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 1998 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 25,
1998 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 18, 1998 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 4, 1998
** 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 25,
1998 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 4, 1998 to all shareholders of record at the close of
business on February 18, 1998 (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 33,892(1) 4.10%
Dale H. Powell 68,800 8.33
W. Curtis Carter 36,720 4.45
Bobbie L. Oliver 173,406 21.00
Mary L. Fitts 66,000(2) 7.99
All officers and directors
as a group(8 persons) 379,730 45.99
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 . . . . . . . . 68 1978
Dale H. Powell . . . . . . . . . 64 1980
W. Curtis Carter . . . . . . . . 79 1991
Bobbie L. Oliver . . . . . . . . . 65 1994
Mary L. Fitts . . . . . . . . . . 58 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.
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.
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 1997 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 1997.
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
Mary L. Fitts
February 4, 1998
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 $9,651 $14,511
President and
Chairman of the 1996 $75,000 $20,322 $15,278
Board
1995 $75,000 $18,542 $16,221
(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 1997, 1996 and 1995, and $1,304, $2,071 and $3,014
of Company contributions to Mr. Powell's profit-sharing plan account for
1997, 1996 and 1995 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 1997. In addition, $2,561 was paid
in 1997 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 1997. In addition, $6,000 was be paid in 1997 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 J. Dillard Powell, the recently deceased brother of Dale
H. Powell and a director of the Company until his death. 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
$760,598 for 1997.
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 1997, 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 1998. Brown, Edwards and Company audited
the accounts of the Company for fiscal 1997. 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
1999 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, 1998.
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 judgment of the person or persons
named therein. 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. 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 4, 1998
** 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 18, 1998 at the annual meeting of shareholders to be held on
March 25, 1998 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.
W. Curtis Carter Dale H. Powell Edwin J. Campbel
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 , 1998
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING
THE ENCLOSED ENVELOPE.
** end of proxy card **
??
EXHIBIT 13 - 1997 Annual Report to Shareholders
<PAGE> * * *
"FRONT COVER"
"schematic of a house with Mod-U-Krafs' 25th anniversary logo"
Mod-U-Kraf Homes, Inc. 1996 ANNUAL REPORT
<PAGE> * * *
"INSIDE FRONT COVER"
"picture of Mod-U-Kraf home in Brandywine, Maryland"
(Front Cover)
Mod-U-Kraf Homes was the 1997 winner of NAHB, Building Systems Council/Country
Home magazine's modular home design of the year award for the "ANNAPOLIS"
Model, a 2,502 sq. ft., brick faced, two story home constructed in Brandywine,
Maryland. An article showcasing the "ANNAPOLIS" will appear in Country Home
magazine's April 1998 edition.
<PAGE> * * *
IN MEMORIAM
(Picture of J. Dillard Powell)
J. Dillard Powell
Director
Mod-U-Kraf Homes, Inc.
May 18, 1933 - January 12, 1988
On January 12, 1998, your organization was deeply saddened by the unexpected
death of J. Dillard Powell, twin brother of President and Board Chairman Dale
H. Powell. He had served on Mod-U-Kraf's Board of Directors since March,
1991. As a recognized business leader, Dillard Powell was admired and
respected by his peers, co-workers, friends, neighbors, community leaders,
state and local agencies, and members from all sectors of the building
industry. He will be sadly missed by everyone who knew him.
* * *
<PAGE>
To Our Shareholders
Your management and board of directors are happy to report continued
profitability for the year. Although our sales increased 41.33% we fell $2
million short of our projected $18 million dollar goal for the year. $1.2
million of product, built and ready for delivery, had to be carried forward
into the first quarter of 1998.
Wet weather in many areas hampered our builders from getting
foundations in and our delivery crews were unable to make delivery due to
site conditions. Had we been able to accomplish these deliveries we would
have been close to sales projections for 1997.
Net sales for the year ending, December 31, 1997, were $16,072,448
which compares to net sales in 1996 of $11,372,471. Net income, after
taxes, for the year ending, December 31, 1997, was $180,685 which compares
to net income, after taxes, for the year 1996 of $177,663. The net income
for 1997 amounts to $0.22 per common share, which compares to net income,
after taxes, of $0.22 per share during fiscal year 1996.
We are continuing to make improvements and modifications in our new
manufacturing facility, and adjustments to our sales and marketing program.
As these changes come into play, sales and revenues should continue to
increase to improve our gross profit margins. The Company should then move
back to or exceed the profitable level of past periods.
During 1997, we installed fall protection over the assembly lines in
the new plant to comply with OSHA regulations. We have moved all
production personnel from the old plant to the new plant and are making
preparations to bring the fall protection in this facility up to OSHA
standards as well. The new facility has ample capacity to take care of our
present production; however, when the projects we are quoting begin to
materialize we will need to re-open the old facility.
Increased awareness and acceptance by the public, builders, and
financial community of the many advantages of code complying sectionalized
products continue to improve the industry's status in the marketplace.
Combined with the shortage of skilled trades in many markets, a tremendous
growth trend has been created for our industry.
Mod-U-Kraf's management and Board of Directors appreciate the
continued support of our shareholders and employees.
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, 1997 and 1996, and the
related consolidated statements of income, stockholders' equity and cash flows
for the years ended December 31, 1997, 1996, and 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the 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, 1997 and 1996, and the results
of their operations and their cash flows for the years ended December 31,
1997, 1996 and 1995 in conformity with generally accepted accounting
principles.
Brown, Edwards & Company, L.L.P.
CERTIFIED PUBLIC ACCOUNTANTS
Roanoke, Virginia
January 23, 1998
<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. The Company has built over
7,000 homes in 26 years of business at its corporate headquarters in
Rocky Mount, Virginia.
The Company markets its homes in Virginia, West Virginia,
North Carolina, South Carolina, Maryland, Tennessee, and parts of
Pennsylvania and Kentucky. Mod-U-Kraf employs territory sales
representatives to market its homes regionally and offers its homes
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, the Company also builds duplexes, townhouses, motel
units, medical centers and office buildings.
All Mod-U-Kraf products are constructed in either one of two
production facilities. All homes are built inside a production
facility out of weather and harms way by a work force of approximately
150 skilled craft 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 to the marketplace.
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 2, 1998 was 396. The
range of bid and ask quotations and dividends declared for the last two
calendar years are listed below.
QUOTATIONS ON COMMON STOCK
1997 1996
Dividends
BID ASK BID ASK Declared
High Low High Low High Low High Low 1997 1996
First 7 4 7/8 10 5 3/4 3 1/2 - 4 1/2 4 1/4 $0.03 $0.03
Second 7 1/2 7 10 9 4 1/8 3 1/2 4 7/8 4 1/4 $0.03 $0.03
Third 7 1/2 7 1/2 9 1/2 8 1/2 5 4 1/8 6 4 7/8 $0.03 $0.03
Fourth 7 1/2 55 7/8 9 1/2 7 1/2 5 - 6 - $0.03 $0.03
Source: Wheat First Butcher Singer & Koonce Securities
The Corporation presently expects to pay dividends in the future as earnings
permit.
<PAGE> * * *
OTHER BUSINESS DATA
SELECTED FINANCIAL DATA
Year Ended December 31,
1997 1996 1995 1994 1993
Net Sales $16,072,448 $11,372,471 $9,083,419 $9,288,807 $7,893,216
0perating Inc(Loss) 376,446 323,643 542,434 476,888 371,050
Net Earnings(Loss) 180,685 177,663 378,824 308,204 537,301
Earnings(Loss) Per Share
Primary & Fully Diluted(1)0.22 0.22 0.46 0.38 0.66
Cash Dividends Per Sh (1)0.12 0.12 0.12 0.12 0.10
Total Assets 9,075,041 9,617,921 7,845,504 6,329,477 5,883,150
Current Ratio 4.40 to 1 3.72 to 1 5.17 to 1 5.32 to 1 7.26 to 1
Deferred comp. 1.075,307 1,147,186 1,206,188 1,253,491 1,307,380
Book Value Per Share (1)5.74 5.65 5.55 5.25 4.99
(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, 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 1995 1996
CURRENT ASSETS
Cash and cash equivalents $ 589,992 1,077,270
Certificates of deposit - 200,000
Trade and other receivables 145,444 52,928
Inventories (Note 2) 2,253,063 2,289,696
Notes receivable(Note 3) 661,762 796,721
Income taxes receivable (Note 7) - 46,123
Prepaid expenses 44,886 43,390
--------- ---------
Total current assets 3,695,147 4,506,128
NOTES RECEIVABLE (Note 3) 176,168 192,906
PROPERTY AND EQUIPMENT(Note 4) 4,022,354 3,893,831
OTHER ASSETS
Deferred taxes (Note 7) 464,273 486,139
Cash surrender value of officers' life
insurance 137,878 116,227
Reimbursement account (Note 6) 160,242 152,706
Earnings on unused bond proceeds (Note 6) 113,612 105,474
Debt issue costs 69,350 73,310
Model Homes 236,017 91,220
--------- ---------
$9,075,041 $9,617,921
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt
(Note 6) $ 150,000 $ 150,000
Postretirement benefits (Note 5) 71,933 66,490
Accounts payable, trade and other
liabilities 366,310 525,228
Accrued compensation 161,512 201,121
Customer deposits 83,727 293,655
Income taxes payable (Note 7) 5,847 -
--------- ---------
Total current liabilities 839,329 1,236,494
POSTRETIREMENT BENEFITS(Note 5) 1,003,374 1,080,696
LONG-TERM DEBT (Note 6) 2,489,755 2,639,755
COMMITMENTS AND CONTINGENCIES (Notes 6
and 12) - -
--------- ---------
Total liabilities 4,332,458 4,956,945
--------- ---------
STOCKHOLDERS' EQUITY
Common stock, $1 par value,
2,000,000 shares authorized; 825,649
shares issued and outstanding $ 825,649 $ 825,649
Additional paid-in capital 459,671 459,671
Retained earnings 3,457,263 3,375,656
--------- ---------
4,742,583 4,660,976
--------- ---------
$ 9,075,041 $9,614,921
========= =========
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, 1997, 1996, and 1995
1997 1996 1995
---------- --------- ---------
Net sales $16,072,448 $11,372,471 $9,083,419
Cost of goods sold (Note 13) 12,613,342 8,625,822 6,433,361
---------- --------- ---------
Gross profit 3,459,106 2,746,649 2,650,058
Selling, general and
administrative expenses 3,082,660 2,423,006 2,107,624
---------- --------- ---------
Operating income 376,446 323,643 542,434
Postretirements benefits
expense (Note 5) 89,132 101,877 127,010
Non-operating income, net
(Note 11) 346 68,365 192,085
---------- --------- ---------
Income before income taxes 287,663 290,131 607,509
Federal and state income tax
expense (Note 7) 106,978 112,468 228,685
---------- --------- ---------
Net income $ 180,685 $ 177,663 $ 378,824
========== ========= =========
Earnings per share $ .22 $ .22 $ .46
======== ========= ========
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, 1997, 1996, and 1995
Common Additional Total Total
Stock Paid-in Retained Stockholders
($1 Par) Capital Earnings Equity
--------- ---------- ---------- -----------
Balance, December 31,
1994 813,649 440,421 3,016,965 4,271,035
Net income - - 378,824 378,824
Dividends paid
($.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 $825,649 $459,671 $3,375,656 $4,660,976
Net income - - 180,685 180,685
Dividends paid
($.12 per share) - - (99,078) (99,078)
------- ------- --------- ---------
Balance, December 31
1997 $825,649 $459,671 $3,457,263 $4,742,583
======= ======= ========= =========
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 $ 180,685 $ 177,663 $ 378,204
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and
amortization 474,246 286,333 163,912
Deferred taxes 21,866 22,100 ( 9,631)
Loss (gain) on sale
of equipment ( 4,706) 170 993
Increase in cash value of
life insurance ( 21,651) ( 20,787) ( 15,517)
Adjustment to post-
retirement benefits ( 71,879) ( 59,002) ( 47,303)
Change in certain current
assets and liabilities:
(Increase) decrease in:
Trade and other
receivables ( 92,516) 10,938 92,295
Inventories 36,633 ( 989,580) ( 161,811)
Income tax receivable 46,123 ( 46,123) -
Prepaid expenses ( 1,496) 1,566 3,808
(Decrease) increase in:
Accounts payable,
trade and other
liabilities ( 158,918) 168,522 ( 28,859)
Accrued compensation ( 39,609) ( 30,905) ( 2,769)
Customer deposits ( 209,928) 270,340 ( 125,234)
Income taxes payable 5,847 ( 60,364) 23,322
--------- --------- ---------
Net cash provided
by operating
activities 19,880 ( 269,129) 273,030
--------- --------- ---------
INVESTING ACTIVITIES
Proceeds from sale of
equipment 8,200 - -
Purchase of property and
equipment, net of debt
incurred 1996 $1,554,961:
1995 $1,311,484; 1994 $-0- ( 602,303) ( 379,746) ( 201,250)
Principal received on notes
receivable 852,984 820,271 1,675,875
Notes receivable arising
from sales ( 701,287) ( 706,246) (1,092,480)
Decrease (increase) in
certificates of deposit 200,000 489,000 ( 389,000)
Sale (purchase) of U.S.
Treasury Note - - 204,935
---------- --------- ---------
Net cash provided by
(used in) investing
activities ( 242,409) 223,279 198,080
---------- --------- ---------
FINANCING ACTIVITIES
Proceeds from sale of
common stock - - 31,250
Payments on long-term debt ( 150,000) ( 150,000) -
Cash dividends paid ( 99,078) ( 98,078) ( 98,718)
Funding of reimbursement
account ( 7,536) ( 7,190) ( 145,516)
Earnings on unused
bond proceeds ( 8,138) ( 47,350) ( 58,124)
---------- --------- ---------
Net cash used in
financing activities ( 264,752) ( 303,618) ( 271,108)
---------- --------- ---------
Increase in cash and
cash equivalents ( 487,278) ( 349,468) 200,002
CASH AND CASH EQUIVALENTS
Beginning 1,077,270 1,426,738 1,226,736
--------- --------- ---------
Ending $ 589,992 $1,077,270 $1,426,738
========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash payments for:
Income taxes, net of
refunds received $ 33,142 $ 218,955 $ 214,783
========= ========= =========
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, 1997
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.
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.
Concentrations of credit risk:
-------------------------------
In some cases, the Company provides short-term construction
financing which is generally limited to 78 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 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 previous
sales of repossessed collateral.
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.
Model Homes:
-----------
Model homes consist of manufactured units at cost plus site
preparation and completion costs. All costs except the
manufactured unit are amortized over the estimated useful
life of the model, typically five years. The manufactured
units are transferred to inventory and sold at the conclusion
of their useful life.
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.
<PAGE> * * *
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 825,649 for 1997 and 1996, and
821,649 for 1995.
Advertising costs:
-----------------
Advertising costs, which consist primarily of newspaper and
yellow page advertisements, brochures and signage are
expensed as incurred
Reclassification:
----------------
For comparability, the amounts presented for 1996 and 1995
have been reclassified, where appropriate, to conform to
the presentation used for 1997.
Note 2. Inventories
The components of inventories are as follows:
1997 1996
----------- -----------
Raw materials $ 779,048 $ 1,054,192
Work-in-process 227,072 262,091
Finished goods 847,411 696,586
Land and units held
for sale 399,532 276,827
----------- -----------
$ 2,253,063 $ 2,289,696
=========== ===========
Total general and administrative costs incurred and the
portion of those costs remaining in inventory are as
follows:
1997 1996 1995
-------- -------- --------
General and
administrative
costs:
Incurred $ 983,821 $ 865,408 $ 740,046
======== ======== ========
Remaining in
inventory $ 60,997 $ 49,853 $ 22,432
======== ======== ========
Note 3. Notes Receivable
Notes receivable consist of the following:
1997 1996
-------- --------
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. $ 164,172 $ 169,990
Credit line deed of trust notes
receivable, interest ranging from
0% to 10.5%, payable at various
dates through 1998. Secured by
deeds of trust on certain real estate. 647,370 782,329
Other Notes 9,513 14,808
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. 16,875 22,500
--------- ---------
837,930 989,627
Less current portion (661,762) ( 796,721)
--------- ---------
$ 176,168 $ 192,906
========== ==========
<PAGE> * * *
Note 4. Property and Equipment
Major classes of property and equipment are as follows:
1997 1996
--------- --------
Land and improvements $ 774,774 $ 773,539
Buildings 2,948,351 2,940,628
Manufacturing equipment 2,055,831 1,623,065
Other furniture, fixtures
and equipment 716,198 432,515
--------- ---------
6,495,154 5,769,747
Less accumulated depreciation $2,518,808 $2,085,797
--------- ---------
3,976,346 3,683,950
Construction in process 46,008 209,881
--------- ---------
$4,022,354 $3,893,831
========= =========
Maintenance and repairs expense incurred amounted to
$219,212, $176,605 and $134,405 for 1997, 1996, and
1995, respectively.
Note 5. Postretirement Benefits
The Company is obligated under postretirement benefits
agreements with two former officers as follows:
1997 1996
--------- ----------
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%. $ 466,315 $ 500,797
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%. 475,793 500,903
Postretirement benefits other than
pensions. Details are presented below. 133,199 145,486
--------- ---------
1,075,307 1,147,186
Less current portion 71,933 66,490
--------- ---------
$1,003,374 $1,080,696
========= =========
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 Postretirement
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 4.25,
4.1 and 4.95 percent at December 31, 1997, 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:
1997 1996
---- ----
Required prepaid interest deposit $ 67,811 $ 67,811
Unused monthly principal deposits 75,000 75,000
Earnings 17,431 9,895
-------- --------
$160,242 $ 152,706
======== ========
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, 1997, $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 $300,000. Any unused proceeds and
related earnings at July 12, 1998 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 $113,612 and
$105,474 at December 31, 1997 and 1996, respectively.
Debt issue costs will be amortized over the term of the
debt.
Note 7. Income Taxes
The provision for income taxes consists of the following
components:
1997 1996 1995
--------- -------- --------
Current tax expense $ 85,112 $ 90,368 $ 238,316
Deferred tax expense(benefit) 21,866 22,100 ( 9,631)
------- ------- -------
$106,978 $112,468 $228,685
======== ======== ========
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:
1997 1996 1995
-------- -------- ---------
Differing cost basis of
property and equipment $ 4,394 $ 8,067 $( 24,248)
Amounts expensed when
incurred, deducted when paid:
Deferred Compensation 27,314 32,959 18,285
Warranty & accrued vacation ( 8,675) ( 4,658) ( 1,437)
Other, net ( 1,167) ( 3,268) ( 2,231)
-------- ------- --------
$ 21,866 $ 22,100 $( 9,631)
======== ======= ========
<PAGE> * * *
The provision for income taxes differs from amounts computed by
applying the statutory Federal income tax rate to income before taxes
for the following reasons:
1997 1996 1995
--------------- --------------- --------------
Percent Percent Percent
of of of
Pretax Pretax Pretax
Amount Income Amount Income Amount Income
-------- ------ -------- ------ -------- ------
Tax expense at
federal rate $ 97,805 34.0% $ 98,645 34.0% $206,553 34.0%
Increase (decrease)
in taxes from:
State taxes, net
of federal tax
effect 11,507 4.0% 11,605 4.0% 24,300 4.0%
Other, net ( 2,334) (0.08%) 2,218 1.0% ( 2,168) (0.4%)
-------- ----- -------- ----- -------- ----
$106,978 37.2% $112,468 39.0% $228,685 37.6%
======== ===== ======== ===== ======== =====
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 and cash equivalents, trade receivables and payables
and customer deposits:
---------------------------------------------------
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. 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. 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 $46,134, $40,142, and
$53,010 for 1997, 1996 and 1995, respectively.
<PAGE> * * *
Note 10. Non-operating Income
Non-operating income is composed of the following:
1997 1996 1995
-------- -------- --------
Interest income $ 108,421 $ 130,119 $ 175,971
Interest expense,
net of earnings
on debt proceeds ( 115,550) (64,603) ( 4,867)
Other, net 7,478 2,849 20,981
-------- -------- --------
$ 349 $ 68,365 $ 192,085
======== ======== ========
Note 11. Commitments and Contingencies
Litigation:
----------
The Company is co-defendant in a suit seeking damages in the
amount of $350,000 for breach of warranty and improper
workmanship in the manufacture of a modular home. Management
and counsel are of the opinion that the Company will be
successful in its defense against this claim.
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
$16,796, 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 has undergone 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 $760,598,
$662,539 and $462,654 for 1997, 1996 and 1995,
respectively.
The Company has a note receivable from the President (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 D. Powell, Treasurer
DIRECTORS
Dale H. Powell, Board Chairman
Edwin J. Campbell
W. Curtis Carter
Bobbie L. Oliver
Mary L. Fitts
<PAGE> * * *
"INSIDE BACK COVER"
WE ARE THERE . . .
CHECK US OUT ON THE WORLD WIDE WEB . . .
www.mod-u-kraf.com
<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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