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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED, EFFECTIVE OCTOBER 7, 1996)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996, OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED) FOR THE TRANSITION PERIOD FROM
_____________ TO _______________.
COMMISSION FILE NO. 0-26142
BELMONT HOMES, INC.
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(Exact name of registrant as specified in its charter)
MISSISSIPPI 64-0834574
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
HIGHWAY 25 SOUTH, INDUSTRIAL PARK DRIVE, BELMONT, MISSISSIPPI 38827
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 601-454-9217
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Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
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NONE NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.10 PAR VALUE PER SHARE
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(Title of Class)
Indicate by check mark whether the registrant: (1)
has filed all reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 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
Indicate by check mark if disclosure of delinquent
filers pursuant to Item 405 of Regulation S-K is not contained herein, and will
not 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-K
or any amendment to this Form 10-K. |_|
The aggregate market value of the shares of Common
Stock (based upon the closing price of these shares in the over-the-counter
market on March 25, 1996) of the registrant held by nonaffiliates on March 25,
1997 ($8.75 per share), was approximately $61,692,000.
As of March 25, 1997, 9,467,000 shares of the
registrant's Common Stock were outstanding.
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DOCUMENTS INCORPORATED BY REFERENCE
Documents incorporated by reference and the part of Form 10-K
into which the document is incorporated:
<TABLE>
<S> <C>
Portions of the Registrant's Proxy
Statement Relating to the Annual Meeting of
Shareholders to be held on June 3, 1997...........Part III
</TABLE>
FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements regarding the
business and industry of Belmont Homes, Inc. (the "Company"), including, without
limitation, those regarding the integration of the businesses of its
subsidiaries, the growth and financing strategies of the Company, projections of
revenues, income, earnings per share or other financial items, the effective
implementation of the Company's business or growth strategy, the adequacy of the
Company's capital resources and other statements regarding trends relating to
the manufactured home industry and various other items involve known and unknown
risks, uncertainties and other factors which may cause the actual results,
performance and achievements of the Company to be materially different from any
future results, performance or achievements expressed or implied by such
forward-looking statements. Such factors include general economic and business
conditions; industry trends; demographic changes; competition; raw material and
labor costs and availability; import protection and regulation; relationships
with customers, distributors or dealers; changes in the business strategy or
development plans of the Company; the availability, terms and development of
capital; changes in or failure to identify or consummate successful acquisitions
or to assimilate the operations of any acquired businesses with those of the
Company; the availability of other forms of housing; the availability of
consumer credit; general inflationary pressures; the growing number of dealers
and manufacturers operating in the Company's markets; and government regulation.
PART I
ITEM 1. BUSINESS
GENERAL
The Company produces and markets a variety of single- and
double-section manufactured homes under a variety of brand names through
approximately 410 dealers and 550 sales centers in 20 states, primarily in the
southern United States. The Company has long-established relationships with most
of its dealers, and management believes these relationships contribute
significantly to the Company's selling efforts. The Company targets its homes to
a variety of price points within the moderately-priced segment of the
manufactured housing market. The Company's single-section homes range in size
from 672 square feet to 1,280 square feet and sell at retail prices between
$12,500 and $34,100. The Company's double-section homes range in size from 1,040
square feet to 2,356 square feet and sell at retail prices between $20,000 and
$59,600. The Company manufacturers homes in 11 production
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facilities, five of which are located in Mississippi, four of which are located
in Arkansas, and two of which are located in Georgia. The Company believes that
its clustering approach to manufacturing enables the Company to achieve certain
economies of scale unavailable to manufacturers with decentralized operations.
The Company, which was incorporated in Mississippi in 1993, is a successor to a
business which commenced operations in 1987.
OPERATIONS
The Company's operating strategy is to produce, at a low
manufacturing cost, practical and high quality homes that are competitively
priced. The following are the key elements of the Company's operating strategy:
(i) to produce practical homes at affordable prices; (ii) to produce low-cost
homes in clustered manufacturing facilities; (iii) to increase penetration in
existing markets and (iv) to expand the Company's geographic presence and
manufacturing capacity.
The Company strives to offer homes with standard features at
competitive prices at a variety of price points within the manufactured housing
market. The designs of the Company's manufactured homes emphasize basic
features, including central heating and a kitchen with a refrigerator and a
range. Most optional features permit the consumer to customize the home.
The Company strives to produce high quality homes at the
lowest manufacturing cost possible. In contrast to competitors that operate
decentralized production facilities, the Company clusters its production
facilities. As a result, the Company is able to utilize a centralized management
team and sales staff for each cluster. Within a cluster, each facility is
dedicated to the production of a particular type of home. This specialized
production system allows the Company to schedule longer production runs of each
type of floor plan, resulting in higher volume, lower manufacturing costs and,
the Company believes, improved quality. A production run often includes more
than 30 floors of the same floor plan. The Company currently has five facilities
clustered in and around Belmont, Mississippi, and four facilities located
approximately ten miles apart in Conway and Bigelow, Arkansas. In addition, with
the acquisition of Bellcrest Homes, Inc. ("Bellcrest") in October 1996, the
Company added two facilities clustered in the Millen, Georgia area.
The Company intends to increase its penetration of its primary
and secondary markets by increasing the number of dealers selling its homes in
each of the 20 states in which the Company's products are currently sold. The
Company plans to continue to concentrate its efforts on the southern region of
the United States because of its dealer and customer relationships and the
substantial opportunity for growth which management believes this region offers.
ACQUISITIONS
The Company's acquisition strategy is to acquire manufacturers
that (i) produce manufactured homes which broaden and complement the Company's
existing product lines, (ii) utilize a complementary independent dealer network,
(iii) operate facilities in areas which will expand the Company's geographic
market and (iv) provide management of the Company with the opportunity to
increase such manufacturer's floor production and operating margins by
implementing the Company's clustered facility manufacturing philosophy and other
operating procedures.
On October 25, 1996, the Company acquired all of the
outstanding capital stock of Bellcrest Homes, Inc. for $9.5 million in cash.
Further, if certain performance criteria are met by Bellcrest, additional
payments equal to $3.5 million will be paid by the Company to the former
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shareholders of Bellcrest. With the acquisition of Bellcrest, the Company
operates 11 manufacturing facilities with an estimated aggregate annual
production capacity of 26,650 floors. The acquisition of Bellcrest broadened the
Company's product lines and strengthened the Company's capacity to produce
multi-section homes. Bellcrest's single-section homes range in size from 924
square feet to 1,280 square feet and sell at retail prices between $22,100 and
$34,100. Bellcrest's double-section homes range in size from 1,144 square feet
to 2,396 square feet and sell at retail prices between $33,300 and $59,600.
Bellcrest's net sales for the fourth quarter of 1997 were approximately $11.8
million. Multi-section homes have historically accounted for more than
two-thirds of the annual sales of Bellcrest.
Although the Company has engaged in preliminary discussions
with respect to potential acquisitions, it does not have any agreements or
understandings with respect to the acquisition of any additional manufacturers
or facilities.
INDUSTRY OVERVIEW
A manufactured home is a complete single-family residence that
is built in a production facility and transported to either a dealer or a home
site. Manufactured homes offer many of the amenities of, and are generally
constructed with the same materials as, site-built homes. The manufactured homes
are built in floors, with homes consisting of one or more floors. Multi-section
homes are joined at the home site by the dealer or an independent installer.
Manufactured homes must meet the national construction and safety standards
building code administered by Housing and Urban Development ("HUD"), which sets
specified industry-wide levels of quality relating to design, materials and
performance standards.
Manufactured housing has historically been one of the most
affordable alternatives for the home buyer. As a result of manufacturing
efficiencies, manufactured homes can be purchased at a lower cost per square
foot than site-built homes. According to the U.S. Census Bureau, in 1994 the
average retail cost per square foot was $22.03 for a single-section manufactured
home and $27.41 for a double-section manufactured home, as compared to an
average of $58.65 for a site-built home. Because of the lower cost of
manufactured homes as compared to site-built homes, manufactured homes
traditionally have enabled first-time home buyers and retirees to overcome the
obstacles of large down payments and high monthly mortgage payments.
According to statistics published by the Manufactured Housing
Institute ("MHI"), the manufactured housing industry's share of the
single-family housing market has increased from 25.7% of total single-family
homes sold in 1992 to 32.4% in 1996. The following table shows the level of new
domestic single-family housing sales and shipments and the portion of such sales
and shipments represented by manufactured and site-built homes:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
(In thousands, except percentages)
<S> <C> <C> <C> <C> <C>
New single-family site-built homes sold(1).............. 610 666 670 667 757
New single-family manufactured homes shipped............ 211 254 304 340 363
--- --- --- ----- -----
Total......................................... 821 920 974 1,007 1,120
=== === === ===== =====
New manufactured homes as a percentage of total(1)...... 25.7% 27.6% 31.2% 33.7% 32.4%
</TABLE>
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(1) New single-family site-built homes sold exclude contractor-built and
owner-built homes and rental properties. For example, in 1994,
contractor-built and owner-built homes and rental properties accounted
for an aggregate of 526,000 single-family housing starts.
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According to the MHI, domestic shipments of manufactured homes
declined by 42.1% from a peak of 295,079 in 1983 to a low of 170,713 homes in
1991. Management of the Company believes that the principal causes for this
decline include economic downturns in certain oil and gas producing states and
the deterioration of general economic conditions culminating in the most recent
national recession. Additionally, excess site-built housing inventories,
contraction in the availability of financing and high levels of apartment
vacancies and repossessed manufactured housing inventories contributed to the
decline in manufactured home sales in certain regions. As a result of these
conditions, the number of manufacturers in the industry fell from 185 in 1983 to
85 in 1991. This trend, however, has reversed, resulting in increased
competition for the Company. In 1996, the number of manufacturers increased to
98 companies with 313 plants, from 92 companies with 285 plants in 1995.
While the industry has historically been seasonal, with lower
shipments occurring in the first and last part of each calendar year, prior to
1996 and since 1991, the manufactured housing industry had experienced a
significant increase in sales during these and other periods, slightly reducing
the seasonality that has affected the industry. According to the MHI, nationwide
shipments in 1996 increased 7% to 363,411 homes from 339,601 homes in 1995,
while industry shipments in the Company's primary and secondary markets
increased by 12.2% and 5.7% respectively. However, according to MHI, monthly
industry shipments declined 5.5% in November 1996 and 4.5% in December 1996
compared to same month sales in 1995. The November 1996 decline was the first
such monthly decline since December 1991. This decline in fourth quarter
shipments represents a return to the seasonality historically present in the
manufactured housing industry. The Company expects that this seasonality will
be present in the first and fourth quarters of 1997.
According to MHI, 1996 was the first year in the history of
the manufactured housing industry that sales of multi-section homes surpassed
sales of single-section homes. In 1996, industry shipments of multi-section
homes increased to 52.2% of all manufactured homes sold in the United States
during the year, from 48.8% in 1995. The Company's shipments of multi-section
homes in 1996 increased to 25.8% or 2,870 homes of the total homes sold by the
Company during the year, from 17% or 1,335 multi-section homes sold in 1995.
Approximately 74% of the homes sold by the Company during 1996 were, therefore,
single-section homes. During the fourth quarter of 1996, although the Company's
shipment of homes increased 5% to 2,905 homes (primarily as a result of the
Company's acquisition of Bellcrest in October 1996), when compared to sales of
2,766 homes in the fourth quarter of 1995, sales of the Company's single-section
homes decreased 12.5% during the fourth quarter of 1996 to 2,000 homes, when
compared to sales of 2,287 single-section homes in the fourth quarter of 1995.
Although management believes the current level of industry
shipments is sustainable based on continued favorable economic and demographic
factors, it does believe that industry conditions have recently become
significantly more competitive and seasonal. Management of the Company believes
that this increased competition is primarily the result of the increasing
number of manufacturers and plants operating in the industry, together with a
related increase in the number of independent and other retail dealers
operating in the Company's territory. The return of seasonality is consistent
with historical trends present in the industry. Management also believes, based
upon recent trends, that the multi-section segment of the industry has become
more competitive among manufacturers and more attractive to purchasers of
manufactured housing. Management believes that this increased competition and
return to seasonality could adversely effect the Company's future sales and
results of operations.
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PRODUCTS
The Company strives to offer homes with standard features at
competitive prices at a variety of price points within the moderately-priced
segment of the manufactured housing market. Management believes that the
acquisition of Bellcrest increased the breadth of the Company's products,
especially in the multi-sectioned product line.
PRODUCT LINES. The Company sells its homes under the Premier,
Glenwood, Delta, Spirit, River Valley, Bellcrest and other brand names. The
number of floor plans offered in each line, range of sizes and retail prices,
and percentage of Company sales for the year ended December 31, 1996 in each
such line are as follows:
<TABLE>
<CAPTION>
TOTAL FLOOR PERCENTAGE OF SALES FOR YEAR ENDED
BRAND NAME TYPE PLANS OFFERED SIZE (SQ. FT.) RETAIL PRICE RANGE December 31, 1996 (1)
- ---------- -------------- ------------- -------------- ------------------ -------------------------------
<S> <C> <C> <S> <C> <C>
Premier, Single-section 81 672 - 1,216 $12,500 - $30,000 42%
Glenwood, Delta
Premier, Double-section 21 1,040 - 1,976 $20,000 - $55,000 23%
Glenwood, Delta
Spirit/River Valley Single-section 16 896 - 1280 $19,500 - $27,800 19%
Spirit/River Valley Double-section 22 1,120 - 2,180 $28,500 - $48,700 11%
Bellcrest Single-section 66 924 - 1,280 $22,100 - $34,100 1%
Bellcrest Double-section 87 1,144 - 2,356 $33,300 - $59,600 4%
Total 293 100.0%
=== =====
</TABLE>
The Company's product lines differ primarily in terms of price, size,
style and quality of furnishings. Premier homes contain two to four bedrooms, a
living room, dining room, kitchen, one or two bathrooms and standard features
such as central heating, a range, refrigerator, furniture, carpet and draperies.
Optional features which may be added to the standard models include, among other
things, fireplaces, vaulted ceilings and patio doors. The Glenwood line features
more expensive carpet, cabinets, draperies, furniture and appliances than the
Premier line. Spirit homes contain a more elaborate floor plan and more
elaborate presentation than Premier homes. Standard features include vaulted
textured ceilings in certain rooms, a range, refrigerator, carpeting and
draperies. Optional features added to the standard models include, among other
things, fireplaces, vaulted textured ceilings throughout, hard board siding,
shingled roofs and storm windows. The River Valley line features less expensive
standard features and fewer options than the Spirit line. The Bellcrest line,
which was acquired in October 1996, includes ten separate brands with homes
offering a variety of standard and optional features similar to the Premier and
Spirit lines.
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DESIGN AND COSTING. The Company designs its homes to provide
attractive, practical features at affordable prices. The Company believes that
it has been able to develop designs that are responsive to consumers' needs
while maintaining low operating costs. In order to continue to provide practical
homes at attractive prices, management annually reviews the Company's existing
designs to determine which designs should be eliminated and which should be
modified to respond to design trends, material availability or cost concerns.
Additionally, in anticipation of trade shows, the Company seeks to develop
several new single-section and double-section models each year.
To control costs, the Company places particular emphasis on
the versatility of the designs so that a few basic features of each decor can be
interchanged within a variety of styles. This flexibility offers the consumer
additional variations of decors to suit their particular tastes. Additionally,
the use of standardized floor plans permits the Company to take advantage of
efficiencies of scale in scheduling. The Company also offers numerous
combinations of exterior designs, including different colors of vinyl siding and
hard board siding, trim and, on its double-section and Wind Zone homes, shingle
roofing.
MANUFACTURING OPERATIONS
FACILITIES. The Company produces its manufactured homes in 11
facilities, five of which are located in Mississippi, four of which are located
in Arkansas and two of which are located in Georgia. The Company's facilities
generally operate on a one shift per day, five days per week basis, 50 weeks per
year. A production manager oversees operations in each facility with the
assistance of five or eight foremen, each of whom is responsible for a
particular stage of the production process. The following table provides certain
information with respect to the Company's manufacturing facilities:
<TABLE>
<CAPTION>
DATE OPENED
FACILITY OR ACQUIRED SQUARE FEET CAPACITY(1)
-------- ----------- ----------- -----------
(IN FLOORS)
<S> <C> <C> <C> <C>
Belmont, MS 1 March 1988 77,000 1,750
2 October 1992 54,000 2,600
3 December 1993 80,000 2,500
4 March 1995 104,000 4,100
Clarksdale, MS 1 August 1995 86,000 2,000
Conway, AK 1 October 1995 (2) 91,000 2,100
2 October 1995 79,500 1,300
3 June 1996 110,000 3,400
4 September 1996 110,000 3,400
Millen, GA 1 October 1996 66,000 2,000
2 October 1996 56,000 1,500
TOTAL 913,500 26,650
======= ======
</TABLE>
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(1) Capacity figures are estimates of management on the basis of one shift
per day, five days per week, 50 weeks per year.
(2) The Company leases this facility on a month-to-month basis.
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Based on significant increases in Company sales of
double-section homes in the past five years, management believes that the demand
for double-section homes will continue to increase as a percentage of
manufactured housing sales, while the market for 14-foot single-section homes
will continue to decline, consistent with the Company's recent experience. As a
result, the Company generally utilizes its larger production facilities to
produce double-section homes and its smaller production facilities to produce
single-section homes.
The Company's production facilities are clustered, which
allows management to minimize the duplication of personnel necessitated by
having production facilities located in different states or regions, enhance
quality control and to reduce start-up costs of additional facilities. The
Company believes it realizes specific cost savings by having one purchasing
staff responsible for the procurement, handling and storage of inventory for its
clustered production facilities. Additionally, the Company is able to utilize
one sales staff for each cluster of its facilities. Manufacturers generally
provide dealers with their products within a limited radius based upon the cost
of transporting the home to the dealer. The cost savings resulting from the
Company's centralized operations and transportation arrangements permit the
Company to expand the radius of its dealer network and still offer its homes at
competitive prices.
SCHEDULING. Because management believes that the efficient
scheduling of production is essential to its success, the Company generally
schedules lengthy production runs of each type of floor plan in each of its
facilities. Management believes that the Company's scheduling system results in
the production of better quality homes in a more efficient manner. Employees at
each facility construct the same home in repetition during a production cycle,
which familiarizes the employees with their roles in the manufacturing process
for the particular type of home. The employees become more efficient in
performing their tasks, and the quality of their workmanship improves as a
result of this repetition. The Company's sales personnel verify each order
before it is scheduled for production, because dealer orders are subject to
cancellation prior to manufacture for a variety of reasons.
RAW MATERIALS. The principal materials used in the production
of the Company's homes include lumber, gypsum, particleboard, paneling,
insulation, steel, wiring, plumbing, carpet, vinyl, linoleum, fasteners and
hardware items, appliances, electrical items, windows and doors. These materials
and components are generally readily available and are purchased by the Company
from numerous sources on standard industry terms, which generally require
payment within 30 days and offer a 2% discount for payment within ten days. The
proximity of the Company's suppliers permits the delivery of such materials on
an as-needed basis, thereby reducing the need to maintain a significant
inventory of raw materials. No supplier accounted for more than 12.3% of the
Company's raw material purchases during 1996. While the Company is dependent
upon the timely delivery of such raw materials to its facilities, the loss of
any one supplier would not have a material effect on the Company. The Company
purchases the appliances for its homes from General Electric, but the Company is
not a party to and does not intend to enter any long-term contracts with
suppliers. The Company believes its current policy of purchasing from many
suppliers enables it to benefit from lower costs and avoid any supply problems
caused by using one source of raw materials.
During the second half of 1996, the Company invested an
aggregate of approximately $2.5 million in two joint ventures. The first joint
venture, in which the Company invested with Cavalier Homes, Inc. ("Cavalier"),
produces laminated wallboard, paneling and interior doors. The second joint
venture, in which the Company invested with Cavalier and Southern Energy Homes,
Inc., produces cabinet doors. The majority of the 1996 sales for these joint
ventures were to the respective joint venture partners. The Company expects such
sales to increase as the full-year requirements of the joint venture partners
are met
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and through sales to unaffiliated parties. The Company believes that prices
charged by these joint ventures for materials are competitive with the Company's
other sources of materials.
Management believes that the size of its purchases allows it
to obtain favorable volume discounts. The Company's costs of operations,
however, can be significantly affected by the availability and pricing of raw
materials. Sudden increases in demand for construction materials, particularly
lumber and insulation, can greatly increase the costs of production. In the
past, the Company has added a lumber surcharge to the price of its homes to
offset anticipated lumber price increases the Company may experience. While the
Company historically has been able to reflect a significant portion of raw
material cost increases in its current prices by anticipating such increases,
such raw material cost increases cannot always be reflected immediately in the
Company's prices, especially in backlog orders for which price adjustments are
not made, and, consequently, may adversely affect the Company's profitability.
QUALITY CONTROL. The operation of clustered production
facilities allows the dedication of each facility to a particular type of home,
which permits lengthy production runs of the same floor plan. Increased
repetition makes employees more proficient, which results in improved quality.
The Company adheres to strict quality standards, which management believes equal
or surpass standards enforced by HUD, and continually refines its production
procedures to increase productivity and reduce warranty claims. Personnel at
each of the Company's facilities track and correct production deficiencies at
various stages of production that are attributable to the manufacturing process.
In accordance with HUD requirements, an independent HUD-approved, third-party
inspector inspects each of the Company's manufactured homes for compliance
during construction at the Company's manufacturing facilities.
Before a home moves from one production station to another,
the foreman in charge of the station inspects the home. The Company also employs
inspectors who perform a final inspection prior to shipping each home. One of
the inspectors serves as quality control manager and reports the results of the
inspections directly to the President of the Company. In addition, the quality
control manager, the other inspectors and all foremen meet daily to review
problems in production and to suggest improvements to the manufacturing process.
Each facility must be certified in accordance with HUD requirements prior to its
opening for production.
TRANSPORTATION. The Company uses a combination of its own
drivers and common carriers to deliver its homes. The trucks used by the
Company's employee drivers are owned by the driver and leased to the Company.
Each lease is terminable by either party upon 30 days notice. Management
believes that an employee driving his own truck will take better care of both
the truck and the home being delivered. The manufacturing facilities operate by
Spirit Homes, Inc. ("Spirit" or "Spirit Homes") and Bellcrest, subsidiaries of
the Company, utilize common carriers to deliver their homes.
SALES AND DEALER NETWORK
The Company sells manufactured homes through approximately 410
dealers and 550 sales centers in 20 states, principally in the southern United
States. Approximately 80% of the Company's sales during 1996 occurred in its
primary market states of Alabama, Arkansas, Kentucky, Louisiana, Mississippi,
Missouri, Oklahoma, Tennessee and Texas. Management believes that the quality of
its independent dealer network has been, and will continue to be important to
the Company's performance. For the year ended December 31, 1996, net sales at
the Company's ten largest dealers accounted for approximately 20%.
Management believes that providing attractive and well-built
homes at affordable prices is essential to recruiting and retaining dealers. The
Company provides each dealer with a territory which the Company considers
exclusive. Although not contractually bound to maintain any exclusive
territories on behalf of its dealers, management believes this practice
encourages dealer loyalty. The Company markets
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its homes to dealers through target mailings, trade publications and
participation in regional trade shows and participates in advertising campaigns
of its dealers on a cooperative basis. Additionally, the Company supports its
dealers through the distribution of floor plan literature and brochures. The
Company's strategy of selling its homes through independent dealers helps to
ensure that the Company's homes are competitive with those of other
manufacturers in terms of consumer satisfaction, product design, quality and
price.
The Company's senior management and sales personnel maintain
personal contact with the Company's independent dealers. Each member of the
Company's sales staff focuses on a particular region or state and is paid a
commission based upon the sales generated. The Company gives its sales personnel
considerable discretion in the amount and nature of contact with the independent
dealers in their territory, which allows the independent dealers to receive
individualized service. Because these independent dealers have significant
influence over a retail customer's purchase decision, the Company encourages its
independent dealers to promote the Company's homes, monitors each independent
dealer's inventory and offers a volume purchase rebate to all of its independent
dealers. The Company also sponsors activities with dealers at trade shows and
rewards certain dealers with expense-paid promotional trips. The Company does
not have formal marketing agreements with its independent dealers, and
substantially all of the Company's dealers also sell homes of other
manufacturers.
WARRANTIES AND SERVICE
The Company provides the initial consumer with a HUD-mandated
one-year limited warranty on the structure of the home. The Company also offers
a 90-day warranty on plumbing and electrical components. In addition to the
Company's warranty, direct warranties are provided by the manufacturers of the
components, appliances and floor covering included in the homes. Upon delivery
of a home, the dealer completes a checklist detailing any needed repairs to the
home and sends it to the Company's service manager, who is responsible for
taking the necessary corrective action.
Warranty and service expense for the Company approximated 2.1%
of net sales in 1995 and 3.2% of net sales in 1996. The Company maintains a
warranty reserve which management believes is adequate to cover estimated
warranty claims to be incurred and which to date has been sufficient to cover
the Company's warranty expenses. The Company often incurs service expenditures
after the warranty period has expired. Management believes that this practice
increases dealer loyalty and maintains goodwill.
DEALER AND RETAIL FINANCING
Almost all of the Company's dealers finance their purchases
through "floor plan" arrangements under which a financial institution provides
the dealer with a loan for the purchase price of the home and receives a
security interest in the home as collateral. In connection with a "floor plan"
arrangement, the financial institution providing the financing customarily
requires the Company to enter into a separate repurchase agreement with the
financial institution under which the Company is obligated, upon default by the
dealer, to repurchase the homes for an amount equal to the unpaid loan balance
plus certain administrative and handling expenses. At December 31, 1996, the
Company had a contingent repurchase liability under floor plan financing
arrangements of approximately $86.1 million. The risk of loss under such
repurchase agreements is mitigated by the fact that (i) sales of the Company's
manufactured homes are spread over a large number of independent dealers, and
(ii) the price the Company is obligated to pay generally declines over the term
of the repurchase agreement (generally 12 months). The costs incurred by the
Company under such repurchase agreements have been nominal. No assurance can be
given, however, that the Company will not suffer losses with respect to, and as
a consequence of, these financing
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arrangements. The Company has no contingent liability with respect to any
financing arrangement made by the home buyer to purchase his or her home from
the dealer.
COMPETITION
The manufactured housing industry is highly competitive at
both the manufacturing and retail levels, with competition based upon factors
including total price to the dealer, product features, quality, warranty repair
service and the terms of dealer and retail customer financing. A number of firms
such as Fleetwood Enterprises, Inc., Champion Enterprises, Inc., Oakwood Homes
Corporation and Clayton Homes, Inc., among others, have been operating longer
and possess greater manufacturing, financial and other resources than the
Company, and there are numerous firms producing manufactured homes in the states
in which the Company operates, many of which are in direct competition with the
Company in the states where its homes are sold. Certain of the Company's
competitors provide customers with financing from captive finance subsidiaries.
Additionally, management believes that a significant amount of new manufactured
housing production capacity has been developed in the past three years and that
the number of retail dealers has increased during the same period. A downturn in
the manufactured housing industry could result in excess industry capacity,
which in turn could result in increased competition adversely affecting the
Company's results of operations or financial condition. In addition, the Company
competes with other manufacturers, some of which maintain their own retail sales
centers, for quality independent dealers. While management believes that
mortgage financing has generally become more available in the manufactured
housing industry in recent years, a contraction in consumer credit could provide
an advantage to those competitors with internal financing capabilities.
Manufactured homes also compete with site-built homes, as well as apartments,
townhouses, condominiums and existing site-built and manufactured homes. See
"Business - Industry Overview."
The barriers to entry into the manufactured housing industry
are relatively low. Management believes, however, that the qualifications for
obtaining inventory, accounts receivable and finished goods financing, which are
based upon the financial strength of the manufacturer and each of its dealers,
have in recent years become more difficult to meet.
REGULATION
The Company's business is subject to a number of federal,
state and local laws. Construction of manufactured housing is governed by the
National Manufactured Housing Construction and Safety Standards Act of 1974. In
1976, HUD issued regulations under this Act establishing comprehensive national
construction standards. The HUD regulations cover all aspects of manufactured
home construction, including structural integrity, fire safety, wind loads,
thermal protection and ventilation. Such regulations preempt conflicting state
and local regulation on such matters. These regulations are subject to
continual change. New wind load regulations became effective in July 1994 for
certain hurricane-prone areas and new thermal protection standards affecting
all regions of the country to a varying degree became effective October 1994.
Despite the scope and strict enforcement of these regulations, there can be no
assurance that one of the Company's homes will not be damaged or destroyed by
an act of God, especially hurricanes and tornadoes. The Company's manufacturing
facilities and the plans and specifications of its manufactured homes have been
approved at the opening of each facility for compliance with applicable federal
regulations by HUD-designated inspection agencies. An independent, HUD-approved
third-party inspector checks each of the Company's manufactured homes for
compliance during construction. Failure to comply with the HUD regulations
could expose the Company to a wide variety of sanctions, including closing one
or more of the Company's production facilities.
11
<PAGE> 12
Manufactured, modular and site-built homes are all built with
particleboard, paneling and other products that contain formaldehyde resins.
Since February 1985, HUD has regulated the allowable concentration of
formaldehyde in certain products used in manufactured homes and required
manufacturers to warn purchasers concerning formaldehyde associated risks. The
Company uses materials in its manufactured homes that meet HUD standards for
formaldehyde emissions and that otherwise comply with HUD regulations in this
regard. In addition, certain components of manufactured homes are subject to
regulation by the CPSC which is empowered to ban the use of component materials
believed to be hazardous to health and to require, through HUD regulations, the
manufacturer to repair defects in components of its homes. The CPSC, the
Environmental Protection Agency and other governmental agencies have in the past
evaluated the effects of formaldehyde. Regulations of the Federal Trade
Commission also require disclosure of a manufactured home's insulation
specifications.
The transportation of manufactured homes on highways is
subject to regulation by various federal, state and local authorities. Such
regulations may prescribe size and road use limitations and impose lower than
normal speed limits and various other requirements.
The Company's manufactured homes are also subject to local
zoning and housing regulations. A number of states require manufactured home
producers to post bonds to ensure the satisfaction of consumer warranty claims,
but no claims have been made against the Company with respect to these bonds. A
number of states have adopted procedures governing the installation of
manufactured homes. Utility connections are subject to state and local
regulation and must be complied with by the dealer or other person installing
the home.
The Company is subject to the Magnuson-Moss Warranty Federal
Trade Commission Improvement Act which regulates the descriptions of warranties
on products. The description and substance of the Company's warranties are also
subject to a variety of state laws and regulations.
The Company's operations are subject to federal, state and
local laws and regulations relating to the generation, storage, handling,
emission, transportation, disposal and discharge of materials into the
environment. Governmental authorities have the power to enforce compliance with
these regulations, and violations may result in the payment of fines or the
entry of injunctions, or both. Furthermore, the requirements of such
environmental laws and enforcement policies have generally become stricter in
recent years. The Company currently does not believe it will be required under
existing environmental laws and enforcement policies to expend amounts which
will have a material adverse effect on its operating results or financial
condition. The Company is unable to make any assurance, however, that the
ultimate cost of compliance with environmental laws and enforcement policies
will not have a material adverse effect on the operating results or financial
condition of the Company.
EMPLOYEES
As of December 31, 1996, the Company employed 2,251 full-time
employees involved in the following functional areas: manufacturing, 2,006;
transportation, 55; sales, 30; field service, 47; administration and clerical,
94; and management, 19. The Company's manufacturing operations require primarily
semi-skilled labor, and the personnel levels fluctuate with seasonal changes in
production volume. The Company believes that it has a good relationship with its
employees. None of the Company's employees is covered by a collective bargaining
agreement, and the Company has never experienced any work stoppage.
12
<PAGE> 13
TRADEMARKS
The Company has applied with the United States Patent and
Trademark office to register "Belmont Homes," and "Spirit Homes," as trademarks.
Management believes that the "Belmont Homes" and "Spirit Homes" marks have
significant value and are important factors in marketing the Company's products.
INSURANCE
The Company maintains general liability and property
insurance. The costs of insurance coverage vary generally, and the availability
of certain coverage has fluctuated in recent years. While the Company believes
that its present insurance coverage is adequate for its current operations,
there can be no assurance that the coverage is sufficient for all future claims
or will continue to be available in adequate amounts or at reasonable rates. The
Company also posts bonds in those states which require manufactured home
producers to post such bonds to ensure satisfaction of consumer warranty claims.
Additionally, the Company sponsors a self-funded group medical plan for its
employees, which plan is administered by a third party. The plan has obtained
reinsurance coverage which limits the Company's liability thereunder.
ITEM 2. PROPERTIES
The Company's facilities are described in Item 1 under the
caption "Manufacturing Operations - Facilities." The Company owns all of its
properties except for the production facility in Conway, Arkansas, which is
leased on a month-to-month basis. The Company believes that its facilities are
adequate for its current production needs and that adequate space for expansion
is available should additional production capacity be required.
ITEM 3. LEGAL PROCEEDINGS
The Company is, from time to time, a party to litigation which
arises in the normal course of its business. The Company does not have pending
any litigation that, separately or in the aggregate, is expected to have a
material adverse effect on the operating results or financial condition of the
Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
13
<PAGE> 14
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Common Stock is quoted on the Nasdaq National Market
("Nasdaq") under the symbol BHIX. The following table sets forth the range of
high and low sales prices on Nasdaq for the two most recent fiscal years, as
reported by Nasdaq:
<TABLE>
<CAPTION>
1995 High(1) Low (1)
---- ------- -------
<S> <C> <C>
Second Quarter............................ $ 6.92 $ 6.00
Third Quarter............................. 10.17 6.50
Fourth Quarter............................ 13.33 9.33
1996
----
First Quarter............................. $12.33 $10.25
Second Quarter............................ 15.83 11.83
Third Quarter............................. 17.42 12.08
Fourth Quarter............................ 18.67 8.06
1997
----
First Quarter (through March 25, 1997).... $10.75 $ 7.62
</TABLE>
- -----------------------
(1) High and low sales prices have been adjusted to reflect a three-for-two
stock split distributed to the Company's shareholders on November 1,
1996.
The high and low sale prices shown above reflect the fact that
the Company closed its initial public offering on June 8, 1995. As a result,
high and low sales prices are not given for the first quarter of 1995. As of
March 25, 1997, there were approximately 108 record holders of the Company's
Common Stock.
The Company historically has retained and currently intends to
retain all earnings to finance the development and expansion of its operations
and, therefore, does not anticipate paying cash dividends or making any other
distributions on its shares of its common stock in the foreseeable future.
Furthermore, the Company's credit facilities contain restrictions on the
Company's ability to pay dividends. The Company's future dividend policy will be
determined by its Board of Directors on the basis of various factors, including
the Company's results of operations, financial condition, business
opportunities, capital requirements and such other factors as the Board of
Directors may deem relevant.
In connection with the Company's acquisition of Bellcrest, the
Company issued to a former shareholder of Bellcrest warrants to purchase 75,000
shares of the Company's common stock for approximately $14.66 per share (the
"Warrant"). The Warrant contains customary antidilution provisions, expires on
October 25, 2001, and is subject to the terms of the Registration Rights
Agreement dated October 25, 1996, between the Company and the holder of the
Warrant. The Warrant was issued by the Company in reliance upon Section 4(2) of
the Securities Act of 1933, as amended.
14
<PAGE> 15
<TABLE>
<CAPTION>
ITEM 6. SELECTED FINANCIAL DATA
Predecessor (1)
---------------------------
Period From
-----------------------
Year Ended Jan 1 to Jun 1 to Pro -------------------------
December 31, May 31, Dec 31, Forma Year Ended December 31,
--------------------------------------------------------------------------------------------------------------
(in thousands, except
per share date) 1992 1993 1993 1993 1994 1995 1996
-------------------------------------------------------------------------------------------------------------
INCOME DATA:
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales $41,441 $26,639 $44,125 $70,765 $107,423 $150,576 $234,050
Cost of sales 35,869 22,941 37,027 59,988 89,902 127,165 197,801
-------------------------------------------------------------------------------------------------------------
Gross profit 5,572 3,698 7,098 10,777 17,521 23,411 36,249
Selling, general
and
administrative
expenses 2,198 1,593 2,710 4,458 6,731 9,333 17,032
-------------------------------------------------------------------------------------------------------------
Income from
operations 3,374 2,105 4,388 6,319 10,790 14,078 19,217
Other income
(expense),
net (104) 34 (637) (1,014) (1,062) (314) 420
Income taxes -- -- 1,430 1,996 3,349 5,154 7,524
-------------------------------------------------------------------------------------------------------------
Net income 3,270 2,139 2,321 3,309 6,379 8,610 12,113
Income tax
adjustment 1,242 789 -- -- -- -- --
------------------------------------
Net income,
adjusted for
income taxes $ 2,028 $ 1,350 -- -- -- -- --
====================================
Preferred stock
dividends (43) (81) (81) (28) --
Net income
applicable
to common
stock 2,278 3,228 6,298 8,582 12,113
==========================================================================
Net income per
common share $0.43 $0.61 $1.20 $1.23 $1.29
--------------------------------------------------------------------------
Weighted average
common shares
outstanding 5,250 5,250 5,250 6,963 9,426
--------------------------------------------------------------------------
</TABLE>
15
<PAGE> 16
<TABLE>
<CAPTION>
Predecessor (1)
---------------
Year Ended
December 31,
-----------------------------------------------------------------------------------
1992 1993 1994 1995 1996
-----------------------------------------------------------------------------------
OPERATING DATA:
<S> <C> <C> <C> <C> <C>
Net sales per home sold $15,009 $17,085 $17,709 $19,209 $21,080
Homes sold:
Single section 2,388 3,370 5,042 6,504 8,233
Double-section 373 772 1,024 1,335 2,870
-----------------------------------------------------------------------------------
Total 2,761 4,142 6,066 7,839 11,103
-----------------------------------------------------------------------------------
Percent double-section 13.5% 18.6% 16.8% 17.0% 25.8%
-----------------------------------------------------------------------------------
Manufacturing facilities 1 3 3 7 11
BALANCE SHEET DATA:
Total assets 7,149 17,040 23,096 50,068 79,355
Long-term debt 1,343 10,878 9,850 6,919 1,303
Shareholders' equity
(deficit) 4,079 (1,072) 5,307 29,048 53,847
</TABLE>
- -----------------
(1) Historical data of the Predecessor prior to the Predecessor
Acquisition. See note one of the Notes to Consolidated Financial
Statements.
16
<PAGE> 17
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company achieved record sales and profits in 1996 due to
management's plant expansion strategy, a growing manufactured housing industry
and the acquisition of Bellcrest Homes, Inc. during the fourth quarter. Net
sales increased 55% to $234.1 million from $150.6 million last year, following a
40% increase in 1995. Net income increased 41% to $12.1 million compared to $8.6
million in 1995.
The manufactured housing market historically has been highly
cyclical and seasonal and is influenced by many of the same national and
regional economic and demographic factors which affect the overall housing
market, including availability of financing, regional employment trends,
consumer confidence and availability of alternative housing. Management believes
long-term industry growth is, and will continue to be, most affected by the
affordability of manufactured housing relative to site-built housing. According
to MHI, industry shipments grew 7% to 363,411 homes in 1996, the fifth
consecutive year of growth. Industry shipments increased 12% in 1995 and 20% in
1994. The Company's shipments continued to exceed the industry, increasing 42%
to 11,103 homes in 1996; following gains of 29% in 1995 and 46% in 1994.
However, monthly industry shipments declined 5.5% in November 1996 and 4.5% in
December 1996 compared to same month sales in 1995. The November 1996 decline
was the first monthly decline since December 1991. This decline in fourth
quarter shipments represents a return to the seasonality historically present
in the manufactured housing industry. The Company expects that this seasonality
will be present in the first and fourth quarters of 1997.
During the fourth quarter of 1996, although the Company's
shipment of homes increased 5% to 2,905 homes (primarily as a result of the
Company's acquisition of Bellcrest in October 1996 and its higher mix of
multi-section homes), when compared to sales of 2,766 homes in the fourth
quarter of 1995, sales of the Company's single-section homes decreased 12.5%
during the fourth quarter of 1996 to 2,000 homes, when compared to sales of
2,287 single-section homes in the fourth quarter of 1995.
Although management believes that the current level of
industry shipments is sustainable based on continued favorable economic and
demographic factors, it also believes that industry conditions have recently
become significantly more competitive and seasonal. Management of the Company
believes that this increased competition is primarily the result of the
increasing number of manufacturers and plants operating in the industry,
together with a related increase in the number of independent and other retail
dealers operating in the Company's territory. The return of seasonality is
consistent with historical trends present in the industry. Management also
believes, based upon recent trends, that the multi-section segment of the
industry has become more competitive among manufacturers and more attractive to
purchasers of manufactured housing. Management believes that this increased
competition and return to seasonality could adversely effect the Company's
future sales and results of operations. See "Business - Industry Overview."
During the fourth quarter of 1996 the Company acquired
Bellcrest, a manufactured housing company headquartered in Millen, Georgia for
$9.5 million in cash and $3.5 million in potential incentive payments based on
future operating criteria. In the fourth quarter of 1995, the Company acquired
Spirit Homes, Inc. a manufactured housing company in Conway, Arkansas for $9.8
million in cash and notes.
17
<PAGE> 18
The following table sets forth information derived from the
Company's historical financial statements.
<TABLE>
<CAPTION>
1994 1995 1996
------ ------ ------
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Cost of sales 83.7 84.5 84.5
----- ----- -----
Gross profit 16.3 15.5 15.5
Selling, general and administrative 6.3 6.2 7.3
----- ----- -----
Income from operations 10.0 9.3 8.2
Other income (expense), net (1.0) (.2) .2
Income taxes 3.1 3.4 3.2
----- ----- -----
Net income 5.9% 5.7% 5.2%
----- ----- -----
</TABLE>
1996 COMPARED TO 1995
NET SALES. Net sales increased 55.4% in 1996 to $234.1 million from
$150.6 million in 1995, on a volume increase of 41.6%. Homes sold increased
3,264 units to 11,103 in 1996 from 7,839 in 1995. The majority of this volume
increase results from Spirit Homes which opened two new plants during the second
half of 1996. In addition, approximately 14% or 458 homes are from the
acquisition of Bellcrest during the fourth quarter of 1996. Multi-sectional
homes increased to 25.8% of homes sold in 1996 from 17% in 1995. The average
price of a multi-section home in 1996 was $30,687 compared with $30,583 in the
prior year. Single-section homes increased 5.1% in average price to $17,731 in
1996 from $16,874 in 1995 due to price and mix changes.
COST OF SALES. Cost of sales includes costs of raw materials, direct
labor, service and warranty expense, insurance and payroll taxes. Cost of sales
increased 55.5% to $197.8 million in the current year from $127.2 million in
1995. Cost of raw materials and direct labor, which are two of the largest
components of cost of sales, increased in 1996 to $148.2 million and $26.9
million, respectively, from $98.6 million and $16.5 million in 1995. As a
percentage of net sales, cost of sales was 84.5% for both 1996 and 1995.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased 82.8% to $17 million in 1996 from $9.3
million in the prior year, primarily as a result of higher dealer promotional
costs, sales commissions and salaries supporting the higher sales. Dealer
promotional costs increased to $6.6 million or 2.8% of net sales in 1996 from
$2.6 million or 1.7% in 1995. Selling, general and administrative expense was
7.3% of net sales in 1996 compared to 6.2% in the prior year. The Company
believes its selling and administrative expense as a percentage of net sales
will increase in the future due primarily to increased dealer costs as a result
of an increase in the number of dealers and manufacturers in its market
territory. Selling expenses include commissions, advertising expenses, salaries
for sales support personnel and sales incentives. General and administrative
expenses include administrative salaries, bonuses, insurance costs,
professional fees and goodwill amortization.
INTEREST EXPENSE. Interest expense declined to $285 thousand in 1996
from $825 thousand in 1995 due primarily to the effect of debt reduction from
the use of proceeds of the Company's secondary sale of stock in January 1996.
18
<PAGE> 19
1995 COMPARED TO 1994
NET SALES. Net sales increased 40.2% in 1995 to $150.6 million from
$107.4 million in 1994, on a volume increase of 29.2%. Homes sold increased
1,773 units to 7,839 in 1995 from 6,066 in 1994. This volume increase results
from the opening in March 1995 of the Company's fourth and largest plant at its
Belmont cluster, the addition of a fifth plant purchased in August 1995 in
Clarksdale, Mississippi, and the acquisition of Spirit Homes whose sales, from
acquisition in October 1995, of 650 homes represent 37% of the total 1995 volume
increase. The average price of a single-section home increased 8.3% to $16,874
in 1995 from $15,575 in the prior year while the average price of a double
section home increased 8.4% to $30,583 from $28,218 in 1994. These increases in
average price result from both price and mix changes, including the sale of
higher priced vinyl siding and Wind Zone homes in 1995 not available in 1994.
COST OF SALES. Cost of sales increased 41.4% to $127.2 million in
1995 from $89.9 in 1994. Cost of raw materials and direct labor, which are two
of the largest components of cost of sales, increased in 1995 to $98.6 million
and $16.2 million, respectively, from $71.2 million and $10.7 million in 1994.
As a percentage of net sales, cost of sales for 1995 increased to 84.5% from
83.5% due primarily to the higher manufacturing costs for Spirit Homes.
Additionally, slightly higher manufacturing costs were incurred during 1995 as a
result of the start up of two plants.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased 38.7% to $9.3 million in 1995 from $6.7
million in 1994, primarily as a result of higher sales commissions and dealer
rebates resulting from increased sales. Selling, general and administrative
expense was 6.2% of net sales in 1995 compared to 6.3% in 1994.
INTEREST EXPENSE. Interest expense declined to $825 thousand in 1995
from $1.2 million in 1994 primarily due to the effect of debt reduction from the
use of proceeds of the Company's initial public stock offering in June 1995.
LIQUIDITY AND CAPITAL RESOURCES
Historically the Company has financed its operations and capital
requirements through debt borrowings and internally generated funds. Capital
requirements have arisen primarily in connection with the expansion of
production capacity and the increased working capital needs that have
accompanied sales growth. In June 1995 the Company raised approximately $15.3
million in net cash proceeds from the initial sale of stock to the public. The
net proceeds were used to repay all, then existing, outstanding long-term debt
and to redeem all outstanding preferred stock including preferred stock
dividends. In October 1995, the Company acquired all of the outstanding stock of
Spirit for $2.4 million in cash, the issuance of $7.4 million of notes to the
former shareholders and the assumption of certain indebtedness including $3
million for an Industrial Development Bond issue for the construction of two new
plants. In January 1996, the Company raised approximately $11.7 million in net
cash proceeds from a secondary public offering of its stock and used $10.4
million to retire the Spirit notes and bond. In October 1996, the Company
acquired all of the stock of Bellcrest for $9.5 million in cash at closing and
$3.5 million in potential incentive payments based on future performance
criteria. The Company financed this purchase through the use of existing cash
resources including the borrowing of $5 million under its principal bank credit
line.
Net cash provided by operating activities increased to $10.7 million
in 1996 from $8.5 million in 1995 and $6.2 million in 1994. Accounts receivable
are funded by approved dealer floor-plan financing and usually are collected
within 15 days. All homes are manufactured against orders, and, currently no
homes
19
<PAGE> 20
are produced for inventory. Changes in working capital accounts relate primarily
to the increases in sales volume. The change in accounts payable relates
primarily to the timing of payments to vendors.
Net cash used by investing activities was $17.6 million in 1996,
compared to $13.1 million in 1995 and $1.0 million in 1994. In 1996, an
additional $1.5 million (net) was invested in certificates of deposit maturing
within one year compared to $6.7 million (net) in 1995. Net capital
expenditures were $5.9 million in 1996, $5.4 million in 1995 and $1.3 million
in 1994. Net capital expenditures relate primarily to plant expansion including
two new plants opened by Spirit Homes in 1996 and two plants added to the
Belmont cluster in 1995. In addition, during 1996 the Company utilized $2.5
million for investment in two raw material supply joint ventures which will
produce passage doors, paneling and cabinet doors.
The Company's principal credit line is a $10 million facility that
expires in May 1998. Borrowings bear interest at the bank's prime rate or LIBOR
plus 2.65% and are secured by substantially all the assets of the Company. At
December 31, 1996, the Company had outstanding borrowings under this line of
$5 million which was borrowed to purchase Bellcrest.
The Company believes that existing cash balances, cash flow from
operations and the additional availability under its lines of credit will be
adequate to fund the operations and expansion plans of the Company through 1997.
The Company plans to continue its current growth strategy of
acquiring or constructing new manufacturing facilities when necessitated by
consumer demand. In order to provide any additional funds necessary for the
continued pursuit of its growth strategy, the Company may incur, from time to
time, additional short- and long-term indebtedness, and may issue, in public or
private transactions, equity and debt securities, the availability and terms of
which will depend upon market and other conditions. Although management believes
that the combinations of these sources of funds will be sufficient to meet the
Company's liquidity needs and its growth plans, there can be no assurance that
such additional financing will be available on terms acceptable to the Company.
There are no new accounting pronouncements the adoption of which
would have a material effect on the Company's financial condition or results of
operations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Appendix F.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
20
<PAGE> 21
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
This information is incorporated by reference from the Company's
Proxy Statement relating to the Annual Meeting of Shareholders to be held on
June 3, 1997.
ITEM 11. EXECUTIVE COMPENSATION
This information is incorporated by reference from the Company's
Proxy Statement relating to the Annual Meeting of Shareholders to be held on
June 3, 1997, except that the Comparative Performance Graph and the Compensation
Committee Report on Executive Compensation included in the Proxy Statement are
expressly not incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
This information is incorporated by reference to the Company's Proxy
Statement relating to the Annual Meeting of Shareholders to be held on June 3,
1997.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
This information is incorporated by reference to the Company's Proxy
Statement relating to the Annual Meeting of Shareholders to be held on June 3,
1997.
21
<PAGE> 22
PART IV
ITEM 14. EXHIBITS, CONSOLIDATED FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
Index to Consolidated Financial Statements, Financial Statement
Schedules and Exhibits
(1) Consolidated Financial Statements and Report of Independent
Certified Public Accountants: See Item 8 herein.
The Consolidated Financial Statements of the Company
required to be included in Part II, Item 8, are indexed on
Page F-1 and submitted as a separate section of this report.
(2) All schedules, other than Schedule II - Valuation and
Qualifying Accounts, are omitted because they are not
applicable or not required, or because the required
information is included in the consolidated financial
statements or notes thereto.
(3) Exhibits
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
<TABLE>
<S> <C>
3.1 -- Restated Articles of Incorporation of the Registrant (1)
3.2 -- Bylaws of the Registrant (1)
4.1 -- Article 5 of the Restated Articles of Incorporation of the Registrant (included in Exhibit 3.1)(1)
4.2 -- Specimen of Common Stock certificate (1)
10.1 -- Registrant's 1994 Incentive Stock Plan (1)
10.2 -- Registrant's 1994 Non-Qualified Stock Option Plan for Non-Employee Directors (1)
10.3 -- Manufacturer Agreement, dated March 21, 1988, between Registrant and Ford Motor Credit Company
(successor to Meritor Creditor Corporation) (1)
10.4 -- Floorplan Repurchase Agreement, dated April 3, 1990, between Registrant and Bombardier Capital,
Inc. (1)
10.5 -- Inventory Repurchase Agreement, dated September 30, 1993, between Registrant and NationsCredit
Commercial Corporation (1)
10.6 -- Pre-Sold Floorplan Financing Agreement, dated January 12, 1994, between Registrant and Green Tree
Financial Corporation (1)
10.7 -- Floorplan Repurchase Agreement, dated October 18, 1994, between Registrant and ITT Commercial
Finance Corp. (1)
10.8 -- Manufacturer's Financing Agreement, dated March 8, 1994, between Registrant and Deere Credit,
Inc. (1)
10.9 -- Registrant's Form of Manufacturer's Repurchase Agreement (1)
10.10 -- Guaranty of Repurchase Obligations between BHI and Bombardier Capital, Inc. dated June 7, 1990 (1)
10.11 -- $500,000 LINE OF CREDIT, DATED JULY 1, 1994, BETWEEN REGISTRANT AND COLONIAL BANK (1)
10.12 -- Noncompetition Agreement between Registrant and Jerold Kennedy (1)
10.13 -- $2,000,000 Line of Credit, dated January 11, 1995, between Registrant and Colonial Bank (1)
10.14 -- Stock Purchase Agreement, dated as of October 1, 1995, among Registrant and John W. Allison, Milburn
Adams, Wendell R. Kennedy, J.B. Pendergraft, Jimmie Don McKissick, Chuck Heriford and Dale
Hancock (2)
10.15 -- Client Services Agreement, dated February 13, 1995, between Spirit Homes, Inc. and TSC Human
Resources III, Inc. (3)
10.16 -- Pre-Sold Floorplan Financing Agreement, dated January 19, 1994, between Spirit Homes, Inc. and Green
Tree Financial Corporation (3)
</TABLE>
22
<PAGE> 23
<TABLE>
<S> <C>
10.17 -- Stock Floorplan Financing Agreement, dated September 29, 1994, between Spirit Homes, Inc. and Green
Tree Financial Corporation (3)
10.18 -- Manufacturer's Financing Agreement between Spirit Homes, Inc. and Deere Credit, Inc. (3)
10.19 -- Floorplan Repurchase Agreement, dated March 13, 1990, between Spirit Homes, Inc. and Bombardier
Capital, Inc. (3)
10.20 -- Manufacturer Agreement dated July 22, 1992, between Spirit Homes, Inc. and Ford Consumer Finance
Company, Inc. (3)
10.21 -- Floorplan Agreement, dated November 23, 1994, between Spirit Homes, Inc. and ITT Commercial
Finance Corp. (3)
10.22 -- $420,076 Fixed Rate Commercial Promissory Note and Loan and Guaranty Agreement, dated July 14,
1995, between Spirit Homes, Inc. and Boatmen's National Bank of Conway (3)
10.23 -- $10,000,000 Revolving Credit Note, dated November 10, 1995, between Registrant and Bank of
Mississippi (3)
10.24 -- $10,000,000 Loan and Security Agreement, dated November 10, 1995, between Registrant and Bank of
Mississippi (3)
10.25 -- Stock Purchase Agreement dated October 25, 1996, among the Registrant, Bellcrest Holding Co., Inc.,
G. Hiller Spann, Joe. H. Bell, James M. Birdwell and Deroy Dailey, Jr.(4)
10.26 -- Form of Pre-Sold Floorplan Financing Agreement, dated February
10, 1994, by and between Bellcrest Homes, Inc. and Green Tree
Financial Corporation (5)
10.27 -- Form of Floorplan Repurchase Agreement, dated August 10, 1993, by
and between Bellcrest Homes, Inc. and Bombardier Capital
Group (5)
10.28 -- Form of Inventory Repurchase Agreement, dated January 4, 1994, by
and between Bellcrest Homes, Inc. and Nationscredit Commercial
Corporation (5)
10.29 -- Form of Manufacturer Agreement, dated January 16, 1987, by and
between Bellcrest Homes, Inc. and Meritor Credit Corporation (5)
10.30 -- Form of Manufacturer's Financing Agreement, dated June 1, 1994,
by and between Bellcrest Homes, Inc. and Deere Credit, Inc.(5)
10.31 -- Form of Floorplan Agreement, dated April 24, 1992, by and between
Bellcrest Homes, Inc. and ITT Commercial Finance Corp.(5)
10.32 -- Form of Manufacturer Agreement dated January 12, 1987, by and
between Bellcrest Homes, Inc. and General Electric Credit
Corporation(5)
11.1 -- Statement re: computation of per share earnings (5)
21.1 -- Subsidiaries of the Registrant (5)
23.1 -- Consent of KPMG Peat Marwick LLP (5)
27.1 -- Financial Data Schedule (for SEC use only) (5)
</TABLE>
- ----------
(1) Incorporated by reference to the exhibits filed with the Registrant's
Registration Statement on Form S-1, Registration No. 33-87868.
(2) Incorporated by reference to the exhibits filed with the Registrant's
Current Report on Form 8-K, filed October 13, 1995, File No. 0-26142.
(3) Incorporated by reference to the exhibits filed with the Registrant's
Registration Statement on Form S-1, Registration No. 33-80823.
(4) Incorporated by reference to the exhibits filed with the Registrant's
Current Report on Form 8-K, filed November 13, 1996, File No. 0-26142.
(5) Filed herewith.
23
<PAGE> 24
EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
The following is a list of all executive compensation plans and
arrangements filed as exhibits to this Annual Report on Form 10-K:
Exhibit
Number Exhibit
- ------- -------
10.1 Registrant's 1994 Incentive Stock Plan (1)
10.2 Registrant's 1994 Non-Qualified Stock Option Plan for
Non-Employee Directors (1)
- --------------------
(1) Incorporated by reference to exhibits filed with the Registrant's
Registration Statement on Form S-1, Registration No. 33-87868.
(4) Reports on Form 8-K.
On November 13, 1996, the Company filed a Current Report on Form 8-K to
report, pursuant to Item 2, the closing of the Company's acquisition of
Bellcrest and, pursuant to Item 5, that Jerold Kennedy, the President
and Chief Executive Officer of the Company, had been diagnosed with lung
cancer.
24
<PAGE> 25
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.
BELMONT HOMES, INC.
By: /s/ Jerold Kennedy
---------------------------------
Jerold Kennedy
President and
March 27, 1997 Chief Executive Officer
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.
<TABLE>
<CAPTION>
Name Title(s) Date
---- -------- ----
<S> <C> <C>
/s/ A. Douglas Jumper, Sr. Chairman of the Board March 28, 1997
- -------------------------------
A. Douglas Jumper, Sr.
/s/ Jerold Kennedy President and Chief March 28, 1997
- -------------------------------
Jerold Kennedy Executive Officer; Director
(principal executive officer)
/s/ William M. Kunkel Vice President of Finance March 28, 1997
- -------------------------------
William M. Kunkel (principal financial officer
and accounting officer)
/s/ John W. Allison President of Spirit Homes, Inc; March 28, 1997
- -------------------------------
John W. Allison Director
/s/ Thomas D. Keenum, Sr. Secretary, General Counsel; March 28, 1997
- -------------------------------
Thomas D. Keenum, Sr. Director
/s/ Roger D. Moore Director of Sales and Marketing; March 28, 1997
- -------------------------------
Roger D. Moore Director
/s/ Don D. Murphy Director March 28, 1997
- -------------------------------
Don D. Murphy
/s/ J.M. Page Director March 28, 1997
- -------------------------------
J.M. Page
/s/ Hollis Sparks Director March 28, 1997
- -------------------------------
Hollis Sparks
</TABLE>
<PAGE> 26
BELMONT HOMES, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Independent Auditors' Report F-2
Consolidated Balance Sheets as of December 31, 1995 and 1996 F-3
Consolidated Statements of Income for the years ended
December 31, 1994, 1995 and 1996 F-4
Consolidated Statements of Shareholders' Equity for the years ended
December 31, 1994, 1995 and 1996 F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1994, 1995 and 1996 F-6
Notes to Consolidated Financial Statements F-7
</TABLE>
F-1
<PAGE> 27
Independent Auditors' Report
The Board of Directors and Shareholders
Belmont Homes, Inc.:
We have audited the consolidated financial statements of Belmont Homes, Inc. and
subsidiaries as listed in the accompanying index. These consolidated financial
statements are the responsibility of the management of the Company. Our
responsibility is to express an opinion on these consolidated 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 Belmont Homes, Inc.
and subsidiaries as of December 31, 1995 and 1996, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
Jackson, Mississippi /s/ KPMG Peat Marwick LLP
February 21, 1997
F-2
<PAGE> 28
BELMONT HOMES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In Thousands, except for share information)
<TABLE>
<CAPTION>
December 31,
------------
Assets 1995 1996
------ ---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,055 $ 5,070
Certificates of deposit maturing within one year, at cost
which approximates market 6,717 8,243
Accounts receivable 7,302 7,829
Inventories (Note 4) 7,425 13,020
Prepaid expenses and other 1,355 2,661
-------- --------
Total current assets 24,854 36,823
Property, plant and equipment, net (Note 5) 14,812 22,318
Goodwill and other assets, less accumulated amortization
of $855 and $1,359, respectively (Note 3) 10,402 20,214
-------- --------
$ 50,068 $ 79,355
======== ========
Liabilities and Shareholders' Equity
------------------------------------
Current liabilities:
Notes and current portion of long-term debt (Notes 7 and 14) $ 4,600 $ 9,093
Trade accounts payable 3,665 3,461
Accrued expenses and other liabilities (Note 6) 5,552 10,744
-------- --------
Total current liabilities 13,817 23,298
Long-term debt (Notes 7 and 14) 6,919 1,303
Deferred income taxes (Note 8) 284 907
-------- --------
Total liabilities 21,020 25,508
-------- --------
Shareholders' equity (Notes 10, 11 and 14):
Preferred stock of no par value -- --
Common stock of $.10 par value. Authorized 20,000,000 shares;
issued and outstanding 5,455,000 and 9,466,500 shares, respectively 546 947
Additional paid-in capital 15,087 27,372
Retained earnings 16,908 29,021
-------- --------
32,541 57,340
Adjustment to predecessor equity (3,493) (3,493)
-------- --------
Total shareholders' equity 29,048 53,847
-------- --------
Commitments and contingencies (Note 12) $ 50,068 $ 79,355
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 29
BELMONT HOMES, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(In Thousands, except for share information)
<TABLE>
<CAPTION>
Year ended December 31,
--------------------------------------
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Net sales $ 107,423 $ 150,576 $ 234,050
Cost of sales 89,902 127,165 197,801
Gross profit 17,521 23,411 36,249
Selling, general and administrative expenses 6,731 9,333 17,032
------------- ------------ ------------
Income from operations 10,790 14,078 19,217
------------- ------------ ------------
Other expenses (income):
Interest expense (Note 13) 1,185 825 285
Interest income (123) (511) (705)
------------- ------------ ------------
1,062 314 (420)
------------- ------------ ------------
Income before income taxes 9,728 13,764 19,637
Income tax expense (Note 8) 3,349 5,154 7,524
------------- ------------ ------------
Net income 6,379 8,610 12,113
Dividends on preferred stock (81) (28) -
------------- ------------ ------------
Net income applicable to common shares $ 6,298 $ 8,582 $ 12,113
============= ============ ============
Net income per common share $ 1.20 $ 1.23 $ 1.29
============= ============ ===========
Weighted average common shares outstanding 5,250,000 6,963,000 9,426,000
============= ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 30
BELMONT HOMES, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
(In Thousands, except for share information)
<TABLE>
<CAPTION>
Additional Adjustment
Common paid-in Retained to predecessor
stock capital earnings equity Total
------ ---------- -------- -------------- -----
<S> <C> <C> <C> <C> <C>
Balance (deficit) at December 31, 1993 $ 350 $ - $ 2,071 $ (3,493) $ (1,072)
Net income - - 6,379 - 6,379
------- ---------- ---------- ---------- -----------
Balance at December 31, 1994 350 - 8,450 (3,493) 5,307
Initial sale of common stock to
public (Note 14) 196 15,087 - - 15,283
Dividends on preferred stock - - (152) - (152)
Net income - - 8,610 - 8,610
------- ---------- ---------- ---------- -----------
Balance at December 31, 1995 546 15,087 16,908 (3,493) 29,048
Sale of common stock to public
(Note 14) 80 11,645 - - 11,725
Exercise of stock options 6 751 - - 757
Tax benefit from exercise of
stock options - 204 - - 204
Three for two stock split 315 (315) - - -
Net income - - 12,113 - 12,113
------- ---------- ---------- ---------- -----------
Balance at December 31, 1996 $ 947 $ 27,372 $ 29,021 $ (3,493) $ 53,847
======= ========== ========== ========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 31
BELMONT HOMES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In Thousands, except for share information)
<TABLE>
<CAPTION>
Year ended December 31,
--------------------------------------
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 6,379 $ 8,610 $ 12,113
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 892 1,248 1,899
Deferred income taxes (85) (124) (292)
Changes in operating assets and liabilities, net of effect of
acquisitions:
Accounts receivable (207) (2,300) 334
Inventories (328) (1,560) (3,339)
Prepaid expenses and refundable
income taxes (384) 665 (79)
Other assets (147) 165 (101)
Accounts payable (954) 661 (1,680)
Accrued expenses 1,082 1,178 1,806
---------- ---------- -----------
Net cash provided by operating activities 6,248 8,543 10,661
---------- ---------- -----------
Cash flows from investing activities:
Additions to property, plant and equipment (1,335) (5,447) (5,915)
Purchases of certificates of deposit (2,998) (8,717) (16,114)
Maturities of certificates of deposit 3,299 2,000 14,588
Acquisitions, net of cash acquired (Note 3) - (2,377) (8,145)
Investment in and advances to joint ventures - - (2,511)
Cash restricted for construction - 1,548 521
Other 30 (100) -
---------- ---------- -----------
Net cash used by investing activities (1,004) (13,093) (17,576)
---------- ---------- -----------
Cash flows from financing activities:
Proceeds from notes and long-term debt 6,500 - 38
Repayments of notes and long-term debt (7,127) (12,957) (11,394)
Net borrowings on line of credit agreements - - 8,600
Retirement of preferred stock, including dividends - (1,052) -
Preferred and common stock - 15,283 12,686
---------- ---------- -----------
Net cash provided (used) by financing activities (627) 1,274 9,930
---------- ---------- -----------
Net increase (decrease) in cash and cash equivalents 4,617 (3,276) 3,015
Cash and cash equivalents at beginning of year 714 5,331 2,055
---------- ---------- -----------
Cash and cash equivalents at end of year $ 5,331 $ 2,055 $ 5,070
========== ========== ===========
Supplemental disclosure - interest paid $ 726 $ 1,125 $ 344
========== ========== ===========
Supplemental disclosure - income taxes paid $ 3,802 $ 4,150 $ 6,529
========== ========== ===========
Supplemental disclosure - non cash financing
transactions (See note 3).
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 32
BELMONT HOMES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In Thousands, except for share information)
(1) Basis of Presentation
Belmont Homes, Inc. ("Belmont"), incorporated in Mississippi in June 1993,
is a producer of a variety of single and double section manufactured homes which
are marketed primarily in the southern United States. Belmont and its
wholly-owned subsidiaries, Spirit Homes, Inc., Bellcrest Homes, Inc. and Delta
Homes, Inc. (collectively, the "Company") operate five production facilities in
Mississippi, four production facilities in Arkansas and two production
facilities in Georgia.
The consolidated financial statements include the accounts of Belmont
Homes, Inc. and its wholly-owned subsidiaries. All significant intercompany
transactions and balances have been eliminated in consolidation. These financial
statements have been prepared in conformity with generally accepted accounting
principles. Accordingly, management has made estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Material estimates that are particularly susceptible to change in the near-term
relate to determination of estimated costs for warranty claims and promotional
programs. Actual results could differ significantly from those estimates.
(2) Summary of Significant Accounting Policies
(a) Cash Equivalents
Cash and cash equivalents includes demand deposits, savings
accounts and certificates of deposit with an original maturity of
three months or less.
(b) Accounts Receivable
The Company's net sales and related accounts receivable arise
from customers in the manufactured housing industry in the southern
United States and are subject to credit risk inherent in the industry.
Credit is extended in the normal course of business under normal trade
terms. The Company has established an allowance of $37 at December 31,
1995 and 1996, based upon the expected collectibility of its
receivables. Homes are manufactured to dealer orders and a sale is
recognized upon delivery of the home and the transfer of title.
F-7
<PAGE> 33
BELMONT HOMES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(c) Inventories
Inventories are stated at the lower of cost (first-in, first-out)
or market (net realizable value).
(d) Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation of
plant and equipment is calculated using the straight-line method over
the estimated useful lives of the assets.
(e) Goodwill
Goodwill represents the excess of the purchase price over the
fair value of the net assets acquired and is being amortized over
twenty-five years using the straight-line method.
If facts and circumstances indicate that goodwill may be
impaired, an assessment will be made by the Company to determine if a
writedown is required or if its estimated useful life should be
revised. The assessment will be based primarily on forecasted
operating income, including interest expense, depreciation and
amortization other than goodwill; supplemented if necessary by an
independent appraisal of fair value. The Company believes that no
impairment of goodwill has occurred and that no revision of its
estimated useful life is required.
(f) Product Warranties and Volume Incentives
The Company warrants its homes against manufacturing defects for
a period of ninety days for plumbing and electrical components and for
one year on the basic home structure, commencing at the time of sale
by a dealer, and provides an allowance for warranty claims based on
experience and accumulated statistical data. Expenses related to such
claims are accrued currently as operating expenses based on an
estimate of claims to be incurred and the cost of repairs performed.
F-8
<PAGE> 34
BELMONT HOMES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The Company awards volume incentive rebates to dealers using a
predetermined formula applied to certain models of homes purchased
during the rebate period. Rebates are paid semi-annually. Based on
management's estimate of rebates which will be earned during the
rebate period, the Company accrues a promotional allowance for rebates
earned but not paid. Related expenses are accrued currently as
operating expenses based on estimates of revenue and the number of
homes sold.
Management believes the liabilities established for warranty
claims and promotional allowances at December 31, 1996 are adequate to
cover the ultimate related net costs, but the liabilities are
necessarily based on estimates and, accordingly, the amounts
ultimately paid will be more or less than such estimates.
(g) Income Taxes
The Company uses the asset and liability method in accounting for
income taxes. Under the asset and liability method, deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled.
The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the
enactment date. Additionally, recognition is required of deferred tax
liabilities and deferred tax assets for the deferred tax consequences
of differences between the assigned values and the tax bases of the
assets and liabilities recognized in a purchase business acquisition.
The income tax benefit resulting from purchased excess tax basis is
accounted for as a reduction of goodwill in the year realized.
(h) Stock Based Compensation
The Company accounts for its stock option plans in accordance
with the provisions of Statement of Financial Accounting Standards No.
123 ("SFAS 123"), "Accounting for Stock Based Compensation", which
provides an alternative to the Accounting Principles Board's Opinion
No. 25 ("APB 25"), "Accounting for Stock Issued to Employees", and is
effective for the year which began January 1, 1996. As permitted by
SFAS 123, the Company will continue to account for its employee stock
plans in accordance with the provisions of APB 25 and provide expanded
disclosures as required under SFAS 123. Accordingly, SFAS 123 will not
have a significant impact on the Company's financial position or
results of operations.
F-9
<PAGE> 35
BELMONT HOMES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(i) Investment in Joint Ventures
The Company accounts for its investments in joint ventures using
the equity method. Financial results from the joint ventures are
recorded as a component of cost of sales in the accompanying
consolidated financial statements.
(j) Accounting Changes
Effective January 1, 1996, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of." SFAS No. 121 requires that long-lived assets and certain
identifiable intangibles to be held and used by the Company be
reviewed for impairment whenever events or changes in circumstances
indicate that their carrying amount may not be recoverable. This
statement requires that the majority of long-lived assets and certain
identifiable intangibles to be disposed of be reported at the lower of
carrying amount or fair value less cost to sell. Implementation of
this statement did not have a material impact on the Company's
consolidated financial statements.
Effective January 1, 1996 the Company adopted SFAS 123 as
described in (h) above.
(k) Net Income Per Share
Net income per share calculations are based on the weighted
average number of common shares and dilutive common share equivalents
outstanding during each period. All earnings per share data have been
adjusted for the three for two stock split declared on November 1,
1996.
(l) Reclassifications
Certain prior years' amounts have been reclassified to conform to
classifications used in 1996.
F-10
<PAGE> 36
BELMONT HOMES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(3) Acquisitions
On October 24, 1996, in a transaction accounted for using the purchase
method of accounting, the Company completed its purchase of 100% of the
stock of Bellcrest Homes, Inc. ("Bellcrest") through the cash payment of
$9,500.
The effects of the acquisition at the purchase date were as follows:
<TABLE>
<S> <C>
Decrease in cash, net $ 7,145
Increase in other current assets 3,422
Increase in property, plant and equipment 3,525
Increase in goodwill and other assets 6,762
Increase in current liabilities 4,756
Increase in long-term debt and deferred income taxes 1,808
</TABLE>
The following unaudited pro forma data are provided for comparative
purposes and are not necessarily indicative of actual results that would
have been achieved had the acquisition of Bellcrest been consummated at an
earlier date and are not necessarily indicative of future results. Assuming
that the acquisition was consummated on January 1, 1995 and January 1,
1996, respectively, unaudited pro forma net sales, net income and net
income per common share, after giving effect to certain adjustments,
including amortization of goodwill and other assets, increased interest
expense on debt related to the acquisition, increased depreciation expense,
and related income tax effects, for the years ended December 31, 1995 and
1996 follow:
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Net sales $180,093 $265,374
Net income 8,736 12,204
Net income per common share 1.25 1.29
</TABLE>
In the event Bellcrest attains certain stated levels of earnings
before income taxes for the three month period ended December 31, 1996 and
for each of the years ending December 31, 1997 and 1998, the Company is
required to pay the former Bellcrest shareholders additional consideration
in an amount not to exceed $3,500 in the aggregate. Any such additional
amounts paid will be recorded as goodwill in the period earned. Subsequent
to December 31, 1996, the Company paid $1,000, the amount earned and
accrued for 1996, to the former shareholders.
F-11
<PAGE> 37
BELMONT HOMES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
In conjunction with this acquisition, a former Bellcrest shareholder
was issued warrants for the purchase of 75,000 shares of Belmont common
stock. The warrants, which expire in October 2001, are exercisable at
$14.66 per share and their fair value at the issue date was estimated to be
negligible. None of these warrants have been exercised as of December 31,
1996.
In August 1995 Belmont incorporated Delta Homes, Inc., a wholly-owned
subsidiary, and purchased for $450 a production facility in Clarksdale,
Mississippi.
In October 1995 Belmont acquired, in a transaction accounted for using
the purchase method of accounting, all the outstanding common stock of
Spirit Homes, Inc. for $9,500, consisting of cash of $2,450 and debt of
$7,350.
During 1996 the Company acquired a 50% ownership interest in Quality
Housing Supply LLC (Quality), which manufactures gypsum and laminated
wallboard and various exterior and interior home doors. The Company is
entitled to purchase products from Quality and to share in the earnings
(losses) of the operation based on the relative purchases of Quality
product during 1996 and based on a 50/50 split thereafter. Purchases made
by the Company were $2,387 during 1996.
The Company also owns a 33% ownership interest in Ridge Pointe
Manufacturing LLC (Ridge Pointe), which manufactures a variety of cabinet
doors used in the Company's manufactured houses. The Company is entitled to
purchase products from Ridge Pointe, such purchases were not material to
the Company's 1996 consolidated financial statements.
At December 31, 1996, the Company's investment in Quality and Ridge
Pointe was approximately $2,611. Equity in the entities' results of
operations for 1996 was not material.
(4) Inventories
The components of inventories are as follows:
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Raw materials $ 4,670 $ 9,702
Work in process 580 798
Finished homes 2,175 2,520
-------- --------
$ 7,425 $ 13,020
======== ========
</TABLE>
F-12
<PAGE> 38
BELMONT HOMES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(5) Property, Plant and Equipment
The components of property, plant and equipment are as follows:
<TABLE>
<CAPTION>
Estimated
useful life 1995 1996
----------- ---- ----
<S> <C> <C> <C>
Land - $ 873 $ 1,445
Land improvements 15 years 1,211 1,948
Buildings 40 years 6,448 11,798
Machinery, equipment and tools 3 - 7 years 2,986 7,683
Furniture, fixtures and equipment 3 - 7 years 445 708
Automotive equipment 5 years 1,097 1,466
Construction in progress - 2,710 -
Cash restricted for construction 521 -
------- -------
16,291 25,048
Less accumulated depreciation (1,479) (2,730)
------- -------
$14,812 $22,318
======= =======
</TABLE>
(6) Accrued Expenses
Accrued expenses and other liabilities consist of the following:
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Warranty $ 1,465 $ 3,566
Promotional allowance 1,377 2,916
Salaries and estimated bonuses 1,057 1,561
Payable to former Bellcrest Homes, Inc. shareholders (note 3) -- 1,000
Income taxes 609 718
Other 1,044 983
------- -------
$ 5,552 $10,744
======= =======
</TABLE>
F-13
<PAGE> 39
BELMONT HOMES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(7) Notes and Long-Term Debt
Notes and long-term debt consist of the following:
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
(a) 9.25% note payable to bank, due April 1997 $ 170 $ 142
(b) 9.25% note payable to bank, due in monthly instalments
through January 1999 406 367
(c) 6% shareholder note, repaid in 1996 525 -
(d) Notes liquidated in February 1996 with proceeds of secondary
stock offering:
- 6% acquisition notes to former Spirit Homes, Inc.
shareholders 7,350 -
- Variable/Fixed Rate Industrial Development Revenue Bonds 3,000 -
(e) Note payable to bank at prime plus .25%, due in monthly
instalments through March 2006 - 1,065
(f) Amounts due under various line of credit agreements - 8,600
(g) Amounts due under various capital leases 68 222
------- -------
Total notes and long-term debt 11,519 10,396
Less: current portion 4,600 9,093
------- -------
Long-term debt $ 6,919 $ 1,303
======= =======
</TABLE>
The Company has various lines of credit with banks totaling $15,000
which expire at various dates through May 10, 1998. At December 31, 1996
the Company had outstanding letters of credit of $275 under one credit line
issued to satisfy state bonding regulations for service warranty. The
Company's principal credit line, a $10,000 facility, for which there was
$5,000 outstanding at December 31, 1996, bears interest at the bank's prime
rate or LIBOR plus 2.65%. Borrowings under the line are secured by
substantially all of the assets of Belmont. Restrictive covenants require
the maintenance of amounts and ratios of tangible net worth and working
capital.
F-14
<PAGE> 40
BELMONT HOMES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(8) Income Taxes
A reconciliation of actual income tax expense to the computed
"expected" tax expense follows:
<TABLE>
<CAPTION>
1994 1995 1996
-------------------- ------------------- --------------------
Percentage Percentage Percentage
of pre-tax of pre-tax of pre-tax
Amount income Amount income Amount income
------ ---------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
"Expected" tax expense computed
at normal U. S. Federal
corporate tax rate $3,308 34.0% $4,679 34.0% $6,873 35.0%
State income taxes, net of
Federal benefit 271 2.8 416 3.0 687 3.5
State job credits (341) (3.5) (344) (2.5) (471) (2.4)
Other 111 1.1 403 3.0 435 2.2
------ ---- ------ ---- ------ ----
Actual tax expense $3,349 34.4% $5,154 37.5% $7,524 38.3%
====== ==== ====== ==== ====== ====
</TABLE>
Components of income tax expense (benefit) are as follows:
<TABLE>
<CAPTION>
Current Deferred Total
------- -------- -----
<S> <C> <C> <C>
December 31, 1994:
Federal $ 3,275 $ 5 $ 3,280
State 159 (90) 69
-------- ------- ---------
$ 3,434 $ (85) $ 3,349
======== ======= =========
December 31, 1995:
Federal $ 4,910 $ (43) $ 4,867
State 368 (81) 287
-------- ------- ---------
$ 5,278 $ (124) $ 5,154
======== ======= =========
December 31, 1996:
Federal $ 7,040 $ (102) $ 6,938
State 776 (190) 586
-------- ------- ---------
$ 7,816 $ (292) $ 7,524
======== ======= =========
</TABLE>
F-15
<PAGE> 41
BELMONT HOMES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities are presented below:
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Deferred tax assets:
Accounts receivable, due to allowance
for doubtful accounts $ 14 $ 14
Inventories, due to additional costs inventoried
for tax purposes 82 212
Accrued expenses, due to the timing of deduction 546 1,274
State jobs credit carryforward 91 385
Plant, equipment and other assets, due to different tax
basis and depreciation and amortization methods 100 -
-------- --------
Gross deferred tax assets 833 1,885
-------- --------
Deferred tax liabilities:
Goodwill, due to different amortization period (384) (534)
Plant, equipment and other assets, due to different tax
basis and depreciation and amortization methods - (401)
Other, net - (38)
-------- --------
Gross deferred tax liabilities (384) (973)
-------- --------
Net deferred tax asset $ 449 $ 912
======== ========
</TABLE>
The significant components of deferred income tax expense attributable
to income from continuing operations for the years ended December 31, 1995
and 1996 are as follows:
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Increase in net deferred tax asset (exclusive of
the effect of other components listed below) $ (319) $ (463)
Effect of acquisitions:
Spirit Homes, Inc. 195 -
Bellcrest Homes, Inc. - 171
-------- --------
Deferred tax expense $ (124) $ (292)
======== ========
</TABLE>
The state jobs credit carryforward expires on December 31, 1999.
The Company has determined, based on the Company's history of
profitable operations and expectations for the future, that the deferred
tax assets will more likely than not be fully realized and that no
valuation allowance was necessary at December 31, 1995 or 1996.
F-16
<PAGE> 42
BELMONT HOMES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(9) Employee Benefit Plans
Group Medical Plan:
The Company has a self-funded group medical plan which is administered
by a third party administrator. The Plan has reinsurance coverage limiting
its liability for any individual employee loss to $15, with a cap of $348
in aggregate losses in any one year. The cost of this plan to the Company
was $453, $688 and $1,090 for the years ended December 31, 1994, 1995 and
1996, respectively.
401(K) Tax-Deferred Savings Plan:
Participants, full time employees with at least six months service,
may elect to contribute up to 15% of their annual compensation to the plan.
The Company may make discretionary matching contributions, which
approximated $167, $146 and $135 for the years ended December 31, 1994,
1995 and 1996, respectively.
(10) Stock Plans
Incentive Stock Plan:
The Company has reserved 600,000 shares of Common Stock for issuance
pursuant to incentive or non-qualified stock options to be granted under
the Belmont Homes, Inc. 1994 Incentive Stock Plan (the "Incentive Plan").
The compensation committee appointed by the board of directors may grant to
officers, directors and key employees non-transferable options to purchase
shares of common stock for terms not longer than ten years (five years in
the case of incentive stock options granted to an individual who, at the
time of the grant, owns more than 10% of the total combined voting power of
all classes of stock of the Company), at prices to be determined by the
board of directors or the compensation committee, which may not be less
than 100% of the fair market value of the common stock on the date of grant
(110% in the case of an individual who, at the time of the grant of
incentive stock options, owns more than 10% of the total combined voting
power of all classes of stock of the Company), in the case of incentive
stock options under Section 422 of the Internal Revenue Code which may be
granted only to employees, and may not be less than 50% of the fair market
value of the Common Stock on the date of grant in the case of non-statutory
stock options. Options granted under the Incentive Plan may be exercisable
in instalments. Unless terminated earlier, the Incentive Plan will
terminate in 2004. The aggregate fair market value of stock with regard to
which incentive stock options are exercisable by an individual for the
first time during any calendar year may not exceed $100 as of the date of
the most recent grant. The Incentive Plan is administered by the
F-17
<PAGE> 43
BELMONT HOMES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
compensation committee of the board of directors. During the year ended
December 31, 1995, options were granted for 75,000 shares at an option
price of $6 per share, of which 30,000 were vested and exercised in 1996.
The Company granted options in 1996 for an additional 393,000 shares under
this plan at $10.67 per share, 54,000 of which were exercised during 1996.
Non-Employee Director Stock Option Plan:
The Company has adopted the Belmont Homes, Inc. 1994 Non-Qualified
Stock Option Plan for Non-Employee Directors (the "Director Plan"), and has
reserved 75,000 shares for issuance under the plan. The Director Plan
provides for the granting of non-qualified stock options to each director
of the Company who is not also either an employee or officer of the company
("non-employee directors"). The Director Plan authorizes the issuance of up
to 75,000 shares of common stock pursuant to options having an exercise
price equal to the fair market value of the common stock on the date the
options are granted.
The Director Plan contains provisions providing for adjustment of the
number of shares available for option and subject to unexercised options in
the event of stock splits, dividends payable in common stock, business
combinations or certain other events. The board of directors shall have no
authority, discretion or power to select the participants who will receive
options pursuant to the Director Plan, to set the number of shares of
common stock to be covered by each option, to set the exercise price or the
period within which the options may be exercised or to alter any other
terms or conditions specified therein, except as set forth below.
The Director Plan provides for the grant on the first trading date
each year (the "grant date") of options to purchase 1,500 shares to each
non-employee director serving the Company on such date. The board of
directors may revoke, on or prior to each January 1, the next automatic
grant of options otherwise provided for by the Director Plan if no options
have been granted to employees since the preceding January 1 under any
employee stock purchase or option plan that the Company might adopt
hereafter.
Each option shall be exercisable as to one-third of the shares subject
to option beginning two years after the grant date, as to two-thirds of
such shares beginning three years after the grant date and in full
beginning four years after the grant date, and shall expire ten years after
the grant date (the "Option Period"), unless canceled sooner due to
termination of service or death, or unless such option is fully exercised
prior to the end of the Option Period.
F-18
<PAGE> 44
BELMONT HOMES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The Company granted 6,000 options under this plan in 1996 and granted
an additional 6,000 options subsequent to December 31, 1996.
All shares and per share amounts above for both plans are adjusted for
the 3 for 2 stock split in 1996.
Options under both plans are granted at the market price of the shares
on the date of the grants. Additional information follows:
<TABLE>
<CAPTION>
Incentive
stock options Directors plan
------------- --------------
Average Average
Number option price Number option price
of shares per share of shares per share
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, December 31, 1994 - $ - - $ -
Options granted 75,000 6.00 - -
Options exercised - - - -
------- ------ ----- ------
Balance, December 31, 1995 75,000 6.00 - -
Options granted 393,000 10.67 6,000 12.06
Options exercised (84,000) 9.00 - -
Options forfeited (7,500) 10.67 - -
------- ------ ----- ------
Balance, December 31, 1996 376,500 $10.11 6,000 $12.06
======= ====== ===== ======
</TABLE>
The number of shares of common stock, as well as stock option prices,
were adjusted to reflect the three for two stock split.
Under the Incentive Plan and the Director Plan, the Company may grant
options to its employees and directors for a remaining 139,500 and 69,000
shares of common stock, respectively. The exercise price of each option
equals the market price of the Company's stock on the date of grant.
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following
weighted-average assumptions used for grants made during the years ended
December 31, 1995 and 1996, respectively: no dividend yield; expected
volatility of 46 percent for both years, risk-free interest rates of 5.9
and 5.3 percent, and expected option lives of 4 years for both years
presented.
F-19
<PAGE> 45
BELMONT HOMES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
A summary of the status of the Company's stock option plans at
December 31, 1995 and 1996 and changes during the years ended on those
dates is presented below:
<TABLE>
<CAPTION>
Year ended Year ended
December 31, 1995 December 31, 1996
----------------- -----------------
Weighted- Weighted-
average average
Stock Options Shares exercise price Shares exercise price
------------- ------ -------------- ------ --------------
<S> <C> <C> <C> <C>
Outstanding at beginning of year - $ - 75,000 $ 6.00
Granted 75,000 6.00 399,000 10.69
Exercised - - (84,000) 9.00
Forfeited - - (7,500) 10.67
------ ------ ------- -------
Outstanding at end of year 75,000 $ 6.00 382,500 $ 10.15
====== ====== ======= =======
Options exercisable at end of year - 22,800
====== =======
Weighted-average fair value of
options granted during the year $ 2.58 $ 4,49
====== =======
</TABLE>
The following table summarizes information about fixed stock options
for the year ended December 31, 1996:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------- -------------------
Weighted-
Number average Weighted- Number Weighted-
Range of outstanding remaining average exercisable average
exercise prices at 12/31/96 contractual life exercise price at 12/31/96 exercise price
--------------- ----------- ---------------- -------------- ------------ --------------
<S> <C> <C> <C> <C> <C>
$ 6.00 - $ 12.06 382,500 4.1 years $10.15 22,800 $10.67
</TABLE>
The Company applies APB Opinion 25 and related interpretations in
accounting for its plans. Accordingly, no compensation cost has been
recognized for its stock option plans. Had compensation cost been
determined based on the fair value at the grant dates for awards under the
plan consistent with the method of SFAS No. 123, the Company's net income
and income per common share would have been reduced to the pro forma
amounts indicated below for the year ended December 31, 1996. The pro forma
amounts for 1995 are not material.
<TABLE>
<CAPTION>
<S> <C> <C>
Net income As reported $12,113
=======
Pro forma $11,871
=======
Net income per common share As reported $ 1.29
=======
Pro forma $ 1.26
=======
</TABLE>
F-20
<PAGE> 46
BELMONT HOMES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(11) Preferred Stock
The Company's articles of incorporation authorize 5,000,000 shares of
preferred stock. The board of directors has the authority, without any
further vote or action of the shareholders of the Company, to issue shares
of preferred stock in one or more series and to determine the relative
rights and preferences of the shares of any such series.
During the year ended December 31, 1995, 900 outstanding shares were
redeemed at par value plus dividends of $152.
(12) Commitments and Contingencies
It is customary practice for companies in the manufactured home
industry to enter into repurchase agreements with financial institutions
which provide financing to dealers. Generally the agreements provide for
the repurchase of manufactured homes from the financial institutions in the
event of repossession upon dealer's default. The Company's contingent
liability under such agreements was approximately $86,149 at December 31,
1996. There have been no repurchases of homes under these agreements in
1995 and 1996, and there is no accrual for repurchase obligations.
The Company leases delivery trucks from substantially all its drivers
who deliver homes to dealers. Rentals for these trucks are based on a rate
per mile and the leases are cancelable by either party upon thirty days
notice. Rent expense under these leases was approximately $1,982, $2,647
and $3,140 for the years ended December 31, 1994, 1995 and 1996,
respectively.
The Company has pending claims incurred in the normal course of
business which, in the opinion of management, can be disposed of without
material effect on the accompanying consolidated financial statements.
(13) Related Party Transactions
The Company had several notes payable (Note 7) to shareholders and
other related parties. Interest paid and accrued to related parties was
$1,069, $776 and $120 for the years ended December 31, 1994, 1995 and 1996,
respectively.
The Company paid or accrued $200, $690 and $73 in 1994, 1995 and 1996,
respectively, for construction of plant facilities to a company in which a
shareholder and director of the Company is also a shareholder.
F-21
<PAGE> 47
BELMONT HOMES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The Company paid $10, $8 and $12 in 1994, 1995 and 1996, respectively,
for legal services to a law firm in which a shareholder and director of the
Company is a partner.
The Company paid $272, $367 and $250 for the years ended December 31,
1994, 1995 and 1996, respectively, for the purchase of automotive equipment
from a company in which a shareholder and director of the Company is also a
shareholder.
(14) Public Offerings of Securities
In June, 1995 the Company completed an initial public offering of
1,955,000 shares (before stock split) of common stock. The net proceeds of
approximately $15,300 were used to retire debt and preferred stock and for
working capital.
In January, 1996 the Company completed a secondary public offering of
800,000 shares (before stock split) of common stock. The net proceeds of
approximately $11,725 were used to retire debt and for working capital.
Supplemental net income per share for 1995 and 1996, based on net
earnings after adjustment for dividends on preferred stock and the after
tax effect of interest expense on debt repaid with proceeds of the above
offerings, and on the weighted average shares of common stock outstanding
for 1995 and 1996, giving effect to the number of shares sold in the
offerings, the proceeds of which were used to repay such preferred stock
and debt, is as follows assuming the transactions were effective on January
1, 1995:
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Net income, as adjusted $ 9,052 $ 12,160
============== ===============
Net income per share $ 1.05 $ 1.28
============== ===============
Weighted average shares 8,598,000 9,512,000
============== ===============
</TABLE>
(15) Financial Instruments
Statement of Financial Accounting Standards No. 107, "Disclosures
about Fair Value of Financial Instruments," requires that the Company
disclose estimated fair values for its financial instruments (as defined).
The Company's financial instruments principally consist of cash and cash
equivalents, certificates of deposit, short-term trade receivables and
payables and various debt instruments. Due to their short term nature, the
fair value of
F-22
<PAGE> 48
BELMONT HOMES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
certificates of deposit, trade receivables and payables approximates their
carrying value. The fair value of the various debt instruments has been
estimated using interest rates currently offered to the Company for
borrowings having similar character, collateral and duration. The fair
market value of such financial instruments approximates the Company's
carrying amounts.
(16) Quarterly Information (Unaudited)
(In thousands except per share data)
<TABLE>
<CAPTION>
First Second Third Fourth Total
----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1996
----------------------------
Net sales $51,445 $61,681 $57,512 $63,412 $234,050
Gross profit 8,015 9,464 8,867 9,903 36,249
Income from operations 4,207 5,563 5,230 4,217 19,217
Net income 2,642 3,539 3,355 2,577 12,113
Net income per common share $ 0.29 $ 0.37 $ 0.35 $ 0.28 $ 1.29
Year ended December 31, 1995
----------------------------
Net sales $25,275 $35,259 $36,739 $53,303 $150,576
Gross profit 3,822 5,772 6,004 7,813 23,411
Income from operations 2,153 3,678 3,872 4,375 14,078
Net income 1,266 2,079 2,561 2,704 8,610
Net income per common share $ 0.24 $ 0.34 $ 0.31 $ 0.33 $ 1.23
</TABLE>
F-23
<PAGE> 49
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS (IN THOUSANDS)
BELMONT HOMES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Additions Deductions -
------------------------- accounts
Balance Increase Amounts written off
at attributable charged and Balance at
beginning to to warranty end of
Description of year acquisitions expense expenditures year
----------- --------- ------------ ------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended December 31, 1994 $ 25 $ -- $ -- $ -- $ 25
Year ended December 31, 1995 25 12 -- -- 37
Year ended December 31, 1996 37 -- -- -- 37
Warranty accrual:
Year ended December 31, 1994 $ 354 $ -- $1,469 $1,266 $ 557
Year ended December 31, 1995 557 540 3,151 2,783 1,465
Year ended December 31, 1996 1,465 805 7,506 6,210 3,566
</TABLE>
<PAGE> 50
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
<S> <C>
3.1 -- Restated Articles of Incorporation of the Registrant (1)
3.2 -- Bylaws of the Registrant (1)
4.1 -- Article 5 of the Restated Articles of Incorporation of the Registrant (included in Exhibit 3.1)(1)
4.2 -- Specimen of Common Stock certificate (1)
10.1 -- Registrant's 1994 Incentive Stock Plan (1)
10.2 -- Registrant's 1994 Non-Qualified Stock Option Plan for Non-Employee Directors (1)
10.3 -- Manufacturer Agreement, dated March 21, 1988, between Registrant and Ford Motor Credit Company
(successor to Meritor Creditor Corporation) (1)
10.4 -- Floorplan Repurchase Agreement, dated April 3, 1990, between Registrant and Bombardier Capital,
Inc. (1)
10.5 -- Inventory Repurchase Agreement, dated September 30, 1993, between Registrant and NationsCredit
Commercial Corporation (1)
10.6 -- Pre-Sold Floorplan Financing Agreement, dated January 12, 1994, between Registrant and Green Tree
Financial Corporation (1)
10.7 -- Floorplan Repurchase Agreement, dated October 18, 1994, between Registrant and ITT Commercial
Finance Corp. (1)
10.8 -- Manufacturer's Financing Agreement, dated March 8, 1994, between Registrant and Deere Credit,
Inc. (1)
10.9 -- Registrant's Form of Manufacturer's Repurchase Agreement (1)
10.10 -- Guaranty of Repurchase Obligations between BHI and Bombardier Capital, Inc. dated June 7, 1990 (1)
10.11 -- $500,000 LINE OF CREDIT, DATED JULY 1, 1994, BETWEEN REGISTRANT AND COLONIAL BANK (1)
10.12 -- Noncompetition Agreement between Registrant and Jerold Kennedy (1)
10.13 -- $2,000,000 Line of Credit, dated January 11, 1995, between Registrant and Colonial Bank (1)
10.14 -- Stock Purchase Agreement, dated as of October 1, 1995, among Registrant and John W. Allison, Milburn
Adams, Wendell R. Kennedy, J.B. Pendergraft, Jimmie Don McKissick, Chuck Heriford and Dale
Hancock (2)
10.15 -- Client Services Agreement, dated February 13, 1995, between Spirit Homes, Inc. and TSC Human
Resources III, Inc. (3)
10.16 -- Pre-Sold Floorplan Financing Agreement, dated January 19, 1994, between Spirit Homes, Inc. and Green
Tree Financial Corporation (3)
10.17 -- Stock Floorplan Financing Agreement, dated September 29, 1994, between Spirit Homes, Inc. and Green
Tree Financial Corporation (3)
10.18 -- Manufacturer's Financing Agreement between Spirit Homes, Inc. and Deere Credit, Inc. (3)
10.19 -- Floorplan Repurchase Agreement, dated March 13, 1990, between Spirit Homes, Inc. and Bombardier
Capital, Inc. (3)
10.20 -- Manufacturer Agreement dated July 22, 1992, between Spirit Homes, Inc. and Ford Consumer Finance
Company, Inc. (3)
10.21 -- Floorplan Agreement, dated November 23, 1994, between Spirit Homes, Inc. and ITT Commercial
Finance Corp. (3)
10.22 -- $420,076 Fixed Rate Commercial Promissory Note and Loan and Guaranty Agreement, dated July 14,
1995, between Spirit Homes, Inc. and Boatmen's National Bank of Conway (3)
10.23 -- $10,000,000 Revolving Credit Note, dated November 10, 1995, between Registrant and Bank of
Mississippi (3)
10.24 -- $10,000,000 Loan and Security Agreement, dated November 10, 1995, between Registrant and Bank of
Mississippi (3)
10.25 -- Stock Purchase Agreement dated October 25, 1996, among the Registrant, Bellcrest Holding Co., Inc.,
G. Hiller Spann, Joe. H. Bell, James M. Birdwell and Deroy Dailey, Jr.(4)
10.26 -- Form of Pre-Sold Floorplan Financing Agreement, dated February
10, 1994, by and between Bellcrest Homes, Inc. and Green Tree
Financial Corporation (5)
10.27 -- Form of Floorplan Repurchase Agreement, dated August 10, 1993, by
and between Bellcrest Homes, Inc. and Bombardier Capital
Group (5)
10.28 -- Form of Inventory Repurchase Agreement, dated January 4, 1994, by
and between Bellcrest Homes, Inc. and Nationscredit Commercial
Corporation (5)
10.29 -- Form of Manufacturer Agreement, dated January 16, 1987, by and
between Bellcrest Homes, Inc. and Meritor Credit Corporation (5)
10.30 -- Form of Manufacturer's Financing Agreement, dated June 1, 1994,
by and between Bellcrest Homes, Inc. and Deere Credit, Inc.(5)
10.31 -- Form of Floorplan Agreement, dated April 24, 1992, by and between
Bellcrest Homes, Inc. and ITT Commercial Finance Corp.(5)
10.32 -- Form of Manufacturer Agreement dated January 12, 1987, by and
between Bellcrest Homes, Inc. and General Electric Credit
Corporation(5)
</TABLE>
<PAGE> 51
<TABLE>
<S> <C>
11.1 -- Statement re: computation of per share earnings (5)
21.1 -- Subsidiaries of the Registrant (5)
23.1 -- Consent of KPMG Peat Marwick LLP (5)
27.1 -- Financial Data Schedule (for SEC use only) (5)
</TABLE>
- ----------
(1) Incorporated by reference to the exhibits filed with the Registrant's
Registration Statement on Form S-1, Registration No. 33-87868.
(2) Incorporated by reference to the exhibits filed with the Registrant's
Current Report on Form 8-K, filed October 13, 1995, File No. 0-26142.
(3) Incorporated by reference to the exhibits filed with the Registrant's
Registration Statement on Form S-1, Registration No. 33-80823.
(4) Incorporated by reference to the exhibits filed with the Registrant's
Current Report on Form 8-K, filed November 13, 1996, File No. 0-26142.
(5) Filed herewith.
<PAGE> 1
EXHIBIT 10.26
PRE-SOLD FLOORPLAN FINANCING AGREEMENT
THIS AGREEMENT, dated the 10th day of February, 1994, is by and between
Bellcrest Homes, Inc. (hereinafter referred to as "Manufacturer") and Green Tree
Financial Corporation and its subsidiaries (hereinafter referred to as "Green
Tree").
WHEREAS, Manufacturer is engaged in the manufacturing of manufactured homes
and modular homes which are sold to a network of Manufacturer's dealers
throughout the United States and which manufactured homes and modular homes are
resold to retail customers by dealers; and
WHEREAS, Manufacturer recognizes and acknowledges the value to Manufacturer
of its dealers obtaining an additional source of floorplan financing for the
purchase of Manufacturer's products; and
WHEREAS, Green Tree is in the business of providing floorplan financing for
manufactured home and modular home dealers including the taking and processing
of credit applications, credit qualification procedures and the supervision of
the extension of floorplan credit in the manufactured housing industry;
NOW, THEREFORE, Manufacturer and Green Tree hereby agree as follows:
1. DEFINITIONS. As used herein:
1.1 "Commitment" shall mean any agreement, oral or written, made by
Green Tree's authorized employees to Manufacturer's employees to
reserve and hold for Manufacturer's specific account, for a
specified period of time, a stated amount of funds from the
Dealer's floorplan line to be paid for a given Pre-Sold Unit upon
presentation of Manufacturer's Statement of Origin ("MSO") and
original invoice.
1.2 "Dealer(s)" shall mean manufactured home and modular home dealers
who are customers of Manufacturer to whom funds are loaned by
Green Tree under a Floorplan Financing and Security Agreement
between dealer and Green Tree.
1.3 "Floorplan Finance Transaction" shall mean the debt of any Dealer
to Green Tree incurred for the financing of the purchase of a
Pre-Sold Unit from Manufacturer, together with any security
instrument in the form of a security agreement, chattel mortgage,
trust receipt,
1
<PAGE> 2
conditional sale agreement, or other similar document securing
such debt.
1.4 "Pre-Sold Unit(s)" shall mean only those new manufactured homes
or modular homes (including the contents of said homes)
manufactured by Manufacturer and sold to Dealer for which Green
Tree has received (from Dealer) and approved an application for
credit submitted by a retail customer of Dealer, and said
customer has ordered a particular manufactured home or modular
home for which Dealer seeks floorplan financing.
1.5 "Repurchase Price" of a Pre-Sold Unit, unless defined differently
in subsequent amendments to this Agreement, shall mean the lesser
of: (a) the unpaid principal balance owned by Dealer to Green
Tree, or (b) the amount paid by Green Tree to Manufacturer on
behalf of Dealer, less curtailments due to Green Tree under
paragraph 6.1 below (unless such curtailments have been waived by
Manufacturer in writing).
2. SCOPE OF AGREEMENT.
Any Commitment by Green Tree to finance Dealer's floorplan under this
Agreement shall be strictly limited to Pre-Sold Units.
3. COMMITMENTS.
Manufacturer shall secure from Green Tree a Commitment for each
Pre-Sold Unit to be financed by Green Tree before it is shipped. Green
Tree may, but shall be under no obligation to, finance any Pre-Sold
Unit shipped to Dealer without Manufacturer first obtaining such
Commitment. Manufacturer shall not seek a Commitment for, nor deliver
to Dealer, any Pre-Sold Unit for which it does not have a bona fide
order from a representative of Dealer. Manufacturer shall not forward
to Green Tree its invoice and MSO for payment unless it has received a
Commitment from Green Tree and until the Pre-Sold Unit has been
shipped.
4. PAYMENT OF INVOICE PRICE.
Payments for Pre-Sold Units financed by Green Tree for Dealer under
the terms of this Agreement shall be mailed by Green Tree on the tenth
(10th) calendar day after shipment date of Pre-Sold Unit as indicated
on Manufacturer's invoice. Green Tree
2
<PAGE> 3
must have received and approved Manufacturer's invoice and MSO before
payment shall be due.
5. QUALIFICATION OF DEALERS BY GREEN TREE.
5.1 Dealer shall make application to Green Tree by executing a
Floorplan Financing and Security Agreement and necessary
financing statements.
5.2 Green Tree shall have complete and sole discretion in its
decisions as between itself and Dealer to either extend or
terminate floorplan financing.
5.3 In the event that Manufacturer requests that Green Tree accept a
Dealer that it has previously rejected, Manufacturer (by separate
letter agreement) shall provide Green Tree with an unlimited
guaranty of that Dealer's obligations to Green Tree.
6. TERMS AND COSTS TO DEALER OF AGREEMENT FOR FLOORPLAN FINANCING.
6.1 Curtailments are a part of this Agreement and Green Tree shall
make a reasonable effort to collect same from Dealer in
accordance with the following payment schedule:
<TABLE>
<CAPTION>
Billing Period (Month) % of Original Invoice
--------------------- Price per month
---------------------
<S> <C>
1-3 0%
4-6 3%
7-9 5%
10-11 10%
12 PAID IN FULL
</TABLE>
Green Tree shall be allowed an administrative processing period
of thirty (30) days beyond the periods set forth above (for
mailing of billing statements, collecting funds from Dealer and
processing thereof).
(a) A "Billing Period" shall mean any calendar month.
(b) "Paid in Full" shall mean payment by Dealer to Green Tree of
the entire amount remaining unpaid on any Pre-Sold Unit so
that 100% of the invoice price has been paid.
(c) Curtailments shall be billed by Green Tree to Dealer in
accordance with the
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<PAGE> 4
foregoing payment schedule on a per Pre-Sold Unit basis
commencing on the first day of the month following the
receipt by Green Tree of the original invoice and MSO.
(d) The foregoing payment schedule shall prevail until modified
by Green Tree (to allow for seasonal sales fluctuations or
special programs) with Manufacturer's prior written
authorization.
6.2 Interest and a documentation, handling and inspection ("DHI") fee
per Pre-Sold Unit shall be paid monthly by Dealer.
7. REPURCHASE UPON DEFAULT.
Green Tree shall exercise due diligence in attempting to collect all
amounts due it from Dealers when and as due for all Pre-Sold Units
sold by Manufacturer. In the event Dealer is unable or unwilling to
pay any amount due Green Tree on a given Floorplan Finance
Transaction, such action shall constitute prima facie default on all
Floorplan Finance Transactions between Green Tree and Dealer. If Green
Tree, as a consequence of such default, lawfully repossess Pre-Sold
Units financed by it for the Dealer, Manufacturer will, upon written
demand from Green Tree, repurchase any Pre-Sold Unit covered by this
Agreement when surrendered to Manufacturer by Green Tree at any point
within the continental United States, and will pay Green Tree the
Repurchase Price therefor under the following conditions:
7.1 Manufacturer agrees to take possession of any Pre-Sold Unit
covered by this Agreement within fourteen (14) days after receipt
of Green Tree's written repurchase demand and shall pay the
Repurchase Price to Green Tree on or before the twentieth (20th)
calendar day after receipt of the written demand to repurchase.
If payment is not so made, Manufacturer shall pay all interest
and DHI fees accruing after the twentieth (20th) day at Green
Tree's standard floorplan rate. Green Tree's obligation to
collect curtailments from Dealer shall be fully satisfied at the
time Green Tree demands repurchase hereunder.
7.2 Responsibility for the safety of the Pre-Sold Unit and it
contents shall remain with Green Tree until physical possession
of the Pre-Sold Unit is delivered to Manufacturer or a maximum
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<PAGE> 5
of fourteen (14) days after repurchase notification, whichever
occurs first.
7.3 Subject to limitations in paragraph 7.1 above, Manufacturer may
inspect Pre-Sold Units prior to repurchase. (Reasonable wear
incidental to displaying the Pre-Sold Unit for sale shall not
affect its condition). Green Tree may participate in that
inspection if desired.
7.4 The intent of the inspection referred to in paragraph 7.3 above
shall be to determine any damage to the Pre-Sold Unit or
shortages of any standard or optional items supplied by
Manufacturer. If any standard item(s) supplied by Manufacturer
with such Pre-Sold Unit or any specifically identified optional
accessory item(s) listed in the Manufacturer's invoice and
supplied by Manufacturer with such Pre-Sold Unit is missing, the
Repurchase Price shall be reduced by the cost of replacement of
such item(s).
7.5 Green Tree may demand repurchase for the reason that any Pre-Sold
Unit is not marketable or otherwise salable due to manufacturing
defects or noncompliance with applicable state or federal codes.
Manufacturer shall be allowed a reasonable time to correct any
such defect(s).
7.6 Green Tree may also demand repurchase in the event of breach of
any of the warranties described in paragraph 10.3 herein.
7.7 Upon repurchasing any repossessed Pre-Sold Unit under the terms
of this Agreement, Manufacturer shall be subrogated to a
corresponding portion of the rights of Green Tree against the
Dealer with respect to such repossessed Pre-Sold Units and the
related Floorplan Finance Transaction. Green Tree agrees to
execute and deliver assignment of all such related instruments to
Manufacturer upon request.
7.8 If a Pre-Sold Unit is lawfully repossessed by Green Tree and
Manufacturer is unable or unwilling to take possession of said
Pre-Sold Unit or otherwise to pay the Repurchase Price to Green
Tree upon the appropriate written demand, then Manufacturer
agrees that Green Tree may, at its option, setoff any amount due
and payable by Green Tree to Manufacturer under this Agreement
against Green Tree's
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<PAGE> 6
right to receive money from Manufacturer pursuant to
Manufacturer's repurchase obligation described herein.
8. COSTS OF REPOSSESSION.
In connection with any repossession covered in paragraph 7 hereof,
Manufacturer shall reimburse Green Tree for all reasonable costs of
transportation, security and storage incurred as a result of
Manufacturer's failure to take possession of Pre-Sold Units under
paragraph 7.1 above. Green Tree shall furnish Manufacturer with
receipts supporting any claim for reimbursement.
9. TERMINATION OF MANUFACTURER'S OBLIGATION.
Manufacturer's obligation under this Agreement to repurchase any
Pre-Sold Unit shall terminate as of the 366th day after the date of
delivery of the Pre-Sold Unit by Manufacturer; provided, however, that
Green Tree shall be allowed an additional thirty (30) day period for
administrative processing. During such administrative period,
Manufacturer's repurchase obligation which immediately precedes such
period shall continue in full force and effect. If Green Tree is
unable to obtain possession of any Pre-Sold Unit prior to the
expiration of said 365 days because of pending legal or governmental
proceedings, Manufacturer shall be obligated to repurchase the
Pre-Sold Unit(s) within fifteen (15) days after Green Tree has
obtained legal possession thereof.
10. INDEMNIFICATION AND WARRANTY.
10.1 Green Tree hereby agrees that it will indemnify and hold harmless
Manufacturer, its agents, employees, successors and assigns, and
all other persons, firms or corporations liable or claimed to be
liable through Manufacturer because of any failure by Green Tree
to comply with any state or federal laws.
10.2 Green Tree warrants that:
(a) All requests for floorplan Commitments shall be processed
through and recommended by Manufacturer's various plants.
(b) Reporting of Dealer activity shall be provided by Green Tree
upon written request by Manufacturer, but not more
frequently than every sixty (60) days.
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<PAGE> 7
(c) Original invoices and MSO's shall be held by Green Tree,
unless otherwise provided by law.
(d) Green Tree shall inspect Manufacturer's Pre-Sold Units held
by Dealers at 30-45 day intervals.
10.3 Manufacturer warrants, with respect to each Pre-Sold Unit
shipped, that:
(a) Its invoice represents a bona fide order by Dealer.
(b) The Pre-Sold Unit has been delivered to Dealer.
(c) Title to each Pre-Sold Unit is free and clear of all liens
and encumbrances.
(d) Its invoice is true and accurate and does not include items
not sold with Pre-Sold Unit.
(e) Its invoice complies with the Truth in Invoicing Practices
Statement.
(f) Its invoice compliance with all applicable state and federal
laws.
10.4 Manufacturer and Green Tree hereby mutually agree to notify the
other party immediately of any material problem and/or
sold-out-of-trust situations of which it is aware with respect to
any of Manufacturer's Dealers.
11. TERMINATION.
This Agreement shall continue in full force and effect from the
effective date until terminated by either party by thirty (30) days
written notice sent by registered or certified mail to the address
shown herein. Such termination shall not affect the rights and
obligations of the parties as to any transaction with Dealers or among
the parties entered into prior to the receipt of such notice of
termination.
12. PARTIES BOUND.
This Agreement shall inure to the benefit of and bind the parties
hereto, their agents, employees and successors, but it is not
assignable without the prior written consent of the parties hereto.
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<PAGE> 8
13. ENTIRE AGREEMENT.
This Agreement supersedes any prior agreements between the parties
with respect to floorplan financing provided by Green Tree to Dealers
and constitutes the entire agreement and may not be modified or
amended in any manner, except in writing signed by the parties.
14. HOW NOTICES SENT.
14.1 To Manufacturer at: Bellcrest Homes, Inc.
206 Magnolia Street
P.O. Box 630
Millen, Georgia 30442
14.2 To Green Tree at: Green Tree Financial
Corporation and its
subsidiaries
345 St. Peter Street
St. Paul, Minnesota 55102
Attention: Floorplan
Department Manager
15. GOVERNING LAW.
This Agreement is to be governed by and construed according to the
laws of the State of Minnesota. If any provision of this Agreement is
held to be invalid or to be contrary to the laws of Minnesota or
constituted authority which may apply to this Agreement, such
provision shall be regarded as severable and not deemed to be a part
of this Agreement.
_______________________ GREEN TREE FINANCIAL
(Manufacturer) CORPORATION and its
subsidiaries
BELLCREST HOMES, INC.
By:_______________ By:___________________
Its: President Its:__________________
And:_______________ And:__________________
Its: Vice President Finance Its:__________________
8
<PAGE> 1
EXHIBIT 10.27
BOMBARDIER CAPITAL GROUP FLOORPLAN
REPURCHASE
AGREEMENT
("Agreement")
- --------------------------------------------------------------------------------
1. Recitals. The undersigned intends to sell at wholesale to retail dealers
or distributors various products which now or in the future may exist (the
"Merchandise"). Some dealers or distributors may require financial assistance in
order to make such purchases from us (each a "Buyer"). To induce Bombardier
Capital Group ("BCG") to finance the acquisition of Merchandise by any Buyer and
in consideration of the financing thereby enabling us to sell Merchandise to
such Buyers, we agree that, whenever a Buyer requests the shipment of
Merchandise from us and requests that BCG finance the Merchandise in accordance
with any plan of financing offered by BCG from time to time, we may deliver to
BCG a Wholesale Instrument describing the Merchandise requested to be financed
by BCG (any Merchandise so financed being the "Merchandise"). As used herein,
"Wholesale Instrument" shall mean a note, invoice, bill of sale, conditional
sales contract, chattel mortgage, lease, trust receipt, chattel paper or other
evidence of indebtedness or obligation of payment arising out of the sale or
delivery of Merchandise to a Buyer.
2. Warranties and Representations. Delivery of a Wholesale Instrument shall
evidence and warrant the following:
(a) That any transfer to the retail dealer or distributor of all right,
title, and interest in and to the Merchandise shall be contingent upon
BCG's financing the transaction;
(b) That our title to the Merchandise is free and clear of all liens and
encumbrances when transferred to the retail dealer or distributor,
except for liens in favor of BCG;
(c) That the Merchandise has been the subject of a bona fide order by the
dealer or distributor placed with us and accepted by us and that the
dealer or distributor has requested that the transaction be financed
by BCG;
(d) That the Merchandise is new, unused, and free of any defects; and
(e) That the Merchandise has been shipped to the purchasing dealer or
distributor no more than ten days prior to the Wholesale Instrument
date.
In the event we breach any of the foregoing warranties, we will immediately
upon demand pay to BCG, in cash, an amount equal to the outstanding balance owed
to BCG with respect to such Merchandise, plus the costs and expenses, if any,
incurred by BCG in the enforcement of this Agreement.
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<PAGE> 2
3. Acceptance of Wholesale Instrument. This Agreement shall in no way bind
BCG to finance the acquisition of any Merchandise, but shall apply only to
acquisition transactions accepted by BCG. BCG's final acceptance of a
transaction shall be indicated only by BCG's issuance to us of a draft of or
other instrument in payment of our Wholesale Instrument less the amount of BCG's
discount charge (if any) under the applicable financing program.
4. Payment of Wholesale Instrument. The payment of a Wholesale Instrument
shall be according to such pricing program(s) ("Program") as accepted by us. Our
acceptance of any Program may or may not be evidenced by a separate agreement or
letter of understanding between BCG and us with respect to particular Programs,
but the terms of this Agreement shall prevail in the event of any conflict with
the terms of any Program.
5. Repurchase Obligations. If BCG pays the Wholesale Instrument (whether by
check, draft, notice of set off authorized hereunder, or any other means), we
will repurchase, within thirty (30) days of our receipt of the possession of
Merchandise or within ten (10) days of BCG repurchase demand, whichever date
occurs first, such Merchandise from BCG whenever and for whatever reason BCG or
we come into possession of the Merchandise on the following terms and
conditions:
(a) We will accept delivery of and repurchase the Merchandise, or any
portion of the Merchandise that may from time to time be
delivered, in a condition that is new, unused and as may have
normal wear and tear resulting from display or demonstration, at
such location(s) as you may reasonably designate;
(b) The price which we will pay to BCG will be an amount equal to the
total unpaid balance owed to BCG on the Merchandise plus any
reasonable expense, charges or penalties incurred by BCG in
connection with the storage or possession of the Merchandise
subsequent to repurchase demand, as well as all duties and
Canadian taxes (including the goods and services taxes) (the
"Repurchase Price"), excluding our wholesale cost for parts and
accessories installed by us to replace such parts and accessories
specifically identified and delivered pursuant to invoice and
financed by you; and,
(c) The Repurchase Price shall be payable to BCG in lawful money of
(i) the United States if the Merchandise was financed by
Bombardier Capital Inc., or (ii) of Canada if the Merchandise was
financed by Bombardier Credit Ltd.
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<PAGE> 3
(d) Our obligation to repurchase Merchandise shall terminate on the
540th day after the date of our invoice on such Merchandise,
<TABLE>
<CAPTION>
Time Between Time Between
Date of Date of
Invoice Invoice and
and Date of Date of Your
Your Request % of Original Request for % of Original
for Repurchase Invoice Amount Repurchase Invoice Amount
- -------------- -------------- ------------ --------------
<S> <C> <C> <C>
0-180 days 100% 361-390 days 86%
181-210 days 98% 391-420 days 84%
211-240 days 96% 421-450 days 82%
241-270 days 94% 451-480 days 80%
271-300 days 92% 481-510 days 78%
301-330 days 90% 511-540 days 76%
331-360 days 88%
</TABLE>
We acknowledge that the above-mentioned time periods are calibrated to
reflect payment due dates from Buyers and that administrative delays can arise
with respect to collection of such payments from the respective Buyers.
Accordingly, BCG shall have thirty (30) days after the expiration of each stated
time period during which to demand a repurchase from us, and, if a demand is
made during the thirty (30) days, then the repurchase percentage of the original
invoice amount, if applicable, will be the rate as stated in the expired period.
In the event no obligations arise hereunder to repurchase the Merchandise,
we shall, at your request, provide remarketing services with respect to such
Merchandise you repossess.
In the event we default in the payment of the Repurchase Price when due,
interest shall immediately commence accruing on the unpaid portion of the
Repurchase Price at the rate of eighteen percent (18%) per annum until fully
paid. Merchandise repossessed or in the possession of BCG may be sold or
disposed of by BCG, its agents or affiliates, without prior repurchase demand.
6. Bailment and Transfer of Repurchased Merchandise. Until such time as BCG
has received the repurchase payment any Merchandise or portion thereof is held
by us solely as bailee for BCG and is subject to the superior possessory right
of BCG. Immediately upon demand we shall surrender possession of any Merchandise
pursuant to the instructions of BCG. Contemporaneous to full and final payment
to BCG of the Repurchase Price, the bailment shall terminate and BCG shall
thereby transfer to us all of its right, title, and interest in and to the
Merchandise.
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<PAGE> 4
7. Set Off and Extensions. Upon notice to us, BCG may deduct, set off,
withhold, or apply any sums or payments due from us to BCG against any sums due
from BCG to us. If BCG is entitled to a set off under the terms of this
Agreement at the time BCG receives a Wholesale Instrument from us, or before
such Wholesale Instrument falls due, then, to the extent of such entitlement,
BCG's notice of set off delivered to us shall constitute an instrument in
payment for all purposes of this Agreement. BCG may extend the time for payment
of, modify, restructure, or defer the obligations of any Buyer without notice to
us and without altering our obligations hereunder.
8. Waiver. We waive notice of non-payment, protest and dishonor of any
Wholesale Instrument, and all other notices we might otherwise be entitled by
law. We waive any rights we may have to require BCG to proceed against the
dealer or distributor or to pursue any other remedy in BCG's power. BCG's delay
in failure to exercise any rights granted hereunder shall not operate as a
waiver of those rights. Any delay by BCG in repossessing Merchandise that is
subject to this Agreement shall not waive or modify our obligations hereunder,
so long as BCG pursues repossession in good faith. In the event BCG is unable to
enforce its security interest in any Merchandise as a result of bankruptcy
proceedings or other litigation, mediation or arbitration affecting the
Merchandise, any expiration of our repurchase obligations shall be stayed
effective the commencement date of such bankruptcy proceedings or other
litigation, mediation or arbitration.
9. Financial Statements. We will deliver to you our financial statement for
the fiscal year then most recently ended not later than twenty (20) days after
the preparation of such financial statement, but in no event later than one
hundred twenty (120) days after the expiration of each of our fiscal years. In
addition, as BCG may reasonably request from time to time, we will promptly
deliver to BCG interim financial statements. All of our financial statements
shall be prepared in accordance with generally accepted accounting principles.
10. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the successors and assigns of BCG and the undersigned. All of BCG's
obligations hereunder may be performed by any of BCG's subsidiary and/or
affiliated companies, and all of the promises we make hereunder shall inure
jointly and severally to BCG and each of BCG's subsidiary and/or affiliated
companies as the same may exist from time to time. If BCG finances the
acquisition of any Merchandise sold or shipped to a Buyer by any subsidiary,
affiliated company and/or distributor of ours, we agree that all of our promises
and obligations shall remain in force as if such Merchandise had been sold or
shipped by us.
11. Termination. We may terminate this Agreement by notice to the other
party, the termination to be effective thirty days after the date of delivery
thereof, but the termination shall in no manner terminate our liability with
respect to financial transactions entered into by BCG with any Buyer prior to
the
4
<PAGE> 5
effective date of termination, including, without limitation, transactions which
will not be completed until after the effective date of termination.
12. Louisiana. With respect to transactions financed by BCG for Buyers
located in the State of Louisiana, upon BCG's payment for each item of
Merchandise, we hereby assign and grant to BCG without warranty or recourse, any
vendor's privilege and lien on that item granted under Louisiana law to the
fullest extent as if BCG had actually sold the Merchandise to the dealer or
distributor; provided, however, that nothing contained in this Agreement shall
be deemed a representation or warranty by us that any valid or enforceable
vendor's lien or privilege exists under Louisiana law.
13. Miscellaneous. We do not intend to enter into a joint venture with BCG
and nothing contained in this Agreement shall be construed to establish a joint
venture between BCG and us. We agree that any repurchase by us of Merchandise
pursuant to this Agreement does not constitute a purchase of the debt owed by
any Buyer to BCG.
14. Merger Clause and Modification. This Agreement constitutes the entire
agreement of the parties with respect to the subject matter hereof. No course of
dealing, course of performance or trade usage, and no parol evidence of any
nature shall be used to supplement or modify the terms of this Agreement. If at
any time one or more provisions of this Agreement becomes invalid, illegal or
unenforceable in whole or in part in any jurisdiction, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
or impaired. This Agreement may not be modified except by written agreement
signed by all parties hereto. We agree to provide to BCG such further writings,
certificates or other documentation as BCG may reasonably request in order to
fulfill the intent of this Agreement.
15. Notices. All notices or repurchase demands required or permitted to be
delivered hereunder shall be in writing, and shall be deemed received three (3)
days after mailed postage prepaid, certified mail, return receipt requested, to
the business addresses for the parties as written below.
16. Counterparts and Headings. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, and such counterparts
shall together constitute but one and the same agreement. The section headings
in this Agreement are inserted for convenience of reference only and shall not
limit or otherwise effect the meaning of any provision thereof.
Notice of the acceptance of this Agreement is hereby waived.
IN WITNESS WHEREOF, we have caused this Agreement to be executed by our
undersigned agents, duly authorized.
5
<PAGE> 6
Date:___________________________ BELLCREST HOMES, INC.
By:_____________________________ By:___________________
Title:__________________________ Title:________________
(If a Corporation, two authorized Address:______________
officers must sign). ______________________
6
<PAGE> 7
CERTIFICATE OF CORPORATE SECRETARY
The undersigned, Secretary of Bellcrest Homes, Inc. (the "Corporation")
hereby certifies to Bombardier Capital Group, its successors and assigns, that
the foregoing FLOORPLAN REPURCHASE AGREEMENT was approved, and executed thereof
by Glinn H. Spann and Richard S. Kluttz acting on behalf of the Corporation was
authorized, by resolution of the board of directors of the Corporation duly
adopted at a valid meeting of the board of directors of the Corporation held on
April 22, 1987, which resolution has not been amended or revoked and remains in
full force and effect. I further certify that the signatures appearing above are
in fact the signatures of the persons so authorized. In witness whereof, I have
subscribed my name and attached the seal of the Corporation hereto this 10th day
of August, 1993.
______________________________
Secretary
ACCEPTED:
By: BOMBARDIER CAPITAL INC. By: BOMBARDIER CREDIT LTD.
By:______________________________ By:___________________________
Name:____________________________ Name:_________________________
Title:___________________________ Title:________________________
Attn: Manufacturing Accounts Attn: Manufacturing Accounts
Region Region
Seven Burlington Square 5571 Saint Joseph Street
P.O. Box 5309 Valcourt, Quebec
Burlington, Vermont Canada JOE 2L0
U.S.A. 05402-5309
7
<PAGE> 1
EXHIBIT 10.28
INVENTORY REPURCHASE AGREEMENT
AGREEMENT between NATIONSCREDIT COMMERCIAL CORPORATION (herein called "NCC") and
BELLCREST HOMES, INC., herein called "Seller", a Corporation of Georgia.
1. In consideration of the mutual promises contained herein, the parties
agree as follows:
a) "Inventory" means merchandise sold by Seller and financed by NCC
under the terms of a Financing Agreement extended by Dealer in
favor of NCC or more specifically identified as:
BELLCREST PRODUCTS
b) "Dealer" means any individual, partnership, firm, corporation, or
other business entity that buys Inventory from Seller.
c) "Financing Agreement" means the written agreement and all related
documentation including without limitation any note, chattel
mortgage, security agreement, financing statement, or other
writing pursuant to which NCC has executed inventory financing.
2. NCC from time to time will purchase or otherwise acquire invoices
acceptable to NCC and arising out of the sale by Seller by Inventory
to Dealers. Such invoices shall be purchased or otherwise acquired
under the plans and at terms and rates of NCC in effect from time to
time.
3. The Seller warrants that its invoices when presented represent a
bonafide order by the Dealer, and its titles as shown are clear and
free of all liens and encumbrances, and Dealer named has requested the
Inventory to be financed by NCC. In the event that the purported sale
from Seller to Dealer is not a bonafide sale of Inventory, or if the
Inventory, at the time of delivery to Dealer, is subject to a lien in
favor of Seller or anyone claiming under or through Seller, Seller
shall repurchase from NCC, upon demand, the invoice(s) purchased or
otherwise acquired from Seller by NCC for an amount equal to the then
unpaid balance plus costs and expenses incurred by NCC in respect
thereto, and any accrued and unpaid charges of NCC.
4. If NCC shall repossess or otherwise come into the possession of any
inventory which is covered by a Financing Agreement, Seller agrees to
repurchase from NCC, upon demand, such repossessed Inventory under the
following terms and conditions.
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<PAGE> 2
(a) This Agreement shall be binding as provided for one hundred
percent (100%) of the Seller's invoice plus freight if approved
and financed by NCC.
(b) In the event that the Dealer defaults in payment of his
"Financing Agreement" with NCC, upon written notice from NCC to
Seller that it has possession of the Inventory, the Seller will
accept delivery from NCC from any point of repossession where the
Seller's Inventory may be safely removed.
(c) The repurchase price shall first be determined on the basis of
the Seller's invoice price plus freight if financed by NCC,
excluding interest, finance and insurance charges.
Additionally, if NCC is legally restrained from obtaining
possession of the inventory because of bankruptcy or other legal
action, the repurchase limitation period shall be extended until
any order is removed plus sixty (60) days.
The repurchase price is further determined by the length of time
between the date of delivery of the inventory and the postmark
date of NCC's written request to Seller to repurchase, as set
forth in the schedule directly below.
Inventory
0 days through 365 days 100.0%
366 days through 395 days 98.0%
396 days through 425 days 96.0%
426 days through 455 days 94.0%
456 days through 485 days 92.0%
486 days through 509 days 90.0%
510 days and over 0.0%
* A 30 day grace period shall be added at 395 days, 425 days, 455
days, 485 days, and 509 days to collect money due.
(d) The Inventory must be in new and unused condition except for any
wear that is reasonable necessary or incidental to displaying it
for sale or storing it. Seller will not be required to repurchase
under this Agreement, any Inventory: (a) that has been refinanced
by NCC, (b) where title thereto has been transferred or assigned
to others by the Dealer, (c) where the Inventory has been paid
for by the Dealer directly to Seller.
(e) On Inventory repurchased, in addition to the repurchase price,
Seller will, (a) pay NCC interest
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<PAGE> 3
at the then prevailing Dealer rate, provided payment is not made
to NCC within thirty (30) days from the date NCC provides Seller
with written notification of possession and request to
repurchase, (b) reimburse NCC for reasonable costs and expenses
in connection with any repossession, not to exceed $100.00 for
each product repossessed regardless of the number of products
repossessed. All claims for repossession costs must be supported
by receipts from NCC.
(f) If any specifically standard or accessory items listed on the
invoice and supplied by the Seller, are missing from the product
or the product is damaged, the repurchase price, in turn, will be
adjusted and reduced accordingly by the Seller's cost for such
items missing, or the Manufacturer's cost to repair the damage to
the product.
5. Upon repurchasing any repossessed inventory under the terms of this
Agreement, as a condition to payment of the repurchase price, NCC will
convey to Seller all of its rights as a secured party in possession as
outlined in the applicable section of the Uniform Commercial Code,
free and clear of all liens and encumbrances. NCC agrees to defend and
indemnify Seller against any and all third party claims arising out of
a lien or encumbrance alleged to be superior to that of NCC.
6. If Seller, for any reason, fails to pay NCC as required by this
Agreement, NCC shall have the right to set off obligation, if any, of
NCC to Seller against obligations of Seller to NCC.
7. If not prohibited by the Law of jurisdiction in which enforcement is
sought, Seller shall pay court costs and a reasonable Attorney's fee
in the event NCC is required to enforce its rights hereunder against
Seller through legal proceedings.
8. NCC may assign this Agreement, but Seller may not assign this
Agreement without prior written consent of NCC. This Agreement shall
inure to the benefit of, and bind the respective parties thereto,
their successors and assigns, and shall be governed by the Law of the
State where Seller is located.
9. This Agreement shall continue in force and effect until terminated by
either party by notice to the other party, which notice, if given
orally, shall be confirmed promptly in writing. Such termination shall
not affect the rights and obligations of the parties as to any
transactions entered into prior to the receipt of such notice of
termination, including without limitation,
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transactions which will not be completed until after the effective
date of termination.
THIS AGREEMENT SHALL BECOME EFFECTIVE AS OF JANUARY 4, 1994.
NATIONSCREDIT COMMERCIAL CORPORATION BELLCREST HOMES. INC.
By:_________________________________ By:______________________
Title:______________________________ Title:___________________
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EXHIBIT 10.29
MANUFACTURER AGREEMENT
AGREEMENT, between MERITOR CREDIT CORPORATION, a New York corporation
("Lender"), having a principal place of business at 101 Merritt 7, Norwalk,
Connecticut, and Manufacturer named below.
WHEREAS, Manufacturer wishes to make manufactured homes available to its
dealers; and
WHEREAS, Lender has agreed to extend a wholesale financing accommodation to
dealers pursuant to which Lender will pay Manufacturer's invoices on behalf of
dealers; and
WHEREAS, Lender wishes to require Manufacturer to reimburse Lender for amounts
due and unpaid by dealers to Lender and/or repurchase homes under certain
circumstances.
NOW, THEREFORE, in consideration of the premises and of the mutual covenants and
agreements contained therein, the parties hereto agree as follows:
1. Prior to shipping any manufactured home ("Product") to any one of its
dealers ("Dealer"), Manufacturer will obtain Lender's oral approval. At the
time of shipping of Product to Dealer, Manufacturer will provide Lender
with the original invoice and certificate or origin. Manufacturer warrants
that (a) its invoice represents a bona fide order by Dealer; (b) title to
Product is clear of all liens and encumbrances; (c) the invoice is true and
accurate and does not contain items not sold with Product; (d) the invoice
is not inflated above published wholesale price (Manufacturer's cost plus
reasonable profit for Manufacturer); (e) the invoice does not include
dealer's rebate, unless full disclosure of such is made; (f) the invoice
complies with the Uniform Invoicing Code of the Manufactured Housing
Institute; (g) the Product is new and has not been used as a dwelling by
any person or used commercially for any purpose other than display and/or
demonstration; and (h) no Product is unsalable due to a manufacturing
defect or non-compliance with the National Manufactured Home Construction
and Safety Standards Act of 1974. Upon breach of any of the above
warranties (a) through (h), at any time, Manufacturer agrees to pay Lender,
upon demand, the present balance owed by Dealer to Lender for Product plus
interest at the rate paid by Dealer to Lender.
2. Lender will advance Manufacturer 100% of the wholesale invoice amount or
such portion thereof as has been agreed upon in writing in advance by
Lender, Dealer and Manufacturer.
3. Lender will require Dealer to obtain and maintain insurance against loss by
fire, theft, and physical damage for the wholesale invoice amount of each
Product.
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4. Whenever Lender repossesses a Product from Dealer for any reason, Lender
will notify Manufacturer verbally of such repossession and issue a
repurchase request to Manufacturer advising Manufacturer where Product is
available for reclamation. Manufacturer will be required to repurchase such
Product at a repurchase price determined as follows:
Single Section Products - The original invoice amount:
(a) less 2% of the original invoice amount for each 30 day period
from date of delivery of Product to Dealer to date of repurchase,
starting with the fourth 30 day period, and, in addition, Lender
will be allowed another 30 day period for administrative
processing before any reductions from the original invoice amount
are made;
(b) plus up to one month's past due interest charges earned by Lender
and uncollected from Dealer.
Multi Section Products - The original invoice amount:
(a) less 2% of the original invoice amount for each 30 day period
from date of delivery of Product to Dealer to date of repurchase,
starting with the sixth 30 day period, and, in addition, Lender
will be allowed another 30 day period for administrative
processing before any reductions from the original invoice amount
are made;
(b) plus up to one month's past due interest charges earned by
Landlord and uncollected from Dealer.
Manufacturer's obligation to repurchase a Product under this Paragraph 4
will remain in effect for 365 days (12 months) from date of delivery for
single section Products, and for 455 days (15 months) from date of delivery
for multi-section Products.
5. Whenever Lender issues a repurchase request to Manufacturer, Manufacturer
agrees to take possession of Product within 10 days of notice, and to pay
Lender in accordance with this Agreement within 20 days of such notice. If
Manufacturer does not take possession within 10 days of notice,
Manufacturer agrees to reimburse Lender for costs incurred in providing
physical protection for Product.
6. Whenever Lender repossesses and Manufacturer is required to repurchase a
Product, Manufacturer will reimburse Lender for reasonable costs and
expenses not to exceed $75.00 per single section Product and $150.00 per
multi section Product, regardless of the number of Products repossessed.
7. Upon reimbursement of Lender or repurchase of a Product under the terms of
this Agreement, Manufacturer will be subrogated
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to a corresponding portion of Lender's rights against Dealer with respect
to such Product and the security or title retention instrument covering
such Product, and Lender agrees to execute and deliver such assignments and
other documents relating thereto as Manufacturer may request. Any such
reimbursement or repurchase by Manufacturer will not constitute a sale or
disposition under the Uniform Commercial Code. Following any such
reimbursement or repurchase, Manufacturer will have the duties of a secured
party under the Uniform Commercial Code.
8. Periodically, but at least annually, Lender will, upon request, provide
Manufacturer with a report detailing Manufacturer's contingent liability
under this Agreement.
9. In the event that Manufacturer fails to make any payment due to Lender
under this Agreement on a timely basis, Lender will have an immediate right
of set-off against any money or other property of Manufacturer in Lender's
possession.
10. Manufacturer agrees to indemnify and hold Lender harmless from any and all
expenses, claims or damages of whatever kind or nature, including
reasonable attorney's fees, relating to or arising out of any claim against
Lender for breach of warranty or product liability with respect to
Products.
11. This Agreement will inure to the benefit of and bind the parties hereto,
their successors and assigns, and all of their subsidiaries whether now
existing or hereafter formed, and shall be effective until terminated by
either party at any time upon 10 days' written notice to the other, but
termination will not relieve either party from obligations assumed prior to
the effective date of said termination notice.
12. This Agreement is not intended to and does not set up any third party
beneficiary rights on behalf of any Dealer.
13. All parties to this Agreement hereby waive any and all rights to a trial by
jury in any action or proceeding, whether in law or in equity, arising out
of or related to this Agreement.
14. The parties may submit to arbitration any controversy or claim arising out
of or relating to this Agreement, or the breach thereof, and any such
controversy or claim shall be settled by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association, and
judgment upon the award rendered by the Arbitrator(s) may be entered in any
court having jurisdiction thereof.
15. Either party to this Agreement will be entitled to all costs of suit,
including reasonable attorney's fees, upon prevailing in any action or
proceeding brought to enforce any provision of this Agreement.
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16. Time is of the essence with respect to Manufacturer's performance of its
obligations hereunder.
17. If any provision of this Agreement should be held to be invalid or
unenforceable by any court, the validity and enforceability of the
remaining provisions will not be affected.
18. This Agreement supersedes any prior agreement between the parties,
constitutes the entire agreement, and may not be modified or amended except
in writing. Notwithstanding the foregoing, the terms and conditions of any
prior agreement as it relates to any Product shipped prior to the execution
of this Agreement will remain in effect.
19. All notices which are required to be given under this Agreement will be
addressed to Manufacturer and Lender, postage prepaid, as follows:
TO MANUFACTURER: Bellcrest Homes, Inc.
P.0. Box 630
Millen, GA 30442
Attn: Glinn H. Spann President
TO LENDER: MERITOR CREDIT CORPORATION
101 Merritt 7, First Floor
Norwalk Connecticut 06851
Attn: Manufactured Housing, with a
copy to General Counsel
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20. This Agreement will be governed by and construed in accordance with the
laws of the State of Connecticut. The parties hereto have accepted this
Agreement on the dates set forth below:
Manufacturer: Bellcrest Homes, Inc.
By: _________________________
Title: President
Address: P.0. Box 630
Millen, GA 30442
Date: January 16, 1987
MERITOR CREDIT CORPORATION
By:__________________________
Title:_______________________
Date:________________________
21. Manufacturer will not be required to repurchase a product if title thereto
has been transferred or assigned by a Dealer to a retail buyer in the
ordinary course of business who has accepted delivery of and used such
Product.
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<PAGE> 6
EXHIBIT A
LIMITED ADDENDUM TO THE MANUFACTURER AGREEMENT
The Manufacturer Agreement between Ford Motor Credit Company, successor in
interest to Meritor Credit Corporation, f.k.a. PSFS Credit Corporation, and
BELLCREST HOMES, INC., dated 1/6/87, is amended as follows:
Paragraph 4, Single Section Products, subparagraph (a):
1. The figure 2% Is changed to 3%
2. The term "starting with the fourth 30 day period" is changed to
"starting with the ninth 30 day period."
Paragraph 4, Multi Section Products, subparagraph (a):
1. The figure 2% is changed to 3%
2. The term "starting with the sixth 30 day period" is changed to
"starting with the ninth 30 day period."
These changes are limited to repurchases from the following dealer(s):
Greeson Homes Corp., Inc.
(all locations)
Except as amended hereby, said Manufacturer Agreement remains in full force and
effect.
Firm Name: Bellcrest Homes, Inc. Ford Motor Credit Company
By:_________________________ By:___________________________
Title:______________________ Title:________________________
Date:________________________ Date:_________________________
<PAGE> 1
EXHIBIT 10.30
MANUFACTURER'S FINANCING AGREEMENT
MANUFACTURED HOUSING
AGREEMENT between Deere Credit, Inc., a Delaware corporation, with offices
located at 1415 28th St., West Des Moines, Iowa 5O265-1450 ("Creditor"), and
Bellcrest Homes, Inc., a Georgia corporation, with offices located at 206
Magnolia Street, Millen, GA 30442 and any of its subsidiary corporations which
produce manufactured housing ("Manufacturer").
In consideration of Creditor's extension of lines of credit to Manufacturer's
independent or Manufacturer-owned dealers to finance Manufacturer's products
sold or distributed at wholesale, the parties agree as follows:
1. Definitions.
1.1 "Goods" shall mean all products manufactured, sold or distributed
by Manufacturer or its subsidiaries.
1.2 "Dealer(s)" shall mean any person, firm or corporation which buys
or acquires Goods at wholesale from Manufacturer and sells such
Goods at retail.
1.3 "Wholesale Instrument" shall mean a note, chattel paper or other
evidence of indebtedness or obligation arising out of the
acquisition of Goods by Dealers from Manufacturer.
2. Purchase of Wholesale Instruments. Creditor may, from time to time,
finance the acquisition of Goods by Dealers by purchasing, otherwise
acquiring or entering into Wholesale Instruments with a Dealer if the
Dealer's creditworthiness and financial responsibility are acceptable
to Creditor. Such financing by Creditor shall be in accordance with
Creditor's plan or plans of wholesale financing in effect from time to
time, and shall be limited to enabling Dealers to purchase and acquire
Goods from Manufacturer. If Manufacturer requests that Creditor extend
such financing to a Dealer, Manufacturer warrants that, to its
knowledge the financing will be used for such purpose.
3. Payment to Manufacturer. When the Creditor's wholesale financing plan
calls for payment directly to Manufacturer, such payment shall be made
following the receipt by Creditor of a copy of the Manufacturer's
invoice to the Dealer and the original of the Manufacturer's
Certificate(s) of Origin for the unit of Goods being financed.
4. Repurchase by Manufacturer.
<PAGE> 2
4.1 After Repossession. If Creditor or Manufacturer repossesses or
comes into possession of any unit of Goods covered by any
Wholesale Instrument, Manufacturer will, upon demand of Creditor,
promptly repurchase such Goods, wherever located from Creditor if
the conditions set forth in Section 4.2 are met. On the Wholesale
Instrument for each repurchased unit of Goods, Manufacturer shall
pay Creditor the total unpaid balance (excluding unpaid finance
charges, but including freight and delivery charges if financed
by Creditor), less the amount of any curtailment or final
maturity which was not waived or extended with the approval of
Manufacturer and which is past due from Dealer 30 days or more as
of the date Creditor notifies Manufacturer of a default by Dealer
("Repurchase Price"). Creditor shall be responsible for handling
any repossession or foreclosure proceedings. Manufacturer hereby
grants Creditor a security interest in, and shall not assert any
superior interest in or title to, such Goods until the Repurchase
Price has been paid in full, which shall be done within 30 days
following receipt by Manufacturer of a statement showing the
amount owed. Creditor agrees to store all repossessed Goods
within a reasonable distance of Dealer's principal or satellite
location as specified in the individual Dealer's Inventory
Security Agreement.
In the event Manufacturer fails to pay the Repurchase Price in
full within said 30 days, Manufacturer shall be liable for and
shall also pay Creditor all accrued and unpaid finance charges
under Dealer's current financing terms with Creditor on each
Wholesale Instrument on the Goods from the date on which Creditor
notified Manufacturer to repurchase the Goods to the date the
Repurchase Price is paid in full. Upon receipt by Creditor of the
full Repurchase Price and any finance charges due as provided
herein for any Goods repossessed, Creditor agrees to transfer to
Manufacturer any and all rights that Creditor may have in and to
the Goods as a secured creditor under the Uniform Commercial Code
and will return Manufacturer's Certificate of Origin.
4.2 Conditions for Repurchase.
4.2.1 Creditor has paid Manufacturer for the Goods on behalf of
Dealer;
4.2.2 Creditor has determined that Dealer is in default and is
ceasing all wholesale
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financing of Goods with Dealer and its principals;
4.2.3 Creditor has taken actual or constructive physical
possession of the Goods unless Manufacturer has agreed to
do so;
4.2.4 Title to the Goods has never passed from Dealer to a retail
purchaser; and
4.2.5 The Goods have not been rented and are otherwise in new and
unused condition, except for normal wear and tear
incidental to storage, display, and incidental
demonstration.
4.3 Additional Costs.
Manufacturer agrees to pay Creditor $100 per section per unit of
Goods for its direct repossession costs, including its storage
costs. After Creditor's repossession and tender of the Goods to
Manufacturer, Manufacturer shall be fully responsible for all
costs and expenses associated with the possession, relocation,
care, maintenance, and ongoing storage of each unit of Goods.
5. Remarketing by Manufacturer.
In the event the Conditions for Repurchase are not met, but Creditor
has obtained possession of Goods, Manufacturer agrees to assist
Creditor in selling such Goods. Manufacturer agrees to use its best
efforts to remarket the Goods through its Dealer organization or other
commercially reasonable methods.
6. Payment and Term Changes. Creditor, in its sole discretion, may renew,
extend or modify the time or amount of payment of Wholesale
Instruments and may also amend the Terms and Conditions of its
financing arrangements with the Dealer. Except as specifically set
forth in this Agreement, no such renewal, extension modification or
amendment shall affect the liability of Manufacturer hereunder.
7. No Waiver by Creditor. The failure to exercise any right hereunder by
Creditor shall not operate as a waiver of such right. All remedies
contained in this Agreement shall be cumulative and alterative, and
shall be in addition to all other remedies available to Creditor by
agreement or law.
8. Manufacturer's Warranties and Representations. Manufacturer warrants
and represents to Creditor:
(a) that it is a corporation duly existing, qualified and in good
standing to do business in all jurisdictions where necessary;
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(b) that each of its invoices represents a bona fide order by Dealer,
and all invoices shall be true and accurate and shall comply with
all applicable rules and standards, including the
Truth-In-Invoicing Practice Statement of the Manufactured Housing
Institute;
(c) that the Dealer will have title to the Goods which are the
subject of a Wholesale Instrument free and clear of all claims of
Manufacturer's creditors;
(d) that Manufacturer has shipped to Dealer Goods which are the
subject of a Wholesale Instrument no earlier than ten (10) days
prior to, nor later than, the date on which Manufacturer submits
a copy of the invoice on such Goods to Creditor for payment, and
that such Goods will be received by Dealer in good and salable
condition free of material defects; and
(e) that Goods which are the subject of a Wholesale Instrument comply
with all state, federal and local laws and regulations in the
jurisdictions in which such Goods are to be offered for sale by
Dealer.
9. Manufacturer's Covenants. Manufacturer covenants and agrees:
(a) to promptly notify Creditor if a Dealer materially defaults under
Manufacturer's Dealer Agreement or is discontinued as one of
Manufacturer's authorized Dealers;
(b) to promptly notify Creditor, to the best of its knowledge and
information; (i) if there is a change in control of a Dealer or a
change of a principal owner or senior officer of the Dealer; (ii)
if a Dealer files for bankruptcy or other protection from
creditors, or has material litigation or investigations commenced
against it;
(c) to provide Creditor with its price lists and literature regarding
the Goods;
(d) to honor all its warranties on the Goods and to pay Dealer's
warranty claims on the Goods within a reason- able period of
time;
(e) to promptly notify Creditor of any material change in
Manufacturer's financial condition, principal officers,
directors, or control, and to provide annual audited financial
statements to Creditor within 90 days of the end of its calendar
or fiscal year;
(f) to indemnify and hold harmless Creditor from any claim, lawsuit,
judgment, court order, or other dispute, arising from the Goods
or the sale of the Goods from Manufacturer to a Dealer, and from
any matter alleging defects in or misrepresentation of the Goods.
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(g) not to issue more than one Certificate of Origin to any unit of
Goods, except upon the request of Creditor or after
Manufacturer's repurchase of the Goods.
10. Breach of Warranties or Representations. In the event of breach by
Manufacturer of any warranties or representations contained in this
Agreement, upon demand by Creditor, Manufacturer will pay Creditor on
the Wholesale Instrument for each unit of Goods directly or indirectly
affected by such breach, an amount equal to the total unpaid balance
of the Wholesale Instrument (including unpaid finance charges), plus
all costs and expenses (including attorneys' fees) reasonably incurred
by Creditor as a result of the breach.
11. Notice of Assignment of Dealer Funds. Creditor has obtained or intends
to obtain from each Dealer an assignment of Dealer's funds of whatever
nature owing, now or in the future, from Manufacturer to Dealer, as
security for any amounts Dealer may owe, now or in the future, to
Creditor under the terms of Dealer's Inventory Security Agreement.
Manufacturer hereby acknowledges this assignment and agrees to honor
Creditor's claims to Dealer's funds upon notice from Creditor.
12. Notices. All written notices sent hereunder shall be sent by
facsimile, overnight courier, or certified mail, postage prepaid, and
addressed as follows:
If to Manufacturer: If to Creditor:
Bellcrest Homes, Inc. Deere Credit, Inc.
206 Magnolia St. 1415 28th Street
P.O. Box 630 West Des Moines, IA 50265-1450
Millen, GA 30442 Attention: Manager, Wholesale
Attention: G. Hiller Spann Fax Number: 515-222-4554
Fax Number: 912-982-2992
13. Assignment. This Agreement shall be binding upon and inure to the
benefit of the successors or assigns of the parties hereto. Creditor
may assign this Agreement, in whole or in part, to any of its
subsidiary or affiliated companies and, upon such assignment, such
subsidiary or affiliated company shall be entitled to all of the
benefits of this Agreement and the obligations of the Manufacturer
contained in this Agreement.
14. Amendment. This Agreement may not be modified, altered or amended
except in writing executed by the parties hereto.
15. Choice of Law. The validity, enforceability and interpretation of this
Agreement and any Amendments and Addenda hereto shall be governed by
the laws of the State of Iowa, the place of business of the Creditor.
16. Termination. Either party hereto may cancel this Agreement at any
time, upon thirty (30) days' notice in writing. The
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termination of this Agreement shall in no manner affect the
obligations of Manufacturer as to Wholesale Instruments purchased,
otherwise acquired or entered into by Creditor prior to the effective
date of termination.
17. Effective Date/Entire Agreement. This Agreement shall be effective as
of the date stated below and shall as of that date supersede any prior
Manufacturer's Financing Agreement-Manufactured Housing between
Creditor and Manufacturer. This Agreement constitutes the entire
agreement of the parties and no oral statements or other
understandings are enforceable unless provided for herein in writing.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their authorized officers or representatives as of the 1st day of June,
1994.
ATTEST:
Bellcrest Homes, Inc.
(Manufacturer)
By:_______________________
Title:____________________ By:___________________________
Title:________________________
DEERE CREDIT, INC. (Creditor)
By:___________________________
Title:________________________
6
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ADDENDUM TO MANUFACTURER'S FINANCING AGREEMENT
MANUFACTURED HOUSING
This is an Addendum to the Manufacturer's Financing Agreement-Manufactured
Housing (the "Agreement") between Deere Credit, Inc. ("Creditor") and Bellcrest
Homes, Inc. ("Manufacturer") dated June 1, 1994. In consideration of Creditor
discounting all invoices payable to Manufacturer pursuant to the Agreement by
0%, Creditor agrees to offer participating Dealers of Manufacturer special terms
on Goods covered by a Wholesale Instrument as follows:
I. Rates:
Rate Period Applicable Rate
(Measured from date of Wholesale Instrument)
NEGOTIATED BETWEEN CREDITOR AND DEALER
II. Flat Charges:
a) _______ % per month on the lowest outstanding
balance (other than $0) of each Wholesale
Instrument outstanding during the month.
b) $_________________ per month per unit of Goods
covered by any Wholesale Instrument outstanding
during the month.
NEGOTIATED BETWEEN CREDITOR AND DEALER.
III. Curtailment schedule on each unit of Goods covered by a
Wholesale Instrument:
Curtailment Due Date Curtailment Percent
(Measured from date of Wholesale Instrument)
180th Day From Invoice 2% of Original Invoice
Each 30 Days Thereafter 2% of Original Invoice
365th Day From Invoice Payment Due In Full
If any of the above Curtailment Due Dates arise during the month(s) of
________________________________, the above Curtailment Percents shall
not apply; in such months the Curtailment Percent shall be _______%.
IV. Payment to Manufacturer: Payment to Manufacturer by
Creditor pursuant to Section 3 of the Agreement shall be
within 10 days following the receipt by Creditor of a
copy of the Manufacturer's invoice to the Dealer and the
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original of the Manufacturer's Certificate(s) of Origin
for the unit of Goods being financed.
Agreed to this 1st day of June, 1994.
ATTEST Bellcrest Homes, Inc.
(manufacturer)
By:_____________________ By:___________________________
Title:__________________ Title:________________________
DEERE CREDIT, INC. (Creditor)
By:___________________________
Title: Manager, Market Development
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ADDENDUM TO MANUFACTURER'S FINANCING AGREEMENT
MANUFACTURED HOUSING
Reference Definition #4 Section 4.1:
Manufacturer shall deduct the wholesale cost of any damages or
shortages from any unit repurchased. Normal wear does not constitute
damage.
Agreed to this 1st day of June, 1994.
Bellcrest Homes, Inc.
ATTEST (Manufacturer)
By:_____________________ By:___________________________
Title:__________________ Title: President
DEERE CREDIT, INC. (Creditor)
By:___________________________
Title: Manager, Market Development
3
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EXHIBIT 10.31
FLOORPLAN AGREEMENT
To: ITT COMMERCIAL FINANCE CORP.
8251 Maryland Avenue Clayton,
Missouri 63105
We sell various products ("Merchandise") to dealers and/or distributors
(collectively, "Dealer") who may require financial assistance in order to make
such purchases from us. To induce you to finance the acquisition of Merchandise
by any Dealer and in consideration thereof, we agree that:
1. Whenever a Dealer requests the shipment of Merchandise from us and that
you finance such Merchandise, we may deliver to you an invoice(s) describing the
Merchandise. By delivery of an invoice we warrant the following:
a. That we transfer to the Dealer all right, title and interest in
and to the Merchandise so described contingent upon your approval
to finance the transaction;
b. That our title to the Merchandise is free and clear of all liens
and encumbrances when transferred to the Dealer;
c. That the Merchandise is in salable condition, free of any
defects;
d. That the Merchandise is the subject of a bona fide order by the
Dealer placed with and accepted by us and that the Dealer has
requested the transaction be financed by you; and
e. That the Merchandise subject to the transaction has been shipped
to Dealer not more than 10 days prior to the invoice date.
If we breach any of the above-described warranties, we will immediately:
(i) pay to you any amount equal to the total unpaid balance (being principal and
finance charges) owed to you on all Merchandise directly or indirectly related
to the breach; and (ii) reimburse you for all costs and expenses (including, but
not limited to, attorney's fees) incurred by you as a direct or indirect result
of the breach.
2. You will only be bound to finance Merchandise which you have accepted to
finance (which acceptances will be indicated by your issuance of an approval
number or a draft or other instrument to us in payment of the invoice less the
amount of your charges as agreed upon from time to time) and only if: (i) the
Merchandise is delivered to the Dealer within 30 days following your acceptance;
(ii) you have received our invoice for such
<PAGE> 2
Merchandise within 10 days from the date of delivery of the Merchandise to
Dealer; and (iii) you have not revoked your acceptance prior to the shipment of
the Merchandise to Dealer.
3. Whenever you deem it necessary in your sole discretion to repossess or
if you otherwise come into possession of any Merchandise, in which you have a
security interest or other lien, we shall purchase such Merchandise from you at
the time of your repossession or other acquisition or possession in accordance
with the following terms and conditions:
a. We shall purchase such Merchandise, regardless of its condition,
at the point where you repossess it or where it otherwise comes
into your possession;
b. The price that we will pay to you for such Merchandise will be
due and payable immediately in full, and will be an amount equal
to the total unpaid principal balance owed to you on Merchandise
based on our original invoice price, minus, any curtailments paid
by Dealers, in accordance with the following schedule: 2% of the
original invoice price after 270 days from the original invoice
date; and 2% of the original invoice price each 30 days
thereafter. Dealers may be granted a thirty (30) day extension
period in which to pay the curtailments to you. You may request
waivers of scheduled curtailments, in writing, which shall be
sent to us at the address set forth below. Such waivers must be
approved in writing by us in order to be effective. Repurchase
will be in effect for 360 days from the date of invoice.
The repurchase price may be reduced by: the cost of replacing any
missing standard or accessory items which were supplied by us when the
Merchandise was sold and shipped to the Dealer; and, our cost of
repairing any damage to the Merchandise after original delivery to the
Dealer, excluding normal wear and tear resulting from the sales
display or demonstration of the Merchandise.
If your repossession of Merchandise and consequently your tendering of
Merchandise for repurchase, is delayed because of legal proceedings,
including but not limited to proceedings under the Bankruptcy Code,
the date of commencement of or entering into legal proceedings by you
to repossess the Merchandise, or the date of the filing under the
Bankruptcy Code by any party, shall be considered the date that demand
for
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repurchase was made for the purposes of this Section 3.
If we fail to pay you the repurchase price within ten (10) days after
payment is due, we will be responsible for and pay you all finance
charges accrued on the Dealer's account after the demand for
repurchase and until the time the repurchase price is paid.
4. In addition to our obligations set forth above, if you at any time
repossess or otherwise come into possession of any Merchandise from any Dealer,
who received the Merchandise from a third party and not directly from us, we
shall purchase such Merchandise from you on demand in accordance with the terms
set forth above in Section 3; provided, however: (a) you will first request such
third party to purchase such Merchandise from you; and (b) if such third party
fails to immediately purchase such Merchandise from you, we shall immediately
purchase such Merchandise and pay you a purchase price therefore in an amount
equal to the total unpaid balance (being principal and finance charges) owed to
you with respect to such Merchandise and all costs and expenses (including,
without limitation, reasonable attorney fees) paid or incurred by you in
connection with your repossession of such Merchandise, but in no event will our
liability with respect to any item of such Merchandise exceed our original
invoice price for such item. This provision will be in effect if we have
approved your purchase from a third party in writing prior to acquisition by
you.
5. You may extend the time of a Dealer in default to fulfill its
obligations to you without notice to us and without altering our obligations
hereunder. We waive any rights we may have to notice of nonpayment,
nonperformance, dishonor, the amount of indebtedness of a Dealer outstanding at
any time, any legal proceeding against a Dealer, and any other demands and
notices required by law, and any rights we may have to require you to proceed
against a Dealer or to pursue any other remedy in your power. Our liability to
you is direct and unconditional and will not be affected by any change in the
terms of payment or performance of any agreement between you and Dealer, or the
release, settlement or compromise of or with any party liable for the payment or
performance thereof, the release or non-perfection of any security thereunder,
any change in Dealer's financial condition, or the interruption of business
relations between you and Dealer.
6. We shall pay all your expenses (including, without limitation, court
costs, arbitration fees and reasonable attorney fees) in the event you are
required to enforce your rights against us. Your failure to exercise any rights
granted hereunder will not operate as a waiver of those rights.
7. This Agreement will be binding on and inure to the benefit of your
successors and assigns. You may perform or cause
3
<PAGE> 4
to be performed any of your subsidiary and/or affiliated companies, and our
obligations under this Agreement inure to the benefit of your subsidiary and/or
affiliated companies.
8. Either of us may terminate this Agreement by notice to the other in
writing, the termination to be effective 30 days after receipt of the notice by
the other party, but no termination of this Agreement will affect any of our
liability with respect to any financial transactions entered into by you with
any Dealer prior to the effective date of termination, including, without
limitation, transactions that will not be completed until after the effective
date of termination.
9. We waive notice of your acceptance of this Agreement.
10. Any controversy or claim arising out of or relating to this Agreement,
the relationship resulting in or from this Agreement or the breach of any duties
hereunder will be settled by arbitration in accordance with the Code of
Procedure of the National Arbitration Forum, Inc., 2124 Dupont Avenue South,
Minneapolis, Minnesota 55405, and judgment upon the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction thereof.
Dated: April 24, 1992
ATTEST:
____________________________ Bellcrest Homes, Inc.
By:______________________
Title: President
ACCEPTED: Business Address:
ITT COMMERCIAL FINANCE CORP. 206 Magnolia Street
Millen, Georgia 30442
By:___________________________
Title:________________________
+++++++++
1-Name of Vendor
2-Signature of Vendor's Authorized Representative
3-Signature of Vendor's Secretary, if Vendor is a Corporation,
otherwise a Witness' Signature
4
<PAGE> 5
MANUFACTURER CERTIFICATION
This certifies that all invoices submitted to General Electric Credit
Corporation for inventory financing will reflect published prices free of all
rebates except true volume incentives. A volume incentive is defined as an
established manufacturer marketing practice offered to all dealers on an equal,
nondiscriminating basis for volume purchases over a stated period of time of not
less than 6 months.
Any special bonuses, rebates or refunds will be fully disclosed as line
items on the invoices. It is understood that these items will be excluded from
GECC financing.
It is our understanding that this certification will make our invoices
eligible for investments at retail financing of up to 130%, including extra
equipment, but exclusive of any special bonuses, rebates or refunds.
We further understand that General Electric Credit Corporation is relying
on this certificate and would not agree to finance our produce without it.
Dated this 12th day of January, 1987.
Manufacturer:
BELLCREST HOMES, INC.
By: ______________________________________
(Officer)
Title: President
GENERAL
ELECTRIC
CREDIT
CORPORATION
<PAGE> 1
EXHIBIT 10.32
MANUFACTURER AGREEMENT
In consideration of General Electric Credit Corporation (hereinafter GECC)
agreeing to extend, from time to time and in GECC's sole discretion, inventory
financing accommodation on the undersigned Manufacturer's products (manufactured
homes, mobile homes, modular homes, sectional homes and/or motor homes and
recreational vehicles) purchased directly from Manufacturer by Dealers whose
credit and financial responsibility are acceptable to GECC, Manufacturer agrees
as follows:
1. Prior to shipping each product, Manufacturer will obtain GECC's
commitment to finance and pay for such product upon receipt and acceptance by
Dealer. Manufacturer will provide GECC with the original invoice and certificate
of origin. Manufacturer warrants that (a) its invoice represents a bona fide
order by Dealer; (b) titles are clear of all liens and encumbrances; (c)
invoices are true and accurate, represent a fair market price for the product,
have not been inflated above published prices to include any Dealer rebate and
do not contain items not sold with the product; (d) invoices for manufactured
home products comply with the Truth in Invoicing Practices Statement of the
Manufactured Housing Institute; (e) all right, title and interest to the product
have been transferred to Dealer; (f) the product is new, free of all
manufacturing defects, and complies and has been constructed in accordance with
all applicable laws and regulations including, but not in limitation, the
National Manufactured Housing Construction and Safety Standards Act and all
applicable FTC Trade Regulation Rules. In case of any breach of any of the above
warranties (a) through (f), Manufacturer agrees to reimburse GECC for any
amounts advanced plus earned but uncollected charges and to indemnify and hold
GECC harmless against all costs and expenses arising out of or related directly
or indirectly to such breach.
2. GECC will advance one hundred percent (100%) of the net wholesale
invoice amount, of such percentage as has been otherwise agreed upon or as may
be reduced by any Dealer downpayment (which shall be Manufacturer's obligation
to collect). Such amount shall exclude any dealer assistance programs or
subsidies other than volume rebates. A volume rebate is an established
manufacturer marketing practice offered to all Dealers on an equal,
nondiscriminatory basis for volume purchases over a stated period of time of not
less than three months. Rebates on single units or small volume purchases are
not considered eligible.
3. Manufacturer will deliver each product in good and merchantable
condition to the Dealer at such location or place of business as has been
previously approved by GECC under GECC's inventory financing agreement with
Dealer. In the event a product is delivered to Dealer at a location other than
an approved location, Manufacturer shall reimburse GECC for any loss arising out
of such delivery adversely affecting the perfection or priority of GECC's
security interest in such product.
<PAGE> 2
4. If GECC takes actual or constructive possession of a product financed
under this Agreement due to a default on the part of any Dealer, GECC will give
Manufacturer notice followed by a written confirmation requesting repurchase and
state the repurchase price and where Manufacturer is to take delivery.
Manufacturer shall immediately thereafter repurchase such product(s) in
accordance with Section 5 below. Manufacturer shall take delivery of such
product(s) in "as is" condition provided, however, that the repurchase price may
be adjusted as set forth in Section 6 below. The term "default" as used in this
section means the failure by Dealer to meet obligations under agreements with
GECC which in GECC's sole judgment authorizes GECC to take possession of any
products financed under GECC's inventory financing agreement with Dealer.
5. The repurchase price for a product shall be payable prior to taking
delivery or, in GECC's discretion, within 5 days thereafter, and will be the
principal amount due GECC plus, commencing 10 days after GECC's request for
repurchase, earned but uncollected charges. At GECC's option, payment shall be
made by i) Manufacturer's check, or ii) certified or bank check. The repurchase
price shall in no event be reduced by any reserves or other property held by
GECC as security for the performance of Dealer's obligations to GECC.
Notwithstanding the foregoing, Manufacturer's repurchase obligation on each
product shall be reduced by 2% for each Dealer billing period commencing with
the 5th billing period after GECC's advance of funds, provided, however, that
GECC shall have 30 days for administration purposes and provided further that in
the event of a Dealer bankruptcy, Manufacturer's repurchase obligation shall be
fixed as of the filing date.
6. On all products repurchased, in addition to the repurchase price,
Manufacturer will reimburse GECC for the reasonable costs and expenses related
to the repossession, securing and storing of any product. Manufacturer may
deduct from the repurchase price Manufacturer's wholesale cost for any missing
or damaged equipment, furniture or appliances provided the same was specifically
identified on the invoice and was a part of the product as originally delivered
to Dealer.
7. Manufacturer will not be required to repurchase a product if title
thereto has been transferred or assigned by a Dealer to a retail buyer in the
ordinary course of business who has accepted delivery of and used such product,
or if a product has been used as an office or rental or otherwise occupied.
8. Upon the repurchase of any product under the terms of this Agreement,
the Manufacturer shall be subrogated to a corresponding portion of GECC's rights
against the Dealer with respect to such product and the security or title
retention instrument covering such product and GECC agrees to execute and
deliver such partial assignments and other documents relating thereto as the
Manufacturer may reasonably request. Any such repurchase by Manufacturer shall
not constitute a sale or
2
<PAGE> 3
disposition under the Uniform Commercial Code. The Manufacturer shall thereafter
have the duties of a secured party under the Uniform Commercial Code.
9. Manufacturer waives any failure or delay on the part of GECC in
asserting or enforcing any rights of GECC hereunder or against the Dealer.
Manufacturer's liability shall not be affected by any extension or variation of
terms which may be granted in connection with any obligations of Dealer.
10. Any funds of Manufacturer or any other property of Manufacturer that
may now or at any time hereafter be given or left in the possession of GECC, for
any purpose, or that may be in transit to or from GECC for any purpose, are
hereby pledged and delivered to GECC to secure the payment of, or in GECC's
discretion to be offset against, any obligations or liabilities of Manufacturer
to GECC, direct or contingent, whether due or to become due, and whether now
existing or hereafter arising. Manufacturer waives any cause of action against
any Dealer for the collection of any funds offset. A photostatic copy or other
reproduction of this Agreement or of a financing statement shall be sufficient
as a financing statement.
11. Manufacturer hereby authorizes GECC, by any employee of GECC's
designation, to sign, execute, endorse, transfer, file or deliver in the name of
Manufacturer any financing or other statements required by applicable law
concerning GECC's security interest hereunder, any certificates of title or
origin or applications therefor, and any evidences of indebtedness with respect
to any advances made by GECC to finance inventory and to endorse in the name of
Manufacturer any notes, checks, drafts or other instruments for the payment of
money which may come into GECC's possession. This authorization is limited to
those acts reasonably necessary to effectuate this Agreement and to those acts
necessary or desirable in GECC's discretion to secure the indebtedness due
hereunder.
12. In the event that GECC refinances the inventory of a Dealer and such
refinanced inventory was originally floorplanned with another financing source,
then upon notification to Manufacturer, the terms and conditions of this
Agreement shall apply to any of Manufacturer's products in such inventory as
though such products had originally been floorplanned by GECC.
13. Regardless of whether GECC or another finance source provides the
floorplan financing for a product, Manufacturer agrees to honor all warranty
obligations to retail customers whose purchase is financed by GECC and further
agrees to reimburse GECC for any expenses, claims or damage (including
reasonable attorney fees incurred in any litigation), relating to any claim
against GECC for manufacturer defects, breach of warranty or product liability
on Manufacturer's products.
14. Manufacturer agrees that all business operations will be conducted in
compliance with federal, state and local law.
3
<PAGE> 4
Further, all signatures are duly authorized acts of the Manufacturer and the
individual signing on behalf of Manufacturer. This Agreement is not intended to
and does not set up any third party beneficiary rights on behalf of any Dealer
or other person not a party to this Agreement.
15. In the event Manufacturer is a participant in GECC's Instant Access(TM)
program, the following shall apply: Manufacturer shall have a non-exclusive and
non-transferable license to the program's computer software which shall be
revocable by GECC in its discretion. It is expressly understood and agreed that
the software contains "trade secret" information and other data proprietary to
GECC. Manufacturer shall maintain all software in strict confidence and shall
not allow such software to be disclosed, proliferated or duplicated. The license
of software shall be on an "as is" basis and all implied warranties of
merchantability or fitness for a particular purpose are excluded. GECC shall not
be liable for any loss or damage, including, without limitation, any indirect,
special or consequential damages arising from Manufacturer's use of the software
or its performance.
16. All statements of account rendered by GECC to Manufacturer shall be
presumed correct and accurate and constitute an account stated unless, within 30
days after receipt thereof, Manufacturer shall deliver by certified mail, return
receipt requested, written objection thereto specifying any errors in the
statement.
17. Manufacturer shall furnish, at Manufacturer's expense, at least
annually (and sooner if requested by GECC), an audited financial statement, or,
if such statement is not available, a balance sheet, a profit and loss
statement, and such other documents as may be requested by GECC, reflecting the
current financial condition of Manufacturer. Manufacturer further agrees to
provide GECC information related to products financed hereunder, including,
without limitation, product specifications, construction standards, current
price lists, freight practices, any bonus or rebate plans, and warranty
materials. Manufacturer represents that all financial and other information
supplied to GECC is and will be true, complete and accurate. Manufacturer
authorizes GECC to investigate Manufacturer's credit worthiness and credit
capacity as may in GECC's discretion be necessary from time to time.
Manufacturer further authorizes GECC to furnish information concerning
Manufacturer's account to credit reporting agencies and others who may lawfully
receive such information.
18. Time is of the essence with respect to Manufacturer's performance of
obligations hereunder notwithstanding any course of dealing or custom on the
part of GECC to grant extensions of time. Any extension of time shall be a
nonbinding accommodation to Manufacturer and shall not prejudice GECC's right to
demand immediate performance.
19. If any provision of this Agreement should be held to be void, invalid
or unenforceable by any court or other tribunal,
4
<PAGE> 5
the validity and enforceability of the remaining provisions shall
not be affected.
20. In the event Manufacturer declares bankruptcy, makes an assignment for
the benefit of creditors, becomes insolvent or unable to pay debts as they
become due, cease to do business as a going concern, fails to meet consumer
warranty obligations, or otherwise fails to meet any obligation or breaches any
covenant hereunder or under any other agreement with GECC such event shall
constitute a default. A default under the terms of this Agreement shall
constitute a default under any other agreement with GECC. Both parties agree
that the sole and exclusive remedy for any matter or cause of action related
directly or indirectly to any breach of the Agreement shall be a cause of action
sounding in contract and with damages limited to actual and direct damages
incurred. Neither party shall be liable for any consequential, special,
incidental or indirect damages.
21. Waiver of any default is not a wavier of any subsequent default. GECC
shall have the absolute and unconditional right at all times to enforce all
agreements of whatever kind or nature, present or future, in strict accordance
with the written terms thereof, notwithstanding any conduct or custom on the
part of GECC in refraining from doing so at any prior time or times. GECC shall
have the right to refrain from or postpone enforcement of any agreements without
prejudice. The failure to strictly enforce such agreements shall not be
construed as having created a course of dealing between the parties contrary to
the specific terms of the agreements or as having modified, released or waived
the same.
22. Manufacturer hereby waives presentment, protest, demand and notice of
dishonor. GECC may exercise any and all rights available to it as secured party
under the laws of the state governing this Agreement, without limitation or
election, it being agreed that all remedies available to GECC shall be
cumulative. Manufacturer agrees to pay court costs and reasonable attorney's
fees incurred by GECC in enforcing GECC's rights and remedies after default
under this Agreement.
23. Both parties to this Agreement agree to waive any and all rights to a
trial by jury in any action or proceeding, whether in law or in equity, arising
out of or related to this Agreement.
24. This Agreement represents the entire agreement between the parties and
may not be modified or amended except by a writing duly executed by both parties
hereto. All prior representations, promises and conditions whether written or
oral are merged herein and all prior agreements of courses of dealing are hereby
amended. This Agreement shall be binding upon, and inure to the benefit of the
successors and assigns of the parties, provided that no assignment by
Manufacturer shall be valid without GECC's written consent. In the event of
conflict between this and any prior agreement or between this Agreement and any
legend or
5
<PAGE> 6
notation on an invoice, certificate of origin or similar documentation, the
terms of this Agreement shall control.
25. This Agreement shall be effective until terminated by either party,
with or without cause, upon thirty (30) days written notice sent by certified
mail, return receipt requested, but shall continue to be effective as to
obligations assumed hereunder prior to the effective date of termination.
26. This Agreement shall be governed by and construed in accordance with
the laws of the State of Connecticut.
The parties hereto have accepted this Agreement on the dates set
forth below. Accepted at Stamford, Connecticut.
Dated this ________________ day of Dated this 12th day of
______________________________, 19___. January, 1987.
General Electric Credit Corporation: Manufacturer:
__________________________(Seal) BELLCREST HOMES, INC.(Seal)
By:_______________________(Seal) By:__________________(Seal)
Title:_________________________ Title: President
Business Address: 260 Long Ridge Principal Place of Business
Road, Stamford, Connecticut and Mailing Address:
Region Office:_________________ 206 Magnolia St., P.O. Box
630, Millen, Georgia 30442
_______________________________
GUARANTY
As an inducement to GECC to extend inventory financing on Manufacturers'
products purchased directly from Manufacturer by Dealers whose credit and
financial responsibility are acceptable to GECC, but without in any way binding
you to do so, the undersigned do hereby jointly and severally guarantee to GECC
the full and prompt payment and performance by the said Manufacturer of all of
its debts, liabilities and obligations to GECC arising under or directly related
to the Manufacturer Agreement entered into by said Manufacturer.
In the event of default in the performance of this Guaranty, the
undersigned jointly and severally agree to pay all reasonable court costs,
attorneys' fees, and other expenses paid or incurred by GECC in connection with
the enforcement hereof.
This Guaranty shall not be affected or impaired by any modification,
extension, release or variation of the terms of the Manufacturer Agreement, nor
by any waiver of strict compliance with the terms thereof, it being expressly
understood and agreed that notice to or the consent of the undersigned with
respect to any
6
<PAGE> 7
such modification, extension, release, variation or waiver shall not be
required. It is further understood and agreed that the liability of the
undersigned hereunder is direct and unconditional, and may be enforced without
prior resort to any right or remedy, which GECC may have against the
Manufacturer. No delay in exercising any right hereunder or failure to exercise
the same shall operate as a waiver thereof.
To the extent permitted by law, notice of acceptance hereof, notice of
default by the Manufacturer, demand for payment or performance thereof, the
right to a trial by jury in any action hereon, and any and all notices or
demands to which the undersigned might otherwise be entitled are all hereby
expressly waived. This Guaranty shall be governed by and construed in accordance
with the laws of the State of Connecticut.
This Guaranty may not be modified, altered or changed nor may any
provisions hereof be waived, expect by an instrument in writing signed by the
party against whom such modification, alteration, change or waiver is sought to
be enforced. This Guaranty shall be binding upon the successors and assigns of
the undersigned and the benefits hereof shall extend to GECC and include its
successors and assigns.
WITNESS our hands and seals this ____ day of _______________, 19___.
____________________________ _________________________(Seal)
____________________________ By:______________________(Seal)
Title:_________________________
7
<PAGE> 1
EXHIBIT 11.1
BELMONT HOMES, INC.
Computation of weight average shares outstanding
<TABLE>
<CAPTION>
Year ended Year ended Year ended
December 31, 1994 December 31, 1995 December 31, 1996
----------------- ----------------- -----------------
<S> <C> <C> <C>
Historical weighted average
shares outstanding, adjusted
for stock splits 5,250,000 6,947,322 9,411,911
Common stock equivalents -
Employee stock options (1) 16,053 14,378
--------- --------- ---------
Weighted average outstanding
shares 5,250,000 6,963,375 9,426,289
========= ========= =========
</TABLE>
(1) Calculated using the treasury stock method.
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
Name of Subsidiary State of Incorporation Doing Business As
- ------------------ ---------------------- -----------------
<S> <C> <C>
Spirit Homes, Inc. Arkansas Spirit Homes
Delta Homes, Inc. Mississippi Belmont Homes
Belmont Homes Transportation Inc. Mississippi Belmont Homes
Bellcrest Homes, Inc. Georgia Bellcrest Homes
Quality Housing Supply, L.L.C. * Tennessee N/A
Ridge Point Manufacturing, L.L.C. * Alabama N/A
</TABLE>
- ------------------
* Not wholly owned.
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
Board of Directors
Belmont Homes, Inc.
We consent to incorporation by reference in the registration statements on From
S-8 (No. 333-10901) and Form S-3 (No. 333-20477) of Belmont Homes, Inc. and
subsidiaries of our report dated February 21, 1997, relating to the consolidated
balance sheets of Belmont Homes, Inc. and subsidiaries as of December 31, 1995
and 1996 and the related consolidated statements of income, shareholders' equity
and cash flows for each of the years in the three-year period ended December 31,
1996, which report appears in the December 31, 1996 annual report of Form 10-K
of Belmont Homes, Inc. and subsidiaries. We also consent to the reference to our
firm under heading "Experts" in the related prospectuses.
Jackson, Mississippi /s/ KPMG PEAT MARWICK LLP
March 28, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 5,070
<SECURITIES> 8,243
<RECEIVABLES> 7,866
<ALLOWANCES> 37
<INVENTORY> 13,020
<CURRENT-ASSETS> 36,823
<PP&E> 25,048
<DEPRECIATION> 2,730
<TOTAL-ASSETS> 79,355
<CURRENT-LIABILITIES> 23,298
<BONDS> 0
0
0
<COMMON> 947
<OTHER-SE> 52,900
<TOTAL-LIABILITY-AND-EQUITY> 79,355
<SALES> 234,050
<TOTAL-REVENUES> 234,050
<CGS> 197,801
<TOTAL-COSTS> 197,801
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 285
<INCOME-PRETAX> 19,637
<INCOME-TAX> 7,524
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,113
<EPS-PRIMARY> 1.29
<EPS-DILUTED> 1.29
</TABLE>
