<PAGE> 1
CAVCO
1995 ANNUAL REPORT
<PAGE> 2
THE COMPANY
Cavco Industries, Inc., hereinafter referred to as the "Company" or "Cavco",
is the largest manufacturer of residential and recreational housing in Arizona.
The Company began as an unincorporated association in 1965, manufacturing truck
campers under the name of Roadrunner Manufacturing Company. In 1966, the Company
changed its name to Cavalier Manufacturing Company and it incorporated in 1968.
In 1974, the Company changed its name to Cavco Industries, Inc. Through its
dealer network, the Company distributes its manufactured homes in Arizona,
Nevada, New Mexico, Utah, Texas, Washington, Oregon, California, Colorado, Idaho
and Canada.
In November, 1986, the Company began manufacturing relocatable commercial
modular structures for sale or lease, marketed by a division of the Company
doing business as CVC Leasing ("CVC"). In October, 1993, CVC diversified its
leasing operations to include security storage containers. In August, 1994, the
Company sold the relocatable modular commercial structures of CVC. In August,
1994, the Company founded National Security Containers, Inc. ("NSC") to market
and lease security storage containers. NSC sells or leases the containers
directly to any business with a need for additional storage space. Typical
customers include retail stores, construction companies, and educational and
government institutions.
In March, 1987, the Company founded Action Healthcare Management Services,
Inc., ("Action") to provide health care management services. Utilization
management is the primary service provided. Utilization management is a
methodology for monitoring the medical necessity and appropriateness of health
care services, including hospital admissions, proposed length of stay, use of
outpatient facilities and alternate treatment options. The service is initially
performed by licensed nurses, who maintain direct communication with the
participant and his or her physician. Action markets its services to group
health insurance brokers, insurance carriers, third party administrators,
preferred provider organizations, self-insured employers, government employee
groups and multi-employer trusts.
In December, 1991, the Company founded Sun Built Homes, Inc., ("Sun Built") to
develop manufactured housing subdivisions and sell manufactured homes in
established subdivisions.
The Company operates primarily in the manufactured housing industry. Cavco's
philosophy is to design excellent floor plans that have good consumer-perceived
value, build them with a high degree of quality and market them through the best
dealer network possible. Homes produced by Cavco are high-value, affordable
houses manufactured on an assembly line. Through the affordability and quality
of construction, Cavco's products are designed to help fulfill the public's
fundamental needs for shelter.
With regard to the industry segments, see Note 12 to the Consolidated
Financial Statements, p. 18.
<PAGE> 3
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
RESULTS FOR THE YEAR: 1995 1994 1993 1992 1991
------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net Sales $113,708,362 92,061,563 56,915,815 42,413,487 37,156,087
Net income from continuing operations $ 4,533,532 3,928,852 1,515,276 1,231,236 823,837
Income per share from continuing
operations $ 1.34 1.16 .45 .36 .24
YEAR END POSITION:
Total assets $ 51,811,939 41,878,513 30,703,330 25,875,595 20,889,140
Long term debt, net of current position $ 12,692,661 5,413,980 7,853,985 7,209,131 7,636,365
Net stockholders' equity $ 22,383,195 18,145,544 11,467,392 9,325,115 7,640,756
</TABLE>
RESULTS FOR THE YEARS PRIOR TO 1995 HAVE BEEN RESTATED TO REFLECT THE
ELIMINATION OF DISCONTINUED OPERATIONS OF THE COMPANY'S CVC LEASING DIVISION.
EARNINGS PER SHARE HAVE BEEN ADJUSTED FOR A THREE-FOR-TWO STOCK SPLIT WHICH WAS
EFFECTED IN DECEMBER, 1994 AND A TWO-FOR-ONE STOCK SPLIT WHICH WAS EFFECTED IN
APRIL, 1992.
<TABLE>
<S> <C>
1991 37.2
1992 42.4
1993 56.9
1994 92.1
1995 113.7
1991 20.8
1992 25.8
1993 30.7
1994 41.9
1995 51.8
1991 .824
1992 1.231
1993 1.515
1994 3.929
1995 4.534
1991 7.6
1992 9.3
1993 11.4
1994 18.1
1995 22.4
</TABLE>
1
<PAGE> 4
QUARTERLY STOCK DATA
YEAR ENDED SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
BID ASKED
------------------ ------------------
HIGH LOW HIGH LOW
------------------ ------------------
<S> <C> <C> <C> <C>
FIRST QUARTER 13 5/6 10 5/6 14 1/2 11 1/2
SECOND QUARTER 12 9 3/ 13 10 1/4
THIRD QUARTER 11 3/4 8 1/ 12 3/4 9
FOURTH QUARTER 10 3/8 8 3/ 11 1/4 9 3/
</TABLE>
Year Ended September 30, 1994
<TABLE>
<CAPTION>
Bid Asked
------------------ ------------------
High Low High Low
------------------ ------------------
<S> <C> <C> <C> <C>
First Quarter 10 1/8 7 7/ 10 7/8 8 3/
Second Quarter 13 7/8 10 14 7/8 10 5/8
Third Quarter 12 3/8 10 1/8 13 1/8 11
Fourth Quarter 11 5/8 11 12 3/8 11 1/2
</TABLE>
Traded over the Counter, NASDAQ Symbol: CVCO. The above
quotations reflect inter-dealer prices without related
mark-up or mark-down or commission and may not
necessarily represent actual transactions. All prices
have been adjusted to reflect a three-for-two stock split
that went into effect December, 1994.
The following table sets forth the approximate number of
holders of record of each class of equity securities of
the Company as of September 30, 1995:
<TABLE>
<CAPTION>
TITLE OF CLASS NUMBER OF RECORD HOLDERS
<S> <C>
Five Cent ($.05) Par Value
Common Stock 267
</TABLE>
The method of computation chosen is based on the number
of record holders.
During the past two years, the Company has paid no
dividends and has no expectations of paying dividends
during the 1996 fiscal year. In conjunction with a
mortgage note, future dividends must be approved by the
lending institution.
2
<PAGE> 5
PRESIDENT'S LETTER January 1996
CAVCO INDUSTRIES, INC.
To Our Shareholders:
Fiscal 1995 was another record year for our company. Net sales
were up 23.5%, income from continuing operations improved 15.4%,
and stockholders' equity increased 23.4%.
Net sales for fiscal 1995, ended September 30, were $113,708,362
compared to $92,061,563 reported for the prior year. Net income
from continuing operations was $4,533,532 or $1.34 per share, a
solid improvement over the $3,928,852 or $1.16 per share reported
last year. The loss from discontinued operations was $295,881 or
$.09 per share, compared to a profit of $404,507 or $.12 per share
reported last year. The gain on the sale of the assets of the CVC
Leasing division to GE Capital Modular Space during the prior year
resulted in a profit of $2,272,319 or $.67 per share. Net income
per share was $1.25 in fiscal 1995, compared to a net income per
share of $1.95 the prior year. During fiscal 1995, stockholders'
equity grew from $18,145,544 to $22,383,195.
As we anticipated, the sale of the assets of the CVC Leasing
division allowed us to substantially expand the container and
trailer van fleet of National Security Containers, Inc. ("NSC").
During fiscal year 1995, the lease fleet expanded from 2120 to
4100 units, as NSC increased its net assets under lease from
$3,594,677 to $13,689,693. NSC now operates in nine cities in
Arizona, Texas, Colorado, Louisiana and Tennessee. Notwithstanding
its dramatic growth, NSC achieved a profit in its first full year
of operation. The potential of NSC is highlighted by the fact that
it attained a 51.4% gross margin during the year. We expect NSC to
continue to show substantial growth during the coming year.
Through Sun Built Homes, Inc. ("Sun Built") we have continued to
explore ways for our manufactured homes to compete with and expand
into the site-built market. This is best accomplished by working
with third party developers, landowners and our existing dealers
to increase their uses of our homes in their parks and
subdivisions. We expect Sun Built to play an important role to
help us apply our production capabilities to the site-built
market.
All three of our manufacturing facilities showed strong results
for the fiscal year. I am particularly pleased to report that in
June 1995 our company was recognized by a leading industry
periodical as the top Park Model manufacturer in the United
States. Recently, importers and consumers from Japan have shown
much interest in park model-type structures. We have reached
agreement with and shipped a number of homes to retailers in
Japan, and are cautiously optimistic about this new opportunity.
This year we maintained our dominant position in the Arizona
manufactured home market, and at the same time expanded our reach
into other market areas. We continued to build up our dealer base
and sales volume in key markets outside of Arizona, creating
desired geographic diversity.
During the fiscal year we made a substantial investment in our
manufacturing facilities to increase capacity, and added key
management personnel to our production team. We intend to continue
to increase production capabilities during 1996. These investments
should allow us to continue our expansion into new market areas
and increase our penetration in existing markets. The key
ingredients that make us well positioned for future growth are our
strong manufacturing capabilities and efficiencies, our well
designed and customized homes that enjoy high perceived customer
value and instill brand loyalty, and our on-going commitment to
quality and affordability.
We are pleased with the results from 1995, and expect continued
growth and improvement during 1996.
Sincerely,
/s/ A.R. Ghelfi
President
3
<PAGE> 6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
1995 COMPARED TO 1994
Sales for 1995 were $113,708,362, an increase of
$21,646,799 (23.5%) over 1994. The new leasing subsidiary
provided 23 percent of the increase, $5 million in
revenues. The manufacturing operations accounted for the
remaining increase. Plant expansions and upgrades to
machinery allowed production levels to increase at all
facilities. The manufacturing facility added in May 1993
had the most significant favorable impact.
Gross profit margins increased to 18.9 percent compared
to 18.4 percent in 1994. Margins in the manufacturing
operations decreased from 18.2 percent in 1994 to 17.4
percent in 1995. The Company offered a series of low
cost, low margin special floor plans in the spring. The
decrease in manufacturing margins was more than offset by
the leasing operations achievement of a 51.4 percent
gross profit margin.
Selling, general and administrative expenses increased
overall by $2,996,824 (a 29% increase). Most of the
increase was due to expansion of the leasing operations
in 1995. The $533,149 increase in interest expense
reflects increased finance costs incurred from the
Company's use of its lines of credit.
In 1995, net income was $4,237,651 or $1.25 per share,
compared to $6,605,678 or $1.95 per share in 1994. The
decrease in net income was a direct result of the sale of
discontinued operations in 1994. Income from continuing
operations in 1995 was $4,533,532 or $1.34 per share, an
increase of $604,680 or $.18 per share. Income from
discontinued operations and from the gain on the sale of
CVC in 1994 was $404,507 and $2,272,319, respectively,
compared to a loss from discontinued operations in 1995
of $295,881.
1994 COMPARED TO 1993
The Company's 1994 net sales increased $35,145,748
(61.8%) over 1993. Approximately $30 million of the
increase was directly attributable to the Company's new
manufacturing facility, which began production in May,
1993. During 1994, this manufacturing facility expanded
its production through installation of a second assembly
line. The overall increase in manufactured housing sales
was reflective of the continued growth experienced in the
industry over the past three years. The Company had been
able to increase its market share of manufactured homes
in Arizona to over 35 percent. With the new manufacturing
facility and aggressive marketing and dealer support, the
Company should continue this trend.
Gross profit margin is comparable between years (18.4% in
1994, 18.9% in 1993), allowing the increase in sales to
be a direct improvement to the bottom line. Selling,
general and administrative expenses increased $2,393,350
from 1993 to 1994. This increase resulted from the sales
growth, which warranted increased staffing and sales and
marketing programs. Increased expenses were recognized in
all operations. The 30% increase in operating expenses,
in comparison to a 62% increase in sales, exemplified the
Company's continuing efforts to control costs and improve
profitability.
Interest expense increased $164,067 in 1994 over 1993.
The convertible note and the Company's use of its line of
credit led to increased finance costs. The finance costs
were partially offset by interest income earned on
invested proceeds from the sale of CVC.
In 1994, net income was $6,605,678 or $1.95 per share, an
increase of $4,455,972 or $1.31 per share over 1993. The
reason for the large increase was primarily due to the
sale of discontinued operations. In 1994, income from
continuing operations was $3,928,852 or $1.16 per share,
compared to $1,515,276 or $.45 per share in 1993. Income
from discontinued operations was $404,507 in 1994,
compared to $634,430 in 1993. The gain on the sale of CVC
Leasing was $2,272,319 in 1994.
4
<PAGE> 7
LIQUIDITY AND CAPITAL RESOURCES
The Company ended 1995 with working capital of
$8,249,230, comparable to the $8,371,218 at the end of
1994. During the year the Company borrowed $8 million
from lines of credit to fund working capital needs and
additions to assets under lease and property, plant and
equipment.
Cash outflows in 1995 included capital expenditures of
$13.6 million. The Company increased its NSC lease fleet
by $11.3 million and spent $2.3 million on property,
plant and equipment additions, of which $700,000 went to
plant expansion and equipment upgrades at one of the
manufacturing facilities. Approximately $350,000 and
$600,000 was spent on land and delivery equipment for
NSC, respectively. The Company also invested another $1.2
million into its partnerships which are developing
manufactured housing subdivisions.
In June 1995, NSC arranged a $15 million line of credit
to support its lease fleet expansion. The lending
institution advanced $8,000,000 and the Company used $6.5
million of these funds to repay its lines of credit.
The Company has a $4 million bank line of credit that may
be used from time to time to fund working capital needs.
Long term cash requirements, other than normal operating
expenses, are anticipated for plant expansions and
computer system upgrades. NSC has $7,000,000 of
additional funding available from a financial institution
for expansion of its lease fleet. The Company believes
that its existing cash, available lines of credit, and
cash generated from operations will be sufficient to meet
capital expenditure and debt service requirements.
During the past three years, inflation has not had a
significant impact on the Company's operations. The
Company has demonstrated its ability to reduce the
manufacturing costs of its products through engineering
changes and effective price negotiations, and has been
able to adjust the selling price of its products in
reaction to changing costs.
5
<PAGE> 8
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1995 AND 1994
ASSETS
<TABLE>
<CAPTION>
1995 1994
----------- ----------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 8,140,730 9,006,600
Receivables
Trade accounts, net of $280,000 and
$125,000 reserve for uncollectible
accounts in 1995 and 1994,
respectively 3,164,862 4,605,736
Notes 511,302 433,804
Other 509,369 1,153,036
----------- ----------
Total receivables 4,185,533 6,192,576
----------- ----------
Inventories
Held for sale or lease 80,438 2,287,635
Manufacturing:
Work in process 807,949 823,582
Raw materials 2,971,581 2,314,623
Real estate held for sale 6,133,089 4,524,240
----------- ----------
Total inventories 9,993,057 9,950,080
----------- ----------
Prepaid expenses 834,713 461,515
Deferred tax charge 552,981 480,369
----------- ----------
Total current assets 23,707,014 26,091,140
----------- ----------
Notes receivable, net of current portion 1,162,415 1,425,243
Property, plant and equipment, at cost 14,285,539 12,164,077
Less accumulated depreciation 4,666,351 3,634,192
----------- ----------
Net property, plant and equipment 9,619,188 8,529,885
----------- ----------
Assets under lease 14,285,700 3,728,294
Less accumulated depreciation 596,007 133,617
----------- ----------
Net assets under lease 13,689,693 3,594,677
----------- ----------
Investment in partnerships 2,534,703 1,546,724
Other assets 1,098,926 690,844
----------- ----------
$51,811,939 41,878,513
=========== ==========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
6
<PAGE> 9
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
1995 1994
----------- ----------
<S> <C> <C>
Current liabilities
Notes payable $ 1,022,864 1,654,490
Current installments of long term debt 2,444,248 1,875,189
Accounts payable 5,009,125 5,092,187
Accrued expenses 6,939,129 6,472,376
Income taxes 42,418 2,625,680
----------- ----------
Total current liabilities 15,457,784 17,719,922
----------- ----------
Long term debt, excluding current
installments 12,692,661 5,413,980
Other liabilities -- 97,309
Deferred income taxes 1,278,299 501,758
Stockholders' equity:
Common stock, $.05 par value; 8,000,000
shares authorized; 3,382,977 shares
issued and outstanding in 1995 and
1994 169,149 169,149
Capital in excess of par value 312,054 312,054
Retained earnings 21,901,992 17,664,341
----------- ----------
Net stockholders' equity 22,383,195 18,145,544
----------- ----------
$51,811,939 41,878,513
=========== ==========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
7
<PAGE> 10
CONSOLIDATED STATEMENTS OF EARNINGS
YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
------------ ---------- ----------
<S> <C> <C> <C>
Net sales $113,708,362 92,061,563 56,915,815
Cost of sales 92,213,840 75,103,512 46,183,666
------------ ---------- ----------
Gross profit 21,494,522 16,958,051 10,732,149
Selling, general and administrative expenses 13,316,823 10,319,999 7,926,649
------------ ---------- ----------
Operating income 8,177,699 6,638,052 2,805,500
------------ ---------- ----------
Other income (expense):
Interest income 287,385 175,957 40,707
Interest expense (1,047,650) (514,501) (350,434)
Miscellaneous 158,098 156,444 130,403
------------ ---------- ----------
(602,167) (182,100) (179,324)
------------ ---------- ----------
Income from continuing operations before income taxes 7,575,532 6,455,952 2,626,176
Income taxes 3,042,000 2,527,100 1,110,900
------------ ---------- ----------
Income from continuing operations 4,533,532 3,928,852 1,515,276
Discontinued operations:
Income (loss) from operations of CVC Leasing division
(less applicable taxes of ($194,000), $260,800 and
$465,800 for 1995, 1994 and 1993, respectively) (295,881) 404,507 634,430
Gain on sale of CVC Leasing division (less applicable
taxes of $1,465,000) -- 2,272,319 --
------------ ---------- ----------
Net income $ 4,237,651 6,605,678 2,149,706
============ ========== ==========
Income per share from continuing operations $ 1.34 1.16 .45
Income (loss) per share from operations of discontinued
division (.09) .12 .19
Income per share from gain on sale of division -- .67 --
------------ ---------- ----------
Net income per share $ 1.25 1.95 .64
============ ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
8
<PAGE> 11
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
------------ ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 4,237,651 6,605,678 2,149,706
Adjustments to reconcile net income to net cash
provided by operating activities:
Gain on sale of CVC Leasing division -- (3,737,319) --
Depreciation and amortization expense 1,727,696 1,375,533 1,030,450
Provision for deferred income taxes 703,929 (455,900) 202,800
Gain on sales of assets under lease (389,409) (118,512) (254,596)
Change in assets and liabilities:
(Increase) decrease in receivables 1,440,874 (581,448) 397,563
(Increase) decrease in manufacturing and leasing
inventories (641,325) (3,739,014) (1,008,311)
(Increase) decrease in real estate held for sale (1,067,249) (2,833,311) 140,076
(Increase) decrease in prepaid expenses (373,198) 117,989 (359,662)
(Increase) decrease in other assets (241,244) (481,330) 92,138
Increase (decrease) in accounts payable (83,062) 1,305,794 2,114,013
Increase (decrease) in accrued expenses 466,753 2,252,398 1,218,195
Increase (decrease) in income taxes (2,583,262) 2,313,896 181,228
Increase (decrease) in lease deposits and other
liabilities (97,309) 190,682 (583)
----------- ---------- ----------
Net cash provided by operating activities 3,100,845 2,215,136 5,903,017
----------- ---------- ----------
Cash flows from investing activities:
Purchases of property, plant and equipment (2,292,217) (1,962,510) (2,570,729)
Proceeds from sales of property, plant and equipment 111,254 -- --
Additions to assets under lease (11,292,377) (8,182,092) (2,173,901)
Proceeds from sales of assets under lease 2,713,985 773,288 13,599
Increase in notes receivable -- (78,500) (77,000)
Proceeds from collections on notes receivable 1,352,273 420,328 393,320
Additions to investment in partnerships (1,212,979) (1,298,172) (248,552)
Net proceeds from sale of CVC Leasing division -- 10,464,504 --
----------- ---------- ----------
Net cash provided by (used for) investing
activities (10,620,061) 136,846 (4,663,263)
----------- ---------- ----------
Cash flows from financing activities:
Borrowing under lines of credit 7,989,543 7,442,376 2,369,315
Repayment of lines of credit (8,621,169) (6,990,149) (4,889,559)
Proceeds from long-term debt 8,603,857 5,598,713 2,973,715
Repayment of long-term debt (1,318,885) (775,126) (1,654,622)
----------- ---------- ----------
Net cash provided by (used for) financing
activities 6,653,346 5,275,814 (1,201,151)
----------- ---------- ----------
Increase (decrease) in cash and cash equivalents (865,870) 7,627,796 38,603
Cash and cash equivalents at beginning of year 9,006,600 1,378,804 1,340,201
----------- ---------- ----------
Cash and cash equivalents at end of year $ 8,140,730 9,006,600 1,378,804
=========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
9
<PAGE> 12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995, 1994, AND 1993
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of Cavco Industries, Inc. (the
Company) for 1995, 1994 and 1993 include the accounts of Cavco
Industries, Inc. and its subsidiaries, Action Healthcare Management
Services, Inc. (Action), Sun Built Homes, Inc. (Sun Built) and
National Security Containers, Inc. (NSC). The Company owns 93% of
Action and 100% of Sun Built and NSC. In accordance with ARB 51, all
losses applicable to the minority interest of Action have been
charged to the parent. All material intercompany transactions have
been eliminated in the consolidation.
(B) INVENTORIES
Inventories are stated at the lower of cost or market (net realizable
value). Cost is determined by using standard cost (which approximates
actual cost on a first-in, first-out basis) for finished goods and
work-in process and actual cost on a first-in, first-out basis for
raw materials.
(C) PRODUCT WARRANTY
The Company's products carry a one-year warranty on structural
components to the original retail customer. The Company also warrants
certain nonstructural components for 90 days. The warranty covers
defective materials and workmanship. The Company's experience allows
it to reasonably estimate the amount of warranty expense expected to
be incurred for products sold. Warranty expense for the years ended
September 30, 1995, 1994 and 1993 was $1,946,297, $1,664,204, and
$1,021,471, respectively.
(D) REAL ESTATE HELD FOR SALE
Real estate held for sale consists primarily of land purchased by Sun
Built and homes manufactured by the Company for sale in residential
subdivisions. Sun Built capitalizes certain interest costs incurred
with developing the land, and such interest will be included in cost
of sales as property is sold to the buyer. The amount of interest
capitalized during the years ended September 30, 1995 and 1994 was
$127,732 and $33,992, respectively.
In most cases, the customer obtains financing from an outside source
and pays cash for the purchase. In accordance with rules established
by Statement of Financial Accounting Standards No. 66 (Accounting for
Sales of Real Estate), revenues are recognized upon close of sale,
when the property has transferred to the buyer.
(E) INVESTMENT IN PARTNERSHIPS
In November, 1992, the Company formed a limited liability corporation
(LLC) with another company for the purpose of developing a
manufactured housing subdivision. The Company is a 50% partner in the
LLC and accounts for its investment on the equity method. The
Company's investment in the LLC was $2,275,313 and $1,321,724 at
September 30, 1995 and 1994, respectively.
Sun Built is a 50% partner in a LLC formed in August, 1994, to develop
a manufactured housing subdivision. Sun Built accounts for its
investment on the equity method. Its investment was $259,390 and
$225,000 at September 30, 1995 and 1994, respectively.
(F) REVENUE RECOGNITION
The Company recognizes product revenue upon shipment of product.
Revenue from services is recognized when services are performed.
Lease income is recognized over the terms of the leases.
10
<PAGE> 13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS . . . CONTINUED
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(G) STATEMENT OF CASH FLOWS
For purpose of these statements, cash and cash equivalents include cash
on hand and cash in short-term investments with original maturities
of less than three months (primarily money market funds).
Information that does not result in cash receipts or cash payments in
the period, but which affects the financing and investing activities
of the Company is included in supplemental disclosures as follows.
Supplemental Disclosures of Non-cash Investing and Financing
Activities:
In 1995, the Company sold $523,276 of lease assets for notes
receivable. The Company purchased $541,600 of real estate held for
sale, financed by long term debt. Inventory held for sale or lease of
$2,207,197 was transferred into assets under lease.
In 1994, the Company sold $1,015,133 of lease assets for notes
receivable. The Company purchased $470,118 of lease assets financed
by notes payable. The Company purchased $818,784 of real estate held
for sale, assuming $414,384 in notes payable and financing $404,400
by long term debt. Also in 1994, the Company sold its CVC Leasing
division. See Note 14 for detail of non-cash items.
In 1993, the Company sold $1,021,176 of lease assets for notes
receivable. The Company sold $90,750 of real estate held for sale by
issuing notes receivable. The Company purchased automotive equipment
for $114,819, financed by long term debt.
Supplemental Disclosures of Cash Flow information:
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Cash paid during the year for:
Interest $1,020,766 1,109,739 1,010,087
========== ========= =========
Income Taxes $2,540,433 2,394,904 1,192,621
========== ========= =========
</TABLE>
(H) ACCOUNTING STATEMENTS
The Financial Accounting Standards Board has issued a Statement of
Financial Accounting Standards ("SFAS"), No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of," which the Company will be required to implement
effective for the fiscal year ending September 30, 1997. SFAS No. 121
requires that long-lived assets be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount
of the asset may not be recoverable. If the sum of the expected
future cash flows (undiscounted and without interest charges) from an
asset to be held and used is less than the carrying value of the
asset, an impairment loss must be recognized in the amount of the
difference between the carrying value and fair value. Assets to be
disposed of must be valued at the lower of carrying value or fair
value less costs to sell. Management of the Company believes that, if
SFAS No. 121 were implemented currently, no impairment loss would be
recognized.
(2) NOTES RECEIVABLE
Notes receivable include amounts due under finance leases ($1,633,607 and
$1,758,774 at September 30, 1995 and 1994, respectively) and amounts due
from sales of real estate held for sale ($16,610 and $51,773 at
September 30, 1995 and 1994, respectively). The finance leases are
secured by the related assets under lease, and the notes on real estate
sales are secured by deeds of trust. Also included in notes receivable
is the balance on a line of credit extended to a dealer ($23,500 and
$48,500 at September 30, 1995 and 1994, respectively).
11
<PAGE> 14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS . . . CONTINUED
(2) NOTES RECEIVABLE (CONTINUED)
The aggregate maturities of the notes receivable for the five years
subsequent to September 30, 1995 are as follows:
<TABLE>
<S> <C>
1995 $ 511,302
1996 442,701
1997 316,324
1998 144,931
1999 110,679
Thereafter 147,780
----------
$ 1,673,717
==========
</TABLE>
(3) MARKETABLE INVESTMENT SECURITIES
At September 30, 1995 and 1994, the noncurrent portfolios of marketable
investment securities are carried at the lower of aggregate cost or
market. Change in market value is recognized as investment income (or
loss) and is included in miscellaneous income in the consolidated
statement of earnings. Income recognized in 1995 and 1994 was $23,807
and $49,647, respectively.
(4) PROPERTY, PLANT AND EQUIPMENT
Depreciation of property, plant and equipment is provided over the
estimated useful lives of the respective assets on a straight-line
basis. Leasehold improvements are amortized on a straight-line basis
over their estimated useful lives or the terms of the respective leases,
whichever is shorter. Repair and maintenance costs are expensed as
incurred. A summary of property, plant and equipment, at cost, follows:
<TABLE>
<CAPTION>
Average September
Depreciable ---------------------------
Lives (Years) 1995 1994
------------- ------------ -----------
<S> <C> <C> <C>
Land -- $ 2,455,801 2,088,994
Buildings 15-30 2,115,744 2,082,239
Plant equipment 5-10 3,035,233 3,098,417
Office equipment 3-10 1,909,801 1,820,034
Automotive equipment 3 1,868,784 903,864
Building and leasehold improvements 3-20 2,892,126 2,161,751
Construction in progress -- 8,050 8,778
----------- ----------
$ 14,285,539 12,164,077
=========== ==========
</TABLE>
(5) NOTES PAYABLE
The Company has a $4,000,000 revolving line of credit with a bank, with an
interest rate of prime plus 1/2%, expiring on January 31, 1996. This
line of credit is secured by the Company's inventories and accounts
receivable. During the year, the Company obtained additional lines of
credit from the bank to temporarily fund working capital needs.
Sun Built has a $1,000,000 line of credit with a financial institution,
with an interest rate of prime plus 1%, expiring in January 1996. This
line of credit is secured by certain real estate held for sale. Sun
Built has obtained a temporary increase in its credit limit to
$1,375,000.
During the year NSC utilized a temporary line of credit to fund additions
to assets under lease. The maximum borrowed during the year was
$2,750,000 at an average interest rate of 9.40%. The line was paid off
in June 1995. There was no outstanding balance at September 30, 1995.
12
<PAGE> 15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS . . . CONTINUED
(5) NOTES PAYABLE (CONTINUED)
Also included in notes payable in 1994 was $470,118, due for purchases of
storage containers for NSC's lease fleet. The notes were paid off during
1995.
Pertinent information with respect to the bank lines of credit is as
follows:
<TABLE>
<CAPTION>
September 30,
---------------------------------------
1995 1994 1993
----------- ---------- ----------
<S> <C> <C> <C>
Company line of credit:
Outstanding balance at year end $ -- -- --
Interest rate at year end 9.25% 8.25% 6.5%
Maximum credit available 4,000,000 3,500,000 2,500,000
Maximum borrowing during the year 3,750,000 3,500,000 2,500,000
Average outstanding borrowings(a) 1,220,000 1,539,726 1,389,000
Average yearly interest rate(a) 9.5% 7.3% 6.7%
</TABLE>
(a) The average outstanding borrowings during the periods were calculated
by dividing the weighted average daily balance by 365. The average
yearly interest rate during the period was calculated by dividing the
interest expense by the average outstanding borrowings.
<TABLE>
<CAPTION>
September 30,
---------------------------------------
1995 1994 1993
----------- ---------- ----------
<S> <C> <C> <C>
Sun Built line of credit:
Outstanding balance at year end $ 1,022,864 1,184,372 317,761
Interest rate at year end 9.75% 9.5% 7.75%
Maximum credit available 1,375,000 1,184,372 1,000,000
Maximum borrowing during the year 1,360,570 1,184,372 412,219
Average outstanding borrowings(b) 1,178,397 597,614 339,283
Average interest rate for year(b) 10.32% 8.15% 7.4%
</TABLE>
(b) Average outstanding borrowings during the periods were calculated by
dividing the month-end balances (including beginning of year) by 13.
Average yearly interest rates were calculated by dividing the interest
expense by the average outstanding borrowings.
(6) LONG-TERM DEBT
A summary of long-term debt is as follows:
<TABLE>
<CAPTION>
September 30,
-------------------------
1995 1994
----------- ---------
<S> <C> <C>
Convertible note trust, interest payable quarterly at 8%,
unsecured, balance due and payable in April, 1999. (See (a)
below). $ 4,100,000 4,100,000
Notes payable to a financial institution, due in monthly
installments of $133,333 plus interest at 9.06%, secured by
assets under lease and accounts receivable. The note is
amortized over a 5-year period and is due and payable in
July, 2000. (See (b) below). 7,599,981 --
</TABLE>
13
<PAGE> 16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS . . . CONTINUED
(6) LONG-TERM DEBT
<TABLE>
<CAPTION>
September 30,
-------------------------
1995 1994
----------- ---------
<S> <C> <C>
Mortgage note payable, due in monthly installments of
$8,070 plus interest at prime plus 1%, (9.75% at
September 30, 1995) secured by deed of trust on real
estate. The mortgage is amortized over a 13-year term, with
the balance due and payable in August, 2002. (See (b)
below). 1,250,913 1,308,396
Notes payable to a title company, due in monthly
installments of $6,818 including interest at 10%, secured
by real estate held for sale, balances due and payable
ranging from February 1997 to June 1998. 589,268 313,125
Note payable to bank, due in monthly installments of
$19,259 including interest at 9.755%, secured by certain
plant equipment, due and payable in September, 1998. 584,598 --
Note payable to bank, due in monthly installments of
$27,778 plus interest at prime plus 1/2%, (9.25% at
September 30, 1995) secured by certain plant equipment, due
and payable in September, 1996. 361,088 694,433
Note payable due in monthly installments of $2,601
including interest at a rate of 9%, secured by a deed of
trust. The note is amortized over a 30-year term and is due
and payable in July, 2011. 293,009 297,599
Note payable due in monthly installments of $3,416
including interest at a rate of 13% secured by a deed of
trust. The note is amortized over a 15-year term and is due
and payable in November, 2000. 153,663 173,272
Note payable to bank, due in monthly installments of $9,587
including interest at 7.55%, secured by certain office
equipment, due and payable in September, 1996. 116,184 215,357
Notes payable to finance companies, due in monthly
installments totaling $9,019, including interest at various
rates ranging between 6.6% and 11.5%, balances due and
payable ranging from November, 1995 to October, 1998,
secured by automotive and office equipment. 88,205 186,987
----------- ---------
15,136,909 7,289,169
Less current portion 2,444,248 1,875,189
----------- ---------
Long term debt, net of current portion $12,692,661 5,413,980
============ =========
</TABLE>
(a) At any time during the term of the note, all or any portion of the
principal balance is convertible, at the Company's option, into
shares of the Company's common stock at $16 per share (post stock
split), if the stock price exceeds $20 per share (post stock split)
for a period of at least 20 trading days. The Company also has an
option to prepay up to one half of the outstanding principal balance
of the loan after October, 1995. Payment after October, 1995 can be
made in stock, at $16 per share (post stock split), if the stock
price exceeds $16 per share (post stock split) for a period of at
least 20 trading days.
(b) Certain of the Company's loan agreements require compliance with
financial covenants, the most significant of which specify a minimum
current ratio, minimum owner's equity, working capital,
14
<PAGE> 17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS . . . CONTINUED
(6) LONG-TERM DEBT (CONTINUED)
debt coverage ratio, debt service coverage ratio, and minimum
tangible net worth. The agreements also state that any dividends to
stockholders must be approved by the lending institution. At
September 30, 1995, the Company was not in compliance with the
covenant related to debt service coverage ratio for one of the
subsidiaries. The Company obtained a waiver from the bank.
The aggregate maturities of long-term debt for the five years subsequent
to September 30, 1995 are as follows:
<TABLE>
<S> <C>
1996 $ 2,444,248
1997 2,122,336
1998 2,355,904
1999 5,836,817
2000 1,341,456
Thereafter 1,036,148
-----------
$15,136,909
============
</TABLE>
(7) INCOME TAXES
Prior to January 1, 1989, Cavco Industries, Inc. owned less than 80
percent of the stock of Action and therefore filed separate tax returns
for Action. Accordingly, the tax benefit of the net operating loss was
not utilized on a consolidated basis. The net operating loss expiring in
2002 is available to offset future taxable income in Action. In 1994,
$54,362 of that net operating loss carryforward was used to offset
Action's taxable income. For income tax purposes at September 30, 1995,
Action has a net operating loss carryforward of approximately $521,000
remaining. For 1995 and 1993, the consolidated taxable income reflected
a loss of $198,629 and $677,468, respectively, related to Action.
Components of income tax expense are as follows:
<TABLE>
<CAPTION>
Current Deferred Total
---------- -------- ---------
<S> <C> <C> <C>
1995: FEDERAL $1,683,500 552,800 2,236,300
STATE 460,500 151,200 611,700
---------- -------- ---------
$2,144,000 704,000 2,848,000
========== ========= =========
1994: Federal $3,696,400 (357,900) 3,338,500
State 1,012,400 (98,000) 914,400
---------- -------- ---------
$4,708,800 (455,900) 4,252,900
========== ========= =========
1993: Federal $1,024,100 174,500 1,198,600
State 349,800 28,300 378,100
---------- -------- ---------
$1,373,900 202,800 1,576,700
========== ========= =========
</TABLE>
Income tax expense amounted to $2,848,000 for the year ended September 30,
1995 (an effective rate of 40.1%), $4,252,900 for the year ended
September 30, 1994 (an effective rate of 39.2%), and $1,576,700 for the
year ended September 30, 1993 (an effective rate of 42.3%). The actual
tax expense differs from the "expected" tax expense (computed by
applying the U.S. Federal corporate tax rates to earnings before income
tax) as follows:
<TABLE>
<CAPTION>
1995 1994 1993
----- ---- ----
<S> <C> <C> <C>
Federal corporate tax rate 34.0 % 34.0 34.0
State income taxes, net of federal income
tax benefit 6.1 6.1 6.1
Other -- (0.9) 2.2
----- ---- ----
Effective tax rate 40.1 % 39.2 42.3
===== ===== =====
</TABLE>
15
<PAGE> 18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS . . . CONTINUED
(7) INCOME TAXES (CONTINUED)
Deferred tax assets and liabilities represent the estimated future tax
effects attributable to timing differences in the recognition of revenue
and expense items for financial statement and tax return purposes. The
source of these differences and the tax effect of each are set forth as
follows:
<TABLE>
<CAPTION>
September 30,
------------------------
1995 1994
----------- --------
<S> <C> <C>
Current:
Accrued warranty expense $ 355,104 290,695
Reserve for uncollectible accounts 110,924 49,125
Deferred rent 48,011 87,229
Accrued vacation and holiday 40,471 31,950
Accrued bonuses 15,067 15,771
Accrued state tax deduction (16,596) 5,599
----------- --------
Deferred tax charge $ 552,981 480,369
============ =========
Long-term:
Excess of tax over book depreciation $(1,310,517) (576,368)
Loss in partnership (43,827) (12,552)
Advance rents received (16,709) 2,563
Excess of tax over book amortization of intangibles 30,862 14,229
Excess of book gain over tax gain on sale of assets 61,892 61,399
Loss on marketable securities -- 8,971
----------- --------
Deferred tax liability $(1,278,299) (501,758)
============ =========
</TABLE>
(8) EMPLOYEE BENEFIT PLANS
The Company's profit sharing plan is a defined contribution plan which
covers all employees completing two years of service. After two years of
service have been completed, employees begin participation on the first
day of the sixth month or the first day of the plan year, whichever is
earlier. Participants are 100% vested after two years in the Plan. The
Plan was designed to comply with the requirements of ERISA.
Contributions to the Plan are determined annually by the Board of
Directors. The Company contributed $100,000 to the Plan for the year
ended September 30, 1995, $200,000 for 1994 and $150,000 for 1993.
The Company adopted a 401(k) plan in January, 1995. All employees are
eligible to participate after completing four months of service, and may
begin participation on the following January 1 or July 1, whichever is
earlier. Participants may defer up to 15% of annual compensation
(subject to limits set by the Internal Revenue Service) to contribute to
the 401(k) plan. The Company matches 25% of the employee's contribution,
up to 6% of his or her compensation. The Company contributed $68,924 to
the 401(k) plan for the year ended September 30, 1995.
(9) STOCKHOLDERS' EQUITY
The number of shares used in computing earnings per common share was
3,382,977 for 1995, 1994 and 1993. The number of shares reflects a
three-for-two stock split effective December, 1994. Fully diluted
earnings per share are the same as primary earnings per share.
16
<PAGE> 19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS . . . CONTINUED
(9) STOCKHOLDERS' EQUITY (CONTINUED)
Changes in stockholders' equity accounts between years are summarized
below:
<TABLE>
<CAPTION>
UNREALIZED LOSS ON NON-CURRENT
RETAINED EARNINGS MARKETABLE INVESTMENT SECURITIES
----------------- --------------------------------
<S> <C> <C>
Balance September 30, 1992 $ 8,908,957 (65,045)
Net income 2,149,706 --
Net unrealized loss -- (7,429)
----------- -------
Balance September 30, 1993 11,058,663 (72,474)
Net income 6,605,678 --
Net recognized loss -- 72,474
----------- -------
Balance September 30, 1994 17,664,341 --
Net income 4,237,651 --
----------- -------
Balance September 30, 1995 $21,901,992 --
=========== =======
</TABLE>
(10) FINANCING ARRANGEMENTS AND COMMITMENTS
The Company is contingently liable under terms of repurchase agreements
covering dealer floor plan financing arrangements. These arrangements,
which are customary in the industry, provide for the repurchase of
products sold to dealers in the event of default on payments by the
dealer. The risk of loss is spread over numerous dealers and financing
institutions and is further reduced by the resale value of repurchased
units. The Company has not incurred any significant losses from these
arrangements since inception.
During 1995 and 1994, the Company entered into financing arrangements
whereby certain dealers would be assisted in obtaining financing for
purchases of Cavco manufactured homes. The Company has guaranteed the
flooring lines extended to the dealers by the financing institutions.
The Company's maximum liability to financial institutions was $6,500,000
in 1995 and $2,475,000 in 1994.
The Company is the guarantor on a loan agreement which allowed the LLC
(see Note 1) to borrow $3,750,000 from investors. The loan is paid out
over five years, based on scheduled sales of lots. The amount guaranteed
by the Company has been offset by proceeds received on the lot sales,
leaving a balance of $3,177,285 at September 30, 1995.
(11) LEASES
The Company occupies certain land and office buildings and uses certain
equipment under lease arrangements classified as operating leases. Real
estate taxes, insurance and maintenance expenses are obligations of the
Company.
At September 30, 1995, future minimum lease payments due under
noncancellable operating leases, excluding executory costs, are as
follows:
<TABLE>
<CAPTION>
Year Ending
September 30, Amount
------------- -----------
<S> <C>
1996 $ 864,500
1997 686,087
1998 276,243
1999 94,094
2000 26,606
-----------
Total $ 1,947,530
==========
</TABLE>
Total rental expense for 1995, 1994 and 1993 was $1,051,884, $902,332 and
$551,025 respectively.
17
<PAGE> 20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS . . . CONTINUED
(12) INDUSTRY SEGMENT INFORMATION
The Company operates principally in four industries: Manufactured Housing,
Leasing, Health Care Management and Real Estate Development. Operations
are conducted in Arizona and, to a much lesser extent, in Nevada,
Colorado, Idaho, California, Utah, Washington, New Mexico, Georgia,
Pennsylvania, Oregon, Texas and Canada. Operating profit consists of
total revenue less cost of sales and operating expenses. None of the
following have been included in the computation of gross operating
profit: general corporate expenses, non-operating income and expenses
and income taxes. Identifiable assets are those assets used in the
operations of each industry segment. General corporate assets primarily
consist of cash, temporary investments, deferred tax benefits and other
current assets. Information with respect to industry segments as of
September 30, 1995, 1994 and 1993 is set forth on the following page.
<TABLE>
<CAPTION>
HEALTH REAL ESTATE
MANUFACTURED LEASING CARE DEVELOPMENT GENERAL
HOUSING OPERATIONS MANAGEMENT OPERATIONS CORPORATE TOTAL
------------ ---------- ---------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
1995
SALES TO UNAFFILIATED
CUSTOMERS $103,560,443 5,037,282 1,026,230 4,084,407 -- 113,708,362
OPERATING PROFIT (LOSS) 9,439,956 421,795 (136,610 ) 15,213 (1,562,655) 8,177,699
IDENTIFIABLE ASSETS 11,914,234 19,416,794 590,635 7,026,052 12,864,224 51,811,939
DEPRECIATION AND
AMORTIZATION 674,658 786,370 50,266 35,678 180,724 1,727,696
CAPITAL EXPENDITURES 1,089,116 12,438,891 28,080 28,507 -- 13,584,594
1994
Sales to unaffiliated
customers $85,969,747 -- 1,465,525 4,626,291 -- 92,061,563
Operating profit (loss) 7,692,540 -- 114,146 177,379 (1,346,013) 6,638,052
Identifiable assets 10,501,021 13,175,553 677,843 5,448,625 12,075,471 41,878,513
Depreciation and
amortization 521,786 661,824 45,563 29,049 117,311 1,375,533
Capital expenditures 1,181,074 8,665,060 26,998 137,846 133,624 10,144,602
1993
Sales to unaffiliated
customers $53,356,661 -- 589,443 2,969,711 -- 56,915,815
Operating profit (loss) 4,193,014 -- (553,999 ) 281,043 (1,114,558) 2,805,500
Identifiable assets 9,708,746 15,663,167 448,918 1,313,708 3,568,791 30,703,330
Depreciation and
amortization 347,702 571,832 43,367 15,818 51,731 1,030,450
Capital expenditures 1,940,910 2,398,130 114,490 1,584 404,335 4,859,449
</TABLE>
Sales to one manufactured housing customer amounted to $18,129,289, or
15.5% of sales for the year ended September 30, 1995. Sales to two
manufactured housing customers amounted to 17,388,700 and $10,999,677
(18.9% and 11.9% of sales, respectively) for the year ended September
30, 1994. Sales to two manufactured housing customers amounted to
$8,955,898 and $8,211,982 (15.7% and 14.4% of sales, respectively) for
the year ended September 30, 1993.
18
<PAGE> 21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS . . . CONTINUED
(13) ACCRUED EXPENSES
A summary of accrued expenses follows:
<TABLE>
<CAPTION>
September 30,
--------------------------
1995 1994
---------- ---------
<S> <C> <C>
Wages $ 964,821 979,735
Sales promotion programs 2,427,033 1,960,261
Accrued warranty 896,372 739,683
Industrial insurance 1,308,813 944,383
Other 1,342,090 1,848,314
---------- ---------
$6,939,129 6,472,376
========== =========
</TABLE>
(14) DISCONTINUED OPERATIONS
On August 1, 1994, the Company sold the relocatable mobile and modular
commercial structures and related buildings and equipment of its leasing
division (CVC) for $20.1 million, to an unrelated company. Approximately
$8.0 million was used to pay off notes payable associated with the
assets sold; a $1.2 million note receivable remains due from the
purchaser; net cash proceeds totalled $10.9 million. The net value of
assets sold, plus other costs related to the sale, amounted to $16.4
million, resulting in a net gain of $3.7 million.
Net income (loss) from CVC leasing operations is included in the
consolidated statements of income under "discontinued operations".
Revenues from such operations were $2,072,569 for 1995, $8,253,530 for
1994, and $7,732,534 for 1993. Revenues in 1995 were produced from the
sales of jobs that were in progress when the division was sold.
Assets and liabilities related to CVC remaining on the balance sheet as of
September 30, 1995 include trade accounts receivable ($378,406), balance
remaining from purchaser of CVC ($509,369), and rent due on CVC
properties ($121,191). Assets and liabilities related to CVC remaining
on the balance sheet as of September 30, 1994 include trade accounts
receivable ($2,636,925), balance remaining from purchaser of CVC
($1,153,036), customer deposits ($218,988), inventory and assets under
lease ($1,637,084), accounts payable ($327,400), rent due on CVC
properties ($221,956), and other accrued expenses ($383,723).
(15) SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)
Selected quarterly financial data for the years ended September 30, 1995
and 1994 is set forth on the following page. Earnings per share were
adjusted to reflect the three-for-two stock split. Amounts differ from
amounts previously reported on the Company's Form 10-Q's due to
elimination of discontinued operations of the Company's CVC Leasing
division.
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
1995
NET SALES $30,140,661 28,506,700 25,914,959 29,146,042
GROSS PROFIT $ 6,042,484 4,984,232 3,972,700 6,495,106
NET INCOME FROM CONTINUING OPERATIONS $ 1,628,149 956,026 499,164 1,450,193
INCOME PER SHARE FROM CONTINUING OPERATIONS $ .48 .28 .15 .43
1994
Net sales $21,219,830 24,247,343 22,188,008 24,406,382
Gross profit $ 3,519,340 4,003,622 3,645,492 5,789,597
Net income from continuing operations $ 860,622 882,837 704,522 1,480,871
Income per share from continuing operations $ .25 .26 .21 .44
</TABLE>
19
<PAGE> 22
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Cavco Industries:
We have audited the accompanying consolidated balance
sheets of CAVCO INDUSTRIES, INC. (an Arizona
corporation) and subsidiaries as of September 30, 1995
and 1994, and the related consolidated statements of
earnings and cash flows for the three years in the
period ended September 30, 1995. 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 Cavco Industries, Inc. and
subsidiaries as of September 30, 1995 and 1994, and the
results of their operations and their cash flows for
each of the three years in the period ended September
30, 1995, in conformity with generally accepted
accounting principles.
Arthur Andersen LLP
Phoenix, Arizona,
November 22, 1995
20
<PAGE> 23
OFFICERS AND DIRECTORS
ALFRED R. GHELFI -- President and Director of the Company since 1974, Chief
Executive Officer and Director of Action Healthcare
Management Services, Inc. since 1987. Chief Executive
Officer and Director of Sun Built Homes, Inc. since
1991. Chief Executive Officer and Director of National
Security Containers, Inc. since 1994. He works full
time for the company.
RUTH SMITH -- Secretary and a Director of the Company since 1974. Director
of Action Healthcare Management, Inc. since 1987. She works
part time for the company.
ROBERT WOLD -- Director of the Company since 1974. He is the President of
Manufactured Housing Consultants, Inc., a financial
consulting company.
STEPHEN H. KLEEMANN -- Director of the Company since 1984. Director of
Action Healthcare Management Services, Inc. since
1987. He is an officer of Kleemann Capital
Management, Inc., a financial consulting company.
WILLIAM R. BLANDIN -- Executive Vice President and a Director of the
Company since 1984. He works full time for the
Company.
ROBERT WARD -- Treasurer of the Company since 1984. Vice President and
Chief Financial Officer since 1990. Secretary and Treasurer
of Action Healthcare Management Services, Inc. and Sun Built
Homes, Inc., since 1991. Director of Action Healthcare
Management Services, Inc. since 1993. Secretary and
Treasurer of National Security Containers, Inc. since 1994.
He works full time for the Company.
WEN HARGIS -- Vice President of Manufacturing since 1992. He works full
time for the Company.
BRENT GHELFI -- Vice President of Cavco Industries, Inc. and President of
Sun Built Homes, Inc. since January 1995. He works
full-time for the Company.
<TABLE>
<CAPTION>
Legal Counsel Principal Banks Registrar & Transfer Agent
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
James S. Freedman Bank One, Arizona American Securities Transfer
4455 E. Camelback Rd., E160 201 N. Central Avenue 931 Quail Street
Phoenix, Arizona 85018 Dept. A-664 Suite 101
Phoenix, Arizona 85004 Lakewood, Colorado 80215
Zions Credit Corporation
Street 37 West 100 South
Salt Lake City, UT 84110-3954
</TABLE>
<PAGE> 24
EXECUTIVE OFFICES
301 EAST BETHANY HOME ROAD, SUITE C-178
PHOENIX, ARIZONA 85012 - PHONE (602) 265-0580
FAX (602) 277-3647
