10-Q 1 g69469e10-q.txt ORIOLE HOMES CORP 1 SECURITIES AND EXCHANGE COMMISSION ---------------------------------- Washington, D.C. 20549 Form 10Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended: March 31, 2001 Commission File No. 1-6963 ORIOLE HOMES CORP. ---------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Florida 59-1228702 ------------------------------------- ---------------------------------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 1690 S. Congress Ave., Suite 200 Delray Beach, Fl. 33445 -------------------------------------------------- --------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (561) 274-2000 ------------------------------------------------------------------------------ Former name, former address and former fiscal year, if changed since last report. 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, and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the close of the period covered by this report. Class Outstanding at May 11, 2001 ------------------------------------- ----------------------------------- Common Stock, Class A, par value $.10 1,863,649 Common Stock, Class B, par value $.10 2,761,875 2 PART 1 - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ORIOLE HOMES CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS
March 31, December 31, 2001 2000 (Unaudited) (Audited) ------------ ------------ Cash and cash equivalents $ 21,863,419 $ 21,707,756 ------------ ------------ Inventories Land 59,082,277 62,346,437 Homes completed or under construction 32,222,933 34,445,028 Model homes 4,246,928 4,310,488 ------------ ------------ 95,552,138 101,101,953 Less estimated costs of completion included in inventories 15,486,552 16,242,461 ------------ ------------ 80,065,586 84,859,492 ------------ ------------ Property and equipment, at cost Land 81,379 81,379 Buildings 458,855 664,065 Furniture, fixtures and equipment 3,016,976 3,044,175 ------------ ------------ 3,557,210 3,789,619 Less accumulated depreciation 2,089,506 2,127,155 ------------ ------------ 1,467,704 1,662,464 ------------ ------------ Land held for investment, at cost 1,898,910 1,857,300 Other Prepaid expenses 1,745,082 1,713,099 Unamortized debt issuance costs 357,983 392,752 Other assets 2,454,279 2,384,853 ------------ ------------ 4,557,344 4,490,704 ------------ ------------ Total assets $109,852,963 $114,577,716 ============ ============
See notes to the consolidated financial statements. -1- 3 ORIOLE HOMES CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS LIABILITIES AND SHAREHOLDERS' EQUITY
March 31, December 31, 2001 2000 (Unaudited) (Audited) ------------ ------------ Liabilities Line of credit $ 10,000 $ 10,000 Mortgage notes payable 15,488,285 20,415,730 Accounts payable and accrued liabilities 8,145,217 10,022,048 Customer deposits 13,895,218 10,190,140 Senior notes 33,676,200 34,584,277 ------------ ------------ Total liabilities 71,214,920 75,222,195 Shareholders' equity Class A common stock, $.10 par value Authorized - 10,000,000 shares, issued and outstanding - 1,863,649 in 2000 and in 1999 186,365 186,365 Class B common stock, $.10 par value Authorized - 10,000,000 shares, issued and outstanding - 2,761,875 in 2000 and in 1999 276,188 276,188 Additional paid-in capital 19,267,327 19,267,327 Retained earnings 18,908,163 19,625,641 ------------ ------------ Total shareholders' equity 38,638,043 39,355,521 ------------ ------------ Total liabilities and shareholders' equity $109,852,963 $114,577,716 ============ ============
See notes to the consolidated financial statements. -2- 4 ORIOLE HOMES CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended March 31, --------------------------------- 2001 2000 ------------ ------------ Revenues Sales of homes $ 29,913,704 $ 16,076,626 Other operating revenues -- 36,277 Gain on sales of property and equipment and land held for investment, net 102,218 527,139 Interest, rentals and other income 550,873 561,694 ------------ ------------ 30,566,795 17,201,736 ------------ ------------ Costs and expenses Cost of homes sold 26,855,743 14,125,361 Costs relating to other operating revenues 5,903 75,184 Selling, general and administrative expenses 4,422,626 3,753,733 Interest costs incurred 1,787,010 1,437,278 Interest capitalized (deduct) (1,787,010) (1,397,048) ------------ ------------ 31,284,272 17,994,508 ------------ ------------ Net (loss) $ (717,477) $ (792,772) ============ ============ Net (loss) per Class A and B common share available for common stockholders - Basic and Diluted $ (.16) $ (.17) ============ ============ Weighted average number of common stock outstanding - Basic and Diluted 4,625,524 4,625,524 ============ ============
See notes to consolidated financial statements. -3- 5 ORIOLE HOMES CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Three Months Ended March 31, --------------------------------- 2001 2000 ------------ ------------ Cash flows from operating activities Net (loss) $ (717,477) $ (792,772) Adjustments to reconcile net (loss) to net cash provided by (used in) operating activities Depreciation 113,430 122,146 Amortization 62,067 120,406 Gain on sales of property and equipment and land held for investment, net (115,134) (527,139) (Increase) decrease in operating assets Receivables -- 261,875 Inventories 4,800,873 2,214,929 Other assets (107,784) 191,522 Increase (decrease) in operating liabilities Accounts payable and accrued liabilities (1,876,832) (843,645) Customer deposits 3,705,078 1,034,405 ------------ ------------ Total adjustments 6,581,698 2,574,499 ------------ ------------ Net cash provided by operating activities 5,864,221 1,781,727 ------------ ------------ Cash flows from investing activities Return on investment in joint ventures -- 1,242,240 Capital expenditures (49,113) (778,316) Proceeds from the sale of property and equipment and land held for investment 197,000 1,092,999 ------------ ------------ Net cash provided by investing activities 147,887 1,556,923 ------------ ------------ Cash flows from financing activities Proceeds from mortgage notes 4,071,615 394,243 Payment of mortgage notes (8,999,060) (1,570,166) Repurchase of senior notes (929,000) (1,545,000) ------------ ------------ Net cash (used in) financing activities (5,856,445) (2,720,923) ------------ ------------ Net increase in cash and cash equivalents 155,663 617,727 Cash and cash equivalents at beginning of period 21,707,756 18,708,081 ------------ ------------ Cash and cash equivalents at end of period $ 21,863,419 $ 19,325,808 ============ ============ Supplemental disclosures of cash flow information Cash paid during the period for: Interest (net of amount capitalized) $ 900,945 $ 1,432,045 Income taxes $ -- $ --
The accompanying notes are an integral part of these statements. -4- 6 ORIOLE HOMES CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. The consolidated balance sheet as of March 31, 2001 and the related statements of operations and cash flows for the three months ended March 31, 2001 and 2000 of Oriole Homes Corp. (together with its consolidated subsidiaries, the "Company") have been prepared by the Company without audit. In the opinion of management of the Company, all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of the unaudited interim periods have been reflected herein. Certain footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted. It is suggested that these consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company's December 31, 2000 annual report on Form 10K. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. 2. The results of operations for the three months ended March 31, 2001 are not necessarily indicative of the results for the entire year. The Company allocates certain costs to units delivered based upon estimates of the number of units projected to be delivered and the associated timing of the deliveries. When it becomes apparent that the number of deliveries in a project will vary significantly from the estimates, the Company will revise these cost allocations, which will affect results of operations. The Company's consolidated statements of operations for the three-month period ended March 31, 2001 includes revenue and expenses of the Vizcaya project acquired in August of 2000. Accordingly, the results of operations for the three-month period ended March 31, 2001 are not directly comparable to the results of operations for the three-month period ended March 31, 2000. 3. Backlog of contracts for sales of homes:
March 31, 2001 December 31, 2000 ----------------------------- -------------------------------- Units Amounts Units Amounts --------- ----------------- ------------ --------------- Single-family 355 $ 83,718,127 294 $63,914,626 Multi-family 190 27,969,847 166 24,047,090 --- ------------ ----------- ----------- Total 545 $111,687,974 460 $87,961,716 === ============ =========== ===========
The Vizcaya project contributed 128 of the 545 total units and $24.8 million of the $111.7 million backlog as at March 31, 2001. -5- 7 ORIOLE HOMES CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4. Senior Notes On January 13, 1993, the Company issued 12 1/2% senior notes ("Senior Notes"), due January 15, 2003. The Senior Notes have a face value of $70,000,000 and were issued at a discount of $1,930,600. The Senior Notes are senior unsecured obligations of the Company currently subject to redemption at the Company's option at 100% of the principal amount. Under the terms of the indenture ("Indenture"), the Company must make sinking fund payments of $17,500,000 by January 15, 2001 and January 15, 2002. As of December 31, 2000, the Company had satisfied the requirements of each of the sinking fund payments. The Indenture also contains provisions restricting the amount and type of indebtedness the Company may incur, the purchase by the Company of its stock and the payment of cash dividends. At March 31, 2001, the payment of cash dividends is prohibited and will be restricted until the Company posts cumulative net income in excess of $78,784,000. 5. Line of Credit The Company may borrow up to $10,000,000 at an interest rate of prime plus 1.5% under a revolving loan agreement (line of credit) with a bank, secured by a mortgage on certain real property. At March 31, 2001, $9,990,000 was available under this line of credit. The loan agreement expires June 30, 2001 and the Company anticipates it will be able to further extend the line of credit on terms comparable to the current arrangement or obtain a replacement credit facility if necessary. The line of credit can be used to finance ongoing development and construction of residential real estate and short-term capital needs and only requires monthly interest payments. The loan agreement contains typical restrictions and covenants, the most restrictive of which are: a. the Company shall maintain, at all times through the life of the loan, a consolidated tangible net worth of not less than $37,000,000; and b. the Company's ability to incur additional debt is restricted. 6. Mortgage Notes On August 8, 2000, in connection with the Vizcaya project, a wholly owned subsidiary of the Company borrowed an aggregate principal amount of $26,787,200, of which $9,580,430 is for future construction costs (the "Vizcaya Loan"). The Vizcaya Loan is evidenced by a mortgage note, which is due on February 8, 2003 and bears interest at a floating rate equal to the Prime Rate, currently 7.5% per annum. The Vizcaya Loan is secured by real property and other assets acquired in connection with the acquisition of the Vizcaya project. The Company has agreed to guarantee up to an aggregate of $2.0 million of the Vizcaya Loan. Certain individual guarantors, not related to the Company, have agreed to jointly and severally guarantee the Vizcaya Loan. -6- 8 7. Income taxes At March 31, 2001, the Company has no deferred tax benefit related to its net operating loss as the Company's ability to realize these benefits is not "more likely than not" as defined by SFAS Statement No. 109 "Accounting for Income Taxes". 8. Segment information The Company has the following two reportable segments: home building and rental operations. The home building segment develops and sells residential properties and planned communities. The rental operations segment consists of no units at March 31, 2001 and 32 units at March 31, 2000. Selected segment information is set forth below (in thousands): Three Months Ending March 31, ------------------------ 2001 2000 $ $ ------- ------- Revenues Home Building 30,450 17,060 Rental Operations -- 36 Other 117 106 ------- ------- Total 30,567 17,202 ======= ======= Segment net income (loss) Home Building (795) (799) Rental Operations (--) (39) Other 78 45 ------- ------- Total (717) (793) ======= ======= 9. Commitments and contingencies The Company is involved, from time to time, in litigation arising in the ordinary course of business, none of which is expected to have a material adverse effect on the Company's consolidated financial position or results of operations. The Company is also subject to the normal obligations associated with entering into contracts for the purchase, development and sale of real estate in the routine conduct of its business. -7- 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW GENERAL The results of operations for interim periods during the year are not necessarily indicative of results of operations for the fiscal year. The Company allocates certain costs to units delivered based upon estimates of the number of annual units projected to be delivered and the associated timing of the deliveries. In past years, the Company has experienced inventory valuation adjustments reducing net income when expected deliveries fell short of expectations. These included adjustments of $13.9 million in 1995, $21.6 million in 1997 and $4.9 million in 1999. RESULTS OF OPERATIONS The Company's consolidated statements of operations for the three months ended March 31, 2001 includes the results of operations of the Vizcaya project acquired on August 8, 2000. Accordingly, the results of operations for the three-month period ended March 31, 2001 are not directly comparable to the results of operations for the three-month period ended March 31, 2000. Among other things, the acquisition contributed the delivery of 62 homes producing aggregate revenue of $12.6 million and net income of $643,000 to results for the three-month period ended March 31, 2001. The backlog at March 31, 2001 related to the Vizcaya project is 128 homes having aggregate revenue of $24.8 million. THREE MONTHS ENDED MARCH 31, 2001 COMPARED TO THREE MONTHS ENDED MARCH 31, 2000 The Company's revenues from home sales increased $13.8 million (81.3%) to $29.9 million during the first quarter of 2001 as compared to the comparable quarter of 2000 primarily as a result of an increase in the number of homes delivered. Oriole delivered 167 homes in the 2001 first quarter compared to 97 in the same period in 2000. The average selling price of homes delivered increased from $165,700 per home to $179,000 primarily as a result of the higher selling prices of homes that were part of the Vizcaya project. The number of contracts signed at 252 and the aggregate dollar value of those contracts at $53.6 million increased in the 2001 first quarter from 193 and $30.3 million, respectively, from the same period in 2000, primarily due to the Vizcaya project and the initial phase of a multi-family condominium project with The Celebration Company, a subsidiary of The Walt Disney Company. Non-homebuilding revenues decreased to $102,218 during the quarter ended March 31, 2001 from $527,139 in the quarter ended March 31, 2000, primarily because of reduced revenues from the sale of investment properties and the absence of rental revenues from rental properties sold by the Company in the first quarter of 2000. Interest, rentals and other income decreased slightly during the first quarter of 2001 as compared to the same period in 2000. Cost of home sales increased to $26.9 million (90.8%) from $14.1 million in 2000 primarily as a result of an increase in the number of homes delivered. As a percentage of home sales, cost of sales increased to 89.8% from 87.9% in the first quarter of 2001 primarily due to the Company's decision to reduce sales prices on certain remaining homes to close out completed communities. Selling, general and administrative expenses increased $0.7 million in dollar value and decreased as a percentage of revenues to 14.5% from 22.0% as compared to the same period in 2000 due to increased selling costs associated with the $13.4 million increase in revenues. The Company incurred a net loss for the quarter ended March 31, 2001 of $717,000 or $.16 per share compared to a net loss of $793,000 or $0.17 per share during the same period in 2000. Earnings before interest, taxes, depreciation and amortization (EBITDA) increased $.4 million to $1.1 million in the first quarter of 2001 as compared to the same period in 2000. -8- 10 LIQUIDITY AND CAPITAL RESOURCES The Company's cash requirements vary from period to period depending upon changes in inventory, land acquisition and development requirements, construction in progress and, to a lesser extent, the Company's current net income. The Company obtains funds for its cash requirements from operations, the sale of investment property and borrowings. In connection with land acquisitions and development, the Company may borrow money secured by land and improvements. During the first three months of 2001, the Company used a portion of available cash to purchase $0.9 million of senior notes and to pay down $9.0 million of mortgage notes. At March 31, 2001, the Company had approximately $21.9 million in cash and cash equivalents and the availability of substantially all of its $10.0 million revolving line of credit. The line of credit expires June 30, 2001. The Company anticipates that it will be able to further extend the line of credit on terms comparable to the existing line or obtain a replacement credit facility if necessary. The Company believes that funds from operations, available cash and cash available under its line of credit will be sufficient to provide for its cash requirements through March 31, 2002. FORWARD LOOKING STATEMENTS Certain statements made in this document, including certain statements made in Management's Discussion and Analysis, are "forward looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include statements which are predictive in nature, which depend upon or refer to future events or conditions, which include words such as "expects," "anticipates," "intends," "plans," "believes," "estimates," or similar expressions, or which involve hypothetical events. In addition, any statements concerning future financial performance (including future revenues, earnings, or growth rates), ongoing business strategies or prospects, and possible future Company actions, which may be provided by management, are also forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based upon current expectations and projections about future events and are subject to risks, uncertainties, and assumptions about the Company, economic and market factors and the industry in which the Company does business, among other things. These statements are not guaranties of future performance and the Company has no specific intention to update these statements. Actual events and results may differ materially from those expressed or forecasted in forward-looking statements due to a number of factors. The principal important risk factors that could cause the Company's actual performance and future events and actions to differ materially from such forward-looking statements, include but are not limited to the following: changes in consumer preferences, increases in interest rates, a reduction in labor availability, increases in the cost of labor and materials, changes in the regulatory environment particularly as relates to zoning and land use, competitive pricing pressures, changes in federal income tax laws, the general state of the economy, both nationally and in the Company's market, and unseasonable weather trends. -9- 11 PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K Exhibits and Reports on Form 8K (a) Exhibits None (b) There were no reports on Form 8-K filed for the three months ended March 31, 2001. -10- 12 SIGNATURES Pursuant to the requirements of Section 13, 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. ORIOLE HOMES CORP. (Registrant) DATE: MAY 14, 2001 /s/ R.D. LEVY -------------------------- --------------------------------------- R.D. Levy, Chairman of the Board, Chief Executive Officer, Director DATE: MAY 14, 2001 /s/ J. PIVINSKI --------------------------- --------------------------------------- J. Pivinski, Vice President - Finance, Treasurer, Chief Financial Officer -11-