** **

**FORM 10-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 September 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 of registrant 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's telephone number, including area code) |

 

 

Indicateby check mark whether the registrant (1) has filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.      Yes ý   No o

 

Indicate the number of shares outstanding of each of theregistrant's classes of common stock, as of the latest practicable date.

 

 
| **Class**                              |   | **Shares  of Outstanding  at November 5, 2001** |   |
|----------------------------------------|--------|-------------------------------------------------|--------|
|                                   |   |
|                                   |   |                                            |   |
| Class  A Common Stock, $1.00 par value |   | 2,087,945                                       |   |
|                                   |   |                                            |   |
| Class  B Common Stock, $1.00 par value |   | 1,664,922                                       |   |

 

###### **INDEX**

 
| Part I – Consolidated Financial Information  (Unaudited) |                                                                                        |
|---------------------------------------------------------------|---------------------------------------------------------------------------------------------|
|                                                          |                                                                                        |   |
| General                                                       |                                                                                        |   |
| Item 1.                                                       | Consolidated Financial  Statements - Liberty Homes, Inc.                                    |   |
|                                                          |                                                                                        |   |
|                                                          | Consolidated Balance Sheet,  as of September 30, 2001 and December 31, 2000                 |   |
|                                                          |                                                                                        |   |
|                                                          | Consolidated Statement  of Income, for the three months ended September 30, 2001 and 2000   |   |
|                                                          |                                                                                        |   |
|                                                          | Consolidated Statement  of Income, for the nine months ended September 30, 2001 and 2000    |   |
|                                                          |                                                                                        |   |
|                                                          | Consolidated  Statement of Cash Flows for the nine months ended September 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****– CONSOLIDATED FINANCIAL 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.

 

**LIBERTYHOMES, INC.**

**CONSOLIDATEDBALANCE SHEET**

**as of September 30, 2001 and December 31, 2000**

 
|                                                                |   | **September 30,** |       | **December 31,** |   |
|---------------------------------------------------------------------|--------|-------------------|------------|------------------|--------|
| **ASSETS**                                                          |   | **2001**          |       | **2000**         |   |
| Current assets:                                                     |   |              |       |             |   |
| Cash and cash equivalents                                           |   | $                 | 6,407,000  |             | $      | 4,896,000 |   |
| Short term investments                                              |   | 300,000           |       | 350,000          |   |
| Receivables                                                         |   | 11,567,000        |       | 11,259,000       |   |
| Inventories                                                         |   | 15,349,000        |       | 17,422,000       |   |
| Deferred tax asset                                                  |   | 2,655,000         |       | 2,480,000        |   |
| Income taxes refundable                                             |   | 565,000           |       | 3,643,000        |   |
| Prepayments and other                                               |   | 1,988,000         |       | 2,026,000        |   |
|                                                                |   |              |       |             |   |
| Total current assets                                                |   | 38,831,000        |       | 42,076,000       |   |
|                                                                |   |              |       |             |   |
| Property, plant and equipment:                                      |   |              |       |             |   |
|                                                                |   |              |       |             |   |
| Land                                                                |   | 2,422,000         |       | 2,422,000        |   |
| Buildings and improvements                                          |   | 29,639,000        |       | 29,678,000       |   |
| Machinery and equipment                                             |   | 21,795,000        |       | 21,570,000       |   |
|                                                                |   |              |       |             |   |
|                                                                |   | 53,856,000        |       | 53,670,000       |   |
|                                                                |   |              |       |             |   |
| Less accumulated depreciation                                       |   | 27,732,000        |       | 25,977,000       |   |
|                                                                |   |              |       |             |   |
|                                                                |   | 26,124,000        |       | 27,693,000       |   |
|                                                                |   |              |       |             |   |
| Total assets                                                        |   | $                 | 64,955,000 |             | $      | 69,769,000 |   |
|                                                                |   |              |       |             |   |
| **LIABILITIES**                                                     |   |              |       |             |   |
| Current  liabilities:                                               |   |              |       |             |   |
| Accounts payable                                                    |   | $                 | 3,865,000  |             | $      | 3,659,000 |   |
| Notes payable                                                       |   | 2,646,000         |       | 5,209,000        |   |
| Accrued compensation & payroll  taxes                           |   | 1,492,000         |       | 1,416,000        |   |
| Other accrued liabilities                                           |   | 7,487,000         |       | 8,353,000        |   |
|                                                                |   |              |       |             |   |
| Total current liabilities                                           |   | 15,490,000        |       | 18,637,000       |   |
| Deferred  income taxes                                              |   | 2,530,000         |       | 2,530,000        |   |
| Minority interest in subsidiaries                                   |   | 1,064,000         |       | 1,020,000        |   |
| Contingent  liabilities (see notes)                                 |   | --                |       | --               |   |
|                                                                |   |              |       |             |   |
| **SHAREHOLDERS’ EQUITY**                                       |   |              |       |             |   |
| Capital Stock:                                                      |   |              |       |             |   |
| Class A, $1 par value                                               |   |              |       |             |   |
| Authorized-7,500,000 Shares                                    |   |              |       |             |   |
| Issued & outstanding-2,088,000  in 2001 & 2,083,000 in 2000 |   | 2,088,000         |       | 2,083,000        |   |
| Class B, $1 par value                                               |   |              |       |             |   |
| Authorized-3,500,000 Shares                                         |   |              |       |             |   |
| Issued & outstanding-1,665,000  in 2001 & 1,670,000 in 2000 |   | 1,665,000         |       | 1,670,000        |   |
|                                                                |   |              |       |             |   |
| Other  capital                                                      |   | 83,000            |       | 83,000           |   |
|                                                                |   |              |       |             |   |
| Retained  earnings                                                  |   | 42,035,000        |       | 43,746,000       |   |
|                                                                |   |              |       |             |   |
|                                                                |   | 45,871,000        |       | 47,582,000       |   |
|                                                                |   |              |       |             |   |
| Total  liabilities and shareholders’ equity                    |   | $                 | 64,955,000 |             | $      | 69,769,000 |   |
|                                                                     |        |                   |            |                  |        |  |  |  |

 

**LIBERTY HOMES, INC.**

**CONSOLIDATEDSTATEMENT OF INCOME**

 

**for the three months endedSeptember 30, 2001 and 2000**

----

 
|                                                                           |   | **2001**   |       | **2000**   |   |
|--------------------------------------------------------------------------------|--------|------------|------------|------------|--------|
|                                                                           |   |       |       |       |   |
| Net sales                                                                      |   | $          | 29,992,000 |       | $      | 29,763,000 |   |
|                                                                           |   |       |       |       |   |
| Cost of sales                                                                  |   | 25,350,000 |       | 26,910,000 |   |
|                                                                           |   |       |       |       |   |
| Gross profit                                                                   |   | 4,642,000  |       | 2,853,000  |   |
|                                                                           |   |       |       |       |   |
| Selling, delivery, general and  administrative expenses                        |   | 4,491,000  |       | 5,483,000  |   |
|                                                                           |   |       |       |       |   |
| Operating income (loss)                                                        |   | 151,000    |       | (2,630,000 | )      |
|                                                                           |   |       |       |       |   |
| Interest expense                                                               |   | (61,000    | )          | (139,000   | )      |
| Interest and other income                                                      |   | 78,000     |       | 77,000     |   |
|                                                                           |   |       |       |       |   |
| Income (loss) before minorityinterest and income taxes                         |   | 168,000    |       | (2,692,000 | )      |
|                                                                           |   |       |       |       |   |
| Minority interest                                                              |   | (21,000    | )          | 103,000    |   |
|                                                                           |   |       |       |       |   |
| Income tax benefit (expense)                                                   |   | (63,000    | )          | 1,077,000  |   |
|                                                                           |   |       |       |       |   |
| Net income (loss)                                                              |   | $          | 84,000     |       | $      | (1,512,000 | ) |
|                                                                           |   |       |       |       |   |
| Net income (loss) per outstanding  Common Share – basic and fully diluted |   | $          | .02        |       | $      | (.40 | ) |
|                                                                           |   |       |       |       |   |
| Weighted average shares  outstanding                                           |   | 3,753,000  |       | 3,811,000  |   |
|                                                                           |   |       |       |       |   |
| Cash dividend per share:                                                       |   |       |       |       |   |
|                                                                           |   |       |       |       |   |
| Class A Common Stock                                                           |   | $          | .07        |       | $      | .07 |   |
|                                                                           |   |       |       |       |   |
| Class B Common Stock                                                           |   | $          | .07        |       | $      | .07 |   |

 

 

**LIBERTYHOMES, INC.**

**CONSOLIDATED STATEMENT OF INCOME**

** **

**for the ninemonths ended September 30, 2001 and 2000**

----

 
|                                                                 |   | **2001**   |       | **2000**   |   |
|----------------------------------------------------------------------|--------|------------|------------|------------|--------|
|                                                                 |   |       |       |       |   |
| Net sales                                                            |   | $          | 86,330,000 |       | $      | 103,235,000 |   |
|                                                                 |   |       |       |       |   |
| Cost of sales                                                        |   | 73,761,000 |       | 91,742,000 |   |
|                                                                 |   |       |       |       |   |
| Gross profit                                                         |   | 12,569,000 |       | 11,493,000 |   |
|                                                                 |   |       |       |       |   |
| Selling, delivery, general and  administrative expenses              |   | 14,008,000 |       | 16,555,000 |   |
|                                                                 |   |       |       |       |   |
| Operating loss                                                       |   | (1,439,000 | )          | (5,062,000 | )      |
|                                                                 |   |       |       |       |   |
| Interest expense                                                     |   | (287,000   | )          | (228,000   | )      |
| Interest and other income                                            |   | 316,000    |       | 507,000    |   |
|                                                                 |   |       |       |       |   |
| Loss before minorityinterest and income taxes                        |   | (1,410,000 | )          | (4,783,000 | )      |
|                                                                 |   |       |       |       |   |
| Minority interest                                                    |   | (44,000    | )          | 86,000     |   |
|                                                                 |   |       |       |       |   |
| Income tax benefit                                                   |   | 531,000    |       | 1,913,000  |   |
|                                                                 |   |       |       |       |   |
| Net loss                                                             |   | $          | (923,000   | )          | $      | (2,784,000 | ) |
|                                                                 |   |       |       |       |   |
| Net loss per outstandingCommon Share – basic and fully  diluted |   | $          | (.25       | )          | $      | (.72 | ) |
|                                                                 |   |       |       |       |   |
| Weighted average shares  outstanding                                 |   | 3,753,000  |       | 3,871,000  |   |
|                                                                 |   |       |       |       |   |
| Cash dividend per share:                                             |   |       |       |       |   |
|                                                                 |   |       |       |       |   |
| Class A Common Stock                                                 |   | $          | .21        |       | $      | .21 |   |
|                                                                 |   |       |       |       |   |
| Class B Common Stock                                                 |   | $          | .21        |       | $      | .21 |   |

 

**LIBERTY HOMES, INC.**

**CONSOLIDATED STATEMENT OF CASH FLOWS**

**for the nine monthsended September 30, 2001 and 2000**

----

 
|                                                     |   | **2001**   |       | **2000**    |   |
|----------------------------------------------------------|--------|------------|------------|-------------|--------|
| Cash flows provided by (used in)  operating activities:  |   |       |       |        |   |
| Net loss                                                 |   | $          | (923,000   | )           | $      | (2,784,000 | ) |
| Adjustment to reconcile net loss                         |   |       |       |        |   |
| Depreciation                                             |   | 1,771,000  |       | 2,076,000   |   |
| Minority interest in income                              |   | 44,000     |       | (86,000     | )      |
| Net value of retail center assets  written off           |   | 151,000    |       | --          |   |
| Deferred income taxes                                    |   | (175,000   | )          | --          |   |
|                                                     |   |       |       |        |   |
| Changes in assets and liabilities:                       |   |       |       |        |   |
| Receivables                                              |   | (308,000   | )          | (5,197,000  | )      |
| Inventories                                              |   | 2,073,000  |       | (5,244,000  | )      |
| Prepayments and other                                    |   | 38,000     |       | 71,000      |   |
| Accounts payable                                         |   | 206,000    |       | 2,365,000   |   |
| Accrued liabilities                                      |   | (790,000   | )          | (2,232,000  | )      |
| Income taxes payable/receivable                          |   | 3,078,000  |       | (1,198,000  | )      |
|                                                     |   |       |       |        |   |
| Net cash provided by (used in)  operating activities     |   | 5,165,000  |       | (12,229,000 | )      |
|                                                     |   |       |       |        |   |
| Cash flows provided by (used in)  investing activities   |   |       |       |        |   |
| Additions to property, plant and  equipment              |   | (353,000   | )          | (2,222,000  | )      |
| Redemption of short-term  investment                     |   | 50,000     |       | 6,185,000   |   |
|                                                     |   |       |       |        |   |
| Net cash provided by (used in)  investing activities     |   | (303,000   | )          | 3,963,000   |   |
|                                                     |   |       |       |        |   |
| Cash flows provided by (used in)  financing activities - |   |       |       |        |   |
| Cash dividends paid                                      |   | (788,000   | )          | (807,000    | )      |
| Proceeds from notes payable                              |   | 3,393,000  |       | 5,825,000   |   |
| Payments of notes payable                                |   | (5,956,000 | )          | --          |   |
| Retirement of common stock                               |   | --         |       | (685,000    | )      |
|                                                     |   |       |       |        |   |
| Net cash provided by (used in) financing  activities     |   | (3,351,000 | )          | 4,333,000   |   |
|                                                     |   |       |       |        |   |
| Net increase (decrease) in cash  and cash equivalents    |   | 1,511,000  |       | (3,933,000  | )      |
|                                                     |   |       |       |        |   |
| Cash and cash equivalents at  beginning of period        |   | 4,896,000  |       | 10,555,000  |   |
|                                                     |   |       |       |        |   |
| Cash and cash equivalents at end  of period              |   | $          | 6,407,000  |        | $      | 6,622,000 |   |
|                                                     |   |       |       |        |   |
| Supplemental disclosures of cash  flow information cash  |   |       |       |        |   |
| cash paid (received) for income  taxes                   |   | $          | (3,428,000 | )           | $      | 83,000 |   |
| cash paid for interest expense                           |   | 284,000    |       | 219,000     |   |
|                                                          |        |            |            |             |        |  |  |  |  |  |

 

**OTHER INFORMATION**

 

SHORTTERM INVESTMENTS:

 

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

 

INVENTORIES:

 

Inventoriesare stated at the lower of cost or market, with cost determined on a first-in,first-out basis.  Inventories atSeptember 30, 2001 consist of:

 

| Raw  material     |   | $         | 6,547,000  |   |
|-------------------|--------|-----------|------------|--------|
| Work  in Progress |   | 2,147,000 |       |
| Finished  Goods   |   | 6,665,000 |       |
|              |   | $         | 15,349,000 |   |

 

NOTES PAYABLE:

 

               AtSeptember 30, 2001, the Company had the following notes payable:

 

| Revolving credit line  of $10,000,000 secured by retail subsidiary inventory bearing interest at  1/2% over prime rate |   | $      | 2,646,000 |   |
|------------------------------------------------------------------------------------------------------------------------|--------|--------|-----------|--------|
| Unsecured revolving credit line of $5,000,000 Bearing  interest at 1/2% under prime                                    |   |   | - -       |   |
|                                                                                                                   |   | $      | 2,646,000 |   |

 

 

CONTINGENTLIABILITIES:

 

Repurchase Obligations

 

The Company is contingently liable underterms of repurchase agreements with various financial institutions whichprovide for the repurchase of its homes sold to dealers under floorplanfinancing arrangements upon dealer default. The Company's exposure to loss under such agreements is reduced by theresale of the repurchased home.  TheCompany has established what it believes is an appropriate level of accruals toreflect current and anticipated repurchase activity.  The Company believes any losses incurred under outstandingrepurchase agreements in excess of the accruals established as of September 30,2001 will not have a significant impact on the financial condition of theCompany.  However, any substantialincreases in dealer defaults after September 30, 2001 may cause the Company toincur additional losses due to repurchase activity.

 

REVENUERECOGNITION:

 

TheCompany recognizes revenue when the product is shipped to independent dealers.

 

Item2.  Management's Discussion and Analysisof Financial Condition and Results of Operations.

 

Resultsof Operations

 

Netsales for the third quarter of 2001 were $29,992,000, an increase of $229,000from the same quarter of 2000.  Thesales activity of the Company followed the industry trend during thequarter.  Statistics comparing the thirdquarter of 2001 to the same period in 2000 and reported by the NationalConference of States on Building Codes and Standards show the industry suffereda 16% drop in homes shipped and a 14% drop in floors shipped.  Tightened credit at both the wholesale andretail levels continued to dampen the ability of the industry to rebound fromits two year slump.  Furthermore, retailand wholesale loan defaults continue to provide a supply of repossessed homesto be offered for resale, which has displaced some demand for newlymanufactured homes.

 

Duringthe third quarter of 2001, the Company’s gross profit was $4,642,000, a$1,789,000 improvement over the same quarter of 2000.  This cost control improvement and improved expense control ofselling, general and administrative expenses produced a net income of $84,000for the quarter.

 

Liquidityand Capital Resources

 

Liquidityand capital resources improved from the Company’s position at December 31,2000.  Cash, cash equivalents and shortterm investments as of September 30, 2001 and December 31, 2000 were $6,707,000and $5,246,000, respectively.  Workingcapital as of September 30, 2001 and December 31, 2000 was $23,341,000 and$23,439,000, respectively.  Expendituresfor property, plant and equipment were minimal during the quarter.  The Company anticipates that cash flow fromoperations and credit arrangements currently in place will be sufficient tomeet the Company’s foreseeable requirements.

 

Outlookand Risk Factors

 

Thedynamics that propelled the manufacturing component of the industry into itscurrent slump, tight credit and competition with repossessed homes, willcontinue to affect near term performance. Although there was little indication of improvement, these conditionsappeared to be stabilizing prior to September 11, 2001.  A sense for how these factors will reactsince that date is difficult to judge at this time.  Nevertheless, these factors continue to adversely affect new homeorders resulting in lower sales.  Whilethese lower sales have created significant challenges to attain profitability,the resultant cost controls and reduction of the industry’s manufacturingcapacity will bear favorable results in a market upturn.

 

Sincethe Company produces only to dealer orders and sales backlogs are traditionallyshort, the order activity at the Company is indicative of the day to day retailsales activity of its products.  Changesaffecting retail customer demand, such as cost, availability of credit andunemployment, may have an immediate effect on the Company's operations.

 

Ina practice common to the industry, the Company participates in dealer financingprograms which require it to repurchase homes which remain unsold and in dealerinventory for periods ranging from one to one and one-half years after deliveryto the dealer, if the dealer defaults on its financing obligations.

 

Forward Looking Information

 

Thediscussion above contains forward looking statements within the meaning of thePrivate Securities Litigation Reform Act of 1995.  These statements include statements regarding industry andcompany outlooks and risk factors.  TheCompany may make other forward looking statements orally or in writing fromtime to time.  All such forward lookingstatements are not guaranties of future events or performance and involve risksand uncertainties.  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**

 

Item 6.  Exhibits and Reports on Form 8–K

                No reports on Form 8-K for July,August or September, 2001 have been filed.

 

**SIGNATURE**

 

Pursuantto the requirements of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.

 

 

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