<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 27, 1997
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 (I.R.S. Employer
incorporation 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 July 28, 1997 -
18,871,045.
<PAGE> 2
PALM HARBOR HOMES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
JUNE 27, MARCH 28,
1997 1997
---------- ----------
Unaudited
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 42,371 $ 26,346
Investments 3,771 5,752
Receivables 52,067 53,424
Inventories 67,409 66,275
Other current assets 4,620 5,738
---------- ----------
Total current assets 170,238 157,535
Other assets 34,101 35,333
Property, plant and equipment, net 57,275 53,467
---------- ----------
TOTAL ASSETS $ 261,614 $ 246,335
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $ 43,290 $ 37,276
Floor plan payable 36,010 45,255
Accrued liabilities 46,445 35,572
Current portion of long-term debt 205 200
---------- ----------
Total current liabilities 125,950 118,303
Long-term debt, less current portion 3,529 3,583
Deferred income taxes 4,505 4,500
Shareholders' equity:
Common stock, $.01 par value 151 151
Additional paid-in capital 48,994 48,994
Retained earnings 78,679 71,011
---------- ----------
127,824 120,156
Less treasury shares (194) (194)
Notes receivable from shareholders (13)
---------- ----------
Total shareholders' equity 127,630 119,949
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 261,614 $ 246,335
========== ==========
</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
JUNE 27, JUNE 28,
1997 1996
---------- ----------
Unaudited
<S> <C> <C>
Net sales $ 159,097 $ 120,735
Cost of sales 118,561 98,080
Selling, general and administrative
expenses 27,569 15,633
---------- ----------
Income from operations 12,967 7,022
Interest expense (1,044) (376)
Other income 518 365
---------- ----------
Income before income from affiliate
and income taxes 12,441 7,011
Income from affiliate 1,049
---------- ----------
Income before income taxes 12,441 8,060
Income tax expense 4,773 2,596
---------- ----------
Net income $ 7,668 $ 5,464
========== ==========
Income per common share $ 0.51 $ 0.40
========== ==========
Weighted average common shares
outstanding 15,100 13,656
========== ==========
</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 27, JUNE 28,
1997 1996
---------- ----------
Unaudited
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 7,668 $ 5,464
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,720 942
Deferred income tax benefit (189)
Income from affiliate (1,049)
Gain on disposition of assets (5) (6)
Changes in operating assets and liabilities:
Trade accounts receivable 1,357 (2,545)
Due from affiliate (788)
Inventories (1,134) 115
Other current assets 1,312 570
Other assets 846 3,186
Accounts payable and accrued expenses 16,887 3,969
---------- ----------
Net cash provided by operating activities 28,462 9,858
INVESTING ACTIVITIES
Purchases of property, plant and equipment (5,145) (4,960)
Purchase of Energy Efficient Housing, Inc. and Standard
Casualty Company (net of cash acquired and stock issued) (2,229)
Purchases of investments (1,244) (3,371)
Sales of investments 3,225 4,520
Proceeds from disposition of assets 8 6
---------- ----------
Net cash used in investing activities (3,156) (6,034)
FINANCING ACTIVITIES
Net proceeds from (payments on) floor plan payable (9,245) 4,714
Principal payments on long-term debt (49) (45)
Net sales of treasury stock 48
Notes receivable from shareholders, net 13 48
---------- ----------
Net cash (used in) provided by financing activities (9,281) 4,765
---------- ----------
Net increase in cash and cash equivalents 16,025 8,589
Cash and cash equivalents at beginning of period 26,346 23,441
---------- ----------
Cash and cash equivalents at end of period $ 42,371 $ 32,030
========== ==========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 1,060 $ 373
Income taxes 553 749
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 28, 1997. Results of operations
for any interim period are not necessarily indicative of results to be
expected for a full year.
2. Acquisitions
On August 1, 1996, the Company acquired an additional 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. 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 June 24, 1997, 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 8, 1997. The stock dividend was paid on
July 21, 1997. Earnings per share for the three months ended June 27,
1997 and June 28, 1996 do not reflect the 25% stock dividend.
4. Inventories
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
JUNE 27, MARCH 28,
1997 1996
---------- ----------
Unaudited
<S> <C> <C>
Raw materials $ 7,695 $ 7,966
Work in process 2,793 2,600
Finished goods - manufacturing 669 463
- retail 56,252 55,246
---------- ----------
$ 67,409 $ 66,275
========== ==========
</TABLE>
4
<PAGE> 6
5. Other Assets
Other assets include goodwill of $28.7 million at June 27, 1997 and
March 28, 1997, with accumulated amortization of $1.6 million and $1.3
million, respectively.
6. Flooring Payable
The Company has floor plan credit facilities totaling $68.5 million
from financial institutions to finance a major portion of its home
inventory at the Company's retail superstores. These facilities are
secured by a portion of the Company's home inventory and cash in
transit from financial institutions. Interest rates range from prime
(8.5% at June 27, 1997) to prime plus one-half percent. The Company
had $36.0 million and $45.3 million outstanding on these credit
facilities at June 27, 1997 and March 28, 1997, respectively.
7. Line of Credit
On July 11, 1997, the Company obtained a $25.0 million unsecured
revolving line of credit from a financial institution for general
corporate purposes. The line of credit will bear interest, at the
option of the Company (under certain conditions), of either the LIBOR
rate plus .625% or the prime rate minus 1%.
8. Reclassification
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
JUNE 27, JUNE 28,
1997 1996
---------- ----------
<S> <C> <C>
Net sales 100.0% 100.0%
Cost of sales 74.5 81.2
---------- ----------
Gross profit 25.5 18.8
Selling, general and administrative
expenses 17.3 13.0
---------- ----------
Income from operations 8.2 5.8
Interest expense (0.7) (0.3)
Other income 0.3 0.3
---------- ----------
Income before income from
affiliate and income taxes 7.8 5.8
Income from affiliate 0.0 0.9
Income tax expense 3.0 2.2
---------- ----------
Net income 4.8% 4.5%
========== ==========
</TABLE>
6
<PAGE> 8
The following table reflects the percentage increases in retail sales by
Company-owned superstores and in wholesale sales on a pro forma basis as if the
results of Newco were consolidated for both periods presented. It also shows
percentage changes in the average number of Company-owned superstores and in
average home price. Comparative percentages for the first quarters ended June
27, 1997 and June 28, 1996 were as follows:
<TABLE>
<CAPTION>
Pro forma
First Quarter of
Fiscal 1998 vs 1997
-------------------
<S> <C>
Retail:
Dollar sales +25%
Weighted average number
of superstores +29%
Average home price +6%
Wholesale:
Dollar sales +4%
Average home price --
</TABLE>
THREE MONTHS ENDED JUNE 27, 1997 COMPARED TO THREE MONTHS ENDED JUNE 28, 1996
NET SALES. Net sales increased 31.8% to $159.1 million in the first
quarter of fiscal 1998 from $120.7 million in the first quarter of fiscal 1997.
Of this increase, 17.1% was a result of the acquisition of the remaining 58.4%
of Newco. The 31.8% increase in net sales reflects a 5.5% increase in the
volume of homes sold and a significant 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. The number of Company-owned retail superstores increased from 24 in
the first quarter of fiscal 1997 to 59 in the first quarter of fiscal 1998.
GROSS PROFIT. Gross profit increased 78.9% to $40.5 million in the quarter
ended June 27, 1997 compared to $22.7 million in the quarter ended June 28,
1996. During the same period, gross profit margin as a percentage of net sales
increased to 25.5% compared to 18.8%. This increase was primarily the result of
selling 52% of the Company's homes through Company- owned retail superstores in
the first quarter of fiscal 1998 versus 14% in the first quarter of fiscal
1997.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased 76.4% to $27.6 million in the quarter ended
June 27, 1997 from $15.6 million in the quarter ended June 28, 1996, 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 17.3% in the first quarter of fiscal 1998 from 13.0% in the first
quarter of fiscal 1997. This planned increase is due to the growth in the
Company's retail operations. As a percentage of net sales, retail sales have
higher selling, general and administrative expenses due to performance
compensation, advertising and product display expenses.
7
<PAGE> 9
INCOME FROM OPERATIONS. As a result of the foregoing factors, income from
operations increased 84.7% to $13.0 million in the quarter ended June 27, 1997
compared to $7.0 million in the quarter ended June 28, 1996.
INTEREST EXPENSE. Interest expense increased 177.7% to $1.04 million for
the first quarter of fiscal 1998 from $.38 million in the first quarter of
fiscal 1997. This increase was primarily due to an increase in the outstanding
balances held at credit facilities necessary to maintain the additional
inventory levels required to support the opening of 25 Company-owned retail
superstores.
OTHER INCOME. Other income increased 41.9% to $.52 million in the first
quarter of fiscal 1998 from $.37 million in the first quarter of fiscal 1997.
This increase was primarily the result of interest earned on additional cash
available.
INCOME FROM AFFILIATE. Income from affiliate was $1.05 million in the
quarter ended June 28, 1996 compared to zero in the quarter ended June 27,
1997. 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.
LIQUIDITY AND CAPITAL RESOURCES. On July 11, 1997, the Company obtained a
$25.0 million unsecured revolving line of credit from a financial institution
for general corporate purposes. The line of credit will bear interest, at the
option of the Company (under certain conditions), of either the LIBOR rate plus
.625% or the prime rate minus 1%. The Company has floor plan credit facilities
totaling $68.5 million from financial institutions to finance a major portion
of its home inventory at the Company's retail superstores. These facilities are
secured by a portion of the Company's home inventory and cash in transit from
financial institutions. Interest rates range from prime (8.5% at June 27, 1997)
to prime plus one-half percent. The Company had $36.0 million and $45.3 million
outstanding on these credit facilities at June 27, 1997 and March 28, 1997,
respectively.
The Company believes that cash flow from operations, together with floor
plan financing and the revolving line of credit, will be adequate to support
its working capital and planned capital expenditure needs in the foreseeable
future. The Company may, from time to time, obtain additional floor plan
financing for its retail inventories. Such practice is customary in the
industry. 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
8
<PAGE> 10
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.
RECENT ACCOUNTING PRONOUNCEMENTS. In February 1997, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
("SFAS") No. 128, "Earnings Per Share" which will become effective in fiscal
1998. SFAS No. 128 will eliminate the disclosure of primary earnings per share
which includes the dilutive effect of stock options, warrants and other
convertible securities ("Common Stock Equivalents") and instead requires
reporting of "basic" earnings per share, which will exclude Common Stock
Equivalents. Additionally, SFAS No. 128 changes the methodology for fully
diluted earnings per share. In the opinion of the Company's management, it is
not anticipated that the adoption of this new accounting standard will have a
material effect on the reported earnings per share of the Company.
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
a) The Annual Meeting of Shareholders of Palm Harbor Homes, Inc. was
held on June 24, 1997.
b) The following nominees were elected Directors until
the next Annual Meeting of Shareholders and until
their respective successors shall have been elected
and qualified.
Lee Posey
Larry H. Keener
William R. Thomas
Walter D. Rosenberg, Jr.
Frederick R. Meyer
John H. Wilson
A. Gary Shilling
Scott W. Chaney
c) The tabulation of votes for each Director nominee was as follows:
Election of Directors: For Withheld
Lee Posey 12,058,903 4,090
Larry H. Keener 12,060,766 2,227
William R. Thomas 12,060,299 2,694
Walter D. Rosenberg, Jr. 12,060,666 2,327
Frederick R. Meyer 12,060,666 2,327
John H. Wilson 12,060,760 2,233
A. Gary Shilling 12,060,766 2,227
Scott W. Chaney 12,060,766 2,227
d) To appoint Ernst & Young LLP as independent auditors for the year
ending March 27, 1998.
For Withheld Abstaining
12,046,578 2,226 14,189
10
<PAGE> 12
Item 5. Other Information - Not applicable
Item 6. Exhibits and 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: July 28, 1997
Palm Harbor Homes, Inc.
---------------------------------------
(Registrant)
By: /s/ KELLY TACKE
-----------------------------------
Kelly Tacke
Chief Financial and Accounting
Officer
By: /s/ LEE POSEY
-----------------------------------
Lee Posey
Chairman of the Board
11
<PAGE> 13
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED BALANCE SHEET AS OF JUNE 27, 1997 AND CONSOLIDATED
STATEMENT OF INCOME FOR THE THREE MONTHS ENDED JUNE 27, 1997 LOCATED IN THE
COMPANY'S 10-Q 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-27-1998
<PERIOD-START> MAR-29-1997
<PERIOD-END> JUN-27-1997
<CASH> 42,371
<SECURITIES> 3,771
<RECEIVABLES> 52,067
<ALLOWANCES> 0
<INVENTORY> 67,409
<CURRENT-ASSETS> 170,238
<PP&E> 57,275
<DEPRECIATION> 0
<TOTAL-ASSETS> 261,614
<CURRENT-LIABILITIES> 125,950
<BONDS> 3,529
0
0
<COMMON> 151
<OTHER-SE> 127,673
<TOTAL-LIABILITY-AND-EQUITY> 261,614
<SALES> 159,097
<TOTAL-REVENUES> 159,097
<CGS> 118,561
<TOTAL-COSTS> 118,561
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,044
<INCOME-PRETAX> 12,441
<INCOME-TAX> 4,773
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,668
<EPS-PRIMARY> .51
<EPS-DILUTED> .51
</TABLE>
