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, 1995
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
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 of (IRS Employer
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 for such
shorter period that the registrant was required to file reports), and (2) has
been subject to such filing requirements for past 90 days.
Yes X No
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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, 10 & 11
PART II - OTHER INFORMATION
Item 5. Other Information 12
2
MOD-U-KRAF HOMES, INC.
Consolidated Balance Sheets
September 30, 1995 and 1994
ASSETS
1995 1994
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CURRENT ASSETS
Cash and cash equivalents $ 1,211,113 $ 564,773
Certificates of deposit 500,000 500,000
Receivables 124,272 247,167
Inventories (Note 2) 1,677,294 1,618,514
Notes receivable, current portion (Note 3) 1,031,648 1,525,492
Prepaid expenses 66,802 63,834
Deferred income taxes, current portion 54,224 54,333
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Total current assets 4,665,353 4,574,113
LONG-TERM NOTES RECEIVABLE (Note 3) 173,626 171,664
PROPERTY AND EQUIPMENT, at cost less
accumulated depreciation
1995 $1,765,749; 1994 $1,618,292. (Note 4) 1,496,385 929,363
OTHER ASSETS
Deferred income taxes 422,807 453,862
Cash surrender value of life insurance 92,859 77,583
Reimbursement Account (Note 7) 106,349 0
Bond Issue Costs (Note 7) 72,099 0
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$ 7,029,478 $ 6,206,585
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of L-T liabilities (Note 5 61,742 57,114
Accounts payable and other liabilities 440,974 399,696
Accrued compensation 176,429 162,167
Customer deposits 58,005 168,056
Income taxes payable 43,473 21,589
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Total current liabilities 780,623 808,622
LONG-TERM DEFERRED COMPENSATION (Note 5) 1,015,825 1,069,430
POST RETIREMENT BENEFITS (Note 6) 132,676 140,813
LONG-TERM DEBT (Note 7) 575,769 0
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Total liabilities 2,504,893 2,018,865
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STOCKHOLDERS' EQUITY
Common stock, $1 par value, 2,000,000
shares authorized: shares issued and
outstanding 1995 825,649, 1994 813,649 825,649 813,649
Additional Paid in Capital 459,671 440,420
Retained earnings 3,239,265 2,933,651
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4,524,585 4,187,720
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$ 7,029,478 $ 6,206,585
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Accompanying notes are an integral part of these financial statement
3
MOD-U-KRAF HOMES, INC.
Consolidated Balance Sheets
September 30, 1995 and December 31, 1994
ASSETS
1995 1994
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CURRENT ASSETS
Cash and cash equivalents $ 1,211,113 $ 1,226,736
Certificates of deposit 500,000 504,935
Receivables 124,272 212,521
Inventories (Note 2) 1,677,294 1,206,956
Notes receivable, current portion (Note 3) 1,031,648 1,472,979
Prepaid expenses 66,802 71,313
Deferred income taxes, current portion 54,224 49,809
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Total current assets 4,665,353 4,745,249
LONG-TERM NOTES RECEIVABLE (Note 3) 173,626 157,708
PROPERTY AND EQUIPMENT, at cost less
accumulated depreciation
1995 $1,765,749; 1994 $1,652,419. (Note 4) 1,496,385 897,699
OTHER ASSETS
Deferred income taxes 422,807 448,799
Cash surrender value of life insurance 92,859 79,922
Reimbursement Account (Note 7) 106,349 0
Bond Issue Costs (Note 7) 72,099 0
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$ 7,029,478 $ 6,329,377
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of L-T liabilities (Note 5 61,742 58,234
Accounts payable and other liabilities 440,974 379,216
Accrued compensation 176,429 240,145
Customer deposits 58,005 148,549
Income taxes payable 43,473 37,042
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Total current liabilities 780,623 863,186
LONG-TERM DEFERRED COMPENSATION (Note 5) 1,015,825 1,056,451
POST RETIREMENT BENEFITS (Note 6) 132,676 138,806
LONG-TERM DEBT (Note 7) 575,769 0
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Total liabilities 2,504,893 2,058,443
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STOCKHOLDERS' EQUITY
Common stock, $1 par value, 2,000,000
shares authorized: shares issued and
outstanding 1995 825,649, 1994 813,649 825,649 813,649
Additional Paid in Capital 459,671 440,420
Retained earnings 3,239,265 3,016,865
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4,524,585 4,270,934
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$ 7,029,478 $ 6,329,377
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Accompanying notes are an integral part of these financial statement
4
MOD-U-KRAF HOMES, INC.
Consolidated Statement of Income
Quarters Ended September 30, 1995 and 1994
1994 1994
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Net Sales $ 2,300,001 $ 2,612,838
Cost of Sales 1,586,219 1,796,287
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713,782 816,551
Selling, General and Administrative
Expenses 509,675 591,487
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Income/<Loss> from Operations 204,107 225,064
Deferred Compensation Expense 22,907 23,939
Post Retirement Benefits 6,067 (1,924)
Non-operating Income/<Expenses> 45,662 61,220
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Income/<Loss> Before Income Taxes 220,795 264,269
Federal and State Income Taxes 95,234 124,824
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Net Income / <Loss> $ 125,561 $ 139,445
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Earnings per share:
Net Income / <Loss> $ 0.15 $ 0.17
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Depreciation Included in Above Cost $ 41,367 $ 39,683
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Accompanying notes are an integral part of these financial statement
5
MOD-U-KRAF HOMES, INC.
Consolidated Statement of Income
Nine Months Ended September 30, 1995 and 1994
1995 1994
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Net Sales $ 6,523,101 $ 6,334,994
Cost of Sales 4,610,152 4,535,494
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1,912,949 1,799,500
Selling, General and Administrative
Expenses 1,486,245 1,488,583
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Income/<Loss> from Operations 426,704 310,917
Deferred Compensation Expense 69,511 72,542
Post Retirement Benefits Expense 13,791 (5,728)
Non-operating Income/<Expenses> 149,773 139,902
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Income/<Loss> Before Income Taxes
and Extraordinary Items 493,175 384,005
Federal and State Income Taxes 196,827 183,526
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Net Income / <Loss> $ 296,348 $ 200,479
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Earnings per share:
Net Income / <Loss> $ 0.36 $ 0.25
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Depreciation Included in Above Cost $ 118,295 $ 117,461
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Accompanying notes are an integral part of these financial statement
6
MOD-U-KRAF HOMES, INC.
Consolidated Statement of Cash Flows
Quarters Ended September 30, 1995 and 1994
1995 1994
OPERATING ACTIVITIES ---------- ----------
Net Income/<Loss> $ 125,561 $ 139,445
Noncash <income> expenses included
in income or <loss>:
Depreciation 41,367 39,683
Deferred income taxes 9,798 18,670
Gain on sale of property and equipment 993 (15,921)
Increase in cash value of life insurance (1,035) (1,099)
Adjustments to deferred compensation (12,706) (11,674)
Adjustments to post retirement benefits (1,991) (1,924)
Adjustments to reimbursement account (106,349) 0
Adjustments to bond issue costs (72,099) 0
<Increase> decrease in:
Trade receivables 53,621 (72,681)
Inventories 20,590 64,371
Prepaid Expenses (20,071) 71,442
<Decrease> increase in:
Accounts payable and other Liabilities 112,420 14,065
Accrued compensation (11,856) (32,538)
Customer deposits 17,407 55,014
Income taxes payable 39,797 21,589
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Net cash provided by (used in) operations 195,447 288,442
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INVESTING ACTIVITIES
Proceeds from sale of property & equipment 0 22,630
Purchase of plant & equipment (527,756) (67,860)
<Increase> decrease in notes receivable (52,740) (655,663)
<Increase> decrease in cert. of deposits 0 0
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Net cash provided by (used in)
investing activities (580,496) (700,893)
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FINANCING ACTIVITIES
<Decrease> increase in long-term debt 575,769 0
Cash dividends paid (24,769) (24,409)
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Net cash provided by (used in)
financing activities 551,000 (24,409)
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Net increase (decrease) in cash 165,951 (436,860)
CASH
Beginning 1,045,162 1,001,633
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Ending $ 1,211,113 $ 564,773
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for:
Interest $ 26,002 $ 0
Income taxes $ 46,175 $ 38,215
Accompanying notes are an integral part of these financial statement
7
MOD-U-KRAF HOMES, INC.
Consolidated Statement of Cash Flows
Nine Months Ended September 30, 1995 and 1994
1995 1994
OPERATING ACTIVITIES ---------- ----------
Net Income/<Loss> $ 296,348 $ 200,479
Noncash <income> expenses included
in income or <loss>:
Depreciation 118,295 117,461
Deferred income taxes 21,577 42,821
Gain on sale of property and equipment (2,212) (15,921)
Increase in cash value of life insurance (12,937) (20,221)
Adjustments to deferred compensation (37,326) (34,295)
Adjustments to post retirement benefits (5,922) (5,728)
Adjustments to reimbursement account (106,349) 0
Adjustments to bond issue costs (72,099) 0
<Increase> decrease in:
Trade receivables 88,249 (161,484)
Inventories (470,338) (145,086)
Prepaid Expenses 4,514 (18,721)
<Decrease> increase in:
Accounts payable and other Liabilities 61,757 117,778
Accrued compensation (63,716) (15,917)
Customer deposits (90,544) 119,108
Income taxes payable 6,431 15,738
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Net cash provided by (used in) operations (264,272) 196,012
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INVESTING ACTIVITIES
Proceeds from sale of property & equipment 3,205 22,630
Purchase of plant & equipment (717,976) (142,168)
<Increase> decrease in notes receivable 425,412 (648,489)
<Increase> decrease in cert. of deposits 4,935 100,000
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Net cash provided by (used in)
investing activities (284,424) (668,027)
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FINANCING ACTIVITIES
Proceeds from stock option sale 31,251 0
<Decrease> increase in long-term debt 575,769 0
Cash dividends paid (73,947) (73,725)
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Net cash provided by (used in)
financing activities 533,073 (73,725)
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Net increase (decrease) in cash (15,623) (545,740)
CASH
Beginning 1,226,736 1,110,513
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Ending $ 1,211,113 $ 564,773
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for:
Interest $ 26,002 $ 445
Income taxes $ 173,628 $ 132,310
Accompanying notes are an integral part of these financial statement
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 1995 were $6,523,101, as compared
to $6,334,994 for 1994. This represents an increase in sales volume of
2.97%. The third quarter of 1995 produced a sales volume of $2,300,001 as
compared to $2,612,838 for the third quarter of 1994 for a decrease in sales
volume of 11.97%.
Cost of sales were 70.67% of net sales for the first nine months of 1995
as compared to 71.74% for the same period in 1994. The cost of sales percent
for the third quarter of 1995 were 68.97% compared to 69.10% for the third
quarter of 1994.
Selling, general and administrative expenses were 22.78% of net sales
for the first nine months of 1995 compared to 23.35% of net sales for the
first nine months of 1994. The third quarter of 1995 produced a percent of
22.16% as compared to 2.29% for the third quarter of 1994.
Income from operations has shown a 37.24% increase for the first nine
months and a 9.31% decrease for the third quarter over 1994.
The first nine months of 1995 showed net income of $296,348 compared to
net income of $200,476 for 1994, a 47.82% increase. The new pricing and
product line implemented at the end of the first quarter are achieving their
desired results. With only a 8.70% increase in net modular sales for the
first three quarters we have increased operating profits by 37.24%.
We are projecting that we will end 1995 about 5% behind 1994 in sales
volume, but net profits will be about 30% ahead of 1994 profits. This will
be an increase in earnings per share of $0.10 over 1994.
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
reflects all adjustments, consisting only of normal recurring
adjustments which are, in the opinion of management, necessary to a
statement of the results for the quarter ended Sept. 30, 1995. Results
for the quarter ended September 30, 1995 are not necessarily indicative
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 and 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:
1995 1994
Raw Materials 628,234 640,773
Work-In-Progress 94,334 114,556
Finished Goods 584,117 417,591
Land and Units held for sale 370,609 445,594
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1,677,294 1,618,514
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3. Notes Receivable
1995 1994
Various mortgage notes receivable secured by
deeds of trust 136,994 242,646
Demand note receivable with interest payable
quarterly at 9%, unsecured 13,675 16,275
Life insurance note receivable from an officer
of the Company (non-interest bearing) 6,512 7,254
Installment notes receivable from various
shareholders secured by shares of common
stock of the Company 28,125 0
Various construction loans (all current) 1,019,968 1,430,981
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1,205,274 1,697,156
Less current portion 1,031,648 1,525,492
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173,626 171,664
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4. Property and Equipment
1995 1994
Land and improvements 462,212 273,288
Buildings 1,473,675 1,073,835
Manufacturing equipment 995,023 879,627
Other furniture, fixtures and equipment 331,224 320,905
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3,262,134 2,547,655
Less accumulated depreciation 1,765,749 1,618,292
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1,496,385 929,363
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10
MOD-U-KRAF HOMES, INC.
NOTES TO FINANCIAL INFORMATION
5. Deferred Compensation, Related Parties
1995 1994
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. 539,987 568,485
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. 529,443 550,196
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1,069,430 1,118,681
Less Current Maturities 53,605 49,251
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1,015,825 1,069,430
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6. Post Retirement Benefits
1995 1994
Present value of estimated future benefits 140,813 148,676
8,137 7,863
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132,676 140,813
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7. 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. Crestar Bank holds a first lien and security interest on the
facility. The bonds are payable in equal annual principal amounts of
$150,000 through 2015. The interest rate was 4.10% September 30, 1995.
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 the bonds and is
payable in monthly installments currently estimated at $22,100. 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 on the
bonds. As of September 30, 1995, the Reimbursement Account balance was
as follows:
Required prepaid interest deposit $67,809
Unused monthly principal deposits 37,500
Earnings 1,040
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$106,349
11
MOD-U-KRAF HOMES, INC.
NOTES TO FINANCIAL INFORMATION
(Note 7 cont.)
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 September 30, 1995, $575,769 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 been drawn.
Any unused proceeds will be used for early retirement of bonds.
Bond issue costs will be amortized over the life of the bonds.
8. The Board Of Directors of Mod-U-Kraf Homes, Inc. on November 1, 1995
will declare a $.03 per-share cash dividend on all shares outstanding on
November 17, 1995 and to be paid on December 1, 1995.
9. The Company uses the annualized method in its computation of Federal
Income Taxes.
10. Revenues are recorded when the houses are delivered for sales made on
account. Cash sales paid in advance are recorded when produced.
12
MOD-U-KRAF HOMES, INC.
OTHER INFORMATION
N O N E
13
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.
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(Registrant)
Date: November 10, 1995
s/Dale H. Powell
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Dale H. Powell
President and Chairman of the Board
s/Jeffrey L. Boudreaux
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Jeffrey L. Boudreaux
Controller