<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) MARCH 14, 1997
ZARING HOMES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
OHIO 0-13136 1-1071348
(STATE OF OTHER JURISDICTION (COMMISSION (IRS EMPLOYER
OF INCORPORATION) FILE NUMBER) IDENTIFICATION NO.)
11300 CORNELL PARK DRIVE, SUITE 500, CINCINNATI, OHIO 45242-1825
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (513) 489-8849
11300 CORNELL PARK DRIVE, SUITE 300, CINCINNATI, OHIO 45242-1825
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
<PAGE> 2
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
A. 1996 FINANCIAL STATEMENTS
Copies of the following documents are attached hereto as Appendix I and
incorporated herein: (i) selected financial data, (ii) management's discussion
and analysis of consolidated results of operations and financial condition;
(iii) consolidated balance sheet of Zaring Homes, Inc. ("Zaring") and
subsidiaries as of December 31, 1996 and 1995, and the related consolidated
statements of income, shareholders' equity, cash flows, related notes to
consolidated financial statements, and (iv) the report of independent public
accountants, Arthur Andersen LLP, dated February 3, 1997, with respect to the
consolidated financial statements.
EXHIBITS:
23 Consent of Arthur Andersen LLP
27 Financial Data Schedule
SIGNATURE
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 hereunto duly authorized.
ZARING HOMES, INC.
BY: /s/ Ronald G.Gratz
----------------------------------
NAME: Ronald G. Gratz
TITLE: Vice President and Chief Financial Officer
Date: March 14, 1997
<PAGE> 3
[LOGO] FINANCIAL CONTENTS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C>
Overview ......................................... 13
Results of Operations ............................ 13
Fiscal 1996 Compared to Fiscal 1995 .............. 14
Fiscal 1995 Compared to Fiscal 1994 .............. 14
Income Taxes ..................................... 15
Loan Agreements .................................. 15
Commitments ...................................... 15
Capital Resources and Liquidity .................. 15
Provisions for Writedown to Net Realizable Value.. 16
Inflation ........................................ 16
Cautionary Statement ............................. 16
CONSOLIDATED FINANCIAL STATEMENTS
Balance Sheets ................................... 17
Statements of Income ............................. 18
Statements of Shareholders' Equity ............... 19
Statements of Cash Flows ........................ 20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1 Basis of Presentation .......................... 21
2 Summary of Significant Accounting Policies ..... 21
3 Investments in Joint Ventures .................. 23
4 Notes Payable .................................. 23
5 Income Taxes ................................... 24
6 Retirement Plan ................................ 25
7 Related Party Transactions ..................... 25
8 Commitments and Contingencies .................. 26
9 Shareholders' Equity ........................... 26
10 Stock Option Plans ............................ 27
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS ...... 28
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS .................. 29
SELECTED FINANCIAL DATA ................................... 30
DIRECTORS AND OFFICERS, AND SHAREHOLDER INFORMATION ....... 32
</TABLE>
ZARING HOMES, INC., ANNUAL REPORT 1996
Financial Contents
<PAGE> 4
[LOGO} MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The Company's business and the home building industry in general are
subject to changes in national and local economic conditions, as well
as other factors. Those factors include employment levels, availability
of financing, interest rates, consumer confidence, and housing demand.
The Company's results of operations for the periods presented reflect
the cyclical nature of the home building industry.
RESULTS OF OPERATIONS
The following table sets forth the Company's income statement line items as a
percentage of the Company's net revenues for the periods indicated.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 1996 1995 1994
(DOLLARS IN THOUSANDS) AMOUNT PERCENTAGE AMOUNT PERCENTAGE AMOUNT PERCENTAGE
------ ---------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
Net revenues $ 174,793 100.0% $127,084 100.0% $101,611 100.0%
Cost of sales 145,515 83.2 103,799 81.7 81,454 80.2
--------- ---- ------- ---- -------- ----
Gross profit 29,278 16.8 23,285 18.3 20,157 19.8
Selling, general and
administrative expenses 21,648 12.4 16,479 13.0 14,167 13.9
Other income 195 .1 175 .2 610 .6
--------- ---- ------- ---- -------- ----
Income before income taxes 7,825 4.5 6,981 5.5 6,600 6.5
Provision for income taxes 2,998 1.7 2,701 2.1 2,651 2.6
--------- ---- ------- ---- -------- ----
Net income $ 4,827 2.8% $ 4,280 3.4% $ 3,949 3.9%
========= ==== ======== ==== ======== ====
</TABLE>
The table below sets forth new orders (net of cancellations), closings
and year-end backlog in units and dollars.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
New orders 800 676 468
Closings 754 583 465
Backlog 263 217 124
Sales value of backlog
at end of period (000's omitted) $64,193 $47,033 $24,566
Average revenue per closing (000's omitted) $ 228 $ 215 $ 214
</TABLE>
A home is included in "New Orders" when the Company's standard sales
contract is executed. A home is included in "Closings" when the title
is transferred to the buyer. Revenue and cost of sales for a home are
recognized at the date of closing. A home is in "Backlog" during the
time after a new order contract is executed and prior to the transfer
of title to the purchaser.
Sales of the Company's homes generally are made pursuant to a standard
sales contract, which requires a down payment of approximately 2% to
20% of the sales price. The standard sales contract typically includes
a financing contingency that permits the purchaser to cancel if
mortgage financing is unattainable within a specified period, usually
less than six weeks. The contract may also include other contingencies
such as the sale of an existing house. The Company utilizes the Quality
Time Masters(TM) scheduling system that generally enables the Company
to complete its homes in less than 120 days from the date a building
permit is issued. A partially constructed home (one held "under roof")
normally can be completed within 60 days after a contract is signed.
Although the Company believes that substantially all backlog at
December 31, 1996 will be completed and closed during 1997, there can
be no assurance that such closings will occur. The Company experienced
cancellations of its contracts at a rate of 23.4% during 1996 compared
to 17.8% during 1995. The higher level of cancellations is the result
of, among other factors, buyers' expectations of mortgage interest
rates. Trends in the Company's backlog are subject to change from
period to period based upon economic conditions including consumer
confidence levels, interest rates, and the availability of mortgages.
ZARING HOMES, INC., ANNUAL REPORT 1996
Management's Discussion and Analysis of
Financial Condition and Results of Operations
<PAGE> 5
[LOGO} MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS
OF OPERATIONS
FISCAL 1996 COMPARED TO FISCAL 1995
Net revenues in 1996 increased by $47.7 million, or 37.5% over 1995.
The Company delivered 754 homes in 1996 compared to 583 in 1995, a
29.3% increase. This increase is attributable to the strength of the
housing market, primarily in the first half of 1996, and the continued
growth in the Company's 1994 expansion cities of Raleigh and
Indianapolis, which combined to deliver 107 additional homes in 1996 as
compared to 1995.
Although the Company's gross profit increased $5,993, or 26%, over
1995, the gross profit percentage decreased from 18.3% in 1995 to 16.8%
in 1996. The decline in the gross margin percentage is attributable to,
among other factors, increased subcontractor costs due to demand for
their services, the mix of units sold and increases in certain other
production and warranty costs, which the Company was unable to pass
through to its customers.
Selling, general and administrative expense increased approximately
31.4% to $21.6 million in 1996. Selling expenses decreased to 6.9% of
revenues for 1996 compared to 7.1% of revenues in 1995, primarily due
to start-up marketing costs incurred in the Company's Raleigh and
Indianapolis operations in 1995 and increased costs related to model
homes in all divisions in 1995. General and administrative expense
decreased as a percentage of revenues from 5.8% in 1995 to 5.5% in
1996, as a result of continuing to realize the economies of scale
associated with expansion.
Other income increased slightly in 1996 due to increases in joint
venture income.
As a result of the foregoing, income before taxes for 1996 increased
$844, or approximately 12% over 1995. As a percentage of revenue,
income before taxes decreased from 5.5% in 1995 to 4.5% in 1996.
FISCAL 1995 COMPARED TO FISCAL 1994
Net revenues in 1995 increased $25.5 million, or 25.1% over 1994. The
Company delivered 583 homes in 1995 compared to 465 homes in 1994, a
25.4% increase. The increase in homes delivered is attributable to the
increasing strength in the housing market during the second half of
1995 and the geographic expansion in Raleigh, North Carolina and
Indianapolis, Indiana. The Company's Cincinnati operations closed 340
homes in 1995 compared to 339 homes in 1994. The Nashville operations
closed 191 homes in 1995 compared to 126 in 1994, a 51.6% increase. The
Raleigh and Indianapolis operations closed 43 homes and 9 homes,
respectively, in 1995. These two divisions had no closings in 1994.
Gross profit percentage decreased from 19.8% in 1994 to 18.3% in 1995,
a reduction of 7.6%. As consumer traffic declined during the second
half of 1994 and the first half of 1995, the Company discounted certain
home prices to reduce inventory. Also contributing to the decline in
gross profit is an increase in net interest expense within cost of
goods sold as a result of higher average levels of borrowings and
interest rates during the year. In addition, the expansion of
operations in the Raleigh and Indianapolis divisions negatively
impacted the gross margin in 1995.
Selling, general and administrative expenses decreased as a percentage
of net revenues from 13.9% in 1994 to 13.0% in 1995, a 6.5% decrease.
Selling expenses increased to 7.1% of revenues for the year ended
December 31, 1995 from 7.0% for the comparable period in 1994. This
increase is attributable to start-up marketing costs in the Company's
Raleigh and Indianapolis operations and increased costs related to
model homes in all divisions. General and administrative expenses
decreased as a percentage of revenue from 6.9% in 1994 to 5.8% in 1995.
The Company has achieved economies of scale through its expansion to
Raleigh and Indianapolis.
ZARING HOMES, INC., ANNUAL REPORT 1996
Management's Discussion and Analysis of
Financial Condition and Results of Operations
<PAGE> 6
[LOGO} MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS
OF OPERATIONS
The decrease in other income in 1995 is primarily due to the Company
realizing $105 in income from joint ventures compared to $424 in 1994.
As a result of the above, income before taxes for 1995 increased
approximately $381 or 5.8% over 1994. As a percentage of net revenues,
income before taxes decreased from 6.5% in 1994 to 5.5% in 1995.
INCOME TAXES
The Company's effective tax rate for 1995 and 1996 was approximately
38% to 40%, which reflects the federal statutory rate plus state tax
rates, net of federal tax benefit.
LOAN AGREEMENTS
In March 1996, the Board of Directors of the Company approved and the
Company entered into a new unsecured $87.5 million syndicated credit
facility with commercial banks. This agreement consists of a revolving
credit facility providing for borrowings up to $72.5 million and term
debt of $15 million. This revolving facility enables the Company to
borrow funds depending upon its borrowing base, as defined, at interest
rates up to the prime rate. Available borrowings are limited by the
Company's outstanding letters of credit and its borrowing base, as
defined in the agreement. As of December 31, 1996, $15.5 million was
borrowed by the Company against the revolving credit facility ($13.4
million was available). The $15 million term debt is payable in 20
equal quarterly installments beginning in July 1996 (balance of $13.5
million as of December 31, 1996). Approximately $11.8 million of the
term credit facility was used to refinance the preexisting subordinated
notes with the remainder available for expansion and land development.
The other term notes payable to banks ($5.2 million as of December 31,
1996) are payable in 12 equal quarterly installments beginning in
September 1998 and bear interest at a fixed rate of 7.95%.
COMMITMENTS
As of December 31, 1996, and December 31, 1995, the Company had
commitments to purchase residential lots from third parties in the
aggregate amounts of $23,278 and $19,434, respectively, through 2000.
At December 31, 1996, the Company also had commitments under various
operating leases in the aggregate amount of $8,769 payable over a ten
year period. It is anticipated that funding for these commitments will
be funded through the Company's working capital.
CAPITAL RESOURCES AND LIQUIDITY
Fiscal 1996 Compared to Fiscal 1995
Net cash used by operating activities increased by $11,674 from a net
cash provided of $6,880 in 1995 to net cash used of $4,794 in 1996. The
increase in net income was offset by larger investments in inventories.
Net cash used for investing activities increased by $1,013 due to
greater purchases of property and equipment. Net cash provided by
financing activities was $4,080, an increase of $9,884 over 1995 due to
net bank borrowings of $4,684 offset by the net purchase of treasury
stock.
The Company believes that its present cash balances, with amounts
available from its borrowing agreements and amounts generated from
future operations, will provide adequate funds for its future plans.
FISCAL 1995 COMPARED TO FISCAL 1994
Net cash provided by operating activities increased by $29,033 from a
net use of cash of $22,153 in 1994 to cash provided of $6,880 in 1995.
The increase in inventory in the Raleigh and Indianapolis divisions has
been offset by the reduction of speculative homes in the Cincinnati
division.
Net cash provided by financing activities decreased by approximately
$24,208 due to a reduction in bank borrowings needed to fund operations
and payments on subordinated notes.
ZARING HOMES, INC., ANNUAL REPORT 1996
Management's Discussion and Analysis of
Financial Condition and Results of Operations
<PAGE> 7
[LOGO} MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS
OF OPERATIONS
PROVISIONS FOR WRITEDOWN TO
NET REALIZABLE VALUE
The Company periodically reviews the value of land and inventories and
records writedowns necessary to reflect declines in value. The
provision for writedown to net realizable value represents reserves
recorded after these evaluations to reflect such declines in value. The
estimated net realizable value of real estate inventories represents
management's estimate based on present plans and intentions, selling
prices in the ordinary course of business, and forecasted economic and
market conditions. Accordingly, the realization of the value of the
Company's real estate inventories is dependent upon future events and
conditions that may cause actual results to differ from amounts
presently estimated.
INFLATION
Housing demand, in general, is affected adversely by increases in
interest rates. If mortgage interest rates increase significantly, the
Company's revenues, gross profit, and net income could be adversely
affected.
CAUTIONARY STATEMENT
Certain statements contained in this "Management's Discussion and
Analysis of Financial Condition and Results of Operations" section that
are not related to historical results are forward looking statements.
Actual results may differ materially from those projected or implied in
the forward looking statements. Further, certain forward looking
statements are based upon assumptions of future events which may not
prove to be accurate. These forward looking statements involve risks
and uncertainties including but not limited to those referred to under
the caption "Management's Discussion and Analysis of Financial
Condition and Results of Operations; Cautionary Statements" in the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
1996, filed with the Securities and Exchange Commission. Readers should
carefully review those risk factors and uncertainties in conjunction
with reading this Management's Discussion and Analysis of Financial
Condition and Results of Operations.
ZARING HOMES, INC., ANNUAL REPORT 1996
Management's Discussion and Analysis of
Financial Condition and Results of Operations
<PAGE> 8
[LOGO] CONSOLIDATED BALANCE
SHEETS AS OF DECEMBER 31,
1996 AND 1995
(all amounts in thousands except share data)
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 2,440 $ 4,513
Receivables:
Related parties 227 --
Other 326 108
Inventories
Residential housing completed or under construction 47,664 35,628
Land, development costs and finished lots 35,988 38,532
Property and equipment, net 2,619 1,798
Investments in and advances to unconsolidated joint ventures 1,086 1,578
Future tax benefit 675 801
Cash surrender value of life insurance and other assets 3,672 2,480
-------- --------
$ 94,697 $ 85,438
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Revolving credit facility $ 15,500 $ 12,500
Term notes payable 18,745 5,245
Subordinated notes payable -- 11,816
Accounts payable and other accrued liabilities 9,115 9,009
Customer deposits 2,549 1,703
Income taxes payable 107 854
-------- --------
Total liabilities 46,016 41,127
-------- --------
Commitments and contingencies
Shareholders' equity:
Preferred shares, no par value, 2,000,000 shares authorized,
none issued or outstanding -- --
Common shares, no par value, 18,000,000 shares authorized,
5,036,480 and 5,035,520 issued and 4,781,110 and 4,850,159
outstanding in 1996 and 1995, respectively 25,146 25,136
Additional paid-in capital 7,687 7,533
Retained earnings 17,854 13,027
-------- --------
50,687 45,696
Less - Treasury shares, at cost, 255,370 and 185,361 shares
at December 31, 1996 and 1995, respectively (2,006) (1,385)
-------- --------
Total shareholders' equity 48,681 44,311
-------- --------
$ 94,697 $ 85,438
======== ========
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these consolidated balance sheets.
ZARING HOMES, INC., ANNUAL REPORT 1996
Consolidated balance Sheets
<PAGE> 9
[LOGO] CONSOLIDATED BALANCE
SHEETS AS OF DECEMBER 31,
1996 AND 1995
(all amounts in thousands except share data)
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
NET REVENUES $ 174,793 $ 127,084 $ 101,611
COST OF SALES 145,515 103,799 81,454
---------- ---------- ----------
Gross profit 29,278 23,285 20,157
OPERATING EXPENSES:
Selling 12,012 9,063 7,072
General and administrative 9,636 7,416 7,095
---------- ---------- ----------
Income from operations 7,630 6,806 5,990
OTHER INCOME:
Investment income 33 62 184
Income from unconsolidated joint ventures 159 105 424
Other, net 3 8 2
---------- ---------- ----------
Total other income 195 175 610
---------- ---------- ----------
Income before provision for income taxes 7,825 6,981 6,600
PROVISION FOR INCOME TAXES 2,998 2,701 2,651
---------- ---------- ----------
Net income $ 4,827 $ 4,280 $ 3,949
========== ========== ==========
EARNINGS PER SHARE $ 1.01 $ 0.88 $ 0.80
========== ========== ==========
WEIGHTED AVERAGE SHARES OUTSTANDING 4,778,826 4,850,159 4,933,206
========== ========== ==========
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these consolidated statements.
ZARING HOMES, INC., ANNUAL REPORT 1996
Consolidated Statements of Income
<PAGE> 10
[LOGO] CONSOLIDATED BALANCE
SHEETS AS OF DECEMBER 31,
1996, 1995, AND 1994
(all amounts in thousands except share data)
<TABLE>
<CAPTION>
Shares Additional
----------------------- Common Paid-In Retained Treasury
Common Treasury Shares Capital Earnings Shares Total
---------- -------- ------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1993 5,035,520 (35,340) $25,136 $7,533 $ 4,798 $ (179) $ 37,288
Purchase of treasury shares -- (150,021) -- -- -- (1,206) (1,206)
Net income -- -- -- -- 3,949 -- 3,949
---------- -------- ------- ------ ------- ------- --------
BALANCE, DECEMBER 31, 1994 5,035,520 (185,361) 25,136 7,533 8,747 (1,385) 40,031
Net income -- -- -- -- 4,280 -- 4,280
---------- -------- ------- ------ ------- ------- --------
BALANCE, DECEMBER 31, 1995 5,035,520 (185,361) 25,136 7,533 13,027 (1,385) 44,311
Purchase of treasury shares -- (135,009) -- -- -- (1,198) (1,198)
Sale of treasury shares -- 65,000 -- 154 -- 577 731
Issuance of common shares 960 -- 10 -- -- -- 10
Net income -- -- -- -- 4,827 -- 4,827
---------- -------- ------- ------ ------- ------- --------
BALANCE, DECEMBER 31, 1996 5,036,480 (255,370) $25,146 $7,687 $17,854 $(2,006) $ 48,681
========== ======== ======= ====== ======= ======= ========
Number of common
shares authorized 18,000,000
==========
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these consolidated statements.
ZARING HOMES, INC., ANNUAL REPORT 1996
Consolidated Statements of Shareholders' Equity
<PAGE> 11
[LOGO] CONSOLIDATED STATEMENTS OF
CASH FLOWS AS OF DECEMBER 31,
1996, 1995, AND 1994
(all amounts in thousands)
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,827 $ 4,280 $ 3,949
Adjustments to reconcile net income to cash
provided by (used for) operating activities-
Depreciation 1,189 929 575
Income from unconsolidated joint ventures (159) (105) (424)
Compensation associated with sale of treasury stock 147 -- --
Change in assets and liabilities-
Future tax benefit 126 -- 95
Receivables (445) 454 648
Inventories (9,492) (388) (27,744)
Cash surrender value of life insurance and other assets (1,192) (559) (441)
Accounts payable and other accrued liabilities 106 1,258 1,916
Customer deposits 846 804 (791)
Income taxes payable (747) 207 64
-------- -------- --------
Net cash provided by (used for) operating activities (4,794) 6,880 (22,153)
======== ======== ========
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (2,010) (973) (1,657)
Sales of marketable securities -- -- 2,167
Distributions from unconsolidated joint ventures, net 651 627 800
-------- -------- --------
Net cash provided by (used for) investing activities (1,359) (346) 1,310
======== ======== ========
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on notes payable 48,320 23,195 35,865
Repayments on notes payable (43,636) (28,999) (16,255)
Sale of treasury stock 594 -- --
Purchase of treasury stock (1,198) -- (1,206)
-------- -------- --------
Net cash provided by (used for) financing activities 4,080 (5,804) 18,404
======== ======== ========
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (2,073) 730 (2,439)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 4,513 3,783 6,222
-------- -------- --------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 2,440 $ 4,513 $ 3,783
======== ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for
Interest $ 2,051 $ 2,884 $ 1,633
Income taxes $ 3,507 $ 2,503 $ 2,290
SUPPLEMENTAL DISCLOSURE OF NON-CASH INFORMATION:
During 1996, the Company incurred non-cash charges to general and
administrative expense of $147 (Note 9)
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these consolidated statements.
ZARING HOMES, INC., ANNUAL REPORT 1996
Consolidated Statements of Cash Flows
<PAGE> 12
[LOGO]NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS AS OF
DECEMBER 31, 1996 AND 1995
(all amounts in thousands except share and per share data)
1 BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts
of Zaring Homes, Inc. (an Ohio corporation) and subsidiaries (the
Company) that are composed of the following: Zaring Holdings, Inc.,
Zaring Homes of Indiana, LLC, Zaring Homes Kentucky, LLC, and HomeMax,
Inc. The Company's principal business is the designing, constructing,
marketing and selling of single-family homes and the acquisition and
development of land for sale as residential lots in the midwest and
southeastern United States. The Company began operations in Cincinnati,
Ohio in 1964 and commenced operations in Nashville, Tennessee in 1986.
During the three year period ended December 31, 1996, operations
commenced in Louisville, Kentucky, Charlotte, North Carolina, and
Knoxville, Tennessee (1996 cities) and in Raleigh/Durham, North
Carolina and Indianapolis, Indiana (1994 cities).
In November 1996, the Company formed HomeMax, Inc., a wholly-owned
subsidiary, for the purpose of entering into the retail distribution of
manufactured housing. The accounts of HomeMax, Inc. have been
consolidated in the accompanying financial statements.
Subsequent to December 31,1996, the Company's Board of Directors
authorized, subject to shareholder approval, a plan to restructure the
corporate organization of the Company. The restructuring, if approved,
would result in the current holders of the Company's common shares
converting their shares into shares of Zaring National Corporation (the
Holding Company). The Company will become a wholly-owned subsidiary of
the Holding Company.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Cash and Cash Equivalents
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents. The carrying
value of all cash equivalents approximates full market value as of
December 31, 1996 and 1995.
b) Inventories
Inventories are stated at the lower of cost or market. Costs include
acquisition, land development, direct and indirect production costs,
land deposits, interest, taxes and certain other carrying costs related
to development and construction activities. Market represents estimates
based on management's present plans and intentions of sale prices less
development and disposition costs, assuming that disposition occurs in
the normal course of business. Residential housing completed or under
construction is not pledged as collateral under any of the Company's
financing arrangements.
The following table summarizes the components of residential housing
inventory as of December 31:
ZARING HOMES, INC., ANNUAL REPORT 1996
Note to Consolidated Financial Statements
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
RESIDENTIAL HOUSING UNDER A CONTRACT OF SALE $24,884 $15,120
RESIDENTIAL HOUSING UNDER CONSTRUCTION 12,355 11,834
MODEL HOMES 10,425 8,674
------- -------
$47,664 $35,628
======= =======
</TABLE>
In 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of" (SFAS
121), effective for fiscal years beginning after December 15, 1995. The
new standard requires that long-lived assets be reviewed for impairment
whenever events or changes in circumstances indicate that their
carrying amount may not be recoverable. The adoption of SFAS 121 had no
material impact on the financial statements.
ZARING HOMES, INC., ANNUAL REPORT 1996
Note to Consolidated Financial Statements
<PAGE> 13
[LOGO]NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS AS OF
DECEMBER 31, 1996 AND 1995
(all amounts in thousands except share and per share data)
c) CAPITALIZED INTEREST
Interest is capitalized on land in the process of development and
residential housing construction costs during the development and
construction period. The following table summarizes the activity with
respect to capitalized interest:
<TABLE>
<CAPTION>
Years Ended December 31, 1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Capitalized interest, beginning of year $ 1,123 $ 751 $ 405
Interest incurred 2,310 2,920 1,662
Interest expensed (2,359) (2,548) (1,316)
------- ------- -------
Capitalized interest, end of year $ 1,074 $ 1,123 $ 751
======= ======= =======
</TABLE>
d) DEPRECIATION
Property and equipment are depreciated over the estimated useful lives
of the assets using accelerated and straight-line methods.
e) REVENUE AND COST RECOGNITION
Revenues and costs of sales are recognized upon closing the sale, at
which time title is transferred to the purchaser.
f) EARNINGS PER SHARE
Earnings per share are computed by dividing net income by the weighted
average number of common shares outstanding during the period increased
by the effect of dilutive stock options, if any.
g) SERVICE AND WARRANTY LIABILITIES
Service and warranty costs are estimated and provided for at the time
of closing on a home.
h) ADVERTISING
The Company expenses the costs of advertising as incurred. Advertising
expense for the years ended December 31, 1996, 1995 and 1994
approximated $1,019, $663 and $849, respectively.
i) SFAS 123 "ACCOUNTING FOR
STOCK-BASED COMPENSATION"
The Company has elected to account for the cost of its stock options
utilizing the intrinsic value method prescribed in Accounting
Principles Board Opinion No. 25 (APB 25) as allowed by Statement of
Financial Accounting Standards No. 123 "Accounting for Stock-Based
Compensation" (SFAS 123). Accordingly, no compensation cost has been
recognized for stock options as substantially all stock options were
granted at prices that approximated fair market value, as defined by
the plans, at the measurement date. The pro forma disclosures required
by SFAS 123 are presented in Note 10.
j) USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
k) RECLASSIFICATIONS
Certain reclassifications have been made to the prior years' financial
statements to conform with the 1996 presentation.
ZARING HOMES, INC., ANNUAL REPORT 1996
Note to Consolidated Financial Statements
<PAGE> 14
[LOGO]NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS AS OF
DECEMBER 31, 1996 AND 1995
(all amounts in thousands except share and per share data)
3 INVESTMENTS IN JOINT VENTURES
The Company participates in two joint ventures to develop and sell
residential property to third parties or to the venture partners who
construct residential housing on the property. In addition, the Company
also participates in a partnership which provides mortgage brokering
services.
For each venture, the Company has a 50% ownership interest and its
venture partner has the other 50% interest. All key decisions regarding
venture activities are made jointly by both ventures. Accordingly, the
Company uses the equity method to account for the investments in these
joint ventures.
Fees received by the Company for services provided to the joint
ventures are offset against costs to the extent incurred in providing
these services. Any excess is deferred by the Company to the extent of
its ownership interest in the venture and recognized as income as the
venture closes on sales of properties to third parties.
The following tables summarize unaudited financial information related
to the Company's joint venture activities:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 1996 1995 1994
STATEMENTS OF INCOME
------ ------ ------
<S> <C> <C> <C>
REVENUES $3,442 $1,460 $2,988
COSTS AND EXPENSES 3,124 1,250 2,139
------ ------ ------
PRETAX INCOME $ 318 $ 210 $ 849
====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996 1995
BALANCE SHEETS
------ ------
<S> <C> <C>
ASSETS, PRIMARILY LAND AND LAND IMPROVEMENTS $1,720 $3,196
LIABILITIES, INCLUDING AMOUNTS DUE TO THE COMPANY OF $559 IN 1996 $ 666 $ 40
EQUITY $1,054 $3,156
</TABLE>
4 NOTES PAYABLE
On May 13, 1996, the Company entered into an unsecured, $87.5 million
syndicated credit facility with PNC Bank as agent. The new credit
facility consists of a revolving credit facility, providing for
borrowings up to $72.5 million, depending on the Company's borrowing
base, as defined in the agreement, and a $15 million term loan. $10
million of the revolving credit facility may be used for letters of
credit. The credit agreement bears interest in accordance with various
options, depending upon the Company's debt-to-equity ratio, as detailed
below.
ZARING HOMES, INC., ANNUAL REPORT 1996
Note to Consolidated Financial Statements
<PAGE> 15
[LOGO]NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS AS OF
DECEMBER 31, 1996 AND 1995
(all amounts in thousands except share and per share data)
The Company's notes payable consist of the following at December 31:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
REVOLVING CREDIT FACILITY, PAYABLE TO PNC BANK, AS AGENT,
$72.5 MILLION MAXIMUM AVAILABLE BORROWINGS AT INTEREST RATE OPTIONS OF
(a) THE GREATER OF THE PRIME RATE OR THE FEDERAL FUNDS RATE PLUS .5% OR
(b) THE EURO-RATE PLUS 1.25% TO 1.625%, DEPENDING ON THE COMPANY'S
LEVERAGE RATIO (BORROWINGS OUTSTANDING AT DECEMBER 31, 1996 ARE AT 7.6%),
EXPIRING IN JULY 1999. THE 1995 REVOLVING CREDIT FACILITY WAS REFINANCED
IN 1996 $15,500 $12,500
------- -------
TERM LOAN, PAYABLE TO PNC BANK, AS AGENT, BORROWINGS AT
INTEREST RATE OPTIONS OF (a) THE GREATER OF THE PRIME RATE OR THE FEDERAL
FUNDS RATE PLUS .5% OR (b) THE EURO-RATE PLUS 1.375% TO 1.75%, DEPENDING
ON THE COMPANY'S LEVERAGE RATIO (BORROWINGS OUTSTANDING AT DECEMBER 31,
1996 ARE AT 7.2%),
PAYABLE IN 20 QUARTERLY INSTALLMENTS BEGINNING JULY 1, 1996 $13,500 $ --
OTHER TERM NOTES PAYABLE:
NOTES PAYABLE TO BANKS, INTEREST AT 7.95%, PAYABLE IN 12 EQUAL
QUARTERLY INSTALLMENTS BEGINNING IN SEPTEMBER 1998 5,245 5,245
------- -------
$18,745 $ 5,245
======= =======
SUBORDINATED NOTES PAYABLE:
SUBORDINATED NOTES PAYABLE TO BANKS, PAID IN 1996 $ -- $11,816
======= =======
</TABLE>
At December 31, 1996, the Company had approximately $13,400 of
borrowings available per the terms of its revolving credit agreement.
The bank credit agreements include provisions which require, among
others, that the Company maintain certain levels of tangible net worth
and cash flow from operations as well as limiting the Company's ratio
of debt to equity.
The Company is contingently liable under letters of credit of
approximately $5,112 issued as a result of lot and land acquisition and
development activities through December 31, 1996. The carrying value of
the revolving credit facility and term loan approximates fair market
value as these notes are priced at current market rates. The fair
market value of the Company's other term and subordinated notes payable
as of December 31, 1996 and 1995 was approximately $5,275 and $17,300,
respectively. The fair market value of these securities was estimated
by discounting the expected cash flows at the rates currently offered
to the Company for debt of the same remaining maturities.
Scheduled maturities of notes payable are summarized as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
<S> <C> <C>
1997 $ 3,000
1998 3,874
1999 20,248
2000 4,748
2001 2,375
-------
$34,245
=======
</TABLE>
5 INCOME TAXES
The Company has adopted Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes" (SFAS 109). This statement requires
deferred tax recognition for all temporary difference in accordance
with the liability method and requires adjustments of future tax
benefits and deferred tax liabilities for enacted changes in tax laws
and rates.
ZARING HOMES, INC., ANNUAL REPORT 1996
Note to Consolidated Financial Statements
<PAGE> 16
[LOGO]NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS AS OF
DECEMBER 31, 1996 AND 1995
(all amounts in thousands except share and per share data)
The following summarizes the provision for income taxes:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 1996 1995 1994
------- ------ ------
<S> <C> <C> <C>
CURRENTLY PAYABLE:
FEDERAL $ 2,484 $2,071 $1,994
STATE AND LOCAL 640 630 562
DEFERRED:
FEDERAL (104) -- 70
STATE AND LOCAL (22) -- 25
------- ------ ------
$ 2,998 $2,701 $2,651
======= ====== ======
</TABLE>
The following is a reconciliation between the statutory federal income
tax rate and the provision for income taxes:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 1996 1995 1994
----------------------- ----------------------- ---------------------
AMOUNT RATE AMOUNT RATE AMOUNT RATE
------- ---- ------- ---- ------ ----
<S> <C> <C> <C> <C> <C> <C>
COMPUTED PROVISION FOR
FEDERAL INCOME TAXES AT
THE STATUTORY RATE $ 2,661 34.0% $ 2,374 34.0% $2,244 34.0%
STATE AND LOCAL INCOME
TAXES, NET OF FEDERAL
INCOME TAX BENEFIT 386 4.9 378 5.4 362 5.5
OTHER (49) (.6) (51) (.7) 45 .7
------- ---- ------- ---- ------ ----
$ 2,998 38.3% $ 2,701 38.7% $2,651 40.2%
======= ==== ======= ==== ====== ====
</TABLE>
At December 31, 1996 and 1995, the future tax benefit consists of the
following:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
COSTS CAPITALIZED TO INVENTORY $ 88 $120
RECOGNITION OF WARRANTY EXPENSE 130 116
INVENTORY RESERVES 37 116
CURRENTLY NONDEDUCTIBLE EXPENSES 420 449
---- ----
$675 $801
==== ====
</TABLE>
6 RETIREMENT PLAN
The Company has established a defined contribution plan for all
eligible employees. The plan provides for voluntary contributions by
the Company's employees up to a specified maximum percentage of gross
pay. Company contributions are discretionary. Company contributions
accrued and expensed approximated $54 in 1996, $28 in 1995 and $200 in
1994.
7 RELATED PARTY TRANSACTIONS
In 1996, 1995 and 1994, the Company sold residential lots to two
companies that are owned by related parties for approximately $105,
$247, and $146, respectively. The Company also sold finished
residential homes to members of management for total sales of
approximately $375, $1,156 and $1,564 for the years ended December 31,
1996, 1995 and 1994, respectively. In 1996 and 1995, the Company
purchased residential lots from a company related through common
ownership for $1,834 and $69, respectively. There were no purchases in
1994. Also in 1996, the Company purchased residential lots and land
from a company owned by a member of the Zaring Board of Directors for
$1,845. There were no such purchases in 1995 or 1994.
ZARING HOMES, INC., ANNUAL REPORT 1996
Note to Consolidated Financial Statements
<PAGE> 17
[LOGO]NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS AS OF
DECEMBER 31, 1996 AND 1995
(all amounts in thousands except share and per share data)
In 1994, as part of a separation agreement, the Company purchased a
residential home from an officer and member of management. The total
purchase price was $475. Also, as part of this agreement, the Company
advanced to the officer $100, which was secured by a residential lot.
This advance was repaid in full in 1995.
Interest expense related to the subordinated notes to shareholders was
approximately $453 for the year ended December 31, 1994. There was no
such interest in 1996 or 1995 as the notes were refinanced during 1994.
8 COMMITMENTS AND CONTINGENCIES
a) Lot Purchases
In addition to land under development, the Company has commitments to
purchase residential lots from various outside parties as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, NUMBER OF LOTS AMOUNT
-------------- ------
<S> <C> <C> <C>
1997 295 $12,437
1998 174 7,090
1999 78 2,719
2000 35 1,032
--- -------
582 $23,278
=== =======
</TABLE>
b) Litigation
The Company is subject to various claims, lawsuits and administrative
proceedings arising in the ordinary course of business with respect to
real estate, environmental zoning and other matters, which seek
remedies or damages. The Company believes that any liability that may
finally be determined will not have a material effect on its financial
position or results of operations.
c) Operating Leases
The Company is obligated under noncancelable operating lease agreements
for office space. Rental expense under these agreements was $439, $329
and $215 for the years ended December 31, 1996, 1995 and 1994,
respectively. Future minimum lease payments under these operating lease
agreements are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
<S> <C> <C>
1997 $ 813
1998 960
1999 839
2000 800
2001 767
Thereafter 4,590
------
$8,769
======
</TABLE>
9 SHAREHOLDERS' EQUITY
a) PREFERRED SHARES
The Company is authorized to issue up to 2,000,000 preferred shares of
which 1,000,000 are voting and 1,000,000 are nonvoting. No preferred
shares have been issued.
b) COMMON SHARES
During 1994, the Company purchased on the open market 150,021 common
shares at an average price of $8.04 per share for a total value of
approximately $1,206.
During 1996, the Company purchased an additional 135,009 common shares
at a price of $8.875 per share. During 1996, the Company sold 65,000
shares out of treasury to directors and employees for $9.15 per share
which was less than the then current market value. The difference
between the amounts received and the market value has been recorded as
compensation expense and included in general and administrative
expenses. These transactions brought the total number of treasury
shares to 255,370.
ZARING HOMES, INC., ANNUAL REPORT 1996
Note to Consolidated Financial Statements
<PAGE> 18
[LOGO]NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS AS OF
DECEMBER 31, 1996 AND 1995
(all amounts in thousands except share and per share data)
In 1996, the Company issued as an incentive three shares to each full
time employee (960 common shares with a total market value of $10).
10 STOCK OPTION PLANS
The Company has adopted stock option plans (the Plans) for employees
and non employee directors in 1996 and 1993. Had compensation cost for
these plans been determined consistent with SFAS 123, the Company's net
income and earnings per share would have been reduced to the following
pro forma amounts:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
----------------- -----------------
<S> <C> <C>
NET INCOME
AS REPORTED $ 4,827 $ 4,280
PRO FORMA $ 4,703 $ 4,277
EARNINGS PER SHARE
AS REPORTED $ 1.01 $ .88
PRO FORMA $ .98 $ .88
</TABLE>
Because the method of accounting as prescribed by SFAS 123 has not been
applied to options granted prior to January 1, 1995, the pro forma net
income and earnings per share information may not be representative of
that to be expected in future years.
The Company may grant options for up to 300,000 shares under the Plans.
The Company has granted options on 66,383 shares through December 31,
1996. The option exercise prices approximated the stock's market price
on the date of grant. Of the options granted, 23,863 will vest subject
to the Company's annual performance and conformity with certain other
performance criteria. These options expire ten years from grant date.
25,000 of the options vest in three annual installments beginning in
1997 and expire in ten years. The remaining options vest at their grant
date and expire ten years from date of grant.
A summary of the status of the Company's stock option plans at December
31, 1996 and 1995 and changes during the years then ended is presented
in the table and narrative below:
<TABLE>
<CAPTION>
Years Ended December 31, 1996 1995
----------------------------- -----------------------------
SHARES PRICE SHARES PRICE
------- ----- ------- -----
<S> <C> <C> <C> <C>
OUTSTANDING, BEGINNING OF YEAR 15,020 $12.67 94,000 $13.50
GRANTED 77,500 11.63 2,000 7.25
EXERCISED -- -- -- --
FORFEITED/EXPIRED (26,137) 11.15 (80,980) 13.50
------- ----- ------- -----
OUTSTANDING, END OF YEAR 66,383 $12.05 15,020 $12.67
====== ====== ====== ======
EXERCISABLE, END OF YEAR 25,854 $12.60 15,020 $12.67
====== ====== ====== ======
</TABLE>
At December 31, 1996, 13,020 of the options have an exercise price of
$13.50 and remaining contractual life of 7 years. 4,500 of the
outstanding options have exercise prices of $7.25 to $13.50, a weighted
average fair value of $5.21, and a remaining contractual life of
approximately 8.6 years. 25,000 of these options have an exercise price
of $12.50, a fair value of $6.41, and a remaining contractual life of
10 years. The remaining 23,863 options have an exercise price of
$11.15, a fair value of $5.72 and a remaining contractual life of 10
years.
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option pricing model with the following
weighted-average assumptions used for grants in 1996 and 1995:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 1996 1995
--- ------ -----
<S> <C> <C>
DIVIDEND YIELD 0% 0%
EXPECTED VOLATILITY 36% 36%
RISK-FREE INTEREST RATE 6.5% 6.5%
EXPECTED LIVES 7 years 7 years
</TABLE>
ZARING HOMES, INC., ANNUAL REPORT 1996
Note to Consolidated Financial Statements
<PAGE> 19
[LOGO} MANAGEMENT'S RESPONSIBILITY
FOR FINANCIAL STATEMENTS
Zaring Homes, Inc. maintains a system of internal control over the
preparation of its financial statements. It should be recognized that
even an effective internal control system, no matter how well designed,
cannot ensure the elimination of errors with respect to the preparation
of financial statements; further, because of changes in conditions,
internal control system effectiveness may vary over time.
The independent public accountants provide an objective opinion as to
whether the financial statements present fairly the financial position,
results of operations and cash flows of the Company. In this process,
they evaluate the system of internal accounting controls and perform
such tests and other procedures as they deem necessary.
The Audit Committee of the Board of Directors, composed of non employee
directors, meets periodically with the independent public accountants
to evaluate the effectiveness of the work performed by the independent
public accountants in discharging their respective responsibilities and
to assure their independent and free access to the Audit Committee.
The Company has implemented a formal internal auditing function that
evaluated and formally reported to the Audit Committee on the adequacy
and effectiveness of internal accounting controls, policies and
procedures.
Based on this assessment, management believes that, as of December 31,
1996, the Company maintained an effective system of internal control
over the preparation of its financial statements.
/s/ Allen G. Zaring /s/ Ronald G. Gratz
------------------------ --------------------------
Allen G. Zaring, III Ronald G. Gratz
Chairman Chief Financial Officer
ZARING HOMES, INC., ANNUAL REPORT 1996
Management's Responsibility for Financial Statements
<PAGE> 20
[LOGO] REPORT OF INDEPENDENT
PUBLIC ACCOUNTANTS
TO THE BOARD OF DIRECTORS
AND SHAREHOLDERS OF
ZARING HOMES, INC.:
We have audited the accompanying consolidated balance sheets of ZARING
HOMES, INC. (an Ohio corporation) AND SUBSIDIARIES as of December 31,
1996 and 1995, and the related consolidated statements of income and
shareholders' equity and cash flows for each of the three years in the
period ending December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Zaring
Homes, Inc. and subsidiaries as of December 31, 1996 and 1995, and the
results of their operations and their cash flows for each of the three
years in the period ended December 31, 1996 in conformity with
generally accepted accounting principles.
/s/ Arthur Andersen LLP
Cincinnati, Ohio,
February 3, 1997
ZARING HOMES, INC., ANNUAL REPORT 1996
Report of Independent Public Accountants
<PAGE> 21
[LOGO] SELECTED FINANCIAL DATA
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
(Dollars in Thousands, Except Per Share Data)
YEARS ENDED DECEMBER 31, 1996 1995 1994 1993 1992
-------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Net Revenues 1 $174,793 $127,084 $101,611 $88,544 $ 66,476
Cost of Sales 145,515 103,799 81,454 67,989 50,503
-------- -------- -------- ------- --------
Gross Profit 29,278 23,285 20,157 20,555 15,973
Selling, General and
Administrative Expenses 21,648 16,479 14,167 10,879 8,334
-------- -------- -------- ------- --------
Operating Income 7,630 6,806 5,990 9,676 7,639
Other Income (Expense) 195 175 610 448 (155)
-------- -------- -------- ------- --------
Income Before Taxes 7,825 6,981 6,600 10,124 7,484
Provision for Income Taxes
(Pro Forma 1992 - 1993) 2,998 2,701 2,651 3,983 3,008
-------- -------- -------- ------- --------
Net Income
(Pro Forma 1992 - 1993) $ 4,827 $ 4,280 $ 3,949 $ 6,141 $ 4,476
======== ======== ======== ======= ========
Earnings Per Share
(Pro Forma 1992 - 1993) $ 1.01 $ 0.88 $ 0.80 $ 1.48 $ 1.49
======== ======== ======== ======= ========
Weighted Average Shares
Outstanding (000's) 2 4,779 4,850 4,933 4,150 3,001
======== ======== ======== ======= ========
</TABLE>
SELECTED QUARTERLY FINANCIAL DATA
<TABLE>
<CAPTION>
(Dollars in Thousands, Except Per Share Data)
THREE MONTHS ENDED DEC. 31, SEPT. 30, JUNE 30, MARCH 31,
1996 1996 1996 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Income Statement Data:
Net Revenues (1) $48,607 $55,516 $43,415 $27,255
Cost of Sales 41,227 46,085 35,739 22,464
------- ------- ------- -------
Gross Profit 7,380 9,431 7,676 4,791
Selling, General and Administrative Expenses 5,540 6,609 5,276 4,223
------- ------- ------- -------
Operating Income 1,840 2,822 2,400 568
Other Income 18 14 113 50
------- ------- ------- -------
Income Before Taxes 1,858 2,836 2,513 618
Provision for Income Taxes 676 1,092 990 240
------- ------- ------- -------
Net Income $ 1,182 $ 1,744 $ 1,523 $ 378
======= ======= ======= =======
Earnings Per Share $ 0.25 $ 0.36 $ 0.32 $ 0.08
======= ======= ======= =======
Weighted Average Shares Outstanding (000's) 4,779 4,778 4,777 4,775
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED DEC. 31, SEPT. 30, JUNE 30, MARCH 31,
1995 1995 1995 1995
------- -------- ------- --------
<S> <C> <C> <C> <C>
Income Statement Data:
Net Revenues (1) $43,420 $ 33,459 $29,975 $ 20,230
Cost of Sales 35,072 27,353 24,830 16,544
------- -------- ------- --------
Gross Profit 8,348 6,106 5,145 3,686
Selling, General and Administrative Expenses 4,695 4,317 3,780 3,687
------- -------- ------- --------
Operating Income (Loss) 3,653 1,789 1,365 (1)
Other Income (Expense) 36 (17) 44 112
------- -------- ------- --------
Income Before Taxes 3,689 1,772 1,409 111
Provision for Income Taxes 1,397 701 556 47
------- -------- ------- --------
Net Income $ 2,292 $ 1,071 $ 853 $ 64
======= ======== ======= ========
Earnings Per Share $ 0.47 $ 0.22 $ 0.18 $ 0.01
======= ======== ======= ========
Weighted Average Shares Outstanding (000's) 4,850 4,850 4,850 4,850
======= ======== ======= ========
</TABLE>
ZARING HOMES, INC., ANNUAL REPORT 1996
Selected Financial Data
<PAGE> 22
[LOGO] SELECTED FINANCIAL DATA
BALANCE SHEET DATA
(Dollars in Thousands)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total Assets $94,697 $85,438 $84,693 $61,150 $44,280
Notes Payable $34,245 $29,561 $35,365 $15,755 $12,118
Total Liabilities $46,016 $41,127 $44,662 $23,862 $21,980
Shareholders' Equity $48,681 $44,311 $40,030 $37,288 $22,300
</TABLE>
SELECTED OPERATING DATA
(Dollars in Thousands)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 1996 1995 1994 1993 1992
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Operating Data:
Units
New Orders (3) 800 676 468 449 345
Closings 754 583 465 402 311
Backlog (4) 263 217 124 121 74
Average Revenue Per Closing $ 228 $ 215 $ 214 $ 214 $ 209
Sales Value of Backlog at End of Year $64,193 $47,033 $24,566 $27,498 $18,551
Percent of Net Revenues:
Gross Profit 16.8% 18.3% 19.8% 23.2% 24.0%
Selling, General and
Administrative Expenses 12.4% 13.0% 13.9% 12.3% 12.5%
</TABLE>
SELECTED OPERATING DATA (IN UNITS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED DEC. 31, SEPT. 30, JUNE 30, MARCH 31,
1996 1996 1996 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
New orders (3) 160 152 184 304
Closings 206 237 191 120
Backlog (4) 263 309 394 401
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED DEC. 31, SEPT. 30, JUNE 30, MARCH 31,
1995 1995 1995 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
New orders (3) 167 173 193 143
Closings 189 163 138 93
Backlog (4) 217 239 229 174
</TABLE>
(1) Revenue from a sale is recognized upon the closing of the sale.
(2) Adjusted to give effect to the 620-for-1 share split in 1993.
(3) New Orders represent total new home orders received during the
period, net of cancellations.
(4) Backlog includes new orders which have not yet closed.
ZARING HOMES, INC., ANNUAL REPORT 1996
Selected Financial Data
<PAGE> 1
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our reports, included in this Form 8-K, into the Company's previously filed
Registration Statements File No. 33-85588 and File No. 333-22679.
March 14, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Zaring
Homes, Inc. Consolidated Financial Statement as of December 31, 1996 and 1995.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 2,440
<SECURITIES> 0
<RECEIVABLES> 553
<ALLOWANCES> 0
<INVENTORY> 83,652
<CURRENT-ASSETS> 0
<PP&E> 2,619
<DEPRECIATION> 0
<TOTAL-ASSETS> 94,697
<CURRENT-LIABILITIES> 0
<BONDS> 34,245
0
0
<COMMON> 25,146
<OTHER-SE> 23,535
<TOTAL-LIABILITY-AND-EQUITY> 94,697
<SALES> 174,793
<TOTAL-REVENUES> 174,793
<CGS> 145,515
<TOTAL-COSTS> 145,515
<OTHER-EXPENSES> 21,648
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 7,825
<INCOME-TAX> 2,998
<INCOME-CONTINUING> 4,827
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,827
<EPS-PRIMARY> 1.01
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</TABLE>
