7,011
<INCOME-TAX> 2,596
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,464
<EPS-PRIMARY> .50
<EPS-DILUTED> .50
</TABLE>
