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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 30, 1996
COMMISSION FILE NUMBER 0-26142
BELMONT HOMES, INC.
-------------------
(Exact name of registrant as specified in its charter)
MISSISSIPPI 64-0834574
----------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
HIGHWAY 25 SOUTH, INDUSTRIAL PARK DRIVE (601) 454-9217
BELMONT, MISSISSIPPI 38827 --------------
---------------------------- (Registrant's telephone area
(Address, including zip code of principal number, including code)
executive offices)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
At July 31, 1996, 6,255,000 shares of the Registrant's $.10 Par Value
Common Stock were outstanding.
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
BELMONT HOMES, INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited - In thousands except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
------- -------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $61,681 $35,259 $113,126 $ 60,534
Cost of sales 52,214 29,487 95,644 50,940
------- ------- -------- --------
Gross profit 9,467 5,772 17,482 9,594
Selling, general and administrative 3,904 2,094 7,712 3,763
------- ------- -------- --------
Income from operations 5,563 3,678 9,770 5,831
Interest income (expense), net 153 (340) 216 (563)
------- ------- -------- ---------
Income before taxes 5,716 3,338 9,986 5,268
Income tax expense 2,177 1,259 3,805 1,923
------- ------- -------- --------
Net income 3,539 2,079 6,181 3,345
Preferred stock dividends (13) (33)
------- ------- -------- --------
Net income per common share $ .56 $ .51 $ 1.00 $ .87
Weighted average common shares
outstanding 6,358 4,087 6,194 3,794
------- ------- -------- --------
</TABLE>
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BELMONT HOMES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
Unaudited
June 30, December 31,
--------- ------------
1996 1995
--------- ------------
ASSETS
------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 5,985 $ 2,055
Certificates of deposit 8,000 6,717
Accounts receivable, net 9,857 7,302
Inventories 10,040 7,425
Prepaid and other 1,271 1,355
------- -------
Total current assets 35,153 24,854
Property, plant and equipment, net 17,389 14,812
Goodwill and other assets, net 10,601 10,402
------- -------
$63,143 $50,068
------- -------
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Current portion of long-term debt $ 209 $ 4,600
Accounts payable 5,956 3,665
Accrued expenses 9,331 5,552
------- -------
Total current liabilities 15,496 13,817
Long-term debt 393 6,919
Deferred income taxes 284 284
------- -------
Total liabilities 16,173 21,020
------- -------
Shareholders' equity:
Common stock 625 545
Additional paid-in capital 26,749 15,088
Retained earnings 23,089 16,908
Adjustment to predecessor basis (3,493) (3,493)
------- -------
Total shareholders' equity 46,970 29,048
------- -------
$63,143 $50,068
</TABLE>
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BELMONT HOMES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - In thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
--------
1996 1995
------- ------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 6,181 $ 3,345
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 702 337
Changes in operating assets and liabilities:
Accounts receivable (2,555) (3,680)
Inventories (2,615) (523)
Prepaid and other (330) 1,044
Accounts payable 2,291 2,200
Accrued expenses 3,779 1,073
-------- --------
Net cash provided by operating activities 7,453 3,796
-------- --------
Cash flows from investing activities:
Additions to property, plant and equipment (3,064) (1,785)
Certificates of deposit (1,283) (3,004)
-------- --------
Net cash used by investing activities (4,347) (4,789)
-------- --------
Cash flows from financing activities:
Repayment of long-term debt (10,917) (12,720)
Proceeds from sale of common stock net of
offering costs 11,741 15,296
Payment of preferred stock dividends - (152)
Retirement of preferred stock - (900)
-------- --------
Net cash provided (used) by financing activities 824 1,524
-------- --------
Net increase (decrease) in cash and equivalents 3,930 531
Cash and equivalents at beginning of year 2,055 5,331
-------- --------
Cash and equivalents end of period $ 5,985 $ 5,862
-------- --------
</TABLE>
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BELMONT HOMES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED QUARTERLY FINANCIAL STATEMENTS
(UNAUDITED)
(1) Basis of Presentation
In June 1993 Belmont Homes, Inc. ("Belmont"), which was 43% owned by
shareholders of BHI, Inc. (Predecessor) and 57% owned by new investors,
acquired through the issuance of debt and equity securities, substantially all
of the assets and liabilities of Predecessor for a purchase price of $15,541.
This transaction was accounted for using the purchase method of accounting
including the computational guidelines contained in EITF Issue No. 88-16.
In August 1995 Belmont incorporated Delta Homes, Inc., a wholly-owned
subsidiary and purchased for $450 a production facility in Clarksdale,
Mississippi.
In October 1995 Belmont acquired, in a transaction accounted for using the
purchase method of accounting, all the outstanding common stock of Spirit
Homes, Inc. ("Spirit") for $9,800 of cash and debt.
In January 1996 the Company completed the sale of 800 shares of its common
stock raising net proceeds of approximately $11,800 which were used to retire
substantially all long-term debt.
The condensed consolidated financial statements include the accounts of
Belmont Homes, Inc. and its wholly-owned subsidiaries from incorporation or
acquisition date (collectively, the "Company") and have been prepared without
audit pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and 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 Company's audited financial statements and notes
thereto.
In the opinion of management, all adjustments, consisting only of normal
recurring adjustments that are necessary for a fair presentation, have been
included in the condensed consolidated financial statements for the interim
periods ended June 30, 1996 and 1995. The results of operations for the three
and six month periods are not indicative of the results of operations to be
expected for the full year ending December 31, 1996 or any other interim
period.
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(2) Inventories
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
-------- ------------
<S> <C> <C>
Raw materials $ 7,030 $ 4,670
Work-in-process 505 580
Finished homes 2,505 2,175
------- -------
$10,040 $ 7,425
------- -------
</TABLE>
Item 2. Management's Discussion And Analysis Of Financial Condition And
Results Of Operations
Results Of Operations
The following table sets forth for the periods indicated information
derived from the Company's condensed financial statements expressed as a
percentage of net sales:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30
-------- -------
1996 1995 1996 1995
----- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 84.7 83.6 84.5 84.2
--------- ----- ----- -----
Gross profit 15.3 16.4 15.5 15.8
Selling, general and administrative 6.3 5.9 6.8 6.2
----- ----- ----- -----
Income from operations 9.0 10.5 8.7 9.6
Interest income (expense), net .2 (1.0) .2 (1.0)
Income taxes 3.5 3.6 3.4 3.1
----- ----- ----- -----
Net income 5.7 5.9 5.5 5.5
----- ----- ----- -----
</TABLE>
Three Months Ended June 30, 1996 Compared To Three Months Ended June 30, 1995
Net sales for the three months ended June 30, 1996 increased by 75% to
$61.7 million from $35.3 million for the three months ended June 30, 1995. The
number of homes sold during the quarter increased 62% to 2,971 homes from 1,840
in the second quarter of 1995. Of this increase, 63% resulted from the sale of
homes at Spirit which was acquired by the Company in
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October 1995 with the balance due to the addition of the Company's fourth and
fifth plants in March and August 1995, respectively. Multi-sectional homes
increased to 25.7% of homes sold during the second quarter of 1996 from 17.3%
in the same quarter of 1995. The average price of a home sold increased 8.3%
to $20,791 in 1996 from $19,163 in 1995 due, in part, to the higher mix of
multi-sectional homes and the higher price for the Spirit single-section homes.
Cost of sales includes costs of raw materials, direct labor, service and
warranty expense, insurance and payroll taxes. Cost of sales during the second
quarter of 1996 increased 77% to $52.2 million from $29.5 million for the
second quarter of 1995. Cost of raw materials and direct labor, which are two
of the largest components of cost of sales, increased to $38.5 million and $7.5
million, respectively, for the second quarter of 1996 from $22.9 million and
$3.8 million, respectively, for the second quarter of 1995 primarily as a
result of increased sales volume. As a percentage of net sales, cost of sales
for the second quarter of 1996 increased to 84.6% from 83.9% in the second
quarter of 1995, due to increases in direct labor and warranty costs which were
offset, in part, by decreases in raw materials.
Selling, general and administrative expenses for the second quarter of
1996 increased by 86% to $3.9 million from $2.1 million in the second quarter
of 1995. As a percentage of net sales, selling, general and administrative
expense increased to 6.3% for the second quarter of 1996 from 5.9% for the
second quarter of 1995 as a result of higher selling and promotional costs, due
in part to the higher percentage of such costs for sales at Spirit Homes.
Net interest income was $153 thousand for the second quarter of 1996
compared with net interest expense of $340 thousand for the second quarter of
1995. In January 1996 the Company used a portion of the net proceeds of a
secondary public offering of stock to retire $10.9 million of interest bearing
debt.
Six Months Ended June 30, 1996 Compared To Six Months Ended June 30 ,1995
Net sales for the six months ended June 30, 1996 increased 87% to $113.1
million from $60.5 million for the six months ended June 30, 1995. The number
of homes sold increased 72% to 5,457 in 1996 from 3,173 in 1995. Of this
increase, 64% was attributable to Spirit Homes which was acquired in October
1995 with the balance due to increases the Company's Delta and Belmont lines.
Increases in the average home selling price due to price and mix changes also
contributed to the dollar increase in 1996 sales.
Costs of sales for the six months ended June 30, 1996 increased 88% to
$95.6 million from $50.9 million for the six months ended June 30, 1995. Costs
of raw materials and direct labor increased to $71.5 million and $13.1 million,
respectively, in 1996 from $39.8 million and $6.2 million, respectively, in
1995 primarily as a result of increased sales volume. As a percentage of net
sales, cost of sales for the six months ended June 30, 1996 increased to 84.5%
from 84.2% due primarily to increased direct labor and warranty costs which
were offset in part through reduced raw material costs.
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Selling, general and administrative expenses for the six months ended June
30, 1996 increased 105% to $7.7 million from $3.8 million in the comparable
period of the prior year. As a percentage of net sales, selling, general and
administrative expense increased to 6.8% for the six months ended June 30, 1996
from 6.2% for the six months ended June 30, 1995 as a result of higher selling
and promotional costs, due in part to the higher percentage of such costs at
Spirit Homes, and to higher legal and professional costs associated with the
Company's continuing acquisition program.
Net interest income was $216 thousand for the six months ended June 30,
1996 compared with net interest expense of $563 thousand for the six months
ended June 30,1995. In January 1996 the Company used a portion of the proceeds
of a secondary public stock offering to retire substantially all outstanding
interest bearing debt.
Liquidity And Capital Resources
Cash and equivalents including certificates of deposit were $14 million at
June 30, 1996 compared to $8.8 million at year end December 31, 1995.
In January 1996 the Company raised approximately $11.8 million in net cash
proceeds from the secondary sale of 800 thousand shares of stock to the public.
Approximately $10.9 million of these proceeds were used to retire all but $623
thousand of interest bearing debt. In June 1995 the Company raised $15.3
million in net cash proceeds from the initial sale of its stock to the public
and used $13.8 million for the retirement of debt and preferred stock. As a
result of these transactions, net cash provided by financing activities for the
six months ended June 30, 1996 was $824 thousand compared with $1.5 million for
the six months ended June 30, 1995.
Net cash provided by operating activities was $7.5 million for the six
months ended June 30, 1996 compared to $3.8 million for the six months ended
June 30, 1995 primarily as a result of the increase in net income to $6.2
million for the six months ended June 30 ,1996 from $3.3 million in the
comparable period of 1995. Accounts receivable are funded by approved dealer
floor-plan financing and usually are collected within 15 days. All homes are
manufactured against orders, and currently, no homes are produced for
inventory.
The Company utilized $3.1 million for the purchase of property, plant and
equipment during the six months ended June 30, 1996 compared with $1.8 million
during the six months ended June 30, 1995. Expenditures during 1996 were for
the addition of two plants at Spirit Homes while the expenditures in 1995 were
for the completion of the Company's fourth plant at Belmont.
The Company plans to continue its current growth strategy of acquiring or
constructing new manufacturing facilities when necessitated by consumer demand.
In order to provide any additional funds necessary for the continued pursuit
of this growth strategy, the Company may incur, from time to time, additional
short- and long-term bank indebtedness, including mortgage
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loans and industrial revenue bond financing, and may issue, in public or
private transactions, equity and debt securities, the availability and terms of
which will depend upon market and other conditions.
The Company's backlog at June 30,1996 was approximately $25.5 million
compared to $18.3 million at June 30 ,1995. The Company considers its order
backlog to be firm orders and has had limited cancellation experience to date.
Certain forward-looking statements in this Quarterly Report on Form 10-Q
(including statements regarding the growth and financing strategies of the
Company) involve known and unknown risks, uncertainties and other factors which
may cause the actual results, performance or achievements of the Company to be
materially different from any future results, performance, or achievements
expressed or implied by such forward-looking statements. Such factors include
general economic and business conditions; industry trends; demographic changes;
competition; raw material and labor costs and availability; import protection
and regulation; relationships with customers, distributors or dealers; changes
in the business strategy or development plans of the Company; the availability,
terms and deployment of capital; changes in or the failure to comply with
government regulations; and the inability or failure to identify or consummate
successful acquisitions or to assimilate the operations of any acquired
businesses with those of the Company.
PART II--OTHER INFORMATION
Item 6.
(a) Exhibits
Exhibit 27. Financial Data Schedule (for SEC use only).
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K for the three months
ended June 30, 1996.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BELMONT HOMES, INC.
------------------------
Date: July 31, 1996 /s/ Jerold Kennedy
------------------------
President And CEO
Date: July 31, 1996 /s/ William A. Sheffield
------------------------
Chief Financial Officer
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF BELMONT HOMES, INC. FOR THE SIX MONTHS ENDED JUNE 30,
1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 5,985
<SECURITIES> 8,000
<RECEIVABLES> 9,894
<ALLOWANCES> 37
<INVENTORY> 10,040
<CURRENT-ASSETS> 35,153
<PP&E> 19,355
<DEPRECIATION> 1,966
<TOTAL-ASSETS> 63,143
<CURRENT-LIABILITIES> 15,496
<BONDS> 0
0
0
<COMMON> 625
<OTHER-SE> 46,345
<TOTAL-LIABILITY-AND-EQUITY> 63,143
<SALES> 113,126
<TOTAL-REVENUES> 113,126
<CGS> 95,644
<TOTAL-COSTS> 95,644
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 66
<INCOME-PRETAX> 9,986
<INCOME-TAX> 3,805
<INCOME-CONTINUING> 6,181
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,181
<EPS-PRIMARY> 1.00
<EPS-DILUTED> 0
</TABLE>
