<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 December 27, 1996
Commission file number 0-26188
PALM HARBOR HOMES, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 59-1036634
- --------------------------------------------- ----------------------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification Number)
15303 Dallas Parkway, Suite 800, Dallas, Texas 75248
--------------------------------------------------------
(Address of principal executive offices) (Zip code)
972-991-2422
----------------------------------------------------
(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 February 3, 1997 -
15,096,308.
<PAGE> 2
PALM HARBOR HOMES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
DECEMBER 27, MARCH 29,
1996 1996
----------- -----------
Unaudited
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 29,615 $ 23,441
Investments 6,456 5,087
Due from affiliate 3,848
Receivables 43,948 33,052
Inventories 58,006 18,863
Other current assets 5,016 4,693
----------- -----------
Total current assets 143,041 88,984
Other assets 34,906 19,535
Property, plant and equipment, net 48,661 35,193
----------- -----------
TOTAL ASSETS $ 226,608 $ 143,712
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts and flooring payable $ 71,217 $ 34,748
Accrued liabilities 33,989 31,323
Current portion of long-term debt 197 186
----------- -----------
Total current liabilities 105,403 66,257
Long-term debt, less current portion 3,634 3,784
Deferred income taxes 4,602 4,689
Shareholders' equity:
Common stock, $.01 par value 151 109
Additional paid-in capital 48,994 23,012
Retained earnings 64,056 46,272
----------- -----------
113,201 69,393
Less treasury shares (194) (205)
Notes receivable from shareholders (38) (206)
----------- -----------
Total shareholders' equity 112,969 68,982
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 226,608 $ 143,712
=========== ===========
</TABLE>
See accompanying notes.
1
<PAGE> 3
PALM HARBOR HOMES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 27, DECEMBER 29, DECEMBER 27, DECEMBER 29,
1996 1995 1996 1995
----------- ----------- ----------- -----------
Unaudited Unaudited
<S> <C> <C> <C> <C>
Net sales $ 150,796 $ 104,976 $ 424,248 $ 306,989
Cost of products sold 117,415 87,291 333,756 255,703
Selling, general and
administrative expenses 23,276 13,109 63,994 37,955
----------- ----------- ----------- -----------
Income from operations 10,105 4,576 26,498 13,331
Interest expense (881) (140) (1,043) (670)
Other income 719 413 1,527 857
----------- ----------- ----------- -----------
Income before income from
affiliate and income taxes 9,943 4,849 26,982 13,518
Income from affiliate 761 1,049 2,431
----------- ----------- ----------- -----------
Income before income taxes 9,943 5,610 28,031 15,949
Income tax expense (3,924) (2,029) (10,247) (5,315)
----------- ----------- ----------- -----------
Net income $ 6,019 $ 3,581 $ 17,784 $ 10,634
=========== =========== =========== ===========
Income per common share $ .40 $ .27 $ 1.22 $ .86
=========== =========== =========== ===========
Weighted average common
shares outstanding 15,103 13,155 14,617 12,435
=========== =========== =========== ===========
</TABLE>
See accompanying notes.
2
<PAGE> 4
PALM HARBOR HOMES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
DECEMBER 27, DECEMBER 29,
1996 1995
----------- -----------
Unaudited
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 17,784 $ 10,634
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 3,439 2,196
Deferred income taxes (120) 86
Income from affiliate (1,049) (2,431)
(Gain)loss on disposition of assets (21) 33
Changes in operating assets and liabilities:
Trade accounts receivable 4,608 (870)
Due from affiliate 3,848 (1,401)
Inventories (12,704) (3,583)
Other current assets 26 536
Other assets 7,060 (1,391)
Accounts and flooring payable
and accrued expenses (665) (1,448)
----------- -----------
Net cash provided by operating activities 22,206 2,361
INVESTING ACTIVITIES
Purchases of property, plant and equipment (14,120) (3,578)
Purchase of Energy Efficient Housing, Inc.,
Standard Casualty Company and Newco
Homes, Inc. (net of cash acquired
and stock issued) (3,284)
Purchases of short-term investments (10,370) (3,314)
Sales of short-term investments 11,655
Proceeds from disposition of assets 21 28
----------- -----------
Net cash used in investing activities (16,098) (6,864)
FINANCING ACTIVITIES
Proceeds from sale of stock, net 21,508
Principal payments on long-term debt (139) (5,700)
Notes receivable from shareholders, net 168 (254)
Net sales (purchases) of treasury stock 37 (102)
----------- -----------
Net cash provided by financing activities 66 15,452
----------- -----------
Net increase in cash and cash equivalents 6,174 10,949
Cash and cash equivalents at beginning of period 23,441 11,421
----------- -----------
Cash and cash equivalents at end of period $ 29,615 $ 22,370
=========== ===========
Supplemental schedule of non-cash investing activities:
Common stock issuance for acquisition of Energy
Efficient Housing, Inc. and Newco Homes, Inc. $ 25,998
</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. 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 August 1, 1996, the Company acquired the remaining 58.4% of Newco
Homes, Inc. ("Newco"), 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 consisted of $17.3 million cash and 1,444,445 shares
of the Company's common stock (after giving effect of the stock dividend
below). Prior to the acquisition of the remaining 58.4% of Newco, the
Company recorded its 41.6% equity interest in the net earnings of Newco
as income from affiliate.
3. Stock Dividend
On July 12, 1996, the Board of Directors of the Company declared a
5-for-4 stock split effected in the form of a 25% stock dividend to
shareholders of record on July 26, 1996. The stock dividend was
paid on August 2, 1996. Historical common share and per share data for
all periods presented have been adjusted to reflect the stock split.
4
<PAGE> 6
4. Inventories
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 27, MARCH 29,
1996 1996
---------- -----------
<S> <C> <C>
Raw materials $ 6,982 $ 7,014
Work in progress 2,562 2,405
Finished goods - manufacturing 195 1,062
- retail 48,267 8,382
-------- ---------
$ 58,006 $ 18,863
======== =========
</TABLE>
5. Flooring Payable
The Company has revolving lines of credit totaling $67.5 million from
financial institutions, with interest rates ranging from prime to prime
plus one percent, for floor planning of homes at the Company's retail
superstores. The Company had $38.7 million outstanding on these lines
of credit as of December 27, 1996 compared to $3.4 million at March 29,
1996.
6. Reclassifications
Certain prior period amounts have been reclassified to conform to the
current period presentation.
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 NINE MONTHS ENDED
DECEMBER 27, DECEMBER 29, DECEMBER 27, DECEMBER 29,
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of products sold 77.9 83.1 78.7 83.3
----------- ----------- ----------- -----------
Gross profit 22.1 16.9 21.3 16.7
Selling, general and
administrative expenses 15.4 12.5 15.1 12.4
----------- ----------- ----------- -----------
Income from operations 6.7 4.4 6.2 4.3
Interest expense (0.6) (0.1) (0.2) (0.2)
Other income 0.5 0.3 0.4 0.3
----------- ----------- ----------- -----------
Income before income from
affiliate and income taxes 6.6 4.6 6.4 4.4
Income from affiliate 0.0 0.7 0.2 0.8
Income tax expense (2.6) (1.9) (2.4) (1.7)
----------- ----------- ----------- -----------
Net income 4.0% 3.4% 4.2% 3.5%
=========== =========== =========== ===========
</TABLE>
6
<PAGE> 8
The following table reflects the percentage changes in retail sales by
Company-owned superstores and in wholesale sales on a pro forma basis as if the
results of Newco and Energy Efficient Housing were consolidated for both
periods presented. It also shows percentage increases in the average number of
Company-owned superstores and in average home price. Comparative percentages
for the third quarters and nine months ended December 27, 1996 and December 29,
1995 were as follows:
<TABLE>
<CAPTION>
Pro forma Pro forma
Third Quarter of First Nine Months of
Fiscal 1997 vs 1996 Fiscal 1997 vs 1996
------------------- -------------------
<S> <C> <C>
Retail:
Dollar sales +27.2% +20.8%
Weighted average number
of superstores +36.8% +30.2%
Average home price +7.2% +9.3%
Wholesale:
Dollar sales +12.9% +18.7%
Average home price + 0.7% +4.4%
</TABLE>
THREE MONTHS ENDED DECEMBER 27, 1996 COMPARED TO THREE MONTHS ENDED DECEMBER
29, 1995
NET SALES. Net sales increased 43.7% to $150.8 million in the third
quarter of fiscal 1997 from $105.0 million in the third quarter of fiscal 1996.
Of this increase, 30.2% was a result of the acquisition of the remaining 58.4%
of Newco. The 43.7% increase in net sales reflects an 18.2% increase in the
volume of homes sold and a 25.5% increase in the number of the Company's homes
sold through Company-owned retail superstores. In addition to the Company's
acquisitions, the increase in volume and retail sales of the Company's homes
through Company-owned superstores resulted from the opening of new retail
superstores and an increase in production at manufacturing facilities.
GROSS PROFIT. Gross profit increased 88.8% to $33.4 million in the
quarter ended December 27, 1996 compared to $17.7 million in the quarter ended
December 29, 1995. During the same period, gross profit margin as a percentage
of net sales increased to 22.1% compared to 16.9%. This increase was primarily
the result of selling 33% of the Company's homes through Company-owned retail
superstores in the third quarter of fiscal 1997 versus 7% in the third quarter
of fiscal 1996.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased 77.6% to $23.3 million in the quarter ended
December 27, 1996 from $13.1 million in the quarter ended December 29, 1995,
primarily due to operating expenses related to acquired superstores and
increased sales. As a percentage of net sales, selling, general and
administrative expenses increased to 15.4% in the third quarter of fiscal 1997
from 12.5% in the third quarter of fiscal 1996. Of the 2.9% increase,
approximately 1.7% was related to performance compensation based on operating
results at acquired superstores.
7
<PAGE> 9
INCOME FROM OPERATIONS. As a result of the foregoing factors, income
from operations increased 120.8% to $10.1 million in the quarter ended December
27, 1996 compared to $4.6 million in the quarter ended December 29, 1995.
INCOME FROM AFFILIATE. Income from affiliate was $0.76 million in the
quarter ended December 29, 1995 compared to $0.0 in the quarter ended December
27, 1996. The decrease was due to consolidating Newco's operating results with
the Company's operations beginning in the second quarter of fiscal 1997. See
"Acquisitions" in Notes to Condensed Consolidated Financial Statements.
NINE MONTHS ENDED DECEMBER 27, 1996 COMPARED TO NINE MONTHS ENDED DECEMBER 29,
1995
NET SALES. Net sales increased 38.2% to $424.2 million in the nine
months ended December 27, 1996 from $307.0 million in the nine months ended
December 29, 1995. Of this increase, 21.1% was a result of the acquisition of
the remaining 58.4% of Newco. The 38.2% increase in net sales reflects an
18.9% increase in the volume of homes sold and a 24.9% increase in the number
of the Company's homes sold through Company-owned retail superstores. In
addition to the Company's acquisitions, the increase in volume and retail sales
of the Company's homes through Company-owned superstores resulted from the
opening of new retail superstores and an increase in production at
manufacturing facilities.
GROSS PROFIT. Gross profit increased 76.5% to $90.5 million in the nine
months ended December 27, 1996 compared to $51.3 million in the nine months
ended December 29, 1995. During the same period, gross profit margin as a
percentage of sales increased to 21.3% from 16.7%. This increase was primarily
the result of selling 33% of the Company's homes through Company-owned retail
superstores in the first nine months of fiscal 1997 versus 8% in the first nine
months of fiscal 1996.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased 68.6% to $64.0 million in the nine months
ended December 27, 1996 from $38.0 million in the nine months ended December
29, 1995, primarily due to operating expenses related to the acquired
superstores, increased sales and start-up expenses for a new manufacturing
facility. As a percentage of net sales, selling, general and administrative
expenses increased to 15.1% in the nine months ended December 27, 1996 from
12.4% in the nine months ended December 29, 1995. Of the 2.7% increase,
approximately 1.6% was related to performance compensation based on operating
results at acquired superstores.
INCOME FROM OPERATIONS. As a result of the foregoing factors, income
from operations increased 98.8% to $26.5 million in the nine months ended
December 27, 1996 compared to $13.3 million in the nine months ended December
29, 1995.
INCOME FROM AFFILIATE. Income from affiliate decreased 56.9% to $1.0
million in the nine months ended December 27, 1996 from $2.4 million in the
nine months ended December 29, 1995. The decrease was due to consolidating
Newco's operating results with the Company's operations beginning in the second
quarter of fiscal 1997. See "Acquisitions" in Notes to Condensed Consolidated
Financial Statements.
8
<PAGE> 10
LIQUIDITY AND CAPITAL RESOURCES. The Company has revolving lines of
credit totaling $67.5 million from financial institutions, with interest rates
ranging from prime to prime plus one percent, for floor planning of homes at
the Company's retail superstores. The Company had $38.7 million outstanding on
these lines of credit as of December 27, 1996 compared to $3.4 million at March
29, 1996.
The Company believes that cash flow from operations and floor plan
financing will be adequate to support its working capital and planned capital
expenditures 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 27A 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.
9
<PAGE> 11
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) Reports on Form 8-K - Not applicable
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: February 3,1997
Palm Harbor Homes, Inc.
----------------------------------
(Registrant)
By: /s/ Kelly Tacke
----------------------------------
Kelly Tacke
Chief Financial and Accounting
Officer
By: /s/ Lee Posey
----------------------------------
Lee Posey
Chairman and Chief Executive
Officer
10
<PAGE> 12
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
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 DECEMBER 27, 1996 AND CONSOLIDATED
STATEMENT OF INCOME FOR THE NINE MONTHS ENDED DECEMBER 27, 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> 9-MOS
<FISCAL-YEAR-END> MAR-28-1997
<PERIOD-START> MAR-30-1996
<PERIOD-END> DEC-27-1996
<CASH> 29,615
<SECURITIES> 6,456
<RECEIVABLES> 43,948
<ALLOWANCES> 0
<INVENTORY> 58,006
<CURRENT-ASSETS> 143,041
<PP&E> 48,661
<DEPRECIATION> 0
<TOTAL-ASSETS> 226,608
<CURRENT-LIABILITIES> 105,403
<BONDS> 3,634
0
0
<COMMON> 151
<OTHER-SE> 113,050
<TOTAL-LIABILITY-AND-EQUITY> 226,608
<SALES> 424,248
<TOTAL-REVENUES> 424,248
<CGS> 333,756
<TOTAL-COSTS> 333,756
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,043
<INCOME-PRETAX> 26,982
<INCOME-TAX> 10,247
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,784
<EPS-PRIMARY> 1.22
<EPS-DILUTED> 1.22
</TABLE>
