SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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):
[X] No fee required.
[ ] 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 2000 Annual Meeting of Shareholders of
Mod-U-Kraf Homes, Inc. will be held at Ippy's Restaurant in the Erath
Room located at 1760 North Main St., Rocky Mount, Virginia (beside
the Comfort Inn) on March 22, 2000 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 16, 2000 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 3, 2000
** 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 22,
2000 at Ippy's Restaurant in the Erath Room located at 1760 North Main St.,
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 3, 2000 to all shareholders of record at the close of
business on February 16, 2000 (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 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.
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 . . . . . . . . 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. 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 1999 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 1999.
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 2, 2000
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 1998, 1997 and 1996, and $1,325, $1,325
and $1,304 of Company contributions to Mr. Powell's profit-sharing plan
account for 1999, 1998 and 1997 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 1999. In addition, $2,122
was paid in 1998 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 1998. 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 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 $643,000 for 1999.
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 reports of ownership and changes in ownership with the Securities and
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.
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 2000. Brown, Edwards and Company audited
the accounts of the Company for fiscal 1999. 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
2001 ANNUAL MEETING OF SHAREHOLDERS
Any shareholder wishing to make a proposal to be acted upon at the 2001
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 4, 2000.
The deadline for submitting a stockholder proposal or a nomination for
director that is not to be included in such proxy statement is January 18,
2001. If the Company receives notice of a shareholder proposal after
January 18, 2001, the persons named as proxies in the proxy statement for
the 2001 Annual meeting will have discretionary voting authority to vote on
such proposal at the 2001 Annual meeting.
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.
* * *
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 3, 2000
** 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 16, 2000 at the annual meeting of shareholders to be held on
March 22, 2000 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 , 2000
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING
THE ENCLOSED ENVELOPE.
** end of proxy card **
EXHIBIT 13 - 1999 Annual Report to Shareholders
<PAGE> * * *
"FRONT COVER"
"schematic of a Mod-U-Kraf house"
Mod-U-Kraf Homes, Inc.
1999
ANNUAL REPORT
<PAGE> * * *
"INSIDE FRONT COVER"
FRONT COVER: Personal home of
Chris, Tammy, Jake and Cyle Angie
Builder: Chris Angie
Location: Morganton, North Carolina
BELOW: BELOW:
The "Windsor" The "Windsor" with brick exterior & garage
1999 Richmond Home Show Builder: Chris Angie
Location: Morganton, North Carolina
"Photograph of a Mod-U-Kraf "Photograph of a Mod-U-Kraf home"
home"
<PAGE> * * *
To Our Shareholders
Your management and board of directors report continued
profitability for the year 1999 for your company.
The Company is pleased to report a record setting year in both
sales and profitability. These results are attributable to a
strong housing industry and excellent weather conditions
throughout the entire year. Increased profitability is the result
of increased manufacturing efficiency in our Weaver Street plant
and the high volume of sales from having both plants running the
entire year. The original Old Franklin Turnpike plant was
shutdown for all of 1998 due to reduced demand for most of the
year. The plant was restarted at the beginning of 1999 and ran
the entire year. The favorable weather conditions also allowed
us to keep finished goods inventory at lower levels than has
normally been possible in prior years.
Net sales for the year ending, December 31, 1999 were $22,245,279
which compares to net sales in 1998 of $15,586,511. Net income, after
taxes, for the year ending December 31, 1999, was $1,042,985 which compares
to net income, after taxes, for the year 1998 of $115,397. Net income
for 1999 amounts to $1.26 per common share, which compares to net income,
after taxes, of $0.14 per share during fiscal year 1998.
We have continued to make modifications and improvements in our new
manufacturing facility during the year. 1999 was a year of product
diversification for the company since Multi-family Projects,
University Student Housing, Office Buildings, Motels and Assisted
Care Living Center were built during the year.
A Vice President of Operations and a Vice President of Administration
were promoted from our existing staff to help manage the increased
production and sales experienced during the year.
Our Designer Series Model Home, the Wellington, located in Roanoke,
Virginia has continued to "show-case" the tremendous potential of
our code-complying products. We have added several new homes to the
Designer line with gratifying sales results. We expect to add
additional homes to our total line of homes during the year 2000.
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, 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> * * *
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
8,000 homes in 29 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, eastern Tennessee, and
eastern 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 4,300 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 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
170 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 29 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 15, 2000 was 368. The
range of bid and ask quotations and dividends declared for 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.
The Corporation presently expects to pay dividends in the future as earnings
permit.
<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
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.
Selling, General and Administrative Expense as a percentage of net
sales decreased for 1999 to 17.44% from 19.90% in 1998.
We are reporting 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, which it expects will result 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 direct cost to the Company for this problem was
our need to replace our telephone system, at a cost of $27,000.
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 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, 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)
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 1998 $60,245:
1997 $-0-; 1996 $1,554,961 ( 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)
---------- --------- ---------
<PAGE> * * *
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
======== ======== ========
<PAGE> * * *
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
========== ==========
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.
<PAGE> * * *
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.
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 to purchase
the facility from the IDA. The Company's obligation under
the agreement 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
======== ========
<PAGE> * * *
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 a $500,000 line of credit with Crestar Bank
bearing interest at LIBOR plus .75%. The line is secured
by a first lien and security interest on the new facility,
is payable on demand, and expires 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 12. 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> * * *
OFFICERS
Dale H. Powell
President & Chairman of the Board
Edwin J. Campbell
Executive Vice President & Corporate Secretary
Jeffrey D. Powell
Vice President of Operations & Treasurer
George W. Scott
Vice President of Administration
Steven T. Montgomery
Controller
DIRECTORS
Dale H. Powell, Board Chairman
Edwin J. Campbell
W. Curtis Carter
Bobbie L. Oliver
Mary L. Fitts
<PAGE> * * *
"INSIDE BACK COVER"
Honoring Our Employees for Participation in Community Events
Mod-U-Kraf Homes participated in the 1999 Franklin County Christmas
Parade. Our company proudly accepted First Place for the Best
Industrial Float. The theme of the parade was "Christmas at the
turn of the Century, 1899-1999". Picture A is the group of our
employees who designed the float and put it all together.
Pictures B-F are photographs of different eras that were featured
on the float. (1999, 1920,1950 (D & E) and 1970) Picture
G is a group of our employees who participated in the American
Heart Walk. The group raised $1,000.00.
"Various pictures presented as described above."
<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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