SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to S240.14a-11(c) or S240.14a-12
Mod-U-Kraf Homes, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1) or Item 22(a)(2)
of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form of Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule of Registration Statement No.:
3) Filing Party:
4) Date Filed:
MOD-U-KRAF HOMES, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN that the 1997 Annual Meeting of Shareholders of
Mod-U-Kraf Homes, Inc. will be held at the Virginia First Savings Bank
located at 216 College Street, Rocky Mount, Virginia on March 26, 1997 at
10:00 a.m. for the following purposes:
1. To elect a Board of Directors to serve for the ensuing year; and
2. To transact such other business as may properly come before the
meeting.
The Board of Directors has fixed February 19, 1997 at the close of
business, as the record date for the determination of shareholders entitled
to notice of and to vote at the Annual Meeting and any adjournment thereof.
You are requested to mark, sign, date and return the enclosed proxy
promptly regardless of whether you expect to attend the meeting. A
postage-paid return envelope is enclosed for your convenience.
If you are present at the meeting, you may vote in person even though
you may have previously delivered your proxy.
By Order of the Board of Directors
EDWIN J. CAMPBELL, Corporate Secretary
March 6, 1997
** end of proxy notice **
** start proxy statement **
MOD-U-KRAF HOMES, INC.
P. O. Box 573
Rocky Mount, Virginia 24151
Telephone: (540)483-0291, FAX (540)483-2228
PROXY STATEMENT
GENERAL
Proxies in the form enclosed are solicited by the Board of Directors of
Mod-U-Kraf Homes, Inc. (the "Company") for the Annual Meeting of Shareholders
(the "Annual Meeting") to be held at 10:00 A.M. on March 26, 1997 at the
Virginia First Savings Bank located at 216 College Street, Rocky Mount,
Virginia. Any person giving a proxy may revoke it at any time before it is
voted by means of a writing addressed to the Secretary of the Company, by
giving a subsequently dated proxy or by voting personally the shares
represented by the proxy. A proxy, when executed and not so revoked, will be
voted and, if the proxy contains any specific instructions, it will be voted
in accordance with such instructions.
The Company is mailing this Proxy Statement and the accompanying proxy on
or before March 6, 1997 to all shareholders of record at the close of
business on February 19, 1997 (the "Record Date"). The cost of solicitation
of proxies will be borne by the Company. In addition to the use of the mails,
proxies may be solicited by employees of the Company, but no special
compensation will be paid to any employee for such solicitation.
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) 391,111 47.37
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.
ELECTION OF DIRECTORS
Proxies will be voted for the election of the following nominees as
directors. The Board of Directors has no reason to believe that any of the
nominees will be unavailable, but if so proxies will be voted for such
substitutions as the Board of Directors shall designate. The election of
each nominee for director requires the affirmative vote of the holders of a
plurality of the shares of Common Stock cast in the election of directors at
a meeting in which a quorum (a majority of all outstanding shares of Common
Stock) is present. Votes that are withheld and shares held in street name
that are not voted in the election of directors will not be included in
determining the number of votes cast. Unless otherwise specified in the
accompanying form of proxy, it is intended that votes will be cast for the
election of all of the nominees as directors.
Name Age Director Since
------ ----- ----------------
Edwin J. Campbell . . . . . . . . 67 1978
Dale H. Powell . . . . . . . . . 63 1980
W. Curtis Carter . . . . . . . . 78 1991
J. Dillard Powell . . . . . . . . 63 1991
Bobbie L. Oliver . . . . . . . . . 64 1994
Mary L. Fitts . . . . . . . . . . 57 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 managing real estate and rental properties.
She is 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.
Meetings and Committees of the Board
The Board of Directors does not have a standing executive committee,
nomination committee, compensation committee or audit committee but instead
fulfills the functions of these committees itself. The Board of Directors
also functions as the nominating committee and reviews the qualifications of
possible candidates suggested by management of the Company.
The Stock Option Committee of the Board of Directors administers the
Company's stock option plan and consists of Messrs. Campbell and Carter.
The Board of Directors held five meetings during fiscal 1996 and the
Stock Option Committee met one time. No director attended fewer than 75% of
these meetings.
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 1996.
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 5, 1997
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
Annual Compensation
All
Name and (1) Other (2)
Principal Position Year Salary Bonus Compensation
Dale H. Powell 1996 $75,000 $20,322 $15,278
President and
Chairman of the 1995 $75,000 $18,542 $16,221
Board
1994 $75,000 $11,507 $15,956
(1) Bonus is calculated on the prior years' earnings in accordance with
Mr. Powell's employment agreement.
(2) Consists of $13,207 of premiums paid by the Company on a "split-dollar"
insurance policy for 1995, 1994 and 1993, and $2,071, $3,014 and $2,749
of Company contributions to Mr. Powell's profit-sharing plan account for
1996, 1995 and 1994 respectively.
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.
Compensation of Directors
Outside directors are paid a fee of $250.00 for each meeting of the Board
of Directors attended.
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 1996. In addition, $3,010 was paid
in 1996 to Mrs. Oliver for health insurance premiums. Mrs. Oliver, a
director, is 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 1996. In addition, $6,150 was 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
$662,539 for 1996.
SECTION 16(A) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
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 1996, all filing
requirements applicable to its officers, directors and 10% shareholders were
met.
SELECTION OF AUDITORS
The Board of Directors has appointed Brown, Edwards and Company,
independent certified public accountants, as auditor of the books and records
of the Company for fiscal 1997. Brown, Edwards and Company audited the
accounts of the Company for fiscal 1996. Representatives of Brown, Edwards
and Company are expected to be present at the Annual Meeting, will be given
an opportunity to make a statement, and will be available to respond to
appropriate questions if they desire to do so.
MATTERS TO BE PRESENTED AT THE
1998 ANNUAL MEETING OF SHAREHOLDERS
Any shareholder wishing to make a proposal to be acted upon at the 1998
Annual Meeting of Shareholders and to be included in the Company's proxy
statement for such meeting must present such proposal to the Company at its
principal office in Rocky Mount, Virginia not later than November 6, 1997.
OTHER MATTERS
At the date of this Proxy Statement, management knows of no matter to
come before the Annual Meeting other than those stated in the notice of the
Annual Meeting. As to other matters, if any, that may properly come before
the Annual Meeting, it is intended that proxies in the accompanying form will
be voted in accordance with the best judgement of the person or persons named
therein.
* * *
We hope that you will be able to attend this meeting in person, but if
you cannot be present, please execute the enclosed proxy card and return it
in the accompanying postage-paid envelope as promptly as possible. Your
stock will be voted in accordance with the instructions you give on the
proxy, and in the absence of any such instructions will be voted FOR election
of all nominees of the Board of Directors.
EDWIN J. CAMPBELL, Corporate Secretary
March 6, 1997
** end of proxy statement **
** proxy card **
PROXY MOD-U-KRAF HOMES, INC.
P.O. Box 573, Rocky Mount, Virginia, 24151
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Dale H. Powell and Edwin J. Campbell as
Proxies, each with the power to appoint his substitute, and hereby authorizes
them to represent and vote, as designated below, all the shares of common
stock of Mod-U-Kraf Homes, Inc. held of record by the undersigned on February
19, 1997 at the annual meeting of shareholders to be held on March 26, 1997
or at any adjournment thereof.
1. ELECTION OF DIRECTORS FOR all nominees listed WITHHOLD AUTHORITY
below (except as marked to vote for all
to the contrary below) nominees listed
[ ] below [ ]
INSTRUCTION: To withhold authority to vote for any individual nominee,
strike through the nominee's name in the list below.
J. Dillard Powell W. Curtis Carter Dale H. Powell
Edwin J. Campbell Mary L. Fitts Bobbie L. Oliver
2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR PROPOSAL 1.
When shares are held by joint tenants, both should sign. When signing
as an attorney, executor, administrator, trustee or guardian, please give
full title as such. If a corporation, please sign in full corporate name by
president or other authorized officer. If a partnership, please sign in
partnership name by authorized person.
Signature
Signature if held jointly
Dated , 1997
PLEASE MARK, SIGN, DATE AND RETURN
THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
** end of proxy card **
EXHIBIT 13 - 1995 Annual Report to Shareholders
<PAGE> * * *
"FRONT COVER"
"schematic of a house with Mod-U-Krafs' 25th anniversary logo"
1996 ANNUAL REPORT
<PAGE> * * *
"INSIDE FRONT COVER"
"picture of Mod-U-Kraf home in Henrico County, Virginia"
This stately 5-section, 2970 sq. ft., five star energy rated "Jefferson
(Rev)", is located in Henrico County, VA. Builder: Thomas E. Searson.
<PAGE> * * *
LETTER TO SHAREHOLDERS
Your management and Board of Directors are happy to report that our new
manufacturing facility was completed in July of 1996. The total cost of the
construction was within the $3 million original estimated cost.
Our new plant went into production in July and our revenues have
continued to increase as we work up to anticipated production levels. The
process required adjustments in equipment and personnel as each house passes
through a production station. These adjustments will continue until we
achieve our production goal of two housing units per day. We are presently
producing one housing unit per day in the new facility and anticipate
producing two housing units per day by May 1, 1997.
The increased overhead for training new employees, and other start-up
costs, consumed most of our profits from the Old Franklin Turnpike plant for
1996.
Net sales for the year ending December 31, 1996 were $11,372,471 which
compares to sales in 1995 of $9,083,419.
Net income after taxes for the year ending December 31, 1996 was
$177,663 which compares to net income after taxes for the year 1995 of
$378,824. The net income for 1996 amounts to $0.22 per common share which
compares to net income after taxes of $0.46 per share during the fiscal year
1995.
We have realigned and expanded our sales territories and hired sales
personnel to insure that we have the orders necessary to produce sales in
excess of $18 million in 1997 and continue to expand through 1998.
Favorable interest rates and market demand has created an opportunity
for multi-family and commercial units for our company in 1997. Projects
scheduled to build include motels, day care centers, multi-family units, and
office buildings.
This continuing awareness and acceptance by the public, builders, and
financial community of the many advantages of our code complying
sectionalized products combined with the shortage of skilled trades in many
markets has created a tremendous growth trend for our industry for now and
into the future.
Dale H. Powell
President and Chairman of the Board
LEGAL COUNSEL EXECUTIVE OFFICES
- --------------------------------- -------------------------------------
Hunton & Williams 201 Old Franklin Tkpe. (P.O. Box 573)
Richmond, Virginia Rocky Mount, Virginia
INDEPENDENT ACCOUNTANT TRANSFER AGENT
- --------------------------------- -------------------------------------
Brown Edwards & Company, L.L.P. First Union Bank
Roanoke, Virginia Charlotte, North Carolina
A COPY OF THE FORM 10-KSB AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION IS AVAILABLE THROUGH THE COMPANY AT NO COST TO A SHAREHOLDER UPON
WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY AT P.O. BOX 573, ROCKY MOUNT,
VIRGINIA 24151.
<PAGE> * * *
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, 1996 and 1995, and the
related consolidated statements of income, stockholders' equity and cash
flows for the years ended December 31, 1996, 1995, and 1994. 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 consolidated 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, 1996 and 1995, and the
results of their operations and their cash flows for the years ended December
31, 1996, 1995 and 1994 in conformity with generally accepted accounting
principles.
Brown, Edwards & Company, L.L.P.
CERTIFIED PUBLIC ACCOUNTANTS
Roanoke, Virginia
January 24, 1997
<PAGE> * * *
BUSINESS INFORMATION
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, code complying sectionalized homes of
its own design. In its 25 years in business at its corporate headquarters in
Rocky Mount, Virginia, Mod-U-Kraf has built over 7,000 homes.
The Company markets its homes in Virginia, West Virginia, North
Carolina, South Carolina, Maryland, Delaware, and parts of Tennessee,
Pennsylvania, and Kentucky. Mod-U-Kraf employs territory sales
representatives and its homes are offered primarily to builders, land
developers, and realtors who act as "turnkey" contractors.
These homes are available in over 65 standard models ranging in size
from 705 square feet to 2,970 square feet. There are over 100 options to
allow for custom choices in exterior and interior designs. Styles of homes
offered include Cape Cod, country homes and vacation homes. These homes
allow for great rooms, spacious kitchen-dining-living areas, ample closets
and fireplaces.
In addition to single family homes, Mod-U-Kraf builds duplexes, motel
units, medical and dental clinics, and office buildings.
All Mod-U-Kraf products are constructed in either one of two production
facilities. All homes are built inside out of weather and harms way by a
work force of approximately 170 skilled crafts people and technicians
specially trained in their areas and take great pride in their work.
The units are transported to the construction site after being loaded on
specially designed transporters. At the site, the units are off-loaded by
crane to a permanent foundation. They are then secured together by a "zip-
up" procedure and completed by the contractor, who makes plumbing and
electrical connections, does final grading and landscaping, and adds
exterior finish.
Mod-U-Kraf's motto "After 25 years our reputation is still building"
emphasizes the years of philosophical commitment to quality craftsmanship and
new product development. Hi-tech production facilities, name brand
materials, and skilled workmanship insure increased productivity, high
quality, and ultimate customer satisfaction. Utilizing proven sales
techniques, keeping sales exhibits current, and providing in-house sales
consultation strengthens our ability to remain competitive in the
marketplace.
Management takes great pride in the fact that offering quality products
and service has enabled us to maintain the same builders for many years.
Mod-U-Kraf looks forward to a future of increased profitability and its
commitment to provide premier sectionalized homes.
The Company's business cannot be characterized as comprising more than
one industry segment.
MARKET AND DIVIDEND INFORMATION
The Corporation's common stock is traded in the over-the-counter market.
The number of shareholders as of February 6, 1997 was 448. The range of bid
and ask quotations and dividends declared for the last two calendar years are
listed below.
QUOTATIONS ON COMMON STOCK
1996 1995
Dividends
BID ASK BID ASK Declared
High Low High Low High Low High Low 1996 1995
First 3 1/2 -- 4 1/2 4 1/4 4 3 1/2 4 1/2 -- $0.03 $0.03
Second 4 1/8 3 1/2 4 7/8 4 1/4 4 3 3/4 4 1/2 4 1/8 $0.03 $0.03
Third 5 -- 4 1/8 6 -- 4 7/8 3 3/4 3 1/2 4 1/2 -- $0.03 $0.03
Fourth 5 -- -- 6 -- -- 3 1/2 -- 4 1/2 -- $0.03 $0.03
Source: Wheat, First Securities, Inc.
The Corporation presently expects to pay dividends in the future as earnings
permit.
<PAGE> * * *
OTHER BUSINESS DATA
SELECTED FINANCIAL DATA
Year Ended December 31,
1996 1995 1994 1993 1992
Net Sales $11,372,471 $9,083,419 $9,288,807 $7,893,216 $6,898,726
Operating Income (Loss) 323,643 542,434 476,888 371,050 347,623
Net Earnings (Loss) 177,663 378,824 308,204 537,301 252,814
Earnings(Loss) Per Share
Primary & Fully Diluted (1) 0.22 0.46 0.38 0.66 0.31
Cash Dividends Per Share (1) 0.12 0.12 0.12 0.10 0.10
Total Assets 9,617,921 7,845,504 6,329,477 5,883,150 5,241,378
Current Ratio 3.72 to 1 5.17 to 1 5.32 to 1 7.26 to 1 7.13 to 1
Deferred compensation 1,147,186 1,206,188 1,253,491 1,307,380 1,110,067
Book Value Per Share (1) 5.65 5.55 5.25 4.99 4.42
(1) 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. Per share amounts for the
years ended December 31, 1992 through 1993 have been restated to reflect
the 20% stock dividend issued on March 2, 1994.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
1996 net sales of $11,372,471 were 25.20% higher than 1995 net sales of
$9,083,419. Our total units sold increased by 20.96% over last year. This
increase is due to the additional production from our new facility that went
into operation in August of 1996.
Gross Profit percentage declined in 1996 to 24.15% from 29.17% in 1995
and 27.27% in 1994. This is also due to the start-up of our new production
facility. We have had increased manufacturing and payroll cost as we bring
production up to our desired level.
With the increase in production cost, we have kept the Selling, general
and administrative expenses at the same level as prior years. Their
percentages were 21.30% in 1996 compared to 23.20% and 22.14% for 1995 and
1994, respectively. To date we have not had any significant increases in
staffing requirements or overhead expenses in the Selling, general or
administrative expense area as we made the transition into our new
manufacturing facility. As volume increase, we anticipate adding staff as
the workload increases.
Along with the decrease in Interest income, rental incomes has stopped
due to the sale of our remaining Ski View Complex units. In addition, our new
long term debt has added $64,000 in interest expense. We anticipate interest
expense to be approximately $114,000 in 1997 if interest rates remain stable.
Revenues and profits should show a significant increase in 1997 as we
realize the benefits of our increased production capacity. 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 completed and put into operation our new manufacturing
facility in August 1996. The cost of the 104,000 sq. ft. facility, including
improvements and equipment was approximately $2,800,000 which was financed by
an Industrial Development Bond Issue. The debt associated with this issue
has a remaining life of 18 1/2 years.
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.
<PAGE> * * *
MOD-U-KRAF HOMES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and 1995
ASSETS 1996 1995
CURRENT ASSETS
Cash and cash equivalents $ 1,077,270 $1,426,738
Certificates of deposit 200,000 689,000
Trade and other receivables 52,928 63,866
Inventories (Note 2) 2,358,346 1,368,766
Notes receivable, current portion
(Note 3) 796,721 882,234
Income taxes receivable (Note 7) 46,123 -
Prepaid expenses 65,940 67,506
--------- ---------
Total current assets 4,597,328 4,498,110
LONG-TERM NOTES RECEIVABLE (Note 3) 192,906 221,418
PROPERTY AND EQUIPMENT, at cost less
accumulated depreciation (Note 4) 3,893,831 2,245,627
OTHER ASSETS
Deferred taxes (Note 7) 486,139 508,239
Cash surrender value of officers' life
insurance 116,227 95,440
Reimbursement account (Note 6) 152,706 145,516
Earnings on unused bond proceeds (Note 6) 105,474 58,124
Debt issue costs 73,310 73,030
--------- ---------
$9,617,921 $7,845,504
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt
(Note 6) $ 150,000 $ 150,000
Current portion of postretirement
benefits (Note 5) 66,490 75,366
Accounts payable, trade and other
liabilities 525,228 356,706
Accrued compensation 201,121 232,026
Customer deposits 293,655 23,315
Income taxes payable (Note 7) - 60,364
--------- ---------
Total current liabilities 1,236,494 897,777
LONG-TERM POSTRETIREMENT BENEFITS
(Note 5) 1,080,696 1,130,822
LONG-TERM DEBT (Note 6) 2,639,755 1,234,514
COMMITMENTS AND CONTINGENCIES (Notes 6
and 12) - -
--------- ---------
Total liabilities 4,959,945 3,263,113
--------- ---------
STOCKHOLDERS' EQUITY
Common stock, $1 par value,
2,000,000 shares authorized; shares
issued and outstanding 825,649 in
1996 and 1995 $ 825,649 $ 825,649
Additional paid-in capital 459,671 459,671
Retained earnings 3,375,656 3,297,071
--------- ---------
4,660,976 4,582,391
--------- ---------
$ 9,617,921 $7,845,504
========= =========
The Notes to Consolidated Financial Statements
are an integral part of these statements.
<PAGE> * * *
MOD-U-KRAF HOMES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31, 1996, 1995, and 1994
1996 1995 1994
---------- --------- ---------
Net sales $11,372,471 $9,083,419 $9,288,807
Cost of goods sold (Note 13) 8,625,822 6,433,361 6,755,710
---------- --------- ---------
Gross profit 2,746,649 2,650,058 2,533,097
Selling, general and
administrative expenses 2,423,006 2,107,624 2,056,209
---------- --------- ---------
Operating income 323,643 542,434 476,888
Postretirements benefits
expense (Note 5) 101,877 127,010 114,749
Non-operating income, net
(Note 11) 68,365 192,085 192,845
---------- --------- ---------
Income before income taxes 290,131 607,509 554,984
Federal and state income tax
expense (Note 7) 112,468 228,685 246,780
---------- --------- ---------
Net income $ 177,663 $ 378,824 $ 308,204
========== ========= =========
Earnings per share $ .46 $ .46 $ .38
======== ========= ========
The Notes to Consolidated Financial Statements
are an integral part of these statements.
<PAGE> * * *
MOD-U-KRAF HOMES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended December 31, 1996, 1995, and 1994
Common Additional Total Total
Stock Paid-in Retained Stockholders
($1 Par) Capital Earnings Equity
--------- ---------- ---------- -----------
Balance, December 31,
1993 813,655 440,440 2,806,871 4,060,966
Net income - - 308,204 308,204
Dividends paid
($.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 $4,582,391
Net income - - 177,663 177,663
Dividends paid
($.12 per share) - - (99,078) (99,078)
------- ------- --------- ---------
Balance, December 31,
1996 $825,646 $459,671 $3,375,656 $4,660,976
======= ======= ========= =========
The Notes to Consolidated Financial Statements
are an integral part of these statements.
<PAGE> * * *
MOD-U-KRAF HOMES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1996, 1995, and 1994
1996 1995 1994
--------- --------- ---------
OPERATING ACTIVITIES
Net income $ 177,663 $ 378,824 $ 308,204
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and
amortization 286,333 163,912 151,701
Deferred taxes 22,100 ( 9,631) 52,408
Loss (gain) on sale
of equipment 170 993 ( 11,553)
Increase in cash value of
life insurance ( 20,787) ( 15,517) ( 22,561)
Adjustment to post-
retirement benefits ( 59,002) ( 47,303) ( 53,889)
Change in certain current
assets and liabilities:
(Increase) decrease in:
Trade and other
receivables 10,938 92,295 ( 71,717)
Inventories ( 989,580) ( 161,811) 266,473
Income tax receivable ( 46,123) - -
Prepaid expenses 1,566 3,808 ( 26,200)
(Decrease) increase in:
Accounts payable,
trade and other
liabilities 168,522 ( 27,859) 88,818
Accrued compensation ( 30,905) ( 2,769) 70,537
Customer deposits 270,340 ( 125,234) 99,601
Income taxes payable ( 60,364) 23,322 31,191
--------- --------- ---------
Net cash provided
by operating
activities ( 269,129) 273,030 883,013
--------- --------- ---------
INVESTING ACTIVITIES
Proceeds from sale of
equipment - - 13,900
Purchase of property and
equipment, net of debt
incurred 1996 $1,554,961:
1995 $1,311,484; 1994 $-0- ( 379,746) ( 201,250) ( 140,481)
Principal received on notes
receivable 820,271 1,675,875 1,324,245
Notes receivable arising
from sales ( 706,246) (1,092,480) (1,961,384)
Decrease (increase) in
certificates of deposit 489,000 ( 389,000) 300,000
Sale (purchase) of U.S.
Treasury Note - 204,935 ( 204,935)
---------- --------- ---------
Net cash provided by
(used in) investing
activities 223,279 198,080 ( 668,655)
---------- --------- ---------
FINANCING ACTIVITIES
Proceeds from sale of
common stock - 31,250 -
Payments on long-term debt ( 150,000) - -
Cash dividends paid ( 99,078) ( 98,718) ( 98,135)
Debt issue costs, net of
debt incurred
1995 $73,030 - - -
Funding of reimbursement
account ( 7,190) ( 145,516) -
Earnings on unused
bond proceeds ( 47,350) ( 58,124) -
---------- --------- ---------
Net cash used in
financing activities ( 303,618) ( 271,108) ( 98,135)
---------- --------- ---------
Increase in cash and
cash equivalents ( 349,468) 200,002 116,223
CASH AND CASH EQUIVALENTS
Beginning 1,426,738 1,226,736 1,110,513
--------- --------- ---------
Ending $1,077,270 $1,426,738 $1,226,736
========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash payments for:
Income taxes, net of
refunds received $ 218,955 $ 214,783 $ 163,181
========= ========= =========
The Notes to Consolidated Financial Statements
are an integral part of these statements.
<PAGE> * * *
MOD-U-KRAF HOMES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996
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.
<PAGE> * * *
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 825,649, 821,649 and 813,652 for
1996, 1995 and 1994, respectively.
Reclassification:
----------------
For comparability, the amounts presented for 1995 and 1994
have been reclassified, where appropriate, to conform to
the presentation used for 1996.
Note 2. Inventories
The components of inventories are as follows:
1996 1995
----------- -----------
Raw materials $ 1,054,192 $ 556,194
Work-in-process 262,091 46,421
Finished goods 765,236 372,584
Land and units held
for sale 276,827 393,567
----------- -----------
$ 2,358,346 $ 1,368,766
=========== ===========
Total general and administrative costs incurred and the
portion of those costs remaining in inventory are as
follows:
1996 1995 1994
-------- -------- --------
General and
administrative
costs:
Incurred $ 865,408 $ 740,046 $ 715,350
======== ======== ========
Remaining in
inventory $ 49,853 $ 22,432 $ 22,251
======== ======== ========
Note 3. Notes Receivable
Notes receivable consist of the following:
1996 1995
-------- --------
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. $ 169,990 $ 134,888
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. 782,329 921,314
Other Notes 14,808 19,325
Note receivable from the President, pay-
able in annual principal installments of
$5,625 plus interest at 5.03%, secured
by common stock of the Company. 22,500 28,125
--------- ---------
989,957 1,103,652
Less current portion 796,721 882,234
--------- ---------
$ 192,906 $ 221,418
========== ==========
<PAGE> * * *
Note 4. Property and Equipment
Major classes of property and equipment are as follows:
1996 1995
--------- --------
Land and improvements $ 773,539 $ 275,590
Buildings 2,940,628 1,076,311
Manufacturing equipment 1,623,065 1,020,645
Other furniture, fixtures
and equipment 432,515 349,592
--------- ---------
5,769,747 2,722,138
Less accumulated depreciation $2,085,797 $1,802,732
--------- ---------
3,683,950 919,406
Construction in process 209,881 1,326,221
--------- ---------
$3,893,831 $2,245,627
========= =========
Maintenance and repairs expense incurred amounted to
$173,605, $134,405 and $132,178 for 1996, 1995, and
1994, respectively.
Note 5. Postretirement Benefits
The Company is obligated under postretirement benefits
agreements with two former officers as follows:
1996 1995
--------- ----------
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%. $ 500,797 $ 532,477
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%. 500,903 523,974
Present value of estimated
postretirement benefits other than
pensions discounted at 8.50%.
Details are presented below. 145,486 149,737
--------- ---------
1,147,186 1,206,188
Less current portion 66,490 75,366
--------- ---------
$1,080,696 $1,130,822
========= =========
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.
The Company accounts for these obligations in a manner
similar to that described in Statement of Financial Accounting
Standards No. 106, "Employer's Accounting for Potretirement
Benefits Other than Pensions" under which such costs are
recognized as incurred rather that 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.
<PAGE> * * *
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
4.1 and 4.95 percent at December 31, 1996 and 1995,
respectively.
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. The Reimbursement Account balance
was follows:
1996 1995
---- ----
Required prepaid interest deposit $ 67,811 $ 67,811
Unused monthly principal deposits 75,000 75,000
Earnings 9,895 2,705
-------- --------
$152,706 $ 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, 1996, $2,939,755 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 less
cumulative payments of $150,000. 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 $105,474 and
$58,124 at December 31, 1996 and 1995, respectively.
Debt issue costs will be amortized over the term of the
debt.
Estimated aggregate maturities of principle on long-term
debt obligations are $150,000 annually through 2015.
Note 7. Income Taxes
The provision for income taxes consists of the following
components:
1996 1995
--------------------------- -------------------------
Federal State Total Federal State Total
--------- -------- -------- -------- -------- -------
Current tax
expense $ 65,951 $ 24,417 $ 90,368 $194,664 $ 43,652 $238,316
Deferred tax
expense
(benefit) 16,858 5,242 22,100 (12,973) 3,342 ( 9,631)
------- -------- ------- -------- ------- --------
$ 82,809 $ 29,659 $112,468 $181,691 $ 46,994 $228,685
======== ======= ======== ======== ======== ========
1994
---------------------------
Federal State Total
--------- ------- --------
Current tax
Expense $156,446 $ 37,926 $194,372
Deferred tax
expense
(benefit) 48,598 3,810 52,408
--------- ------- --------
$205,044 $ 41,736 $246,780
========= ======== ========
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:
1996 1995 1994
-------- -------- ---------
Differing cost basis of
property and equipment
for tax and financial
reporting purposes $ 8,067 $(24,248) $ 34,884
Amounts expensed when
incurred, deducted when paid:
Deferred Compensation 21,959 18,285 17,970
Warranty & accrued vacation ( 4,658) ( 1,437) ( 2,114)
Contributions ( 11,020) - -
Other, net 7,752 ( 2,231) 1,668
-------- ------- --------
$ 22,100 $( 9,631) $ 52,408
======== ======= ========
<PAGE> * * *
Total tax provisions differ from amounts computed by
applying the statutory Federal income tax rate to income
before income taxes for the following reasons:
1996 1995 1994
--------------- --------------- --------------
Percent Percent Percent
of of of
Pretax Pretax Pretax
Amount Income Amount Income Amount Income
-------- ------ -------- ------ -------- ------
Income tax expense
at statutory
federal rate $ 98,645 34.0% $206,553 34.0% $188,695 34.0%
Increase in income
taxes from:
State income taxes,
net of federal
tax effect 11,605 4.0% 24,300 4.0% 22,199 4.0%
Other, net 2,218 1.0% ( 2,168) (0.4%) 35,886 6.5%
-------- ----- -------- ----- -------- ----
$112,468 39.0% $228,685 37.6% $246,780 44.5%
======== ===== ======== ===== ======== =====
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, 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, 1996 and 1995,
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 1994 through 1996
was the exercise of 12,000 options 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 $40,142, $53,010, and
$52,401 for 1996, 1995 and 1994, respectively.
<PAGE> * * *
Note 11. Non-operating Income
Non-operating income is composed of the following:
1996 1995 1994
-------- -------- --------
Interest income $ 130,119 $ 175,971 $ 159,586
Interest expense,
net of earnings
on debt proceeds ( 64,603) ( 4,867) ( 445)
Rental and other
income 3,205 22,091 22,250
Other, net ( 356) ( 1,110) 11,454
-------- -------- --------
$ 68,365 $ 192,085 $ 192,845
======== ======== ========
Note 12. Commitments and Contingencies
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.
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
$15,480, 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 related interest. 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 $662,539,
$462,654 and $484,701 for 1996, 1995 and 1994,
respectively.
The Company has notes receivable from various shareholders
(Note 3) and is obligated under deferred compensation
agreements to two former employees (Note 5).
<PAGE> * * *
OFFICERS
Dale H. Powell, President & Chairman of the Board
Edwin J. Campbell, Vice President & Corporate Secretary
Jeffrey L. Boudreaux, Controller
DIRECTORS
Dale H. Powell, Board Chairman
Edwin J. Campbell
W. Curtis Carter
J. Dillard Powell
Bobbie L. Oliver
Mary L. Fitts
<PAGE> * * *
"INSIDE BACK COVER"
"picture of Mod-U-Kraf's new production facility"
Mod-U-Kraf's new plant is located in the Franklin County-Rocky Mount
Industrial Park at 260 Weaver Street, Rocky Mount, Virginia. The 104,000 sq.
ft. facility officially opened for production in July, 1996.
"picture of ribbon cutting at grand opening ceremony"
Grand opening and ribbon cutting ceremony was held on July 18, 1996. (L to
R): Delegate Allen Dudley; Mod-U-Kraf President and Board Chairman Dale
Powell; guest speaker Wayne Sterling, Director of Economic Development for
the Commonwealth of Virginia; Mod-U-Kraf Vice President Joe Campbell and
Congressman Virgil Goode, Jr.
<PAGE> * * *
"BACK COVER"
"company logo"
MOD-U-KRAF HOMES, INC. P.O.BOX 573 ROCKY MOUNT, VIRGINIA
AND SUBSIDIARY
<end of report>
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