-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Sn+YKPQLlPoc0LKyrrwMsbtNLEq3xCoQt417s/BWCyn/rOOyDSMkO24XCnH2lwBB xbY620B5CAwZ/1IfaiGNBA== 0000950144-96-008465.txt : 19961120 0000950144-96-008465.hdr.sgml : 19961120 ACCESSION NUMBER: 0000950144-96-008465 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19961118 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: ORIOLE HOMES CORP CENTRAL INDEX KEY: 0000074928 STANDARD INDUSTRIAL CLASSIFICATION: OPERATIVE BUILDERS [1531] IRS NUMBER: 591228702 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-06963 FILM NUMBER: 96668247 BUSINESS ADDRESS: STREET 1: 1690 S CONGRESS AVE STE 200 CITY: DELRAY BEACH STATE: FL ZIP: 33445 BUSINESS PHONE: 4072742000 FORMER COMPANY: FORMER CONFORMED NAME: ORIOLE LAND & DEVELOPMENT CORP DATE OF NAME CHANGE: 19720615 10-K/A 1 ORIOLE HOMES CORP. 10-K/A #2 12/31/95 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------------------- FORM 10-K/A-2 Annual Report pursuant to Section 13 of The Securities Exchange Act of 1934 For the fiscal year ended December 31, 1995 File No. 1-6963 ORIOLE HOMES CORP. ------------------ 1690 South Congress Avenue, Suite 200, Delray Beach, Florida 33445 (407) 274-2000 Florida 59-1228702 - ------------------------------------ ---------------------------- (State of Incorporation) (I.R.S. Employer I.D.) Securities registered pursuant of Section 12(b) of the act: Name of Each Exchange on Title of Each Class Which Registered - ------------------------------------ ------------------------ Class A Common Stock, $.10 par Value American Stock Exchange Class B Common Stock, $.10 par Value American Stock Exchange 12 1/2% Senior Notes due 2003 ------------------------- The Registrant (1) HAS filed all reports required to be filed by Section 13 of the Securities Exchange Act of 1934 during the preceding twelve months; and (2) HAS been subject to the filing requirements for at least the past 90 days. 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/A or any amendment to this form 10-K/A [X]. As of March 11, 1996, the Company had outstanding 1,891,249 shares of its Class A Common Stock and 2,734,275 shares of its Class B Common Stock. The aggregate market value of voting stock held by non-affiliates of the Registrant is $24,173,243 as of March 11, 1996. Part II is partially incorporated by reference from the Registrant's Annual Report to Shareholders for the year ended December 31, 1995, and Part III is incorporated by reference from the Registrant's Proxy statement for the 1996 Annual Meeting. 2 ITEM 8 Item 8 is hereby amended by deleting the Consolidated Statements of Operations Table contained in the Company's 1995 Form 10-K and substituting the following table in lieu thereof: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ORIOLE HOMES CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, ASSETS LIABILITIES AND SHAREHOLDERS' EQUITY
1995 1994 ---- ---- Cash and cash equivalents $ 3,275,615 $ 14,609,489 Receivables Mortgage notes (Note B) 280,562 1,098,688 Due at closing 114,700 167,609 Income taxes (Note I) 1,660,846 -- ------------ ------------ 2,056,108 1,266,297 ------------ ------------ Inventories (Notes A and C) Land 103,435,218 112,721,638 Houses and condominiums completed or under construction 48,306,006 40,497,339 Model houses and condominiums 3,386,194 2,199,908 ------------ ------------ 155,127,418 155,418,885 Less estimated costs of completion included in inventories 23,699,916 28,592,120 ------------ ------------ 131,427,502 126,826,765 ------------ ------------ Property and equipment (at cost) (Notes A, H and O) Land 7,168,046 7,170,113 Buildings 22,283,655 22,473,045 Furniture, fixtures and equipment 5,445,387 5,432,784 ------------ ------------ 34,897,088 35,075,942 Less accumulated depreciation 10,892,078 10,447,207 ------------ ------------ 24,005,010 24,628,735 ------------ ------------ Other Prepaid expenses 2,378,932 1,990,535 Unamortized debt issuance costs 2,098,760 2,277,529 Investment in and advances to joint ventures (Note E) 5,625,000 7,000,000 Land held for investment (at cost) 3,001,783 2,996,901 Deferred income taxes (Note I) 458,375 -- Other assets 5,151,232 3,061,755 ------------ ------------ 18,714,082 17,326,720 ------------ ------------ Total assets $179,478,317 $184,658,006 ============ ============
The accompanying notes are an integral part of these statements. 3 ORIOLE HOMES CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, LIABILITIES AND SHAREHOLDERS' EQUITY
1995 1994 ---- ---- Liabilities Line of credit (Note G) $ 8,500,000 $ - Mortgage notes payable (Note H) 15,041,573 17,419,250 Accounts payable 7,328,804 6,464,417 Dividends payable -- 993,409 Customer deposits (Note J) 6,072,046 4,975,199 Accrued expenses and other liabilities (Note K) 8,393,132 7,820,330 Deferred income taxes (Note I) -- 1,104,706 Senior notes (Note L) 66,481,313 66,457,682 ------------ ------------ Total liabilities 111,816,868 105,234,993 ------------ ------------ Shareholders' equity (Notes L, M and N) Class A common stock, $.10 par value Authorized - 10,000,000 shares Issued - 1,891,249 in 1995 and 1,893,349 in 1994 189,125 189,335 Class B common stock, $.10 par value Authorized - 10,000,000 shares Issued - 2,734,275 in 1995 and 2,732,175 in 1994 273,428 273,218 Additional paid-in capital 19,267,327 19,267,327 Retained earnings 47,931,569 59,693,133 ------------ ------------ Total shareholders equity 67,661,449 79,423,013 ------------ ------------ Total liabilities and shareholders' equity $179,478,317 $184,658,006 ============ ============
4 ORIOLE HOMES CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31,
1995 1994 1993 ----------------- ----------------- ------------------ Revenues Sales of houses and condominiums $ 73,409,093 $ 110,116,572 $ 98,302,003 Sales of land 1,610,441 1,959,779 891,041 Other operating revenues 3,070,455 3,365,024 3,600,196 Gain on sales of property and land held for investment, net 173,619 202,374 42,258 Interest, rentals and other income (Note O) 3,972,662 4,333,548 3,260,305 ------------- ------------- ------------- 82,236,270 119,977,297 106,095,803 ------------- ------------- ------------- Costs and expenses Cost of houses and condominiums sold 62,232,488 91,778,577 80,682,884 Non-recurring write-down of inventory (Note C) 13,917,025 -- -- Cost of land sold 1,384,516 1,726,119 772,020 Costs relating to other operating revenues 3,180,214 2,804,767 2,517,756 Selling, general and administrative expenses 15,532,512 16,313,685 16,001,923 Interest costs incurred 10,653,413 10,430,616 10,154,739 Interest capitalized (deduct) (9,898,999) (9,736,452) (9,997,908) ------------- ------------- ------------- 97,001,169 113,317,312 100,131,414 ------------- ------------- ------------- Income (loss) before provision for (benefit from) income taxes and extraordinary charge (14,764,899) 6,659,985 5,964,389 Provision for (benefit from) income taxes (Note I) (3,003,335) 2,523,065 2,324,023 ------------- ------------- ------------- Income (loss) before extra- ordinary charge (11,761,564) 4,136,920 3,640,366 Extraordinary charge - loss on early retire- ment of debt, net of income taxes -- -- (999,288) ------------- ------------- ------------- Net income (loss) $ (11,761,564) $ 4,136,920 $ 2,641,078 ============= ============= ============= Net income (loss) per common share before extraordinary charge $ (2.54) $ .89 $ .79 Extraordinary charge -- -- (.22) ------------- ------------- ------------- Net income (loss) per Class A and Class B common share $ (2.54) $ .89 $ .57 ============= ============= =============
The accompanying notes are an integral part of these statements. 5 ORIOLE HOMES CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31,
1995 1994 1993 ---- ---- ---- Increase (decrease) in cash Cash flows from operating activities Net income (loss) $ (11,761,564) $ 4,136,920 $ 2,641,078 Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities Depreciation 1,258,516 1,234,118 1,265,836 Amortization 437,006 474,897 333,062 Deferred income taxes (1,563,081) 382,344 (11,748) Gain on sales of property and equipment and other assets (173,619) (202,374) (42,258) Loss on early retirement of debt -- -- 1,602,194 Changes in assets and liabilities (Increase) decrease in receivables (789,811) 356,362 250,624 (Increase) decrease in inventories (4,596,546) 1,575,418 (10,058,507) (Increase) in other assets (2,477,874) (2,512,938) (650,765) Increase (decrease) in accounts payable 864,387 (43,474) 1,256,048 Increase (decrease) in customer deposits 1,096,847 (1,116,371) 1,110,379 Increase (decrease) in accrued expenses and other liabilities 572,802 (113,292) 3,773,250 ------------- ------------- ------------- Total adjustments (5,371,373) 34,690 (1,171,885) ------------- ------------- ------------- Net cash (used in) provided by operating activities (17,132,937) 4,171,610 1,469,193 ------------- ------------- ------------- Cash flows from investing activities Return of (investment in) joint ventures 1,375,000 (3,500,000) (3,500,000) Land held for investment (4,882) (205,451) -- Capital expenditures (1,212,533) (702,466) (416,120) Proceeds from sales of property and equipment 747,170 780,966 152,771 ------------- ------------- ------------- Net cash provided by (used in) investing activities 904,755 (3,626,951) (3,763,349) ------------- ------------- ------------- Cash flows from financing activities Proceeds from mortgage notes 345,508 3,444,962 -- Payment of mortgage notes (2,723,185) (425,191) (160) Borrowings under line of credit agreement 20,500,000 9,500,000 196,317 Repayments under line of credit agreement (12,000,000) (9,596,317) (13,100,000) Payment of term loan -- -- (22,000,000) Repurchase of debentures -- -- (18,563,000) Proceeds from issuance of 12 1/2% senior notes -- -- 68,069,400 Repurchase of senior notes (126,000) (1,910,000) -- Issuance costs (108,606) (75,000) (2,681,514) Dividends paid (993,409) (1,524,156) (1,918,458) ------------- ------------- ------------- Net cash provided by (used in) financing activities 4,894,308 (585,702) 10,002,585 ------------- ------------- ------------- Net (decrease) increase in cash (11,333,874) (41,043) 7,708,429 Cash and cash equivalents at beginning of year 14,609,489 14,650,532 6,942,103 ------------- ------------- ------------- Cash and cash equivalents at end of year $ 3,275,615 $ 14,609,489 $ 14,650,532 ============= ============= ============= Supplemental disclosures of cash flow information Cash paid during the year for: Interest (net of amount capitalized) $ 610,777 $ 624,828 $ -- Income taxes $ 643,049 $ 3,268,315 $ 1,501,243
The accompanying notes are an integral part of these statements. 6 ORIOLE HOMES CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
Common Stock -------------------------------------------------------------- Class A Class B Additional -------------------------- -------------------------- Paid-in Retained Shares Amount Shares Amount Capital Earnings ------ ------ -------- ------ ------- -------- Balance at January 1,1993 1,895,564 $ 189,557 2,729,960 $ 272,996 $ 19,267,327 $ 57,351,158 Net income for 1993 -- -- -- -- -- 2,641,078 Stock conversion (15) (2) 15 2 -- -- Cash dividends Class A common stock $.55 per share -- -- -- -- -- (1,042,555) Class B common stock $.60 per share -- -- -- -- -- (1,637,981) ------------ ------------ ------------ ------------ ------------ ------------ Balance at December 31,1993 1,895,549 189,555 2,729,975 272,998 19,267,327 57,311,700 Net income for 1994 -- -- -- -- -- 4,136,920 Stock conversion (2,200) (220) 2,200 220 -- -- Cash dividends Class A common stock $.35 per share -- -- -- -- -- (663,002) Class B common stock $.40 per share -- -- -- -- -- (1,092,485) ------------ ------------ ------------ ------------ ------------ ------------ Balance at December 31, 1994 1,893,349 189,335 2,732,175 273,218 19,267,327 59,693,133 Net loss for 1995 -- -- -- -- -- (11,761,564) Stock conversion (2,100) (210) 2,100 210 -- -- ------------ ------------ ------------ ------------ ------------ ------------ Balance at December 31, 1995 1,891,249 $ 189,125 2,734,275 $ 273,428 $ 19,267,327 $ 47,931,569 ============ ============ ============ ============ ============ ============
The accompanying notes are an integral part of these statements. 7 ORIOLE HOMES CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION Principles of Consolidation The accompanying Consolidated Financial Statements include the accounts of Oriole Homes Corp. and all wholly-owned subsidiaries (the "Company"). Significant intercompany accounts and transactions have been eliminated in consolidation. Operations The Company, a Florida corporation, is engaged principally in the design, construction, marketing and sale of single and multi-family residential homes (including condominiums) primarily in southeast (Palm Beach, Broward and Martin Counties) Florida. The Company also has developments in Naples and Ocala, Florida. Revenue Recognition The Company records revenues and profits from sales of real estate in accordance with generally accepted accounting principles governing profit recognition for real estate transactions. Inventories Inventories are carried at cost, plus accumulated development and construction costs (including capitalized interest and real estate taxes). House and condominium inventories which are completed and being held for sale aggregate approximately $13,275,000 in 1995 and $12,152,000 in 1994. The accumulated costs of land, houses and condominiums are not in excess of estimated net realizable value. Estimated net realizable value is based upon sales achieved and backlog in the normal course of business less estimated cost to complete and dispose of the property. The Company's management, on an on-going basis, reviews individual projects in inventory for impairment. Interest Capitalization The Company follows the practice of capitalizing certain interest costs incurred on land under development and houses and condominiums under construction. Such capitalized interest is included in cost of house and condominium sales when the units are delivered. During the years 1995, 1994, and 1993 respectively, the Company capitalized interest in the amount of $9,898,999, $9,736,452 and $9,997,908 and expensed as a component of cost of goods sold $6,270,173, $9,313,121 and $10,036,456. 8 ORIOLE HOMES CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION - Continued Depreciation The Company provides for depreciation of property and equipment by the straight-line and accelerated methods over the following estimated useful lives of the various classes of depreciable assets: Buildings 25 to 27 years Furniture, fixtures and equipment 5 to 7 years Debt Issuance Costs and Unamortized Discount Costs incurred in connection with obtaining debt have been deferred and are being amortized by the interest method over the term of the debt. Cash Equivalents Cash equivalents consist of highly liquid investments with maturities of three months or less when purchased. Concentration of Credit Risk The Company's cash and cash equivalents are placed mainly with one institution with a high credit rating. The carrying amount approximates fair value due to the short maturity of these instruments. Net Income Per Share Earnings (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares outstanding during each year: 4,625,524 shares in 1995, 1994 and 1993. Advertising The Company expenses advertising costs as incurred, except for sales brochures and site plans which are accounted for in "Other Assets." Sales brochures and site plans are expensed as the materials are used or distributed to customers. Advertising expense for the years ended December 31, 1995, 1994 and 1993 was $1,411,412, $1,713,158 and $1,989,756, respectively. (continued) 9 ORIOLE HOMES CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION - Continued Estimates In preparing financial statements in conformity with generally accepted accounting principles, management makes estimates and assumptions (i.e. estimated costs to complete for construction inventory or estimated net realizable value) that affect the reported amounts and disclosures of assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Income Taxes The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for 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. Financial Statement Reclassification Certain amounts reflected in the consolidated financial statements for the year ended December 31, 1994 have been reclassified to conform to the presentation for the year ended December 31, 1995. NOTE B - MORTGAGE NOTES First and second mortgage notes receivable bear interest at rates ranging from 7% to 10%. The Company's receivables are primarily mortgages which are collateralized by real estate. Minimum payments required on the first and second mortgage notes in each of the five years subsequent to December 31, 1995 are: 1996 - $3,546; 1997 - $3,844; 1998 - $4,167; 1999 - $266,234 and 2000 - $2,771. NOTE C - SPECIAL CHARGE The Company recorded, in the fourth quarter, a non-recurring charge of $13,917,025 ($11,079,381, net of tax benefit, or $2.40 per common share) related to the write-down of certain land inventory to its estimated net realizable value. The write-down pertains to land inventory for approximately 360 unsold housing units located in three developments. These three developments were originally purchased in 1989 and 1991. 10 ORIOLE HOMES CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE D - LIFE INSURANCE The Company purchased life insurance on the lives of two of its officers and their spouses (officers) who own significant shares of common stock of the Company. An irrevocably designated trustee of the officers is the beneficiary. The accumulated premiums on the above policies during the years ended December 31, 1995 and 1994 were $641,352 and $427,568, respectively, and are classified as other assets. Upon the death of the officers or termination of the policies, the Company shall receive an amount equal to the aggregated premiums paid less any policy loans and unpaid interest or cash withdrawals received by the Company. In connection with the policies, the Company has an option with the officers to acquire all or any part of the Class A or Class B common stock of the Company owned by such individuals at the market price of such securities at the time of their death. NOTE E - INVESTMENT IN AND ADVANCES TO JOINT VENTURES The Company entered into three joint venture agreements during 1995 and 1994. The first two joint ventures construct and sell homes. The third joint venture provides mortgage financing for the Company's home sales. The joint ventures are accounted for using the cost method. The Company's investment and advances are as follows:
1995 1994 --------------- --------------- Advances $ - $ 1,350,000 Investment 5,625,000 5,650,000 --------------- --------------- $ 5,625,000 $ 7,000,000 =============== ===============
11 ORIOLE HOMES CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE F - MORTGAGE SUBSIDIARY South Florida Residential Mortgage Company (SFRMC), a wholly-owned subsidiary of the Company, provides mortgage financing services. Summarized financial information for SFRMC is as follows:
1995 1994 ------------ ------------ Assets First mortgage notes receivable $ - $ 513,465 Other assets 43,058 20,645 Due from parent company 848,940 414,875 ------------ ------------ Total assets $ 891,998 $ 948,985 ============ ============ Liabilities and shareholder's equity Other liabilities $ 6,735 $ 29,787 Shareholder's equity 885,263 919,198 ------------ ------------ Total liabilities and shareholder's equity $ 891,998 $ 948,985 ============ ============ Revenues $ 50,138 $ 293,734 Expenses 104,547 264,720 ------------ ------------ Income (loss) before provision for (benefit from) income taxes (54,409) 29,014 Provision for (benefit from) income taxes (20,474) 10,918 ------------ ------------ Net income (loss) $ (33,935) $ 18,096 ============ ============
NOTE G - LINE OF CREDIT A revolving loan agreement (line of credit) with a bank, collateralized by land, provides up to $15,000,000 of borrowings, of which $6,500,000 is available at December 31, 1995, at an interest rate of prime plus 1.5%. On January 12, 1996, the line of credit was increased to $20,000,000. The agreement expires July 1, 1997. The line of credit can be used to finance ongoing development and construction of residential real estate and short-term capital needs and will only require monthly interest payments. The credit agreement has no compensating balance arrangements and contains typical restrictions and covenants, the most restrictive of which include the following: a. The Company shall maintain, at all times through the life of the loan, its consolidated tangible net worth at not less than $60,000,000. b. The Company's ability to incur additional debt is restricted by covenants in the agreement. (continued) 12 ORIOLE HOMES CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE G - LINE OF CREDIT - Continued Average interest rates and balances outstanding, for revolving lines of credit payable to banks, based on a weighted average are as follows:
1995 1994 1993 ------------ ------------- ------------- Daily average outstanding borrowings $ 7,045,000 $ 1,805,944 $ 2,962,230 Average interest rate during the period 8.2% 8.6% 6.2% Interest rate at the end of the period 10.0% 10.0% 7.5% Maximum outstanding during the year $ 12,500,000 $ 7,010,000 $ 35,000,000
NOTE H - MORTGAGE NOTES PAYABLE Mortgage notes payable at December 31, 1995 and 1994, are summarized as follows:
1995 1994 ----------- ---------- Mortgage note, interest at 8.875%, requires monthly interest payments of $51,031 with principal balance due on February 1, 1996; collateralized by land, buildings and equipment (1) $6,900,000 $6,900,000 Mortgage note, interest at 9.2%, requires monthly payments of $63,965 including interest, matures on February 1, 1996; collateralized by land, buildings, equipment and rents (1) 7,446,065 7,499,304 Mortgage note, interest at 10%, requires monthly payments of $25,766, including interest, matured on July 1, 1995; collateralized by land -- 2,669,946
(continued) 13 ORIOLE HOMES CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE H - MORTGAGE NOTES PAYABLE - Continued
1995 1994 ------------ ------------ Mortgage note, interest at prime plus 3.25%, requires interest with principal payments as land is sold, matures May 31, 1996; collateralized by land $ 695,508 $ 350,000 ------------ ------------ $ 15,041,573 $ 17,419,250 ============ ============
(1) On February 20, 1996, the Company consolidated and refinanced the mortgage notes under the following terms: maturity date of March 1, 2003; interest rate at 7.15%; monthly principal and interest payment of $91,696. NOTE I - INCOME TAXES Deferred income taxes and benefits are provided for significant income and expense items recognized in different years for tax and financial reporting purposes. Temporary differences which give rise to significant deferred tax assets (liabilities) follow:
1995 1994 ------------ ------------- State net operating loss carryforward $ 310,986 $ -- Inventory write-down adjustment 5,232,802 -- Warranties on houses and condominiums 770,245 925,592 Percentage of completion 174,878 342,490 Uniform cost capitalization 184,757 178,463 ------------ ------------ Total deferred tax assets, before valuation allowance 6,673,668 1,446,545 Less: valuation allowance 2,706,144 -- ------------ ------------ Total deferred tax assets, net of valuation allowance 3,967,524 1,446,545 ------------ ------------ Installment sales -- (13,990) Deferred expenses (3,333,765) (2,315,641) Accelerated depreciation (175,384) (221,620) ------------ ------------ Total deferred tax liabilities (3,509,149) (2,551,251) ------------ ------------ Net deferred tax asset (liability) $ 458,375 $ (1,104,706) ============ ============
(continued) 14 ORIOLE HOMES CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE I - INCOME TAXES - Continued The Company files consolidated income tax returns. The components of the provision for (benefit from) income taxes are as follows:
Current Deferred Total ------- -------- ----- Year Ended December 31, 1995, Federal $ (1,440,254) $ (1,582,344) $ (3,022,598) State -- 19,263 19,263 ------------- ------------- ------------- $ (1,440,254) $ (1,563,081) $ (3,003,335) ============= ============= ============= Year Ended December 31, 1994, Federal $ 1,848,612 $ 305,537 $ 2,154,149 State 292,109 76,807 368,916 ------------- ------------- ------------- $ 2,140,721 $ 382,344 $ 2,523,065 ============= ============= ============= Year Ended December 31, 1993, Federal $ 1,478,474 $ (3,500) $ 1,474,974 State 254,391 (8,248) 246,143 ------------- ------------- ------------- $ 1,732,865 $ (11,748) $ 1,721,117 ============= ============= =============
The reasons for the difference between the total tax expense and the amount computed by applying the statutory federal income tax rate to income before income taxes are as follows:
1995 1994 1993 ---------------- ------------- ------------- Provision for (benefit from) taxes at statutory rates (34%) $ (5,020,066) $ 2,264,395 $ 1,483,147 State income taxes, net of federal tax benefit (811,999) 241,644 158,193 Other 122,586 17,026 79,777 ------------- ------------- ------------- Tax expense (benefit), before valuation allowance (5,709,479) 2,523,065 1,721,117 Valuation allowance 2,706,144 -- -- ------------- ------------- ------------- Net tax expense (benefit) $ (3,003,335) $ 2,523,065 $ 1,721,117 ============= ============= =============
15 ORIOLE HOMES CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE I - INCOME TAXES - Continued The Company has a Federal net operating loss carryback and a State net operating loss carryforward of $4,236,558. The Federal net operating loss will be carried back and fully absorbed in 1992. The State net operating loss carryforward expires in the year 2010. Deferred income tax provision results from temporary differences in the recognition of revenues and expenses for tax and financial statement purposes. The sources of these differences are as follows:
Years ended December 31, ------------------------------------------------------- 1995 1994 1993 ------------- ------------- ------------- Net effect of inventory write-down adjustment $ (5,232,802) $ -- $ -- Net effect of development and other costs 1,018,124 589,052 (80,256) Net profit realized, applicable to sales reported on the installment basis for tax purposes (13,990) (14,165) (10,938) Net of State net operating loss carry- forward (310,986) -- -- Net effect of (increase) decrease in reserve for warranties on houses and condominiums 155,347 (73,756) (156,920) Net effect of uniform cost capitalization and percentage of completion 161,318 (61,254) 218,765 Net effect of depreciation (46,236) (57,533) 17,601 ------------- ------------- ------------- (4,269,225) 382,344 (11,748) Less: valuation allowance 2,706,144 -- -- ------------- ------------- ------------- $ (1,563,081) $ 382,344 $ (11,748) ============= ============= =============
16 ORIOLE HOMES CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE J - CUSTOMER DEPOSITS Certain customer deposits, pursuant to statutory regulations of the State of Florida or by agreement between the buyer and seller, are held in segregated bank accounts. At December 31, 1995 and 1994, cash in the amounts of approximately $289,000 and $253,000, respectively, was so restricted. The Company entered into an escrow agreement with a bank and the Division of Florida Land Sales and Condominiums which allowed the Company to use customer deposits which were previously maintained in an escrow account. Deposits of up to $1,100,000 in 1995 and $1,900,000 in 1994, which could be released to the Company, are guaranteed by performance bonds aggregating $5,000,000 for 1995 and 1994. NOTE K - ACCRUED EXPENSES AND OTHER LIABILITIES Accrued expenses and other liabilities include the following:
1995 1994 ------------ ------------- Accrued interest $ 3,893,771 $ 3,899,765 Reserve for warranties on houses and condominiums 1,983,202 2,419,218 Accrued real estate and property taxes 1,648,948 11,756 Income taxes payable -- 296,904 Other accrued liabilities 867,211 1,192,687 ------------ ------------ $ 8,393,132 $ 7,820,330 ============ ============
NOTE L - SENIOR NOTES Senior Notes are comprised as follows:
1995 1994 ------------ ------------ 12 1/2% senior notes due January 15, 2003 with an effective interest rate of 13.02% $ 70,000,000 $ 70,000,000 Repurchase of senior notes to be used as part of sinking fund (2,036,000) (1,910,000) Unamortized discount (1,482,687) (1,632,318) ------------ ------------ $ 66,481,313 $ 66,457,682 ============ ============
(continued) 17 ORIOLE HOMES CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE L - SENIOR NOTES - Continued On January 13, 1993, the Company issued 12 1/2% senior notes ("Notes"), due January 15, 2003. The Notes have a face value of $70,000,000 and were issued at a discount of $1,930,000. The notes are senior unsecured obligations of the Company subject to redemption at the Company's option on or after January 15, 1998 at 105% of the principal amount and thereafter at prices declining annually to 100% of the principal amount on or after January 15, 2001. The indenture under which senior notes were issued requires sinking fund payments of $17,500,000 on January 15, 2001 and January 15, 2002. The indenture, 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 December 31, 1995, dividend payments are restricted and will be restricted until the Company posts cumulative net income in excess of $20,500,000. NOTE M - STOCK OPTIONS The Company adopted two stock option plans: one for employees and one for nonemployee directors, both effective in 1994. Under the stock option plan for employees (the "1994 Stock Option Plan"), 400,000 shares of Class B common stock are reserved for issuance upon exercise of stock options. Under the stock option plan for non-employee directors (the "1994 Stock Option Plan for Nonemployee Directors"), 20,000 shares of class B common stock are available for issuance. The stock option plans are accounted for under APB Opinion 25 and related Interpretations. Statement of Financial Accounting Standards No. 123 ("SFAS No.123"), "Accounting for Stock-Based Compensation," effective for the Company in 1996, will require additional disclosures regarding the fair value of options. The Company does not expect the implementation of SFAS No.123 to have a material effect on the Company's financial position or results of operations. Both plans provide for the granting of incentive stock options on such terms and at such prices as may be determined by the Board of Directors. The per share exercise price of incentive stock options cannot be less than the fair market value per share of the Class B common stock on the date of the grant. Accordingly, no compensation cost has been recognized for the plans. Each option is exercisable after the period or periods specified in the option agreement, but no option may be exercised more than five years after the date of the grant for the 1994 Stock Option Plan and no more than ten years for the 1994 Stock Option Plan for Nonemployee Directors. (continued) 18 ORIOLE HOMES CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE M - STOCK OPTIONS - Continued The following table summarizes options granted and/or exercised during the years ended December 31, 1995 and 1994. At December 31, 1995 and 1994, 1,800 and -0- options, respectively, were eligible for exercise under the terms of the various option plans.
1994 Stock Option Plan 1994 for Stock Nonemployee Option Plan Directors ----------- --------- Granted -- 3,600(2) Exercised -- -- Forfeited -- -- ------------ ------------ Outstanding 12/31/94 -- 3,600 Granted 38,000(1) 3,600(3) Exercised -- -- Forfeited -- -- ------------ ------------ Outstanding 12/31/95 38,000 7,200 ============ ============ 1) Exercise price $ 6.875 -- 2) Exercise price $ 8.62 -- 3) Exercise price $ 7.50 --
NOTE N - COMMON STOCK Class A common stock and Class B common stock have identical dividend rights with the exception that the Class B common stock is entitled to a $.025 per share additional dividend. Class A common stock is entitled to one vote per share, while Class B common stock is entitled to one-tenth vote per share. Holders of Class B common stock are entitled to elect 25% of the Board of Directors as long as the number of outstanding shares of Class B common stock is at least 10% of the number of outstanding shares of both classes of common stock. At the option of the holder of record, each share of Class A common stock may be converted at any time into one share of Class B common stock. 19 ORIOLE HOMES CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE O - LEASING ARRANGEMENTS Rental properties In connection with certain housing developments, the Company leases recreation facilities. The Company also leases rental units. These leases are accounted for as operating leases. The following schedule provides an analysis of the Company's property under operating leases (included in property and equipment) by major classes as of December 31, 1995 and 1994:
1995 1994 ------------ ----------- Land $ 7,168,046 $ 7,170,113 Buildings 22,283,655 22,473,045 Furniture, fixtures and equipment 965,277 986,134 ------------ ------------ 30,416,978 30,629,292 Less accumulated depreciation 7,216,168 6,697,665 ------------ ------------ $ 23,200,810 $ 23,931,627 ============ ============
The following is a schedule of approximate future minimum rental income required under these leases as of December 31, 1995: 1996 $ 2,368,000 1997 638,000 1998 638,000 1999 638,000 2000 638,000 Thereafter 54,007,000 ----------- $58,927,000 ===========
(continued) 20 ORIOLE HOMES CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE O - LEASING ARRANGEMENTS - Continued Offices and Warehouse The Company leases its offices and warehouse under lease agreements extending through 1997, with options to renew for up to five years, accounted for as operating leases. The following is a schedule, by years, of the approximate future minimum rental payments as of December 31, 1995: 1996 $ 167,000 1997 135,000 --------------- $ 302,000
=============== Total rent expense for each of the years ended December 31, 1995, 1994 and 1993 amounted to approximately $200,000. NOTE P - DEFERRED COMPENSATION PLAN The Company has a defined contribution plan established pursuant to Section 401(K) of the Internal Revenue Code. Employees contribute to the plan a percentage of their salaries, subject to certain dollar limitations, and the Company matches a portion of the employees' contributions. The Company's contribution to the plan amounted to $63,121 in 1995, $63,685 in 1994 and $60,851 in 1993. NOTE Q - FINANCIAL INSTRUMENTS The financial statements include various estimated fair value information as of December 31, 1995 and 1994, as required by Statement of Financial Accounting Standards 107, "Disclosures about Fair Value of Financial Instruments". Such information, which pertains to the Company's financial instruments, is based on the requirements set forth in that Statement and does not purport to represent the aggregate net fair value of the Company. The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value: Cash and Cash Equivalents The carrying amount approximates fair value because of the short maturity of those instruments. (continued) 21 ORIOLE HOMES CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE Q - FINANCIAL INSTRUMENTS - Continued Receivables and Payables The carrying amount approximates fair value because of the short maturity of those instruments. Notes Payable, Mortgage Notes Payable and Senior Notes Quoted market prices offered to the Company for debt are used to estimate the fair value of the Company's long-term debt. The carrying amounts of notes and mortgage notes payable approximate fair value due to the length of the maturities, the interest rates being tied to market indices and/or due to the interest rates not being significantly different from the current market rates available to the Company. All of the Company's financial instruments are held for purposes other than trading. The carrying amounts in the table below are the amounts at which the financial instruments are reported in the financial statements. The estimated fair values of the Corporation's financial instruments, at December 31, where the carrying value does not approximate fair value, are as follows:
1995 1994 ----------------------------------- ----------------------------------- Carrying Estimated Carrying Estimated Amount Fair Value Amount Fair Value -------------- --------------- -------------- ----------------- Senior notes $ 66,481,313 $ 55,730,000 $ 66,457,682 $ 59,919,000
NOTE R - 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. 22 GRANT THORNTON REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Board of Directors Oriole Homes Corp. We have audited the accompanying consolidated balance sheets of Oriole Homes Corp. and Subsidiaries as of December 31, 1995 and 1994, and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Oriole Homes Corp. and Subsidiaries at December 31, 1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. S/ GRANT THORNTON, LLP Miami, Florida February 16, 1996 (except for Note H, as to which the date is February 20, 1996) 23 SIGNATURES Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the Registrant has duly caused this Amendment to the Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized. ORIOLE HOMES CORP. Date: 11-14-96 s/ R. D. Levy - ---------------------------------- -------------------------------- R. D. Levy, Chairman of the Board Chief Executive Officer, Director Date: 11-14-96 s/ A. Nunez - ---------------------------------- -------------------------------- A. Nunez, Senior Vice President Treasurer, Chief Financial Officer, Chief Accounting Officer, Director -----END PRIVACY-ENHANCED MESSAGE-----