-----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, MFE/SFPgpkv9Cx04SQnvzKW4rqI/JEua/MmWfYCmsJHPHQN/FjOkRc09uk0/0slI zFQoq7VLv8t0vQ3Zdemz8Q== 0000892569-98-002307.txt : 19980817 0000892569-98-002307.hdr.sgml : 19980817 ACCESSION NUMBER: 0000892569-98-002307 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MODTECH INC CENTRAL INDEX KEY: 0000864601 STANDARD INDUSTRIAL CLASSIFICATION: PREFABRICATED WOOD BLDGS & COMPONENTS [2452] IRS NUMBER: 330044888 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-18680 FILM NUMBER: 98687143 BUSINESS ADDRESS: STREET 1: 2830 BARRETT AVE STREET 2: PO BOX 1240 CITY: PERRIS STATE: CA ZIP: 92370 BUSINESS PHONE: 9099434014 MAIL ADDRESS: STREET 1: 2830 BARRETT AVENUE STREET 2: P O BOX 1240 CITY: PERRIS STATE: CA ZIP: 92370 10-Q 1 FORM 10-Q FOR THE PERIOD ENDED JUNE 30, 1998 1 SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 12 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For quarter ended June 30, 1998 Commission File Number 000 - 18680 MODTECH, INC. - -------------------------------------------------------------------------------- California 33 - 0044888 - --------------------------------- ------------------------------ (State or other jurisdiction (I.R.S. Employer of Incorporation or organization) Identification No.) 2830 Barrett Avenue, Perris, CA 92572 - --------------------------------- ------------------------------ (Address of principal executive office) (Zip Code Registrant's telephone number: (909) 943 - 4014 - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) 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 June 30, 1998, there were 9,856,169 of the Registrant's Common Stock outstanding. 2 MODTECH, INC. FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1998 PART I. STATEMENT REGARDING FINANCIAL INFORMATION The financial statements included herein have been prepared by MODTECH, INC. (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. It is suggested that the financial statements be read in conjunction with the financial statements and notes thereto included in the Company's Annual report on Form 10-K for the year ended December 31, 1997 as filed with the Securities and Exchange Commission. 3 MODTECH, INC. Condensed Consolidated Balance Sheets (Unaudited)
December 31, June 30, 1997 1998 - ------------------------------------------------------------------------------------------------ Audited Unaudited - ------------------------------------------------------------------------------------------------ Assets Current assets Cash $11,629,000 $25,426,000 Contracts receivable, net, including costs in excess of billings of $16,021,000 and $16,818,000 in 1997 and 37,531,000 40,825,000 1998, respectively Inventories 3,932,000 1,959,000 Due from affiliates 1,098,000 504,000 Deferred tax asset 2,094,000 2,094,000 Other current assets 310,000 228,000 ----------- ----------- Total current assets 56,594,000 71,036,000 ----------- ----------- Property and equipment, net 11,229,000 12,266,000 Other Assets Deferred tax asset 99,000 99,000 Other assets 298,000 135,000 ----------- ----------- $68,220,000 $83,536,000 =========== =========== Liabilities and Shareholders' Equity Current liabilities Accounts payable and accrued liabilities $11,763,000 $17,094,000 Billings in excess of costs 6,997,000 9,469,000 Current portion of long-term debt 1,417,000 -- ----------- ----------- Total current liabilities 20,177,000 26,563,000 Stockholders Equity Common stock, shares authorized, $.01 par. Authorized 20,000,000 shares; issued and outstanding 9,820,000 and 9,856,000 in 1997 and 1998, respectively 98,000 100,000 Additional paid-in capital 39,331,000 39,531,000 Retained earnings 8,614,000 17,342,000 ----------- ----------- Total shareholders' equity 48,043,000 56,973,000 ----------- ----------- $68,220,000 $83,536,000 =========== ===========
The accompanying notes are an integral part of these financial statements. 4 MODTECH, INC. Condensed Consolidated Statements of Income (Unaudited)
Three Months Ended Six Months Ended June 30, June 30, 1997 1998 1997 1998 - ----------------------------------------------------------------------------------------------------- Net sales $ 33,093,000 $ 42,482,000 $ 58,906,000 $ 75,876,000 Cost of goods sold 26,251,000 32,333,000 47,688,000 58,675,000 ------------ ------------ ------------ ------------ Gross profit 6,842,000 10,149,000 11,218,000 17,201,000 Selling, general, and administrative expenses 1,144,000 1,634,000 2,182,000 2,741,000 ------------ ------------ ------------ ------------ Income from operations 5,698,000 8,515,000 9,036,000 14,460,000 ------------ ------------ ------------ ------------ Other income (expense): Interest income (expense), net (330,000) 183,000 (549,000) 389,000 Other - net 48,000 8,000 64,000 15,000 ------------ ------------ ------------ ------------ (282,000) 191,000 (485,000) 404,000 ------------ ------------ ------------ ------------ Income before income taxes 5,416,000 8,706,000 8,551,000 14,864,000 Income taxes (2,133,000) (3,339,000) (3,356,000) (5,649,000) ------------ ------------ ------------ ------------ Net income $ 3,283,000 5,367,000 5,195,000 $ 9,215,000 ============ ============ ============ ============ Basic earnings per share $ 0.38 0.54 0.60 $ 0.93 ============ ============ ============ ============ Weighted-average shares outstanding 8,670,000 9,856,000 8,670,000 9,856,000 ============ ============ ============ ============ Diluted earnings per share $ 0.35 0.49 0.55 $ 0.83 ============ ============ ============ ============ Weighted-average shares outstanding 9,370,000 11,000,000 9,370,000 11,100,000 ============ ============ ============ ============
The accompanying notes are an integral part of these financial statements 5 MODTECH, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended June 30, 1997 1998 - -------------------------------------------------------------------------------------------- Cash flows from operating activities: Net income $ 5,195,000 $ 9,215,000 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 472,000 570,000 (Increase) decrease in operating assets and liabilities: Contracts receivable (18,192,000) (3,294,000) Inventories (3,685,000) 1,973,000 Due from affiliates (132,000) 594,000 Other assets (27,000) 245,000 Deferred tax asset -- -- Accounts payable and accrued liabilities 6,093,000 5,331,000 Billings in excess of costs 5,703,000 2,472,000 ------------ ------------ Net cash provided by (used in) operating activities (4,573,000) 17,106,000 ------------ ------------ Cash flows from investing activities: Proceeds from sale of equipment 12,000 -- Purchase of property and equipment (508,000) (1,607,000) ------------ ------------ Net cash used in investing activities (496,000) (1,607,000) ------------ ------------ Cash flows from financing activities: Net principal borrowings (payments) under revolving credit lines 7,288,000 -- Principal payments on long-term debt -- (1,417,000) Investment in affiliate -- (307,000) Conversion of stock options 79,000 22,000 ------------ ------------ Net cash provided by (used in) financing activities 7,367,000 (1,702,000) ------------ ------------ Net increase in cash 2,298,000 13,797,000 Cash at beginning of period 405,000 11,629,000 ------------ ------------ Cash at end of period $ 2,703,000 $ 25,426,000 ============ ============
The accompanying notes are an integral part of these financial statements 6 MODTECH, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS June 30, 1998 1) Management Opinion In the opinion of management, the condensed 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 months ended June 30, 1998 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) Taxes on Income Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. 3) Earnings Per Share Effective December 31, 1997, the Company adopted Statement of Financial Accounting Standards No. 128, "Earnings per Share" (SFAS No. 128). This statement replaces the previously reported primary and fully diluted earnings per share with basic and diluted earnings per share. Unlike Primary earnings per share, basic earnings per share excludes any dilutive effects of options and convertible securities. Diluted earnings per share is very similar to the previously reported fully diluted earnings per share. All earnings per share amounts for all periods have been restated to conform to the SFAS No. 128 requirement. 7 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 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, 1997 1998 1997 1998 -------------------------------------------------------------- Net sales 100.0% 100.0% 100.0% 100.0% Gross profit 20.7 23.9 19.0 22.7 Selling, general and 3.5 3.9 3.7 3.6 administrative Income from operations 17.2 20.0 15.3 19.1 Interest income (expense), net (1.0) 0.4 (0.9) 0.5 Income before taxes on income 16.4 20.5 14.5 19.6
Net sales for the three and six months ended June 30, 1998, increased by $9,389,000 or 28.4% and $16,970,000 or 28.8%. The increase in revenue is attributable to the growth in the school population, the Class Size Reduction program and a diversification of our product line. Gross profit as a percentage of net sales for the three and six months ended June 30, 1998 increased to 23.9% and 22.7% from 20.7% and 19.0% for the same period in 1997. The increase was due principally to the utilization of the manufacturing facilities and the realization of manufacturing efficiencies. Selling, general and administrative expenses increased for the three and six months ended June 30, 1998 by $490,000 and $559,000, an increase of 42.8% and 25.6%. The increase is primarily due to the increase in sales expense as well as the 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, are 3.9% and 3.6% for 1998. The percentages were 3.5% and 3.7% for the same period in 1997. Due to a higher cash balance and reduced line of credit borrowing, the six months ended June 30, 1998 reflects net interest income of $389,000 compared to net interest expense of $549,000 for the same period in 1997, a favorable increase of $938,000 or 170.9%. On March 20, 1998, the Company purchased an 80% interest in Trac Modular Manufacturing, Inc (Trac). The purchase price approximated the fair value of net assets on the purchase date. Trac is based in Glendale, Arizona. The financial activity for this subsidiary has been included in the Company's financial statements for the second quarter of 1998. 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. 8 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, 1998, the Company had $25,426,000 in cash. During the six months ended June 30, 1998, the Company provided cash in it's operating activities. The Company has a revolving loan commitment that will expire September 1998. The Company is entitled to borrow, from time to time up to $20,000,000 with actual borrowings limited to specified percentages of eligible accounts receivables, equipment and inventories. On June 30, 1998, no amounts were outstanding under this loan. During March, 1998, an officer of the Company exercised 35,000 options for a total of $22,000. 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 1997, the FASB issued Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130"). SFAS 130 establishes standards for the reporting and display of comprehensive income and its components (revenues, expenses, gains and losses) in a full set of general-purpose financial statements. SFAS 130 requires all items that are required to be recognized under accounting standards as components of comprehensive income to be reported in a financial statement that is displayed with the same prominence as other financial statements. SFAS 130 does not require a specific format for that financial statement but requires that an enterprise display an amount representing total comprehensive income for the period covered by that financial statement. SFAS 130 requires an enterprise to (a) classify items of other comprehensive income by their nature in a financial statement and (b) display the accumulated balance of other comprehensive income separately from retained earnings and additional paid-in capital in the equity section of a statement of financial position. SFAS 130 is effective for fiscal years beginning after December 15, 1997. Management has determined the adoption of SFAS 130 will not have a material impact on the Company's combined financial statement or results of operations. In June 1997, the FASB issued Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information" ("SFAS 131"). SFAS 131 establishes standards for public business enterprises to report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports issued to shareholders. It also establishes standards for related disclosures about products and services, geographic areas and major customers. This statement supersedes FASB Statement No. 14, "Financial Reporting for Segments of a Business Enterprise", but retains the requirement to report information about major customers. It amends FASB Statement No. 94, "Consolidation of All Majority-Owned Subsidiaries", to remove the special disclosure requirements for previously unconsolidated subsidiaries. SFAS 131 requires, among other items, that a public business enterprise report a measure of segment profit or loss, certain specific revenue and expense items, and segment assets, information about the revenues derived from the enterprise's products or services, and major customers. SFAS 131 also requires that the enterprise report descriptive information about the way that the operating segments were determined and the products and services provided by the operating segments. SFAS 131 is effective for financial statements for periods beginning after December 15, 1997. In the initial year of application, comparative information for earlier years is to be restated. SFAS 131 need not be applied to interim financial statements in the initial year of its application, but comparative information for interim periods in the initial year of application is to be reported in financial statements for interim periods in the second year of application. Management has not determined whether the adoption of SFAS 131 will have a material impact on the Company's segment reporting. 9 In February 1998, the FASB issued Statement of Financial Accounting Standards No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits" ("SFAS 132"). SFAS 132 revises employers' disclosures about pension and other postretirement benefit plans. It does not change the measurement or recognition of those plans. SFAS 132 is effective for fiscal years beginning after December 15, 1997. SFAS 132, requiring only additional information disclosures, is effective for the Company's fiscal year ending December 31, 1998. In June 1998, the 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, including certain derivative instruments embedded in other contracts, and hedging activities. SFAS 133 is effective for all fiscal quarters of fiscal years beginning after June 15, 1999. Application of SFAS 133 is not expected to have a material impact on the Company's financial position, results of operations or liquidity. YEAR 2000 Many computer programs use only the last two digits of a year to store or process dates. This is the case with the accounting program used by the Company. As a result, the programs may treat dates after 1999 as earlier than dates before 2000. This could adversely affect routines such as calculating depreciation or aging accounts receivable. The Company is in the process of correcting this defect in the Company's program, and the Company expects the defect with be corrected without material cost before the year 2000. The Company's customers, suppliers and service providers may use computer programs with similar defects which, to the extent not corrected, could adversely affect the Company's operations, such as the receipt of supplies, services, purchase orders and payments of accounts receivable. 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 From 8-K None 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, Inc. Date: August 13, 1998 by: /S/ Michael G. Rhodes ---------------------- ---------------------- Michael G. Rhodes Chief Financial Officer 12 EXHIBIT INDEX
Exhibit Number Description - ------ ----------- 27 Financial Data Schedule
EX-27 2 FINANCIAL DATA SCHEDULE
5 6-MOS DEC-31-1998 JUN-30-1998 25,426,000 0 40,825,000 0 1,959,000 71,036,000 12,266,000 0 83,536,000 26,563,000 0 0 0 56,973,000 0 83,536,000 75,876,000 75,876,000 58,675,000 58,675,000 2,741,000 0 0 14,864,000 5,649,000 9,215,000 0 0 0 9,215,000 .93 .83
-----END PRIVACY-ENHANCED MESSAGE-----