================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended: March 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from _________to _________.
Commission file number: 0-28024
THE FORTRESS GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 54-1774997
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
1650 Tysons Boulevard, Suite 600, McLean, Virginia
22102 (Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (703) 442-4545
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 __
As of May 11, 1999, there were outstanding 12,136,767 shares of common
stock, par value $.01, of the registrant.
================================================================================
<PAGE>
THE FORTRESS GROUP, INC.
QUARTER ENDED MARCH 31, 1999
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1.
The Fortress Group, Inc.
Consolidated Balance Sheets (unaudited) 3
Consolidated Statements of Operations
(unaudited) 4
Consolidated Statements of Cash Flows
(unaudited) 5
Notes to Consolidated Financial Statements
(unaudited) 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 12
PART II - OTHER INFORMATION
Item 2. Changes in Securities 18
Item 6. Exhibits and Reports on Form 8-K. 18
(a) Exhibits.
(b) Reports on Form 8-K.
SIGNATURES 19
EXHIBIT INDEX 20
</TABLE>
2
<PAGE>
THE FORTRESS GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
----------- -------------
(unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 18,952 $ 23,102
Accounts and notes receivable 19,246 12,714
Due from related parties 936 1,378
Real estate inventories 330,219 310,706
Land held for resale 7,987 7,954
Mortgage loans 16,388 15,397
Investments in land partnerships 5,274 9,616
Property and equipment, net 13,828 13,785
Prepaid expenses and other assets 16,133 15,980
Goodwill, net 35,483 39,271
--------- ---------
Total assets $ 464,446 $ 449,903
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued construction liabilities $ 33,222 $ 35,501
Notes and mortgages payable 313,049 292,769
Due to related parties 208 3,405
Accrued expenses 17,282 16,260
Customer deposits 14,247 10,708
--------- ----------
Total liabilities 378,008 358,643
------- -------
Minority interest 79 67
--------- ----------
Shareholders' equity
Preferred stock, all classes and series, $.01 par value, 1 million 1 1
authorized (See Note 6)
Common stock, $.01 par value, 99 million authorized,
12,401,867 and 12,173,207 issued, respectively 124 122
Additional paid-in capital 69,449 71,313
Preferred subscription receivable (333) (333)
Retained earnings 18,339 21,311
Treasury stock, at cost, 265,100 shares (1,221) (1,221)
--------- ----------
Total shareholders' equity 86,359 91,193
--------- ----------
Total liabilities and shareholders' equity $464,446 $449,903
========= ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
THE FORTRESS GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
For the Three For the Three
Months Ended Months Ended
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
TOTAL REVENUES $150,724 $120,345
------------ -----------
HOMEBUILDING:
Residential sales $148,267 $118,026
Lot sales and other 1,073 1,456
------------ -----------
Homebuilding revenues 149,340 119,482
Cost of sales:
Construction and land costs 127,484 101,661
Amortization of purchase accounting adjustments 228 542
------------ -----------
Gross profit 21,628 17,279
Selling 10,569 8,272
General and administrative 8,801 6,747
Special charges (See Note 8) 1,270
Goodwill amortization 780 532
------------ -----------
Net operating income 208 1,728
------------ -----------
Other expense (income):
Interest expense 1,145 1,121
Interest income (109) (157)
Other, net (701) (225)
------------ -----------
Homebuilding (loss)/income before taxes (127) 989
FINANCIAL SERVICES:
Operating revenues 1,384 863
General, administrative and other expenses 1,310 882
Interest expense 242 157
Interest income (205) (182)
------------ -----------
Financial Services income before taxes 37 6
Loss on sale of Landmark Homes (See Note 8) (2,900)
------------ -----------
Total (loss)/income before taxes (2,990) 995
(Benefit)/provision for income taxes (1,046) 398
------------ -----------
Net (loss)/income $ (1,944) $ 597
============ ===========
Income available to common shareholders, basic and diluted $ (2,973) $ 138
============ ===========
NET INCOME PER SHARE DATA (See Note 7):
Basic net (loss)/income per share $ (.25) $ .01
=========== ===========
Diluted net (loss)/income per share $ (.25) $ .01
=========== ===========
Basic weighted average shares outstanding 11,950,920 11,605,334
=========== ===========
Diluted weighted average shares outstanding 11,950,920 13,112,729
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
THE FORTRESS GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
<TABLE>
<CAPTION>
For the Three For the Three
Months Ended Months Ended
March 31, 1999 March 31, 1998
--------------- ---------------
<S> <C> <C>
Cash flows from operating activities
Net (loss)/income ($1,944) $ 597
Adjustments to reconcile net income to net cash (used in)/
provided by operating activities:
Depreciation and amortization 2,881 1,697
Minority interest (24)
Special charges 1,270
Gain on sale of investment in land partnerships (247)
Loss on sale of Landmark Homes 2,900
Loss (gain) on sale of property and equipment 23 (85)
Changes in operating assets and liabilities
Accounts and notes receivable (1,355) 6,423
Due from related parties 442 464
Real estate inventories (28,409) (5,600)
Land held for resale (33) (226)
Mortgage loans (991) (1,042)
Prepaid expenses and other assets (401) 71
Accounts payable and accrued construction liabilities (2,146) (4,250)
Accrued expenses 468 5,895
Customer deposits 3,626 3,508
--------- ---------
Net cash (used in)/provided by operating activities (23,916) 7,428
--------- ---------
Cash flows from investing activities
Acquisition of homebuilders, net of acquired cash (24,334)
Proceeds from sale of Landmark Homes, net of cash sold 3,078
Payment of contingent consideration (2,372) (2,034)
Purchase of property and equipment (2,214) (1,603)
Proceeds from sale of property and equipment 21 292
Investments in land partnerships (422) (1,623)
--------- --------
Net cash used in investing activities (1,909) (29,302)
--------- --------
Cash flows from financing activities
Borrowings under notes and mortgages payable 160,949 112,445
Repayment of notes and mortgages payable (135,558) (113,968)
Repayment of related party borrowings (254) (474)
Proceeds from issuance of Class AA Preferred Stock, net 27,663
Redemption of Class C preferred stock (1,693)
Other (net) (169) 17
Preferred dividends (1,600) (378)
Common dividends (29)
Purchase of treasury stock (157)
--------- ---------
Net cash provided by financing activities 21,675 25,119
--------- ---------
Net (decrease) increase in cash and cash equivalents (4,150) 3,245
Cash and cash equivalents, beginning of period 23,102 12,406
--------- ---------
Cash and cash equivalents, end of period $ 18,952 $ 15,651
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
THE FORTRESS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BUSINESS AND ORGANIZATION
The Fortress Group, Inc. ("Fortress" or the "Company") was formed in June 1995
to create a national homebuilding company for the acquisition and development of
land or improved lots and the construction of residential for-sale housing.
Fortress began operations simultaneous with the closing of its initial public
offering on May 21, 1996 (the "Offering"), and the acquisition of four
homebuilding companies, which as a group are referred to as the Predecessor
Companies:
<TABLE>
<S> <C>
Homebuilder Market(s)
The Genesee Company ("Genesee") Denver and Fort Collins, Colorado and Tucson, Arizona
Buffington Homes, Inc. ("Buffington) Austin and San Antonio, Texas
Christopher Homes ("Christopher") Las Vegas, Nevada
Solaris Development Corp. ("Sunstar") Raleigh-Durham, North Carolina
</TABLE>
Subsequent to the Offering, Fortress acquired the following homebuilding
companies:
<TABLE>
<S> <C> <C>
Homebuilder Date Acquired Market(s)
Landmark Homes, Inc. ("Landmark") August 31, 1996 Wilmington North Carolina, Myrtle
(sold March 1999) Beach, South Carolina
Brookstone Homes, Inc. ("Brookstone") December 31, 1996 Janesville, Madison, and Milwaukee
Wisconsin
D.W. Hutson Construction Company, now February 28, 1997 Jacksonville, Florida
known as Fortress Homes and Communities
of Florida ("Fortress Florida")
Wilshire Homes, Inc. ("Wilshire") April 1, 1997 Austin and San Antonio, Texas
Don Galloway Homes, Inc. ("Galloway") August 1, 1997 Charlotte, North Carolina and
Charleston, South Carolina
The Iacobucci Organization ("Iacobucci") October 1, 1997 Philadelphia, Pennsylvania
WestBrook Homes ("WestBrook") January 1, 1998 Loudoun County, Virginia
Whittaker Construction ("Whittaker") March 1, 1998 St. Louis, Missouri
Quail Construction ("Quail) April 1, 1998 Portland, Oregon
</TABLE>
In January 1997, Fortress formed Fortress Mortgage, Inc. ("Fortress Mortgage"),
a wholly-owned subsidiary, to provide mortgage-lending services to the Company's
builder subsidiaries. Fortress Mortgage currently provides mortgage services in
the Company's markets in Texas, Colorado, North Carolina, Nevada, Wisconsin,
Florida, Oregon, and Missouri.
The accompanying consolidated financial statements of Fortress have been
prepared by the Company. Certain information and footnote disclosures normally
included in financial statements presented in accordance with generally accepted
accounting principles have been condensed or omitted. The Company believes the
disclosures made are adequate to make the information presented not misleading.
However, the financial statements should be read in conjunction with the
financial statements of the Company and notes thereto included in the 1998
Annual Report on Form 10-K.
Interim results are not necessarily indicative of fiscal year performance
because of the impact of seasonal and short-term variations.
6
<PAGE>
NOTE 2 - BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of
Fortress, a Delaware corporation, and its majority-owned subsidiaries. All
significant intercompany accounts and transactions have been eliminated in
consolidation. The results of companies acquired during the periods presented
are included from their respective dates of acquisition.
Certain amounts in the prior period financial statements have been reclassified
to conform to the current presentation.
NOTE 3 - REAL ESTATE INVENTORIES
Real estate inventories are summarized as follows (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
---------- -------------
(unaudited)
<S> <C> <C>
Work-in-progress
Sold homes $126,832 $112,001
Speculative 61,674 68,288
-------- ----------
Total work-in-progress 188,506 180,289
Land
Finished lots 73,524 76,824
Land under development 44,788 33,454
Unimproved land held for development 8,837 6,407
-------- ----------
Total land 127,149 116,685
Lumber yard inventory 2,616 2,223
Model homes 11,948 11,509
-------- ----------
$330,219 $310,706
======== ==========
</TABLE>
NOTE 4 - INTEREST
Information regarding interest is as follows (in thousands):
<TABLE>
<CAPTION>
For the Three Months Ended March 31,
1999 1998
------------ -----------
(unaudited) (unaudited)
<S> <C> <C>
During the periods:
Interest incurred $ 8,117 $ 7,122
Interest capitalized (6,730) (5,845)
Interest amortized to cost of sales 5,678 4,371
-------- --------
Total interest expensed in statement of operations $ 7,065 $ 5,648
======== ========
At the end of the periods:
Capitalized interest in ending inventory $ 24,162 $ 20,944
======== ========
</TABLE>
7
<PAGE>
NOTE 5 - NOTES AND MORTGAGES PAYABLE
Notes and mortgages payable consist of the following (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
------------ -------------
(unaudited)
<S> <C> <C>
13.75% Senior Notes due 2003 $100,000 $100,000
Project specific land, land development and
construction loans 199,062 180,144
Mortgage warehouse lines of credit 15,823 14,408
Other 2,736 3,069
--------- --------
317,621 297,621
Less: Unamortized senior note issuance costs (4,572) (4,852)
--------- --------
$313,049 $292,769
========= ========
</TABLE>
The Company pays interest on the Senior Notes in arrears on May 15 and November
15 of each year at the rate of 13.75% per annum. The Senior Notes may not be
redeemed at any time prior to maturity. The Senior Notes are unsecured and rank
pari passu with, or senior in right of payment to, all other existing and future
unsecured indebtedness of the Company. The Senior Notes, however, are
effectively subordinated to secured debt of the Company to the extent of any
collateral, as well as to the Company's subsidiaries' indebtedness. The Company
is required to maintain a consolidated tangible net worth of at least $15
million and other financial covenants, as defined in the Senior Note Indenture.
The Company was in compliance with all financial covenants at March 31, 1999.
In addition, the Senior Note Indenture restricts certain payments including
dividends and repurchase or redemptions of stock. As of March 31, 1999, the
Company had in excess of $10 million available for such payments. However, the
Company also may make payments such as those described above from cash generated
by subsidiaries designated as "unrestricted" as defined in the Senior Note
Indenture.
The loan agreements for project specific land, land development and construction
loans are secured by a lien on the applicable residential development project or
a specific unit under construction. Repayment of the loans are generally due
upon sale of the collateral property. The loans bear interest at annual variable
rates ranging from 2.0% over the London Interbank Offer Rate (LIBOR) to 1.25%
over prime rate and fixed rates generally from 8% to 12%. Certain of the
subsidiary credit facilities contain covenants that limit the Company's overall
ratio of debt to tangible net worth, and other covenants including minimum
tangible net worth, current ratio and interest coverage. In addition, many of
the credit facilities include similar covenants at the subsidiary level. The
Company and its subsidiaries were in compliance with all such covenants as of
March 31, 1999.
The Company's mortgage subsidiary has two warehouse lines of credit outstanding
for the purpose of originating loans. The warehouse lines are secured by the
mortgage loans held for sale and are repaid upon sale of the mortgage loans. The
lines bear interest at variable rates ranging from 1.5% over the Euro rate to
1.75% over the 30-day Federal Funds Rate, based on the type of loan and lending
requirements.
One of the Company's subsidiaries has a line of credit for the purpose of
purchasing lumber yard inventory. The line of credit matures October 1, 1999 and
bears interest at prime minus 1/2%. At March 31, 1999 the total commitment
available is $2.0 million with $1.65 million currently outstanding. The
outstanding portion of this line is included in "other" above. The remainder of
other notes and mortgages payable consists primarily of debt financed corporate
insurance policies which bear interest at varying rates between 6.8% and 6.9%.
NOTE 6 - CONVERTIBLE PREFERRED STOCK
The following are the Company's classes and series of preferred stock, amounts
designated, and amounts outstanding at March 31, 1999 and December 31, 1998:
Class AAA cumulative convertible (rate of 9% per annum), 40,000 designated,
40,000 and 0, respectively, issued and outstanding ($40 million
initial liquidation preference)
Class AA cumulative convertible (rate of 12% per annum decreased to 6% on
March 6, 1998), 53,333 designated, 0 and 40,000, respectively, issued
and outstanding ($40 million initial liquidation preference)
Series A 11% cumulative convertible, 20,000 designated, 0 issued and outstanding
Series B convertible, 40,000 designated, 0 issued and outstanding
Series C convertible, 70,000 designated, 18,493 and 39,656, respectively,
issuable (See below)
8
<PAGE>
Series D convertible, 67,500 designated, 45,000 issued and outstanding
($4,500,000 aggregate liquidation
preference)
Series E 6% convertible, 50,000 designated, 19,381 issued and outstanding
($1,938,100 aggregate liquidation preference)
Series F convertible, 5,000 designated, 5,000 issued and outstanding ($500,000
aggregate liquidation preference)
Under a Restructuring Agreement dated December 31, 1998 between the Company and
Prometheus, the Company issued to Prometheus, effective February 4, 1999, 40,000
shares of Class AAA Redeemable Convertible Preferred Stock having an initial
liquidation value of $40,000,000 in exchange for the outstanding 40,000 shares
of Class AA Convertible Preferred Stock having a liquidation value of
$40,000,000 held by Prometheus. In addition the Company issued Prometheus
Supplemental Warrants convertible into common stock. Please refer to the
Company's financial statements as reported on Form 10-K for the year ended
December 31, 1998 (Note 9 - Shareholders' Equity and Note 17 - Subsequent
Events) for further information on the classes and terms of preferred stock and
warrants.
The number of shares into which each Supplemental Warrant may be exercisable
will also be subject to certain customary anti-dilution adjustments. The
exercisability of the Supplemental Warrants would also be subject to a revenue
test, which provides that the Supplemental Warrants may not be exercised unless
the Company's consolidated revenues for the most recent 16 full fiscal quarters
exceeds $2,429,190,500. The revenue test is subject to adjustment for the sale
of any Company subsidiary. As of March 31, 1998, for purposes of the revenue
test, the Company's cumulative consolidated revenues for the most recent sixteen
quarters was $1,687,230,000.
In addition, the Company is required to maintain a minimum annualized revenue
amount of $610 million for the last four quarters tested, which is adjusted
to $590 million for the four quarter period ended March 31, 2001 and June 30,
2001. The minimum annualized revenue is subject to further adjustment for the
sale of Company subsidiaries.
The Series C stock (18,493 shares as of March 31, 1999) has been treated as
outstanding for the purpose of calculating earnings per share; however, it will
only be legally outstanding upon issuance.
NOTE 7 - (LOSS) EARNINGS PER SHARE
The following table reconciles the numerators (income) and the denominators
(shares) of the basic and diluted per-share computations (in thousands):
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
----------------------
(unaudited)
1999 1998
---- ----
<S> <C> <C>
Net (loss)/income ($ 1,944) $ 597
Less: Preferred stock dividends (1,029) (442)
Less: Imputed preferred stock dividend 0 (17)
------------ ------------
Basic EPS
(Loss)/Income available to common
shareholders ($2,973) $138
Weighted average number of common
shares outstanding 11,950,920 11,605,334
------------ -----------
Basic (loss)/earnings per share ($ .25) $ .01
============ ===========
Diluted EPS
(Loss)/income available to common
shareholders, basic ($ 2,973) $ 138
Plus preferred stock dividends 0 0
------------ -----------
(Loss)/income available to common
shareholders, diluted ($ 2,973) $ 138
============ ===========
Weighted average number of common
shares outstanding 11,950,920 11,605,334
Effect of dilutive securities
Preferred stock 0 1,243,331
Options 0 3,836
Restricted stock 0 24,556
Warrants 0 235,672
------------ ------------
Weighted average number of common
shares outstanding 11,950,920 13,112,729
========== =============
Diluted (loss)/earnings per share ($ .25) $ .01
============== =============
</TABLE>
9
<PAGE>
Given the loss available to common shareholders, for the three months ended
March 31, 1999, no common stock equivalents of the Company's various classes and
series of preferred stock were included in the computation of diluted loss per
share for that period because the effect of adding back the related dividends
and the weighted average common shares would be antidilutive.
The Company's intention upon conversion or redemption (as the case may be) of
Series B, C, D, E and F (see Note 8- Convertible Preferred Stock Form 10-K) is
to issue Common Stock on the basis of the 10-for-1 conversion ratio contemplated
in the respective agreements and to pay cash for the difference between the $100
liquidation value per share and the market value of the Common Stock converted
at 10-for-1. Accordingly, the Company has included, in its calculation of
earnings per share for the three months ended March 31, 1998, an additional
1,243,331 shares of common stock to be issued under the "if converted" method at
the 10-for-1 conversion ratio.
The following shares were not included in the computation of diluted EPS for the
three months ended March 31, 1999 and 1998 because the effect of adding back the
related dividends and the weighted average common shares was antidilutive:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
1999 1998
------------------------------------------------------------------------------------------
Average
Convertible common Convertible Average
Outstanding into stock Outstanding into Common Stock
at common equivalents at common Equivalents
Class/Series March 31, shares outstanding March 31, shares Outstanding
------------ ----------- ----------- ------------ ------------ -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Class AAA 40,000 6,666,667 4,148,167 0 0 0
Class AA -- -- 7,555,500 40,000 6,666,667 3,785,820
Series A -- -- 10,000 277,056 277,056
Series C 18,493 184,930 356,590 Dilutive Dilutive Dilutive
Series D 45,000 450,000 450,000 Dilutive Dilutive Dilutive
Series E 19,381 193,810 193,810 2,500 25,000 13,056
Series F 5,000 50,000 16,670 -- -- --
</TABLE>
NOTE 8 - SALE OF ASSETS AND SPECIAL CHARGES
On March 26 1999, the Company sold the assets of Landmark and realized a loss of
$2.9 million. As of the disposition date, Landmark had total assets of
approximately $11.3 million, which included unrecovered goodwill of
approximately $3.0 million. The total selling price was approximately $8.3
million.
On March 31, 1999 the Company, as part of a restructuring of its Texas
operations, sold its interest in several land partnerships in its Austin and San
Antonio markets. The total proceeds to the Company from this sale of
approximately $5.4 million, were received after month end and are included
in accounts receivable at March 31, 1999. The gain on the sale of these
partnership interests of approximately $247,000 is included in other income in
the acompanying Consolidated Statement of Operations.
10
<PAGE>
Included in operating expenses for the quarter ended March 31, 1999 are costs
related to the restructuring of two of the Company's operating subsidiaries,
Wilshire (formerly operating as Buffington) and WestBrook.
Concurrent with the decision to sell its interest in several Texas land
partnerships the Company decided to exit certain communities. Costs totaling
$480,000 are charges related to employee severance, carrying costs for model
homes, and the write off of other product-line related assets that were
determined to provide no future benefit under the restructured operation. As of
March 31, 1999, approximately $58,000 of the estimated restructuring costs had
been paid and charged against the liability. The restructuring costs are
expected to be incurred within approximately six months.
In restructuring its WestBrook operation, the Company made a decision to exit
subdivision-based homebuilding operations and focus on custom and semi-custom
homebuilding. The cost of this restructuring, totaling $790,000, includes the
write off of various subdivision-related costs that are not expected to have
future value under the restructured operation. These costs include the write off
of land purchase deposits, previously capitalized architectural costs and other
land development costs. Also included in this charge is the write off of
$294,000 in remaining goodwill. As of March 31, 1999, all of these costs had
been incurred and there is no outstanding liability. WestBrook will continue to
build out its current backlog and will have exited its subdivision-based
operations within approximately six months.
NOTE 9 - SUBSEQUENT EVENTS
In April 1999 the Company redeemed 5,500 shares of Class AAA stock, ($5,500,000
liquidation value). Consequently, in addition to reducing the number of
preferred shares outstanding, the Company has reduced, pro-rata, the number of
Supplemental Warrants potentially issuable under its Supplemental Warrant
Agreement. As of April 7, 1999 the Company had issued and outstanding 34,500
shares of Class AAA cumulative convertible preferred stock. The Company also had
outstanding Supplemental Warrants (not exercisable before September 30, 2001)
providing for the issuance of between 0 and 28,750,000 shares of additional
common stock. The actual number of shares into which these warrants may be
converted is subject to a revenue test and is further determined by the average
price of the Company's common stock at the time of conversion. Please refer to
the Company's financial statements as reported on Form 10-K for the year ended
December 31, 1998 ( Note 9 -Shareholders' Equity and Note 17-Subsequent Events)
for further information on the classes and terms of preferred stock and
warrants.
As a result of the redemption of the 5,500 shares of Class AAA stock, the
Company is ogligated under the "make-whole" provision relative to the Prometheus
common stock investment of 898,845 shares, for arranging the sale of a pro-rata
portion (123,592 shares) of common stock held by Prometheus and delivering a
minimum of $5.50 per share to Prometheus. The Company's actual cost will be the
difference, if any, between $5.50 per share and the amount realized from the
sale of the stock. The Company will record this obligation as a reduction to its
Additional Paid-In-Capital.
11
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The following table sets forth for the periods indicated certain items of the
Company's unaudited consolidated financial statements in dollars (expressed in
thousands) and as a percentage of the Company's total and segment revenues:
<TABLE>
<CAPTION>
For the Three For the Three
Months Ended Months Ended
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues $150,724 100.0% $120,345 100.0%
Homebuilding revenues 149,340 99.1% 100.0% 119,482 99.1% 100.0%
Homebuilding gross profit 21,628 14.3% 14.5% 17,279 14.4% 14.5%
Homebuilding income before special
charges and taxes 1,143 0.8% 0.8% 989 0.8% 0.8%
Homebuilding (loss) income before taxes (127) (0.1)% (0.1)% 989 0.8% 0.8%
Mortgage revenues 1,384 0.9% 100.0% 863 0.7% 100.0%
Mortgage expenses 1,347 0.9% 97.3% 857 0.7% 99.3%
Mortgage income before taxes 37 - 2.7% 6 - 0.7%
Loss on Sale of Landmark Homes (2,900) (1.9)% -
Net (loss) income (1,944) (1.3)% 597 0.5%
</TABLE>
Consolidated Results of Operations
Comparison of the Company's Results of Operations for the Three Months Ended
March 31, 1999 and 1998.
Homebuilding Operations
General
<TABLE>
<CAPTION>
New Orders, Net Closings Backlog<F1>1 at March 31,
--------------- ------------- ---------------------
Three Months Three Months
1999 1998 1999 1998 1999 1998
<S> <C> <C> <C> <C> <C> <C>
State
Arizona 14 13 30 8 18 14
Colorado 103 120 63 74 223 229
Florida 302 317 162 155 439 313
Missouri 128 56 124 37 192 186
Nevada 44 36 16 15 114 84
North Carolina 206 203 154 154 295 299
Oregon 19 N/A 18 N/A 12 N/A
Pennsylvania 34 74 39 47 48 76
South Carolina 35 71 31 59 85 83
Texas 190 229 202 182 288 296
Virginia 10 20 8 5 19 27
Washington 12 N/A 8 N/A 6 N/A
Wisconsin 66 55 44 22 83 55
------- ------ ------- ------ ----- -----
Total 1,163 1,194 899 758 1,822 1,662
</TABLE>
- -------------
<F1> 1 Backlog represents homes sold but not yet closed.
As seen in the above chart, the Company achieved net new orders of
1,163 homes for the three months ended March 31, 1999 compared to 1,194 homes
for the same period in 1998, a decrease of 2.6%. A 17% decrease in new orders in
the Company's Texas subsidiary from the first quarter of 1998 to the first
quarter of 1999 is attributable to the Company's strategy to exit the
entry-level market and concentrate on move-up communities. (see Note 8 - Sale of
Assets and Special Charges). The Company believes that this repositioning into
fewer communities will result in lower unit volume, but improved profitability.
Several other subsidiaries achieved lower new orders in the first quarter of
1999 versus the same period in 1998. However, most of these, with the exception
of the company's Philadelphia area subsidiary, have maintained basically flat,
and in some cases increased backlog volume at March 31, 1999 as compared to
March 31, 1998. Offsetting these decreases was the impact of having in 1999 the
benefit of new orders from the subsidiaries acquired during the first quarter of
1998.
12
<PAGE>
The Company has a combined backlog of 1,822 homes, with a dollar volume of
$359.8 million at March 31, 1999 as compared to 1,662 homes, with a dollar
volume of $305.4 million at March 31, 1998. This represents an increase of 9.6%
and 17.8% for units and dollar volume, respectively. The per-home value of
backlog rose from approximately $183,000 in the first quarter of 1998 to
approximately $197,000 in the first quarter of 1999. This per-home increase is
attributable, in large part, to the rise in luxury home backlog at the Company's
Las Vegas subsidiary, where the average backlog per home at March 31, 1999 was
approximately $539,000.
Revenues
Homebuilder revenues for the first quarter of 1999 were $149.3 million, as
compared to $119.5 million for the same period of 1998, representing an increase
of 24.9%. Most of this increase is attributable to the increase in the number of
homes closed (899 versus 758, an 18.6% increase). The rest is due to an increase
in the average price of homes closed (approximately $165,000 for the first
quarter of 1999 as compared to approximately $156,000 in the first quarter of
1998). As with new orders, the subsidiaries acquired during the first quarter of
1998 accounted for the majority of the increase in closings and revenue
experienced this year. Also included in homebuilder revenues were $1.1 million
and $1.5 million in sales of lots for the quarters ended March 31, 1999 and
1998, respectively. Revenues from existing subsidiaries were, in the aggregate,
essentially flat.
Gross Profit
Gross profit for the quarter ended March 31, 1999 was $21.6 million, as compared
to $17.3 million for the comparable period of 1998. This 24.9% increase is
consistent with the increase in revenue discussed above. Gross profit margins
remained constant at 14.5% for both periods, in spite of reduced margin levels
at our Las Vegas subsidiary.
Operating Expenses
Operating expenses including selling, general and administrative, special
charges, and goodwill, for the quarters ended March 31, 1999 and 1998 were $21.4
million (14.3% of revenue) and $15.6 million (13.0% of revenue), respectively.
The company recognized $1.3 million in special charges during the quarter ended
March 31, 1999 pertaining to restructuring costs associated with several of its
subsidiaries (see Note 8 - Sale of Assets and Special Charges). Excluding the
impact of these charges, total operating expenses for the quarter ended March
31, 1999 would have been $20.1 million, and 13.5% of revenue.
Selling expenses increased to $10.6 million (7.1% of revenue) for the quarter
ended March 31, 1999 as compared to $8.3 million (6.9% of revenue) for the same
period of 1998. Contributing signficantly to this increase as a percent of
revenue was an increase in selling and marketing expenses associated with
several luxury models at the Company's Las Vegas subsidiary. The relatively low
volume of closings in the first quarter of 1999 resulted in less revenue to
absorb these primarily fixed selling expenses.
General and administrative expenses were $8.8 million (5.9% of revenue) for the
first quarter of 1999, as compared to $6.7 million (5.6% of revenue) for the
first quarter of 1998. In accordance with the implementation or Statement of
Position 98-1 (SOP 98-1) changes in accounting for costs related to
implementation of information technology systems, which require these costs to
be expensed as incurred, accounted for a large portion of the increase. Costs
associated with data conversion are now being expensed as incurred. In addition,
the amortization and depreciation of costs which were capitalized in prior years
is also a contributive factor to this increase.
Homebuilding Pretax
Excluding the impact of the special charges discussed above, homebuilding pretax
profit for the quarter was $1,143,000. This compares to $989,000 for the
comparable quarter of 1998, representing an increase of 15.6%. Gross profit
Dollar increases, offset partially by operating expense increases, both of which
are discussed above, combined to achieve this increase in pretax profit before
special charges.
13
<PAGE>
Financial Services Segment
Fortress Mortgage's first quarter 1999 closing volume, units closed and capture
rates all increased from the comparable period of 1998. These increases resulted
mainly from additional volume generated at the following Fortress Mortgage
branches that began operating during 1998:
- - Jacksonville
- - St. Louis
- - Milwaukee
- - Portland
- - Charlotte
Revenue for the three months ended March 31, 1999 increased 60.4% to $1.4
million from $863,000 for the comparable period of 1998 due to the increased
closing volume. The gross profit margin (operating revenues as a percentage of
closing volume) remained constant at approximately 2.8%.
Financial services pretax profit generated by Fortress Mortgage was $37,000 for
the first quarter of 1999, as compared to $6,000 for the first quarter of 1998
Loss on Sale of Landmark Homes
Consistent with its strategy to redeploy capital invested in under-performing
assets, the Company sold the assets of Landmark in March 1999, thereby exiting
the Wilmington, North Carolina and Myrtle Beach, South Carolina markets. The
Company recognized a pretax loss of $2.9 million on this disposition, due
primarily to unrecovered goodwill of approximately $3.0 million.
Net (Loss)/Income
Due to the previously described factors and the income tax effect thereof, net
loss for the three months ended March 31, 1999 was $1.9 million, as compared to
net income of $597,000 for the three months ended March 31, 1998. Excluding the
impact of the special charges and the sale of Landmark, net income for the first
quarter of 1999 would have been approximately $700,000, an increase of 17.3%
over the prior year.
The restructuring of the Prometheus agreement resulted in an increase in the
preferred dividend rate related to that class of stock from 6% to 9% annually.
Additionally, the Prometheus investment of $40.0 million was outstanding for the
entire quarter in 1999 compared to an investment of $11.7 million for
approximately two months of 1998 and $40.0 million for the remainder of the
first quarter. This change in preferred rate along with the increase in
preferred investment resulted in an increase in the amount of preferred
dividends impacting (loss)/earnings per share. Total preferred dividends for the
first quarter 1999 increased to $1.0 million from $459,000 in the prior year.
Excluding the impact of the special charges and the sale of Landmark, the
Company's loss per common share (after preferred dividends) for the quarter
would have been $0.03.
Earnings before interest, taxes, depreciation and amortization (EBITDA)
increased 17.9% to $9,618,000 for the three months ended March 31, 1999 as
compared to $8,159,000 for the same period in 1998. EBITDA is provided as a
supplemental measurement of the Company's operating performance. EBITDA does not
represent cash flows from operations as defined by GAAP and should not be
considered as an alternative to net income as an indicator of the Company's
operating performance or to cash flows as a measure of liquidity. In addition,
EBITDA measures presented by the Company may not be comparable to other
similarly titled measures of other companies.
Liquidity and Capital Resources
The Company's operating activities involve several components, principally home
construction, land development, and mortgage loan origination for home
purchasers. During the three months ended March 1999, the Company's operating
activities, taken in the aggregate, utilized approximately $23.9 million of
cash. This cash utilization was primarily the result of increases in inventories
of approximately $28.4 million which is consistent with the Company's growth in
its backlog and the seasonal nature of the homebuilding industry. Increases in
customer deposits of $3.6 million offset this use. Proceeds from the sale of the
Company's investment in several land partnerships were received after March 31,
and increased accounts and notes receivable by $5.2 million.
14
<PAGE>
The majority of the Company's investing activities during the three months--net
cash use of $1.9 million--related to (a) additional consideration under the
earnout provision of prior period acquisitions ($2.4 million), and (b) property
and equipment expenditures ($2.2 million). These investments were offset by
proceeds from the sale of Landmark ($3.1 million net).
The Company's financing activities generated cash of $21.7 million. These
activities included net borrowings under notes and mortgages payable of $25.4
million. In addition the redemption of Class C preferred stock of $1.7 million
and preferred dividend payments of $1.6 million offset these cash inflows.
Management believes that funds available through the existing credit facilities
coupled with the cash on hand and cash generated through operations will be
adequate for the anticipated cash need of its current operations for the
foreseeable future. As of March 31, 1999, the Company had cash and cash
equivalents on hand of $19.0 million.
At March 31, 1999, the Company had 3,877 lots in inventory, which represents, in
aggregate, an estimated twelve month supply of land based on sales absorption
rates for the first three months of 1999. One of the Company's operating
strategies is to keep a relatively low supply of finished lots and lots under
development in order to manage and minimize risk associated with land ownership.
The Company utilizes land options and investments in limited land partnerships
as methods of controlling and subsequently acquiring land. The Company plans to
continue these practices and expects to exercise, subject to market conditions,
substantially all of its option contracts. At March 31, 1999, the Company had an
additional 6,608 lots under option representing just over a one-and-a-half-year
supply of land based on the same absorption rates as above.
Year 2000
As computer systems and other business equipment are embedded with chips or
processors that use only two digits to represent the year or are programmed with
software that uses such a two digit system, they may be unable to accurately
process certain data before, during or after January 1, 2000. If not addressed
and corrected, such programs and chips may cause computer systems to fail or to
miscalculate data. This issue is commonly referred to as the "Y2K" issue.
In conjunction with the ongoing process of converting all of its builder
subsidiaries to an integrated computer information system ("ICIS"), Fortress
began the project of addressing the Y2K issue during 1998. The Company's project
is directed at modifying or replacing portions of its existing computer systems
to ensure that they will function properly with respect to dates in the year
2000 and thereafter. The Company's plan encompasses both information technology
systems and non-information technology systems, such as chips embedded in its
security systems, office equipment, and facilities.
The general phases of the Company's plan include the following: (1) plan and
ensure company-wide awareness of the Y2K issue, (2) inventory all possible Y2K
risks, (3) assess inventory (including identification of non-Y2K compliant
items, prioritize inventory into mission-critical and non-mission-critical
categories, and plan for repair and replacement of non-compliant items), (4)
repair or replace non-Y2K compliant items, (5) plan and execute Y2K testing, and
(6) design and implement contingency plans for non-compliant items. Due to the
Company's structure and its ongoing computer information system rollout, the
Company is in different phases of implementation of its plan at its different
subsidiaries.
The Company has assessed the information systems of the subsidiaries as its
greatest area of business risk and, accordingly, has given this area highest
priority. As of March 31, 1999, the Company has completed the first phase and is
well underway with phases two and three at all subsidiaries. The plan is to be
through phase five at all subsidiaries early in the second quarter of 1999 and
to have completed all phases throughout the Company by the end of the third
quarter of 1999.
15
<PAGE>
The Company's information technology ("IT") group is currently involved with its
ICIS vendor performing Y2K testing on the ICIS. Even in its current operating
state, several applications of the system in use now are already Y2K compliant.
The most recent version, which renders the entire system Y2K compliant, is being
tested currently. The vendor has completed its testing and has already upgraded
several customers. The Company's IT group has almost completed their own testing
with Company data on this version. The IT group expects to complete this testing
and upgrade to the Y2K compliant version in the second quarter. This affects
three of the Company's subsidiaries and the corporate office, which are
currently operating on the system. As of March 1999, one builder subsidiary is
not Y2K compliant. The Company has begun the conversion process at this
subsidiary and plans for the conversion to be completed during the third quarter
of 1999. Due to the IT group's current focus on bringing the Company into Y2K
compliance, those subsidiaries who either received or purchased Y2K compliant
versions of their software will not implement ICIS until 2000. Management does
not consider this delay in implementation to have a material adverse impact on
the Company.
Over the last twelve months, the Company's IT group has normalized the network
server and desktop operating systems, hardware platforms and network peripheral
devices to equipment and software that are certified as Y2K ready. Each desktop
computer in use at all builder subsidiaries has been certified to be Y2K
compliant or has been identified for replacement by the end of June 1999. Each
server hardware component and operating system is certified to be Y2K ready.
Each component of the subsidiary builder local area networks is compliant and
the wide area network equipment and software is likewise certified. Additional
Y2K assessment and testing remains for one little-used inventory systems which
will be completed by the end of June 1999.
While the Company is giving greatest priority to its operating systems and those
of its subsidiaries, the Company is also addressing the Y2K issues associated
with the Company's telephone and voice mail systems, fax machines, copiers and
other office systems integrated into the office facilities, and other equipment
including embedded chips or processors. Nine of the Company's largest builder
subsidiaries have completed a comprehensive survey of all computer and embedded
systems and are fully Y2K compliant. The remaining builder subsidiaries are
scheduled to be assessed, repaired or replaced and tested by the end of June
1999. The IT group has not identified any office system that will not be Y2K
compliant.
The Company is currently assessing whether third parties with which the Company
and its operating subsidiaries have a material relationship are Y2K compliant.
The Company's assessments with respect to these third party verification
projects will be substantially completed as of June 30, 1999. As part of this
assessment, the Company has examined its relationships with suppliers,
subcontractors, financial institutions and other third parties to determine the
status of their Y2K efforts as related to the Company. As a general matter, the
Company is vulnerable to significant suppliers' inability to remedy their own
Y2K issues. Furthermore, the Company relies on financial institutions,
government agencies (particularly for zoning, building permits and related
matter), utility companies, telecommunication service companies and other
service providers outside of its control. While certain third parties
significant to the Company's business have provided certain assurances regarding
their intentions to be Y2K compliant, there is no assurance that such third
parties will not suffer a Y2K business disruption. It is conceivable that such
failures could, in turn, have a material adverse effect on the Company's results
of operations, financial condition, and liquidity.
Costs
As the Company's Y2K project has been combined with the ICIS project, many areas
of the project would have been undertaken regardless of the Y2K issue.
Management estimates that the total cost of the ICIS project will be
approximately $4.0 to $4.5 million; however, it is not possible to determine the
portion of that amount which is specifically attributable only to the Y2K
compliance work. The total amount expended on the ICIS project work from
inception to March 31, 1999 was approximately $3.2 million. The Company believes
that the costs to specifically address the Y2K issue will not have a material
impact on the Company's results of operations, financial condition, or liquidity
for any year in the reasonably foreseeable future. The plan for the successful
completion of the Company's Y2K project and the estimated total costs are based
upon certain assumptions by management regarding future events, including the
continued availability of qualified resources to implement the program and the
cost of such resources.
16
<PAGE>
Risks
The Company acknowledges that its failure to resolve a material Y2K issue could
result in the interruption in, or a failure of, certain normal business
activities or operations. Possible risks of Y2K failure include among other
risks, delays or errors with respect to payments, third-party delivery of
materials, and government approvals. Such failures could materially adversely
affect the Company's results of operations. Although the Company generally
considers its exposure to the Y2K issue risks from third party suppliers as
generally low, due to the uncertainty of the Y2K readiness of third-party
suppliers, the Company is unable to determine at this time whether the
consequences of Y2K failures will have a material impact on the Company's
results of operations, financial condition, or liquidity. In addition, the
Company could be materially adversely affected by Y2K system failures at
government agencies on which the Company is dependent for zoning, building
permits, and related matters. Further, the Company could be materially adversely
affected if Y2K system failures result in widespread economic or financial
market disruption. The Company's Y2K project is expected to significantly reduce
the Company's level of uncertainty and exposure to the Y2K issue. To date, the
Company has not identified any operating systems, either of its own or of a
material third-party supplier, that present a material risk of not being Y2K
compliant or for which a suitable alternative cannot be implemented.
Contingency Plan
The Company's Y2K contingency plan focused on whether it would be feasible to
get non-compliant builder subsidiaries converted to the Company-wide ICIS
(scheduled for conversion to the Y2K compliant version in June 1999). After
carefully assessing the current progress, the Company decided that of three
remaining non-compliant subsidiaries, two would upgrade their existing software
to a Y2K compliant version, and the third would convert to the ICIS by the end
of the third quarter of 1999. In addition, of the two subsidiaries being
upgraded on their current systems, the Company has begun the conversion process,
which is slated for completion at the end of the third quarter of 1999.
While management expects that the company will not experience material adverse
consequences in connection with the Y2K issue as it relates to its internal
operating system, no assurance can be given that the system will operate as
expected in the Year 2000. See "Risks" section above and "Statement on
Forward-Looking Information".
Statement on Forward-Looking Information
Certain information included within this report is "forward-looking"
within the meaning of the Private Securities Litigation Reform Act of 1995
including but not limited to, statements concerning growth, anticipated
operating results, financial position, and liquidity and financial resources.
Such information involves known and unknown risks, uncertainties and other
factors that may cause actual results to differ materially. Such risks,
uncertainties and other factors include, but are not limited to, fluctuations in
interest rates, availability of raw materials and labor costs, levels of
competition, the effect of government regulation, the availability of capital,
the price of the Company's common stock, weather conditions, changes in general
economic conditions and other factors which may adversely effect the Company's
earnings and/or the earnings of the acquired homebuilders or earnings per share.
17
<PAGE>
PART II - OTHER INFORMATION
Item 2. Changes in Securities.
Under a Restructuring Agreement dated December 31, 1998 between the Company and
Prometheus Homebuilders LLC ("Prometheus"), the Company issued to Prometheus,
effective February 4, 1999, 40,000 shares of Class AAA Redeemable Convertible
Preferred Stock having an initial liquidation value of $40,000,000 in exchange
for the outstanding 40,000 shares of Class AA Convertible Preferred Stock having
a liquidation value of $40,000,000 held by Prometheus. A more detailed
description of the features of this class of stock as well as other terms
related to this agreement has been reported on Form 8-K, filed March 5, 1999.
Effective March 10, 1999, the Company, pursuant to the previously reported terms
of the asset purchase agreement between the Company, D.W. Hutson Construction,
Inc. ("Hutson") and the principal shareholder of Hutson, issued 21,163 shares of
its Class C preferred stock. Effective March 11, 1999, the Class C preferred
stock was converted in accordance with its terms into 211,630 shares of Company
common stock and $1,693,014 in cash. The issuance of the Class C preferred stock
was exempt from registration under the Securities Act as a transaction not
involving a public offering. The Company common stock issued upon conversion is
registered under the Securities Act for resale pursuant to the Company's
existing shelf registration statement.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Number Description
------ -----------
27 Financial Data Schedule
(b) Reports on Form 8-K.
Form 8-K filed February 5, 1999 reporting, pursuant to Item 5,
the issuance of 40,000 shares of Class AAA Redeemable
Convertible Preferred Stock.
18
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
THE FORTRESS GROUP, INC.
Date: 05/17/99 By: /s/ George C, Yeonas
-------- ----------------------------------
George C. Yeonas
President and Chief Executive Officer
Date: 05/17/99 By: /s/ Jeffrey W. Shirley
-------- -----------------------------------
Jeffrey W. Shirley
Vice President of Finance
(Principal Financial Officer)
19
<PAGE>
EXHIBIT INDEX
Number Description Page
------ ----------- ----
27 Financial Data Schedule
20
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FORTRESS GROUP, INC. CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1999 AND
FROM THE FORTRESS GROUP, INC. CONSOLIDATED STATEMENT OF OPERATIONS FOR THE
QUARTER ENDED MARCH 31, 1999.
</LEGEND>
<CIK> 0001010607
<NAME> The Fortress Group, Inc.
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1.00
<CASH> 18,951
<SECURITIES> 0
<RECEIVABLES> 19,246
<ALLOWANCES> 0
<INVENTORY> 330,219
<CURRENT-ASSETS> 0
<PP&E> 13,828
<DEPRECIATION> 0
<TOTAL-ASSETS> 464,446
<CURRENT-LIABILITIES> 0
<BONDS> 95,428
0
1
<COMMON> 124
<OTHER-SE> 86,234
<TOTAL-LIABILITY-AND-EQUITY> 464,446
<SALES> 149,340
<TOTAL-REVENUES> 150,724
<CGS> 127,712
<TOTAL-COSTS> 149,132
<OTHER-EXPENSES> 609
<LOSS-PROVISION> (2,900)
<INTEREST-EXPENSE> 1,145
<INCOME-PRETAX> (2,990)
<INCOME-TAX> (1,046)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,944)
<EPS-PRIMARY> (0.25)
<EPS-DILUTED> (0.25)
</TABLE>
