** **

**FORM10-Q**

 

**SECURITIES AND EXCHANGE COMMISSION**

 

**Washington DC 20549**

 

 

**(Mark One)**
| **ý**                                                                                                                                                                                                                                                  | **Quarterly Report Pursuant to Section 13 or 15(d) of the Securities  Exchange Act of 1934**  |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                        |                                                                                          |
| **For  the quarterly period ended March 31, 2002.**                                                                                                                                                                                                         |
|                                                                                                                                                                                                                                                        |                                                                                          |
| — 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 of registrantas 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)                         |
|                                                             |   |                               |
| **574.533.0431**                                                 |
|  (Registrant’s telephone number, including  area code) |

 

Indicate by check mark whether the registrant (1) has filed all reportsrequired to be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days.         Yes   ý      No   o

 

 

Indicate the number of shares outstanding of each of the registrant’sclasses of common stock, as of the latest practicable date.

 
|                                  |   | **Shares of Outstanding** |
|---------------------------------------|--------|---------------------------|
| **Class**                             |   | **at May 4, 2002**        |
|                                  |   |                      |
| Class A Common Stock, $1.00 par value |   | 2,085,645                 |
|                                  |   |                      |
| Class B Common Stock, $1.00 par value |   | 1,659,422                 |
|                                       |        |                           |  |

 

 

 

 

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###### **INDEX**

 
| Part I  — Consolidated Financial Information (Unaudited) |   |
|---------------------------------------------------------------|--------|
|                                                          |   |   |
| General                                                       |   |   |
| Item 1.                                                       |   | Consolidated Financial Statements — Liberty Homes,  Inc. |
|                                                          |   |   |
|                                                          |   | Consolidated  Balance Sheet, as of March 31, 2002 and December 31, 2001 |
|                                                          |   |   |
|                                                          |   | Consolidated  Statement of Income, for the three months ended March 31, 2002 and 2001 |
|                                                          |   |   |
|                                                          |   | Consolidated  Statement of Cash Flows for the three months ended March 31, 2002 and 2001 |
|                                                          |   |   |
|                                                          |   | Notes to Consolidated Financial Statements |
|                                                          |   |   |
| 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 |
|                                                               |        |  |  |

 

 

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PART I – CONSOLIDATED FINANCIALINFORMATION

 

General

 

The consolidatedfinancial statements and footnotes thereto listed in the Index on page 2 ofthis report have been prepared using generally accepted accounting principlesapplied on a basis consistent with 2001. The results of operations for the interim period presented are notnecessarily indicative of results to be expected for the year.  The information furnished herein reflectsall adjustments (consisting of normal recurring adjustments) which, in theopinion of management, are necessary for a fair presentation of the results forthe interim periods.

 

 

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**LIBERTY HOMES, INC.**

CONSOLIDATED BALANCESHEET

as of March 31, 2002 andDecember 31, 2001

 

 
|                                                                    |   | **March 31,** |             | **December  31,** |   |
|-------------------------------------------------------------------------|--------|---------------|------------------|-------------------|--------|
|                                                                    |   | **2002**      |             | **2001**          |   |
| **ASSETS**                                                              |   |          |             |              |   |
| Current assets:                                                         |   |          |             |              |   |
| Cash and cash equivalents                                               |   | $             |  4,157,000  |              | $      |  7,223,000 |   |
| Short term investments                                                  |   | 300,000       |             | 300,000           |   |
| Receivables                                                             |   | 9,572,000     |             | 10,506,000        |   |
| Inventories                                                             |   | 13,453,000    |             | 12,567,000        |   |
| Deferred tax asset                                                      |   | 2,366,000     |             | 2,820,000         |   |
| Income taxes refundable                                                 |   | 1,347,000     |             | 362,000           |   |
| Prepayments and other                                                   |   | 2,151,000     |             | 2,248,000         |   |
|                                                                    |   |          |             |              |   |
| Total current assets                                                    |   | 33,346,000    |             | 36,026,000        |   |
|                                                                    |   |          |             |              |   |
|                                                                    |   |          |             |              |   |
| Land                                                                    |   | 2,412,000     |             | 2,412,000         |   |
| Buildings and improvements                                              |   | 29,597,000    |             | 29,549,000        |   |
| Machinery and equipment                                                 |   | 22,143,000    |             | 21,840,000        |   |
|                                                                    |   |          |             |              |   |
|                                                                    |   | 54,152,000    |             | 53,801,000        |   |
|                                                                    |   |          |             |              |   |
| Less accumulated depreciation                                           |   | 28,885,000    |             | 28,328,000        |   |
|                                                                    |   |          |             |              |   |
|                                                                    |   | 25,267,000    |             | 25,473,000        |   |
|                                                                    |   |          |             |              |   |
| Total assets                                                            |   | $             |  58,613,000 |              | $      |  61,499,000 |   |
|                                                                    |   |          |             |              |   |
| **LIABILITIES**                                                         |   |          |             |              |   |
| Current liabilities:                                                    |   |          |             |              |   |
| Accounts payable                                                        |   | $             |  3,444,000  |              | $      |  2,651,000 |   |
| Floorplan notes payable                                                 |   | 2,233,000     |             | 2,383,000         |   |
| Accrued compensation & payroll taxes                                |   | 1,283,000     |             | 1,055,000         |   |
| Other accrued liabilities                                               |   | 4,474,000     |             | 6,906,000         |   |
|                                                                    |   |          |             |              |   |
| Total current liabilities                                               |   | 11,434,000    |             | 12,995,000        |   |
| Deferred income taxes                                                   |   | 2,450,000     |             | 2,450,000         |   |
| Minority interest in consolidated subsidiaries                          |   | 1,069,000     |             | 1,097,000         |   |
| Contingent liabilities (see notes)                                      |   | —        |             | —            |   |
|                                                                    |   |          |             |              |   |
| **SHAREHOLDER’S  EQUITY**                                          |   |          |             |              |   |
| Capital Stock:                                                          |   |          |             |              |   |
| Class A, $1 par value                                                   |   |          |             |              |   |
| Authorized—7,500,000  Shares                                       |   |          |             |              |   |
| Issued & outstanding—2,086,000 in 2002 & 2,088,000 in 2001 |   | 2,086,000     |             | 2,088,000         |   |
| Class B, $1 par value                                                   |   |          |             |              |   |
| Authorized—3,500,000  Shares                                       |   |          |             |              |   |
| Issued & outstanding—1,659,000 in 2002 & 1,665,000 in 2001 |   | 1,659,000     |             | 1,665,000         |   |
|                                                                    |   |          |             |              |   |
| Other capital                                                           |   | 83,000        |             | 83,000            |   |
|                                                                    |   |          |             |              |   |
| Retained earnings                                                       |   | 39,832,000    |             | 41,121,000        |   |
|                                                                    |   |          |             |              |   |
|                                                                    |   | 43,660,000    |             | 44,957,000        |   |
|                                                                    |   |          |             |              |   |
| Total liabilities and  stockholder’s equity                        |   | $             |  58,613,000 |              | $      |  61,499,000 |   |

 

 

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LIBERTY HOMES,INC.

 

CONSOLIDATED STATEMENT OF INCOME

 

for the three monthsended March 31, 2002 and 2001

 

 
|                                                                    |   | **2002**   |       | **2001**   |   |
|-------------------------------------------------------------------------|--------|------------|------------|------------|--------|
|                                                                    |   |       |       |       |   |
| Net sales                                                               |   | $          | 21,899,000 |       | $      | 24,761,000 |   |
|                                                                    |   |       |       |       |   |
| Cost of sales                                                           |   | 19,292,000 |       | 21,673,000 |   |
|                                                                    |   |       |       |       |   |
| Gross profit                                                            |   | 2,607,000  |       | 3,088,000  |   |
|                                                                    |   |       |       |       |   |
| Selling,  delivery, general and administrative                          |   |       |       |       |   |
| Expenses                                                                |   | 4,115,000  |       | 4,861,000  |   |
|                                                                    |   |       |       |       |   |
| Operating loss                                                          |   | (1,508,000 | )          | (1,773,000 | )      |
|                                                                    |   |       |       |       |   |
| Interest expense                                                        |   | (46,000    | )          | (130,000   | )      |
|                                                                    |   |       |       |       |   |
| Interest and  other income                                              |   | 26,000     |       | 126,000    |   |
|                                                                    |   |       |       |       |   |
| Loss before  minority interest  and income taxes                   |   | (1,528,000 | )          | (1,777,000 | )      |
|                                                                    |   |       |       |       |   |
| Minority  interest                                                      |   | 28,000     |       | (6,000     | )      |
|                                                                    |   |       |       |       |   |
| Income tax  benefit                                                     |   | 519,000    |       | 669,000    |   |
|                                                                    |   |       |       |       |   |
| Net loss                                                                |   | $          | (981,000   | )          | $      | (1,114,000 | ) |
|                                                                    |   |       |       |       |   |
| Share loss per  outstanding Common Share — basic and fully diluted |   | $          | (0.26      | )          | $      | (0.30 | ) |
|                                                                    |   |       |       |       |   |
| Weighted average  shares outstanding                                    |   | 3,749,000  |       | 3,753,000  |   |
|                                                                    |   |       |       |       |   |
| Cash dividend  per share:                                               |   |       |       |       |   |
|                                                                    |   |       |       |       |   |
| Class A Common  Stock                                                   |   | $          | 0.07       |       | $      | 0.07 |   |
|                                                                    |   |       |       |       |   |
| Class B Common  Stock                                                   |   | $          | 0.07       |       | $      | 0.07 |   |

 

 

5

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LIBERTY HOMES,INC.

 

CONSOLIDATED STATEMENT OF CASH FLOWS

 

for the threemonths ended March 31, 2002 and 2001

 

 
|                                                                         |   | **2002**   |      | **2001**   |   |
|------------------------------------------------------------------------------|--------|------------|-----------|------------|--------|
| Cash flows from  operating activities                                        |   |       |      |       |   |
| Net loss                                                                     |   | $          | (981,000  | )          | $      | (1,114,000 | ) |
| Adjustment to  reconcile net income to net cash used in operating activities |   |       |      |       |   |
| Depreciation                                                                 |   | 557,000    |      | 666,000    |   |
| Net book value  of retail center fixed assets written off                    |   | —     |      | 151,000    |   |
| Minority  interest                                                           |   | (28,000    | )         | 5,000      |   |
|                                                                         |   |       |      |       |   |
| Changes in  assets and liabilities:                                          |   |       |      |       |   |
| Receivables                                                                  |   | 934,000    |      | (116,000   | )      |
| Inventories                                                                  |   | (886,000   | )         | (909,000   | )      |
| Prepayments and  other                                                       |   | 97,000     |      | 42,000     |   |
| Accounts payable                                                             |   | 793,000    |      | 360,000    |   |
| Other current  liabilities                                                   |   | (2,204,000 | )         | (1,873,000 | )      |
| Income taxes  receivable/payable                                             |   | (531,000   | )         | (677,000   | )      |
| Total  adjustments                                                           |   | (1,268,000 | )         | (2,351,000 | )      |
| Net cash used in  operating activities                                       |   | (2,249,000 | )         | (3,465,000 | )      |
|                                                                         |   |       |      |       |   |
| Cash flows used  in investing activities                                     |   |       |      |       |   |
| Additions to property,  plant and equipment                                  |   | (351,000   | )         | (194,000   | )      |
|                                                                         |   |       |      |       |   |
| Net cash used in  investing activities                                       |   | (351,000   | )         | (194,000   | )      |
|                                                                         |   |       |      |       |   |
| Cash flows  provided by (used in) financing activities                       |   |       |      |       |   |
| Cash dividends  paid                                                         |   | (262,000   | )         | (263,000   | )      |
| Proceeds from  notes payable                                                 |   | 311,000    |      | 1,717,000  |   |
| Payments of  notes payable                                                   |   | (461,000   | )         | (829,000   | )      |
| Retirement of  common stock                                                  |   | (54,000    | )         | —     |   |
|                                                                         |   |       |      |       |   |
| Net cash  provided by (used in) financing activities                         |   | (466,000   | )         | 625,000    |   |
|                                                                         |   |       |      |       |   |
| Net decrease in  cash and cash equivalents                                   |   | (3,066,000 | )         | (3,034,000 | )      |
|                                                                         |   |       |      |       |   |
| Cash and cash  equivalents at beginning of period                            |   | 7,223,000  |      | 4,896,000  |   |
|                                                                         |   |       |      |       |   |
| Cash and cash  equivalents at end of period                                  |   | $          | 4,157,000 |       | $      | 1,862,000 |   |
|                                                                         |   |       |      |       |   |
| Supplemental  disclosures of cash flow information                           |   |       |      |       |   |
| Cash paid during  the period for income taxes                                |   | —     |      | —     |   |
| Cash paid for  interest expense                                              |   | $          | 46,000    |       | $      | 150,000 |   |

 

 

6

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OTHER INFORMATION

 

SHORT TERMINVESTMENTS:

 

Short-terminvestments consist primarily of certificates of deposits with originalmaturities greater than 90 days.

 

 

INVENTORIES:

 

Inventories arestated at the lower of cost or market, with cost determined on a first-in,first-out basis.  Inventories at March31, 2002 consist of:

 

| Raw Material     |   | $         | 5,970,000  |   |
|------------------|--------|-----------|------------|--------|
| Work in Progress |   | 2,038,000 |       |
| Finished goods   |   | 5,445,000 |       |
|             |   | $         | 13,453,000 |   |

 

 

NOTES PAYABLE:

 

               At March 31, 2002, the Companyhad the following notes payable:

 
| Revolving credit  line of $8,500,000 secured by subsidiaries’ retail inventory bearing interest  at 1/2% over prime rate |   | $             | 2,233,000 |   |
|-------------------------------------------------------------------------------------------------------------------------------|--------|---------------|-----------|--------|
|                                                                                                                          |   |          |      |
| Unsecured  revolving credit line of $5,000,000 bearing interest at 1/2% under prime                                           |   | —0— |      |
|                                                                                                                          |   | $             | 2,233,000 |   |

 

CONTINGENTLIABILITIES:

 

RepurchaseObligations — The Company is contingently liable under terms of repurchaseagreements with various financial institutions which provide for the repurchaseof its homes sold to dealers under floor plan financing arrangements upondealer default. The Company’s exposure to loss under such agreements is reducedby the resale of the repurchased home. The Company believes any losses incurred under outstanding

 

 

7

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repurchase agreements in excess of the accruals established as of March31, 2002 will not have a significant impact on the financial condition of theCompany.  However, any substantial increasesin dealer defaults after March 31, 2002 may cause the Company to incuradditional losses due to repurchase activity.

 

 

REVENUERECOGNITION:

 

The Companyrecognizes revenue when the product is shipped to independent dealers.

 

Item 2.  Management’s Discussion and Analysis ofFinancial Condition and Results of Operations.

 

Results ofOperations

 

Net sales for thefirst quarter of 2002 were $21,899,000, a decrease of $2,862,000 or 12% fromthe same quarter of 2001. Credit at both the wholesale and retail levelcontinues to adversely affect the industry as well as the Company throughtighter underwriting standards and further fallout of major lendinginstitutions.  As wholesale creditavailability has fallen, dealers have been forced into reducing inventories ofstock units by not replacing them when sold. As this reduction process levels out, factory orders should followretail sales activity more closely. Chattel mortgage availability has been quite restricted and has, to alarge extent, kept consumers out of this portion of the market.  Although credit institutions have lessenedthe pace of repossessions, second-hand units continue to provide competitivealternatives to new factory orders.

 

During thequarter, the Company continued its cost control measures in response to thesoft market for its homes.  In spite oflower sales, the Company was able to reduce the

 

8

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loss during the current quarter with a net loss of $981,000 compared toa net loss of $1,114,000 during the quarter a year ago.

 

Liquidity and Capital Resources

 

Liquidity andcapital resources dropped slightly from the Company’s position at December 31,2001.  Cash, cash equivalents and shortterm investments as of March 31, 2002 and December 31, 2001 were $4,457,000 and$7,523,000, respectively.  Workingcapital as of March 31, 2002 and December 31, 2001 was $21,912,000 and$23,031,000, respectively.  Expendituresfor property, plant and equipment and operations were the main uses of capitalresources during the quarter.  TheCompany anticipates that cash flow from operations will be sufficient to meetthe Company’s foreseeable requirements.

 

Outlook and Risk Factors

 

                The dynamics thatpropelled the manufacturing component of the industry into its current slump,tight credit and continued competition with repossessed homes, will continue toaffect near term performance.  Thesefactors adversely affect new home orders resulting in lower sales.  While these lower sales have createdsignificant challenges to attain profitability, the resultant cost controls andreduction of the industry’s manufacturing capacity will bear favorable resultsin a market upturn.

 

Since the Companyproduces only to dealer orders and sales backlogs are traditionally short, theorder activity at the Company is indicative of the day to day retail salesactivity of its products.  Changesaffecting retail customer demand, such as cost, availability of credit andunemployment, may have an immediate effect on the Company’s

 

9

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operations.

 

It is a commonpractice for manufactured housing producers to participate in dealer financingprograms which require the manufacturer to repurchase homes which remain unsoldand in dealer inventory within a certain time period following delivery to thedealer, if the dealer defaults on its financing obligations.  When initiated, this repurchase obligationbrings homes back into the wholesale market and may result in some discountingas the units are resold.  Currently, theindustry has a significant level of these repurchased homes as well ashomeowner repossessions that will compete with future orders to factories fornew homes.  The Company believes thereserves accrued at March 31, 2002 are adequate for known repurchaserequirements that it may have at that date. However, any substantial increases in dealer defaults after March 31,2002 may cause the Company to incur additional losses due to repurchaseactivity.

 

Forward Looking Information

 

The discussionabove contains forward 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

 

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local levels, changes in interest rates, the stability of dealerdistribution networks, unanticipated results in pending legal proceedings andthe condition of the economy and its effect on consumer confidence.

 

 

PART II — OTHER INFORMATION

 

Item 6.  Exhibits and Reports on Form 8–K

 

No reports on Form8–K for January, February or March, 2002 have been filed.

 

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**SIGNATURE**

 

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.

 

 

 

| LIBERTY HOMES, INC.                           |
|-----------------------------------------------|
| Registrant                                    |
|                                          |
|                                          |
|                                          |
| BY:  /s/ Marc  A. Dosmann                |
| Marc A. Dosmann                               |
| Vice President — Chief Financial Officer |
| (Principal Financial and Accounting Officer)  |

 

 
| Dated | May 15, 2002 |
|-------|--------------|

 

 

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