U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1996
------------------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _____________ to ______________
Commission file number 0 - 7 0 9 3
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MOD-U-KRAF HOMES, INC.
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(Exact name of small business issuer as
specified in its charter)
VIRGINIA 54-0893908
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(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
P. O. BOX 573, ROCKY MOUNT, VIRGINIA 24151
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(Address of principal executive offices)
(540) 483-0291
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(Issuer's telephone number)
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(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes [ X ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date: 825,649
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1
MOD-U-KRAF HOMES, INC.
INDEX
PART I - FINANCIAL INFORMATION
Balance Sheets 2 & 3
Statements of Income 4 & 5
Statements of Cash Flows 6 & 7
Management's Discussion and Analysis 8
Notes to Financial Information 9
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of
Security Holders 10
2
MOD-U-KRAF HOMES, INC.
Consolidated Balance Sheets
June 30, 1996 and 1995
ASSETS 1996 1995
---------- ----------
CURRENT ASSETS
Cash and cash equivalents $ 1,653,941 $ 1,045,162
Certificates of deposit 498,839 500,000
Receivables 41,097 177,893
Inventories (Note 2) 1,191,708 1,697,884
Notes receivable, current portion (Note 3) 813,988 981,240
Prepaid expenses 74,336 46,728
Income taxes receivable 90,986 0
Deferred income taxes, current portion 44,375 56,898
----------- ----------
Total current assets 4,409,270 4,505,805
LONG-TERM NOTES RECEIVABLE (Note 3) 197,958 171,294
PROPERTY AND EQUIPMENT, at cost less
accumulated depreciation
1996 $1,893,025; 1995 $1,729,346. (Note 4) 3,555,983 1,010,992
OTHER ASSETS
Deferred income taxes 455,443 429,931
Cash surrender value of life insurance 112,165 91,824
Reimbursement Account (Note 7) 224,946 0
Earnings on Unused Bond Proceeds 97,180 0
Bond Issue Costs (Note 7) 75,301 0
---------- ----------
$ 9,128,246 $ 6,209,846
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of L-T liabilities
(Note 5 and 6) 220,429 60,547
Accounts payable and other liabilities 586,494 328,554
Accrued compensation 136,044 188,285
Customer deposits 95,842 40,598
Income taxes payable 0 3,676
---------- ----------
Total current liabilities 1,038,809 621,660
LONG-TERM DEFERRED COMPENSATION (Note 5) 974,927 1,029,655
POST RETIREMENT BENEFITS (Note 5) 120,999 134,738
LONG-TERM DEBT (Note 7) 2,373,582 0
---------- ----------
Total liabilities 4,508,317 1,786,053
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STOCKHOLDERS' EQUITY
Common stock, $1 par value, 2,000,000
shares authorized: shares issued and
outstanding 1996 825,649, 1995 825,649 825,649 825,649
Additional Paid in Capital 459,671 459,671
Retained earnings 3,334,609 3,138,473
---------- ----------
4,619,929 4,423,793
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$ 9,128,246 $ 6,209,846
========== ==========
Accompanying notes are an integral part of these financial statements.
3
MOD-U-KRAF HOMES, INC.
Consolidated Balance Sheets
June 30, 1996 and December 31, 1995
ASSETS 1996 1995
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CURRENT ASSETS
Cash and cash equivalents $ 1,653,941 $ 1,426,738
Certificates of deposit 498,839 689,000
Receivables 41,097 120,226
Inventories (Note 2) 1,191,708 1,368,766
Notes receivable, current portion (Note 3) 813,988 882,235
Prepaid expenses 74,336 67,505
Income taxes receivable 90,986 0
Deferred income taxes, current portion 44,375 60,829
---------- ----------
Total current assets 4,409,270 4,615,299
LONG-TERM NOTES RECEIVABLE (Note 3) 197,958 165,058
PROPERTY AND EQUIPMENT, at cost less
accumulated depreciation
1996 $1,893,025; 1995 $1,802,732. (Note 4) 3,555,983 2,245,626
OTHER ASSETS
Deferred income taxes 455,443 447,410
Cash surrender value of life insurance 112,165 95,440
Reimbursement Account (Note 7) 224,946 145,516
Earnings on Unused Bond Proceeds 97,180 58,124
Bond Issue Costs (Note 7) 75,301 73,030
---------- ----------
$ 9,128,246 $ 7,845,503
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of L-T liabilities
(Note 5 and 6) 220,429 225,366
Accounts payable and other liabilities 586,494 338,757
Accrued compensation 136,044 249,975
Customer deposits 95,842 23,314
Income taxes payable 0 60,364
---------- ----------
Total current liabilities 1,038,809 897,776
LONG-TERM DEFERRED COMPENSATION (Note 5) 974,927 1,001,700
POST RETIREMENT BENEFITS (Note 5) 120,999 129,122
LONG-TERM DEBT (Note 7) 2,373,582 1,234,514
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Total liabilities 4,508,317 3,263,112
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STOCKHOLDERS' EQUITY
Common stock, $1 par value, 2,000,000
shares authorized: shares issued and
outstanding 1996 825,649, 1995 825,649 825,649 825,649
Additional Paid in Capital 459,671 459,671
Retained earnings 3,334,609 3,297,071
---------- ----------
4,619,929 4,582,391
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$ 9,128,246 $ 7,845,503
========== ==========
Accompanying notes are an integral part of these financial statements.
4
MOD-U-KRAF HOMES, INC.
Consolidated Statement of Income
Quarters Ended June 30, 1996 and June 30, 1995
1996 1995
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Net Sales $ 3,434,875 $ 2,206,217
Cost of Sales 2,552,378 1,567,144
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882,497 639,073
Selling, General and Administrative
Expenses 635,119 494,023
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Income/<Loss> from Operations 247,378 145,050
Deferred Compensation Expense 22,072 23,171
Post Retirement Benefits Expense (8,094) 4,773
Non-operating Income/<Expenses> 32,023 52,794
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Income/<Loss> Before Income Taxes 265,423 169,900
Federal and State Income Taxes 81,016 57,981
Deferred Income Tax Adjustment 15,807 9,728
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Income Taxes 96,823 67,709
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Net Income / <Loss> 168,600 102,191
========== ==========
Earnings per share:
Net Income / <Loss> 0.20 0.12
========== ==========
Depreciation Included in Above Cost 45,492 39,786
========== ==========
Accompanying notes are an integral part of these financial statements.
5
MOD-U-KRAF HOMES, INC.
Consolidated Statement of Income
Six Months Ended June 30, 1996 and June 30, 1995
1996 1995
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Net Sales $ 5,020,649 $ 4,223,100
Cost of Sales 3,844,968 3,023,933
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1,175,681 1,199,167
Selling, General and Administrative
Expenses 1,063,392 976,570
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Income/<Loss> from Operations 112,289 222,597
Deferred Compensation Expense 44,429 46,605
Post Retirement Benefits Expense (4,107) 7,723
Non-operating Income/<Expenses> 62,986 104,112
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Income/<Loss> Before Income Taxes 134,953 272,381
Federal and State Income Taxes 39,455 89,814
Deferred Income Tax Adjustment 8,421 11,779
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Income Taxes 47,876 101,593
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Net Income / <Loss> 87,077 170,788
========== ==========
Earnings per share:
Net Income / <Loss> 0.11 0.21
========== ==========
Depreciation Included in Above Cost 91,271 76,927
========== ==========
Accompanying notes are an integral part of these financial statements.
6
MOD-U-KRAF HOMES, INC.
Consolidated Statement of Cash Flows
Quarters Ended June 30, 1996 and 1995
1995 1995
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OPERATING ACTIVITIES
Net Income/<Loss> $ 168,600 $ 102,191
Noncash <income> expenses included
in income or <loss>:
Depreciation and amortization 45,492 39,786
Deferred income taxes 15,807 9,728
Loss (gain) on sale of equipment (170) (3,205)
Increase in cash value of life insurance (15,133) (14,410)
Adjustments to deferred compensation (13,540) (12,441)
Adjustments to post retirement benefits (11,361) (1,972)
<Increase> decrease in:
Trade receivables (10,055) 27,516
Inventories 382,440 (9,861)
Prepaid Expenses (15,938) 8,695
Income taxes receivable (90,986) 0
<Decrease> increase in:
Accounts payable and other Liabilities 165,482 (25,926)
Accrued compensation (27,610) 18,015
Customer deposits 22,960 (3,120)
Income taxes payable (49,416) (29,727)
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Net cash provided by (used in)
operations 566,572 105,269
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INVESTING ACTIVITIES
Proceeds from sale of property & equipment 875 3,205
Purchase of plant & equipment net of
debt incurred 1996 $499,966, 1995 $0 (218,736) (151,475)
<Increase> decrease in notes receivable
arising from sales 140,588 361,457
<Increase> decrease in certificates
of deposit 195,147 (192,047)
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Net cash provided by (used in)
investing activities 117,874 21,140
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FINANCING ACTIVITIES
Proceeds from sale of common stock 0 31,251
Cash dividends paid (24,769) (24,769)
Debt issue costs, net of debt incurred
1996 $151, 1995 $0 (33,318) 0
Funding of reimbursement account (37,500) 0
Earnings on unused bond proceeds (12,951) 0
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Net cash provided by (used in)
financing activities (108,538) 6,482
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Net increase (decrease) in cash 575,908 132,891
CASH
Beginning 1,078,033 912,271
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Ending $ 1,653,941 $ 1,045,162
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for:
Interest $ 0 $ 0
Income taxes $ 122,626 $ 91,750
Accompanying notes are an integral part of these financial statements.
7
MOD-U-KRAF HOMES, INC.
Consolidated Statement of Cash Flows
Six Months Ended June 30, 1996 and 1995
1995 1995
OPERATING ACTIVITIES ---------- ----------
Net Income/<Loss> $ 87,077 $ 170,788
Noncash <income> expenses included
in income or <loss>:
Depreciation and amortization 91,268 76,927
Deferred income taxes 8,421 11,779
Loss (gain) on sale of equipment (170) (3,205)
Increase in cash value of life insurance (16,725) (11,902)
Adjustments to deferred compensation (26,796) (24,620)
Adjustments to post retirement benefits (13,037) (3,931)
<Increase> decrease in:
Trade receivables 79,129 34,628
Inventories 177,059 (490,928)
Prepaid Expenses (6,831) 24,585
Income taxes receivable (90,986) 0
<Decrease> increase in:
Accounts payable and other Liabilities 247,737 (50,663)
Accrued compensation (113,931) (51,860)
Customer deposits 72,528 (107,951)
Income taxes payable (159,196) (33,366)
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Net cash provided by (used in)
operations 335,547 (459,719)
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INVESTING ACTIVITIES
Proceeds from sale of property & equipment 875 3,205
Purchase of plant & equipment net of
debt incurred 1996 $1,141,750, 1995 $0 (260,078) (190,220)
<Increase> decrease in notes receivable
arising from sales 135,998 478,152
<Increase> decrease in certificates
of deposit 190,161 4,935
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Net cash provided by (used in)
investing activities 66,956 296,072
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FINANCING ACTIVITIES
Proceeds from sale of common stock 0 31,251
Cash dividends paid (49,538) (49,178)
Debt issue costs, net of debt incurred
1996 $2,271, 1995 $0 (13,044) 0
Funding of reimbursement account (75,000) 0
Earnings on unused bond proceeds (37,718) 0
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Net cash provided by (used in)
financing activities (175,300) (17,927)
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Net increase (decrease) in cash 227,203 (181,574)
CASH
Beginning 1,426,738 1,226,736
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Ending $ 1,653,941 $ 1,045,162
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for:
Interest $ 0 $ 0
Income taxes $ 190,245 $ 127,453
Accompanying notes are an integral part of these financial statements.
8
MOD-U-KRAF HOMES, INC
Management's Discussion and Analysis
of the Second Quarter Statements
Net sales for the second quarter of 1996 were $3,434,875 as compared
to $2,206,217 for the second quarter of 1995, a 55% increase. Sales for
the first six months of 1996 were $5,020,649 as compared to $4,223,100
in 1995 for an increase in sales volume of 19%.
Cost of Sales was 74.31% of net sales for the second quarter of 1996
and 71.03% for the second quarter of 1995. For the first six months
cost of sales was 76.55% for 1996 compared to 71.60% for 1995. We are
experiencing unfavorable variances in our production labor and materials
due to the start up of our new production facility. We don't anticipate
this to stabilize until the fourth quarter.
Selling, General and Administrative expenses was 18.49% of net sales
for the second quarter of 1996 and 22.39% for the same quarter of 1995.
They were 21.18% for the first six months of 1996 compared to 23.12% for
the same period in 1995.
The net income for the second quarter of 1996 is $168,600 compared
to net income of $102,191 for the second quarter of 1995. This is $0.20
per share for the second quarter of 1996 and $.12 per share for the same
period in 1995. Net income for the first six months is $87,077, $0.11
common share for 1996, compared to $170,788, $0.21 per common share, for
1995.
There are no other significant variances.
There have been no material changes in liquidity and capital
resources for the first six months of 1996. On July 12, 1995 Mod-U-Kraf
Homes, Inc. executed a financing agreement for the construction of our
new manufacturing facility. This agreement consists of $3,000,000
Industrial Development Authority of Franklin County, Virginia Industrial
Development Revenue Bonds (MOD-U-KRAF HOMES, INC. Project), Series 1995.
These bonds will be payable over a 20 year period and are tax-exempt
obligations that carry short-term floating interest rates. The average
rates for the first four months of 1996 and for 1995 have been 3.74%
and 4.05% respectively.
9
MOD-U-KRAF HOMES, INC.
NOTES TO FINANCIAL INFORMATION
1. The financial information furnished herein is not certified, but re-
flects all adjustments, consisting only of normal recurring adjust-
ments which are, in the opinion of management, necessary to a fair
statement of the results for the quarter ended June 30, 1996. The
results for the quarter ended June 30, 1996 are not necessarily in-
dicative of results to be expected for the entire year. The housing
industry is seasonal in nature and revenues to the Company during
the period April 1 to September 30 are normally greater than revenues
during the balance of the year.
Both primary & fully diluted net income per common share are based
on the weighted average number of shares of common stock outstanding
during each year and common stock equivalents of dilutive stock
options.
2. Inventories
The components of inventories are as follows 1996 1995
---- ----
Raw Materials 677,495 671,005
Work-In-Progress 78,396 65,225
Finished Goods 83,575 674,906
Land and Units held for sale 352,242 286,748
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1,191,708 1,697,884
========== ==========
3. Notes Receivable 1996 1995
---- ----
Various mortgage notes receivable secured by
deeds of trust 172,795 141,505
Various construction loans(all current) 800,037 961,859
Demand note receivable with interest payable
quarterly at 9%, unsecured 11,575 14,375
Life insurance note receivable from an
officer of the Company(non-interest bearing) 5,039 6,670
Note receivable from the President, payable
in annual principal installments of $5,625
with interest at 5.03% 22,500 28,125
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1,011,946 1,152,534
Less current portion 813,988 981,240
---------- ----------
197,958 171,294
========== ==========
4. Property and Equipment 1996 1995
---- ----
Land and improvements 270,970 220,970
Buildings 1,076,311 1,073,835
Manufacturing equipment 1,076,147 992,478
Other furniture, fixtures and equipment 393,598 326,905
---------- ----------
2,817,026 2,614,188
Less accumulated depreciation (1,893,025) (1,729,346)
Construction in progress 2,631,982 126,150
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3,555,983 1,010,992
========== ==========
5. Deferred Compensation, Related Parties 1996 1995
---- ----
Present Value of deferred compensation
benefits payable to the widow of O.Z. Oliver
at $6,311 monthly until the earlier of her
death or Sept. 2006, discounted at 8.50% in
1996 and 1995. 516,972 547,339
Present Value of deferred compensation
benefits payable to Robert K. Fitts at $5,560
monthly until his death after which the
benefits are payable to his spouse until the
earlier of her death or July 2007, discounted
at 8.50% in 1996 and 1995. 512,683 534,797
Present value of estimated post-retirement
benefits other than pensions discounted at
8.50%. 136,700 142,804
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1,166,355 1,224,940
Less Current Maturities 72,821 60,547
---------- ----------
1,093,534 1,164,393
========== ==========
6. Long-Term Debt
On July 12, 1995, the IDA of Franklin County, VA issued bonds in the
amount of $3,000,000 to finance the construction of a manufacturing
facility. The Series 1995 variable Rate Demand Industrial Revenue
Bonds are secured by the Company's irrevocable Letter of Credit with
Crestar Bank. The letter of credit agreement subjects the Company to
certain financial and operating covenants, all of which the Company
was in compliance with at year end. Crestar Bank holds a first lien
and security interest on the facility. The bonds are payable in
annual principal amounts of $150,000 through 2015. The interest rate
was 3.45% at June 30, 1996. Interest of approximately $53,000 was
incurred and capitalized during the second quarter of 1996.
The Company has entered into an agreement of sale to purchase the
facility from the IDA. The Company's obligation under the Agreement
of Sale is equal to the required principal and interest payments on
the bonds and is payable in monthly installments currently estimated
at $22,000. The monthly payments are deposited into a Reimbursement
Account with Crestar Bank and used to pay all principal, interest
and fees related to the Bonds. The Company also agreed to maintain
an additional required deposit in the Reimbursement Account equal to
55 days of interest at 15.0% on the bonds. As of June 30, 1996, the
Reimbursement Account balance was as follows:
Required prepaid interest deposit $ 67,811
Unused monthly principal deposits 150,000
Earnings 7,135
--------
$224,946
The Company's policy is to reflect the balance of the Reimbursement
Account as an asset until the funds are used by the trustee for
payment of bond obligations, at which time the Company reduces its
obligations under the asset sale agreement.
As of June 30, 1996, $2,373.582 of the bond proceeds have been drawn
from the trustee. The Company's obligation under the asset sale
agreement is reflected at the amount of bond proceeds that have been
drawn. Any unused proceeds will be for early retirement of bonds.
Amounts earned on bond proceeds prior to their being drawn from the
trustee are to be applied to principal reduction in the future.
these earnings amounted to $97,180 at June 30, 1996.
Debt issue costs will be amortized over the life of the bonds.
7. The Board Of Directors of Mod-U-Kraf Homes, Inc. on August 7, 1996
declared a $.03 per share cash dividend on all shares outstanding
on August 23, 1996 and to be paid on September 6, 1996.
8. The Company uses the annualized method in its computation of Federal
Income Taxes.
9. Revenues are recorded when the houses are delivered for sales made
on account. Cash sales paid in advance are recorded when produced.
10
MOD-U-KRAF HOMES, INC.
OTHER INFORMATION
NONE
11
MOD-U-KRAF HOMES, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MOD-U-KRAF HOMES, INC.
-----------------------------------
(Registrant)
Date: August 8, 1996
s/Dale H. Powell
-------------------------------------
Dale H. Powell
President and Chairman of the Board
s/Jeffrey L. Boudreaux
-------------------------------------
Jeffrey L. Boudreaux
Controller
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 1653941
<SECURITIES> 498839
<RECEIVABLES> 41097
<ALLOWANCES> 0
<INVENTORY> 1191708
<CURRENT-ASSETS> 4409270
<PP&E> 5449008
<DEPRECIATION> 1893025
<TOTAL-ASSETS> 9128246
<CURRENT-LIABILITIES> 1038809
<BONDS> 0
0
0
<COMMON> 825649
<OTHER-SE> 3794280
<TOTAL-LIABILITY-AND-EQUITY> 9128246
<SALES> 5020649
<TOTAL-REVENUES> 5020649
<CGS> 3844968
<TOTAL-COSTS> 4908360
<OTHER-EXPENSES> (22664)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 134953
<INCOME-TAX> 47876
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 87077
<EPS-PRIMARY> .11
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</TABLE>
