<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C.
20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1995
Commission file number 0-6087
LINDAL CEDAR HOMES, INC.
(A Delaware Corporation)
4300 South 104th Place, Seattle, Washington 98178
Telephone number: (206) 725-0900
I.R.S. Employer Identification No. 91-0508250
Securities registered pursuant to Section 12(g) of the Act:
Common stock, par value $.01 per share
This Statement, excluding cover page, contains 42 pages
<PAGE> 2
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended December 31, 1995
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from to
----------
Commission file number 0-6087
LINDAL CEDAR HOMES, INC.
(Exact name of registrant as specified in charter)
<TABLE>
<CAPTION>
<S> <C>
Delaware 91-0508250
(State or other jurisdiction of organization) (I.R.S. Employer Identification No.)
4300 South 104th Place, Seattle, Washington 98178
(Address of principal executive offices) (Zip Code)
</TABLE>
<TABLE>
<S> <C>
(Registrant's telephone number, including area code) (206) 725-0900
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common stock, par value $.01 per share
(Title of Class)
</TABLE>
Aggregate market price of shares held by nonaffiliates at March 14, 1996 was
$6,217,485, consisting of 1,657,996 shares.
The number of shares of common stock outstanding on March 14, 1996 was 4,060,139
shares.
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 twelve 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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. /X/
---
The total number of pages in this Form 10-K is 42.
See index to exhibits on page 40.
-1-
<PAGE> 3
PART I
ITEM 1. BUSINESS
GENERAL
Lindal Cedar Homes, Inc. (the "Company") was incorporated under the laws
of the State of Washington in 1966. In 1986, the Company was reincorporated
under the laws of the State of Delaware.
The Company is primarily engaged in the manufacture and distribution of
custom cedar homes. The Company manufactures standard dimension cedar lumber.
This lumber is combined with other purchased forest products and building
materials into packages which can be shipped nationally and internationally to
the home buyer's construction site. The sale of homes accounted for 73% of
consolidated revenue in 1995, 71% of consolidated revenue in 1994 and 77% of
consolidated revenue in 1993. Sales of the homes totaled $30.7 million in 1995,
$28.2 million in 1994 and $32.4 million in 1993.
In 1995, 93% of the Company's home sales were made through approximately
175 independent dealers. The balance of the home sales were made from
Company-operated sales courts and through the Company's telemarketing
activities, which were phased out in 1995. In 1995, the Company owned or leased
11 display courts, eight of which were operated by independent dealers.
For approximately 11 years, the Company used a network of independent
manufacturer's representatives to recruit, train and support its home dealer
network. In 1993, the Company began expanding its regional sales management
structure, staffed by its employees, to replace the manufacturer's
representative functions. The transition was completed in 1995. The Company
believes this new organization structure allows better control of its sales
activities, and moves support and sales services closer to the dealers.
Traditionally, the Company has had three classes of dealers: Commercial,
Storefront/Design Center and Live-in. A Commercial dealer constructs a model
home in a commercial location and operates their business from it. The
Storefront/Design Center dealer displays and operates from a retail location. A
Live-in dealer uses a Lindal home as their residence and place of business. The
Company no longer actively recruits Live-in dealers. The Company has and
continues to encourage commercial dealerships as this class of dealer has
consistently proven to be superior. However, as the construction of a model home
is economically infeasible in some urban or sparsely populated areas, in 1994
the Company expanded the Storefront/Design Center concept. The Design Center,
which is professionally designed, is located in a shopping center environment.
It relies on in-store displays and point-of-sale materials, rather than a model
home to promote and sell the Company's products. The Storefront dealer
incorporates many of the features of the design center, but can be opened for a
smaller investment. Of the Company's 175 dealers, approximately 40% were
Commercial dealers. There were 10 operating Storefront/Design Centers at the end
of 1995.
The Company has three home products: the Cedar Frame, the Access (formerly
the Cedarway product) and Cedar: Solid Home. The Cedar Frame Home utilizes a
cavity wall. The Cedar: Solid Home utilizes, predominantly, a solid cedar wall.
The Access product retains many of the features of the Cedar Frame Home,
including a cavity wall. However, its list price is approximately 25% to 30%
lower than a Cedar Frame Home due to a less extensive package of materials and
less expensive package components. In 1995, the Access product accounted for 12%
of home sales revenue and 17% of the home units shipped.
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<PAGE> 4
The Company sells homes both for year-round and vacation occupancy. Most of
the purchasers of such homes are professional and business people with higher
than average incomes. In recent years, approximately 70% of the Company's homes
have been purchased for use as primary residences.
The Company's principal competitor in its home market is the local custom
builder; however, in some circumstances it may also compete with other pre-cut,
pre-fab and modular building firms. The primary basis for competition is design
services, quality of materials, price and service.
The Company's revenues tend to be seasonal. Most home shipments
traditionally occur between April and October. It is the Company's policy to
carry sufficient amounts of inventory to respond to the needs of its customers.
In 1995, 1994 and 1993, no single customer or dealer accounted for 10% or more
of consolidated revenue.
Besides being seasonal, the housing industry is cyclical. The Company
follows industry patterns, but believes that it is somewhat better equipped to
weather industry downturns than other manufacturers or builders with lower cost
products that appeal to a larger but less affluent market. This belief is based
upon the Lindal products' traditional appeal to the middle and upper income
consumers who historically have been less affected by economic downturns.
The Company recognizes revenue from orders when the home package is
shipped. The total backlog approximated $22 million at December 31, 1995, $19
million at December 31, 1994 and $12 million at December 31, 1993. Of the orders
for homes that the Company had at December 31, 1995, it was estimated that
approximately $2.5 million were probable to ship in the first two months of
1996. At December 31, 1994, $2.7 million were considered probable to ship in the
first two months of 1995. At December 31, 1993, $3.0 million of homes were
considered probable to ship in the first two months of 1994. Because the
Company's business is seasonal, the backlog data and the December 31 estimates
of homes that are probable to ship in the next 60 days do not necessarily
reflect the level of the Company's business on an annual basis.
RAW MATERIALS
The primary raw material used by the Company in its manufacturing is
western red cedar, available in quantity only in British Columbia, Canada,
Alaska and the Pacific Northwest United States. Pressures are continuing to be
placed on the log market by harvesting restrictions in the United States and
Canada. In 1995, the price of cedar logs generally continued at its elevated
level. The Company is aware of the potential for shortages and/or fluctuations
in the price of cedar logs. At December 31, 1995, the Company believes it can
meet its requirements for all of 1996 based on current market conditions.
The Company is also working to secure its cedar raw material needs on a
longer term basis. The Province of British Columbia established a program which
sets aside a portion of the allowable annual harvesting of timber for smaller
companies. The harvesting rights are sold, through timber sales, to companies
which can demonstrate the highest value being added to the raw lumber through
efforts made in British Columbia. In 1994, the Company was notified that it had
been granted the rights to harvest approximately 50,000 cubic meters of timber
between 1994 and 1997. The Company entered into a joint venture with a third
party, who provided services related to the planning, management of timber
harvesting and marketing of the logs. As the majority of the timber was not
cedar and/or not suitable for processing in the Company's sawmill, the timber
harvested was sold on the log market in Canada. By having these logs available
for sale, the purchase of cedar logs for the Company's sawmill was greatly
facilitated in 1994 and 1995. The harvesting of logs began in the fourth quarter
of 1994. The sale of the harvested logs was essentially completed in the second
quarterof 1995. Earnings, before income taxes, were $1,022,000 from this venture
in 1995. Refer
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<PAGE> 5
to note 1(d) to the consolidated financial statements on page 23 of this report
for additional information.
Currently bids are being placed on additional timber sales. The majority of
this timber will not be cedar and/or not suitable for processing in the
Company's sawmill. If a sale or sales are obtained, it is not expected to be as
profitable as the just completed venture primarily due to the price that will be
paid for the harvesting rights and the anticipated market conditions. Presently,
the Company plans to form another joint venture to harvest the timber and sell
the logs. The ability to control timber rights is expected to facilitate the
purchase of cedar logs or lumber for the term of the sale or sales. The term of
harvesting rights obtained in any single timber sale is expected to be 5 to 6
years. However, it is expected that additional sales will be obtained for at
least another five years. Two of the conditions of obtaining a timber sale are
that home shipments be made from British Columbia and that substantial lumber
remanufacturing activities be carried out in British Columbia.
Currently, home shipments are made from Surrey, British Columbia and Kent,
Washington. In anticipation of receiving a timber sale that would be acceptable
to the Company, employees at the Kent Washington facility were notified in late
February 1996 that the home shipment operations will be moved to British
Columbia within the next year. The Company is currently negotiating a
termination package for the 12 union employees affected. The three non-union
employees are expected to be assigned to other positions.
The Company believes that there are significant benefits to the maximum
practical consolidation of manufacturing and distribution operations.
Accordingly, the consolidation of sunroom and window manufacturing is also being
studied. This consolidation would occur in the state of Washington. Currently,
windows are manufactured by the Company in Kirkland, Washington and sunrooms, on
a contract basis by a third party, in Tacoma, Washington.
Assuming that an acceptable timber sale is received, a consolidation of the
lumber remanufacturing is also anticipated. Lumber is currently remanufactured
by the Company in Tacoma, Washington and Surrey, British Columbia. It is
expected that most lumber remanufacturing for homes will occur at the location
from which the homes are shipped, though no timetable for this consolidation has
been established.
Also in anticipation of obtaining a timber sale, a 10 year agreement was
obtained with the union for the Canadian plant employees. This agreement
provides that the new jobs being located in Canada will be at wage rates
starting at 60% of the present British Columbia Coast Master Agreement and
rising, over the next 10 years, to a maximum of 80% of that agreement.
The Surrey, British Columbia location also includes a sawmill which
currently produces the majority of the Company's cedar lumber needs. Most of the
sawmill's output that meets quality standards is remanufactured into the cedar
components of homes. Preferably, the higher grades of lumber are used in home
packages, where the margins are better. Sawmill production that is not of a
grade suitable for use in homes or is in excess of requirements for home sales
is sold on the commodity lumber market. Material sales, primarily commodity
lumber from all locations, approximated $3.8 million in 1995, $4.0 million in
1994 and $3.0 million in 1993.
As previously stated, the obtaining of additional timber sales will greatly
facilitate the procurement of cedar logs or lumber and benefit the Company
through the operations of the joint venture. However, if acceptable timber sales
are not obtained, the Company believes that, for the next two to four years,
cedar logs will be available through well established markets.After that time,
the future of the sawmill operations is currently not known. However, it is
believed that sufficient supplies of cedar lumber will be available, through
established markets, to produce the Company's cedar homes for the foreseeable
future.
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<PAGE> 6
Although cedar logs are the primary raw material used in manufacturing, the
Company purchases substantial quantities of forest products on the commodity
market to ship in its home packages. Since 1993, the Company has experienced the
extreme volatility and record price levels that have been present throughout the
forest products industry. Presently, the Company does not anticipate any serious
problems in securing the needed forest products in the foreseeable future. The
Company does expect that the price volatility may intermittently occur for some
time. For this reason, in January 1994 Company began hedging a portion of the
expected non-cedar lumber needs using options and futures contracts. The Company
may also make selected strategic purchases, when relatively favorable prices
exist in the market, of larger quantities than it has historically. These
purchases are not expected to be in excess of anticipated needs.
FOREIGN OPERATIONS
The Canadian operations have traditionally supplied wood products to the
U.S. facilities and engaged in sales outside the United States. Sales to
unaffiliated customers of the Canadian operations during 1995, 1994 and 1993
were as follows (in thousands of U.S. dollars):
<TABLE>
<CAPTION>
1995 1994 1993
--------------------
<S> <C> <C> <C>
Home sales - Canadian $1,853 2,074 2,734
Home sales - overseas - 687 2,282
Other operating revenue 3,600 3,396 2,446
--------------------
Total foreign sales $5,453 6,157 7,462
====================
</TABLE>
The U.S. parent company had export sales totaling $2.4 million in 1995 and
$1.5 million in 1994. The U.S. parent had no export sales in 1993.
For additional information on the Company's foreign operations, refer to
note 9 to the consolidated financial statements on pages 35-36 of this report.
EMPLOYEES
At the end of February 1996, the Company had 215 employees.
A significant number of the Company's Surrey, British Columbia employees
are covered by a collective bargaining agreement with the IWA-Canada. In 1994
the collective bargaining agreement was extended to June 1997. In anticipation
of obtaining a timber sale, a 10-year agreement was negotiated with this union.
This agreement provides that the new jobs created through the consolidation of
operations will be at wage rates starting at 60% of the present British Columbia
Coast Master Agreement and rising, over the next 10 years, to a maximum of 80%
of that agreement. For additional information, refer to note 7(b) to the
consolidated financial statements on page 35 of this report.
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<PAGE> 7
ITEM 2. PROPERTIES
Information with respect to the location of the Company's principal
locations, which are owned unless otherwise stated, at December 31, 1995 is as
follows:
- Seattle, Washington head office complex on two acres, with a 13,000
square foot office building and two display models.
- Seattle, Washington business park adjacent to the head office complex
on five acres, with 86,000 square feet of concrete tilt-up warehouse.
The Company is using approximately 12,310 square feet for storage and
office space. The balance of the facility is leased to third parties.
At December 31, 1995, all 86,000 square feet is either leased or used
by the Company.
- Surrey, British Columbia manufacturing plant, warehouse, dry kilns and
sawmill on ten acres with 61,000 square feet under roof. Canadian and,
at times, some overseas destined home shipments originate from this
facility. The leases for this land expire in January 1997 and June 1999
and are expected to be renewed in the ordinary course of business.
These leases have been renewed regularly since the early 1970's.
- Kent, Washington 38,000 square foot warehouse on two acres of land.
U.S. destined and recently most overseas home shipments originate from
this facility.
- Renfrew, Ontario facility on 21 acres with 110,000 square feet under
roof. The Company is using approximately 11,000 square feet for office
and warehouse facilities. The rest of the facility is leased to third
parties. At December 31, 1995, approximately 100,000 square feet is
either leased or used by the Company.
- Tacoma, Washington woodworking operation (including dry kilns) on four
acres with approximately 47,000 square feet under roof. Leases on the
land and buildings expire in 2000. An additional 24,000 square feet of
covered storage is currently being rented on a month-to-month basis.
- Land for 11 sales locations, including the head office display court.
Six parcels are owned (three in Washington and one each in California,
Massachusetts and British Columbia) and five parcels are leased (two in
Hawaii and one each in Ontario, Alberta and Japan). Additionally, one
parcel of land owned by the Company (Michigan) had a model under
construction. The Company also owns three parcels of undeveloped land
(two in Washington and one each in California and Ontario) that it
intends to use for future sales locations.
- Kirkland, Washington 36,000 square foot manufacturing/warehousing
facility under a lease expiring in 1998. This facility is used for the
manufacture of windows.
- Office space, ranging from 240 to 450 square feet per location, is
leased in Michigan, Utah and Virginia for use as regional sales
offices. The leases are either month-to-month or expire in 1996.
ITEM 3. LEGAL PROCEEDINGS
The Company is presently involved in several lawsuits which are considered
ordinary, routine litigation incidental to the business of the Company. Accruals
provided are believed adequate to offset any known future liabilities that may
arise from these legal actions.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
fourth quarter of 1995.
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<PAGE> 8
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) Market information:
The Company's common stock is traded on The NASDAQ Stock Market under
the symbol LNDL. The following table sets forth the reported high and
low activity for each quarter of 1995 and 1994 as reported by NASDAQ.
<TABLE>
<CAPTION>
High Low
----- ----
<S> <C> <C>
1995
- ----
First quarter $4.75 3.25
Second quarter 4.38 3.63
Third quarter 5.00 3.38
Fourth quarter 5.00 4.00
1994
- ----
First quarter 6.00 4.50
Second quarter 5.25 4.00
Third quarter 4.25 3.00
Fourth quarter 4.00 3.00
</TABLE>
(b) Approximate number of shareholders of record, including
beneficial shareholders:
<TABLE>
<CAPTION>
Title of class March 14, 1996
-------------- --------------
<S> <C>
Common stock of $.01 par value 1,465
</TABLE>
(c) Dividends:
No cash dividends were paid in 1995 or 1994, and the Company does not
expect to pay a cash dividend in 1996.
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<PAGE> 9
ITEM 6. SELECTED FINANCIAL DATA
(In thousands, except ratios and per share amounts)
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenue $42,311 39,533 41,996 38,583 37,286
Operating income 653 1,251 1,254 2,282 2,613
Earnings before
extraordinary item
and cumulative
effect of
accounting change 1,337 1,017 865 1,688 1,753
Net earnings 1,337 1,017 708 1,688 1,817
Earnings per common
share before
extraordinary item
and cumulative
effect of
accounting change .33 .25 .21 .41 .43
Net earnings per
common share .33 .25 .17 .41 .45
Total assets 27,992 26,914 25,144 25,029 24,585
Working capital 8,840 8,399 8,084 7,715 5,805
Long-term debt 1,216 1,864 1,951 2,115 2,201
Current ratio 2.20:1 2.16:1 2.33:1 2.19:1 1.78:1
</TABLE>
The computation of earnings per common share for all periods presented
gives effect to a 5-for-4 stock split effected in the form of a 25% stock
dividend issued April 27, 1992 and 10% stock dividends issued on May 12, 1993
and May 27, 1991.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Company's policy is that all home and sunroom orders be accompanied by
a cash deposit and that units be paid in full before shipment or be shipped on a
C.O.D. basis. The majority of home and sunroom sales are prepaid. Lumber sales
are made on terms common to the lumber industry.
The Company pays its vendors within stated terms and takes advantage of
discounts for early payment. Customer deposits for home and sunroom orders and
operations are the Company's primary sources of cash. The Company does not
foresee the need to increase its lines of credit in 1996. Traditionally,
operations have been the primary source of funds for expansion and/or facilities
acquisition.
As previously stated, the Company is beginning a process of consolidating
its manufacturing and distribution operations. Assuming that an acceptable
timber sale is obtained, a significant investment in a lumber
remanufacturing/home distribution facility in British Columbia is anticipated.
The Company is also studying the consolidation of its sunroom and window
operations in Washington state. Given the number of unresolved variables, the
amount of the potential investment cannot currently be fixed. Accordingly, if a
timber sale is obtained, a study of its acceptability in light of the required
capital investment, operational viability and many other factors relating to the
consolidation in British Columbia will be undertaken. Assuming that one or both
studies related to consolidation prove advantageous, the capital investment is
planned to be partially funded by the sale of properties. The Company
anticipates that additional sources of financing will be required to complete
the expected consolidations.
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<PAGE> 10
Cash and cash equivalents decreased $1.6 million (48%) from December 31,
1994 to 1995 due primarily to the $1.2 million (261%) increase in short-term
investments. At December 31, 1995, short-term investments were primarily
comprised of bankers acceptances. Approximately 85% of the short-term
investments mature, at planned intervals, before May 1, 1996. Cash and cash
equivalents is traditionally at its lowest level in the first quarter of the
year. Should the Company have a need to borrow for operating needs, it has
available lines of credit totaling $2.9 million. The Company did not use the
available lines of credit, at any time, in 1995, 1994 or 1993.
In 1995, the Company also paid off an 11% mortgage that was due in 2010,
increased its raw materials, work-in-process and finished goods inventories due
to some strategic purchases and reduced its accounts payable.
At December 31, 1994, $500,000 was included in trade receivables for the
estimated refund of duty paid on Canadian lumber for the period August 1992 to
February 1994. In 1995 the refunds of this duty totalled $765,000. The cost of
goods sold in 1995 and 1994 was reduced $265,000 and $500,000, respectively. In
1994 cost of goods sold was also reduced for $170,000 due to the reversal of
estimated duty that had been recorded in 1992 for goods that entered the U.S. in
bond from March 1992 to July 1992. Additionally, interest income in 1995
included $123,000 paid on the tax amounts that were refunded. The Company does
not expect any significant duty refunds in 1996.
Trade receivables increased $300,000 (15%) from December 31, 1994 to
December 31, 1995 due primarily to increased home sales in December 1995.
Inventories increased $38,000 (0%) from December 31, 1994 to December 31,
1995. Raw materials, work-in-process and finished goods inventories increased
$448,000 (6%) due primarily to some selected strategic purchases. Display homes
inventory, net of accumulated amortization, decreased $410,000 (26%) due to
amortization and the sale of one model. There were no significant additions to
display model inventory in 1995. Raw materials, work-in-process and finished
goods inventories turned over 4.5 times in 1995, 4.1 times in 1994 and 4.3 times
in 1993. If the $265,000 and $670,000 reductions to the cost of goods sold
related to the duty on Canadian lumber are reversed from 1995 and 1994, raw
materials, work-in-process and finished goods inventories turned over 4.5 and
4.2 times, respectively.
In 1994, the Company began hedging a portion of the non-cedar lumber needs
for its home packages. Futures contracts and options are being used. The
program's objective is to manage well-defined commodity price risks. These
derivative financial instruments are not being used for trading purposes. Refer
to note 1(i) to the consolidated financial statements on page 24 of this report
for additional information.
Prepaid expenses increased $515,000 (36%) from December 31, 1994 to
December 31, 1995 due primarily to increased planbook inventory. In 1994, the
new Lindal planbook, Originals, was introduced. In 1996, a reprint of Originals
is planned. The estimated cost of the reprint is $850,000 to $950,000.
Accounts payable-trade decreased $763,000 (34%) from December 31, 1994 to
December 31, 1995 due primarily to the timing of certain payments and the
accrual, at December 31, 1994, of a $400,000 payment for the new planbook.
Accrued salaries and wages increased $145,000 (31%) from December 31, 1994
to December 31, 1995 due to an increased accrual for profit sharing.
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<PAGE> 11
Long-term debt decreased $648,000 (35%) from December 31, 1994 to December
31, 1995 due primarily to the September 1995 pay-off of an 11% mortgage that was
due in 2010. At December 31, 1994, this mortgage had a balance owing of
$616,000.
In 1995, the Company invested $659,000 in computer related equipment and
software and office machines, $394,000 in manufacturing equipment, $218,000 in
land improvements and $317,000 for all other capital expenditures. All 1995
capital expenditures were financed from operations.
In 1994, the Company invested $1,023,000 in display model and design center
construction or acquisition and furnishings, $223,000 to purchase land for
future display model locations, $241,000 for computer related equipment and
software and other office machines, $70,000 to improve the Tacoma woodworking
facility and $193,000 for all other capital expenditures. All 1994 capital
expenditures were financed from operations.
In 1993, the Company invested $248,000 for display model construction,
$111,000 to purchase land for a future display model location, $181,000 for
computer related equipment and software, $73,000 for improvements to the
business park that is adjacent to the Company's head office, $60,000 to improve
the Tacoma woodworking facility and $208,000 for all other capital expenditures.
All 1993 capital expenditures were financed from operations.
In addition to the $850,000 to $950,000 for the reprinting of the current
planbook, the Company is considering, for 1996, the construction of one to three
display models and will continue to evaluate other purchases/projects to
determine if investment is warranted. The Company expects to finance these
commitments with funds generated from operations. The aforementioned investment
in consolidation of its manufacturing and distribution operations is not
anticipated to be material in 1996.
RESULTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995 AND 1994
Revenue increased $2.8 million (7%) from 1994 to 1995. Home and sunroom
sales revenue increased $2.7 million (9%) from $30.8 million in 1994 to $33.5
million in 1995. The number of home units shipped increased 5% from 413 in 1994
to 433 in 1995. The average revenue per home unit shipped increased 5% from
approximately $67,800 in 1994 to $71,000 in 1995 primarily due to price
increases.
The gross profit percentage (gross profit/revenue) decreased from 26.3% in
1994 to 24.9% in 1995. The cost of goods sold in 1994 and 1995 were reduced
$670,000 and $265,000, respectively, related to the estimated refund of duty.
With these credits removed from the cost of goods sold, the gross profit
percentage was 24.6% in 1994 compared to 24.3% in 1995.
Selling, general and administrative expenses increased $665,000 (8%) from
1994 to 1995. Salaries and related benefits increased $410,000 (11%). Bad debt
expense increased $140,000 due to the 1994 reversal of previously accrued
amounts. Amortization of deferred marketing costs, primarily associated with the
current planbook, increased $130,000 (199%) . Amortization of these costs began
in September 1994. Settlement and related legal expenses associated with various
matters incidental to the business of the Company increased $73,000 (73%).
Commission expense decreased $219,000 (29%) primarily due to the phase-out of
the manufacturer's representative program, which was replaced by the expanded
regional management structure.
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<PAGE> 12
Display court expenses increased $79,000 (13%) from 1994 to 1995 due to
growth in the number of display models.
Equity in earnings of affiliate, which were generated by a 50% owned joint
venture, were $1,022,000 in 1995. This joint venture was formed to harvest and
sell logs from the timber sale that was obtained in 1994. There was no equity in
earnings of affiliate in 1994 or 1993.
Interest income increased $264,000 (222%) from 1994 to 1995 due to interest
paid on duty amounts that were refunded and additional funds being available to
invest in 1995.
Income tax expense increased $431,000 (109%) from 1994 to 1995 due
primarily to the significant increase in earnings of the Canadian subsidiaries
at the higher effective tax rate. In 1994 the Company's Canadian subsidiary had
a loss, before income tax expense, of $114,000. In 1995 it had earnings, before
income taxes, of $805,000. The effective Canadian tax rate in 1995
approximated 42%.
YEARS ENDED DECEMBER 31, 1994 AND 1993
Revenue decreased $2.5 million (6%) from 1993 to 1994. Home and sunroom
sales revenue decreased $4.5 million (13%) from $35.3 million in 1993 to $30.8
million in 1994. The number of home units shipped decreased 21% from 526 in 1993
to 413 in 1994. The average revenue per home unit shipped increased 10% from
approximately $61,500 in 1993 to $67,800 in 1994 primarily due to price
increases.
Material and chips sales revenue increased $1.1 million (33%) from 1993 to
1994. All other revenue sources increased $.9 million (26%) due primarily to
revenue recognized due to the production of home plans.
The gross profit percentage (gross profit/revenue) increased from 24.0% in
1993 to 26.3% in 1994. The 1994 cost of goods sold was reduced $670,000 related
to the estimated refund of duty. With this $670,000 credit removed from the cost
of goods sold, the gross profit percentage for 1994 was 24.6%. The benefit of
home price increases in 1993 and 1994 was partially offset by increased material
sales, which have minimal margins, and costs not related to forest and building
products.
Selling, general and administrative expenses increased $161,000 (2%) from
1993 to 1994. Salaries and related benefits and travel and entertainment
increased $588,000 (18%) and $143,000 (55%), respectively, due primarily to the
expanded regional sales management structure. Commission expense decreased
$388,000 (34%) primarily due to the phase-out of the manufacturer's
representative program, which is being replaced by the expanded regional
management structure. Advertising increased $146,000 (12%) due largely to the
strategy of increasing national exposure to generate more leads in the second
half of 1994, after the disappointing new orders the Company experienced in the
first quarter of 1994. Settlement and related legal expenses associated with
various matters incidental to the business of the Company decreased $300,000
(75%) due to reduced legal activity.
Display court expenses increased $183,000 (43%) from 1993 to 1994 due to
growth in the number of display models.
OTHER MATTERS
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121 (SFAS 121) which establishes accounting
standards for the impairment of long-lived assets and certain identifiable
intangibles, and goodwill related to those assets to be held and used. This
standard also applies to long-lived assets and certain identifiable intangibles
to be disposed of. SFAS 121 requires that long-lived assets and certain
identifiable intangibles to be held and
-11-
<PAGE> 13
used by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The Company must adopt SFAS 121 in 1996. Management believes
adoption of SFAS 121 will not impact the Company's financial position and
results of operations.
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123 (SFAS 123) which addresses the
accounting for stock-based compensation arrangements. SFAS 123 permits a company
to choose either a new fair-value-based method or the current APB Opinion 25
intrinsic-value-based method of accounting for stock-based compensation
arrangements. The statement requires pro forma disclosures of net income and
earnings per share computed as if the fair-value-based method had been applied
in financial statements of companies that continue to follow current practices
in accounting for such arrangements under APB Opinion 25. The Company must adopt
SFAS 123 for the year ending December 31, 1996. Management will continue to
record stock-based compensation using the current APB Opinion 25
intrinsic-value-based method and, therefore, believes adoption of SFAS 123 will
not impact the Company's financial position and results of operations.
Effective January 1, 1993, the Company changed its method of accounting for
income taxes. For additional information, refer to notes 1(k) and 5 to the
consolidated financial statements on pages 25 and 32-33, respectively, of this
report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements are listed in the index to consolidated financial
statements and schedules on page 14 of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information required under this item is contained in the Registrant's 1996
Proxy Statement, and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information required under this item is contained in the Registrant's 1996
Proxy Statement, and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required under this item is contained in the Registrant's 1996
Proxy Statement, and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required under this item is contained in the Registrant's 1996
Proxy Statement, and is incorporated herein by reference. See also notes 4(d)
and 8 to the consolidated financial statements on pages 31-32 and 35 of this
report for information regarding related party transactions.
-12-
<PAGE> 14
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements and Financial Statement Schedules: See
page 14 for index to consolidated financial statements and schedules.
(b) No reports on Form 8-K were filed during the last quarter of the
period covered by this report.
(c) Exhibits: See page 40 for index to exhibits.
-13-
<PAGE> 15
LINDAL CEDAR HOMES, INC.
Index to Consolidated Financial Statements and Schedules
Financial Statements
<TABLE>
<CAPTION>
Pages
<S> <C>
Independent Auditors' Report 15
Consolidated Balance Sheets as of December 31, 1995 and 1994 17-18
Consolidated Statements of Earnings for each of the years
in the three-year period ended December 31, 1995 19
Consolidated Statements of Stockholders' Equity for each of
the years in the three-year period ended December 31, 1995 20
Consolidated Statements of Cash Flows for the each of the
years in the three-year period ended December 31, 1995 21-22
Notes to Consolidated Financial Statements 23-36
Schedules
Schedule II - Valuation and Qualifying Accounts 37
All other schedules are omitted because they are not
required or because the information is presented in the
consolidated financial statements or the notes thereto.
</TABLE>
-14-
<PAGE> 16
INDEPENDENT AUDITORS' REPORT
================================================================================
The Board of Directors and Stockholders
Lindal Cedar Homes, Inc.:
We have audited the consolidated financial statements of Lindal Cedar Homes,
Inc. and subsidiaries as listed in the accompanying index. In connection with
our audits of the consolidated financial statements, we also have audited the
financial statement schedule as listed in the accompanying index. These
consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement
schedule 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Lindal Cedar Homes,
Inc. and subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1995, in conformity with generally accepted accounting
principles. Also in our opinion, the related financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set forth
therein.
As discussed in note 1(k) to the consolidated financial statements, the Company
changed its method of accounting for income taxes in 1993.
/s/ KPMG Peat Marwick LLP
Seattle, Washington
February 17, 1996
-15-
<PAGE> 17
CONSOLIDATED FINANCIAL STATEMENTS
AND SCHEDULES
-16-
<PAGE> 18
LINDAL CEDAR HOMES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994
(Dollar amounts in thousands, except per share amounts)
<TABLE>
<CAPTION>
=====================================================================================================
Assets 1995 1994
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents, including time deposits of
$1,359 in 1995 and $2,428 in 1994 $ 1,661 3,219
Short-term investments 1,714 475
Receivables:
Trade 2,342 2,042
Current installments of long-term notes receivable 106 46
Refundable income taxes - 59
-------------------
2,448 2,147
Less allowance for doubtful receivables 204 203
-------------------
Net receivables 2,244 1,944
Inventories 8,526 8,488
Prepaid expenses 1,930 1,415
Deferred income taxes 157 103
-------------------
Total current assets 16,232 15,644
Long-term notes receivable, excluding current installments 517 601
Investment in affiliate 45 340
Property, plant and equipment, at cost less accumulated
depreciation and amortization 10,500 9,679
Other assets, at cost less accumulated amortization of
$315 in 1995 and $118 in 1994 698 650
- -----------------------------------------------------------------------------------------------------
$ 27,992 26,914
=====================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
-17-
<PAGE> 19
CONSOLIDATED BALANCE SHEETS, CONTINUED
<TABLE>
<CAPTION>
(Dollar amounts in thousands, except per share amounts)
====================================================================================================
Liabilities and Stockholders' Equity 1995 1994
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Current liabilities:
Current installments of long-term debt $ 48 59
Accounts payable - trade 1,492 2,255
Accrued salaries and wages 617 472
Other accrued expenses 682 577
Income taxes payable 188 -
Customer deposits 4,365 3,882
---------------
Total current liabilities 7,392 7,245
Long-term debt, excluding current installments 1,216 1,864
Deferred income taxes 104 107
Stockholders' equity:
Common stock, $.01 par value. Authorized 10,000,000 shares;
issued and outstanding 4,060,139 shares in 1995 and
4,030,873 shares in 1994 41 40
Additional paid-in capital 15,856 15,778
Cumulative translation adjustment (644) (810)
Retained earnings 4,027 2,690
----------------
Total stockholders' equity 19,280 17,698
- -----------------------------------------------------------------------------------------------------
$27,992 26,914
=====================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
-18-
<PAGE> 20
LINDAL CEDAR HOMES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
Years ended December 31, 1995, 1994 and 1993
(Dollar amounts in thousands, except per share amounts)
<TABLE>
<CAPTION>
===============================================================================================
1995 1994 1993
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue $42,311 39,533 41,996
Cost of goods sold 31,758 29,126 31,930
------------------------------
Gross profit 10,553 10,407 10,066
Operating expenses:
Selling, general and administrative expenses 9,209 8,544 8,383
Display court expenses 691 612 429
------------------------------
Total operating expenses 9,900 9,156 8,812
------------------------------
Operating income 653 1,251 1,254
Other income (expense):
Equity in earnings of affiliate 1,022 - -
Rental income 326 187 201
Interest income 383 119 132
Interest expense (223) (204) (222)
Other, net 5 62 4
------------------------------
Other income, net 1,513 164 115
------------------------------
Earnings before income tax expense and
cumulative effect of accounting change 2,166 1,415 1,369
Income tax expense 829 398 504
------------------------------
Earnings before cumulative effect of
accounting change 1,337 1,017 865
Cumulative effect of change in accounting for income taxes - - (157)
------------------------------
Net earnings $ 1,337 1,017 708
==============================
Earnings (loss) per common share:
Before cumulative effect of accounting change .33 .25 .21
Cumulative effect of accounting change - - (.04)
- -----------------------------------------------------------------------------------------------
Net earnings per common share $ .33 .25 .17
===============================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
-19-
<PAGE> 21
LINDAL CEDAR HOMES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended December 31, 1995, 1994 and 1993
(Dollar amounts in thousands, except share amounts)
<TABLE>
<CAPTION>
======================================================================================================
Number Additional Cumulative
of shares Common paid-in translation Retained
outstanding stock capital adjustment earnings
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balances at December 31, 1992 3,622,874 $ 36 13,141 (261) 3,506
Stock options exercised 35,200 - 70 - -
10% stock dividend including $1
for fractional shares; issued
May 12, 1993 at fair market value 362,900 4 2,537 - (2,541)
Current year translation adjustment - - - (230) -
Net earnings 1993 - - - - 708
-------------------------------------------------------------
Balances at December 31, 1993 4,020,974 40 15,748 (491) 1,673
Stock options exercised and shares
issued through the Employee Stock
Purchase Plan 9,899 - 30 - -
Current year translation adjustment - - - (319) -
Net earnings 1994 - - - - 1,017
-------------------------------------------------------------
Balances at December 31, 1994 4,030,873 40 15,778 (810) 2,690
Stock options exercised and shares
issued through the Employee Stock
Purchase Plan 24,266 1 57 - -
Issuance of restricted stock 5,000 - 21 - -
Current year translation adjustment - - - 166 -
Net earnings 1995 - - - - 1,337
- ------------------------------------------------------------------------------------------------------
Balances at December 31, 1995 4,060,139 $ 41 15,856 (644) 4,027
======================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
-20-
<PAGE> 22
LINDAL CEDAR HOMES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1995, 1994 and 1993
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
===================================================================================================
Increase (Decrease) in Cash and Cash Equivalents 1995 1994 1993
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Cash received from customers $ 41,895 39,887 41,896
Cash paid to suppliers and employees (40,589) (37,109) (39,568)
Distribution of earnings from affiliate 1,022 - -
Interest received 378 99 115
Interest paid (229) (206) (223)
Income taxes paid (630) (600) (373)
Cash paid for litigation settlement, including related
legal fees (186) (107) (389)
--------------------------------
Net cash provided by operating activities 1,661 1,964 1,458
Cash flows from investing activities:
Purchase of short-term investments (4,218) (574) (2,376)
Liquidation of short-term investments 2,982 1,774 1,897
Cash received for repayment of notes (not related to the
sale of homes) 356 216 106
Cash received from sale of property, equipment and
furniture and fixtures 2 219 5
Additions to property, plant and equipment (1,557) (822) (638)
Disbursements for loans (not related to the sale of homes) (258) (271) (192)
Additions to other assets (244) (191) (348)
Investment in affiliate (365) (346) -
Return of investment in affiliate 666 - -
------------------------------
Net cash provided by (used in) investing (2,636) 5 (1,546)
activities
Cash flows from financing activities:
Proceeds from exercise of stock options and stock
purchased through the Employee Stock Purchase Plan 58 30 70
Cash paid in lieu of fractional shares for stock dividends
and stock split - - (1)
Repayment of long-term debt (53) (53) (81)
Retirement of long-term debt (604) (98) (79)
Additions to long-term debt - 36 -
------------------------------
Net cash used in financing activities (599) (85) (91)
Effect of exchange rates on cash and cash equivalents 16 (27) (32)
------------------------------
Net increase (decrease) in cash and cash (1,558) 1,857 (211)
equivalents
Cash and cash equivalents at beginning of year 3,219 1,362 1,573
- ---------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 1,661 3,219 1,362
===================================================================================================
(Continued)
</TABLE>
See accompanying notes to consolidated financial statements.
-21-
<PAGE> 23
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
=================================================================================================
1995 1994 1993
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Reconciliation of net earnings to net cash provided by operating
activities:
Net earnings $1,337 1,017 708
------------------------------
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization of plant and
equipment 798 785 824
Amortization of other assets 196 65 18
Amortization of display homes 245 199 123
Gain on disposal of property, equipment and
furniture and fixtures (1) (65) (4)
Undistributed loss of affiliate - 6 -
Deferred income tax expense (55) 76 113
Compensation expense related to restricted stock 21 - -
Change in asset and liabilities:
(Increase) decrease in net receivables (188) (474) 25
Increase in inventories (196) (524) (322)
(Increase) decrease in prepaid expenses (527) (348) 361
Increase (decrease) in current liabilities
other than current portion of long-term debt 182 1,171 (359)
Notes receivable decrease (increase) related to
operating activities (157) 56 (29)
Decrease in other assets related to operating
activities 6 - -
------------------------------
Total adjustments 324 947 750
- -------------------------------------------------------------------------------------------------
Net cash provided by operating activities $1,661 1,964 1,458
=================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
-22-
<PAGE> 24
LINDAL CEDAR HOMES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
(Dollar amounts in thousands, except per share amounts)
===============================================================================
(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) DESCRIPTION OF BUSINESS
Lindal Cedar Homes, Inc. (Company) sells high quality, custom cedar home
packages to customers, domestically and internationally, through its
network of approximately 175 independent dealers. The Company generally
requires cash deposits upon placement of order and final payment upon
shipment of the home package.
(B) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the
Company and its Canadian and domestic wholly-owned subsidiaries. All
significant intercompany balances and transactions have been eliminated
in consolidation.
(C) USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
(D) INVESTMENT IN AFFILIATE
In 1994, the Company acquired a 50% interest in a corporate joint
venture (JV) which is accounted for in accordance with the equity
method. The remaining 50% interest is held by an unaffiliated company.
Any contributions to the JV, which were made for working capital
requirements, and asset or equity distributions from the JV are made in
accordance with the respective ownership interests. The JV was formed to
harvest timber in British Columbia, Canada. The harvesting of the timber
began in the fourth quarter of 1994. The sale of the harvested logs was
essentially completed in the second quarter of 1995.
(E) FOREIGN EXCHANGE
Assets and liabilities denominated in foreign currencies are translated
at year-end exchange rates, stockholders' equity at historical rates,
and revenue and expenses at weighted-average rates during the year. The
resulting translation adjustment is reported as a component of
stockholders' equity.
(F) CASH EQUIVALENTS
For purposes of the consolidated statements of cash flows, the Company
considers all short-term investments with a maturity at date of purchase
of three months or less to be cash equivalents.
(Continued)
-23-
<PAGE> 25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share amounts)
===============================================================================
(G) SHORT-TERM INVESTMENTS
Short-term investments consist of securities maturing within one year,
and are classified as available-for-sale. Accordingly, these investments
are carried at fair value, and the Company records any unrealized
holding gains and losses, net of income taxes, as a separate component
of stockholders' equity.
(H) INVENTORIES
Inventories are stated at the lower of cost (principally first-in,
first-out) or market (net realizable value).
The Company has erected display homes in various metropolitan and
recreational areas for display to the public and has adopted the policy
of charging 20% of the original cost (net of estimated residual value)
of such homes against income annually. It is also the Company's policy
to offer for sale and to sell the display homes at prices below normal
retail, but generally approximating recorded valuations plus a normal
gross profit; therefore, the display homes are included in inventories
at the lower of amortized cost or net realizable value. At the time of
sale, any remaining unamortized amounts are charged to cost of goods
sold.
A summary of inventories at December 31 follows:
<TABLE>
<CAPTION>
1995 1994
-------------
<S> <C> <C>
Raw materials $2,838 2,634
Work-in-process 1,581 1,389
Finished goods 2,938 2,886
Display homes 1,169 1,579
-------------
$8,526 8,488
=============
</TABLE>
(I) FINANCIAL INSTRUMENTS
The fair value of the Company's financial instruments approximates their
recorded value.
The Company has only limited involvement with derivative financial
instruments and does not use them for trading purposes. Futures and
option contracts are used to manage well-defined commodity price risks
on noncedar lumber used in home packages.
Deferred gains or losses under futures and option contracts are included
on a net basis in the carrying amounts of inventories in the
consolidated balance sheet.
(Continued)
-24-
<PAGE> 26
LINDAL CEDAR HOMES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share amounts)
===============================================================================
At December 31, 1995, the Company had 18 futures contracts with
broker-dealers of approximately $516 maturing through September 1996
with a net deferred gain of $1. The Company is exposed to, but does not
anticipate, credit loss in the event of nonperformance by the other
parties to the contracts. The Company does not obtain or provide
collateral or other security to support the contracts.
(J) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation of
property, plant and equipment is provided over the estimated useful
lives of the respective assets on the straight-line basis. Leasehold
improvements are amortized on the straight-line basis over the terms of
the respective leases, if shorter than their estimated useful lives.
Improvements and additions are capitalized; maintenance and repairs are
charged to expense.
The estimated useful lives for buildings and leasehold improvements
range from 3 to 30 years; and for equipment, furniture and fixtures 3 to
10 years.
(K) INCOME TAXES
Effective January 1, 1993, the Company adopted Statement of Accounting
Standards No. 109, Accounting for Income Taxes, (Statement 109) and
reported the cumulative effect of that change in the method of
accounting for income taxes in the consolidated statement of earnings
for 1993. 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 basis. 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 the deferred tax assets and
liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
No provision has been made for U.S. Federal income taxes on the
undistributed earnings of the Company's foreign subsidiaries as it is
management's intention to reinvest such earnings indefinitely or to
distribute them in a manner which will not generate significant
additional taxes. At December 31, 1995, the Company's cumulative
undistributed earnings of the subsidiaries for which Federal income
taxes have not been provided was $689.
(L) EARNINGS PER COMMON SHARE
Earnings per common share are computed based on the weighted average
number of common shares and common share equivalents outstanding. When
dilutive, stock options are included as common share equivalents using
the treasury stock method.
(Continued)
-25-
<PAGE> 27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share amounts)
===============================================================================
There was no difference between primary and fully diluted earnings per
share for all periods presented. The number of shares used to compute
primary and fully diluted earnings per share was 4,085,420 and 4,094,005
for 1995; 4,056,477 and 4,057,688 for 1994; and 4,085,383 and 4,095,491
for 1993.
The Company issued a 10% stock dividend on May 12, 1993. All necessary
adjustments to earnings per share calculations have been made for the
periods presented.
(M) ADVERTISING
The Company expenses advertising costs when the related advertising
first takes place. The Company recognized advertising expense of $1,480
in 1995, $1,449 in 1994 and $1,309 in 1993.
(N) NEW ACCOUNTING STANDARDS
In March 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 121 (SFAS 121) which establishes
accounting standards for the impairment of long-lived assets and certain
identifiable intangibles, and goodwill related to those assets to be
held and used. This standard also applies to long-lived assets and
certain identifiable intangibles to be disposed of. SFAS 121 requires
that long-lived assets and certain identifiable intangibles to be held
and used by an entity be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. The Company must adopt SFAS 121 in 1996.
Management believes adoption of SFAS 121 will not impact the Company's
financial position and results of operations.
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123 (SFAS 123) which
addresses the accounting for stock-based compensation arrangements. SFAS
123 permits a company to choose either a new fair-value-based method or
the current APB Opinion 25 intrinsic-value-based method of accounting
for stock-based compensation arrangements. The statement requires pro
forma disclosures of net income and earnings per share computed as if
the fair-value-based method had been applied in financial statements of
companies that continue to follow current practices in accounting for
such arrangements under APB Opinion 25. The Company must adopt SFAS 123
for the year ending December 31, 1996. Management will continue to
record stock-based compensation using the current APB Opinion 25
intrinsic-value-based method and, therefore, believes adoption of SFAS
123 will not impact the Company's financial position and results of
operations.
(Continued)
-26-
<PAGE> 28
LINDAL CEDAR HOMES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share amounts)
================================================================================
(2) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31 consists of the following:
<TABLE>
<CAPTION>
1995 1994
---------------
<S> <C> <C>
Buildings and leasehold improvements $ 7,634 7,445
Equipment 4,618 4,192
Furniture and fixtures 3,079 2,383
---------------
15,331 14,020
Less accumulated depreciation and amortization 8,856 8,135
---------------
6,475 5,885
Land 4,025 3,794
---------------
Net property, plant and equipment $10,500 9,679
===============
</TABLE>
(3) LONG-TERM DEBT
Long-term debt at December 31 consists of the following:
<TABLE>
<CAPTION>
1995 1994
-------------
<S> <C> <C>
First mortgage note payable, due in monthly
installments of $13, including interest at
9.5%; final payment due 2009 $1,230 1,272
First mortgage note payable, due in monthly
installments of $7, including interest at
11%; final payment was due 2010 - 616
Other 34 35
-------------
Total long-term debt 1,264 1,923
Less current installments 48 59
-------------
Long-term debt, excluding current installments $1,216 1,864
=============
</TABLE>
At December 31, 1995, certain properties, having an aggregate net book value
of approximately $3,511, are pledged as collateral on the above long-term
debt.
(Continued)
-27-
<PAGE> 29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share amounts)
================================================================================
Long-term debt matures as follows:
<TABLE>
<CAPTION>
There-
1996 1997 1998 1999 2000 after
--------------------------------------
<S> <C> <C> <C> <C> <C>
$ 48 52 58 63 69 974
======================================
</TABLE>
At December 31, 1995, the Company had $2,900 of unsecured lines of credit
with banks to be drawn upon as needed, with interest at 1/2% above the prime
rate. A $2,500 line of credit expires in April 1996 with the remaining line
of credit expiring in July 1996.
(4) STOCKHOLDERS' EQUITY
(A) EMPLOYEE STOCK OPTION PLANS
The Company has provided for the granting of stock options to key
employees under two plans: the 1984 Incentive Stock Option Plan (the
1984 Plan) and the 1988 Combined Incentive Stock Option and
Non-Qualified Stock Option Plan (the 1988 Plan). Both plans are
administered by the Stock Option Committee of the Board of Directors
(Committee).
Under the terms of the 1984 Plan, options to purchase shares of the
Company's common stock were granted at a price equal to the fair market
value of the stock at the date of grant. The 1984 Plan expired on
December 21, 1994 and no future options will be granted under this plan.
There are 466,971 shares of common stock authorized for grants under the
terms of the 1988 Plan. Options granted under this plan may be
designated as incentive or nonqualified at the discretion of the
Committee. The exercise price of the options granted under this plan is
set at the time of grant, but may not be less than the fair market value
of the Company's stock at the date of grant. This plan will expire on
May 26, 1998.
Generally, options under both plans vest and may be exercised over
either a five-year period in cumulative increments of 20% each year
beginning one year from the date of grant, or as determined at the
discretion of the Committee.
Options granted, other than incentive options to 10% stockholders,
expire ten years from the date of grant. Incentive options to 10%
stockholders expire five years from the date of grant.
(Continued)
-28-
<PAGE> 30
LINDAL CEDAR HOMES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share amounts)
===============================================================================
The following is a summary of stock option activity under both plans:
<TABLE>
<CAPTION>
Outstanding options
-----------------------------------
Number of shares
Shares ----------------
available Non-
for grant Qualified qualified Price per share
------------------------------------------------
<S> <C> <C> <C> <C>
Balances at December 31, 1992 154,815 259,202 - $.92-5.38
Amendment to 1988 Plan 165,000 - - -
Options granted (46,000) 21,000 25,000 5.38
Options exercised - (35,200) - .92-4.36
Options relinquished 8,113 (8,113) - 3.16-4.89
10% stock dividend - May 12, 1993 15,846 25,152 - -
----------------------------------------------
Balances at December 31, 1993 297,774 262,041 25,000 .92-5.38
Options granted (99,500) 49,500 50,000 3.50-5.00
Options exercised - (2,274) - 2.94-3.91
Options relinquished 43,272 (43,272) - 3.16-4.88
Expired due to termination of plan (21) - - -
----------------------------------------------
Balances at December 31, 1994 241,525 265,995 75,000 .92-5.38
Options exercised - (16,033) - .92-3.91
Options relinquished 894 (1,894) - 4.36-5.38
----------------------------------------------
Balances at December 31, 1995 242,419 248,068 75,000 $2.16-5.38
==============================================
</TABLE>
At December 31, 1995, options to purchase 259,370 shares were
exercisable at an average exercise price of $4.12 per share.
(B) DIRECTORS AND DISTRIBUTORS STOCK OPTION PLAN
In 1993, 110,000 shares of common stock were reserved for issuance to
nonemployee directors of the Company and distributors who serve on the
Top Distributor Advisory Council (Council). In 1995, the shareholders
approved an amendment to the Plan which, among other things, increased
the number of shares reserved for issuance under the Directors and
Distributors Stock Option Plan (Plan) from 110,000 shares to 210,000
shares.
(Continued)
-29-
<PAGE> 31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share amounts)
===============================================================================
For the years 1993 and 1994, nonemployee directors were granted options
to purchase one share of common stock for each $1 of net after-tax
earnings of the Company. For 1993, the exercise price was the market
price of the Company's stock on April 1, 1993. For 1994, the exercise
price was the market price of the Company's stock on the first business
day of the year.
The 1995 amendment to the Plan also changed the formula used to grant
options to nonemployee directors. Pursuant to this amendment,
nonemployee directors, when first elected to the Board by the
shareholders, would receive an initial grant of options to purchase
10,000 shares of the Company's common stock. The nonemployee directors
in office when this amendment was approved were granted, effective the
day the amendment was approved, options to purchase 10,000 shares of the
Company's common stock. This amendment further provided that options to
purchase 5,000 shares of the Company's common stock would be granted to
nonemployee directors each October 1, commencing in 1995. The exercise
price of all options granted was and shall be the fair market value on
the date of grant.
The options granted to directors who are not a Lindal distributor vest
and are exercisable six months after the grant. Options granted to a
director who is a Lindal distributor for the year of 1993 vested and
were exercisable six months after the grant. For the year 1994 and for
future grants of options to directors who are a Lindal distributor,
options vest and become exercisable as described below.
Beginning on April 1, 1993, and February 1 of each subsequent year, each
distributor who serves on the Council is granted options to purchase 100
shares of common stock for each year of service on the Council. The
options vest and are exercisable over a four-year period beginning with
20% after six months and in annual cumulative increments of 20%
beginning from the date of grant. The exercise price of each option is
the fair market value on the grant date.
Options granted to nonemployee directors who are not Lindal distributors
expire at the earliest of 10 years from the date of grant, 90 days after
the option holder ceases to be a director for any reason other than
death or one year after death. Options granted to nonemployee directors
who are Lindal distributors expire at the earliest of 10 years from the
date of grant, 90 days after the option holder ceases to be a
distributor for any reason other than death or one year after death.
(Continued)
-30-
<PAGE> 32
LINDAL CEDAR HOMES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share amounts)
===============================================================================
The following is a summary of stock option activity under the plan:
<TABLE>
<CAPTION>
Outstanding options
-------------------
Shares Non-
available employee Distri- Price per
for grant directors butors share
---------------------------------------------
<S> <C> <C> <C> <C>
Balances at December 31, 1992 - - - $ -
Initially authorized 100,000 - - -
Options granted (7,032) 2,832 4,200 6.36
10% stock dividend - May 12, 1993 9,580 - 420 -
---------------------------------------------
Balances at December 31, 1993 102,548 2,832 4,620 6.36
Options granted (11,102) 6,102 5,000 5.00-6.00
Options relinquished 110 - (110) -
---------------------------------------------
Balance at December 31, 1994 91,556 8,934 9,510 5.00-6.36
Increase in authorized shares 100,000 - - -
Options granted (79,400) 75,000 4,400 3.50-4.25
Options relinquished 1,725 (1,725) - 6.00-6.36
---------------------------------------------
Balance at December 31, 1995 113,881 82,209 13,910 $3.50-6.36
=============================================
</TABLE>
At December 31, 1995, options to purchase 54,185 shares were exercisable
at an average exercise price of $4.21 per share.
(C) EMPLOYEE STOCK PURCHASE PLAN
The Company's 1993 Employee Stock Purchase Plan provides for 110,000
shares of the Company's common stock to be reserved for issuance upon
exercise of purchase rights granted to participating employees of the
Company. The purchase rights commenced on October 1, 1993, and are
exercisable annually on October 1 of each year at a price equal to the
lesser of 85% of the fair market value of the Company's stock at the
beginning or end of the annual period. In 1995 and 1994, 8,233 and 7,625
shares, respectively, were issued under the plan. No shares were issued
under the plan in 1993.
(D) OTHER GRANTS OF OPTIONS
On June 30, 1995, the Executive Committee of the Board of Directors
granted options to purchase 10,000 shares to Robert McLennaghan for
consulting services performed for the Company. The per share exercise
price of the options was the fair market value on the date of
grant, $3.75. The options were immediately exercisable and expire at the
earlier of 10 years from the date of grant or one year after death.
(Continued)
-31-
<PAGE> 33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share amounts)
===============================================================================
Mr. McLennaghan is the husband of Bonnie McLennaghan, who is the
daughter of Sir Walter Lindal.
(E) ISSUANCE OF RESTRICTED STOCK
Pursuant to a revised compensation program for nonemployee directors, a
total of 5,000 common shares of the Company's common stock was granted,
in December 1995, to the nonemployee directors at the fair market value
at the date of issuance. As the stock issued has not been registered,
all certificates bear the appropriate restrictive legend. A charge of
$21 was recorded as compensation in 1995.
All necessary adjustments have been made for stock dividends issued.
(5) INCOME TAXES
As discussed in note 1(k), the Company adopted Statement 109 as of January
1, 1993. The cumulative effect of this change in accounting for income taxes
of $157 was determined as of January 1, 1993 and is reported separately in
the consolidated statement of earnings for the year ended December 31, 1993.
Total income tax expense (benefit) was allocated as follows:
<TABLE>
<CAPTION>
1995 1994 1993
------------------
<S> <C> <C> <C>
Current:
U.S. Federal $542 394 266
Canadian 339 (76) 274
State 3 5 9
------------------
884 323 549
Deferred:
U.S. Federal (53) 79 (31)
Canadian (2) (4) (14)
------------------
(55) 75 (45)
------------------
Total $829 398 504
==================
</TABLE>
(Continued)
-32-
<PAGE> 34
LINDAL CEDAR HOMES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share amounts)
===============================================================================
The income tax expense in the consolidated financial statements differs from
the amount of income tax determined by applying the applicable U.S. Federal
statutory income tax rate to pretax income as follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------------------
<S> <C> <C> <C>
Statutory tax rate 34% 34% 34%
Effect of Canadian taxes 3 (3) 5
Valuation of deferred tax assets - (4) -
Other, net 1 1 (2)
--------------------
38 % 28% 37%
====================
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December
31 are as follows:
<TABLE>
<CAPTION>
1995 1994
----------
<S> <C> <C>
Deferred tax assets:
Receivables, due to the allowance for doubtful receivables $ 64 68
Uniform inventory capitalization for tax purposes 20 15
Accrued expenses deductible in different years for tax 73 20
Foreign tax credit carryforward - 6
---------
Total gross deferred tax assets 157 109
Less valuation allowance - 6
---------
Net deferred tax assets 157 103
Deferred tax liabilities - property, plant and equipment,
principally due to differences in basis of assets and
depreciation 104 107
---------
Net deferred tax asset (liability) $ 53 (4)
=========
</TABLE>
The valuation allowance at December 31, 1993 for deferred tax assets was
$60.
The Company's Canadian subsidiaries had earnings before income taxes of $805
and $579 in 1995 and 1993, respectively. In 1994, the Canadian subsidiaries
had a loss before income taxes of $114.
(Continued)
-33-
<PAGE> 35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share amounts)
===============================================================================
(6) LEASED ASSETS AND LEASE COMMITMENTS
The Company controls certain properties under operating leases, some of
which are subleased to dealers. In addition, the Company leases certain
production facilities and equipment.
A summary of rent expense under noncancelable operating leases follows:
<TABLE>
<CAPTION>
1995 1994 1993
----------------
<S> <C> <C> <C>
Gross rent expense $427 412 387
Less sublease rentals 5 16 37
----------------
Net rent expense $422 396 350
================
</TABLE>
Noncancelable long-term operating lease commitments are as follows:
<TABLE>
<CAPTION>
Years ending December 31 Aggregate minimum rentals
-------------------------------------------------------
<S> <C>
1996 $354
1997 278
1998 68
1999 38
2000 11
Thereafter -
----
$749
====
</TABLE>
(7) RETIREMENT PLANS
(A) SALARY SAVINGS PROFIT SHARING PLAN
The Company's Salary Savings Profit Sharing Plan under Section 401(k) of
the Internal Revenue Code covers substantially all full-time nonunion
employees. Plan participants may contribute up to 15% of their annual
salary to the plan with the Company making a matching contribution in
the amount of 25% of such employee contributions. Plan administration
costs and the Company's costs of matching employees' contributions to
the plan totaled $78 in 1995, $65 in 1994 and $72 in 1993. The Company
may also contribute to the plan such additional amounts as the Board of
Directors may determine in its sole discretion. The Board of Directors
decided that $31 and $29 accrued at December 31, 1994 and 1993 should be
contributed in 1995 and 1994, respectively, to this plan on behalf of
the employees.
(Continued)
-34-
<PAGE> 36
LINDAL CEDAR HOMES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share amounts)
===============================================================================
(B) PENSION PLAN
The Company contributes to various trusteed defined benefit pension
plans under industry-wide agreements. These contributions are based on
the hours worked by employees covered under collective bargaining
agreements. Pension expense for these plans were $185 in 1995, $228 in
1994 and $177 in 1993. In 1994, a new collective bargaining agreement
was negotiated for the woodworkers in the Province of British Columbia.
The agreement required that employers make two "one time" contributions
to the plan. One payment for $22 was made in November 1994. The second
payment of $38 was made in June 1995.
(8) RELATED PARTY TRANSACTIONS
In 1995, 1994 and 1993, the Company made payments to a private company
controlled by Sir Walter Lindal, and certain other members of the Lindal
family who are officers and directors of the Company of $34 in each of the
respective years as consideration for the use of various patents.
Sales of homes to certain members of the Board of Directors who are also
dealers totaled approximated $949 in 1995, $419 in 1994 and $1,128 in 1993.
All sales were made under normal trade terms.
(9) FOREIGN OPERATIONS
The Company and its subsidiaries are primarily engaged in the manufacture
and distribution of cedar homes. Company operations are conducted in the
United States and in Canada.
<TABLE>
<CAPTION>
1995 1994 1993
-----------------------
<S> <C> <C> <C>
Revenue:
United States:
Sales to unaffiliated customers $36,858 33,376 34,534
Transfers to Canadian operations 1,957 1,874 2,924
-----------------------
38,815 35,250 37,458
Canada:
Sales to unaffiliated customers 5,453 6,157 7,462
Transfers to U.S. operations 7,053 8,802 8,884
-----------------------
12,506 14,959 16,346
-----------------------
51,321 50,209 53,804
Less interarea transfers 9,010 10,676 11,808
-----------------------
Total $42,311 39,533 41,996
=======================
</TABLE>
(Continued)
-35-
<PAGE> 37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share amounts)
===============================================================================
<TABLE>
<CAPTION>
1995 1994 1993
-------------------------
<S> <C> <C> <C>
Operating income (loss):
United States $ 1,134 1,420 732
Canada (481) (169) 522
-------------------------
Total $ 653 1,251 1,254
=========================
Identifiable assets:
United States 22,423 20,933 18,656
Canada 5,569 5,981 6,488
-------------------------
Total $27,992 26,914 25,144
=========================
</TABLE>
Interarea transfers are made at amounts which approximate fair market
values.
(10) LITIGATION
The Company is routinely involved in a number of legal proceedings and
claims that cover a wide range of matters. In the opinion of management, the
outcome of these matters is not expected to have any material adverse effect
on the consolidated financial position or results of operations of the
Company.
-36-
<PAGE> 38
Schedule II
LINDAL CEDAR HOMES, INC.
AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
Years ended December 31, 1995, 1994 and 1993
(In thousands)
<TABLE>
<CAPTION>
=====================================================================================
Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Additions
---------
(1) (2)
Charged Charged
Balance at to costs to other Balance
beginning and accounts - at end
Description of year expenses describe Deductions of year
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1995
- ----
Allowance for
doubtful (2) (a)
receivables $203 111 - 112 (b) 204
======================================================
1994
- ----
Allowance for
doubtful 3 (a)
receivables $249 (29) - 14 (b) 203
=======================================================
1993
- ----
Allowance for
doubtful 3 (a)
receivables $327 26 - 101 (b) 249
=====================================================================================
</TABLE>
(a) Adjustments due to fluctuations in the Canadian dollar exchange rate.
(b) Deductions represent the write-off of uncollectible accounts receivable.
-37-
<PAGE> 39
SIGNATURES
Pursuant to the requirements of Section 13 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.
LINDAL CEDAR HOMES, INC.
March 27, 1996
/s/ Robert W. Lindal
----------------------------
Robert W. Lindal, Chairman
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
<TABLE>
<S> <C> <C> <C> <C> <C>
Date 3/27/96 /s/ Sir Walter Lindal Date 3/27/96 /s/ Robert W. Lindal
---------- --------------------------- ---------- ---------------------------
Sir Walter Lindal Robert W. Lindal
Director and Secretary Director
and Chairman
(Principal Executive
Officer)
Date Date
3/27/96 /s/ Douglas F. Lindal 3/27/96 /s/ Daniel B. Ward
---------- --------------------------- ---------- ---------------------------
Douglas F. Lindal Daniel B. Ward
Director and President Director
Date 3/27/96 /s/ John F. Dacy Date 3/27/96 /s/ Martin J. Lindal
---------- --------------------------- ---------- ---------------------------
John F. Dacy Martin J. Lindal
Vice President Finance Director and
and Treasurer Vice President MIS and
(Principal Financial and Communications and
Accounting Officer) Assistant Secretary
</TABLE>
-38-
<PAGE> 40
<TABLE>
<S> <C> <C> <C> <C> <C>
Date 3/27/96 /s/ Everett G. Martin Date
---------- --------------------------- ---------- ---------------------------
Everett G. Martin Harry A. Pryde
Director and Vice Director
President Midwest
and Eastern Canada
Date 3/27/96 /s/ Rick L. Stanley Date 3/27/96 /s/ William M. Weisfield
---------- --------------------------- ---------- ---------------------------
Rick L. Stanley William M. Weisfield
Director Director
Date 3/27/96 /s/ Charles R. Widman
---------- ---------------------------
Charles R. Widman
Director
</TABLE>
-39-
<PAGE> 41
LINDAL CEDAR HOMES, INC.
EXHIBIT INDEX
Exhibits are numbered in accordance with Item 601 of Regulation S-K.
================================================================================
Exhibit
numbers Description
- ------- ------------------------------------------------------
(3.1) Certificate of incorporation (a)
(3.2) Bylaws (a)
(3.3) 1993 Amendment to the Certificate of Incorporation (d)
(10.1) 1984 Incentive Stock Option Plan (b)
(10.3) 1988 Combined Incentive Stock Option Plan and
Non-Qualified Stock Option Plan (c)
(10.4) Directors and Distributors Stock Option Plan (d)
(10.5) 1993 Employee Stock Purchase Plan (d)
(10.6) Amendment to the Directors' and Distributors' Stock
Option Plan (e)
(21) Subsidiaries of the registrant
(23) Consent of Independent Certified Public Accountants
(a) Incorporated herein by reference from the registration on Form 8B of Lindal
Cedar Homes, Inc., a Delaware corporation, dated March 14, 1987.
(b) Incorporated herein by reference from the Registrant's Form 10-K filed for
the fiscal year ended December 31, 1986.
(c) Incorporated herein by reference from the Registrant's Form 10-K filed for
the fiscal year ended December 31, 1989.
(d) Incorporated herein by reference from the Registrant's Form 10-K filed for
the fiscal year ended December 31, 1993.
(e) Incorporated herein by reference from the Registrant's Proxy Statement
dated April 27, 1994.
================================================================================
Copies of the above exhibits may be obtained from the Securities and Exchange
Commission or the Registrant by request.
-40-
<PAGE> 1
SUBSIDIARIES OF THE REGISTRANT
The following is a list of all subsidiaries, including the jurisdiction under
which each was organized:
======================================================================
Subsidiary Jurisdiction
----------------------------------------------------------------------
Lindal Homes South Pacific, Inc. (a) Hawaii
Lindal Cedar Homes, M.W., Inc. (a) Michigan
Justus Log Homes, Inc. (a) Washington
Lindal Holdings, Inc. (a) Washington
Lindal Cedar Homes, Ltd. (d) British Columbia, Canada
Camida Timber Ltd. (c) British Columbia, Canada
WindowVisions, Inc. (a) Washington
WDK, Ltd. (b) Washington
(a) Wholly-owned subsidiary
(b) Wholly-owned subsidiary of Justus Log Homes, Inc.
(c) 50% owned subsidiary of Lindal Cedar Homes, Ltd.
(d) Wholly-owned subsidiary of Lindal Holdings, Inc.
=======================================================================
-41-
<PAGE> 1
EXHIBIT (23)
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders
Lindal Cedar Homes, Inc.:
We consent to incorporation by reference in the registration statement (No.
33-64186) on Form S-8 of Lindal Cedar Homes, Inc. of our report dated February
17, 1996 relating to the consolidated balance sheets of Lindal Cedar Homes,
Inc. and subsidiaries as of December 31, 1995 and 1994, and the related
consolidated statements of earnings, stockholders' equity, and cash flows and
related schedule for each of the years in the three-year period ended
December 31, 1995, which report appears in the December 31, 1995 annual report
on Form 10-K of Lindal Cedar Homes, Inc.
Our report on the consolidated financial statements and schedule refers to a
change in the method of accounting for income taxes.
/s/ KPMG Peat Marwick LLP
Seattle, Washington
March 26, 1996
-42-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 3,375
<SECURITIES> 0
<RECEIVABLES> 2,342
<ALLOWANCES> 204
<INVENTORY> 8,526
<CURRENT-ASSETS> 16,232
<PP&E> 19,356
<DEPRECIATION> 8,856
<TOTAL-ASSETS> 27,992
<CURRENT-LIABILITIES> 7,392
<BONDS> 1,216
0
0
<COMMON> 41
<OTHER-SE> 19,239
<TOTAL-LIABILITY-AND-EQUITY> 27,992
<SALES> 42,311
<TOTAL-REVENUES> 42,311
<CGS> 31,758
<TOTAL-COSTS> 31,758
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 111
<INTEREST-EXPENSE> 223
<INCOME-PRETAX> 2,166
<INCOME-TAX> 829
<INCOME-CONTINUING> 1,337
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,337
<EPS-PRIMARY> 0.33
<EPS-DILUTED> 0.33
</TABLE>
