FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549-1004
Quarterly Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For The Quarter Year Ended September 30, 1996
Commission File Number 0-8585
Dynamic Homes, Inc. (Exact name of registrant as specified in its charter)
Minnesota (State or Other Jurisdiction of Incorporation or Organization)
41-0960127 (IRS Employer Identification No.)
525 Roosevelt Avenue, Detroit Lakes, MN 56501 (Address of principal
executive offices)
(218) 847-2611 (Registrant's Telephone Number Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports re-
quired to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the reg-
istrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
YES X
NO
As of September 30, 1996, 2,240,850 common shares, par value, $.10 per share,
were outstanding. On January 7, 1995 the Company implemented a plan to re-
purchase up to 100,000 shares of its outstanding common stock. As of September
30, 1996, a total of 43,080 shares have been repurchased and excluded from the
common shares outstanding.
PART I.
Item 1. Financial Statements
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS AND NINE MONTHS
ENDED SEPTEMBER 30, 1996 & 1995
(Unaudited)
<CAPTION>
Three Months Nine Months
9/30/96 9/30/95 9/30/96 9/30/95
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<S> <C> <C> <C> <C>
Revenues
Single - Family 4,159,000 2,424,000 7,127,000 5,331,000
Multi - Family / Commercial 193,000 798,000 1,122,000 1,705,000
Other 126,000 110,000 270,000 263,000
Transportation 259,000 197,000 492,000 449,000
Shagawa Resort 66,000 - 110,000 -
Total Revenues - Net 4,803,000 3,529,000 9,121,000 7,748,000
Cost of Sales
Materials 2,496,000 1,767,000 4,578,000 3,939,000
Labor 397,000 291,000 780,000 691,000
Overhead 460,000 431,000 953,000 912,000
Transportation 266,000 210,000 609,000 526,000
Total Cost of Sales 3,619,000 2,699,000 6,920,000 6,068,000
Gross Profit 1,184,000 830,000 2,201,000 1,680,000
Operating Expenses
Marketing 100,000 73,000 318,000 240,000
Administration 182,000 164,000 550,000 504,000
Other 37,000 - 37,000 -
Shagawa Resort 33,000 - 56,000 -
Total Operating Expenses 352,000 237,000 961,000 744,000
Operating Income 832,000 593,000 1,240,000 936,000
Other (Income) Expense
Interest Expense 34,000 4,000 65,000 14,000
Other, Net (6,000) (6,000) (11,000) (41,000)
Total Other (Income) Expense 28,000 (2,000) 54,000 (27,000)
Income Before Taxes 804,000 595,000 1,186,000 963,000
Income Tax (Provision) Benefit (320,000) (238,000) (473,000) (385,000)
Net Income 484,000 357,000 713,000 578,000
Earnings Per Common Share 0.22 0.16 0.32 0.26
Weighted Average Number of Shares
Outstanding per Period 2,219,700 2,215,900 2,217,100 2,205,200
Dividends per Common Share None None None None
See notes to condensed consolidated financial statements.
</TABLE>
<TABLE>
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 1996 & DECEMBER 30,1995
(Unaudited)
<CAPTION>
9/30/96 12/30/95
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<C> <C>
ASSETS
CURRENT ASSETS:
Cash & cash equivalents 814,000 543,000
Accounts receivable, less allowance for
doubtful accounts, pledged 899,000 699,000
Inventories pledged (Note 2) 1,630,000 1,638,000
Prepaid expenses (Note 5) 91,000 39,000
Deferred income taxes (Note 4) 90,000 90,000
Total Current Assets 3,524,000 3,009,000
OTHER ASSETS:
Other assets (Note 9) 399,000 38,000
Total Other Assets 399,000 38,000
PROPERTY, PLANT & EQUIPMENT, at:
Cost - pledged in part (Note 6) 5,530,000 4,256,000
Less - accumulated depreciation (1,626,000) (1,470,000)
Net Property, Plant & Equipment 3,904,000 2,786,000
Total Assets 7,827,000 5,833,000
LIABILITIES
CURRENT LIABILITIES:
Notes payable - -
Current portion - long-term debt 86,000 62,000
Accounts payable 668,000 216,000
Customer deposits 255,000 408,000
Accrued expenses
Salaries, wages and vacations 207,000 183,000
Taxes, other than income 99,000 50,000
Warranty 75,000 71,000
Other 99,000 89,000
Income Taxes 230,000 184,000
Total Current Liabilities 1,719,000 1,263,000
LONG-TERM DEBT: (Note 7)
Less current portion included above 1,875,000 1,066,000
DEFERRED INCOME TAXES (Note 4) 25,000 25,000
Total Liabilities 3,619,000 2,354,000
STOCKHOLDERS' EQUITY
Common stock, par value $.10 per share
Authorized, 5,000,000 shares; issued and out-
standing, 2,240,850 in 1996; 2,215,850 in 1995 228,000 226,000
Paid-in capital in excess of par 147,000 134,000
Retained earnings 3,977,000 3,263,000
Treasury stock - 43,080 shares (144,000) (144,000)
Total Stockholders' Equity 4,208,000 3,479,000
Total Liabilities & Stockholders' Equity 7,827,000 5,833,000
See notes to consolidated financial statements.
</TABLE>
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1996 & 1995
(Unaudited)
<CAPTION>
9/30/96 9/30/95
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<S> <C> <C>
Cash Flows From Operating Activities
Net Income (Loss) 713,000 578,000
Adjust to Reconcile Net Income or Loss
Provided by (Used in) Operating Activities:
Depreciation 156,000 99,000
Provision for Doubtful Accounts 4,000 4,000
(Gain) Loss on Sale of Property & Equipment - (1,000)
Change in Assets & Liabilities:
(Increase) Decrease in Receivables (204,000) 40,000
(Increase) Decrease in Inventories 8,000 (456,000)
(Increase) Decrease in Prepaid Expenses (52,000) (41,000)
(Increase) Decrease in Deferred Income Tax - -
(Increase) Decrease in Other Assets (361,000) 9,000
Increase (Decrease) in Accounts Payable 452,000 146,000
Increase (Decrease) in Customer Deposit (153,000) 64,000
Increase (Decrease) in Accrued Expenses 87,000 (20,000)
Increase (Decrease) in Income Tax Payable 46,000 161,000
Net Cash Provided by (Used in) Operating Activities 696,000 583,000
Cash Flows From Investing Activities
Proceeds From Sale of Property & Equipment - 3,000
Purchase of Property & Equipment (1,274,000) (1,470,000)
Purchase of Treasury Stock - (144,000)
Net Cash Provided by (used in) Investing
Activities (1,274,000) (1,611,000)
Cash Flows From Financing Activities
Proceeds from Sale of Common Stock 16,000 20,000
Net Borrowings (Payments) on Revolving Credit
Agreements & Other Short-Term Financing - (2,000)
Principal Payments on Long-Term Borrowings
Including Industrial Revenue Bonds (45,000) (32,000)
Proceeds From Long-Term Borrowings 878,000 568,000
Net Cash Provided by (Used in) Financing
Activities 849,000 554,000
Increase (Decrease) in Cash and Equivalents 271,000 (474,000)
Cash and Equivalents
Beginning 543,000 607,000
Ending 814,000 133,000
Supplemental Disclosures of Cash Flow
Information
Cash Payments for:
Income Taxes 427,000 224,000
Interest 62,000 12,000
See notes to condensed consolidated financial statements.
</TABLE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. UNAUDITED STATEMENTS
In the opinion of management, the accompanying unaudited condensed consolidated
financial statements contain all adjustments necessary to present fairly the
financial position of the Company as of September 30, 1996 and December 30,
1995, and the results of operations and cash flows for the nine months ended
September 30, 1996 and September 30, 1995.
Note 2. INVENTORIES
During interim accounting periods, the Company uses the standard cost method of
determining cost of sales and inventory levels. Cost of sales values are
determined monthly based on standards for materials, labor and overhead by
product mix. Deviations from these standards result in adjustments of the
monthly cost of sales amount. Periodic physical inventories are taken during
the fiscal year to determine actual inventory and cost of sales. A physical
inventory was taken during the second quarter of 1996 and the results were re-
flected in the cost of sales reported. No physical inventory was taken during
the third quarter of 1996.
The Breakdown of Inventories is as follows:
<TABLE>
<CAPTION>
9/30/96 9/30/95
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<S> <C> <C>
Finished Goods 745,000 983,000
Work In Process 155,000 181,000
Raw Materials 730,000 756,000
Total Inventories 1,630,000 1,920,000
</TABLE>
Note 3. BACKLOG OF ORDERS
The Company's order backlog consists of completed units awaiting delivery,
current production and orders scheduled for future production. As of September
30, 1996 and September 30, 1995, the Company's backlog of orders was approx-
imately $4,252,000 and $4,801,000, respectively. As of December 30, 1995, the
Company's backlog of orders was $2,595,000. Approximately $1,260,000 of the
current backlog relates to the remaining balance of a large single-family hous-
ing project for the Fort Berthold Housing Authority. It is anticipated that
the project will be completed during the fourth quarter of 1996. However, in-
clement weather-related conditions may cause delays in the delivery and setting
of units which would adversely impact revenue and earnings. The Company recog-
nizes revenue upon the delivery and setting of finished products.
Note 4. DEFERRED INCOME TAXES
Deferred income taxes relate primarily to differences between the basis of re-
ceivables, property and equipment, accrued expenses and book / tax inventory
adjustments for financial and income tax reporting. The deferred tax assets
and liabilities represent future tax return consequences of those differences,
which will either be taxable or deductible when the assets and liabilities are
recovered and settled.
Note 5. PREPAID EXPENSES
<TABLE>
<CAPTION>
9/30/96 9/30/95
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<S> <C> <C>
Advertising 8,000 14,000
Insurance 76,000 42,000
Other 7,000 9,000
91,000 65,000
</TABLE>
Note 6. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
9/30/96 9/30/95
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<S> <C> <C>
Dynamic Homes, Inc.
Land and Improvements 130,000 117,000
Buildings 978,000 956,000
Machinery and Equipment 1,368,000 1,320,000
Construction in Progress 38,000 -
Shagawa Resort, Inc.
Land and Improvements 329,000 -
Buildings 2,033,000 -
Furniture, Fixtures and
Equipment 603,000 -
Construction in Progress 51,000 1,351,000
5,530,000 3,744,000
Less: Accumulated Depreciation -
Dynamic Homes, Inc. (1,577,000) (1,467,000)
Accumulated Depreciation -
Shagawa Resort, Inc. (49,000) -
3,904,000 2,277,000
Note 7. LONG-TERM DEBT
</TABLE>
<TABLE>
<CAPTION>
9/30/96 9/30/95
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<S> <C> <C>
Long-term debt (net of current
maturities) consists of:
- Industrial Development Bonds
of Detroit Lakes, MN 45,000 80,000
- Other Notes and Contracts
Payable 4,000 10,000
- Term Mortgage Loan Agreement
covering Shagawa Resort
project (Note 8) 1,826,000 551,000
1,875,000 641,000
Note 8. SHAGAWA RESORT, INC.
During 1995, Dynamic Homes, Inc. purchased 100% of the common stock of Shagawa
Resort, Inc., a hotel/resort in northern Minnesota. The stock was exchanged
for an account receivable in the amount of $628,100. The hotel/resort remained
under construction until May 1, 1996, when the hotel/resort commenced with nor-
mal business operations. The total cost of the project to Dynamic Homes, Inc.
approximates $3,330,000 which has been reduced by approximately $1,722,000 in
existing equity and various economic incentives. As of September 30, 1996,
several minor items related to interior modifications are still being
addressed.
The Company entered into a debt agreement whereby the balance of the construc-
tion loan, up to a maximum of $1,850,000 will be financed. The agreement calls
for an interest rate of 8.75% to be adjusted every three years, with monthly
principal and interest payments based upon a 20-year amortization and a 10-year
balloon payment. The debt is secured by the assets of Shagawa Resort, Inc. and
a partial guarantee of the Small Business Administration. At the end of
August, 1996, the construction mortgage loan was finalized and converted to a
term mortgage loan. Monthly installments of principal and interest are
$16,231.50 with a blended interest rate of approximately 8 percent.
In conjunction with the purchase of Shagawa Resort, Inc., the Company also
entered into a management agreement for the operation of the hotel/resort. The
management agreement calls for the managing agent to pay minimum monthly pay-
ments of $22,100 to the Company plus a percentage of room and food/beverage
receipts when these exceed the minimum rentals on an annual basis. The minimum
monthly payments are structured to cover the monthly long-term loan mortgage
payments. The Company also entered into an option agreement with the managing
agent which will allow the managing agent to purchase the stock of Shagawa
Resort, Inc. at a price determined by the agreement. The option agreement ex-
pires in December, 1997. The managing agent has met its minimum monthly pay-
ment obligations during the first five months of operation. It is anticipated
that under the terms of the management agreement, the Company's ownership of
Shagawa Resort, Inc. will have a minimum impact on the Company's earnings
during 1996.
Note 9. OTHER ASSETS
</TABLE>
<TABLE>
<CAPTION>
9/30/96 9/30/95
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<S> <C> <C>
Dynamic Homes, Inc.
Deferred Bond & Maintenance
Expense 3,000 5,000
Deposits 13,000 -
Shagawa Resort, Inc.
Prepaid Advertising 11,000 -
Prepaid Legal / Debt Expense 191,000 -
Organization - Start-up 181,000 -
399,000 5,000
</TABLE>
The above referenced other assets for Shagawa Resort, Inc. are being amortized
on a straight-line basis over the estimated life of the asset as follows:
Advertising 3 years
Organization - Start-up 5 years
Legal / Debt Expense 20 years
MANAGEMENT'S DISCUSSION & ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
Three Months Ended September 30, 1996 and 1995
NET SALES:
The Company's revenue for the three months ended September 30, 1996, was
$4,803,000 as compared to $3,529,000 for the year-earlier period. Single-
family revenues during the third quarter of 1996 increased by $1,735,000 or 72%
from the prior year. Multi-family/commercial decreased from $798,000 during
1995 to $193,000 for 1996. Due to the increased sales activity during the
third quarter of 1996, transportation revenues increased by $62,000 while re-
tail related revenues increased by $16,000. In addition, the Company also
realized $66,000 of revenue during the quarter relating to the monthly lease
structure associated with the Shagawa Resort facility. The overall increase in
third quarter revenue was $1,274,000 or 36 percent. The Company's improved
third quarter operating results were primarily generated by single-family
housing. Single-family construction for several Native American reservations
located in the Upper Midwest made a significant contribution to the sales in-
crease. By the end of the third quarter, the 40-unit single-family housing
project for the Turtle Mountain Housing Authority (which was signed and parti-
ally delivered during fiscal 1995), has now been completed. In addition, 17
units of a 45-unit single-family order for the Fort Berthold Housing Authority
has also been completed. If weather conditions permit, the remaining 28 units
of the Fort Berthold order are anticipated to be delivered and set during the
fourth quarter of 1996. Revenues are not recognized until a unit has been de-
livered and set.
The Company's order backlog at September 30, 1996, was $4,252,000 as compared
to $4,801,000 at September 30, 1995 (reference Note 3). Unit order activity
for single-family housing is again showing signs of the traditional late fall
slowdown. In response, the Company has implemented both a model home program
and a winter promotion program to encourage winter construction for single-
family housing. In addition, the Company is also actively pursuing several
multi-family/commercial projects to supplement the single-family housing
sector.
COST OF SALES:
The Company's gross profit (including transportation revenue and expense) of
$1,184,000 for the third quarter of 1996 is up $354,000 from the same period
of 1995. During the third quarter of 1996, the gross margin percent on product
(excluding Shagawa Resort, transportation revenue and expense) was 25.1% as
compared to 25.3% for the 1995 period. The decrease in the gross margin per-
cent reflects the impact of escalating acquisition costs for wood related
materials experienced during the third quarter of 1996.
OPERATING EXPENSES:
The Company's operating expenses, which include transportation, marketing, ad-
ministration and Shagawa Resort increased $171,000 during the 1996 period. Due
to additional delivery and setting activity, transportation related expenses
increased $56,000. Marketing related expenses increased by $27,000 due to
additional media advertising and Builder/Dealer incentive programs. Admini-
stration costs for 1996 increased by $18,000 while Shagawa Resort, Inc. costs
for depreciation and amortization added an additional $33,000 of expense.
Other expenses of $37,000 during the third quarter of 1996 relates to an
employee profit sharing and incentive program. During 1995, a similar plan was
in place with accrued expenses of $22,500. However, in 1995, these expenses
were allocated to the corresponding operating expense categories. The Shagawa
Resort facility was under construction during the third quarter of 1995 and
consequently did not have any affect on operating expenses.
OPERATING INCOME:
Operating income for 1996 increased to $832,000 from $593,000 for 1995. The
40% increase in operating income reflects the benefits associated with a higher
revenue base and better production related overhead absorption.
NET NON - OPERATING INCOME / EXPENSE:
Non-operating expenses for the third quarter of 1996 were $28,000 as compared
to a non-operating income of $2,000 for the 1995 period. Interest related ex-
pense for 1996 increased by $30,000 which is directly related to interest costs
associated with the financing of Shagawa Resort. Other income for both periods
remained constant at $6,000 each quarter.
FEDERAL AND STATE INCOME TAXES:
During the third quarter of both 1996 and 1995, the Company recorded estimated
income tax provisions of $320,000 and $238,000, respectively. Income tax obli-
gations and benefits are estimated at the normal statutory rate.
NET INCOME:
Net income for the third quarter of 1996 was $484,000 or $0.22 per share. This
is an increase of 36% from $357,000 or $0.16 per share in the year earlier
period.
Results of Operations
Nine Months Ended September 30, 1996 and 1995
NET SALES:
The Company's revenue for the nine month period ended September 30, 1996, was
$9,121,000 as compared with $7,748,000 for 1995. This is an increase of
$1,373,000 or 18 percent. Single-family revenue for 1996 increased by
$1,796,000 or 34 percent, while multi-family/commercial revenue decreased by
$583,000 or 34 percent. In conjunction with the higher revenue base for 1996,
transportation and retail revenues also increased by $50,000. Monthly lease
revenues generated from the May 1, 1996 opening of the Shagawa Resort facility
contributed an additional $110,000 of revenue.
New order activity remained quite strong throughout the third quarter, however,
recent single-family order activity has again shown indications of the tradi-
tional seasonal slowdown. In response, the Company has implemented several
Builder/Dealer incentive programs to promote new orders and is also actively
pursuing several multi-family/commercial projects. Based on the Company's
backlog at the end of the third quarter and favorable weather conditions for
setting, the fourth quarter of 1996 has the potential for a relatively strong
quarter.
COST OF SALES:
The Company's gross profit (including transportation revenue and expense) was
$2,201,000 for the first nine months of 1996 as compared to $1,680,000 for
1995. Gross profit percentage for the first nine months of each period are
24.1% and 21.7%, respectively. When transportation revenue and expense plus
Shagawa Resort revenue are excluded, the gross profit on product changes to
25.9% and 24.1%, respectively. The improved 1996 gross profit reflects the
benefits associated with favorable costs for raw materials acquired during the
first half of the year.
OPERATING EXPENSES:
The Company's 1996 operating expenses, which includes transportation, market-
ing, administration and Shagawa Resort, increased by $300,000 to $1,570,000
from $1,270,000 for 1995. Due to additional delivery and setting activity,
transportation related expense increased $83,000. Marketing related expenses
increased by $78,000 due to additional media advertising and several Builder/
Dealer incentive programs. Administration expenses for 1996 increased by
$46,000 due to changes in several compensation structures, while Shagawa
Resort, Inc. costs for depreciation and amortization added an additional
$56,000 of expense. Other expenses of $37,000 were recognized during the third
quarter of 1996 for an employee profit-sharing incentive program. During 1995,
a similar plan was also in place with recognized costs of $22,500. However,
the 1995 expenses were allocated to the corresponding expense categories. The
Shagawa Resort facility which was acquired during the third quarter of 1995,
was under construction during the duration of 1995 and consequently did not
have any affect on 1995 operating expenses.
OPERATING INCOME:
The Company's operating income for the first nine months of 1996 was $1,240,000
as compared to $936,000 for 1995. The increase of $304,000 or 32% reflects the
contributions resulting from a higher revenue base, favorable raw material pur-
chases during the first half of 1996 and slightly better production related
overhead absorption.
NET NON-OPERATING INCOME/EXPENSE:
The Company's net non-operating activities resulted in additional expense of
$54,000 for 1996 versus additional income of $27,000 for 1995. Interest ex-
pense for 1996 increased by $51,000 which is directly attributed to interest
costs associated with the financing of Shagawa Resort. In addition, the Com-
pany also experienced a reduction in interest generated income and insurance
related refunds which decreased 1996 other income by $30,000.
FEDERAL AND STATE INCOME TAXES:
During the first nine months of both 1996 and 1995, the Company recorded esti-
mated income tax provisions of $473,000 and $385,000, respectively. Since all
loss carryforwards were completely utilized as of year-end 1994, the Company
estimated income taxes at the normal statutory rate for both 1996 and 1995.
NET INCOME:
Net income for the first three quarters of 1996 was $713,000 as compared to
$578,000 for the corresponding three quarters of 1995. Earnings per share for
1996 increased by 23% or $0.06 per share from $0.26 per share for 1995 to $0.32
per share for 1996.
Financial Condition
As of September 30, 1996
The Company's working capital was a positive $1,805,000 at September 30, 1996,
versus $1,587,000 at September 30, 1995, and $1,746,000 at December 30, 1995.
The current ratio for September 30, 1996, was 2.0 to 1.0 as compared to 2.1 to
1.0 at September 30, 1995, and 2.4 to 1.0 at December 30, 1995. The Company's
1996 cash flow from operations was a positive $696,000 as compared to a posi-
tive $583,000 for 1995.
During the first three quarters of 1996, cash outflows were required to support
the build-up of customer receivables, reduce the contingent liabilities associ-
ated with customer deposits and the Company's investment interests in the com-
pletion of the Shagawa Resort project (Notes 6 & 9). Cash flows to support the
above referenced activities were primarily provided by utilizing the Company's
internally generated income, supplier payment terms and long-term borrowings
associated with the Shagawa Resort facility.
Long-term debt, net of current maturities, increased from $641,000 at September
30, 1995, to $1,875,000 at September 30, 1996. Long-term debt, net of current
maturities, was $1,066,000 at December 30, 1995. Long-term debt consists pri-
marily of Industrial Revenue Bonds related to the Detroit Lakes facility and
the Shagawa Resort project (Notes 7 and 8). During the third quarter of 1996,
the existing construction loan financing for the Shagawa Resort project was
converted to a term mortgage loan agreement (Note 8). The ratio of long-term
debt to stockholders' equity changed from .20 to 1.0 at September 30, 1995, to
.30 to 1.0 at December 30, 1995, and .45 to 1.0 at September 30, 1996. Stock-
holders' equity (net of treasury stock) increased by $729,000 to $4,208,000 at
September 30, 1996, from $3,479,000 at December 30, 1995, and up $960,000 from
the September 30, 1995, level of $3,248,000. In order to alleviate the lengthy
production backlog experienced this summer, the Company has formulated plans
for another plant expansion at the Detroit Lakes facility. The plant addition
would increase the production facility by 17,000 square feet and production by
approximately 15 percent. The plant expansion is anticipated to become opera-
tional by the spring of 1997. The proposed financing of the project consists
of economic development funding and long-term borrowings.
Dynamic Homes, Inc. has available a short-term line of credit which is
collateralized by inventories and receivables. The credit available is based
on specified percentages of inventories and receivables. On May 1, 1996, the
Company renewed its line of credit for a period of one year. The renewed
credit line increased the maximum available borrowings to $1,100,000 and
exempts short-term letters of credit from reducing the available line of
credit. However, as a condition of converting the Shagawa Resort, Inc. con-
struction financing to permanent long-term financing, the Company was required
to issue a standby letter of credit to a Title Insurance company in the amount
of $425,000 for an initial period of one year commencing July 10, 1996. The
standby letter of credit will automatically extend for additional one year
periods until rescinded by the beneficiary. The standby letter of credit has
consequently reduced the Company's available line from $1,100,000 to $675,000.
As of September 30, 1996, the Company did not have any outstanding borrowings
under the line of credit agreement.
Management believes internally generated cash, short-term borrowings on its
existing credit line and long-term financing arrangements on major capital
additions should provide adequate funds to support the Company operations and
scheduled capital additions during the remainder of 1996 and beginning stages
of 1997.
Statements regarding the Company's operations, performance and financial con-
dition are subject to certain risks and uncertainties. These risks and uncer-
tainties include but are not limited to: rising mortgage interest rates and/or
weakness in regional and national economic conditions that could have an ad-
verse impact on new home and multi-family/commercial sales. Likewise, future
escalating and volatile material costs could also affect the Company's profit
margins.
PART II.
Items 1, 2, 3, 4, and 5 are omitted as each is either not applicable or the
answer to the item is negative.
Item 6. Exhibits and Reports on Form 8-K:
No reports of Form 8-K have been filed during the quarter ended September 30,
1996.
SIGNATURE
Pursuant to the requirements of the Securities Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
Dated: November 14, 1996
Dynamic Homes, Inc. (Registrant)
ELDON MATZ Controller
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDLUE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONDENSED
CONSOLIDATED INCOME STATEMENTS AND CONDENSED CONSOLIDATED BALANCE SHEETS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> SEP-30-1996
<CASH> 815000
<SECURITIES> 0
<RECEIVABLES> 938000
<ALLOWANCES> 39000
<INVENTORY> 1630000
<CURRENT-ASSETS> 3524000
<PP&E> 5530000
<DEPRECIATION> (1626000)
<TOTAL-ASSETS> 7827000
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0
0
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</TABLE>
