-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RjsPGKNdj+0gAQgTq/h2042TZw11mag63/0/C3dcAIdO6u89uRuKO7CS/f70AY3t 2Vc5qTNXEyKDDhEB6Dl0wQ== /in/edgar/work/20000811/0001095811-00-002651/0001095811-00-002651.txt : 20000921 0001095811-00-002651.hdr.sgml : 20000921 ACCESSION NUMBER: 0001095811-00-002651 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000811 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MODTECH HOLDINGS INC CENTRAL INDEX KEY: 0001075066 STANDARD INDUSTRIAL CLASSIFICATION: [2452 ] IRS NUMBER: 330825386 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-25161 FILM NUMBER: 693457 BUSINESS ADDRESS: STREET 1: 2830 BARRETT AVE STREET 2: PO BOX 1240 CITY: PERRIS STATE: CA ZIP: 92571 BUSINESS PHONE: 9099434014 MAIL ADDRESS: STREET 1: 4675 MACARTHUR CT., STREET 2: SUITE 710 CITY: NEWPORT STATE: CA ZIP: 92660 10-Q 1 e10-q.txt FORM 10-Q QUARTER ENDED JUNE 30,2000 1 SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For quarter ended June 30, 2000 Commission File Number 000 - 25161 MODTECH HOLDINGS, INC. - -------------------------------------------------------------------------------- Delaware 33 - 0825386 - --------------------------------- ------------------- (State or other jurisdiction (I.R.S. Employer of Incorporation or organization) Identification No.) 2830 Barrett Avenue, Perris, CA 92571 - --------------------------------------- ------------------- (Address of principal executive office) (Zip Code) Registrant's telephone number: (909) 943-4014 - -------------------------------------------------------------------------------- Indicate by check mark, whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 --- --- As of August 9, 2000, there were 13,205,086 of the Registrant's Common Stock outstanding. 2 MODTECH HOLDINGS, INC. FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2000 PART I. STATEMENT REGARDING FINANCIAL INFORMATION The condensed consolidated financial statements included herein have been prepared by Modtech Holdings, Inc. and subsidiaries (the Company), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information normally included in financial statements prepared in accordance with generally accepted accounting principles has been omitted pursuant to such rules and regulations. However, the Company believes that the financial statements, including the disclosures herein, are adequate to make the information presented not misleading. The condensed consolidated financial statements should be read in conjunction with the Company's consolidated financial statements and notes thereto included in the Company's Annual report on Form 10-K for the year ended December 31, 1999 as filed with the Securities and Exchange Commission. 2 3 MODTECH HOLDINGS, INC. Condensed Consolidated Balance Sheets
December 31, June 30, 1999 2000 ------------- ------------ (Audited) (Unaudited) Assets Current assets: Cash and cash equivalents $ 1,198,000 $ 1,627,000 Contracts receivable, net, including costs in excess of billings of $6,278,000 and $16,137,000 in 1999 and 2000, respectively 25,170,000 53,480,000 Inventories 6,639,000 11,627,000 Due from affiliates 1,008,000 752,000 Deferred tax assets 2,636,000 2,636,000 Other current assets 565,000 486,000 ------------ ------------ Total current assets 37,216,000 70,608,000 ------------ ------------ Property and equipment, net 13,872,000 14,961,000 Other assets Goodwill, net 114,073,000 112,615,000 Covenants not to compete, net 1,974,000 1,581,000 Debt issuance costs, net 1,430,000 1,257,000 Other assets 158,000 181,000 ------------ ------------ $168,723,000 $201,203,000 ============ ============ Liabilities and Shareholders' Equity Current liabilities: Accounts payable and accrued liabilities $ 13,836,000 $ 27,793,000 Billings in excess of costs 5,148,000 3,577,000 Revolving credit line -- 19,325,000 Current maturities of long-term debt 7,000,000 7,500,000 ------------ ------------ Total current liabilities 25,984,000 58,195,000 Deferred tax liabilities 66,000 66,000 Long-term debt, excluding current portion 32,000,000 28,000,000 ------------ ------------ Total liabilities 58,050,000 86,261,000 ------------ ------------ Shareholders' Equity: Series A preferred stock, $.01 par. Authorized 5,000,000 shares; issued and outstanding 388,939 in 1999 and 2000 4,000 4,000 Common stock, $.01 par. Authorized 25,000,000 shares; issued and outstanding 13,134,360 and 13,205,086 in 1999 and 2000, respectively 131,000 132,000 Additional paid-in capital 77,007,000 77,136,000 Retained earnings 33,531,000 37,670,000 ------------ ------------ Total shareholders' equity 110,673,000 114,942,000 ------------ ------------ $168,723,000 $201,203,000 ============ ============
The accompanying notes are an integral part of these condensed consolidated financial statements. 3 4 MODTECH HOLDINGS, INC. Condensed Consolidated Statements of Income (Unaudited)
Three Months Ended Six Months Ended June 30, June 30, ------------------------------- -------------------------------- 1999 2000 1999 2000 - -------------------------------------------------------------------------------------------------------------------------- Net sales $ 48,915,000 $ 65,182,000 $ 69,867,000 $ 108,904,000 Cost of goods sold 40,750,000 55,463,000 58,206,000 93,363,000 ------------ ------------ ------------ ------------- Gross profit 8,165,000 9,719,000 11,661,000 15,541,000 Selling, general, and administrative expenses 2,002,000 1,988,000 3,240,000 3,828,000 Goodwill and covenant amortization 892,000 925,000 1,299,000 1,851,000 ------------ ------------ ------------ ------------- Income from operations 5,271,000 6,806,000 7,122,000 9,862,000 ------------ ------------ ------------ ------------- Other income (expense): Interest expense, net (969,000) (1,210,000) (1,058,000) (2,224,000) Other, net -- 19,000 2,000 27,000 ------------ ------------- ------------ ------------- (969,000) (1,191,000) (1,056,000) (2,197,000) ------------ ------------ ------------ ------------- Income before income taxes 4,302,000 5,615,000 6,066,000 7,665,000 Income taxes (2,001,000) (2,583,000) (2,742,000) (3,526,000) ------------ ------------ ------------ ------------- Net income $ 2,301,000 $ 3,032,000 $ 3,324,000 $ 4,139,000 ------------ ============ ============ ============= Series A Preferred stock dividend 39,000 39,000 58,000 78,000 Net income available to common stock $ 2,262,000 $ 2,993,000 $ 3,266,000 $ 4,061,000 ============ ============ ============ ============= Basic earnings per common share $ 0.18 $ 0.23 $ 0.26 $ 0.31 ============ ============ ============ ============= Basic weighted-average shares outstanding 12,628,000 13,196,000 12,626,000 13,176,000 ============ ============ ============ ============= Diluted earnings per common share $ 0.16 $ 0.21 $ 0.23 $ 0.29 ============ ============ ============ ============= Diluted weighted-average shares outstanding 14,000,000 14,399,000 14,000,000 14,332,000 ============ ============ ============ =============
The accompanying notes are an integral part of these condensed consolidated financial statements 4 5 MODTECH HOLDINGS, INC. Condensed Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended June 30, ------------------------------- 1999 2000 ------------ ------------ Cash flows from operating activities: Net income $ 3,324,000 $ 4,139,000 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 2,101,000 2,918,000 Loss on sale of equipment 8,000 -- (Increase) decrease in assets, net of effects from acquisitions: Contracts receivable (12,885,000) (28,310,000) Inventories (1,342,000) (4,988,000) Due from affiliates 1,492,000 256,000 Income tax receivable 2,760,000 -- Other current and noncurrent assets (1,352,000) 56,000 Increase (decrease) in liabilities, net of effects from acquisitions: Accounts payable and accrued liabilities 4,438,000 13,957,000 Billings in excess of costs 2,142,000 (1,571,000) ------------ ------------ Net cash provided by (used in) operating activities 686,000 (13,543,000) ------------ ------------ Cash flows from investing activities: Purchase of property and equipment (725,000) (1,983,000) Acquisition of subsidiaries (48,622,000) -- ------------ ------------ Net cash used in investing activities (49,347,000) (1,983,000) ------------ ------------ Cash flows from financing activities: Net principal borrowings under revolving credit lines 5,000,000 19,325,000 Net principal borrowings (payments) on long-term debt 44,000,000 (3,500,000) Modtech Merger distribution (39,928,000) -- Proceeds from exercise of stock options 145,000 130,000 ------------ ------------ Net cash provided by financing activities 9,217,000 15,955,000 ------------ ------------ Net increase (decrease) in cash and cash equivalents (39,444,000) 429,000 Cash and cash equivalents at beginning of period 40,142,000 1,198,000 ------------ ------------ Cash and cash equivalents at end of period $ 698,000 $ 1,627,000 ============ ============
The accompanying notes are an integral part of these condensed consolidated financial statements 5 6 MODTECH HOLDINGS, INC. Notes To Condensed Consolidated Financial Statements June 30, 2000 (1) Management Opinion In the opinion of management, the condensed consolidated financial statements reflect all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position and results of operations as of and for the periods presented. The results of operations for the three and six months ended June 30, 2000 are not necessarily indicative of the results to be expected for the full fiscal year. Certain statements in this report constitute "forward looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward - looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance, or achievements of the Company to be materially different from any future results, performance, or achievements, expressed or implied by such forward - looking statements. (2) Inventories Inventories consist of the following: 1999 2000 ---------- ----------- Raw materials $5,404,000 $ 9,799,000 Work in process 1,075,000 1,782,000 Finished goods 160,000 46,000 ---------- ----------- $6,639,000 $11,627,000 ========== =========== (3) Earnings Per Share The following table presents the calculation of basic and diluted earnings per common share under the provisions of SFAS No. 128:
Three Months Ended Six Months Ended June 30, June 30, ------------------------------- ------------------------------- 1999 2000 1999 2000 ------------ ------------ ------------ ------------ BASIC Net income $ 2,301,000 $ 3,032,000 $ 3,324,000 $ 4,139,000 Dividends on preferred stock (39,000) (39,000) (58,000) (78,000) ------------ ------------ ------------ ------------ Net income available to common stock $ 2,262,000 $ 2,993,000 $ 3,266,000 $ 4,061,000 ============ ============ ============ ============ Basic weighted-average shares outstanding 12,628,000 13,196,000 12,626,000 13,176,000 ============ ============ ============ ============ Basic earnings per common share $ 0.18 $ 0.23 $ 0.26 $ 0.31 ============ ============ ============ ============
6 7
DILUTED Net income $ 2,301,000 $ 3,032,000 $ 3,324,000 $ 4,139,000 =========== =========== =========== =========== Basic weighted-average shares outstanding 12,628,000 13,196,000 12,626,000 13,176,000 Add: Conversion of preferred stock 389,000 389,000 389,000 389,000 Exercise of stock options 983,000 814,000 985,000 767,000 ----------- ----------- ----------- ----------- Diluted weighted-average shares outstanding 14,000,000 14,399,000 14,000,000 14,332,000 =========== =========== =========== =========== Diluted earnings per common share $ 0.16 $ 0.21 $ 0.23 $ 0.29 =========== =========== =========== ===========
Options to purchase 204,000 and 547,000 shares of common stock were outstanding during the three and six months ended June 30, 2000, respectively, but were not included in the computation of diluted earnings per share because the option exercise price was greater than the average market price of the common shares and therefore, the effect would be anti-dilutive. (4) Acquisitions SPI Merger. On February 16, 1999, Modtech, Inc. ("Modtech") and SPI Holdings, Inc., a Colorado corporation ("SPI") merged pursuant to the Agreement and Plan of Reorganization and Merger, dated as of September 28, 1998 (the "Merger Agreement"), between Modtech and SPI. SPI is a designer, manufacturer and wholesaler of commercial and light industrial modular buildings. Pursuant to the Merger Agreement, SPI was merged with a subsidiary of Modtech Holdings, Inc. ("Holdings"), a newly formed Delaware corporation (the "SPI Merger"). Concurrently, Modtech was merged with a separate subsidiary of Holdings (the "Modtech Merger"). Pursuant to the mergers, both SPI and Modtech became wholly owned subsidiaries of Holdings. In connection with the SPI Merger, SPI stockholders received approximately $8 million in cash and approximately 4.6 million shares of the Company's Common Stock. The Company refinanced approximately $32 million of SPI debt. In connection with the Modtech Merger, Modtech stockholders received approximately $40 million in cash, approximately 8.3 million shares of the Company's Common Stock and 388,939 shares of the Company's Series A Preferred Stock. Following are the unaudited pro forma combined results, which are based upon the historical consolidated financial statements of Modtech, Inc. and SPI Manufacturing, Inc., combined, and are adjusted to give effect to the mergers. In addition, pro forma adjustments have been made for the acquisitions consummated by SPI prior to the merger. Modtech Holdings, Inc. Unaudited Pro Forma Combined Selected Financial Data
Three Months Ended Six Months Ended June 30, 1999 June 30, 1999 ------------------ ---------------- Net sales $ 48,900,000 $ 75,500,000 Income from operations 5,270,000 6,770,000 Interest expense, net (970,000) (1,490,000) Income before income taxes 4,300,000 5,280,000 Net income 2,300,000 2,870,000 Diluted earnings per common share 0.16 0.20 Diluted weighted-average shares outstanding 14,000,000 14,000,000
Coastal Acquisition. On March 22, 1999, the Company purchased 100% of the stock of Coastal Modular Buildings, Inc. ("Coastal"). Coastal designs and manufactures modular relocatable classrooms and other modular buildings for commercial use. Coastal is based in St. Petersburg, Florida. Pro forma amounts for the Coastal Acquisition are not included, as the effect is not material to the Company's consolidated financial statements. 7 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations The following table sets forth certain items in the Condensed Consolidated Statements of Income as a percent of net sales.
Percent of Net Sales Percent of Net Sales -------------------- -------------------- Three Months Ended Six Months Ended June 30, June 30, -------------------- -------------------- 1999 2000 1999 2000 ----- ----- ----- ----- Net sales 100.0% 100.0% 100.0% 100.0% Gross profit 16.7 14.9 16.7 14.3 Selling, general and administrative expenses 4.1 3.0 4.6 3.5 Goodwill and covenant amortization 1.8 1.4 1.9 1.7 Income from operations 10.8 10.4 10.2 9.1 Interest expense, net (2.0) (1.9) (1.5) (2.0) Income before income taxes 8.8 8.6 8.7 7.0
Net sales for the three and six months ended June 30, 2000, increased by $16,267,000 or 33.3% and $39,037,000 or 55.9%, respectively. The Company experienced increased sales for the three and six months ended June 30, 2000 from the public school system in California where funds from the 1998 California School Construction Bond have begun and continue to flow. Sales outside of California increased, spurred by the growth of the national economy. Additionally, net sales for the six months ended June 30, 2000 increased as the six months ended June 30, 1999 only included net sales for SPI and Coastal from their respective dates of acquisition. Gross profit as a percentage of net sales for the three and six months ended June 30, 2000 decreased to 14.9% and 14.3%, respectively, from 16.7% and 16.7% for the same periods in 1999. The decrease was due principally to a shift in product mix during the three and six month periods ended June 30, 2000. Selling, general and administrative expenses decreased for the three months ended June 30, 2000 by $14,000 or 0.7% and increased by $588,000 or 18.1% for the six months ended June 30, 2000. Selling, general and administrative expenses for the six months ended June 30, 2000 increased as the six months ended June 30, 1999 only included selling, general and administrative expenses for SPI and Coastal from their respective dates of acquisition. The increase is also due to the increase in net sales for the six months ended June 30, 2000, as well as an increase in the number of employees. As a percentage of sales, selling, general, and administrative expenses for the three and six months ended June 30, 2000 are 3.0% and 3.5%, respectively. The percentages were 4.1% and 4.6% for the same periods in 1999. Goodwill and covenant amortization for the three and six months ended June 30, 2000 was $925,000 and $1,851,000. As a percentage of net sales, goodwill and covenant amortization for the three and six months ended June 30, 2000 was 1.4% and 1.7%, 8 9 respectively. Goodwill was recorded for both the SPI Merger and the Coastal Acquisition and is being amortized from the respective dates of acquisition. Interest expense increased for the three and six months ended June 30, 2000 by $241,000 or 24.9% and $1,166,000 or 110.2%, respectively. The increase is attributable to a reduced cash balance, debt incurred as a result of the SPI Merger, which occurred in February 1999, and increased line of credit borrowings. As a percentage of net sales, interest expense decreased from 2.0% in the three months ended June 30, 1999 to 1.9% in 2000. As a percentage of net sales, interest expense increased from 1.5% in the six months ended June 30, 2000 to 2.0% in 2000. INFLATION In the past, the Company has not been adversely affected by inflation, because it has been generally able to pass along to its customers increases in the costs of labor and materials. LIQUIDITY AND CAPITAL RESOURCES To date, the Company has generated cash to meet its needs from operations, bank borrowings and public offerings. At June 30, 2000, the Company had $1,627,000 in cash. During the six months ended June 30, 2000, the Company used cash from operating activities of $13,543,000, primarily resulting from increased contract receivables and inventories. The Company has a $100,000,000 credit facility, of which $30,000,000 represents a revolving loan commitment. The credit facility is secured by all the Company's assets, as well as the Company's stock ownership in its subsidiaries. The credit facility expires in February 2004. On June 30, 2000, $19,325,000 was outstanding under the revolving loan commitment. Management believes that the Company's existing product lines and manufacturing capacity will enable the Company to generate sufficient cash through operations, supplemented by periodic use of its existing bank line of credit, to finance the Company's business at current levels over the next 12 months. Additional cash resources may be required if the Company is able to expand its business beyond current levels. For example, it will be necessary for the Company to construct or acquire additional manufacturing facilities in order for the Company to compete effectively in new market areas or states which are beyond a 300 mile radius from one of its production facilities. The construction or acquisition of new facilities would require significant additional capital. For these reasons, among others, the Company may need additional debt or equity financing in the future. There can be, however, no assurance that the Company will be successful in obtaining such additional financing, or that any such financing will be available on terms acceptable to the Company. NEW ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133). SFAS 133 establishes accounting and reporting standards for derivative instruments embedded in other contracts, and hedging activities. SFAS 133, as amended, is effective for all fiscal quarters of fiscal years beginning after June 15, 2000. Application of SFAS 133 is not expected to have a material impact on the Company's financial position, results of operations or liquidity. In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin 101 (SAB 101) "Revenue Recognition in Financial Statements". This Staff Accounting Bulletin summarizes certain of the staff's views in applying generally accepted accounting principles to revenue recognition in financial statements. The Company does not expect the adoption of SAB 101 to have a material impact on the Company's consolidated results of operations. 9 10 PART II. OTHER INFORMATION Item 1. Legal Proceedings. None Item 2. Changes in Securities None Item 3. Defaults upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders None Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 27 -- Financial Data Schedule (b) Reports on Form 8-K None 10 11 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. Modtech Holdings, Inc. Date: August 11, 2000 By: /s/ Shari L. Walgren --------------------------- Shari L. Walgren Chief Financial Officer 11 12 EXHIBIT INDEX EXHIBIT NUMBER DESCRIPTION ------- ----------- 27 Financial Data Schedule EX-27 2 ex27.txt FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1999 APR-01-2000 JUN-30-2000 1,627,000 0 53,480,000 728,000 11,627,000 70,608,000 22,569,000 7,608,000 201,203,000 58,195,000 0 0 4,000 132,000 114,806,000 201,203,000 65,182,000 65,182,000 55,463,000 55,463,000 2,913,000 0 1,210,000 5,615,000 2,583,000 3,032,000 0 0 0 3,032,000 0.23 0.21
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