----

----

**SECURITIES AND EXCHANGECOMMISSION****Washington DC 20549**

**FORM 10-Q**

(Mark One)
| **ý** | **Quarterly Report Pursuant to Section 13 or 15(d) of the  Securities Exchange Act of 1934 For the quarterly period ended June 30, 2001.** |
|------------|--------------------------------------------------------------------------------------------------------------------------------------------|

**- or -**
| **o** | **Transition Report Pursuant to Section 13 or 15(d) of the  Securities Exchange Act of 1934 For the Transition Period From ________ to  _______.** |
|-------|----------------------------------------------------------------------------------------------------------------------------------------------------|

**Commission File Number 0-5555**

**LIBERTY HOMES, INC.******(Exact name ofregistrant as specified in its charter)
| **Indiana**                               | **35-1174256**                     |
|-------------------------------------------|------------------------------------|
|                                      |                               |
| (State  of Incorporation)                 | (IRS Employer  Identification No.) |
|                                      |                               |
| **PO Box 35, Goshen,  Indiana**           | **46527**                          |
|                                      |                               |
| (Address of principal executive  offices) | (ZIP Code)                         |

** **

**(219) 533-0431**(Registrant'stelephone number, including area code)

 

Indicate by check mark whether the registrant (1)has filed all reports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or for suchshorter 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  ý  No  o

Indicate thenumber of shares outstanding of each of the registrant's classes of commonstock, as of the latest practicable date.
|                                   | Shares of Outstanding |   |
|----------------------------------------|-----------------------|--------|
| Class                                  | at August 3, 2001     |   |
|                                        |                       |   |
| Class  A Common Stock, $1.00 par value | 2,086,645             |   |
|                                   |                  |   |
| Class  B Common Stock, $1.00 par value | 1,666,222             |   |

----

----

**INDEX**

| Part I –  Consolidated Financial  Information (Unaudited) |
|----------------------------------------------------------------|
|                                                                |   |
| Item 1.                                                        | Consolidated Financial Statements – Liberty  Homes, Inc. |
|                                                           |   |
|                                                           | Consolidated Balance Sheet,  as of June 30, 2001 and December 31, 2000 |
|                                                           | Consolidated  Statement of Income, for the three months ended June 30, 2001 and 2000 |
|                                                           | Consolidated  Statement of Income, for the six months ended June 30, 2001 and 2000 |
|                                                           | Consolidated  Statement of Cash Flows for the six months ended June 30, 2001 and 2000 |
|                                                           | Other Information |
| Item 2.                                                        | Management's  Discussion and Analysis of Financial Condition and Results of Operations |
| Part II – Other Information                               |
|                                                           |
| Item 6.                                                        | Exhibits  and Reports on Form 8–K |
|                                                           |
|                                                           | Signature |

**PART I – CONSOLIDATEDFINANCIAL INFORMATION**

General             The consolidated financialstatements and footnotes thereto listed in the Index on page 2 of this reporthave been prepared using generally accepted accounting principles applied on abasis consistent with 2000.  The resultsof operations for the interim period presented are not necessarily indicativeof results to be expected for the year. The information furnished herein reflects all adjustments (consisting ofnormal recurring adjustments) which, in the opinion of management, arenecessary for a fair presentation of the results for the interim periods.

 

**LIBERTY HOMES, INC.**CONSOLIDATED BALANCE SHEETas of June 30, 2001 and December 31, 2000

|       | June  30,                      |       | December  31, |       |
|------------|--------------------------------|------------|---------------|------------|
| **ASSETS** | 2001                           |       | 2000          |       |
|       |                                |       |               |       |
|       | Current assets:                |       |          |       |   |
|       | Cash and cash equivalents      | $          | 5,162,000     |       | $ | 4,896,000 |   |
|       | Short term investments         | 300,000    |          | 350,000    |   |
|       | Receivables                    | 11,835,000 |          | 11,259,000 |   |
|       | Inventories                    | 15,578,000 |          | 17,422,000 |   |
|       | Deferred tax asset             | 2,671,000  |          | 2,480,000  |   |
|       | Income taxes refundable        | 458,000    |          | 3,643,000  |   |
|       | Prepayments and other          | 2,076,000  |          | 2,026,000  |   |
|       |                                |       |               |       |
|       | Total current assets           | 38,080,000 |          | 42,076,000 |   |
|       |                                |       |               |       |
|       |                           |       |          |       |
|       |                           |       |          |       |
|       | Property, plant and equipment: |       |          |       |   |
|       |                           |       |          |       |
|       | Land                           | 2,422,000  |          | 2,422,000  |   |
|       | Buildings and improvements     | 29,559,000 |          | 29,678,000 |   |
|       | Machinery and equipment        | 21,809,000 |          | 21,570,000 |   |
|       |                           |            |          |            |   |
|       |                           | 53,790,000 |          | 53,670,000 |   |
|       |                           |       |          |       |   |
|       | Less accumulated depreciation  | 27,188,000 |          | 25,977,000 |   |
|       |                                |       |               |       |
|       | 26,602,000                     |       | 27,693,000    |       |
|       |                                |       |               |       |
|       | Total assets                   | $          | 64,682,000    |       | $ | 69,769,000 |   |
|       |                                |       |               |       |
|            |                                |            |               |            |  |  |  |  |  |

 

|                                            | June  30,                                                                                                                                                                                      |       | December  31, |       |
|-------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------|------------|
| **LIABILITIES**                                 | 2001                                                                                                                                                                                           |       | 2000          |       |
|                                            |                                                                                                                                                                                                |       |               |       |
|                                            | Current liabilities:                                                                                                                                                                           |       |          |       |   |
|                                            | Accounts payable                                                                                                                                                                               | $          | 3,914,000     |       | $ | 3,659,000 |   |
|                                            | Notes payable                                                                                                                                                                                  | 2,986,000  |          | 5,209,000  |   |
|                                            | Accrued compensation & payroll taxes                                                                                                                                                       | 1,444,000  |          | 1,416,000  |   |
|                                            | Other accrued liabilities                                                                                                                                                                      | 6,715,000  |          | 8,353,000  |   |
|                                            |                                                                                                                                                                                           |       |          |       |
|                                            |                                                                                                                                                                                                |       |               |       |
|                                            | Total current liabilities                                                                                                                                                                      | 15,059,000 |          | 18,637,000 |   |
|                                            |                                                                                                                                                                                                |       |               |       |
|                                            | Deferred income taxes                                                                                                                                                                          | 2,530,000  |          | 2,530,000  |   |
|                                            |                                                                                                                                                                                           |            |          |            |   |
|                                            | Minority interest in subsidiaries                                                                                                                                                              | 1,043,000  |          | 1,020,000  |   |
|                                            |                                                                                                                                                                                           |            |          |            |   |
|                                            | Contingent liabilities (see notes)                                                                                                                                                             | --         |          | --         |   |
|                                            |                                                                                                                                                                                           |       |          |       |
|                                            |                                                                                                                                                                                           |       |          |       |
| **SHAREHOLDERS’ EQUITY**                   |                                                                                                                                                                                           |       |          |       |
|                                            | Capital Stock:                                                                                                                                                                                 |       |          |       |   |
|                                            | Class A, $1 par value  Authorized-7,500,000 Shares       Issued &  outstanding-2,087,000       in 2001 & 2,083,000 in 2000 |       |          |       |   |
|                                            |                                                                                                                                                                                           |       |          |
|                                            |                                                                                                                                                                                           |       |          |
| 2,087,000                                       |                                                                                                                                                                                           | 2,083,000  |          |
|                                            | Class B, $1 par value  Authorized-3,500,000 Shares       Issued & outstanding-1,666,000       in 2001 & 1,670,000 in 2000  |       |          |       |   |
|                                            |                                                                                                                                                                                           |       |          |
|                                            |                                                                                                                                                                                           |       |          |
| 1,666,000                                       |                                                                                                                                                                                           | 1,670,000  |          |
|                                            |                                                                                                                                                                                           |       |          |       |
|                                            | Other capital                                                                                                                                                                                  | 83,000     |          | 83,000     |   |
|                                            |                                                                                                                                                                                           |       |          |       |   |
|                                            | Retained earnings                                                                                                                                                                              | 42,214,000 |          | 43,746,000 |   |
|                                            |                                                                                                                                                                                                |       |               |       |
|                                            | 46,050,000                                                                                                                                                                                     |       | 47,582,000    |       |
|                                            |                                                                                                                                                                                                |       |               |       |
| Total liabilities and shareholders’ equity | $                                                                                                                                                                                              | 64,682,000 |          | $          | 69,769,000 |   |
|                                            |                                                                                                                                                                                                |       |               |       |
|                                                 |                                                                                                                                                                                                |            |               |            |  |  |  |  |  |  |

 

 

LIBERTY HOMES, INC.CONSOLIDATED STATEMENT OFINCOMEfor the three months ended June 30, 2001 and 2000____________

|                                                                           | **2001**                                                 |       | **2000**   |       |
|--------------------------------------------------------------------------------|----------------------------------------------------------|------------|------------|------------|
|                                                                           |                                                          |       |            |       |
|                                                                           |                                                     |       |       |       |
| Net sales                                                                      | $                                                        | 31,577,000 |       | $          | 35,999,000 |   |
|                                                                           |                                                     |       |       |       |
| Cost of sales                                                                  | 26,738,000                                               |       | 31,680,000 |       |
|                                                                           |                                                          |       |            |       |
|                                                                           |                                                     |       |       |       |
|                                                                           | Gross profit                                             | 4,839,000  |       | 4,319,000  |   |
|                                                                           |                                                     |       |       |       |
| Selling, delivery, general and administrative  expenses                        | 4,656,000                                                |       | 5,525,000  |       |
|                                                                           |                                                          |       |            |       |
|                                                                           |                                                     |       |       |       |
|                                                                           | Operating income (loss)                                  | 183,000    |       | (1,206,000 | ) |
|                                                                           |                                                     |       |       |       |
| Interest expense                                                               | (96,000                                                  | )          | (89,000    | )          |
| Interest and other income                                                      | 112,000                                                  |       | 196,000    |       |
|                                                                           |                                                          |       |            |       |
|                                                                           |                                                     |       |       |       |
|                                                                           | Income before (loss) minority interest and  income taxes | 199,000    |       | (1,099,000 | ) |
|                                                                           |                                                     |       |       |       |
| Minority interest                                                              | (17,000                                                  | )          | 31,000     |       |
|                                                                           |                                                     |       |       |       |
| Income tax benefit (expense)                                                   | (75,000                                                  | )          | 439,000    |       |
|                                                                           |                                                          |       |            |       |
|                                                                           |                                                     |       |       |       |
|                                                                           | Net income (loss)                                        | $          | 107,000    |       | $ | (629,000 | ) |
|                                                                           |                                                          |       |            |       |
|                                                                           |                                                     |       |       |       |
| Net income (loss) per outstanding Common Share  – basic and fully diluted | $                                                        | .03        |       | $          | (.16 | ) |
|                                                                           |                                                          |       |            |       |
|                                                                           |                                                     |       |       |       |
| Weighted average shares outstanding                                            | 3,753,000                                                |       | 3,899,000  |       |
|                                                                           |                                                          |       |            |       |
|                                                                           |                                                     |       |       |       |
| Cash dividend per share:                                                       |                                                     |       |       |       |
|                                                                           |                                                     |       |       |       |
|                                                                           | Class A Common Stock                                     | $          | .07        |       | $ | .07 |   |
|                                                                           |                                                          |       |            |       |
|                                                                           | Class B Common Stock                                     | $          | .07        |       | $ | .07 |   |
|                                                                           |                                                          |       |            |       |

LIBERTY HOMES, INC.CONSOLIDATED STATEMENT OF INCOMEfor the six months ended June 30, 2001 and 2000____________

|                                                                  | **2001**                                       |       | **2000**   |       |
|-----------------------------------------------------------------------|------------------------------------------------|------------|------------|------------|
|                                                                  |                                                |       |            |       |
|                                                                  |                                           |       |       |       |
| Net  sales                                                            | $                                              | 56,338,000 |       | $          | 73,472,000 |   |
|                                                                  |                                           |       |       |       |
| Cost  of sales                                                        | 48,411,000                                     |       | 64,832,000 |       |
|                                                                  |                                                |       |            |       |
|                                                                  |                                           |       |       |       |
|                                                                  | Gross profit                                   | 7,927,000  |       | 8,640,000  |   |
|                                                                  |                                           |       |       |       |
| Selling,  delivery, general and administrative expenses               |                                           |       |       |       |
|                                                                  | 9,517,000                                      |       | 11,072,000 |       |
|                                                                  |                                                |       |            |       |
|                                                                  |                                           |       |       |       |
|                                                                  | Operating loss                                 | (1,590,000 | )          | (2,432,000 | ) |
|                                                                  |                                           |       |       |       |
| Interest  expense                                                     | (226,000                                       | )          | (89,000    | )          |
| Interest  and other income                                            | 238,000                                        |       | 430,000    |       |
|                                                                  |                                                |       |            |       |
|                                                                  |                                           |       |       |       |
|                                                                  | Loss before minority interest and income taxes | (1,578,000 | )          | (2,091,000 | ) |
|                                                                  |                                           |       |       |       |
| Minority  interest                                                    | (23,000                                        | )          | (17,000    | )          |
|                                                                  |                                           |       |       |       |
| Income  tax benefit                                                   | 594,000                                        |       | 836,000    |       |
|                                                                  |                                                |       |            |       |
|                                                                  |                                           |       |       |       |
|                                                                  | Net loss                                       | $          | (1,007,000 | )          | $ | (1,272,000 | ) |
|                                                                  |                                                |       |            |       |
|                                                                  |                                           |       |       |       |
| Net  loss per outstanding Common Share – basic and fully diluted | $                                              | (.27       | )          | $          | (.33 | ) |
|                                                                  |                                                |       |            |       |
|                                                                  |                                           |       |       |       |
| Weighted  average shares outstanding                                  | 3,753,000                                      |       | 3,902,000  |       |
|                                                                  |                                                |       |            |       |
| Cash  dividend per share:                                             |                                           |       |       |       |
|                                                                  |                                           |       |       |       |
|                                                                  | Class A Common Stock                           | $          | .14        |       | $ | .14 |   |
|                                                                  |                                                |       |            |       |
|                                                                  |                                           |       |       |       |
|                                                                  | Class B Common Stock                           | $          | .14        |       | $ | .14 |   |
|                                                                  |                                                |       |            |       |

LIBERTY HOMES, INC.CONSOLIDATED STATEMENT OF CASH FLOWSfor the six months ended June 30, 2001 and 2000_______________

|                                                   | **2001**                                                                   |       | **2000**    |       |
|--------------------------------------------------------|----------------------------------------------------------------------------|------------|-------------|------------|
|                                                   | ****                                                                       |       | ****        |       |
| Cash flows provided by (used in) operating activities: |                                                                       |       |        |       |
|                                                   | Net loss                                                                   | $          | (1,007,000  | )          | $ | (1,272,000 | ) |
|                                                   | Adjustment to reconcile net loss to net cash  used in operating activities |       |        |       |   |
|                                                   | Depreciation                                                               | 1,227,000  |        | 1,380,000  |   |
|                                                   | Deferred income taxes                                                      | (191,000   | )           | --         |   |
|                                                   | Minority interest                                                          | 23,000     |        | 17,000     |   |
|                                                   | Net   value of retail center assets written off                       | 151,000    |        | --         |   |
|                                                   | Changes in assets and liabilities:                                         |       |        |       |   |
|                                                   | Receivables                                                                | (576,000   | )           | (5,158,000 | ) |
|                                                   | Income taxes payable/receivable                                            | 3,185,000  |        | (905,000   | ) |
|                                                   | Inventories                                                                | 1,844,000  |        | (4,471,000 | ) |
|                                                   | Prepayments and other                                                      | (50,000    | )           | 38,000     |   |
|                                                   | Accounts payable                                                           | 255,000    |        | 2,446,000  |   |
|                                                   | Other current liabilities                                                  | (1,610,000 | )           | (3,226,000 | ) |
|                                                   |                                                                            |       |             |       |
|                                                   |                                                                       |       |        |       |
| Net cash provided by (used in) operating activities    | 3,251,000                                                                  |       | (11,151,000 | )          |
|                                                   |                                                                            |       |             |       |
|                                                   |                                                                       |       |        |       |
| Cash flows provided by (used in) investing activities  |                                                                       |       |        |       |
|                                                   | Additions to property, plant and equipment                                 | (287,000   | )           | (1,865,000 | ) |
|                                                   | Redemption of short-term investments                                       | 50,000     |        | 6,150,000  |   |
|                                                   |                                                                            |       |             |       |
|                                                   |                                                                       |       |        |       |
| Net cash provided by (used in) investing activities    | (237,000                                                                   | )          | 4,285,000   |       |
|                                                   |                                                                            |       |             |       |
|                                                   |                                                                       |       |        |       |
| Cash flows provided by (used in) financing activities  |                                                                       |       |        |       |
|                                                   | Cash dividends paid                                                        | (525,000   | )           | (545,000   | ) |
|                                                   | Proceeds from notes payable                                                | 2,833,000  |        | 4,651,000  |   |
|                                                   | Payments of notes payable                                                  | (5,056,000 | )           | --         |   |
|                                                   | Retirement of common stock                                                 | --         |        | (246,000   | ) |
|                                                   |                                                                            |       |             |       |
|                                                   |                                                                       |       |        |       |
| Net cash provided by (used in) financing activities    | (2,748,000                                                                 | )          | 3,860,000   |       |
|                                                   |                                                                            |       |             |       |
|                                                   |                                                                       |       |        |       |
| Net increase (decrease) in cash and cash equivalents   | 266,000                                                                    |       | (3,006,000  | )          |
|                                                   |                                                                            |       |             |       |
|                                                   |                                                                       |       |        |       |
| Cash and cash equivalents at beginning of period       | 4,896,000                                                                  |       | 10,555,000  |       |
|                                                   |                                                                            |       |             |       |
|                                                   |                                                                       |       |        |       |
| Cash and cash equivalents at end of period             | $                                                                          | 5,162,000  |        | $          | 7,549,000 |   |
|                                                   |                                                                            |       |             |       |
|                                                   |                                                                       |       |        |       |
| Supplemental disclosures of cash flow information.     |                                                                       |       |        |       |
|                                                   | Cash paid income taxes                                                     | $          | --          |       | $ | 74,000 |   |
|                                                   | Cash received for income taxes refunds                                     | 3,445,000  |        | --         |   |
|                                                   | Cash paid for interest expense                                             | 223,000    |        | 80,000     |   |
|                                                        |                                                                            |            |             |            |  |  |  |  |

**OTHER INFORMATION**

SHORT TERMINVESTMENTS:

             Short-term investments consistprimarily of certificates of deposits with original maturities greater than 90days.

INVENTORIES:

             Inventories are stated at the lowerof cost or market, with cost determined on a first-in, first-out basis.  Inventories at June 30, 2001 consist of:

| Raw  material     | $         | 6,092,000  |   |
|-------------------|-----------|------------|--------|
|              |      |       |
| Work  in Progress | 2,063,000 |       |
|              |      |       |
| Finished  Goods   | 7,423,000 |       |
|              |           |       |
|              | $         | 15,578,000 |   |
|              |           |       |

 

NOTES PAYABLE:

             At June 30, 2001, the Company hadthe following notes payable:

| Revolving  credit lines of $10,000,000 secured  by retail subsidiary inventory bearing interest  at 1⁄2% over prime rate | $      | 2,986,000 |   |
|-----------------------------------------------------------------------------------------------------------------------------|--------|-----------|--------|
|                                                                                                                        |   |      |
| Unsecured  revolving credit line of $5,000,000  Bearing interest at 1⁄2% under prime                                     | - -    |      |
|                                                                                                                        |   |           |   |
|                                                                                                                        | $      | 2,986,000 |   |
|                                                                                                                        |        |      |
|                                                                                                                             |        |           |        |  |

 

CONTINGENTLIABILITIES:

RepurchaseObligations

             The Company is contingently liableunder terms of repurchase agreements with various financial institutions whichprovide for the repurchase of its homes sold to dealers under floor planfinancing arrangements upon dealer default. The Company's exposure to loss under such agreements is reduced by theresale of the repurchased home.  TheCompany believes any losses incurred under outstanding repurchase agreements inexcess of the accruals established as of June 30, 2001 will not have asignificant impact on the financial condition of the Company.  However, any substantial increases in dealerdefaults after June 30, 2001 may cause the Company to incur additional lossesdue to repurchase activity.

REVENUERECOGNITION:

             The Company recognizes revenue whenthe product is shipped to independent dealers.

Item 2. Management's Discussion and Analysis of Financial Condition and Resultsof Operations.

Results ofOperations

             Net sales for the second quarter of2001 were $31,577000, a decrease of $4,422,000 from the same quarter of2000.  The sales activity of the Companyfollowed the industry trend during the quarter.  Statistics comparing the second quarter of 2001 to the sameperiod in 2000 and reported by the National Conference of States on BuildingCodes and Standards show the industry suffered a 28% drop in homes shipped anda 26% drop in floors shipped.  Tightenedcredit at both the wholesale and retail levels continued to dampen the abilityof the industry to rebound from its two year slump.   Furthermore, retail and wholesale loan defaults continue toprovide a supply of repossessed homes to be offered for resale, which hasdisplaced some demand for newly manufactured homes.

             During the second quarter of 2001lower margin resulting from the reduction in sales continued to create achallenge to generate income.  Howeveras the Company continued its cost control measures in response to the softmarket, a net income of $107,000 resulted for the quarter.

Liquidity andCapital Resources

             Liquidity and capital resourcesremained fairly stable and consistent with the Company’s position at December31, 2000.  Cash, cash equivalents andshort term investments as of June 30, 2001 and December 31, 2000 were$5,462,000 and $5,246,000, respectively. Working capital as of June 30, 2001 and December 31, 2000 was$23,021,000 and $23,439,000, respectively. Expenditures for property, plant andequipment were minimal during the quarter. The Company anticipates that cash flow from operations and creditarrangements currently in place will be sufficient to meet the Company’sforeseeable requirements.

Outlook andRisk Factors

             The dynamics that propelled themanufacturing component of the industry into its current slump, tight creditand competition with repossessed homes, will continue to affect near termperformance.  These factors adverselyaffect new home orders resulting in lower sales.  While these lower sales have created significant challenges toattain profitability, the resultant cost controls and reduction of theindustry’s manufacturing capacity will bear favorable results in a marketupturn.
             Since the Company produces only todealer orders and sales backlogs are traditionally short, the order activity atthe Company is indicative of the day to day retail sales activity of itsproducts.  Changes affecting retailcustomer demand, such as cost, availability of credit and unemployment, mayhave an immediate effect on the Company's operations.

             In a practice common to theindustry, the Company participates in dealer financing programs which requireit to repurchase homes which remain unsold and in dealer inventory for periodsranging from one to one and one-half years after delivery to the dealer, if thedealer defaults on its financing obligations. The Company believes the reservesaccrued at June 30, 2001 are adequate for known repurchase requirements at thatdate.  However, any substantialincreases in dealer defaults after June 30, 2001 may cause the Company to incuradditional losses due to repurchase activity.

Forward LookingInformation

             The discussion above containsforward looking statements within the meaning of the Private SecuritiesLitigation Reform Act of 1995.  Thesestatements include statements regarding industry and company outlooks and riskfactors.  The Company may make otherforward looking statements orally or in writing from time to time.  All such forward looking statements are notguaranties of future events or performance and involve risks anduncertainties.  Actual results maydiffer materially from those in the forward looking statements as the result ofa number of material factors.  Thesefactors include without limitation, the availability of financing credit atboth the wholesale and retail level, the availability of a competent workforce,the regulation of the industry at the federal, state and local levels, changesin interest rates, unanticipated results in pending legal proceedings and thecondition of the economy and its effect on consumer confidence.

**PART II - OTHER INFORMATION**

Item6.  Exhibits and Reports on Form 8–K

             No reports on Form 8–K forApril, May or June, 2001 have been filed.

**SIGNATURE**

             Pursuant to the requirements of theSecurities Exchange Act of 1934, the registrant has duly caused this report tobe signed on its behalf by the undersigned thereunto duly authorized.

 
       LIBERTY HOMES, INC.  Registrant       BY:  /s/ MARC A. DOSMANN  Marc A. Dosmann Vice President – Chief Financial Officer (Principal Financial and Accounting Officer)
Dated    August 14, 2001