SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-KSB
(Mark One)
[ X ] Annual report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 (Fee required)
For the fiscal year ended December 31, 1995
-------------------
[ ] Transition report under Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No fee required)
For the transition period from __________ to __________
Commission file number: 0 - 7 0 9 3
MOD-U-KRAF HOMES, INC.
----------------------------------------------
(Name of Small Business Issuer in Its Charter)
VIRGINIA 54-0893908
------------------------------- -------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
P. O. BOX 573, ROCKY MOUNT, VIRGINIA 24151
---------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
703 - 483 - 0291
------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
Securities registered under Section 12(b) of the Exchange Act:
NONE
------------
Securities registered under Section 12(g) of the Exchange Act:
COMMON STOCK
----------------
(Title of Class)
Check whether the issuer: (1) filed all reports to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes [ X ] No [ ]
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no disclosure
will be contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this Form
10-KSB.
Yes [ ] No [ X ]
State issuer's revenues for its most recent fiscal year. $9,083,419
----------
State the aggregate market value of the voting stock held by non-
affiliates computed by reference to the price at which the stock was sold, or
the average bid and asked prices of such stock, as of a specified date within
the past 60 days.
$1,676,684 at March 1, 1996
ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PAST FIVE YEARS
Check whether the issuer has filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court.
Yes [ X ] No [ ]
APPLICABLE ONLY TO CORPORATE REGISTRANTS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date, as of March 15, 1994.
813,649 shares of Common Stock, $1 par value
Transitional Small business Disclosure Format: Yes [ ] No [ X ]
DOCUMENTS INCORPORATED BY REFERENCE
None
----
Item 1. Description of Business
-----------------------
Mod-U-Kraf Homes, Inc. (the "Company"), was incorporated as a Virginia
corporation on August 19, 1971. It is engaged in the business of
manufacturing and selling custom-built sectionalized units (homes) of its own
design. The Company also customizes a commercial line of products consisting
of multi-family and diversified specialty structures. These operations
constitute one business segment.
The sectionalized housing units, available in 58 standard models,
ranging in size from 705 square feet to 2,970 square feet for one and two
family dwellings, consist of two or more virtually complete sections which
are manufactured side by side on an assembly line. Various designs are
available, including Victorian, Cape Cod, vacation homes, two stories and
country homes. There are over 100 options to allow for custom choices.
Interior designs provide for great rooms, spacious kitchen-dining-living
areas, ample closets, and fireplaces. Multi-family projects can contain up
to 24,000 square feet and are custom designed to meet the needs of the
builder and as dictated by building site conditions (including inside and
outside painting and installation of kitchen cabinets and floor coverings).
After completion, the units are loaded on specially designed transporters for
delivery to the building site where they are off-loaded to a permanent
foundation previously prepared by the purchaser. After the sections are off-
loaded, either by crane or rollers, they are secured together by a "zip up"
procedure. The purchaser may then complete the sections by making plumbing
and electrical connections, carrying out final grading and landscaping, and
adding brick veneer, if desired. Prices on our products can vary depending
upon the region into which they are to be shipped. The Company believes that
when completely erected on a lot, landscaped and ready for occupancy, its
single family homes retail from $55,000 to $250,000 or more depending on the
cost of the lot. the prices of multi-family projects can range up to
$1,300,000 or more depending on the total size of the project.
During the past several years, the Company, utilizing the manufactured
section concept, has increasingly entered into a new commercial building
market consisting of condominiums, town-house apartments, dental clinics,
medical office buildings, churches, motels and many other commercial
structures adaptable to the Company's manufacturing methods and capabilities.
During 1995, the Company produced 222.0 units as compared to 222.5 units
in 1994. Gross sales of $9,083,419 and $9,288,807 in 1995 and 1994 were
comprised of 219.5 and 222.0 units sold, respectively.
The chief raw materials used in production are lumber and lumber
products, including plywood, moldings, door and window assemblies: general
building materials such as roofing, insulation, wallboard, fixtures and
hardware; and heating equipment and other appliances. These materials are
presently available at competitive prices through several suppliers serving
the area, and the Company has not experienced and does not foresee dependency
upon any single source of supply for raw material. The price of lumber has
been subject to significant fluctuations which may affect the Company's
profit margin and the prices it charges for its products. The Company passes
increased cost on to its customers by increasing sales prices from time to
time.
At March 1, 1996, the Company had a backlog of unshipped orders for 51.5
units (representing approximately $1,956,834 in gross sales). Comparable
backlog figures at March 1, 1995 were 59.0 units (representing approximately
$2,290,123 in gross sales) and, at March 1, 1994, were 41.5 units
(representing approximately $1,587,969 in gross sales). The Company believes
that approximately 65% of the orders comprising the current backlog are firm.
The Company believes that 35% of the back log balance may not be treated as
firm due to a variety of factors, including unavailability of financing for
its customers, title defects or objections with respect to land upon which
customers expect to erect their homes, and weather conditions which can
affect delivery against contracts. The average delay between booking and
shipment of an order is approximately 75 days.
Company units are sold primarily in Virginia, Maryland, West Virginia
and North Carolina, although some sales have been made in South Carolina,
Kentucky, Ohio, Delaware, Tennessee, Pennsylvania and New Jersey. The
Company offers its products primarily to home builders, land developers and
realtors, although the company has acted as "turnkey" contractor in some
instances, selling several sectionalized homes directly to retail customers
and, depending on the contract, either "zipping-up" the units or completing
the entire home to final grade. Orders consist primarily of from one to
three homes, although larger orders are accepted if received.
Management feels that interest rates will remain stable through the year
in 1996, with a possible decrease, and that the marketing momentum will
continue to yield a firm backlog of sales, which, in turn, creates an
optimistic view toward another successful year in 1996. Forecasts indicate
that total housing starts for 1996 will show a modest increase, and with
increased market share of total housing starts by modular houses, we should
show an increase over 1995. The Company's success is dependent upon the
stability of lumber prices, long term mortgage rates, and the health of the
economy.
The Company does not have long-term agreements with any customer and
does not have any single customer or large group of customers upon which a
material part of its business depends. Sales terms are flexible, varying
from cash 15 days prior to delivery to a completely secured sale with a
nominal down payment, in which the Company provides construction financing
pending sale of the units and disbursement of financing by the permanent
lender. The Company provides permanent financing in connection with a small
number of sales. (See Note 3 of Item 7, Financial Statements)
The Company does not have any material patents, licenses, franchises or
concessions, and it has not made any material expenditures for research and
development during the past three years. The Company employs approximately
20 persons on its administrative and office staff, 15 persons on its sales
staff and 82 persons on its production and delivery staff. None of its
employees is represented by a labor union.
Competition in the housing industry is intense. The Company competes
not only with local, regional and national producers of manufactured housing,
including modular, panalized and mobile homes, but also with local, regional
and national home builders as well. Many of these competitors have financial
resources and productive facilities which far exceed those of the Company.
Moreover, five manufactured housing firms have plants located in or near
Rocky Mount, Virginia, and the Company must accordingly compete with these
firms for labor as well as sales. The Company does not know its competitive
position in the manufactured housing industry.
To the extent weather conditions affect the construction or erection of
houses, the business of the Company can be seasonal, with a larger portion of
sales and shipments of its units occurring in the warmer months of the year,
generally from May through November, than during the winter months.
To the best of its knowledge, the Company is in compliance with federal,
state and environmental protection regulations and does not currently foresee
that capital expenditures will be necessary to maintain such compliance or
that future compliance will significantly affect the earnings or competitive
position of the Company.
The marketing direction of the Company has recently developed two
thrusts. While the overall trend has been towards larger structures, the
Company has developed a series of smaller, lower-cost units to enable it to
compete for entry-level housing and governmental loan programs. Improvements
made in manufacturing facilities have put the Company in the position to
produce both large and smaller units efficiently.
The Company does not have under consideration, except as outlined above,
any program for product research and development. The Company is presently
constructing a new manufacturing facility in the Town of Rocky Mount/County
of Franklin Industrial Park approximately one mile from our present location.
At this time, it is anticipated that the cost will be approximately
$2,500,000 which is being funded by an Industrial Revenue Development Bond
Issue. (See Note 6 of Item 7, Financial Statements). The Company's
employment level has fluctuated, and will continue to fluctuate with the
demand for code-complying manufactured housing. Production employment levels
may vary from 60 employees up to 90 employees as order demand increases
production. It is anticipated that the new manufacturing facility will add
an additional 50 employees over current levels.
The products of the Company are manufactured at facilities in Rocky
Mount, Virginia. See Item 2, below. The existing plant has a production
capacity of 7.5 units per week and the new facility will have a production
capacity of 20 units per week.
Item 2. Description of Property.
-----------------------
The Company's production and transportation office and manufacturing
plant are located in a one-story steel building, approximately 34 years old,
on State Highway 40, one mile east of Rocky Mount, Virginia. The building is
insulated and heated with a concrete floor and totals 20,000 square feet.
Production and transportation offices, located within the plant facility, is
air conditioned and contains approximately 1,000 square feet of floor space.
In 1982, there was a one story metal and wood plumbing and electrical storage
addition with 700 square feet and a one story metal and wood break room
addition, heated and air conditioned, with 700 square feet completed. In
1984, construction was completed on a 7,200 square foot addition to the
plant. In 1988, a one story metal and wood addition containing a supply room
and a "Binks" paint booth was completed containing 1,600 square feet. In
1993, a one story metal building that was built in 1984 which has a concrete
floor and 16' overhead doors and has 3,600 square feet was converted to a
component manufacturing area. A small portion of the plant is used for
storage of materials which will not withstand exposure to the elements.
Total manufacturing area contains approximately 33,800 square feet of space.
Four enclosed storage buildings on the property adjacent to the
manufacturing plant are used to store materials. These buildings are wood
and metal construction with concrete floors and either three or four walls
enclosed. Total enclosed storage is 17,370 square feet.
The corporate headquarters building, including the engineering office,
which is located adjacent to the Rocky Mount plant, was completed and
occupied in December 1973 and contains over 7,800 square feet of office
space. The building was constructed in the Rocky Mount plant from seven
single modules completed in the plant with plant installation of wiring,
lighting, plumbing, carpet, vinyl, and rest rooms with ceramic walls and
floors.
The property is served by a rail siding. The property includes
approximately seven acres of land that provides for, in addition to the plant
buildings, storage buildings and corporate headquarters building, room for
employee and visitor parking, storage of completed sections pending shipment
and two sales models.
In October 1977, the Company purchased a 10-acre parcel adjacent to its
Rocky Mount facilities for possible future expansion. In March 1993, an
additional 16.92 acres were purchased adjacent to the 10 acre parcel. In
October 1994, the Company exchanged, at no cost, 20.229 acres of the total
26.92 acres for 17.983 acres in the Franklin County/Town of Rocky Mount,
Virginia Industrial Park. After the exchange, there are remaining 6.691
acres owned by the Company adjacent to its Rocky Mount facilities.
The 7 acre parcel that contains the manufacturing, storage and office
buildings are separated from the 6.691 acre parcel referred to above by a
rail line.
The Company's new manufacturing facility under construction is located
on 17.983 acres in the Franklin County/Town of Rocky Mount, Virginia
Industrial Park. The facility is a steel building, insulated with a standing
rib roof. The 104,325 square foot building has a 32'6" eave height and has
a sprinkler system throughout. There is 6,680 square feet of mezzanine for
additional storage and 800 square feet of office space inside the building.
The size of the building will allow for storage of all materials for the
construction of the units. This will reduce damage to inventory due to
movement and weather. The entire floor area is covered by 6" of finished
concrete. There are 10 large doors of which 8 are designed for "drive
through" and 2 are "dock" doors for receiving materials. There are five 4
ton bridge cranes installed to assist in the "off-line" production of various
components such as floor systems, walls, and roof systems. The entire
building will be heated by propane with an air rotation system. To allow for
future expansion of the building, an additional 8,750 square feet of finished
floor and grade beams has been added to the building. Three storm water run-
off retention ponds are located on the property. All roof drains on the
building have been "piped" to those ponds. The remainder of the finished lot
will be covered by 6" of compacted surface with approximately 42,000 square
yards of high traffic area underlaid with a surface retention fabric. The
property will be fenced for security purposes.
The Company's transportation and delivery fleet consists of six tractor
cabs and 52 trailers, all of which are owned by the Company.
The Company considers its properties and equipment generally to be well
maintained and in good condition, and adequate for the needs of its business.
Item 3. Legal Proceedings.
------------------
None.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None.
Item 5. Market for Common Stock and Related Stockholder Matters.
--------------------------------------------------------
The Corporation's common stock is traded in the over-the-counter market.
The number of shareholders of record as of February 21, 1996 was 438. The
range of bid and ask quotations and dividends declared for the last two
calendar years are listed below.
QUOTATIONS ON COMMON STOCK
1995 1994
---------------------------- -------------------------- Dividends
BID ASK BID ASK Declared
-------------- ------------- ------------ ------------- ------------
High Low High Low High Low High Low 1995 1994
------ ------ ------ ------ ------ ----- ------ ----- ----- -----
First 4 3 1/2 4 1/2 -- 5 3 3/4 6 4 3/4 $0.03 $0.03
Second 4 3 3/4 4 1/2 4 1/8 5 4 1/2 6 5 1/4 $0.03 $0.03
Third 3 3/4 3 1/2 4 1/2 -- 4 1/2 -- 5 1/4 -- $0.03 $0.03
Fourth 3 1/2 -- 4 1/2 -- 4 1/2 -- 5 1/4 -- $0.03 $0.03
Source: Wheat, First Securities, Inc.
The Corporation presently expects to pay dividends in the future as earnings
permit. The quotations herein reflect inter-dealer prices, without mark-up,
mark-down or commission, and may not represent actual transactions.
Item 6. Management's Discussion and Analysis or Plan of Operation.
----------------------------------------------------------
Because the housing industry is seasonal, 1995 Net Sales of $9,083,419
were 2.21% below 1994 Net Sales of $9,288,807 due to the inclement weather
during the last few weeks of the year. Otherwise we feel that we would have
exceeded 1994 sales. The trend in sales for the past five years have shown
a steady increase in volume. We believe that this trend will continue for
the modular industry. By increasing our production capacity with our new
manufacturing facility we will be able to satisfy the demand.
Gross Profit percentages were 29.17% in 1995 as compared to 27.27% in
1994 and 28.85% in 1993. With stable lumber prices and producing to capacity
we are able to minimize and control our production costs. The new facility
will enable us to exercise more control over our process by using the latest
production techniques.
We have been generating some savings in the Selling, general and
administrative expenses. Their percentages were 23.20%, 22.14% and 24.72%
for the years 1995, 1994 and 1993, respectively. We have been carefully
increasing our staffing in engineering and selling in anticipation of our
expansion and increased volume.
Interest income continues to comprise a significant portion of non-
operating income. For the years 1995, 1994 and 1993, interest income was
91.61%, 82.75%, and 90.73%, respectively, of non-operating income. We keep
a large cash balance to eliminate any short term borrowing that may be needed
for operations if we have a temporary market shift due to weather or interest
rate factors.
There were no other significant variances.
Capital Resources and Liquidity
Total funds generated were sufficient to meet the requirements for plant
and equipment, debt retirement and dividends. By virtue of the cash and
accounts receivable levels, the company feels that it has adequate liquidity
for continued successful operations.
The Company is in the process of constructing a new manufacturing
facility to be completed in the second quarter of 1996 at a cost of
approximately $2,250,000. The plant is being financed by an Industrial
Development Bond Issue. The debt associated with this issue will be payable
over a 20 year period.
The Company believes that the effect of inflation on the results for the
periods presented is not material.
To the extent permitted by competition, the Company passes increased
cost on to its customers by increasing sales prices from time to time.
Item 7. Financial Statements.
---------------------
MOD-U-KRAF HOMES, INC. AND SUBSIDIARY
CONSOLIDATED FINANCIAL REPORT
December 31, 1995
C O N T E N T S
INDEPENDENT AUDITOR'S REPORT ON
THE FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
INDEPENDENT AUDITOR'S REPORT
- ----------------------------
To the Board of Directors and Stockholders of
Mod-U-Kraf Homes, Inc. and Subsidiary
Rocky Mount, Virginia
We have audited the accompanying consolidated balance sheets of
Mod-U-Kraf Homes, Inc. and Subsidiary as of December 31, 1995 and 1994 and
the related consolidated statements of income, stockholders' equity and
cash flows for the years ended December 31, 1995, 1994 and 1993. These
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of Mod-U-
Kraf Homes, Inc. and Subsidiary as of December 31, 1995 and 1994 and the
results of their operations and their cash flows for the years ended
December 31, 1995, 1994 and 1993 in conformity with generally accepted
accounting principles.
Brown, Edwards & Company, L.L.P.
CERTIFIED PUBLIC ACCOUNTANTS
Roanoke, Virginia
January 20, 1996
MOD-U-KRAF HOMES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994
ASSETS 1995 1994
------------- ------------
CURRENT ASSETS
Cash and cash equivalents $ 1,426,738 $ 1,226,736
Certificates of deposit 689,000 300,000
U.S. Treasury note - 204,935
Trade and other receivables 63,866 156,161
Inventories (Note 2) 1,368,766 1,206,955
Notes receivable, current portion
(Note 3) 882,234 1,425,390
Prepaid expenses 67,506 71,314
-------------- ------------
Total current assets 4,498,110 4,591,491
LONG-TERM NOTES RECEIVABLE (Note 3) 221,418 261,657
PROPERTY AND EQUIPMENT, at cost less
accumulated depreciation 1995
$1,802,732; 1994 $1,652,419
(Notes 4 and 6) 2,245,627 897,798
OTHER ASSETS
Deferred taxes (Note 7) 508,239 498,608
Cash surrender value of officers' life
insurance 95,440 79,923
Reimbursement account (Note 6) 145,516 -
Earnings on unused bond proceeds (Note 6) 58,124 -
Debt issue costs (Note 6) 73,030 -
------------- -------------
$ 7,845,504 $ 6,329,477
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt
(Note 6) $ 150,000 $ -
Current portion of postretirement
benefits (Note 5) 75,366 58,234
Accounts payable, trade and other
liabilities 356,706 384,565
Accrued compensation 232,026 234,795
Customer deposits 23,315 148,549
Income taxes payable (Note 7) 60,364 37,042
------------- ------------
Total current liabilities 897,777 863,185
LONG-TERM POSTRETIREMENT BENEFITS
(Note 5) 1,130,822 1,195,257
LONG-TERM DEBT (Note 6) 1,234,514 -
COMMITMENTS AND CONTINGENCIES (Notes 6
and 12) - -
------------ ------------
Total liabilities 3,263,113 2,058,442
------------ ------------
STOCKHOLDERS' EQUITY
Common stock, $1 par value,
2,000,000 shares authorized; shares
issued and outstanding 825,649 in
1995; 813,649 in 1994 (Note 9) $ 825,649 $ 813,649
Additional paid-in capital 459,671 440,421
Retained earnings 3,297,071 3,016,965
------------- --------------
4,582,391 4,271,035
------------- --------------
$ 7,845,504 $ 6,329,477
============= =============
The Notes to Consolidated Financial Statements are an integral part of
these statements.
MOD-U-KRAF HOMES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31, 1995, 1994, and 1993
1995 1994 1993
------------- ------------- -------------
Net sales $ 9,083,419 $ 9,288,807 $ 7,893,216
Cost of goods sold
(Note 13) 6,433,361 6,755,710 5,616,247
------------- ------------- -------------
Gross profit 2,650,058 2,533,097 2,276,969
Selling, general and
administrative expenses 2,107,624 2,056,209 1,905,919
------------- ------------- ------------
Operating income 542,434 476,888 371,050
Postretirements benefits
expense (Note 5) 127,010 114,749 185,359
Non-operating income, net
(Note 11) 192,085 192,845 157,121
------------ ------------- ------------
Income before income taxes
and cumulative effect
adjustments 607,509 554,984 342,812
------------ ------------- ------------
Federal and state income tax
expense (Note 7) 228,685 246,780 147,672
------------ ------------- ------------
Income before cumulative
effect of changes in
accounting principles 378,824 308,204 195,140
Cumulative effect on prior
years of:
Accounting change, net of
related income tax effect
(Note 5) - - ( 95,730)
Accounting change (Note 7) - - 437,891
----------- -------------- --------------
Net income $ 378,824 $ 308,204 $ 537,301
=========== ============== ==============
Earnings per share (Note 14):
Income before cumulative
effect of accounting
changes and 20 percent
stock dividend $ .46 $ .38 $ .29
Combined cumulative effect
of accounting changes - - .50
---------- ------------- -------------
Net income before 20
percent stock dividend .46 .38 .79
Effect of 20 percent
stock dividend $ - $ - $ ( .13)
----------- ------------- -------------
Net income $ .46 $ .38 $ .66
=========== ============= =============
The Notes to Consolidated Financial Statements are an integral part of
these statements.
MOD-U-KRAF HOMES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended December 31, 1995, 1994, and 1993
Common Additional Total
Stock Paid-in Retained Stockholders'
($1 Par) Capital Earnings Equity
--------- ---------- ----------- -----------
Balance, December 31,
1992 $ 681,982 $ - $ 2,934,441 $ 3,616,423
Net income - - 537,301 537,301
Dividends paid
($.12 per share) - - ( 81,216) ( 81,216)
20 percent stock
dividend (Note 14) 135,520 440,440 ( 575,960) -
Retirement of 3,847
shares of common
stock ( 3,847) - ( 7,695) ( 11,542)
----------- --------- ----------- -----------
Balance, December 31,
1993 813,655 440,440 2,806,871 4,060,966
Net income - - 308,204 308,204
Dividends paid
($.12 per share) - - ( 98,135) ( 98,135)
Other ( 6) ( 19) 25 -
----------- ---------- ----------- -----------
Balance, December 31,
1994 813,649 440,421 3,016,965 4,271,035
Net income - - 378,824 378,824
Dividends paid
($.12 per share) - - ( 98,718) ( 98,718)
Issuance of 12,000
shares of
common stock 12,000 19,250 - 31,250
----------- --------- ----------- -----------
Balance, December 31,
1995 $ 825,649 $ 459,671 $ 3,297,071 $ 4,582,391
=========== ========= =========== ===========
The Notes to Consolidated Financial Statements are an integral part of
these statements.
MOD-U-KRAF HOMES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1995, 1994, and 1993
1995 1994 1993
----------- ------------ ------------
OPERATING ACTIVITIES
Net income $ 378,824 $ 308,204 $ 537,301
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and
amortization 163,912 151,701 141,589
Deferred taxes ( 9,631) 52,408 ( 14,115)
Loss (gain) on sale
of equipment 993 ( 11,553) ( 8,300)
Increase in cash value of
life insurance ( 15,517) ( 22,561) ( 21,991)
Adjustment to post-
retirement benefits ( 47,303) ( 53,889) 42,909
Cumulative effect of
accounting changes - - ( 342,161)
Change in certain current
assets and liabilities:
(Increase) decrease in:
Trade and other
receivables 92,295 ( 71,717) 16,582
Inventories ( 161,811) 266,473 ( 186,317)
Prepaid expenses 3,808 ( 26,200) 1,169
(Decrease) increase in:
Accounts payable,
trade and other
liabilities ( 27,859) 88,818 70,107
Accrued compensation ( 2,769) 70,537 ( 3,626)
Customer deposits ( 125,234) 99,601 ( 24,681)
Income taxes payable 23,322 31,191 ( 41,884)
------------ ----------- ------------
Net cash provided by
operating activities 273,030 883,013 166,582
------------ ----------- ------------
INVESTING ACTIVITIES
Proceeds from sale of
equipment - 13,900 8,300
Purchase of property and
equipment, net of debt
incurred 1995 $1,311,484 ( 201,250) ( 140,481) ( 261,452)
Principal received on notes
receivable 1,675,875 1,324,245 1,611,848
Notes receivable arising
from sales ( 1,092,480) ( 1,961,384) ( 1,308,645)
Decrease (increase) in
certificates of deposit ( 389,000) 300,000 -
Sale (purchase) of U.S.
Treasury Note 204,935 ( 204,935) -
----------- ----------- -----------
Net cash provided by (used
in) investing activities 198,080 ( 668,655) 50,051
FINANCING ACTIVITIES
Proceeds from sale of
common stock 31,250 - -
Purchase of common stock
for retirement - - ( 11,542)
Cash dividends paid ( 98,718) ( 98,135) ( 81,216)
Debt issue costs, net of
debt incurred 1995 $73,030 - - -
Funding of reimbursement
account ( 145,516) - -
Earnings on unused
bond proceeds ( 58,124) - -
----------- ------------ -----------
Net cash used in financing
activities ( 271,108) ( 98,135) ( 92,758)
----------- ------------ ------------
Increase in cash and cash
equivalents 200,002 116,223 123,875
CASH AND CASH EQUIVALENTS
Beginning 1,226,736 1,110,513 986,638
----------- ------------ ------------
Ending $ 1,426,738 $ 1,226,736 $ 1,110,513
=========== ============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash payments for:
Income taxes, net of
refunds received $ 214,783 $ 163,181 $ 203,705
============ ============ ============
The Notes to Consolidated Financial Statements are an integral part of
these statements.
MOD-U-KRAF HOMES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
Note 1. Nature of Business and Significant Accounting Policies
------------------------------------------------------
Nature of Business:
The Company is engaged in the business of manufacturing and
selling sectionalized building units of its own design. The
Company also customizes a commercial line of products consisting
of multi-family and diversified specialty structures. The units
are sold primarily to home builders, land developers and
realtors in Virginia, Maryland, West Virginia and North
Carolina.
In some cases, the Company provides short-term construction
financing which is generally limited to 75 to 80 percent of the
estimated fair market value of the completed property. The
Company retains a security interest in the property until the
contract is paid. The Company's wholly-owned subsidiary
developed a small condominium complex in the ski resort area of
Gatlinburg, Tennessee and holds mortgage notes for certain units
sold. The mortgages were limited to 90 percent of the fair
market value of the properties at the time of sale, however, due
to market declines, the mortgage balances may exceed 90 percent
of the current fair market value of the related property. The
Company's exposure to loss on these contracts is limited to the
difference between the receivable and the value of the
collateral. The Company has not experienced any significant
loss on the subsequent sale of repossessed collateral.
Principles of Consolidation:
The consolidated financial statements include the accounts of
the Company's wholly-owned subsidiary, Mountain Resort Building
Systems, Inc. All significant intercompany accounts and
transactions have been eliminated.
Cash and Cash Equivalents:
For purposes of reporting cash flows, the Company considers most
highly liquid investments with an original maturity of three
months or less to be cash equivalents. Certificates of deposit,
regardless of maturity, are not considered cash equivalents.
The Company maintains its cash accounts in commercial banks
located in Virginia. Accounts in each bank are guaranteed by
the Federal Deposit Insurance Corporation (FDIC) up to $100,000
per bank. A portion of the Company's cash balance is uninsured
at year end.
Valuation of Trade Receivables:
Trade receivables are stated at face amount with no allowance
for doubtful accounts because probable uncollectible accounts
are immaterial.
Inventories:
Raw materials are stated at the lower of cost (determined on a
first-in, first-out basis) or market. Work-in-progress and
finished goods are stated at the lower of average cost
(determined on a standard cost basis) or market. Land and units
held for sale are stated at the lower of cost (determined on a
specific property basis) or market.
Depreciation:
Depreciation is provided principally on the straight-line method
over the estimated useful lives of the depreciable assets for
financial reporting purposes. Statutory methods and lives are
used for income tax purposes.
Income Taxes:
Income taxes are provided for the tax effects of transactions
reported in the financial statements and consist of taxes
currently due plus deferred taxes related primarily to
differences from current recognition of deferred compensation
for financial reporting purposes and deferred recognition for
income tax purposes. The deferred taxes represent the future
tax return consequences of those differences, which will either
be taxable or deductible when the assets and liabilities are
recovered or settled.
Recognition of Income:
Revenue is recognized for cash-in-advance sales when production
of the unit is complete. Revenue is recognized for sales on
account when the unit is delivered.
Estimates:
Management uses estimates and assumptions in preparing financial
statements. Those estimates and assumptions affect the reported
amounts of assets and liabilities, the disclosure of contingent
liabilities and the reported revenues and expenses.
Earnings Per Share:
Primary and fully diluted earnings per common share are based on
the weighted average number of shares of common stock
outstanding and common stock equivalents of dilutive stock
options. The weighted average number of actual shares
outstanding was 821,649, 813,652 and 678,456 for 1995, 1994 and
1993, respectively. Earnings per share have been adjusted to
give retroactive effect to the 20 percent stock dividend
declared January 19, 1994. The weighted average number of shares
as retroactively adjusted were 813,970 for 1994 and 1993 (Note
14).
Reclassification:
For comparability, the amounts presented for 1994 and 1993 have
been reclassified, where appropriate, to conform to the
presentation used for 1995.
Note 2. Inventories
The components of inventories are as follows:
1995 1994
---------- -----------
Raw materials $ 556,194 $ 503,735
Work-in-process 46,421 101,021
Finished goods 372,584 311,724
Land and units held
for sale 393,567 290,475
----------- -----------
$ 1,368,766 $ 1,206,955
=========== ===========
Total general and administrative costs incurred and the portion
of those costs remaining in inventory are as follows:
1995 1994 1993
----------- ------------- --------------
General and
administrative
costs:
Incurred $ 740,046 $ 715,350 $ 747,920
=========== ============ =============
Remaining in
inventory $ 22,432 $ 22,251 $ 21,775
=========== ============ =============
Note 3. Notes Receivable
----------------
Notes receivable consist of the following:
1995 1994
------------ ------------
Various mortgage notes receivable,
interest ranging from 8% to 10%,
payable in various monthly install-
ments and balloon payments due at
various dates through August 1999.
Secured by deeds of trust on
certain real estate. $ 134,888 $ 235,172
Credit line deed of trust notes
receivable, interest ranging from
0% to 10.5%, payable at various
dates through 1996. Secured by
deeds of trust on certain real estate. 921,314 1,429,102
Demand note receivable with interest
payable quarterly at 9%, unsecured. 12,975 15,675
Premium demand loan receivable from the
President, no stated interest, secured by
cash surrender value of the related life
insurance policy. 6,350 7,098
Note receivable from the President, payable
in annual principal installments of
$5,625 plus interest at 5.03%, secured
by common stock of the Company. 28,125 -
---------- -----------
1,103,652 1,687,047
Less current portion 882,234 1,425,390
---------- -----------
$ 221,418 $ 261,657
========== ===========
Note 4. Property and Equipment
----------------------
Major classes of property and equipment are as follows:
1995 1994
---------- ----------
Land and improvements $ 275,590 $ 275,590
Buildings 1,076,311 1,073,836
Manufacturing equipment 1,020,645 882,741
Other furniture, fixtures
and equipment 349,592 318,050
---------- -----------
2,722,138 2,550,217
Less accumulated depreciation $ 1,802,732 $ 1,652,419
---------- -----------
919,406 897,798
Construction in process
(see Note 6) 1,326,221 -
---------- ----------
$ 2,245,627 $ 897,798
========== ==========
Maintenance and repairs expense incurred amounted to $134,405,
$132,178 and $113,679 for 1995, 1994, and 1993, respectively.
Note 5. Postretirement Benefits
-----------------------
The Company is obligated under postretirement benefits
agreements with two former officers as follows:
1995 1994
----------- ------------
Present value of deferred
compensation benefits payable to
the widow of O.Z. Oliver, former
Treasurer and Chairman of the Board,
at $6,311 monthly until the earlier
of her death or September 2006,
discounted at 8.50%. $ 532,477 $ 561,585
Present value of deferred
compensation benefits payable to
Robert K. Fitts, former President
and Chairman of the Board, at $5,560
monthly until his death after which
the benefits are payable to his spouse,
Mary L. Fitts until the earlier of
her death or July 2007, discounted
at 8.50%. 523,974 545,171
Present value of estimated
postretirement benefits other than
pensions discounted at 8.50%.
Details are presented below. 149,737 146,735
---------- ----------
1,206,188 1,253,491
Less current portion 75,366 58,234
---------- ----------
$ 1,130,822 $ 1,195,257
========== ==========
The Company is obligated to pay a fixed monthly amount for
health care coverage to the above payees. The Company is also
obligated to pay up to $10,000 annually in premiums for a life
insurance policy assigned to the former President.
Effective January 1, 1993, the Company elected to adopt an
accounting treatment for these obligations similar to that
described in Statement of Financial Accounting Standards No.
106, Employer's Accounting for Postretirement Benefits Other
than Pensions under which such costs are recognized as incurred
rather than when paid. The statement is not required to be
applied to benefits payable to selected employees under terms of
individual contracts. However, it is management's opinion that
adoption of the standard is preferable for financial reporting
purposes. The cumulative effect of this change in accounting
principle amounted to $95,730, net of related deferred tax
benefit of $58,674 and is included in determining net income for
1993.
The effect of a change in the discount rate from 9.78 percent to
8.50 percent is included in determining deferred compensation
expense for 1993. This change resulted in a decrease in net
income of approximately $78,000 and a decrease in earnings per
share of $0.11.
Note 6. Long-Term Debt
--------------
On July 12, 1995, the IDA of Franklin County, VA issued bonds in
the amount of $3,000,000 to finance the construction of a
manufacturing facility. The Series 1995 Variable Rate Demand
Industrial Revenue Bonds are secured by the Company's
Irrevocable Letter of Credit with Crestar Bank. The letter of
credit agreement subjects the Company to certain financial and
operating covenants, all of which the Company was in compliance
with at year end. Crestar Bank holds a first lien and security
interest on the new facility. The bonds are payable in equal
annual principal amounts of $150,000 through 2015. The interest
rate was 4.95 percent at December 31, 1995. Interest of
approximately $58,000 was incurred and capitalized during 1995.
The Company has entered an agreement of sale to purchase the
facility from the IDA. The Company's obligation under the
Agreement of Sale is equal to the required principal and
interest payments on the bonds and is payable in monthly
installments currently estimated at $22,750. The monthly
payments are deposited into a Reimbursement Account with Crestar
Bank and used to pay all principal, interest and fees related to
the Bonds. The Company also agreed to maintain an additional
required deposit in the reimbursement account equal to 55 days
of interest at 15.0 percent on the bonds. As of December 31,
1995, the Reimbursement Account balance was as follows:
Required prepaid interest deposit $ 67,811
Unused monthly principal deposits 75,000
Earnings 2,705
-----------
$ 145,516
===========
The Company's policy is to reflect the balance of the
reimbursement account as an asset until the funds are used by
the trustee for payment of bond obligations, at which time the
Company reduces its obligations under the asset sale agreement.
As of December 31, 1995, $1,384,514 of the bond proceeds have
been drawn from the trustee. The Company's obligation under
the asset sale agreement is reflected at the amount of bond
proceeds that have been drawn. Any unused proceeds will be
used for early retirement of bonds.
Amounts earned on bond proceeds prior to their being drawn
from the trustee are to be applied to principal reduction in
the future. These earnings amounted to $58,124 at December
31, 1995.
Debt issue costs will be amortized over the term of the debt.
Note 7. Income Taxes
------------
Effective January 1, 1993, the Company adopted Statement of
Financial Accounting Standards No. 109, Accounting for Income
Taxes. The cumulative effect of the change in accounting
principle is included in determining net income for 1993.
The provision for income taxes consists of the following
components:
1995 1994
-------------------------- --------------------------
Federal State Total Federal State Total
-------- -------- -------- -------- -------- --------
Current tax
expense $194,664 $ 43,652 $238,316 $156,446 $ 37,926 $194,372
Deferred tax
expense (benefit) (12,973) 3,342 ( 9,631) 48,598 3,810 52,408
-------- -------- -------- -------- -------- --------
$181,691 $ 46,994 $228,685 $205,044 $ 41,736 $246,780
======== ======== ======== ======== ======== ========
1993
------------------------------
Federal State Total
--------- -------- ---------
Current tax expense $130,833 $30,854 $161,787
Deferred tax expense (benefit) (12,630) (1,485) (14,115)
--------- -------- ---------
$118,203 $29,469 $147,672
======== ======== =========
Deferred tax expense (benefit) results from temporary difference
in the recognition of revenue and expense for tax and financial
reporting purposes. The sources of the differences and the tax
effect of each are as follows:
1995 1994 1993
---------- --------- -----------
Differing cost basis of property and
equipment for tax and financial
reporting purposes $( 24,248) $ 34,884 $( 4,992)
Deferred compensation expensed when
incurred, deductible when paid 18,285 17,970 ( 4,595)
Warranty and accrued vacation expensed
when incurred, deductible when paid ( 1,437) ( 2,114) ( 3,341)
Other, net ( 2,231) 1,668 ( 1,187)
---------- ----------- ----------
$( 9,631) $ 52,408 $( 14,115)
========== =========== ==========
Total tax provisions differ from amounts computed by applying the
statutory Federal income tax rate to income before income taxes for
the following reasons:
1995 1994 1993
---------------- ---------------- ----------------
Percent Percent Percent
of of of
Pretax Pretax Pretax
Amount Income Amount Income Amount Income
-------- ------- -------- ------- -------- -------
Income tax expense at
statutory federal rate $206,553 34.0% $188,695 34.0% $116,556 34.0%
Increase in income
taxes from:
State income taxes, net of
federal tax effect 24,300 4.0% 22,199 4.0% 13,712 4.0%
Other, net ( 2,168) (0.4%) 35,886 6.5% 17,404 5.1%
--------- ------- --------- ------- --------- -----
$228,685 37.6% $246,780 44.5% $147,672 43.1%
========= ======= ========= ======= ========= =====
Note 8. Fair Value of Financial Instruments
-----------------------------------
The methods used to estimate the fair value of each material
class of financial instruments are as follows:
Cash, Short-term Investments and Trade Receivables and Payables:
---------------------------------------------------------------
The carrying amount is a reasonable estimate of the fair value
because of the short maturity of these instruments.
Notes Receivable:
----------------
Fair values are estimated by discounting the future cash flows
using the current rates at which similar loans would be made
with similar credit ratings and for the same remaining
maturities. At December 31, 1995 and 1994, carrying values
approximate fair values.
Debt:
----
The interest rate on the long-term debt is reset weekly to
reflect current market rates. Consequently, the carrying value
of debt approximates fair value.
Note 9. Stock Option Plan
-----------------
The Company previously had 150,000 shares of common stock
reserved for issuance to key employees under an incentive stock
option plan, which terminated February 24, 1993. Options were
granted at prices equal to the fair market value on the dates of
grant except for 10 percent stockholders for which the price was
not less than 110 percent of fair market value. Options are
exercisable in cumulative installments over a 5-year period
commencing at the date of grant and expiring at the end of the
fifth year. The only activity in the plan for 1991 through 1993
was the granting of 10,000 options in 1992 (increased to 12,000
due to stock dividend, see Note 14), which were exercised at
$3.125 per share in 1995. All other options granted were
previously exercised or expired unexercised.
Note 10. Profit Sharing Plan and Trust
-----------------------------
The Company has a contributory profit-sharing plan complying
under Section 401(k) and certain other provisions of the
Internal Revenue Code. The plan covers a majority of all
employees meeting minimum eligibility requirements.
Participants may elect to have before-tax (salary reduction)
contributions to be made to the plan on their behalf. The
Company matches such before-tax contributions in the proportion
determined by the Board of Directors at its discretion on an
annual basis. Additionally, the Company may at the Board's
discretion make an additional contribution based on the
Company's pre-tax earnings. The Company's total contributions
to the plan were $53,010, $52,401, and $38,219 for 1995, 1994
and 1993, respectively.
Note 11. Non-operating Income
--------------------
Non-operating income is composed of the following:
1995 1994 1993
--------- ---------- ----------
Interest income $ 175,971 $ 159,586 $ 142,563
Interest expense, net of earnings
on debt proceeds ( 4,867) ( 445) ( 1,146)
Rental and other income 22,091 22,250 7,860
Rental and other expenses ( 117) ( 99) ( 456)
Gain (loss) on sale of equipment ( 993) 11,553 8,300
--------- --------- ---------
$ 192,085 $ 192,845 $ 157,121
========= ========= =========
Note 12. Commitments and Contingencies
-----------------------------
Self-Insurance:
--------------
The Company has a professionally administered self-insurance
program which is used to account for health insurance coverage
for employees on a cost-reimbursement basis. Under the
program, the Company is obligated for claims payments. A stop
loss insurance contract executed with an insurance carrier
covers claims in excess of $15,000 per covered individual and
approximately $110,000 in the aggregate, subject to a maximum
limit of $1,000,000. Total claims expense and administrative
fees of $240,184, $160,878 and $172,149, which did not exceed
the stop loss provisions, were incurred for 1995, 1994 and 1993,
respectively. These amounts include actual claims processed and
an estimate for claims incurred but not reported as of each year
end.
Employment Contracts:
--------------------
The Company is obligated under employment contracts with the
President and Vice President. Combined base annual compensation
under the contracts is approximately $140,000. The contracts
provide for payment of incentive compensation based on certain
percentages of pretax income of the Company, exclusive of any
extraordinary items. The President's contract also provided for
granting options for 10,000 shares of stock under the terms and
conditions of the Company's stock option plan. Such options were
granted during 1992.
Death Benefit:
-------------
The Company is obligated to provide a death benefit to the
estate of the Vice President in the amount of $35,000. The
Company has recognized a liability in the amount of $14,267, the
estimated present value of this obligation discounted at
8.50 percent. The Company is carrying a term life insurance
policy in the amount of $35,000, the purpose of which is to fund
the death benefit.
Sales and Service Tax Audit:
---------------------------
The Company is undergoing an audit of its West Virginia sales
and service tax returns. The West Virginia Department of
Revenue has assessed the Company an additional tax of $117,999
and interest of $14,544. The Company's attorneys have filed a
Petition for Reassessment with the State. In the opinion of the
Company's legal counsel, the Company's chances of success on the
current assessments are favorable.
Note 13. Related Party Transactions
--------------------------
In the normal course of business, the Company makes purchases
from a supplier owned by a director of the Company. Purchases
from this supplier totaled $462,654, $484,701 and $381,442 for
1995, 1994 and 1993, respectively.
The Company has notes receivable from various shareholders (Note
3) and is obligated under deferred compensation agreements to
two former employees (Note 5).
Note 14. Stock Dividend
--------------
On January 19, 1994, the Board of Directors declared a 20
percent stock dividend on the Company's common stock. On March
2, 1994, shareholders of record as of February 9, 1994 received
one additional share of stock for each five shares held. A
total of 135,514 shares of common stock were issued. Earnings
per share and weighted average shares outstanding were restated
for 1993 and 1992 to reflect the 20 percent stock dividend.
This transaction was recorded retroactively in the accompanying
balance sheet as if it occurred on December 31, 1993, resulting
in a reduction of retained earnings equal to the fair market
value of the stock which was $4.25 per share at December 31,
1993.
Item 8. Changes In and Disagreements With Accountants on Accounting
and Financial Disclosure.
---------------------------------------------------------------
None
Item 9. Directors, Executive Officers, Promoters and Control Persons.
-------------------------------------------------------------
Proxies will be voted for the election of the following nominees as
directors at the Company's annual meeting of shareholders to be held on
March 27, 1996.
Name Age Director Since
------ ----- ----------------
Edwin J. Campbell . . . . . . . . 66 1978
Dale H. Powell . . . . . . . . . 62 1980
W. Curtis Carter . . . . . . . . 77 1991
J. Dillard Powell . . . . . . . . 62 1991
Bobbie L. Oliver . . . . . . . . . 63 1994
Mary L. Fitts . . . . . . . . . . 56 1994
EDWIN J. CAMPBELL was Vice President of Sales and marketing of the
Company from 1977 until 1990, and has been Corporate Secretary since March,
1990. He has been Vice President since October, 1990.
DALE H. POWELL was Vice President-Operations of the Company from 1980 to
March 1990, when he became President and Chairman of the Board. Mr. Powell
was Secretary of the Company from March 1988 until March 1990. Mr Powell is
the brother of J. Dillard Powell.
W. CURTIS CARTER, presently retired, was an Officer and Director of
Stuart Lumber Corporation in Stuart, Virginia for 24 years until the company
was sold to the Masonite Corporation in 1977. He remained with Masonite in
accounting and other capacities until his retirement in 1988.
J. DILLARD POWELL has been owner and President of Rocky Mount Supply
Company since 1989. Prior thereto he served as President of Continental
Homes from 1973 to 1988 where he had worked in other capacities since 1960.
He was on the State Board of Housing from 1972 to 1986 serving 8 years as
Chairman; was a Commissioner for the Virginia Housing Development Authority
from 1976 to 1984; Chairman of the National Joint Council of States on
Building Codes and Standards from 1986 to 1988; and has been a Director of
First Virginia Bank-Franklin County since 1983. He is the brother of Dale H.
Powell.
BOBBIE L. OLIVER is the wife of the late O. Z. Oliver, Co-founder and
former Board Chairman of Mod-U-Kraf Homes, Inc. She is the largest
shareholder of the Company and is currently managing real estate and rental
properties. She is the Mother of M. Jan Oliver, the Sister-In-Law of Dale H.
Powell and the Sister of Mary L. Fitts.
MARY L. FITTS, Real Estate Investor, has been owner and operator of an
apartment complex since 1983. She is the wife of Robert K. Fitts, co-founder
of the Company. She is the Sister-In-Law of Dale H. Powell and the Sister of
Bobbie L. Oliver.
Executive Compensation Committee Interlocks and Insider Participation
The Company's Board of Directors, including Company officers Edwin J.
Campbell and Dale H. Powell, functioned as the executive compensation
committee in 1995.
Executive Compensation Committee Report
At Mod-U-Kraf Homes, Inc., all members of the Board of Directors serve
as members of the Compensation Committee. It is the desire of the Committee
to establish a compensation program designed to attract and retain key
employees. Compensation is based on the local pay scales and comparable
industry standards. Compensation for key Company employees is reviewed each
year based on job performance and recommendations to the Board by the
President and Vice President. The President and Vice President are members
of the Board of Directors.
Mod-U-Kraf's executive compensation is based on industry standards for
comparative sized companies. In addition to a base salary, there is
potential for an annual incentive bonus to be earned based on Company profits
before taxes. Only two key executives, the President and Vice President,
participate in the incentive bonus which is detailed in their respective
employment contracts. All other key employees have a base salary which is
reviewed from time to time. There are no other incentives except those
available to all employees, such as profit sharing and stock option plans.
BOARD OF DIRECTORS
Dale H. Powell Edwin J. Campbell W. Curtis Carter
Bobbie L. Oliver J. Dillard Powell Mary L. Fitts
February 7, 1996
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES AND EXCHANGE ACT OF 1934.
The Company's directors, executive officers and owners of more than 10%
Company's shares are required under the Securities Exchange Act of 1934 to
file report of ownership and changes in ownership with the Securities
Exchange Commission. Copies of these reports must also be furnished to the
Company. Based solely on review of the copies of such reports furnished to
the Company through the date hereof, or written representations that no
reports were required; the Company believes that during 1995, all filing
requirements applicable to its officers, directors and 10% shareholders were
met.
Item 10. Executive Compensation.
-----------------------
EXECUTIVE COMPENSATION
The following table presents information relating to total compensation
of the Chief Executive Officer of the Company during the periods indicated.
SUMMARY COMPENSATION TABLE
Long Term
Compensation
Annual Compensation ------------
- ------------------------------------------------------- Awards
Other Options/ All
Name and (1) Annual (2) SARs Other (3)
Principal Position Year Salary Bonus Compensation (Shares) Compensation
- ------------------ ---- ------- ------- ------------ -------- ------------
Dale H. Powell 1995 $75,000 $18,542 - 0 $16,221
President and
Chairman of the 1994 $75,000 $11,507 - 0 $15,956
Board
1993 $75,000 $14,507 - 0 $15,425
(1) Bonus is calculated on the prior years' earnings in accordance with Mr.
Powell's employment agreement.
(2) Amounts of Other Annual Compensation did not equal or exceed 10% of the
total of the relevant annual salary and bonus.
(3) Consists of $13,207 of premiums paid by the Company on a "split-dollar"
insurance policy for 1995, 1994 and 1993, $3,014, $2,749 and $2,218 of
Company contributions to Mr. Powell's profit-sharing plan account for
1995, 1994 and 1993 respectively.
The following table presents information concerning stock options for the
Chief Executive Officer of the Company. No options were granted in 1995.
AGGREGATED OPTION EXERCISES AND YEAR-END VALUE TABLE
Aggregated Option Exercise in Last Fiscal Year and
FY-End Option Value
---------------------------------------------------
Number of Value of
Unexercised Options at Unexercised In-the-Money
FY-End (Shares)(1) Options at FY-End(2)
------------------------- -------------------------
Shares
Acquired
on Value
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ------- -------- -------- ----------- ------------- ----------- -------------
Dale H.
Powell 12,000 $17,422 - - - -
(1) The stock option shares reflects the 20% stock dividend on February 9,
1994.
(2) The market value of the underlying common stock exceeded the exercise
price of the options by $1.642.
Employment Agreements
Under an Employment Agreement with the Company, effective January 1,
1991, Dale H. Powell will be paid an annual base salary of $75,000, subject
to annual review by the Board of Directors. In addition to the base salary,
Mr. Powell will be paid incentive compensation equal to 3% of the income of
the Company before federal and state income taxes, and before the payment of
any dividends or extraordinary non-recurring items or expenses.
Under an Employment Agreement with the Company, effective January 1,
1991, Edwin J. Campbell will be paid an annual base salary of $65,000,
subject to annual review by the Board of Directors. In addition to the base
salary, Mr. Campbell will be paid incentive compensation equal to 2.5% of the
income of the Company before federal and state income taxes, and before
payment of any dividends or extraordinary non-recurring items or expenses.
Compensation of Directors
Outside directors are paid a fee of $250.00 for each meeting of the Board
of Directors attended.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
---------------------------------------------------------------
OWNERSHIP OF EQUITY SECURITIES
The Company's only authorized equity is common stock, $1 par value
("Common Stock"), each share of which has one vote on all matters. There
were outstanding and entitled to vote 825,649 shares of Common Stock on the
Record Date.
The following table presents certain information as of the Record Date
regarding beneficial ownership of Common Stock by the directors and nominees
for directors, officers and directors as a group, and all owners of more than
5% of the Common Stock.
Amount and Nature
Name of Beneficial of Beneficial Percent
Owner Ownership Owned
------------------ --------------------- -------
Edwin J. Campbell 42,092(1) 5.10%
Dale H. Powell 68,800 8.33
W. Curtis Carter 36,720 4.45
J. Dillard Powell 3,793 .46
Bobbie L. Oliver 173,406 21.00
Mary L. Fitts 66,000(2) 7.99
All officers and directors
as a group(8 persons) 393,931 47.71
Robert K. Fitts 78,547(3) 9.51
P. O. Box 82 Boones Mill, VA 24065
(1) Includes shares held in various fiduciary capacities and owned by
or with certain relatives.
(2) Includes 66,000 shares with respect to which voting and investment
power is shared with Robert K. Fitts
(3) Includes 12,547 shares with respect to which Mr. Fitts has sole
voting and investment power and 66,000 shares with respect to which
such power is shared with Mary L. Fitts.
Item 12. Certain Relationships and Related Transactions.
-----------------------------------------------
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to a settlement agreement between the Company and the Estate of
O. Z. Oliver, deferred compensation benefits of $75,726 were paid to Mr.
Oliver's widow, Bobbie L. Oliver, during 1995. In addition, $3,024 will be
paid in 1996 to Mrs. Oliver for health insurance premiums. Mrs. Oliver, a
director, is the mother of M. Jan Oliver, Treasurer of the Company, a Sister
In Law to Dale H. Powell, President and Chairman of the Board of the Company
and a Sister to Mary L. Fitts.
Pursuant to a settlement agreement between the Company and Robert K.
Fitts, deferred compensation benefits of $66,724 and a sum of $10,000 in
premiums for life insurance policies assigned to Mr. Fitts were paid to Mr.
Fitts in 1995. In addition, $4,992 will be paid in 1996 to Mr. Fitts for
health insurance premiums for Mr. Fitts and Mary L. Fitts, his spouse. Mr.
Fitts spouse, Mary L. Fitts, a director, is a Sister of Bobbie L. Oliver and
a Sister-In-Law to Dale H. Powell, President and Chairman of the Board of the
Company.
In the normal course of business, the Company makes purchases from a
supplier owned by a director of the Company, J. Dillard Powell. The supplier
was acquired by Mr. Powell in 1989. Prior to that time, the supplier had
been a long time vendor of the Company. Purchases from this supplier totaled
$462,654 for 1995.
Item 13. Exhibits, Lists And Reports on Form 8-K
---------------------------------------
(a) The following documents are filed as part of this report:
(3) Exhibits:
3.1(a) Articles of Incorporation (filed as an exhibit to Registrant's
Form 10-K for the fiscal year ended December 31, 1983 and
incorporated herein by reference)
3.1(b) Amendment to Articles of Incorporation dated November 2, 1989
(filed as an exhibit to Registrant's Form 10-K for the fiscal
year ended December 31, 1989 and incorporated herein by
reference)
3.2 By-Laws (filed as an exhibit to the Registrant's Form 10-K for
the fiscal year ended December 31, 1990 and incorporated
herein by reference)
3.2(c) Amendment to By-Laws dated January 19, 1994 (filed as an
exhibit to the Registrant's Form 10-KSB for the fiscal year
ended December 31, 1993 and incorporated herein by reference)
3.2(d) Amendment to By-Laws dated February 8, 1995
10.1 1983 Mod-U-Kraf Homes, Inc. Incentive Stock Option Plan (filed
as an exhibit to Registrant's Form 10-K for the fiscal year
ended December 31, 1983 and incorporated herein by reference)
10.3(a) Settlement Agreement, dated as of March 24, 1990, between
Registrant and Robert K. Fitts (filed as an exhibit to
Registrant's Form 10-K for the fiscal year ended Dec. 31, 1989
and incorporated herein by reference)
10.3(b) Settlement Agreement, dated as of September 13, 1990, between
Registrant and the Estate of O.Z. Oliver (filed as an exhibit
to Registrant's Form 8-K filed Sept. 15, 1990 and incorporated
herein by reference)
10.4(a) Employment Agreement, dated November 21, 1990, between
Registrant and Dale H. Powell (filed as an exhibit to
Registrant's Form 10-K for the fiscal year ended Dec.31, 1990
and incorporated herein by reference)
10.4(b) Employment Agreement, dated November 21, 1990, between
Registrant and Edwin J. Campbell (filed as an exhibit to
Registrant's Form 10-K for the fiscal year ended Dec. 31, 1990
and incorporated herein by reference)
21 Subsidiaries
27 Financial Data Schedule
(b) Reports on Form 8-K - None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
MOD-U-KRAF HOMES, INC.
(Registrant)
March 27, 1996 s/Dale H. Powell
-----------------------------
Dale H. Powell, President and
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
March 27, 1996 s/Dale H. Powell
-----------------------------
Dale H. Powell, President and
Chairman of the Board (Principal
Executive officer)
March 27, 1996 s/Edwin J. Campbell
----------------------------
Edwin J. Campbell, Vice President,
Corporate Secretary and Director
March 27, 1996 s/Jeffrey L. Boudreaux
----------------------------
Jeffrey L. Boudreaux, Controller
(Principal Financial and Accounting
Officer)
March 27, 1996 s/W. Curtis Carter
----------------------------
W. Curtis Carter, Director
March 27, 1996 s/J. Dillard Powell
----------------------------
J. Dillard Powell, Director
March 27, 1996 s/Bobbie L. Oliver
----------------------------
Bobbie L. Oliver, Director
March 27, 1996 s/Mary L. Fitts
-----------------------------
Mary L. Fitts, Director
Name of Subsidiary Jurisdiction of Incorporation
- -------------------------------------- -----------------------------
Mountain Resort Building Systems, Inc. Virginia
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