I enclose for filing the Annual Report on Form 10-KSB of Mod-U-
Kraf Homes, Inc. for the year ended December 31, 1999. The
financial statements included in the Annual Report do not reflect
any change from the preceding year in any accounting principles or
practices or in the methods of application of those principles or
practices.
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-KSB
(Mark One)
[ X ] Annual report under Section 13 or 15(d) of the Securities
Exchange
Act of 1934 (Fee required)
For the fiscal year ended December 31, 1999
-------------------
[ ] Transition report under Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No fee required)
For the transition period from __________ to __________
Commission file number: 0 - 7 0 9 3
MOD-U-KRAF HOMES, INC.
----------------------------------------------
(Name of Small Business Issuer in Its Charter)
VIRGINIA 54-0893908
------------------------------- -------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
P. O. BOX 573, ROCKY MOUNT, VIRGINIA 24151
---------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
540 - 483 - 0291
------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
Securities registered under Section 12(b) of the Exchange Act:
NONE
------------
Securities registered under Section 12(g) of the Exchange Act:
COMMON STOCK
----------------
(Title of Class)
Check whether the issuer: (1) filed all reports to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes [ X ] No [ ]
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no disclosure
will be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of
this Form 10-KSB.
[ X ]
State issuer's revenues for its most recent fiscal year. $22,245,279
-----------
State the aggregate market value of the voting stock held by non-
affiliates computed by reference to the price at which the stock was sold,
or the average bid and asked prices of such stock, as of a specified date
within the past 60 days.
$3,009,953 at March 8, 2000
APPLICABLE ONLY TO CORPORATE REGISTRANTS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of March 16, 2000.
825,649 shares of Common Stock, $1 par value
Transitional Small Business Disclosure Format: Yes [ ] No [ X ]
Item 1. Description of Business
-----------------------
Mod-U-Kraf Homes, Inc. (the "Company"), was incorporated as a Virginia
corporation on August 19, 1971. It is engaged in the business of
manufacturing and selling custom-built sectionalized single family housing
units of its own design. The Company also customizes a commercial line of
products consisting of multi-family and diversified specialty structures.
The Company's sectionalized housing units, available in 65 standard
models, ranging in size from 705 square feet to 4,300 square feet for one
and two family dwellings, consist of two or more virtually complete sections
which are manufactured side by side on an assembly line. Various designs
are available, including Victorian, Cape Cod, vacation homes, two stories
and country homes. There are over 100 options to allow for custom choices.
Interior designs provide for great rooms, spacious kitchen-dining-living
areas, ample closets, and fireplaces. Multi-family projects can contain up
to 24,000 square feet and are custom designed to meet the needs of the
builder and as dictated by building site conditions (including inside and
outside painting and installation of kitchen cabinets and floor coverings).
After completion, the units are loaded on specially designed transporters
for delivery to the building site where they are off-loaded to a permanent
foundation previously prepared by the purchaser. After the sections are
off-loaded, either by crane or rollers, they are secured together by a "zip
up" procedure by purchaser. The purchaser may then complete the sections by
making plumbing and electrical connections, carrying out final grading and
landscaping, and adding brick veneer, if desired. Prices on our products
can vary depending upon the region into which they are to be shipped. The
Company believes that when completely erected on a lot, landscaped and ready
for occupancy, its single family homes retail from $55,000 to $320,000 or
more depending on the cost of the lot. The prices of multi-family projects
can range up to $1,300,000 or more depending on the total size of the
project.
During the past several years, the Company, utilizing the manufactured
section concept, has increasingly entered into a new commercial building
market consisting of condominiums, town-house apartments, dental clinics,
medical office buildings, churches, motels and many other commercial
structures adaptable to the Company's manufacturing methods and
capabilities.
During 1999, the Company produced 440.5 units as compared to 291.5
units in 1998. Gross sales of $22,245,279 and $15,586,511 in 1999 and 1998
were comprised of 435.5 and 301.5 units sold, respectively.
The chief raw materials used in production are lumber and lumber
products, including plywood, moldings, door and window assemblies; general
building materials such as roofing, insulation, wallboard, fixtures and
hardware; and heating equipment and other appliances. These materials are
presently available at competitive prices through several suppliers serving
the area, and the Company has not experienced and does not foresee
dependency upon any single source of supply for raw material. The price of
lumber has been subject to significant fluctuations which may affect the
Company's profit margin and the prices it charges for its products. The
Company passes increased cost on to its customers by increasing sales prices
from time to time.
At March 1, 2000, the Company had a backlog of un-shipped orders for
68.0 units (representing approximately $3,016,558 in gross sales).
Comparable backlog figures at March 1, 1999 and 1998 were 108.0 units
(representing approximately $4,764,418 in gross sales) and 70.0 units
(representing approximately $3,125,458 in gross sales), respectively. The
Company believes that approximately 80% of the orders comprising the current
backlog are firm. The Company believes that 20% of the back log balance may
not be treated as firm due to a variety of factors, including unavailability
of financing for its customers, title defects or objections with respect to
land upon which customers expect to erect their homes, and weather
conditions which can affect delivery against contracts. The average time
required between booking and shipment of an order is approximately 75 days.
Company units are sold primarily in Virginia, Maryland, West Virginia
and North Carolina, South Carolina, eastern Kentucky and eastern Tennessee.
The Company offers its products primarily to home builders, land developers
and realtors, although the Company also acts as a "turnkey" contractor,
selling sectionalized homes directly to retail customers and, depending on
the contract, either "zipping-up" the units or completing the entire home
to final grade. Orders consist primarily of from one to three homes,
although larger orders are accepted.
The Company does not have long-term agreements with any customer and
does not have any single customer or large group of customers upon which a
material part of its business depends. Sales terms are flexible, varying
from cash 15 days prior to delivery to a completely secured sale with a
nominal down payment, in which the Company provides construction financing
pending sale of the units and disbursement of financing by the permanent
lender. The Company provides permanent financing in connection with a
small number of sales. (See Note 3 of Item 7, Financial Statements)
The Company does not have any material patents, licenses, franchises or
concessions, has not made any material expenditures for research and
development during the past three years and does not anticipate doing so.
The Company employs approximately 35 persons on its administrative and
office staff, 20 persons on its sales staff and 160 persons on its
production and delivery staff. None of its employees is represented by a
labor union. The Company's employment level has fluctuated, and will
continue to fluctuate with the demand for code-complying manufactured
housing. Production employment levels have been stable for the last two
years and are expected to remain stable with the new Company's manufacturing
facility in operation.
Competition in the housing industry is intense. The Company competes
not only with local, regional and national producers of manufactured
housing, including modular, panelized and mobile homes, but also with local,
regional and national home builders as well. Many of these competitors have
financial resources and production facilities which far exceed those of the
Company. Moreover, five manufactured housing firms have plants located in
or near Rocky Mount, Virginia, and the Company must accordingly compete with
these firms for labor as well as sales.
To the extent weather conditions affect the construction or erection of
houses, the business of the Company can be seasonal, with a larger portion
of sales and shipments of its units occurring in the warmer months of the
year, generally from May through November, than during the winter months.
To the best of its knowledge, the Company is in compliance with all
applicable regulations and does not currently foresee that material capital
expenditures will be necessary to maintain such compliance or that future
compliance will significantly affect the earnings or competitive position of
the Company.
The marketing direction of the Company has recently developed two
thrusts. While the overall trend has been towards larger structures, the
Company has developed a series of smaller, lower-cost units to enable it to
compete for entry-level housing and governmental loan programs.
Improvements made in manufacturing facilities have put the Company in the
position to produce both large and smaller units efficiently.
The products of the Company are manufactured at two facilities in Rocky
Mount, Virginia. See Item 2, below. The original plant has a production
capacity of 5 units per week and the new facility has a production capacity
of 15 units per week.
On March 13, 2000, the Company and Coachmen Industries, Inc. of
Elkhart, Indiana, announced that they had signed a letter of intent calling
for Coachmen to buy all of the outstanding stock of the Company for $11.75
per share. Closing of the transaction is expected in late April or early
May, subject to the completion of due diligence by Coachmen, negotiation
of a definitive agreement, approval by the Company's shareholders and other
customary conditions. The proposal includes plans for the Company to
continue to operate as a separate entity under the Coachmen Housing Group.
The proposal also calls for the Company's current management team to remain
in place, as well as the Company's employees.
Item 2. Description of Property.
-----------------------
The Company's production and transportation office and original
manufacturing plant are located in a one-story steel building, approximately
40 years old, on State Highway 40, one mile east of Rocky Mount, Virginia.
The building is insulated and heated with a concrete floor and totals 20,000
square feet. Production and transportation offices, located within the
plant facility, are air conditioned and contain approximately 1,000 square
feet of floor space. In 1982 there was a one story metal and wood
plumbing and electrical storage addition with 700 square feet and a one
story metal and wood breakroom addition, heated and air conditioned, with
700 square feet completed. In 1984 construction was completed on a 7,200
square foot addition to the plant. In 1988 a one story metal and wood
addition containing a supply room and a "Binks" paint booth was completed
containing 1,600 square feet. In 1993 a one story metal building that was
built in 1984 which has a concrete floor and 16' overhead doors and has
3,600 square feet was converted to a component manufacturing area. A
small portion of the plant is used for storage of materials which will not
withstand exposure to the elements.
Total manufacturing area contains approximately 33,800 square feet of space.
Four enclosed storage buildings on the property adjacent to the
manufacturing plant are used to store materials. These buildings are wood
and metal construction with concrete floors and either three or four walls
enclosed. Total enclosed storage is 17,370 square feet.
The corporate headquarters building, including the engineering office,
which is located adjacent to the Rocky Mount plant, was completed and
occupied in December 1973 and contains over 7,800 square feet of office
space. The building was constructed in the Rocky Mount plant from seven
single modules completed in the plant with plant installation of wiring,
lighting, plumbing, carpet, vinyl, and rest rooms with ceramic walls and
floors.
The property is served by a rail siding. The property includes
approximately seven acres of land that provides for, in addition to the
plant buildings, storage buildings and corporate headquarters building, room
for employee and visitor parking, storage of completed sections pending
shipment and one sales model.
In October 1977, the Company purchased a 10-acre parcel adjacent to its
Rocky Mount facilities for possible future expansion. In March 1993, an
additional 16.92 acres were purchased adjacent to the 10 acre parcel. In
October 1994 the Company exchanged, at no cost, 20.229 acres of the total
26.92 acres for 17.983 acres in the Franklin County/Town of Rocky Mount,
Virginia Industrial Park. After the exchange, there are remaining 6.691
acres owned by the Company adjacent to its Rocky Mount facilities.
The 7 acre parcel that contains the manufacturing, storage and office
buildings are separated from the 6.691 acre parcel referred to above by a
rail line.
The Company's second manufacturing facility is located on 17.983 acres
in the Franklin County/Town of Rocky Mount, Virginia Industrial Park. The
facility is a steel building, insulated with a standing rib roof. The
104,325 square foot building has a 32'6" eave height and has a sprinkler
system throughout. There is 6,680 square feet of mezzanine for additional
storage and 800 square feet of office space inside the building. The size
of the building allows for storage of all materials for the construction of
the units, reducing damage to inventory due to movement and weather. The
entire floor area is covered by 6" of finished concrete. There are 10 large
doors of which 8 are designed for "drive" through and 2 are "dock" doors for
receiving materials. There are five 4 ton bridge cranes installed to assist
in the "off-line" production of various components such as floor systems,
walls, and roof systems. The entire building is heated by propane with an
air rotation system. To allow for future expansion of the building, an
additional 8,750 square feet of finished floor and grade beams have been
added to the building. Three storm water run-off retention ponds are
located on the property. All roof drains on the building have been "piped"
to those ponds. The remainder of the finished lot is covered by a 6"
compacted surface with approximately 42,000 square yards of high traffic
area underlaid with a surface retention fabric. The property is fenced for
security purposes. The IDA of Franklin County, VA issued bonds in the amount
of $3,000,000 to finance the construction of this 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 Company's transportation and delivery fleet consists of twelve tractor
cabs and 57 transporters, all of which are owned by the Company. Four of the
tractor cabs were purchased in 1996 and these transporters were placed in
service during the first quarter of 1997. Two additional tractor cabs
were purchased in 1999 and placed in service in 2000.
The Company considers its properties and equipment generally to be well
maintained and in good condition, and adequate for the needs of its
business. All properties are considered to be adequately insured by the
Company.
Item 3. Legal Proceedings.
------------------
A suit against the Company is pending in the United States
District Court by a former employee who is seeking damages
for unlawful termination. The Company is vigorously
contesting the suit. The ultimate outcome of the litigation
is unknown at this time. However, potential losses,
including fees and costs, could reach $300,000.
Item 4. Submission of Matters to a Vote of Security Holders.
---------------------------------------------------
None
Item 5. Market for Common Equity and Related Stockholder Matters.
--------------------------------------------------------
The Corporation's common stock is traded in the over-the-counter
market. The number of shareholders as of February 15, 2000 was 368. The
range of bid and ask quotations and dividends declared for each quarter
during the last two calendar years are listed below.
QUOTATIONS ON COMMON STOCK
1999 1998 Dividends
BID ASK BID ASK Declared
High Low High Low High Low High Low 1999 1998
First 5 3/4 5 3/4 8 8 6 6 7 1/2 7 1/2 $0.03 $0.03
Second 5 3/4 5 3/4 8 8 5 7/8 5 7/8 7 1/2 7 1/2 $0.03 $0.03
Third 5 3/4 5 3/4 8 8 5 7/8 5 7/8 7 1/2 7 1/2 $0.03 $0.03
Fourth 5 3/4 5 3/4 8 8 5 3/4 5 7/8 8 7 1/2 $0.03 $0.03
Source: Wheat First Union & Koonce Securities, Inc.
For the past 89 consecutive quarters a quarterly dividend of $0.03 per share
of common stock has been declared. The Company presently expects to pay
dividends in the future as earnings permit. The quotations herein reflect
inter-dealer prices, without mark-up, mark-down or commission, and may not
represent actual transactions.
Item 6. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
----------------------------------------------------------
Net Sales for 1999 of $22,245,279 increased 42.72% over 1998 net sales
of $15,586,511. This increase in revenues is the result of a 44% increase in
the number of modular units sold due to having both plants running the
entire year and a strong demand for our homes.
Gross Profit percentage increased in 1999 to 24.72% from 22.13% in
1998. The manufacturing process in our new facility showed significant
improvement over the prior two years of operation. The old manufacturing
facility was started back up at the beginning of 1999 due to the increased
demand for our houses. This facility did not experience the production
inefficiencies the newer facilty did upon opening.
Our Selling, General and Administrative Expense as a percentage
of sales dropped in comparison to the prior year. Actual dollars spent
increased 25% for the year, a majority of which was sales related for
sales commissions and builder discounts on the increased sales volume.
The percentage to net sales decreased for 1999 to 17.44% from 19.90 in
1998.
We are reporting a Non-operating income for the year as opposed to
non-operating expense in the prior year due to the gain on the property
taken by the state in order to widen Route 40 which runs in front of
our home office. The State has deposited $175,596 in a bank account
based on their assessed value of the land. Management has not settled
with the State on the final value of the land. The Non-Operating
income is also partly attributable to increased investment income. At the
end of 1999, the Company had $700,000 in certificates of deposits and
a majority of the remaining cash was in either a money market account
or an investment sweep account.
Management believes that the market for its modular housing is likely to
remain strong for the foreseeable future. The Company intends to capitalize
on this anticipated demand by continuing to improve its production
capacities and efficiency, resulting in improved revenues and gross
profit margins. The Company's success in realizing these goals will
be affected by weather conditions in its market and its ability to
effectively control manufacturing costs, both of which may negatively
impact performance. Demand for the Company's products also is
sensitive to general economic conditions in its market and would be
negatively affected by any economic downturn.
To date, the year 2000 problem has had no significant effect
on Mod-U-Kraf Homes, Inc. We surveyed our key vendors as to their year
2000 readiness during 1999, and all returned responses were positive.
The only directly related cost to the Company for this problem was our
need to replace our telephone system, at a cost of $27,000.
On December 18, 1997, management of the Company determined to
temporarily suspend production at its Highway 40 facility. The suspension
was required by adverse weather conditions that delayed the Company in
delivering new units. Production at that facility remained idle throughout
all of 1998. The new production facility was sufficient to meet our
production needs until the fourth quarter of 1998. At that time, demand was
approaching a level necessitating either re-opening the old plant or risk
losing sales due to the production backlog of houses waiting to go into the
new plant. Preparations were begun in December of 1998 to retool and restock
the old plant. Production resumed in the Highway 40 facility on January 4,
1999 and remained open for all of 1999. We do not foresee a need to close
it again in the near future.
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 17 1/2 years and bears interest at
a variable rate based on variable, tax exempt bonds. At December 31, 1998,
the actual interest rate was 5.75%.
The Company believes that the effect of inflation on the results for
the periods presented is not material. To the extent permitted by
competition, the Company passes increased cost on to its customers by
increasing sales prices from time to time.
Item 7. Financial Statements.
---------------------
MOD-U-KRAF HOMES, INC. AND SUBSIDIARY
CONSOLIDATED FINANCIAL REPORT
December 31, 1999
C O N T E N T S
INDEPENDENT AUDITOR'S REPORT ON
THE FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
<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, 1999 and 1998, and the
related consolidated statements of income, stockholders' equity and cash
flows for the years ended December 31, 1999, 1998, and 1997. 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, 1999 and 1998, and the results
of their operations and their cash flows for the years ended December 31,
1999, 1998 and 1997 in conformity with generally accepted accounting
principles.
Brown, Edwards & Company, L.L.P.
CERTIFIED PUBLIC ACCOUNTANTS
Roanoke, Virginia
January 25, 2000
<PAGE> * * *
OTHER BUSINESS DATA
SELECTED FINANCIAL DATA
Year Ended December 31,
1999 1998 1997 1996 1995
Net Sales $22,245,279 $15,586,511 $16,072,448 $11,372,471 $9,083,419
0perating Inc(Loss) 1,617,544 348,365 376,446 323,643 542,434
Net Earnings(Loss) 1,042,985 115,397 180,685 177,663 378,824
Earnings(Loss) Per Share
Primary & Fully Diluted(1)1.26 0.14 0.22 0.22 0.46
Cash Dividends Per Sh (1)0.12 0.12 0.12 0.12 0.12
Total Assets 11,008,450 9,235,319 9,075,041 9,617,921 7,845,504
Current Ratio 2.77 to 1 3.67 to 1 4.40 to 1 3.72 to 1 5.17 to 1
Deferred comp. 925,123 1,003,402 1,075,307 1,147,186 1,206,188
Book Value Per Share (1)6.91 5.76 5.74 5.65 5.55
(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.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
<PAGE> * * *
MOD-U-KRAF HOMES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
December 31, 1999 and 1998
ASSETS 1999 1998
CURRENT ASSETS
Cash and cash equivalents $ 2,694,694 1,653,742
Trade and other receivables 663,622 351,972
Inventories (Note 2) 2,214,484 1,618,016
Notes receivable(Note 3) 548,063 645,962
Income taxes receivable (Note 7) - 76,900
Prepaid expenses 26,557 34,627
--------- ---------
Total current assets 6,147,420 4,381,219
NOTES RECEIVABLE (Note 3) 142,277 7,663
PROPERTY AND EQUIPMENT(Note 4 and 6) 3,350,249 3,574,488
OTHER ASSETS
Deferred taxes (Note 7) 344,810 416,381
Cash surrender value of officers' life
insurance 167,773 157,732
Reimbursement account (Note 6) 174,149 155,160
Eminent domain deposit (Note 11) 175,596 -
Debt issue costs 61,430 65,390
Model Homes 444,746 477,257
--------- ---------
$11,008,450 $9,235,290
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt
(Note 6) $ 150,000 $ 150,000
Postretirement benefits (Note 5) 85,206 78,279
Accounts payable, trade and other
liabilities 776,934 545,378
Income taxes payable (Note 7) 572,050 -
Accrued compensation 366,881 220,408
Customer deposits 264,653 157,200
--------- ---------
Total current liabilities 2,215,724 1,151,265
POSTRETIREMENT BENEFITS(Note 5) 839,917 925,123
LONG-TERM DEBT (Note 6) 2,250,000 2,400,000
COMMITMENTS AND CONTINGENCIES (Notes 6
and 11) - -
--------- ---------
Total liabilities 5,305,641 4,476,388
--------- ---------
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 4,417,489 3,473,582
--------- ---------
5,702,809 4,758,902
--------- ---------
$ 11,008,450 9,235,290
========= =========
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, 1999, 1998, and 1997
1999 1998 1997
---------- --------- ---------
Net sales $22,245,279 $15,586,511 $16,072,448
Cost of goods sold (Note 12) 16,832,786 12,137,023 12,613,342
---------- ---------- ----------
Gross profit 5,412,493 3,449,488 3,459,106
Selling, general and
administrative expenses 3,794,949 3,101,123 3,082,660
---------- ---------- ----------
Operating income 1,617,544 348,365 376,446
Postretirements benefits
expense (Note 5) 82,292 88,666 89,132
Non-operating income(expense),
net (Note 10) 167,375 (83,863) 349
---------- --------- ---------
Income before income taxes 1,702,627 175,836 287,663
Federal and state income tax
expense (Note 7) 659,642 60,439 106,978
---------- --------- ---------
Net income $ 1,042,985 115,397 $ 180,685
========== ========= =========
Earnings per share $ 1.26 $ 0.14 $ 0.22
========== ========= =========
The Notes to Consolidated Financial Statements
are an integral part of these statements.
MOD-U-KRAF HOMES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
Years Ended December 31, 1999, 1998, and 1997
1999 1998 1997
---------- ---------- -----------
Balance, beginning $ 3,473,582 $3,457,263 $3,375,656
Net income 1,042,985 115,397 180,685
Dividends paid
($.12 per share) (99,078) (99,078) (99,078)
--------- --------- ---------
Balance, ending $ 4,417,489 $3,473,582 $3,457,263
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, 1999, 1998, and 1997
1999 1998 1997
--------- --------- ---------
OPERATING ACTIVITIES
Net income $1,042,985 $ 115,397 $ 180,685
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and
amortization 490,812 517,421 487,496
Deferred taxes 71,571 47,892 21,866
Loss (gain) on sale
of equipment ( 7,000) 21,807 ( 4,706)
Increase in cash value of
life insurance ( 10,041) ( 19,854) ( 21,651)
Adjustment to post-
retirement benefits ( 78,279) ( 71,905) ( 71,879)
Eminent domain gain ( 175,596) - -
Change in certain current
assets and liabilities:
(Increase) decrease in:
Trade and other
receivables ( 311,650) ( 206,528) ( 92,516)
Inventories ( 596,468) 635,047 36,633
Income tax receivable 76,900 ( 76,900) 46,123
Prepaid expenses 8,070 10,259 ( 1,496)
Model homes ( 1.124) ( 264,755) ( 158,067)
(Decrease) increase in:
Accounts payable,
trade and other
liabilities 231,556 179,068 ( 158,918)
Income taxes payable 572,050 ( 5,847) 5,847
Accrued compensation 146,473 58,896 ( 39,609)
Customer deposits 107,453 73,473 ( 209,928)
--------- --------- ---------
Net cash provided
by operating
activities 1,567,712 1,013,471 19,880
--------- --------- ---------
INVESTING ACTIVITIES
Proceeds from sale of
equipment 7,000 45,003 8,200
Purchase of property and
equipment, net of debt
incurred 1999 $0:
1998 $60,245; 1997 $0 ( 228,927) ( 48,645) ( 602,303)
Principal received on notes
receivable 596,597 299,486 852,984
Notes receivable arising
from sales ( 633,363) ( 115,181) ( 701,287)
Decrease (increase) in
certificates of deposit - - 200,000
---------- --------- ---------
Net cash provided by
(used in) investing
activities ( 258,693) 180,663 ( 242,406)
---------- --------- ---------
FINANCING ACTIVITIES
Payments on long-term debt ( 150,000) ( 150,000) ( 150,000)
Cash dividends paid ( 99,078) ( 99,078) ( 99,078)
Funding of reimbursement
account ( 18,989) 5,082 ( 7,536)
Earnings on unused
bond proceeds - 113,612 ( 8,138)
---------- --------- ----------
Net cash used in
financing activities ( 268,067) ( 130,384) ( 264,752)
---------- --------- ----------
Increase in cash and
cash equivalents 1,040,952 1,063,750 ( 487,278)
CASH AND CASH EQUIVALENTS
Beginning 1,653,742 589,992 1,077,270
--------- ---------- ---------
Ending $2,694,694 $1,653,742 $ 589,992
========= ========== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash payments for:
Income taxes, net of
refunds received $ (54,732) $ 95,294 $ 33,142
========= ========== =========
Interest $ 86,423 $ 101,521 $ 104,746
========= ========== =========
Non-cash investing activity:
Eminent domain deposit $ 175,596 $ - $ -
========= ========= ==========
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, 1999
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 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 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. In other cases, short term
financing is provided through trade receivables, which are
unsecured.
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.
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.
During 1999, the Company entered into a treasury services
agreement with a commercial bank to invest in Eurodollars.
At December 31, 1999, the Company had approximately
$660,000, which is not insured by the Federal Deposit
Insurance Corporation (FDIC) and is subject to Cayman Islands
Sovereign risk.
Valuation of Trade Receivables:
------------------------------
Trade and notes receivable 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.
Customer deposits:
-----------------
Customer deposits consist primarily of payments received for
which the revenue recognition criteria described below has not
been met. Ultimately, the deposits are applied to the cost
of the purchase.
Recognition of Revenue:
----------------------
Revenue is recognized for cash-in-advance sales when
production of the unit is complete and for sales on account
when the unit is delivered. Revenue is recognized for Company
financed sales when the financing instrument is executed and
production of the unit is complete.
<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. Actual results could differ from
those estimates.
Earnings Per Share:
------------------
Earnings per share are based on the weighted average number
of shares of stock outstanding, which were 825,649 for
1999, 1998 and 1997.
Advertising costs:
-----------------
Advertising costs, which consist primarily of newspaper and
yellow page advertisements, brochures and signage are
expensed as incurred
Reclassification:
----------------
The amounts presented for prior years have been reclassified,
where appropriate, to conform to the presentation used
for the current year.
Note 2. Inventories
The components of inventories are as follows:
1999 1998
----------- -----------
Raw materials $ 1,038,047 $ 761,513
Work-in-process 362,259 203,636
Finished goods 526,900 360,451
Land and units held
for sale 287,278 292,416
----------- -----------
$ 2,214,484 $ 1,618,016
=========== ===========
Total general and administrative costs incurred and the
portion of those costs remaining in inventory are as
follows:
1999 1998 1997
-------- -------- --------
Incurred $1,103,022 $ 975,754 $ 983,821
======== ======== ========
Remaining in
inventory $ 43,521 $ 43,401 $ 60,997
======== ======== ========
Note 3. Notes Receivable
Notes receivable consist of the following:
1999 1998
-------- --------
Mortgage notes receivable,
interest ranging from 8% to 9%,
payable in various monthly install-
ments and balloon payments due at
various dates through July 2003.
Secured by deeds of trust on
certain real estate. $ 150,326 $ 157,718
Credit line deed of trust notes
receivable, interest ranging from
9% to 10.5%, payable at various
dates through 2000. Secured by
deeds of trust on certain real estate. 532,351 478,862
Other notes 7,663 17,045
--------- ---------
690,340 653,625
Less current portion (548,063) (645,962)
--------- ---------
$ 142,277 $ 7,663
========== ==========
<PAGE> * * *
Note 4. Property and Equipment
Major classes of property and equipment are as follows:
1999 1998
--------- --------
Land and improvements $ 775,724 $ 775,724
Buildings 2,934,429 2,918,912
Manufacturing equipment 2,286,299 2,150,733
Other furniture, fixtures
and equipment 712,230 660,203
--------- ---------
6,708,682 6,505,572
Less accumulated depreciation (3,358,433) (2,931,084)
--------- ---------
3,350,249 3,574,488
Maintenance and repairs expense incurred amounted to
$283,008, $169,324 and $219,212 for 1999, 1998, and
1997, respectively.
Note 5. Postretirement Benefits
The Company is obligated under postretirement benefits
agreements with two former officers. The present value of
these obligations, discounted at 8.5% are as follows:
1999 1998
--------- ----------
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. $ 387,965 $ 428,786
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. 418,742 448,491
Postretirement benefits other than
pensions. Details are presented below. 118,416 126,125
--------- ---------
925,123 1,003,402
Less current portion (85,206) (78,279)
--------- ---------
$ 839,917 $ 925,123
========= =========
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. 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 5.75,
4.15 and 4.25 percent at December 31, 1999, 1998 and 1997,
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 $22,000. 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:
1999 1998
---- ----
Required prepaid interest deposit $ 67,811 $ 67,811
Unused monthly principal deposits 75,000 75,000
Earnings 31,338 12,349
-------- --------
$174,149 $155,160
======== ========
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.
In July 1998, all of the remaining bond proceeds were drawn
from the trustee. Debt issue costs will be amortized over
the term of the debt, or 20 years.
Lines of Credit
---------------
The Company has an unsecured $500,000 line of credit with
Crestar Bank bearing interest at LIBOR plus .75%, payable
on demand, and expiring on January 31, 2001. The
Company also has an unsecured $500,000 line of credit
with BB&T bearing interest at LIBOR plus 2.00%,
payable on demand, with no established expiration.
There were no amounts outstanding under the lines of credit
as of December 31, 1999 and 1998.
Note 7. Income Taxes
The provision for income taxes consists of the following
components:
1999 1998 1997
--------- -------- --------
Current $588,071 $ 12,547 $ 85,112
Deferred 71,571 47,892 21,866
------- ------- -------
$659,642 $ 60,439 $106,978
======== ======== ========
Deferred taxes results from temporary differences 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:
1999 1998 1997
-------- -------- ---------
Differing cost basis of
property and equipment $ (2,533) $ 15,278 $ 4,394
Eminent domain gain 64,192 - -
Amounts expensed when
incurred, deducted when paid:
Deferred Compensation 19,729 26,782 27,314
Warranty & accrued vacation (10,619) 1,058 ( 8,675)
Other, net 802 4,774 ( 1,167)
-------- ------- --------
$ 71,571 47,892 $ 21,866
======== ======= ========
<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:
1999 1998 1997
--------------- --------------- --------------
Percent Percent Percent
of of of
Pretax Pretax Pretax
Amount Income Amount Income Amount Income
-------- ------ -------- ------ -------- ------
Tax expense at
federal rate $578,893 34.0% $ 59,784 34.0% $ 97,805 34.0%
Increase (decrease)
in taxes from:
State taxes, net
of federal tax
effect 68,105 4.0 7,033 4.0 11,507 4.0
Other, net 12,644 0.7 ( 6,378) (3.6) (2,334) (0.8)
-------- ----- -------- ----- -------- ----
$659,642 38.7% $ 60,439 34.4% $106,978 37.2%
======== ===== ======== ===== ======== =====
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 $85,586, $27,815 and $46,134
for 1999, 1998 and 1997, respectively.
<PAGE> * * *
Note 10. Non-operating Income(Expense)
Non-operating income(expense)consists of the following:
1999 1998 1997
-------- -------- --------
Interest income $ 98,310 $ 79,063 $ 108,421
Interest expense (86,423) ( 101,668) (102,290)
Bond service fees (26,126) ( 69,135) ( 13,260)
Eminent domain gain
(Note 11) 164,596 - -
Other, net 17,018 7,877 7,478
-------- -------- --------
$ 167,375 (83,863) $ 349
======== ======== ========
Note 11. 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
$145,000. 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
$19,772, 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.
Eminent domain
--------------
The Commonwealth of Virginia acquired title to certain of
the Company's property through the eminent domain statues.
In connection therewith, the Commonwealth deposited funds
With the Clerk of the Circuit Court of Franklin County,
Virginia, representing its offer for the property. The
Company has recorded a gain (see Note 10) based on this
offer, as this is considered the minimum to be received.
The Company is contesting the offer. The ultimate outcome,
and additional proceeds to be received, if any, cannot be
determined at this time.
Litigation
----------
A suit against the Company is pending in the United States
District Court by a former employee who is seeking damages
for unlawful termination. The Company is vigorously
contesting the suit. The ultimate outcome of the litigation
is unknown at this time. However, potential losses,
including fees and costs, could reach $300,000.
Note 13. Related Party Transactions
In the normal course of business, the Company makes
purchases from a supplier owned by the estate of a director
of the Company. Purchases from this supplier totaled
$643,094 and $760,598 for 1998 and 1997, respectively.
The Company is obligated under deferred compensation
agreements to two former officers (Note 5).
<PAGE> * * *
Item 8. Changes In and Disagreements With Accountants on Accounting
and Financial Disclosure.
---------------------------------------------------------------
None
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act.
-------------------------------------------------------------
The Company's Board of Directors is composed of the following
five members.
Name Age Director Since
------ ----- ----------------
Edwin J. Campbell . . . . . . . . 70 1978
Dale H. Powell . . . . . . . . . 66 1980
W. Curtis Carter . . . . . . . . 81 1991
Bobbie L. Oliver . . . . . . . . . 67 1994
Mary L. Fitts . . . . . . . . . . 60 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 was Vice President from October 1990 until March 1999, at which
time he was appointed Executive Vice President.
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
in Southwest Virginia. 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.
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 1999, all filing
requirements applicable to its officers, directors and 10% shareholders were
met.
Item 10. 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 1999 $75,000 $5,607 $14,469
President and
Chairman of the 1998 $75,000 $8,995 $14,532
Board
1997 $75,000 $9,651 $14,511
(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 annually by the Company on a
"split-dollar" insurance policy for 1999, 1998 and 1997, and $1,263, $1,325
and $1,304 of Company contributions to Mr. Powell's profit-sharing plan
account for 1999, 1998 and 1997 respectively.
Employment Agreement
Under an Employment Agreement with the Company, effective January 1,
1991, Dale H. Powell will be paid an annual base salary of $75,000, subject
to annual review by the Board of Directors. In addition to the base salary,
Mr. Powell will be paid incentive compensation equal to 3% of the income of
the Company before federal and state income taxes, and before the payment of
any dividends or extraordinary non-recurring items or expenses.
Under an Employment Agreement with the Company, effective April 8,
1999, Edwin J. Campbell will be paid an annual base salary of $70,000,
subject to annual review by the Board of Directors. In addition to the
base salary, Mr. Campbell will be paid incentive compensation equal to
2.5% of the income of the Company before federal and state income taxes,
and before 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.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
---------------------------------------------------------------
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
February 16, 2000.
The following table presents certain information as of February 16, 2000,
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 30,052(1) 3.64%
Dale H. Powell 69,000 8.36
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) 375,490 45.48
Robert K. Fitts 78,547(3) 9.51
P. O. Box 82
Boones Mill, VA 24065
(1) Includes shares held in various fiduciary capacities and owned by
or with certain relatives.
(2) Includes 66,000 shares with respect to which voting and investment
power is shared with Robert K. Fitts
(3) Includes 12,547 shares with respect to which Mr. Fitts has sole
voting and investment power and 66,000 shares with respect to
which such power is shared with Mary L. Fitts.
Item 12. Certain Relationships and Related Transactions.
-----------------------------------------------
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 1999. In addition, $2,122
was paid in 1999 to Mrs. Oliver for health insurance premiums. Mrs.
Oliver, a director, is the sister-in-law of Dale H. Powell, President and
Chairman of the Board of the Company and the sister of 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 1999. In addition, $6,000 was be paid in 1999 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 the sister of Bobbie L.
Oliver and the sister-in-law of 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 the family of J. Dillard Powell, the recently deceased
brother of Dale H. 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 approximately $969,047 for 1999.
Item 13. Exhibits, Lists And Reports on Form 8-K.
(a) The following documents are filed as part of this report:
(3) Exhibits:
3.1(a) Articles of Incorporation (filed as an exhibit to
Registrant's Form 10-K for the fiscal year ended December 31,
1983 and incorporated herein by reference)
3.1(b) Amendment to Articles of Incorporation dated November 2, 1989
(filed as an exhibit to Registrant's Form 10-K for the fiscal
year ended December 31, 1989 and incorporated herein by
reference)
3.2(a) By-Laws (filed as an exhibit to the Registrant's Form 10-K
for the fiscal year ended December 31, 1990 and incorporated
herein by reference)
3.2(b) Amendment to By-Laws dated January 19, 1994 (filed as an
exhibit to the Registrant's Form 10-KSB for the fiscal year
ended December 31, 1993 and incorporated herein by reference)
3.2(c) Amendment to By-Laws dated February 8, 1995
3.2(d) Amendment to By-Laws dated February 4, 1998
10.3(a) Settlement Agreement, dated as of March 24, 1990, between
Registrant and Robert K. Fitts (filed as an exhibit to
Registrant's Form 10-K for the fiscal year ended Dec. 31,
1989 and incorporated herein by reference)
10.3(b) Settlement Agreement, dated as of September 13, 1990, between
Registrant and the Estate of O.Z. Oliver (filed as an exhibit
to Registrant's Form 8-K filed Sept. 15, 1990 and
incorporated herein by reference)
10.4(a) Employment Agreement, dated November 21, 1990, between
Registrant and Dale H. Powell (filed as an exhibit to
Registrant's Form 10-K for the fiscal year ended Dec.31, 1990
and incorporated herein by reference)
10.4(b) Employment Agreement, dated November 21, 1990, between
Registrant and Edwin J. Campbell (filed as an exhibit to
Registrant's Form 10-K for the fiscal year ended Dec. 31,
1990 and incorporated herein by reference)
11 Computation of Per Share Earnings
21 Subsidiaries
27 Financial Data Schedule
99.1 Additional Exhibit - News release dated March 13, 2000
(b) Reports on Form 8-K - None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
MOD-U-KRAF HOMES, INC.
(Registrant)
March 22, 2000 By s/Dale H. Powell
-------------------------
Dale H. Powell, President and
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
March 22, 2000 s/Dale H. Powell
-------------------------
Dale H. Powell, President and
Chairman of the Board (Principal
Executive officer)
March 22, 2000 s/Edwin J. Campbell
-------------------------
Edwin J. Campbell, Vice President,
Corporate Secretary and Director
March 2, 2000 s/Steven T. Montgomery
-------------------------
Steven T. Montgomery, Controller
(Principal Financial and Accounting
Officer)
March 22, 2000 s/W. Curtis Carter
-------------------------
W. Curtis Carter, Director
March 22, 2000 s/Bobbie L. Oliver
-------------------------
Bobbie L. Oliver, Director
March 22, 2000 s/Mary L. Fitts
-------------------------
Mary L. Fitts, Director
Mod-U-Kraf Homes, Inc.
Exhibit Index
Exhibit No. Description
3.1(a) Articles of Incorporation (filed as an exhibit to
Registrant's Form 10-K for the fiscal year ended December 31,
1983 and incorporated herein by reference)
3.1(b) Amendment to Articles of Incorporation dated November 2, 1989
(filed as an exhibit to Registrant's Form 10-K for the fiscal
year ended December 31, 1989 and incorporated herein by
reference)
3.2(a) By-Laws (filed as an exhibit to the Registrant's Form 10-K
for the fiscal year ended December 31, 1990 and incorporated
herein by reference)
3.2(b) Amendment to By-Laws dated January 19, 1994 (filed as an
exhibit to the Registrant's Form 10-KSB for the fiscal year
ended December 31, 1993 and incorporated herein by reference)
3.2(c) Amendment to By-Laws dated February 8, 1995
3.2(d) Amendment to By-Laws dated February 4, 1998
10.1 1983 Mod-U-Kraf Homes, Inc. Incentive Stock Option Plan
(filed as an exhibit to Registrant's Form 10-K for the fiscal
year ended December 31, 1983 and incorporated herein by
reference)
10.3(a) Settlement Agreement, dated as of March 24, 1990,
between Registrant and Robert K. Fitts (filed as an exhibit to
Registrant's Form 10-K for the fiscal year ended Dec. 31,
1989 and incorporated herein by reference)
10.3(b) Settlement Agreement, dated as of September 13, 1990, between
Registrant and the Estate of O.Z. Oliver (filed as an exhibit
to Registrant's Form 8-K filed Sept. 15, 1990 and
incorporated herein by reference)
10.4(a) Employment Agreement, dated November 21, 1990, between
Registrant and Dale H. Powell (filed as an exhibit to
Registrant's Form 10-K for the fiscal year ended Dec.31, 1990
and incorporated herein by reference)
10.4(b) Employment Agreement, dated November 21, 1990, between
Registrant and Edwin J. Campbell (filed as an exhibit to
Registrant's Form 10-K for the fiscal year ended Dec. 31,
1990 and incorporated herein by reference)
11 Computation of Per Share Earnings
21 Subsidiaries
27 Financial Data Schedule
99.1 Additional Exhibit - News release dated March 13, 2000
Exhibit 3.2( c)
Mod-U-Kraf Homes, Inc.
Resolution Passed at Board of
Directors Meeting February 8, 1995
Resolved that the Board of Directors hereby finds it to be in the best
interest of the corporation that its By-Laws be amended by deleting Article
II, Section 1 and substituting therefore the following:
Article II
Board of Directors
Section 1. Election. The Board of Directors shall be chosen at the annual
meeting of the shareholders, to hold office until removed or until the next
annual meeting of the shareholders and until their successors are elected.
The number of directors shall be six (6). Directors need not be
stockholders.
Exhibit 3.2(d)
Mod-U-Kraf Homes, Inc.
Resolution Passed at Board of
Directors Meeting February 4, 1998
Resolved that the Board of Directors hereby finds it to be in the
best interest of the Corporation that its By-Laws be amended by
deleting Article II, Section I and substituting the following:
Article II
Board of Directors
Section 1. Election. The Board of Directors shall be chosen at the
annual meetings of the stockholders, to hold office until removed
or until the next annual meeting of the stockholders and until
their successors are elected. The number of Directors shall be no
less than four (4) nor more than six (6). Directors need not be
stockholders.
Exhibit 11
Mod-U-Kraf Homes, Inc.
Computation of Basic and Diluted Earnings Per Share
for the years ended December 31, 1999, 1998 and 1997
1999 1998 1997
----- ----- -----
Net income applicable to common stock(1)$1,042,985 $115,397 $180,685
========= ======== ========
Average number of shares of common
stock outstanding (2) 825.649 825,649 825,649
======== ======== ========
Basic and diluted earnings per share $1.26 $0.14 $0.22
======== ======== ========
Notes:
(1) In the periods presented, the Company had only one class of Common
stock.
(2) To determine the average number of shares of common stock, the
average numberof common shares outstanding during each month
were added together and the sum was then divided by 12.
Exhibit 99.1
Additional Exhibits
News Release
For immediate release Monday, March 13, 2000
Coachmen Industries Proposes to Acquire Mod-U-Kraf Homes, Inc.
Elkhart, Indiana--Coachmen Industries, Inc. (NYSE: COA) of Elkhart,
Indiana, and Mod-U-Kraf Homes, Inc. (OTC: MODU) of Rocky Mount, Virginia,
announced today that they have signed a Letter of Intent calling for
Coachmen to acquire all the outstanding stock of Mod-U-Kraf for $11.75
per share. The proposal includes plans for Mod-U-Kraf to continue to
operate as a separate entity under the Coachmen Housing Group. Closing
of the transaction is expected in late April or early May, subject to
completion of due diligence by Coachmen, negotiation of a definitive
agreement, approval by the shareholders of Mod-U-Kraf and other normal
closing conditions. The letter of intent provides for an exclusive
negotiating period and a significant break-up fee payable to Coachmen
in certain circumstances.
"An integral part of Coachmen's strategic plan is to grow the Housing
Group through the internal expansion of existing business and through
the acquisition of companies that share Coachmen's business goals, values,
practices and philosophies," explained Claire C. Skinner, Chairman of the
Board and CEO of Coachmen Industries, Inc. "Because Mod-U-Kraf matches
up well with us, we want to pursue this acquisition opportunity."
"The association with Coachmen would provide the opportunity to continue
our growth, expand our facilities, offer our employees greater
opportunities and enable Mod-U-Kraf to move into the new millennium as a
major builder of modular homes, "I have known and have had dialogue
with several of Coachmen's senior management team since 1992 and I know
that their goals and plans for growth and expansion are similar to our
own."
Under the agreement, Mod-U-Kraf's current management team would remain
in place, as would the company's roughly 220 employees. "Mod-U-Kraf
is an industry leader and its team has a strong history of success. We
will be very pleased to welcome them to the Coachmen Industries family,"
Skinner said.
Mod-U-Kraf has been building homes for over 28 years. Currently operating
out of two plants, Mod-U-Kraf markets its products in Virginia, North
Carolina, South Carolina, West Virginia, Maryland, Northern Georgia,
Eastern Tennessee and Eastern Kentucky. "the year 1999 was an outstanding
one for Mod-U-Kraf," Powell said. "Sales and profits reached an all-time
high." Sales were in the $22 million range.
James E. Jack, Executive Vice President and Chief Financial Officer for
Coachmen Industries added, "This acquisition would strenghen our position
in modular construction and fit our strategic plan to expand this sector
of Coachmen Industries."
Mod-U-Kraf would join All American Homes as part of Coachmen's Housing
Group. All American Homes, with five manufacturing locations, is the
leading producer of modular, precision-built homes in the U.S.
Though Mod-U-Kraf is involved in the production o modular housing like
All American Homes, the company offers Coachmen new ventures with its
Special Projects Division. Serving the commercial building sector, the
Special Projects Division builds motels, townhouses, condominiums,
apartments, dorms, business offices, day care facilities and medical
offices. All building comply with commercial building codes and are
reviewed by a third party inspection agency.
Coachmen Industries, Inc. is one of the nation's leading producers of
recreation vehicles. The company's All American Homes division is
America's leading producer of modular homes. Unlike the manufactured
housing industry, Coachmen's modular homes are built to local codes
verses HUD codes. Recreation vehicles comprised 83 percent of
Coachmen Industries' 1999 sales and modular homes represented 17
percent. Coachmen is publicly held with stock listed on the New York
Stock Exchange (NYSE) under COA symbol. Mod-U-Kraf is traded over-
the-counter under the MODU symbol.
For more information:
James E. Jack, Executive Vice President and Chief Financial Officer
Coachmen Industries, Inc.
Phone: 219-262-0123
Rich Allen, Corporate Communications, Coachmen Industries, Inc.
Phone: 219-262-0123
E-mail: [email protected]
Web Site: www.coachmen.com
Dale H. Powell, President, Mod-U-Kraf Homes, Inc.
Phone: 540-483-0291
[ARTICLE] 5
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1999
[PERIOD-END] DEC-31-1999
[CASH] 2694694
[SECURITIES] 0
[RECEIVABLES] 663622
[ALLOWANCES] 0
[INVENTORY] 2214484
[CURRENT-ASSETS] 6147420
[PP&E] 6708682
[DEPRECIATION] 3358433
[TOTAL-ASSETS] 11008450
[CURRENT-LIABILITIES] 2215724
[BONDS] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 825649
[OTHER-SE] 4877160
[TOTAL-LIABILITY-AND-EQUITY] 11008450
[SALES] 22245279
[TOTAL-REVENUES] 22245279
[CGS] 16832786
[TOTAL-COSTS] 20627735
[OTHER-EXPENSES] (167375)
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 86423
[INCOME-PRETAX] 1702627
[INCOME-TAX] 659642
[INCOME-CONTINUING] 0
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 1042985
[EPS-BASIC] 1.26
[EPS-DILUTED] 1.26
</TABLE>
