<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, 1996
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 40 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, 1996
[ ] 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)
Delaware 91-0508250
- ---------------------------------------------- ----------------------------
(State or other jurisdiction (I.R.S. Employer
of organization) Identification No.)
4300 South 104th Place, Seattle, Washington 98178
- -----------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(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)
Aggregate market price of shares held by nonaffiliates at March 18, 1997 was
$6,549,944, consisting of 1,690,308 shares.
The number of shares of common stock outstanding on March 18, 1997 was 4,091,136
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 registrant's 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. ( )
The total number of pages in this Form 10-K is 40.
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 77% of
consolidated revenue in 1996, 73% of consolidated revenue in 1995 and 71% of
consolidated revenue in 1994. Sales of the homes totaled $36.0 million in 1996,
$30.7 million in 1995 and $28.2 million in 1994.
In 1996, 94% of the Company's home sales were made through
approximately 180 independent dealers. The balance of the home sales were made
from Company-operated sales courts. In 1996, the Company owned or leased 12
display courts, 10 of which were operated by independent dealers.
In 1993, the Company began expanding its regional sales management
structure, staffed by its employees, to replace independent 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 unfeasible 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 180 dealers, approximately 40% were
Commercial dealers. There were 17 operating Design Centers at the end of 1996.
The majority of the remaining dealers operate from a "Storefront."
The Company has three home products: the Cedar Frame, the Access 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
1996, the Access product accounted for 20% of home sales revenue and 29% of the
home units shipped. In 1995, the Access product accounted for 12% of home sales
revenue and 17% of the home units shipped.
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
-2-
<PAGE> 4
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 1996, 1995 and 1994, 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 dollar value of new orders increased 12% from 1995 to 1996. The
number of new orders increased 5% from 1995 to 1996. The Access product
represented 34% of new orders in 1996 compared to 22% of new orders in 1995.
The Company recognizes revenue from orders when the home package is
shipped. The total backlog approximated $25 million at December 31, 1996, $22
million at December 31, 1995 and $19 million at December 31, 1994. Because the
Company's business is seasonal, the backlog data does not necessarily reflect
the level of the Company's business on an annual basis.
Management believes that there are significant benefits to the maximum
practical consolidation of manufacturing and distribution operations. The
consolidation of the sunroom and window divisions into the newly created Lindal
Building Products Division began in 1996. The sunroom personnel moved to the
Kirkland, Washington facility, previously occupied exclusively by the window
division. Currently, sunrooms continue to be manufactured by a third party.
Windows continue to be manufactured at this Kirkland, Washington
facility. Sunrooms continue to be manufactured, on a contract basis, by a third
party in Tacoma, Washington. It is expected that Lindal Building Products will
begin manufacturing sunrooms in 1997.
Presently, a relocation of the Lindal Building Products Division to
Skagit County, Washington is underway. Negotiations related to a facility are
expected to be finalized in April 1997. This relocation of personnel is expected
to occur in the third quarter of 1997. An investment of approximately $3 million
is expected for plant and equipment related to the Skagit County facility.
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 continue to be placed
on the log market by harvesting restrictions in the United States and Canada. In
1996, 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, 1996, the Company believes it can meet its cedar
log requirements for more than five years.
The Company is 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
-3-
<PAGE> 5
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 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 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
quarter of 1995. Earnings, before income tax expense, from this venture, were
$1,022,000 in 1995 and $25,000 in 1996. Refer to note 1(d) to the consolidated
financial statements on page 23 of this report for additional information.
On September 30, 1996, the award of a second timber sale was announced.
The award is for 327,000 cubic meters of timber over a five-year period. It is
expected that this timber sale will allow the Company to secure a cedar supply
for more than five years.
In 1996, 1995 and 1994, home shipments were made from Surrey, British
Columbia and Kent, Washington.
In anticipation of receiving the second timber sale, the process of
consolidating the distribution operations in British Columbia began in early
1996. In February 1996, employees at the Kent, Washington facility were notified
that the home shipment operations would move to Surrey, British Columbia.
Effective January 1, 1997, all home shipments originated from the Surrey
facility.
Also, in anticipation of receiving the second timber sale described
above, a tentative 10-year agreement was negotiated with the union for the
Canadian plant employees. This agreement provides that the new jobs created/
moved to British Columbia 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. Still unresolved are certain matters regarding
pension benefits. This agreement is expected to be ratified in the second
quarter of 1997.
As a condition of receiving the second timber sale, the Company
committed to consolidating its home shipment operations and to moving a
considerable amount of its lumber remanufacturing to British Columbia. To
accomplish this consolidation, it is expected to require an investment of $5 to
$6 million in new plant and equipment and the leasing of an additional seven to
eight acres adjacent to the current facility. The Company is in the process of
negotiating the required leases. The Company will not invest a significant
amount of cash until the labor agreement is ratified. The Company has evaluated
the project in light of the required capital investment, operational viability
and other relevant factors. Management believes that the Canadian consolidation
is in the best interest of the Company and its stockholders.
Prior to being able to harvest any timber awarded in this sale, the
Company is required to "substantially complete" the items it has committed to
under the conditions of the timber sale. The consolidation of shipping operation
has occurred. Currently, the Company is in the process of beginning the
construction of the new wood remanufacturing and home distribution facility. It
is currently expected that construction will begin in the third quarter of 1997
and be completed by the second quarter of 1998. It is currently expected that
remanufacturing of lumber from this facility will begin in the third quarter of
1998. It is currently not known at what point the Province of British Columbia
will declare that "substantial completion" has occurred.
Until the British Columbia remanufacturing facility is operational,
cedar lumber will continue to be remanufactured by the Company in Tacoma,
Washington. When the remanufacturing of lumber is performed in Surrey, British
Columbia, the Tacoma, Washington facility will provide its services exclusively
to third parties.
-4-
<PAGE> 6
The Company is currently negotiating with a third party for the
management of the harvesting of the timber and the sale of the resulting logs.
It is currently not envisioned that a joint venture company will be formed. The
negotiations are expected to be concluded early in the second quarter of 1997.
The Company continues to believe that this contract will be moderately
profitable. However, it is not expected that this contract will be as
profitable, on a relative basis, as the previously awarded timber sale.
Management believes that the obtaining of this timber sale will greatly
facilitate the procurement of cedar logs or lumber.
The Surrey, British Columbia location includes and will continue to
include 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 $3.7 million
in 1996, $3.8 million in 1995 and $4.0 million in 1994.
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 occur for some time. For this
reason, in January 1994 the 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.
In 1996, the Canadian government implemented a lumber quota system.
This quota system was part of a negotiated settlement related to the United
States government's allegation that Canada was subsidizing the forest products
industry. Under the quota system, each company can import to the United States a
limited quantity of lumber. The Company believes that this constraint on the
supply of lumber has been a significant factor in the volatility experienced in
the lumber market in 1996.
With the consolidation of the Company's home shipments in Surrey,
British Columbia, all home packages that are not sold in Canada or overseas are
imported into the United States. U.S. Customs made a ruling that a Lindal home
package is not a "home" as defined by the applicable customs regulations, rather
it constitutes a shipment of assorted building and forest products. This forces
the Company to use a portion of its assigned quota for the lumber component of
each home package. The Company believes that when a home package is imported
into the United States, it constitutes a "home" under the applicable custom
regulations. As such, the lumber component of the home should not be applied
against its allowable lumber quota. The Company is appealing the ruling and
intends to vigorously contest the matter. Irrespective of the outcome of the
appeal of the ruling, the Company believes that it has sufficient quota for the
term of the United States/Canadian governments' agreement, five years.
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 1996, 1995 and 1994
were as follows (in thousands of U.S. dollars):
-5-
<PAGE> 7
<TABLE>
<CAPTION>
1996 1995 1994
------------------------------
<S> <C> <C> <C>
Home sales - Canadian $ 2,239 1,853 2,074
Home sales - overseas -- -- 687
Other operating revenue 3,147 3,600 3,396
-------- -------- --------
Total foreign sales $ 5,386 5,453 6,157
-------- -------- --------
</TABLE>
The U.S. parent company had export sales totaling $3.3 million in 1996,
$3.0 million in 1995 and $1.5 million in 1994.
For additional information on the Company's foreign operations, refer
to note 9 to the consolidated financial statements on page 36 of this report.
EMPLOYEES
At the end of February 1997, the Company had 233 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 tentative 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. This agreement is expected to be
ratified in the second quarter of 1997. For additional information, refer to
note 7(b) to the consolidated financial statements on page 35 of this report.
ITEM 2. PROPERTIES
Information with respect to the location of the Company's principal
locations, which are owned unless otherwise stated, at December 31, 1996 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 12,000 square feet for storage and
office space. The balance of the facility is leased to third parties.
At December 31, 1996, 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
portions of some U.S. home shipments originated from this facility in
1996 and 1995. Effective January 1, 1997, all home shipments originated
from this facility. The leases for this land expire in January 1998
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 most overseas home shipments originated from this
facility. Effective January 1, 1997, the Surrey, British Columbia
facility shipped all home packages. The sale of this facility closed
on March 28, 1997.
- Renfrew, Ontario facility on 21 acres with 110,000 square feet under
roof. The Company is using approximately 7,000 square feet for office
and warehouse facilities. The rest of the facility is leased to third
parties.
-6-
<PAGE> 8
- 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.
Seven parcels are owned (four in Washington and one each in California,
Michigan and Massachusetts) and four parcels are leased (two in Hawaii
and one each in Ontario and Japan). The Company also owns two parcels
of undeveloped land (one each in Washington and Ontario) that it
intends to use for future sales locations.
- Kirkland, Washington 43,000 square foot manufacturing/warehousing
facility under a lease expiring in January 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 1997.
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 1996.
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 1996 and 1995
as reported by NASDAQ.
<TABLE>
<CAPTION>
High Low
---------------------------
<S> <C> <C>
1996
----
First quarter $ 4.38 3.93
Second quarter 4.17 3.43
Third quarter 3.95 3.83
Fourth quarter 3.98 3.70
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
</TABLE>
-7-
<PAGE> 9
(b) Approximate number of shareholders of record, including
beneficial shareholders:
<TABLE>
<CAPTION>
Title of class March 18, 1997
---------------------------------------- --------------------
<S> <C>
Common stock of $.01 par value 349
</TABLE>
The above number of shareholders of record excludes beneficial
owners. Including beneficial owners, the Company believes that it
is in compliance with the requirement for listing on the NASDAQ
National Market System.
(c) Dividends:
No cash dividends were paid in 1996 or 1995, and the Company does
not expect to pay a cash dividend in 1997.
ITEM 6. SELECTED FINANCIAL DATA
(In thousands, except ratios and per share amounts)
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenue $ 46,635 42,311 39,533 41,996 38,583
Operating income 1,224 653 1,251 1,254 2,282
Earnings before cumulative
effect of accounting change
1,506 1,337 1,017 865 1,688
Net earnings 1,506 1,337 1,017 708 1,688
Earnings per common share
before cumulative effect
of accounting change
.37 .33 .25 .21 .41
Net earnings per common share
.37 .33 .25 .17 .41
Total assets 30,034 27,992 26,914 25,144 25,029
Working capital 10,814 8,840 8,399 8,084 7,715
Long-term debt 1,164 1,216 1,864 1,951 2,115
Current ratio 2.37:1 2.20:1 2.16:1 2.33:1 2.19:1
</TABLE>
The computation of earnings per common share for all periods presented
gives effect to a 10% stock dividend issued on May 12, 1993 and a 5-for-4 stock
split effected in the form of a 25% stock dividend issued April 27, 1992.
-8-
<PAGE> 10
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 1997. Traditionally,
operations have been the primary source of funds for expansion and/or facilities
acquisition.
As previously stated, the Company is in the process of consolidating
its manufacturing and distribution operations.
The Company resources required to finance the Surrey, British Columbia
project and the Lindal Building Products consolidation are estimated to be $8 to
$9 million over 1997 and 1998. Approximately $3 million is expected to come from
the sale of undeveloped land located at Marysville, Washington, which closed in
December 1996, together with the sale of the Kent, Washington facility that had
previously been used for home distribution, which closed March 28, 1997. An
additional $2 to $3 million is expected to come from industrial revenue bonds
associated with the Lindal Building Products facility in Skagit County,
Washington. Currently, the remaining $3 to $4 million is expected to be
financed from cash reserves and operations. However, the Company is considering
additional sources of financing.
Funding for the Lindal Building Products facility is expected to be
required in the spring of 1997. Funding for the Surrey, British Columbia project
is expected to begin in the summer of 1997.
Cash and cash equivalents decreased $399,000 (24%) from December 31,
1995 to December 31, 1996 due primarily to an increase of $1,062,000 (62%) in
short-term investments. At December 31, 1996, short-term investments were
composed of commercial paper, tax exempt bonds and an interest-bearing account.
The proceeds from the sale of the Marysville, Washington property, $1.4 million,
was invested in the interest-bearing account. This funding vehicle for the
proceeds was chosen to allow the Company to avail itself of favorable tax
treatment relating to the sale if the appropriate circumstance arose. The
favorable circumstance did not arise and the funds were removed from the
account in February 1997. Eighty-two percent of the December 31, 1996 short-term
deposits mature at planned intervals before May 1, 1997.
Cash and cash equivalents are traditionally at their lowest levels in
the first quarter of the year. Although no need to borrow for operating needs is
foreseen, should a need arise, operating lines totaling $2.9 million are
available. The Company did not use the available lines of credit, at any time,
in 1995 or 1996.
Inventories increased $2.1 million (25%) from December 31, 1995 to
December 31, 1996. Due to the continuing volatility in the lumber market, a
strategy of holding larger than normal quantities of certain lumber components
for homes has been pursued. This strategy is designed to allow the Company to
ship complete home packages even if short-term supply disruptions occur in the
lumber market. Raw materials, work-in-process and finished goods inventories
turned over 4.2 times in 1996, 4.5 times in 1995 and 4.2 times in 1994.
-9-
<PAGE> 11
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 pages 24 and 25 of this
report for additional information.
In 1996, the Company invested $630,000 in building and improvements,
$410,000 in manufacturing equipment primarily at the Tacoma lumber
remanufacturing facility and Lindal Building Products, $319,000 in computer
related equipment and software and $269,000 for all other capital expenditures.
All 1996 capital expenditures were financed from operations.
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 September 1995, $604,000 was expended to pay-off an 11% mortgage
that was due in 2010.
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 office machines, $70,000 to improve the Tacoma lumber
remanufacturing facility, and $193,000 for all other capital expenditures. All
1994 capital expenditures were financed from operations.
In addition to the $8 to $9 million for the Surrey, British Columbia
and Lindal Building Products facilities, the Company expects to expend
$800,000-$900,000 for a reprint of its current planbook, Originals, and will
continue to evaluate purchases/projects to determine if investment is warranted.
RESULTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996 AND 1995
Revenue increased $4.3 million (10%) from 1995 to 1996. Home and
sunroom revenue increased $5.2 million (16%) from $33.5 million in 1995 to $38.7
million in 1996. The number of home units shipped increased 18% from 433 in 1995
to 512 in 1996. The average revenue per home unit shipped decreased 1% from
$71,000 in 1995 to $70,200 in 1996 due to the Access Product. The Access Product
accounted for 20% of home sales revenue and 29% of the home units shipped in
1996 compared to 12% of home sales revenue and 17% home units shipped in 1995.
Material and chip sales revenue decreased $300,000 (7%) from $4.4
million in 1995 to $4.1 million in 1996. All other revenue sources decreased
$500,000 (11%) from 1995 to 1996 due primarily to the revenue recognized due to
the production of home plans and window sales.
The gross profit percentage (gross profit/revenue) was 24.9% in 1995
compared to 23.3% in 1996. In 1995, the cost of goods sold was reduced $265,000
due to the refund of duty. In 1996, the cost of goods sold included a $150,000
charge related to the closing of the Kent, Washington distribution facility.
With the cost of goods sold adjusted for each of these items, the gross profit
percentage was 24.3% in 1995 compared to 23.7% in 1996. A significant increase
in lumber prices in the last half of 1996, was primarily responsible for the
decline in the gross profit percentage from 1995 to 1996.
-10-
<PAGE> 12
The Company expects that these historically high lumber prices will
continue. Accordingly, in early 1997, a general 4.5% price increase was
implemented for all home packages. This price increase is being phased in during
the second quarter of 1997 and will be fully effective with shipments made in
July 1997.
Selling, general and administrative expenses decreased $177,000 (2%)
from 1995 to 1996. Salaries and related benefits decreased $160,000 (4%) due to
a second quarter 1996 reduction in the number of employees. Advertising expenses
decreased $193,000 (13%). Bad debt expense increased $95,000 (85%).
Equity in earnings of affiliate decreased approximately $1 million
(98%). The joint venture that generated the earnings essentially completed
its operations in 1995.
Other, net [Other income (expense)] income increased from $5,000 in
1995 to $414,000 in 1996 primarily due to the gain on the sale of the
Marysville, Washington property.
Income tax expense decreased $167,000 (20%) from 1995 to 1996 due
primarily to losses in the Canadian operations and a higher effective tax rate
in Canada. The Company's Canadian subsidiaries had earnings before income tax
expense of $805,000 in 1995 compared to a loss before income tax expense of
$444,000 in 1996.
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.
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.
-11-
<PAGE> 13
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.
OTHER MATTERS
Statements contained in this report that are not based on historical
facts are forward looking statements subject to uncertainties and risks
including but not limited to: the consolidation of operations, trade and
government actions, changing economic conditions, trends in the housing market,
raw material and labor costs, availability of raw materials, the ability to
obtain orders and recruit dealers, demographic influences and continued
acceptance of product and services.
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
1997 Proxy Statement, and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information required under this item is contained in the Registrant's
1997 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
1997 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
1997 Proxy Statement, and is incorporated herein by reference. See also notes
4(d) and 8 to the consolidated financial statements on pages 31 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
Consolidated Financial Statements
<TABLE>
<CAPTION>
Pages
<S> <C>
Independent Auditors' Report 15
Consolidated Balance Sheets as of December 31, 1996 and 1995 17-18
Consolidated Statements of Earnings for each of the years in the three-year period ended
December 31, 1996 19
Consolidated Statements of Stockholders' Equity for each of the years in the three-year period ended
December 31, 1996 20
Consolidated Statements of Cash Flows for the each of the years in the three-year period ended
December 31, 1996 21-22
Notes to Consolidated Financial Statements 23-36
</TABLE>
Schedules
<TABLE>
<S> <C>
Schedule II - Valuation and Qualifying Accounts 37
</TABLE>
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.
-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, 1996 and 1995, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1996, 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.
/s/ KPMG Peat Marwick LLP
Seattle, Washington
February 14, 1997
-15-
<PAGE> 17
CONSOLIDATED FINANCIAL STATEMENTS
AND SCHEDULES
-16-
<PAGE> 18
LINDAL CEDAR HOMES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and 1995
(Dollar amounts in thousands, except per share amounts)
<TABLE>
<CAPTION>
Assets 1996 1995
--------- ---------
<S> <C> <C>
Current assets:
Cash and cash equivalents, including time
deposits of $963 in 1996 and
$1,359 in 1995 $ 1,262 1,661
Short-term investments 2,776 1,714
Receivables:
Trade 2,102 2,342
Current installments of long-term
notes receivable 203 106
Refundable income taxes 357 --
--------- ---------
2,662 2,448
Less allowance for doubtful receivables 394 204
--------- ---------
Net receivables 2,268 2,244
Inventories 10,689 8,526
Prepaid expenses 1,423 1,930
Deferred income taxes 314 157
--------- ---------
Total current assets 18,732 16,232
Long-term notes receivable, excluding
current installments 927 517
Investment in affiliate -- 45
Property, plant and equipment, at cost
less accumulated depreciation and
amortization 9,829 10,500
Other assets, at cost less accumulated
amortization of $383 in 1996 and
$315 in 1995 546 698
========= =========
$ 30,034 27,992
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
-17-
<PAGE> 19
CONSOLIDATED BALANCE SHEETS, CONTINUED
(Dollar amounts in thousands, except per share amounts)
<TABLE>
<CAPTION>
Liabilities and Stockholders' Equity 1996 1995
----------- -----------
<S> <C> <C>
Current liabilities:
Current installments of long-term debt $ 52 48
Accounts payable - trade 1,467 1,492
Accrued salaries and wages 759 617
Other accrued expenses 983 682
Income taxes payable -- 188
Customer deposits 4,657 4,365
----------- -----------
Total current liabilities 7,918 7,392
Long-term debt, excluding current installments 1,164 1,216
Deferred income taxes 210 104
Stockholders' equity:
Common stock, $.01 par value. Authorized
10,000,000 shares; issued and
outstanding 4,081,830 shares
in 1996 and 4,060,139 shares in 1995
41 41
Additional paid-in capital 15,916 15,856
Cumulative translation adjustment (748) (644)
Retained earnings 5,533 4,027
----------- -----------
Total stockholders' equity 20,742 19,280
=========== ===========
$ 30,034 27,992
=========== ===========
</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, 1996, 1995 and 1994
(Dollar amounts in thousands, except per share amounts)
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Revenue $ 46,635 42,311 39,533
Cost of goods sold 35,755 31,758 29,126
----------- ----------- -----------
Gross profit 10,880 10,553 10,407
Operating expenses:
Selling, general and administrative expenses 9,032 9,209 8,544
Display court expenses 624 691 612
----------- ----------- -----------
Total operating expenses 9,656 9,900 9,156
----------- ----------- -----------
Operating income 1,224 653 1,251
Other income (expense):
Equity in earnings of affiliate 25 1,022 --
Rental income 363 326 187
Interest income 275 383 119
Interest expense (133) (223) (204)
Other, net 414 5 62
----------- ----------- -----------
Other income, net 944 1,513 164
----------- ----------- -----------
Earnings before income tax expense 2,168 2,166 1,415
Income tax expense 662 829 398
=========== =========== ===========
Net earnings $ 1,506 1,337 1,017
=========== =========== ===========
Net earnings per common share $ .37 .33 .25
=========== =========== ===========
</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, 1996, 1995 and 1994
(Dollar amounts in thousands)
<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, 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
Stock options exercised and shares
issued through the Employee
Stock Purchase Plan 16,691 -- 41 -- --
Issuance of restricted stock 5,000 -- 19 -- --
Current year translation adjustment -- -- -- (104) --
Net earnings 1996 -- -- -- -- 1,506
----------- ----------- ----------- ----------- -----------
Balances at December 31, 1996 4,081,830 $ 41 15,916 (748) 5,533
=========== =========== =========== =========== ===========
</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, 1996, 1995 and 1994
(In thousands)
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 1,506 1,337 1,017
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation and amortization of plant and equipment 949 798 785
Amortization of other assets 167 196 65
Amortization of display homes 227 245 199
Gain on disposal of property, equipment and furniture and fixtures (407) (1) (65)
Undistributed loss of affiliate -- -- 6
Deferred income tax benefit (expense) (51) (55) 76
Compensation expense related to restricted stock 19 21 --
Change in operating asset and liabilities:
Decrease (increase) in net receivables 73 (188) (474)
Increase in inventories (2,390) (196) (524)
Decrease (increase) in prepaid expenses 507 (527) (348)
Increase in current liabilities other than current portion of
long-term debt 522 182 1,171
Notes receivable decrease (increase) related to operating activities (331) (157) 56
Decrease in other assets related to operating activities -- 6 --
---------- ---------- ----------
Net cash provided by operating activities 791 1,661 1,964
Cash flows from investing activities:
Purchase of short-term investments (6,870) (4,218) (574)
Liquidation of short-term investments 5,806 2,982 1,774
Cash received for repayment of notes (not related to the sale of homes) 60 356 216
Cash received from sale of property, equipment and furniture and
fixtures 1,543 2 219
Additions to property, plant and equipment (1,625) (1,557) (822)
Disbursements for loans (not related to the sale of homes) (50) (258) (271)
Additions to other assets (25) (244) (191)
Investment in affiliate -- (365) (346)
Return of investment in affiliate 25 666 --
---------- ---------- ----------
Net cash provided by (used in) investing activities (1,136) (2,636) 5
---------- ---------- ----------
Subtotal, carried forward (345) (975) 1,969
---------- ---------- ----------
</TABLE>
(Continued)
See accompanying notes to consolidated financial statements.
-21-
<PAGE> 23
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
(In thousands)
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Subtotal, brought forward $ (345) (975) 1,969
Cash flows from financing activities:
Proceeds from exercise of stock options and stock purchased through
the Employee Stock Purchase Plan 41 58 30
Repayment of long-term debt (50) (53) (53)
Retirement of long-term debt -- (604) (98)
Additions to long-term debt -- -- 36
---------- ---------- ----------
Net cash used in financing activities (9) (599) (85)
Effect of exchange rates on cash and cash equivalents (45) 16 (27)
---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents (399) (1,558) 1,857
Cash and cash equivalents at beginning of year 1,661 3,219 1,362
---------- ---------- ----------
Cash and cash equivalents at end of year $ 1,262 1,661 3,219
========== ========== ==========
Supplemental disclosures of cash flow information - cash paid during the year
for:
Interest $ 133 229 206
Income taxes 1,229 630 600
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
-22-
<PAGE> 24
LINDAL CEDAR HOMES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(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 180 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 was accounted for in accordance with the equity
method. The remaining 50% interest was 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
were 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>
1996 1995
--------------------
<S> <C> <C>
Raw materials $ 3,491 2,838
Work-in-process 2,234 1,581
Finished goods 4,056 2,938
Display homes 908 1,169
--------------------
$10,689 8,526
====================
</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
December 31, 1996, 1995 and 1994
At December 31, 1996, the Company had 16 futures contracts with
broker-dealers of approximately $442 maturing through September
1997 with a net deferred gain of $67. 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
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, 1996, the Company's cumulative
undistributed earnings of the subsidiaries for which Federal income
taxes have not been provided was $512.
(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.
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 4,097,801
and 4,112,994 for 1996; 4,085,420 and 4,094,005 for 1995; and
4,056,477 and 4,057,688 for 1994.
(Continued)
-25-
<PAGE> 27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share amounts)
(M) ADVERTISING
The Company expenses advertising costs when the related advertising
first takes place. The Company recognized advertising expense of
$1,264 in 1996, $1,480 in 1995, and $1,449 in 1994.
(N) STOCK OPTION PLANS
Prior to January 1, 1996, the Company accounted for its stock
option plans in accordance with the provisions of Accounting
Principles Board (APB) Opinion No. 25, Accounting for Stock Issued
to Employees, and related interpretations. As such, compensation
expense would be recorded on the date of grant only if the current
market price of the underlying stock exceeded the exercise price.
On January 1, 1996, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 123, Accounting for Stock-Based
Compensation, which permits entities to recognize as expense over
the vesting period the fair value of all stock-based awards on the
date of grant. Alternatively, SFAS No. 123 also allows entities to
continue to apply the provisions of APB Opinion No. 25 and provide
pro forma net income and pro forma earnings per share disclosures
for employee stock option grants made in 1995 and future years as
if the fair-value-based method defined in SFAS No. 123 had been
applied. The Company has elected to continue to apply the
provisions of APB Opinion No. 25 and provide the pro forma
disclosure provisions of SFAS No. 123.
(2) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31 consists of the following:
<TABLE>
<CAPTION>
1996 1995
---------------------
<S> <C> <C>
Buildings and leasehold improvements $ 8,204 7,634
Equipment 4,834 4,618
Furniture and fixtures 3,463 3,079
---------------------
16,501 15,331
Less accumulated depreciation and amortization 9,432 8,856
---------------------
7,069 6,475
Land 2,760 4,025
---------------------
Net property, plant and equipment $ 9,829 10,500
=====================
</TABLE>
(Continued)
-26-
<PAGE> 28
LINDAL CEDAR HOMES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
(3) LONG-TERM DEBT
Long-term debt at December 31 consists of the following:
<TABLE>
<CAPTION>
1996 1995
-------------------
<S> <C> <C>
First mortgage note payable, due in monthly installments of $13,
including interest at 9.5%; final payment due 2009 $1,183 1,230
Other 33 34
-------------------
Total long-term debt 1,216 1,264
Less current installments 52 48
-------------------
Long-term debt, excluding current installments $1,164 1,216
===================
</TABLE>
At December 31, 1996, certain properties, having an aggregate net book
value of approximately $3,577, are pledged as collateral for the above
long-term debt.
Long-term debt matures as follows:
<TABLE>
<CAPTION>
There-
1997 1998 1999 2000 2001 after
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 52 57 63 70 76 898
===================================================================
</TABLE>
At December 31, 1996, the Company had $2,865 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 1997 with the
remaining line of credit expiring in July 1997.
(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 Compensation 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.
(Continued)
-27-
<PAGE> 29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share amounts)
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. At
December 31, 1996, there were 53,288 options available for 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.
A summary of the status of both fixed stock option plans as of
December 31, 1996, December 31, 1995 and December 31, 1994 and
changes during the years ended on those dates is presented below:
<TABLE>
1996 1995 1994
---------------------- --------------------- ---------------------
WEIGHTED- Weighted- Weighted-
AVERAGE average average
EXERCISE exercise exercise
SHARES PRICE Shares price Shares price
---------------------- ---------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of
year 323,068 $ 4.12 340,995 $ 4.03 287,041 $ 4.31
Granted 223,400 3.76 - - 99,500 3.54
Exercised (12,843) 2.16 (16,033) 2.09 (2,274) 3.27
Relinquished (66,654) 4.44 (1,894) 4.95 (43,272) 4.83
---------- ---------- ----------
Outstanding at end of year 466,971 $ 3.96 323,068 $ 4.12 340,995 $ 4.03
====================== ====================== =====================
Options exercisable at
year-end 318,216 259,370 248,556
======= ======= =======
Weighted-average fair value
of options granted
during the year $ 2.05 $ -
====== ======
</TABLE>
(Continued)
-28-
<PAGE> 30
LINDAL CEDAR HOMES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
The following table summarizes information about both fixed stock
option plans at December 31, 1996:
<TABLE>
<CAPTION>
Options outstanding Options exercisable
-------------------------------------------- -----------------------------
Weighted-
average Weighted- Weighted-
remaining average average
Range of Number contractual exercise Number exercise
exercise prices outstanding life price exercisable price
- ----------------------------------------------------------------- ---------------------------
<S> <C> <C> <C> <C> <C>
$2.94 to $4.36 381,446 7.8 years $ 3.66 242,546 $ 3.62
$4.80 to $5.38 85,525 4.8 years 5.28 75,670 5.29
------------ -------------
$2.94 to $5.38 466,971 7.3 years $ 3.96 318,216 $ 4.02
============================================ ===========================
</TABLE>
(B) DIRECTORS AND DISTRIBUTORS STOCK OPTION PLAN
In 1994, 110,000 shares of common stock were reserved for issuance
to nonemployee directors of the Company and distributors who serve
on the 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. At December 31, 1996, there were
92,491 options available for grant.
For the year of 1994, nonemployee directors were granted options to
purchase one share of common stock for each $1 of net after-tax
earnings of the Company. The exercise price was the market price of
the Company's stock on the first business day of 1994.
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 each option is 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 also a Lindal distributor, vest and
become exercisable as described below.
(Continued)
-29-
<PAGE> 31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share amounts)
On February 1 of each year, every 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 or one year after the option holder ceases to be a director.
Options granted to distributors, including 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.
A summary of the status of this fixed stock option plan as of
December 31, 1996, December 31, 1995 and December 31, 1994 and
changes during the years ended on those dates is presented below:
<TABLE>
<CAPTION>
1996 1995 1994
------------------------------ ------------------------------ ---------------------------
WEIGHTED- Weighted Weighted-
AVERAGE -average average
EXERCISE exercise exercise
SHARES PRICE Shares price Shares price
------------------------------ ------------------------------ ---------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of
year 96,119 $ 4.23 18,444 $ 5.87 7,452 $ 6.36
Granted 22,100 4.14 79,400 3.89 11,102 5.55
Relinquished (710) 5.38 (1,725) 6.15 (110) 6.36
---------------- ------------ ------------
Outstanding at end of year 117,509 $ 4.21 96,119 $ 4.23 18,444 $ 5.87
============================== ============================== ============================
Options exercisable at
year-end 80,919 54,185 5,211
================ ============ ============
Weighted-average fair value
of options granted
during the year $ 2.36 $ 2.22
================ ============
</TABLE>
(Continued)
-30-
<PAGE> 32
LINDAL CEDAR HOMES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
The following table summarizes information about this fixed stock
option plan at December 31, 1996:
<TABLE>
<CAPTION>
Options outstanding Options exercisable
---------------------------------------------- -----------------------------
Weighted- Weighted-
average average Weighted
Range of Number remaining exercise Number average
exercise prices outstanding contractual life price exercisable exercise price
- --------------------------------------------------------------------- -----------------------------
<S> <C> <C> <C> <C> <C>
$3.50 to $5.00 106,100 8.6 years $ 3.99 70,960 $ 3.95
$6.00 to $6.36 11,409 7.2 years 6.20 9,959 6.20
------------- ---------------
$3.50 to $6.36 117,509 8.5 years $ 4.21 80,919 $ 4.23
============================================== =============================
</TABLE>
(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 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 1996, 1995 and 1994,
3,848, 8,233 and 7,625 shares, respectively, were issued under the
plan.
(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. The weighted-average fair value of these options
was $2.12 per share.
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 4,000 shares of the Company's common stock
was issued in 1996 and 5,000 shares of the Company's common stock
were issued in 1995. The stock issued to the nonemployee directors
was valued at the fair market value at the date of grant. As the
stock issued was not registered, all certificates bear the
appropriate restrictive legend. Compensation expense of $15 and $21
was recorded in 1996 and 1995, respectively.
(Continued)
31
<PAGE> 33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share amounts)
Pursuant to pre-employment negotiations, in January 1996, 1,000
shares of common stock were issued, and valued at the fair market
value at the date of grant, to the person who became the manager of
the Company's building products division. As the stock has not been
registered, the certificate bears the appropriate restrictive
legend. A charge of $4 was recorded as compensation expense in
1996.
(F) OPTION COMPENSATION EXPENSE
The fair value of each option grant was estimated on the date of
grant using the Black-Scholes option-pricing model with the
following assumptions for both 1996 and 1995: expected dividend
yield 0%, risk free interest rates ranging from 5.8% to 7.5%,
expected term of 8.4 years and expected volatility of 37.5%.
The Company applies APB Opinion No. 25 in accounting for its stock
options in the consolidated financial statements. Had the Company
determined compensation cost based on the fair value at the date of
grant for its stock options under SFAS No. 123, the Company's net
earnings and net earnings per common share would have been reduced
to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1996 1995
----------------------
<S> <C> <C>
Net earnings
As reported $ 1,506 1,337
Pro forma 1,311 1,227
Net earnings per common shares:
As reported .37 .33
Pro forma .32 .30
</TABLE>
The pro forma amounts reflect only options granted in 1996 and
1995. Therefore, the full impact of calculating compensation cost
for stock options under SFAS No. 123 is not reflected in the pro
forma amounts presented above because compensation cost is
reflected over the options vesting period of five years and
compensation cost for options granted prior to January 1, 1995 is
not considered.
(Continued)
-32-
<PAGE> 34
LINDAL CEDAR HOMES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
(5) INCOME TAXES
Total income tax expense (benefit) was allocated as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-----------------------------------
<S> <C> <C> <C>
Current:
U.S. Federal $ 1,057 542 394
Canadian (357) 339 (76)
State 13 3 5
-----------------------------------
713 884 323
Deferred:
U.S. Federal (141) (53) 79
Canadian 90 (2) (4)
-----------------------------------
(51) (55) 75
-----------------------------------
\ Total $ 662 829 398
===================================
</TABLE>
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>
1996 1995 1994
-----------------------------
<S> <C> <C> <C>
Statutory tax rate 34 % 34 % 34 %
Effect of Canadian taxes (5) 3 (3)
Valuation of deferred tax assets - - (4)
Other, net 2 1 1
-----------------------------
31 % 38 % 28 %
=============================
</TABLE>
(Continued)
-33-
<PAGE> 35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share amounts)
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>
1996 1995
----------------
<S> <C> <C>
Deferred tax assets:
Receivables, due to the allowance for doubtful receivables $ 128 64
Uniform inventory capitalization for tax purposes 34 20
Accrued expenses deductible in different years for tax 152 73
----------------
Deferred tax assets 314 157
Deferred tax liabilities - property, plant and equipment, principally
due to differences in basis of assets and depreciation 210 104
----------------
Net deferred tax asset $ 104 53
================
</TABLE>
The Company's Canadian subsidiaries had losses before income taxes of
$444 in 1996 and $114 in 1994. In 1995, the Canadian subsidiaries had
earnings before income taxes of $805.
(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>
1996 1995 1994
-----------------------------
<S> <C> <C> <C>
Gross rent expense $ 473 427 412
Less sublease rentals 42 5 16
-----------------------------
Net rent expense $ 431 422 396
=============================
</TABLE>
Noncancelable long-term operating lease commitments are as follows:
<TABLE>
<CAPTION>
Years ending December 31 Aggregate minimum rentals
----------------------------- -----------------------------
<S> <C> <C>
1997 $ 371
1998 165
1999 132
2000 66
------
$ 734
======
</TABLE>
(Continued)
-34-
<PAGE> 36
LINDAL CEDAR HOMES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
(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 $85 in 1996,
$78 in 1995 and $65 in 1994. 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 accrued at both December 31, 1995 and 1994 should be
contributed in 1996 and 1995, respectively, to this plan on behalf
of the employees.
(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 $165 in
1996, $185 in 1995 and $228 in 1994. 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 1996, 1995 and 1994, 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 approximately $639 in 1996, $949 in 1995 and $419 in
1994. All sales were made under normal trade terms.
(Continued)
-35-
<PAGE> 37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share amounts)
(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>
1996 1995 1994
--------------------------------------
<S> <C> <C> <C>
Revenue:
United States:
Sales to unaffiliated customers $ 41,249 36,858 33,376
Transfers to Canadian operations 6,172 1,957 1,874
----------------------------------------
47,421 38,815 35,250
Canada:
Sales to unaffiliated customers 5,386 5,453 6,157
Transfers to U.S. operations 11,440 7,053 8,802
----------------------------------------
16,826 12,506 14,959
----------------------------------------
64,247 51,321 50,209
Less interarea transfers 17,612 9,010 10,676
----------------------------------------
Total $ 46,635 42,311 39,533
========================================
Operating income (loss):
United States 1,869 1,134 1,420
Canada (645) (481) (169)
----------------------------------------
Total $ 1,224 653 1,251
========================================
Identifiable assets:
United States 23,116 22,423 20,933
Canada 6,918 5,569 5,981
----------------------------------------
Total $ 30,034 27,992 26,914
========================================
</TABLE>
Interarea transfers are made at amounts which approximate fair market
values. The net identifiable assets located in Canada approximate total
gross identifiable assets.
(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, 1996, 1995 and 1994
(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>
1996
Allowance for doubtful
receivables 1 (a)
$204 205 - 14 (b) 394
=================================================================================
1995
Allowance for doubtful
receivables (2) (a)
$203 111 - 112 (b) 204
=================================================================================
1994
Allowance for doubtful
receivables 3 (a)
$249 (29) - 14 (b) 203
=================================================================================
</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 31, 1997
/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 3/31/97 /s/ SIR WALTER LINDAL Date 3/31/97 /s/ ROBERT W. LINDAL
------------ -------------------------------- ------------ ---------------------------------
Sir Walter Lindal Robert W. Lindal
Director and Secretary Director, Chairman
and Chief Executive Officer
Date 3/31/97 /s/ DOUGLAS F. LINDAL Date 3/31/97 /s/ MARTIN J. LINDAL
------------ -------------------------------- ------------ ---------------------------------
Douglas F. Lindal Martin J. Lindal
Director, President Director and
and Chief Operating Officer Vice President Information
Systems and
Assistant Secretary
Date 3/31/97 /s/ JOHN F. DACY Date
------------ -------------------------------- ------------ ---------------------------------
John F. Dacy Everett G. Martin
Vice President Finance Director and Vice
and Treasurer President Midwest
(Principal Financial and and Eastern Canada
Accounting Officer)
</TABLE>
-38-
<PAGE> 40
<TABLE>
<S> <C> <C> <C> <C> <C>
Date Date
------------ -------------------------------- ------------ ---------------------------------
Harry A. Pryde Rick L. Stanley
Director Director
Date 3/28/97 /s/ WILLIAM W. WEISFIELD Date
------------ -------------------------------- ------------ ---------------------------------
William M. Weisfield Charles R. Widman
Director Director
</TABLE>
-39-
<PAGE> 41
LINDAL CEDAR HOMES, INC.
EXHIBIT INDEX
Exhibits are numbered in accordance with Item 601 of Regulation S-K.
<TABLE>
<CAPTION>
Exhibit
numbers Description
------- -----------
<S> <C>
(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
</TABLE>
(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
Exhibit (21)
SUBSIDIARIES OF THE REGISTRANT
The following is a list of all subsidiaries, including the jurisdiction under
which each was organized:
<TABLE>
<CAPTION>
Subsidiary Jurisdiction
---------- ------------
<S> <C>
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) British Columbia, Canada
Lindal Cedar Homes, Ltd. (d) British Columbia, Canada
New Vision Log Sales, Ltd. (e) British Columbia, Canada
Camida Timber Ltd. (c) British Columbia, Canada
WindowVisions, Inc. (a) Washington
WDK, Ltd. (b) Washington
</TABLE>
(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.
(e) Wholly-owned subsidiary of Lindal Cedar Homes, Ltd.
-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
14, 1997 relating to the consolidated balance sheets of Lindal Cedar Homes, Inc.
and subsidiaries as of December 31, 1996 and 1995, 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, 1996,
which report appears in the December 31, 1996 annual report on Form 10-K of
Lindal Cedar Homes, Inc.
/s/ KPMG Peat Marwick LLP
Seattle, Washington
March 26, 1997
-42-
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000059591
<NAME> LINDAL CEDAR HOMES, INC.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 4,038
<SECURITIES> 0
<RECEIVABLES> 2,102
<ALLOWANCES> 394
<INVENTORY> 10,689
<CURRENT-ASSETS> 18,732
<PP&E> 19,261
<DEPRECIATION> 9,432
<TOTAL-ASSETS> 30,034
<CURRENT-LIABILITIES> 7,918
<BONDS> 1,164
0
0
<COMMON> 41
<OTHER-SE> 20,701
<TOTAL-LIABILITY-AND-EQUITY> 30,034
<SALES> 46,635
<TOTAL-REVENUES> 46,635
<CGS> 35,755
<TOTAL-COSTS> 35,755
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 205
<INTEREST-EXPENSE> 133
<INCOME-PRETAX> 2,168
<INCOME-TAX> 662
<INCOME-CONTINUING> 1,506
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,506
<EPS-PRIMARY> .37
<EPS-DILUTED> .37
</TABLE>
