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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
MARCH 31, 1997
COMMISSION FILE NUMBER 0-26142
BELMONT HOMES, INC.
(Exact name of registrant as specified in its charter)
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<S> <C>
MISSISSIPPI 64-0834574
(State or other jurisdiction of incorporation or (I.R.S. Employer Identification Number)
organization)
HIGHWAY 25 SOUTH, INDUSTRIAL PARK DRIVE
BELMONT, MISSISSIPPI 38827 (601) 454-9217
(Address, including zip code of principal executive (Registrant's telephone number, including area code)
offices)
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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 May 2, 1997, 9,467,000 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)
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<CAPTION>
Three Months Ended
March 31,
----------------------
1997 1996
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<S> <C> <C>
Net sales $ 52,144 $51,445
Cost of sales 45,415 43,430
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Gross profit 6,729 8,015
Selling, general and administrative 5,305 3,808
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Income from operations 1,424 4,207
Interest income (expense), net (76) 63
-------- -------
Income before income taxes 1,348 4,270
Income tax expense 541 1,628
-------- -------
Net income $ 807 $ 2,642
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Net income per common share $ .09 $ .29
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Weighted average common shares outstanding 9,482 9,111
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BELMONT HOMES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
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<CAPTION>
Unaudited
March 31, December 31,
1997 1996
-------- -------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 9,836 $ 5,070
Certificates of deposit 2,044 8,243
Accounts receivable, net 12,613 7,829
Inventories 13,534 13,020
Prepaid and other 2,512 2,661
-------- -------
Total current assets 40,539 36,823
Property, plant and equipment, net 22,122 22,318
Goodwill and other assets, net 19,823 20,214
-------- -------
$ 82,484 $79,355
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 7,347 $ 9,093
Accounts payable 8,028 3,461
Accrued expenses 10,060 10,744
-------- -------
Total current liabilities 25,435 23,298
Long-term debt 1,488 1,303
Deferred income taxes 907 907
-------- -------
Total liabilities 27,830 25,508
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Shareholders' equity:
Common stock 947 947
Additional paid-in capital 27,372 27,372
Retained earnings 29,828 29,021
Adjustment to predecessor basis (3,493) (3,493)
-------- -------
Total shareholders' equity 54,654 53,847
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$ 82,484 $79,355
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BELMONT HOMES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - In thousands)
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<CAPTION>
Three Months Ended
March 31,
1997 1996
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<S> <C> <C>
Cash flows from operating activities:
Net income $ 807 $ 2,642
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 742 391
Changes in operating assets and liabilities:
Accounts receivable (4,784) (5,599)
Inventories (514) (845)
Prepaid and other 342 111
Accounts payable 4,567 3,659
Accrued expenses (684) 1,496
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Net cash provided by operating activities 476 1,855
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Cash flows from investing activities:
Additions to property, plant and equipment (348) (1,207)
Certificates of deposit and other 6,199 (827)
-------- -------
Net cash provided (used) by investing activities 5,851 (1,640)
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Cash flows from financing activities:
Repayment of long-term debt (1,561) (10,896)
Proceeds from sale of common stock, net of
offering costs -- 11,755
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Net cash provided (used) by financing activities (1,561) 859
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Net increase in cash and equivalents 4,766 680
Cash and equivalents at beginning of period 5,070 2,055
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Cash and equivalents end of period $ 9,836 $ 2,735
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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 October 1996 Belmont acquired, in a transaction accounted for using
the purchase method of accounting, all the outstanding common stock of Bellcrest
Homes, Inc. ("Bellcrest") for $9,500 of cash plus future contingent payments of
$3,500 if certain earnings levels are achieved through December 31, 1998. In
March 1997 the Company paid the former shareholders of Bellcrest $1,000 the
amount of contingent payments earned and accrued for in 1996.
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 March 31, 1997 and 1996. The results of operations for the three
month period are not indicative of the results of operations to be expected for
the full year ending December 31, 1997 or any other interim period.
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(2) Inventories
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<CAPTION>
March 31, December 31,
1997 1996
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<S> <C> <C>
Raw materials $ 9,077 $ 9,702
Work-in-process 1,596 798
Finished homes 2,861 2,520
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$ 13,534 $13,020
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(3) Subsequent Event
In November 1996 the Company's President and CEO, Mr. Jerold Kennedy,
was diagnosed with canccer and he died on May 4, 1997. The Company expects to
receive $1.5 million in proceeds from officer's life insurance during the second
quarter of 1997.
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:
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<CAPTION>
Three Months Ended
March 31,
---------
1997 1996
----- -----
<S> <C> <C>
Net sales 100.0% 100.0%
Cost of sales 87.1 84.4
----- -----
Gross profit 12.9 15.6
Selling, general and administrative 10.2 7.4
----- -----
Income from operations 2.7 8.2
Interest income (expense), net (.1) .1
Income tax expense 1.1 3.2
----- -----
Net income 1.5 5.1
----- -----
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Three Months Ended March 31, 1997 Compared To Three Months Ended March 31, 1996
Net sales for the three months ended March 31, 1997 increased by 1.4%
to $52.1 million from $51.4 million for the three months ended March 31, 1996.
The number of homes sold during the quarter decreased 6.2% to 2,332 homes from
2,486 in the first quarter of 1996 due to a 20% decrease in the sale of
single-section homes. Multi-sectional homes increased to 34.2% of
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homes sold during the first quarter of 1997 from 23% in the same quarter of
1996. The average price of a home sold increased by 8% to $22,360 in 1997 from
$20,694 due primarily to the higher mix of multi-sectional homes.
Cost of sales includes costs of raw materials, direct labor, service
and warranty expense, insurance and payroll taxes. Cost of sales during the
first quarter of 1997 increased 4.6% to $45.4 million from $43.4 million for the
first quarter of 1996. Cost of raw materials and direct labor, which are two of
the largest components of cost of sales, increased to $33.2 million and $6.1
million, respectively, for the first quarter of 1997 from $33 million and $5.6
million, respectively, for the first quarter of 1996. The increase in raw
materials is the result of increased sales. As a percentage of net sales, cost
of sales for the first quarter of 1997 increased to 87.1% from 84.4% in the
first quarter of 1996, due to increases in direct labor, salaries and wages,
warranty, insurance and depreciation resulting in part from inefficiencies
created by operating the Company's 5 Mississippi and 4 Arkansas plants on mixed
and rotational production schedules.
Selling, general and administrative expenses for the first quarter of
1997 increased 39.3% to $5.3 million from $3.8 million in the first quarter of
1996 primarily as a result of increased dealer promotion costs. Dealer promotion
costs increased to $2.3 million in the first quarter of 1997 from $1.2 million
in the first quarter of 1996. The Company believes the number of dealers and
manufacturers in its market territory has increased and expects these higher
promotion costs to continue. As a percentage of net sales, selling, general and
administrative expense increased to 10.2% for the first quarter of 1997 from
7.4% for the first quarter of 1996 due primarily to the higher dealer promotion
costs.
Net interest expense was $76 thousand for the first quarter of 1997
compared with net interest income of $63 thousand for the first quarter of 1996
due primarily to interest on $5 million of borrowings for the Company's purchase
of Bellcrest Homes, Inc. in October 1996.
Liquidity And Capital Resources
Cash and equivalents including certificates of deposit were $11.9
million at March 31, 1997 compared to $13.3 million at year end December 31,
1996.
Net cash provided by operating activities was $476 thousand for the
first quarter of 1997 compared to $1.9 million for the first quarter of 1996 due
primarily to the lower net income in the first quarter of 1997 compared with
1996. Accounts receivable are funded by approved dealer floor-plan financing and
usually are collected within 15 days, except in periods when extended terms are
granted to promote sales. All homes are manufactured against orders, and
currently, no homes are produced for inventory.
The Company utilized $348 thousand for the purchase of property, plant
and equipment during the first quarter of 1997 compared with $1.2 million during
the first quarter of 1996. Expenditures during 1996 were for the addition of two
plants at Spirit Homes.
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The Company's financing activities used $1.6 million in cash for the
repayment of debt during the first quarter of 1997 compared with providing $859
thousand during the first quarter of 1996. In January 1996 the Company raised
approximately $11.8 million in net cash proceeds from the secondary sale of
stock to the public and used $10.9 million of these proceeds to retire
outstanding debt.
In November 1996 the Company's President and CEO, Mr. Jerold Kennedy,
was diagnosed with cancer and he died on May 4, 1997. The Company expects to
receive $1.5 million in proceeds from officer's life insurance during the second
quarter of 1997.
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 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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Disclosure is not required of the Company under this Item 3 at
this time.
PART II--OTHER INFORMATION
Item 6.
(a) Exhibits
Exhibit 27. Financial Data Schedule (for SEC use only).
(b) Reports on Form 8-K
1. Report dated March 31, 1997 announcing that Mr. Jerold Kennedy,
President And CEO had taken an indefinite medical leave of absence and certain
management changes including the naming of Mr. John Allison as acting President
and CEO.
2. Report dated May 4, 1997 announcing the death of Mr. Jerold
Kennedy, the Company's President And CEO.
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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: May 9, 1997 /s/ John Allison
----------------
Acting President And CEO
Date: May 9, 1997 /s/ William Kunkel
------------------
Vice President Finance And CFO
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF BELMONT HOMES, INC. FOR THE THREE MONTHS ENDED MARCH 31,
1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 9,836
<SECURITIES> 2,044
<RECEIVABLES> 12,650
<ALLOWANCES> 37
<INVENTORY> 13,534
<CURRENT-ASSETS> 40,539
<PP&E> 25,395
<DEPRECIATION> 3,273
<TOTAL-ASSETS> 82,484
<CURRENT-LIABILITIES> 25,435
<BONDS> 0
0
0
<COMMON> 947
<OTHER-SE> 53,707
<TOTAL-LIABILITY-AND-EQUITY> 82,484
<SALES> 52,144
<TOTAL-REVENUES> 52,144
<CGS> 45,415
<TOTAL-COSTS> 45,415
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 206
<INCOME-PRETAX> 1,348
<INCOME-TAX> 541
<INCOME-CONTINUING> 807
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 807
<EPS-PRIMARY> 0.09
<EPS-DILUTED> 0
</TABLE>
