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 MARCH 31, 1996
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[ ] 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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<PAGE>
1
MOD-U-KRAF HOMES, INC.
INDEX
PART I - FINANCIAL INFORMATION
Balance Sheets 2
Statements of Income 3
Statements of Cash Flows 4
Management's Discussion and Analysis 5
Notes to Financial Information 6
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of
Security Holders 7
<PAGE>
2
MOD-U-KRAF HOMES, INC.
Consolidated Balance Sheets
March 31, 1996 and 1995
ASSETS 1995 1995
---------- ---------
CURRENT ASSETS
Cash and cash equivalents $1,078,033 $ 912,271
Certificates of deposit 693,986 307,954
Receivables 31,042 205,409
Inventories (Note 2) 1,574,148 1,688,023
Notes receivable, current portion (Note 3) 888,451 1,359,184
Prepaid expenses 58,398 55,423
Deferred income taxes, current portion 66,969 54,124
---------- ----------
Total current assets 4,391,027 4,582,388
LONG-TERM NOTES RECEIVABLE (Note 3) 163,432 154,807
PROPERTY AND EQUIPMENT, at cost less
accumulated depreciation
1996 $1,848,511; 1995 $1,689,560. (Note 4) 2,858,205 899,303
OTHER ASSETS
Deferred income taxes 448,656 442,433
Cash surrender value of life insurance 97,032 77,414
Reimbursement Account (Note 7) 183,016 0
Earnings on unused Bond proceeds 82,891 0
Bond Issue Costs (Note 7) 75,150 0
---------- ----------
$8,299,409 $6,156,345
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of L-T liabilities (Note 5) 226,521 59,376
Accounts payable and other liabilities 421,012 354,479
Accrued compensation 163,654 170,270
Customer deposits 72,882 43,718
Income taxes payable (49,416) 33,403
---------- ----------
Total current liabilities 834,653 661,246
LONG-TERM DEFERRED COMPENSATION (Note 5) 987,271 1,043,195
POST RETIREMENT BENEFITS (Note 6) 127,464 136,782
LONG-TERM DEBT (Note 7) 1,873,646 0
---------- ----------
Total liabilities 3,823,034 1,841,223
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STOCKHOLDERS' EQUITY
Common stock, $1 par value, 2,000,000
shares authorized: shares issued and
outstanding 1994 825,649, 1995 813,649 825,649 813,649
Additional Paid in Capital 459,671 440,420
Retained earnings 3,191,055 3,061,053
---------- ----------
4,476,375 4,315,122
---------- ----------
$8,299,409 $6,156,345
========== ==========
Accompanying notes are an integral part of these financial statements.
<PAGE>
3
MOD-U-KRAF HOMES, INC.
Consolidated Statement of Income
Quarters Ended March 31, 1996 and March 31, 1995
1996 1995
---------- ----------
Net Sales $1,585,773 $2,016,883
Cost of Sales 1,292,454 1,456,788
---------- ----------
293,319 560,095
Selling, General and Administrative
Expenses 428,132 482,548
---------- ----------
Income/<Loss> from Operations (134,813) 77,547
Deferred Compensation Expense 22,356 23,433
Post Retirement Benefits Expense 3,987 2,950
Non-operating Income/<Expenses> 30,963 51,317
---------- ----------
Income/<Loss> Before Income Taxes (130,193) 102,481
Federal and State Income Taxes (41,561) 31,833
Deferred Income Tax Adjustment (7,386) 2,051
---------- ----------
Income Taxes (48,947) 33,884
---------- -----------
Net Income / <Loss> (81,246) 68,597
========== ==========
Earnings per share:
Net Income / <Loss> (0.10) 0.08
========== ==========
Depreciation Included in Above Cost 45,779 37,141
========== ==========
Accompanying notes are an integral part of these financial statements.
<PAGE>
4
MOD-U-KRAF HOMES, INC.
Consolidated Statement of Cash Flows
Quarters Ended March 31, 1996 and 1995
1995 1995
OPERATING ACTIVITIES ---------- ----------
Net Income/<Loss> $ (81,246) $ 68,597
Noncash <income> expenses included
in income or <loss>:
Depreciation and amortization 45,776 37,141
Deferred income taxes (7,386) 2,051
Loss (gain) on sale of equipment 0 0
Increase in cash value of life insurance (1,592) 2,508
Adjustments to post retirement benefits (14,931) (14,138)
<Increase> decrease in:
Trade receivables 89,184 7,112
Inventories (205,381) (481,067)
Prepaid Expenses 9,107 15,890
<Decrease> increase in:
Accounts payable and other Liabilities 82,255 (24,737)
Accrued compensation (86,321) (69,875)
Customer deposits 49,568 (104,831)
Income taxes payable (109,780) (3,639)
---------- ----------
Net cash provided by (used in)
operations (230,747) (564,988)
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INVESTING ACTIVITIES
Proceeds from sale of equipment 0 0
Purchase of property & equipment net of
debt incurred 1996 $641,784 ;1995 $0. (41,342) (38,745)
<Increase> decrease in notes receivable
arising from sales (4,590) 116,695
<Increase> decrease in certificates
of deposit (4,986) 196,982
---------- ----------
Net cash provided by (used in)
investing activities (50,918) 274,932
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FINANCING ACTIVITIES
Proceeds from sale of common stock 0 0
Cash dividends paid (24,769) (24,409)
Debt issue costs, net of debt incurred
1996 $2,120 : 1995 $0. 19,996 0
Funding of reimbursement account (37,500) 0
Earnings on unused bond proceeds (24,767) 0
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Net cash provided by (used in)
financing activities (67,040) (24,409)
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Net increase (decrease) in cash (348,705) (314,465)
CASH
Beginning 1,426,738 1,226,736
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Ending $1,078,033 $ 912,271
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for:
Interest $ 0 $ 0
Income taxes $ 67,619 $ 35,703
Accompanying notes are an integral part of these financial statements.
<PAGE>
5
MOD-U-KRAF HOMES, INC
Management's Discussion and Analysis
of the First Quarter Statements
Net sales for the first quarter of 1996 were $1,585,773 as compared
to $2,016,883 for the first quarter of 1995, a 21.38% decrease. The cold
wet and snowy winter kept our builders from completing foundations which
kept us from shipping and setting houses.
Cost of Sales was 81.50% of net sales for the first quarter of 1996
and 72.23% for the first quarter of 1995. Gross profit was 18.50% for
the first quarter of 1995 and 27.75% for the first quarter of 1994.
Selling, General and Administrative expenses was 23.93% of net sales
for the first quarter of 1996 and 27.77% for the first quarter of 1995.
We had a net loss for the first quarter 1995 of $81,246 compared to
net income of $68,597 for the first quarter of 1995. This is <$0.10>
per share for the first quarter of 1996 and $0.08 per share for the same
period in 1995.
There are no significant variances. After coming off a record first
quarter last year our seasonality came back in full force with the worst
winter for snowfall in many years. This slowed the construction process
considerably in lost production and sets for our operation. We are now
experiencing a substantial increase in orders as the industry rebounds
from this slow start of the year. With our new production facility set
to begin operations in June of this year we will be able to produce the
additional units that are being ordered.
There has been no material changes in liquidity and capital resources
other than the financing or our new production facility.
<PAGE>
6
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 March 31, 1996. The
results for the quarter ended March 31, 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 654,547 768,789
Work-In-Progress 74,693 91,082
Finished Goods 471,411 536,640
Land and Units held for sale 373,497 291,511
----------- -----------
1,574,148 1,688,022
=========== ===========
3. Notes Receivable 1996 1995
---- ----
Various mortgage notes receivable secured by
deeds of trust 132,741 184,792
Various construction loans(all current) 872,392 1,307,179
Demand note receivable with interest payable
quarterly at 9%, unsecured 12,275 15,075
Life insurance note receivable from an
officer of the Company(non-interest bearing) 6,350 6,945
Note receivable from the President, payable
in annual principal installments of$5,625
interest at 5.03% 28,125 0
----------- -----------
1,051,883 1,513,991
Less current portion 888,451 1,359,184
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163,432 154,807
=========== ===========
4. Property and Equipment 1996 1995
---- ----
Land and improvements 275,590 300,962
Buildings 1,076,311 1,073,835
Manufacturing equipment 1,035,503 896,116
Other furniture, fixtures and equipment 376,075 317,950
----------- -----------
2,763,479 2,588,863
Less accumulated depreciation (1,848,511) (1,689,560)
Construction in progress 1,943,237 0
----------- -----------
2,858,205 899,303
=========== ===========
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
1995 and 1994. 524,807 554,538
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 1995 and 1994. 518,388 540,039
Present value of estimated post-retirement
benefits other than pensions discounted at
8.50% 148,061 144,776
----------- -----------
1,191,256 1,239,353
Less Current Maturities 76,521 59,376
----------- -----------
1,114,735 1,179,977
=========== ===========
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 3.50% at March 31, 1996. Interest of approximately $25,000 was
incurred and capitalized during the first quarter of 1996.
The Company has entered 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 March 31, 1996, the
Reimbursement Account balance was as follows:
Required prepaid interest deposit $67,811
Unused monthly principal deposits 112,500
Earnings 2,705
-----------
$183,016
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 March 31, 1996, $1,884,707 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 used 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 $82,891 at March 31, 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 May 8, 1996 de-
clared a $.03 per share cash dividend on all shares outstanding on
May 24, 1996 and to be paid on June 7, 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.
<PAGE>
7
MOD-U-KRAF HOMES, INC.
OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
Mod-U-Kraf Homes, Inc. held its annual meeting of shareholders
on March 27, 1995 The following were elected to the Board of
Directors: Dale H. Powell, Edwin J. Campbell, J Dillard Powell,
W. Curtis Carter, Bobbie L. Oliver and Mary L. Fitts.
<PAGE>
8
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: May 1, 1996
s/Dale H. Powell
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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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 1078033
<SECURITIES> 693986
<RECEIVABLES> 31042
<ALLOWANCES> 0
<INVENTORY> 1574148
<CURRENT-ASSETS> 4391027
<PP&E> 4706716
<DEPRECIATION> 1848511
<TOTAL-ASSETS> 8299409
<CURRENT-LIABILITIES> 834653
<BONDS> 0
<COMMON> 0
0
825649
<OTHER-SE> 3650726
<TOTAL-LIABILITY-AND-EQUITY> 8299409
<SALES> 1585773
<TOTAL-REVENUES> 1585773
<CGS> 1292454
<TOTAL-COSTS> 1720586
<OTHER-EXPENSES> (4623)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (130193)
<INCOME-TAX> (48927)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (81246)
<EPS-PRIMARY> (.10)
<EPS-DILUTED> (.10)
</TABLE>
