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 SEPTEMBER 30, 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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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
September 30, 1996 and 1995
ASSETS 1996 1995
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CURRENT ASSETS
Cash and cash equivalents $ 1,213,595 1,211,113
Certificates of deposit 393,853 500,000
Receivables 72,694 124,272
Inventories (Note 2) 2,030,337 1,677,294
Notes receivable, current portion (Note 3) 669,092 1,031,648
Prepaid expenses 70,783 66,802
Income taxes receivable 100,803 0
Deferred income taxes, current portion 31,704 54,224
---------- ----------
Total current assets 4,582,861 4,665,353
LONG-TERM NOTES RECEIVABLE (Note 3) 194,848 173,626
PROPERTY AND EQUIPMENT, at cost less
accumulated depreciation
1996 $1,985,726; 1995 $1,765,749. (Note 4) 3,964,164 1,496,385
OTHER ASSETS
Deferred income taxes 431,376 422,807
Cash surrender value of life insurance 113,434 92,859
Reimbursement Account (Note 7) 113,633 106,349
Earnings on Unused Bond Proceeds 103,130 0
Bond Issue Costs (Note 7) 74,300 72,099
---------- ----------
$ 9,577,746 7,029,478
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of L-T liabilities
(Note 5 and 6) 212,705 61,742
Accounts payable and other liabilities 699,600 440,974
Accrued compensation 230,121 176,429
Customer deposits 145,003 58,005
Income taxes payable 0 43,473
---------- ----------
Total current liabilities 1,287,429 780,623
LONG-TERM DEFERRED COMPENSATION (Note 5) 959,874 1,015,825
POST RETIREMENT BENEFITS (Note 5) 140,367 132,676
LONG-TERM DEBT (Note 7) 2,680,824 575,769
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Total liabilities 5,068,494 2,504,893
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STOCKHOLDERS' EQUITY
Common stock, $1 par value, 2,000,000
shares authorized: shares issued and
outstanding 1996 825,649, 1995 825,649 825,649 825,649
Additional Paid in Capital 459,671 459,671
Retained earnings 3,223,932 3,239,265
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4,509,252 4,524,585
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$ 9,577,746 7,029,478
========== ==========
Accompanying notes are an integral part of these financial statements.
3
MOD-U-KRAF HOMES, INC.
Consolidated Balance Sheets
September 30, 1996 and December 31, 1995
ASSETS 1996 1995
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CURRENT ASSETS
Cash and cash equivalents $ 1,213,595 1,426,738
Certificates of deposit 393,853 689,000
Receivables 72,694 120,226
Inventories (Note 2) 2,030,337 1,368,766
Notes receivable, current portion (Note 3) 669,092 882,235
Prepaid expenses 70,783 67,505
Income taxes receivable 100,803 0
Deferred income taxes, current portion 31,704 60,829
---------- ----------
Total current assets 4,582,861 4,615,299
LONG-TERM NOTES RECEIVABLE (Note 3) 194,848 165,058
PROPERTY AND EQUIPMENT, at cost less
accumulated depreciation
1996 $1,985,726; 1995 $1,802,732. (Note 4) 3,964,164 2,245,626
OTHER ASSETS
Deferred income taxes 431,376 447,410
Cash surrender value of life insurance 113,434 95,440
Reimbursement Account (Note 7) 113,633 145,516
Earnings on Unused Bond Proceeds 103,130 58,124
Bond Issue Costs (Note 7) 74,300 73,030
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$ 9,577,746 7,845,503
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of L-T liabilities
(Note 5 and 6) 212,705 225,366
Accounts payable and other liabilities 699,600 338,757
Accrued compensation 230,121 249,975
Customer deposits 145,003 23,314
Income taxes payable 0 60,364
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Total current liabilities 1,287,429 897,776
LONG-TERM DEFERRED COMPENSATION (Note 5) 959,874 1,001,700
POST RETIREMENT BENEFITS (Note 5) 140,367 129,122
LONG-TERM DEBT (Note 7) 2,680,824 1,234,514
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Total liabilities 5,068,494 3,263,112
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STOCKHOLDERS' EQUITY
Common stock, $1 par value, 2,000,000
shares authorized: shares issued and
outstanding 1996 825,649, 1995 825,649 825,649 825,649
Additional Paid in Capital 459,671 459,671
Retained earnings 3,223,932 3,297,071
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4,509,252 4,582,391
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$ 9,577,746 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 September 30, 1996 and 1995
1996 1995
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Net Sales $ 2,933,098 2,300,001
Cost of Sales 2,257,980 1,586,219
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675,118 713,782
Selling, General and Administrative
Expenses 649,520 509,675
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Income/<Loss> from Operations 25,598 204,107
Deferred Compensation Expense 21,782 22,907
Post Retirement Benefits Expense 15,171 6,067
Non-operating Income/<Expenses> (44,607) 45,662
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Income/<Loss> Before Income Taxes (55,962) 220,795
Federal and State Income Taxes (6,792) 85,436
Deferred Income Tax Adjustment 36,738 9,798
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Income Taxes 29,946 95,234
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Net Income / <Loss> $ (85,908) 125,561
========== ==========
Earnings per share:
Net Income / <Loss> (0.10) 0.15
========== ==========
Depreciation Included in Above Cost 95,361 41,367
========== ==========
Accompanying notes are an integral part of these financial statements.
5
MOD-U-KRAF HOMES, INC.
Consolidated Statement of Income
Nine Months Ended September 30, 1996 and 1995
1996 1995
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Net Sales $ 7,953,746 6,523,101
Cost of Sales 6,102,948 4,610,152
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1,850,798 1,912,949
Selling, General and Administrative
Expenses 1,712,912 1,486,245
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Income/<Loss> from Operations 137,886 426,704
Deferred Compensation Expense 66,211 69,511
Post Retirement Benefits Expense 11,063 13,791
Non-operating Income/<Expenses> 18,379 149,773
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Income/<Loss> Before Income Taxes 78,991 493,175
Federal and State Income Taxes 32,663 175,250
Deferred Income Tax Adjustment 45,159 21,577
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Income Taxes 77,822 196,827
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Net Income / <Loss> $ 1,169 296,348
========== ==========
Earnings per share:
Net Income / <Loss> 0.00 0.36
========== ==========
Depreciation Included in Above Cost 186,632 118,295
========== ==========
Accompanying notes are an integral part of these financial statements.
6
MOD-U-KRAF HOMES, INC.
Consolidated Statement of Cash Flows
Quarters Ended September 30, 1996 and 1995
1996 1995
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OPERATING ACTIVITIES
Net Income/<Loss> $ (85,908) 125,561
Noncash <income> expenses included
in income or <loss>:
Depreciation and amortization 97,443 41,367
Deferred income taxes 36,738 9,798
Loss (gain) on sale of equipment (1,794) 993
Increase in cash value of life insurance (1,269) (1,035)
Adjustments to deferred compensation (13,830) (12,706)
Adjustments to post retirement benefits 10,421 (1,991)
<Increase> decrease in:
Trade receivables (31,597) 53,621
Inventories (838,629) 20,590
Prepaid Expenses 3,553 (20,071)
Income taxes receivable (9,817) 0
<Decrease> increase in:
Accounts payable and other Liabilities 113,106 112,420
Accrued compensation 94,077 (11,856)
Customer deposits 49,161 17,407
Income taxes payable 0 39,797
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Net cash provided by (used in)
operations (578,345) 373,895
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INVESTING ACTIVITIES
Proceeds from sale of property & equipment 1,794 0
Purchase of plant & equipment net of
debt incurred 1996 $307,242, 1995 $575,769 (198,382) 48,013
<Increase> decrease in notes receivable
arising from sales 148,006 (52,740)
<Increase> decrease in certificates
of deposit 104,986 0
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Net cash provided by (used in)
investing activities 56,404 (4,727)
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FINANCING ACTIVITIES
Cash dividends paid (24,769) (24,769)
Debt issue costs, net of debt incurred 1,001 (72,099)
Funding of reimbursement account 111,313 (106,349)
Earnings on unused bond proceeds (5,950) 0
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Net cash provided by (used in)
financing activities 81,595 ( 203,217)
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Net increase (decrease) in cash (440,346) 165,951
CASH
Beginning 1,653,941 1,045,162
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Ending $ 1,213,595 $ 1,211,113
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for:
Interest $ 25,027 $ 26,002
Income taxes $ 3,025 $ 46,175
Accompanying notes are an integral part of these financial statements.
7
MOD-U-KRAF HOMES, INC.
Consolidated Statement of Cash Flows
Nine Months Ended September 30, 1996 and 1995
1996 1995
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OPERATING ACTIVITIES
Net Income/<Loss> $ 1,169 296,348
Noncash <income> expenses included
in income or <loss>:
Depreciation and amortization 190,676 118,295
Deferred income taxes 45,159 21,577
Loss (gain) on sale of equipment (1,624) (2,212)
Increase in cash value of life insurance (17,994) (12,937)
Adjustments to deferred compensation (40,626) (37,326)
Adjustments to post retirement benefits (2,616) (5,922)
<Increase> decrease in:
Trade receivables 47,532 88,249
Inventories (661,571) (470,338)
Prepaid Expenses (3,278) 4,514
Income taxes receivable (100,803) 0
<Decrease> increase in:
Accounts payable and other Liabilities 360,843 61,757
Accrued compensation (19,854) (63,716)
Customer deposits 121,689 (90,544)
Income taxes payable (60,364) 6,431
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Net cash provided by (used in)
operations (141,662) (85,824)
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INVESTING ACTIVITIES
Proceeds from sale of property & equipment 1,624 3,205
Purchase of plant & equipment net of debt
incurred 1996 $1,377,964, 1995 $575,769 (465,444) (142,207)
<Increase> decrease in notes receivable
arising from sales 183,353 425,412
<Increase> decrease in certificates
of deposit 29,5147 4,935
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Net cash provided by (used in)
investing activities 14,680 291,345
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FINANCING ACTIVITIES
Proceeds from stock option sale 0 31,251
Cash dividends paid (74,308) (73,947)
Debt issue costs, net of debt incurred 1,270 (72,099)
Funding of reimbursement account 31,883 (106,349)
Earnings on unused bond proceeds (45,006) 0
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Net cash provided by (used in)
financing activities (86,161) (221,144)
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Net increase (decrease) in cash (213,143) (15,623)
CASH
Beginning 1,426,738 1,226,736
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Ending $ 1,213,595 $ 1,211,113
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for:
Interest $ 25,027 $ 26,002
Income taxes $ 193,270 $ 173,628
Accompanying notes are an integral part of these financial statements.
8
MOD-U-KRAF HOMES, INC.
Management's Discussion and Analysis
of Nine Months and Quarterly Income Statements
Net sales for the first nine months of 1996 were $7,953,746, as
compared to $6,523,101 for 1995. This represents an increase in
sales volume of 21.93%. The third quarter of 1996 produced a sales
volume of $2,933,098 as compared to $2,300,001 for the third
quarter of 1995 for an increase in sales volume of 27.53%.
Cost of sales were 76.73% of net sales for the first nine months
of 1996 as compared to 70.67% for the same period in 1995. The cost
of sales percent for the third quarter of 1996 were 76.98% compared
to 68.97% for the third quarter of 1995.
Selling, general and administrative expenses were 21.54% of net
sales for the first nine months of 1996 compared to 22.78% of net
sales for the first nine months of 1995. The third quarter of 1996
produced a percent of 22.14% as compared to 22.16% for the third
quarter of 1995.
Income from operations has shown a 67.69% decrease for the first
nine months and a 87.46% decrease for the third quarter over 1995.
The first nine months of 1996 showed net income of $1,169
compared to net income of $296,348 for 1995, a 99.61% decrease. The
process of bringing our new facility up to our desired production
levels has added additional overhead. With our new plant in
production, revenues are beginning to increase as expected. Until
we achieve our production goals of two housing units per day in the
new facility, the increased overhead of operating the new facility
will continue to consume our profits from the Old Franklin Turnpike
plant. We hope to achieve this level in the fourth quarter and
maintain that level into the first quarter of 1997. In addition to
having the increases expense of training employees for the new
plant, we are in the process of realigning our sales territories
and hiring sales personel to ensure that we have orders necessary
when our new plant reaches our production goals.
Other than the financing arrangement for our new manufacturing
facility as outlined in Note 7, there has been no significant
changes in liquidity and capital resources.
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 Sept. 30, 1996. The
results for the quarter ended Sept. 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 revenue
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 1,147,466 628,234
Work-In-Progress 226,991 94,334
Finished Goods 307,508 584,117
Land and Units held for sale 348,372 370,609
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0 0
========== ==========
3. Notes Receivable 1996 1995
---- ----
Various mortgage notes receivable secured by
deeds of trust 171,407 136,994
Various construction loans(all current) 654,119 1,019,968
Demand note receivable with interest payable
quarterly at 9%, unsecured 10,875 13,675
Life insurance note receivable from an
officer of the Company(non-interest bearing 5,039 6,512
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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863,940 1,205,274
669,092 1,031,648
---------- ----------
194,848 173,626
========== ==========
4. Property and Equipment 1996 1995
---- ----
Land and improvements 756,838 275,590
Buildings 2,998,328 1,073,836
Manufacturing equipment 1,799,565 992,326
Other furniture, fixtures and equipment 395,159 331,224
---------- ----------
0 0
Less accumulated depreciation (1,985,726) (1,765,749)
Construction in progress 0 589,158
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(1,985,726) (1,176,591)
========== ==========
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. 508,970 539,987
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. 506,855 529,443
Present value of estimated post-retirement
benefits other than pensions discounted at
8.50%. 147,121 140,813
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1,162,946 1,210,243
Less Current Maturities 62,705 61,742
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1,100,241 1,148,501
========== ==========
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 3.90% at September 30, 1996. Interest incurred and paid is
$134,662 of which $58,839 has been capitalized.
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 Sept. 30, 1996, the
Reimbursement Account balance was as follows:
Required prepaid interest deposit $ 67,811
Unused monthly principal deposits 37,500
Earnings 8,323
--------
$113,634
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 Sept 30, 1996, $2,895,322 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.
The first annual bond payment of $150,000 was made on July 2, 1996.
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 $103,130 at Sept 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 November 6, 1996
declared a $.03 per share cash dividend on all shares outstanding
on November 22, 1996 and to be paid on December 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
N O N E
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: November 8, 1996
s/Dale H. Powell
-------------------------------------
Dale H. Powell
President and Chairman of the Board
s/Jeffrey L. Boudreaux
-------------------------------------
Jeffrey L. Boudreaux
Controller
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<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 1213595
<SECURITIES> 393853
<RECEIVABLES> 72694
<ALLOWANCES> 0
<INVENTORY> 2030337
<CURRENT-ASSETS> 4582861
<PP&E> 5949890
<DEPRECIATION> 1985726
<TOTAL-ASSETS> 9577746
<CURRENT-LIABILITIES> 1287429
<BONDS> 0
0
0
<COMMON> 825649
<OTHER-SE> 3683603
<TOTAL-LIABILITY-AND-EQUITY> 9577746
<SALES> 7953746
<TOTAL-REVENUES> 7953746
<CGS> 6102948
<TOTAL-COSTS> 7815860
<OTHER-EXPENSES> 58895
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 75822
<INCOME-PRETAX> 78991
<INCOME-TAX> 77822
<INCOME-CONTINUING> 0
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<NET-INCOME> 1169
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</TABLE>
