<PAGE> 1
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
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 1-5899
U.S. HOME CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 21-0718930
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
1800 WEST LOOP SOUTH, HOUSTON, TEXAS 77027
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 877-2311
Securities Registered Pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
NAME OF EACH
TITLE OF EACH CLASS EXCHANGE ON WHICH REGISTERED
------------------- ----------------------------
<C> <C>
Common Stock, $.01 par value New York Stock Exchange
Class B Warrants to acquire Common Stock New York Stock Exchange
</TABLE>
Securities Registered Pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes [X] No [ ]
As of January 31. 1998, the number of shares outstanding of Registrant's
voting stock was 11,797,659 and the aggregate market value of the Registrant's
voting stock held by non-affiliates was $418,266,021.
DOCUMENTS INCORPORATED BY REFERENCE
<TABLE>
<CAPTION>
PART OF 10-K
WHERE INCORPORATED
------------------
<S> <C>
Proxy Statement dated March 13, 1998 for the Annual Meeting
of Stockholders to be held on April 22, 1998.............. III
</TABLE>
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<PAGE> 2
PART I
ITEM 1. BUSINESS
GENERAL
U.S. Home Corporation ("U.S. Home" or the "Company"), organized in 1954 and
incorporated in the State of Delaware in 1959, is one of the largest
single-family home builders in the United States based on homes delivered. The
Company currently builds and sells homes in more than 220 new home communities
in 31 market areas in 11 states. Since its formation, the Company has delivered
approximately 275,000 homes. In 1996, the Company was the fifth largest
single-family on-site home builder in the United States based on homes completed
and delivered and has been among the ten largest single-family on-site home
builders in the United States for more than 20 years. The Company conducts
substantially all of its home building business through U.S. Home, the parent
company.
The Company offers a wide variety of moderately-priced homes that are
designed to appeal to the affordable, move-up and retirement and active adult
buyers. In each of its markets, the Company's primary strategy is to build
quality homes, utilizing its Zero Defect Program, which the Company believes
offers prospective home buyers a high level of new home value. The Company
believes that many home purchasers compare homes on the basis of location,
perceived quality and dollars of purchase price per square foot of living area.
As a result, the Company attempts to purchase land and lots in popular growth
corridors, maintain high quality standards and design homes to maximize living
space.
In addition to building and selling single-family homes, the Company
provides mortgage banking services to its customers. The Company originates,
processes and sells mortgages to third-party investors. The Company does not
retain or service the mortgages that it originates but, rather, sells the
mortgages and related servicing rights to investors.
OPERATIONS
The Company is engaged in two related industry segments: home building and
financial services. The revenues, operating profits or losses and identifiable
assets attributable to the Company's industry segments are separately disclosed
in the Consolidated Financial Statements.
HOME BUILDING OPERATIONS
The Company's primary industry segment is the on-site development of
single-family residential communities. During 1997, the Company's product mix
consisted of deliveries of approximately 33% affordable homes, 40% move-up homes
and 27% retirement and active adult homes.
The Company presently has 23 open retirement and active adult communities
in Arizona, California, Florida, Nevada, New Jersey, Ohio, Texas and Virginia.
The Company has also ten additional retirement and active adult communities
which are scheduled to open by 2000. They include one new community in
California, one in Colorado, five in Florida, one in Michigan and two in New
Jersey.
2
<PAGE> 3
MARKETS
U.S. Home's building operations are currently conducted in the following
market areas:
<TABLE>
<CAPTION>
STATES MARKET AREAS
------ ------------
<S> <C>
Arizona.................... Phoenix and Tucson
California................. Bakersfield, Corona, Palm Springs and Sacramento
Colorado................... Colorado Springs, Denver and Fort
Collins/Longmont/Loveland
Florida.................... Bonita Springs, Clearwater/Palm Harbor/Tarpon Springs,
Fort Myers, Hernando County, Naples, Orlando, Pasco
County, Sarasota/Bradenton and Tampa
Maryland/Virginia.......... Annapolis/Baltimore and Washington, D.C. area
Minnesota.................. Minneapolis/St. Paul
Nevada..................... Las Vegas
Ohio....................... Cleveland and Columbus
New Jersey................. Dover/Jackson/Howell, Monroe/Hillsborough and Lumberton
Texas...................... Dallas/Fort Worth, Houston,
McAllen/Harlingen/Brownsville and San Antonio
</TABLE>
The Company seeks to maintain geographic diversity and thus reduce the
potential risk of economic volatility in any given market.
The Company's home building and marketing activities are conducted under
the name of U.S. Home in each of its markets except in Minneapolis/St. Paul
where the Company markets its homes under the name of Orrin Thompson Homes and
in Florida where homes are marketed under the name of Rutenberg Homes as well as
U.S. Home.
Set forth below are revenues for the Company from the sale of single-family
homes by state for each of the last three fiscal years:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------
STATES 1997 1996 1995
------ ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Arizona........................................ $ 132,640 $ 137,606 $ 125,103
California..................................... 118,843 92,193 89,662
Colorado....................................... 238,288 206,231 171,733
Florida........................................ 369,051 335,166 349,526
Maryland/Virginia.............................. 66,651 72,914 69,944
Minnesota...................................... 61,503 64,129 55,746
Nevada......................................... 60,561 62,088 48,030
New Jersey..................................... 85,878 86,656 63,160
Ohio/Indiana(1)................................ 35,492 33,008 13,923
Texas.......................................... 109,408 88,947 88,379
---------- ---------- ----------
$1,278,315 $1,178,938 $1,075,206
========== ========== ==========
</TABLE>
- ---------------
(1) In 1997, the Company made the decision to discontinue its Indiana
operations.
3
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Set forth below are tables providing information (expressed in number of
housing units) with respect to new orders taken, deliveries to purchasers and
backlog of single-family homes by state for each of the last three fiscal years:
NEW ORDERS TAKEN
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
STATES 1997 1996 1995
------ ------ ------ ------
<S> <C> <C> <C>
Arizona..................................................... 899 832 1,015
California.................................................. 636 532 533
Colorado.................................................... 1,285 1,378 1,172
Florida..................................................... 2,597 2,173 2,081
Maryland/Virginia........................................... 355 353 400
Minnesota................................................... 386 294 322
Nevada...................................................... 301 371 335
New Jersey.................................................. 422 471 321
Ohio/Indiana(1)............................................. 111 178 118
Texas....................................................... 901 824 662
----- ----- -----
7,893 7,406 6,959
===== ===== =====
</TABLE>
DELIVERIES
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
STATES 1997 1996 1995
------ ------ ------ ------
<S> <C> <C> <C>
Arizona..................................................... 850 948 893
California.................................................. 560 494 508
Colorado.................................................... 1,340 1,199 1,100
Florida..................................................... 2,304 2,126 2,241
Maryland/Virginia........................................... 351 366 369
Minnesota................................................... 319 306 290
Nevada...................................................... 327 356 306
New Jersey.................................................. 441 475 307
Ohio/Indiana (1)............................................ 163 156 66
Texas....................................................... 841 673 699
----- ----- -----
7,496 7,099 6,779
===== ===== =====
</TABLE>
BACKLOG(2)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
STATES 1997 1996 1995
------ ------ ------ ------
<S> <C> <C> <C>
Arizona..................................................... 318 269 385
California.................................................. 225 149 111
Colorado.................................................... 586 641 462
Florida..................................................... 1,326 1,033 986
Maryland/Virginia........................................... 104 100 113
Minnesota................................................... 174 107 119
Nevada...................................................... 108 134 119
New Jersey.................................................. 160 179 183
Ohio/Indiana (1)............................................ 32 84 62
Texas....................................................... 402 342 191
----- ----- -----
3,435 3,038 2,731
===== ===== =====
</TABLE>
4
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(1) In 1997, the Company made the decision to discontinue its Indiana
operations.
(2) Homes under contract for sale but not delivered at end of year.
The Company anticipates that substantially all of its backlog units, net of
cancellations, as of December 31, 1997 will be completed and delivered during
1998. While operations in certain market areas are affected by seasonal factors
which limit on-site building and sales activities, the Company's ability to
build and deliver its backlog is not considered to be seriously affected by such
factors.
SALES AND MARKETING
The Company employs sales consultants for the sale of single-family homes,
although sales by independent real estate brokers are also encouraged. Specific
sales training programs are provided which inform sales consultants about sales
techniques and methods as well as information about their local market, realtors
and products. The sales programs focus on the Company's Zero Defect Program as a
marketing tool because the sales force is the first contact with the customer.
The Zero Defect Program is a quality assurance program with major emphasis on
construction (see Construction below).
The Company advertises primarily in magazines and local newspapers.
Additionally, homes are marketed by means of model homes, pictorial brochures
and on-site displays. The Company's general marketing strategy seeks to generate
one-third of housing sales through advertisements, one-third through customer
referrals and one-third through realtor contacts.
The Company markets homes in "model home parks" featuring one or more model
homes, attractively furnished and decorated and staffed by the Company's sales
consultants who provide information regarding floor plans, the various
elevations available, decorating options, as well as assisting with mortgage
financing information. The model may include a variety of options and upgrades
which the customer may request at an additional cost, and which include items
such as special floor and window treatment, custom cabinetry, pools, fireplaces
and decks. The Company constantly studies both aesthetic design and
architectural trends, as well as quality construction and engineering trends, in
order to provide customers with high quality, design and value. The Company has
received numerous awards in various markets for outstanding housing design.
By the end of the first quarter of 1998, the Company will have 23 fully
operational U.S. Home Custom Design Studios. Design studios provide customers a
venue to purchase virtually all of the options and upgrades available for their
new homes. Option and upgrade sales are handled by professional designers,
providing an extra service to our customers and freeing sales consultants to
concentrate on home sales.
Selling prices are set in each area based on local market conditions and
competitive factors. The Company's gross margins vary from area to area based on
competitive factors in each market.
The Company's product lines include both single-family detached and
attached homes. During 1997, approximately 80% of the homes delivered were
single-family detached compared to 83% in 1996 and 84% in 1995. The number of
units and average sales prices of single-family homes delivered in 1997, 1996
and 1995 were as follows:
<TABLE>
<CAPTION>
SINGLE-FAMILY DETACHED SINGLE-FAMILY ATTACHED
----------------------- -----------------------
NUMBER AVERAGE NUMBER AVERAGE
OF UNITS SALES PRICE OF UNITS SALES PRICE
-------- ----------- -------- -----------
<S> <C> <C> <C> <C>
1997...................................... 5,960 $178,000 1,536 $141,200
1996...................................... 5,891 170,500 1,208 144,200
1995...................................... 5,708 162,800 1,071 136,400
</TABLE>
In 1997, the national average sales prices of new single-family homes (both
detached and attached) as reported on a preliminary basis by the U.S. Census
Bureau was $175,700 compared with an average sales price of $170,500 for the
Company.
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<PAGE> 6
Variations in the general product and customer mix may exist from year to
year based on shifts in local market demand or product availability. The table
below sets forth the mix of the Company's deliveries for the affordable, move-up
and retirement and active adult home products during the last three years:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Affordable.................................................. 33% 28% 28%
Move-up..................................................... 40% 49% 50%
Retirement and active adult................................. 27% 23% 22%
</TABLE>
The Company has set a goal to increase its annual deliveries to over 10,000
homes in the year 2000, of which one third will be retirement and active adult
home deliveries. However, there can be no assurance such efforts will be
successful.
Many purchasers finance a large portion of the purchase price of a home
through conventional or government insured/guaranteed mortgages from lending
institutions. The Company generally assists purchasers in obtaining mortgages.
Approximately 81% of the homes delivered in 1997, and 83% delivered in 1996 and
82% delivered in 1995, were purchased using mortgage financing.
The Company takes steps to qualify certain of its homes under Veterans
Administration ("VA") and Federal Housing Administration ("FHA") mortgage
financing programs, which provide mortgage financing sources. During 1997, 1996
and 1995 approximately 17% of the Company's homes delivered were financed under
VA and FHA mortgage programs.
CONSTRUCTION
The Company's investment in direct employee labor costs, equipment and
facilities is kept to a minimum because all construction of single-family homes
is performed by independent subcontractors. At all stages of construction,
however, on-site Company managers supervise and coordinate the activities of
these subcontractors and subject their work to quality and cost control
standards. The Company's Director of National Purchasing and Quality Control
provides centralized management of quality standards, both with respect to the
construction of homes and the purchase of certain major components used in the
construction of homes. Company employees are rated and compensation incentives
are affected by a measure of quality standards. The Company's commitment to
quality and its use in the Company's sales efforts are best illustrated by its
Zero Defect Program. Under the Zero Defect Program, the home buyer meets with
the construction supervisor prior to the commencement of, and during,
construction in order to ensure that the home buyer (i) is aware of all quality
features of the house, including those which are not readily apparent in the
finished house, (ii) agrees that the design features, including appliances,
match those ordered and (iii) is satisfied with the finished product. The
Company considers a completed house to have "zero defects" if, upon final
inspection by the home buyer, only a few minor cosmetic items remain to be
corrected.
Construction subcontractors are selected on the basis of competitive bids
and written agreements govern their relationship with the Company. All bids are
based on detailed specifications and complete blueprints to ensure commitment to
the Company's expectation for high quality workmanship.
The Company purchases the majority of its construction material on a
decentralized basis with a "just in time" delivery schedule to each individual
job site. Materials are regularly purchased on a competitive bid basis to ensure
both competitive pricing and high quality. In addition to local purchasing, the
Company has entered into a number of national purchasing agreements in order to
maximize purchasing power. Agreements with each vendor are negotiated on an
annual basis by the Company's Director of National Purchasing and Quality
Control.
In order to minimize the risk associated with completed but unsold
inventory, the Company generally does not commence construction of a
single-family detached home prior to receipt of an executed purchase contract, a
deposit from the customer and preliminary mortgage approval based on the
purchaser's mortgage application. For single-family attached homes, construction
does not generally commence until 50% of the units in a building have been sold.
6
<PAGE> 7
REGULATION
The Company and its subcontractors must comply with various federal, state
and local zoning, building, pollution, environmental, health, advertising and
consumer credit statutes, ordinances, rules and regulations, as well as
regulations relating to specific building materials to be used, building design
and minimum elevations of properties. All of these regulations have increased
the time and cost required to market the Company's products by extending the
time between the initial acquisition of land and the commencement of
construction. The Company's operations, like those of other home builders, have
been periodically subject to moratoriums on development activities caused by
insufficient water, sewage and energy-related facilities. Moratoriums in local
areas have not had a material adverse effect on the Company's overall activities
because of the geographic diversification of the Company's operations.
COMPETITION
The single-family residential housing industry is highly competitive. U.S.
Home competes in each of its markets, with respect to the location, design and
price of its products, with numerous firms engaged in the on-site development of
single-family residential housing, ranging from regional and national firms to
small local companies. The Company is one of the largest on-site builders of
single-family homes in the United States, ranking among the ten largest
single-family on-site home builders in the United States for more than 20 years.
However, because there are so many firms engaged in the single-family home
building industry, the Company accounts for less than 1% of all new on-site
single-family housing sales in the United States.
RAW MATERIALS AND SUBCONTRACTORS
The Company uses numerous suppliers of raw materials and services in its
business and such materials and services have been and continue to be available.
Where appropriate, the Company has adopted national programs for products to
maximize price discounts through volume purchases. The Company also utilizes
numerous independent subcontractors representing all building trades in
connection with the construction of its homes.
COMMUNITY DEVELOPMENT
For a number of years, a significant portion of the Company's finished lot
needs, primarily in its affordable and move-up communities, have been satisfied
through rolling lot options, which enable the Company to initially pay a small
fraction of total lot cost and then purchase the lots on a scheduled basis. For
example, during 1997, 62% of the Company's unit deliveries were from lots
developed by the Company and 37% were from lots acquired by the exercise of
rolling lot options as compared with 56% and 44% in 1996 and 57% and 43% in
1995, respectively. See Management's Discussion and Analysis of Financial
Condition and Results of Operations-Financial Condition and Liquidity, Housing.
The Company's policy is that land cannot be purchased or sold without prior
approval of the Company's Asset Management Committee. Asset Management Committee
approval requires submission of data relating to sales forecasts, a timing
schedule (e.g., estimated dates for the commencement of land development,
housing construction, model opening and sales) and a projection of income and
internal rate of return. All development expenditures are reviewed by the Senior
Vice President-Community Development and the respective President of Operations
prior to the commencement of development. In addition, the Company's by-laws
require approval by the Company's Board of Directors of any acquisition of
unimproved real property or acreage by the Company which is material to the
Company in any single transaction involving an expenditure in excess of $5
million and any other material capital expenditures, borrowings (subject to
certain exceptions) and other commitments by the Company in excess of $5 million
per transaction (excluding transactions involving housing inventory).
The Presidents of Operations and the Division Presidents are responsible
for maintaining continuity of housing sales through awareness of trends in
housing demand in each market area. Feasibility studies and market research
studies are generally required before approval of the purchase of land. These
studies examine the demographics of an area, including population trends, income
trends, employment trends, housing stock
7
<PAGE> 8
and housing demand. Products are matched to customer profile, determined in part
by the market studies and the experience of the local manager in each market.
Housing communities are generally built in or near major metropolitan areas
and are normally located in growing markets for such areas. At December 31,
1997, the Company's land and finished lot inventories totaled $403.0 million,
excluding option deposits. See Note 1 of Notes to Consolidated Financial
Statements. Substantially all housing communities are zoned for their intended
use and serviced by utilities. As of December 31, 1997, the Company had
refundable and nonrefundable deposits totaling $33.4 million for options and
contracts to purchase undeveloped land and finished lots for home building
operations for a total purchase price of approximately $339.0 million. The
Company has incurred pre-development costs of approximately $56.8 million
relating to these properties.
The following table sets forth as of December 31, 1997, by state, the cost
of certain of the Company's land inventories and the estimated number of lots
controlled through direct ownership and under option which are being used or
that are anticipated to be used in the Company's home building operations
(dollars in thousands):
<TABLE>
<CAPTION>
ESTIMATED NUMBER OF HOUSING
UNITS THAT COULD BE
CONSTRUCTED ON LAND CONTROLLED
BOOK AS OF DECEMBER 31, 1997(1)
COST ------------------------------
OF LAND UNDER
STATES OWNED OWNED OPTION TOTAL
------ -------- -------- ------- -------
<S> <C> <C> <C> <C>
Arizona...................................... $ 40,839 2,023 1,821 3,844
California................................... 34,841 799 1,485 2,284
Colorado..................................... 87,224 6,158 1,587 7,745
Florida...................................... 97,541 8,589 12,088 20,677
Maryland/Virginia............................ 35,854 2,419 1,004 3,423
Minnesota.................................... 15,196 1,267 114 1,381
Nevada....................................... 25,250 551 332 883
New Jersey................................... 17,628 674 191 865
Ohio......................................... 6,312 140 585 725
Texas........................................ 24,590 2,003 859 2,862
-------- ------- ------ ------
$385,275 24,623 20,066 44,689
======== ======= ====== ======
</TABLE>
- ---------------
(1) The estimates set forth above have been prepared based on numerous
assumptions made at the date hereof, many of which are beyond the control of
the Company. Many of these assumptions, and hence the estimates, are subject
to change and there can be no assurances that such lots will be used or as
to when they will be used. This table does not include commercial property
and other properties which the Company has no current plans to use, with an
aggregate cost of $17.7 million (including $3.8 million relating to land
under contract for sale). In view of the various stages of development of
the land owned by the Company as of December 31, 1997 (i.e., finished, under
development and development not started), any per lot cost derived by
dividing the book cost by the estimated number of units would not be
meaningful.
Inventory risk is substantial for all home building companies. The market
value of housing inventories, finished lots and raw land can change
significantly over the life of a community, reflecting dynamic market
conditions. In addition, inventory carrying costs are significant, which can
result in losses when trying to exit a poorly performing community or market.
The Company seeks to reduce its risks associated with housing inventories,
finished lots and raw land through (i) maintaining its geographic diversity and
(ii) acquiring lots and land under option where possible, thereby enabling the
Company to control land and lots with a smaller capital investment.
In 1997, the Company's revenues from the sale of developed and undeveloped
land amounted to $13.7 million, as compared to revenues of $10.9 million in 1996
and $16.1 million in 1995.
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REORGANIZATION
The Company and certain of its affiliates commenced proceedings (the
"Cases") under Chapter 11 of Title 11 of the United States Code on April 15,
1991, in order to restructure their indebtedness and other liabilities. The
Company's plan of reorganization (the "Plan") was confirmed in May 1993 by the
United States Bankruptcy Court for the Southern District of New York and became
effective in June 1993 (the "Effective Date"). On the Effective Date, the
Company also completed a public offering of $200 million principal amount of
9.75% senior notes due 2003, the net proceeds from which were utilized to pay a
portion of the claims of certain unsecured creditors of the Company under the
Plan and to repay outstanding amounts under the Company's debtor-in-possession
financing facility.
The Plan effected a recapitalization of the Company and did not result in a
reduction in the scope or other major restructuring of the Company's operations.
During the pendency of the Cases, the Company continued its home building
operations in the ordinary course in its housing markets and improved its market
share in a majority of such markets.
FINANCIAL SERVICES OPERATIONS
The Company's second industry segment consists primarily of its mortgage
banking activities. U.S. Home Mortgage Corporation ("Mortgage"), a wholly-owned
subsidiary of the Company, commenced operations in 1971 and serves an important
role in the Company's sale of its homes by arranging financing for customers.
Mortgage is a Federal National Mortgage Association/Government National
Mortgage Association/Federal Home Loan Mortgage Corporation approved
seller-servicer, headquartered in Clearwater, Florida with branch or satellite
offices in the metropolitan areas of Phoenix and Tucson, Arizona; Bakersfield,
Palm Springs and Sacramento, California; Colorado Springs, Denver, and Fort
Collins, Colorado; Washington, D.C.; Clearwater, Fort Myers, Orlando, and
Sarasota, Florida; Minneapolis, Minnesota; Las Vegas, Nevada; Freehold, New
Jersey; Cleveland, Ohio; and Dallas and Houston, Texas. The Company offers a
wide variety of conventional, FHA and VA financing programs through Mortgage,
thereby providing prospective buyers the benefits of both conventional and
government-assisted loan programs. As a mortgage banker, Mortgage originates and
funds mortgage loans and sells the loans and the related servicing rights
directly to investors. Loans and servicing rights are generally sold by Mortgage
and funded by the investors within 30 days after home delivery. To limit its
risk of interest rate fluctuations, Mortgage regularly enters into fixed price
mandatory forward delivery contracts to sell mortgage-backed securities to
securities dealers or fixed price forward delivery commitments to sell specific
whole loans to investors on a mandatory or best efforts basis. Mortgage has a
secured revolving line of credit to fund the mortgage loans on an interim basis
until purchased by investors. See Note 2 of Notes to Consolidated Financial
Statements.
The following table summarizes certain mortgage banking operating
information (dollars in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Residential mortgage loans
Number of loans originated....................... 4,761 3,786 3,367
Average amount of loan originated................ $ 138 $ 134 $ 128
Total amount of loans originated:
Funded by Mortgage............................ $604,000 $466,000 $376,000
Brokered by Mortgage.......................... 54,000 43,000 57,000
-------- -------- --------
Total............................................ $658,000 $509,000 $433,000
======== ======== ========
Company's homes delivered financed by Mortgage as a
percentage of Company's homes delivered which
were financed.................................... 76% 61% 57%
Company's homes delivered financed by Mortgage as a
percentage of Mortgage's total originations...... 97% 95% 95%
</TABLE>
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<PAGE> 10
While the Company continues to focus its attention primarily upon the
expansion of Mortgage's operations within the Company's own customer base,
Mortgage also offers its services to realtors, unaffiliated builders and
refinance customers.
Among the factors affecting Mortgage's operations are general economic
conditions, federal, state and local regulatory constraints, consumer confidence
and interest rate volatility. These factors, together with the number of homes
delivered by the Company, affect the volume of loan originations which in turn
impact the resulting volume of mortgage loans and mortgage servicing rights
available for sale.
ADDITIONAL INFORMATION
EMPLOYEES
At December 31, 1997, the Company had 1,641 employees. None of the
Company's employees are represented by a union. The Company considers its
relations with its employees to be good. The Company's single-family housing and
community development operations are conducted primarily through independent
subcontractors, thereby limiting the number of direct employees required.
ITEM 2. PROPERTIES
The Company leases its executive offices, located at 1800 West Loop South,
Houston, Texas 77027, pursuant to a lease scheduled to expire on February 28,
1999. The Company does not believe that its executive offices or its other
facilities, consisting of sales and administrative offices located in or near
each of the Company's areas of operations and generally held under leases with
terms not exceeding five years, are material to its operations. The Company
believes the properties are suitable and adequate for its operations.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved from time to time in litigation arising from the
normal course of business, none of which, in the opinion of the Company, is
expected to have a material adverse effect on the financial position or results
of operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
None.
EXECUTIVE OFFICERS OF THE COMPANY
The Company's executive officers during 1997 and their respective ages and
positions are set forth below:
<TABLE>
<CAPTION>
NAME AGE POSITION AND OFFICE
---- --- -------------------
<S> <C> <C>
Robert J. Strudler................... 55 Chairman and Co-Chief Executive Officer
Isaac Heimbinder..................... 54 President, Co-Chief Executive Officer and Chief
Operating Officer
Craig M. Johnson..................... 44 Senior Vice President -- Community Development
Gary L. Frueh........................ 57 Vice President -- Tax and Audit
Frank E. Matthews, II................ 48 Vice President -- Human Resources
Thomas A. Napoli..................... 56 Vice President -- Corporate Finance and
Treasurer
Chester P. Sadowski.................. 51 Vice President -- Controller and Chief
Accounting Officer
Richard G. Slaughter................. 53 Vice President -- Planning and Secretary
Kelly F. Somoza...................... 44 Vice President -- Investor Relations
</TABLE>
10
<PAGE> 11
No family relationship exists among any of the executive officers of the
Company.
Each of the foregoing officers has been elected to serve in the office
indicated until the first meeting of the Board of Directors following the next
annual meeting of stockholders of U.S. Home and until his or her successor is
elected and qualified.
Mr. Strudler has served as Chairman and Co-Chief Executive Officer since
April 26, 1995; prior thereto, he had been Chairman and Chief Executive Officer
of the Company since May 12, 1986.
Mr. Heimbinder has served as President, Co-Chief Executive Officer and
Chief Operating Officer since April 26, 1995; prior thereto, he had been
President and Chief Operating Officer of the Company since May 12, 1986.
Mr. Johnson has served as Senior Vice President -- Community Development
since April 26, 1995; prior thereto, he had been Vice President -- Community
Development since June 11, 1992.
Mr. Frueh has served as Vice President -- Tax and Audit since February 5,
1992.
Mr. Matthews has served as Vice President -- Human Resources since April
23, 1997; prior thereto, he had been Director -- Human Resources since February
15, 1991.
Mr. Napoli has served as Vice President -- Corporate Finance and Treasurer
since February 13, 1997; prior thereto, he had been Vice President -- Finance
and Chief Financial Officer since April 21, 1989.
Mr. Sadowski has served as Vice President -- Controller and Chief
Accounting Officer since December 17, 1987.
Mr. Slaughter has served as Vice President -- Planning and Secretary since
December 18, 1986.
Ms. Somoza has served as Vice President -- Investor Relations since
December 6, 1996; prior thereto, she had been a Vice President since June 11,
1992. Ms. Somoza is also the administrator of the Company's profit sharing and
employees' savings programs.
11
<PAGE> 12
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
As of February 5, 1998, there were 2,056 holders of record of the Company's
common stock, $.01 par value per share. The principal market on which the common
stock is traded is the New York Stock Exchange. Information concerning the high
and low sales prices for the Company's common stock for each calendar quarter
during 1997 and 1996 is set forth below:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996
CALENDAR ------------------ ------------------
QUARTER HIGH LOW HIGH LOW
-------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
First........................................... $29.75 $24.50 $29.38 $23.25
Second.......................................... 27.75 23.00 26.13 22.75
Third........................................... 38.81 26.63 24.75 19.25
Fourth.......................................... 39.38 32.94 26.00 19.50
</TABLE>
No dividends were paid by the Company during 1997 or 1996. The Company's
credit agreement (the most restrictive of the Company's borrowing agreements)
prohibits the Company from paying dividends on its capital stock, other than
stock dividends.
12
<PAGE> 13
ITEM 6. SELECTED FINANCIAL DATA
U.S. HOME CORPORATION AND SUBSIDIARIES
CONSOLIDATED SELECTED FINANCIAL DATA
FOR THE FIVE YEARS ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Operating Revenues................... $1,319,752 $1,211,450 $1,107,945 $995,311 $812,077
Income Before Reorganization Items,
Income Taxes and Extraordinary
Loss............................... 74,900 55,901 59,072 52,526 44,640
Reorganization Items................. -- -- -- -- 6,915
Income Taxes......................... 27,713 11,713 22,152 19,697 (33,966)
---------- ---------- ---------- -------- --------
Income Before Extraordinary Loss..... 47,187 44,188 36,920 32,829 71,691
Extraordinary Loss, Net of Income Tax
Benefit............................ 8,650 -- -- -- --
---------- ---------- ---------- -------- --------
Net Income........................... $ 38,537 $ 44,188 $ 36,920 $ 32,829 $ 71,691
========== ========== ========== ======== ========
Basic Earnings Per Common Share:
Income before extraordinary loss... $ 4.08 $ 3.88(2) $ 3.29 $ 3.21 $ 8.20(3)
Extraordinary loss................. $ (.75) $ -- $ -- $ -- $ --
Net Income......................... $ 3.33 $ 3.88(2) $ 3.29 $ 3.21 $ 8.20(3)
Diluted Earnings Per Common Share:
Income before extraordinary loss... $ 3.50 $ 3.28(2) $ 2.78 $ 2.50 $ 5.98(3)
Extraordinary loss................. $ (.62) $ -- $ -- $ -- $ --
Net Income......................... $ 2.88 $ 3.28(2) $ 2.78 $ 2.50 $ 5.98(3)
Dividends Per Common Share........... $ -- $ -- $ -- $ -- $ --
BALANCE SHEET DATA (at year end):
Total Assets......................... $1,067,529 $ 947,411 $ 842,084 $753,203 $682,637
========== ========== ========== ======== ========
Revolving Credit Facilities --
Housing............................ $ 29,000 $ -- $ 24,000 $ 7,553 $ --
Financial Services................. 40,343 42,414 35,371 10,014 20,566
---------- ---------- ---------- -------- --------
$ 69,343 $ 42,414 $ 59,371 $ 17,567 $ 20,566
========== ========== ========== ======== ========
Long-Term Debt --
Housing............................ $ 395,918 $ 362,887 $ 300,599 $304,327 $311,937
Financial Services................. -- -- -- 1,034 1,102
---------- ---------- ---------- -------- --------
$ 395,918 $ 362,887 $ 300,599 $305,361 $313,039
========== ========== ========== ======== ========
</TABLE>
- ---------------
(1) As required by Statement of Financial Accounting Standards No. 128, which
was effective for all periods ending after December 15, 1997, earnings per
share for 1996, 1995, 1994 and 1993 have been restated. See Note 1 of Notes
to Consolidated Financial Statements.
(2) In 1996, basic earnings per common share included $.04 per share and diluted
earnings per common share included $.03 per share due to the net effect of
an $8,233, net of tax, provision for impairment of land inventories and an
$8,691 tax benefit.
(3) In 1993, basic earnings per common share and diluted earnings per common
share were $3.05 and $2.23, respectively, excluding $5.15 basic earnings per
common share and $3.75 diluted earnings per common share, respectively, due
to a $45,000 decrease in the deferred tax asset valuation allowance.
13
<PAGE> 14
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
HOUSING
The following table, which excludes the provision for impairment of land
inventories recorded in 1996 (see Results of Operations Other -- Impairment of
Land Inventories below and Consolidated Statements of Operations), sets forth
certain financial information for the Company's housing segment for the periods
indicated (dollars in thousands, except average sales price):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Revenues --
Single-family homes........................ $1,278,315 $1,178,938 $1,075,206
Land and other............................. 15,785 12,268 17,077
---------- ---------- ----------
Total...................................... $1,294,100 $1,191,206 $1,092,283
========== ========== ==========
Single-family homes --
Gross margin amount........................ $ 229,980 $ 217,461 $ 199,629
Gross margin percentage.................... 18.0% 18.4% 18.6%
Units delivered............................ 7,496 7,099 6,779
Average sales price........................ $ 170,500 $ 166,100 $ 158,600
New orders taken........................... 7,893 7,406 6,959
Backlog at end of year:
Aggregate sales amount.................. $ 608,974 $ 530,857 $ 460,337
Units................................... 3,435 3,038 2,731
Selling, general and administrative expenses
as a percentage of housing revenues........ 9.5% 9.5% 9.7%
Interest --
Paid or accrued............................ $ 38,153 $ 33,484 $ 31,995
Percentage capitalized..................... 100.0% 100.0% 100.0%
Previously capitalized interest included in
interest expense........................ $ 33,789 $ 30,786 $ 27,555
Percentage of housing revenues............. 2.6% 2.6% 2.5%
</TABLE>
REVENUES AND SALES --
Revenues from sales of single-family homes for 1997 increased 8% from 1996.
The increase resulted from a 5% increase in the number of housing units
delivered and a 3% increase in the average sales price. Revenues from sales of
single-family homes for 1996 increased 10% from 1995, resulting primarily from a
5% increase in the number of housing units delivered and a 5% increase in the
average sales price. The average sales price is impacted by product mix,
geographical mix and changing prices on units delivered.
New orders taken in 1997 increased 7% from 1996. New orders taken in 1996
increased 6% from 1995. The increases in new orders in 1997 and 1996 reflects
the continued demand for new single-family homes which the Company believes was
brought about by strong consumer confidence, opening of new home communities and
stable mortgage interest rates.
GROSS MARGINS --
The gross margin percentage for 1997 decreased from 1996 and the gross
margin percentage for 1996 decreased from 1995. These decreases were primarily
due to a more competitive housing environment, resulting in the increased use of
sales incentives, the cost of which the Company was not able to offset by
increases in the average sales prices. While 1997 gross margin percentage
decreased compared to 1996, the gross margin percentages for the fourth quarter
of 1997 (18.7%) increased compared to the gross margin
14
<PAGE> 15
percentages for the third quarter of 1997 (18.1%) and the fourth quarter of 1996
(18.1%). There can be no assurance margins will continue to improve because they
could be adversely affected by future events, including a change in the
competitive housing environment and increases in construction labor and material
costs.
BACKLOG --
The backlog aggregate sales amount at December 31, 1997 increased 15%
compared to December 31, 1996, and at December 31, 1996 increased 15% compared
to December 31, 1995. The increases in the value of the backlog reflect the
increases in the number of units under contract and increases in the average
sales price. Substantially all of the Company's backlog units at December 31,
1997, net of cancellations, are expected to result in revenues in 1998.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES --
As a percentage of housing revenues, selling, general and administrative
expenses in 1997 remained the same when compared to 1996 and 1996 declined as
compared to 1995. Actual selling, general and administrative expenses for 1997
increased $9.9 million compared to 1996. This increase was primarily due to
increased payroll costs and advertising and marketing center expenses resulting
from increased activities. Similarly, actual selling, general and administrative
expenses for 1996 increased $7.3 million compared to 1995. This increase was
primarily due to increases in volume-related expenses ($4.1 million) resulting
from the increase in deliveries in 1996 when compared to 1995 and increases in
other selling, general and administrative expenses resulting from increased
activities and earnings.
INTEREST --
Interest paid or accrued for 1997 increased approximately 14% compared to
1996 and increased approximately 5% in 1996 compared to 1995. The increase in
1997 was primarily due to increased average borrowings under the Company's
unsecured revolving credit agreement (the "Credit Facility") and the sale of the
Company's 8.25% senior notes due 2004 (the "2004 Senior Notes") and 8.88% senior
subordinated notes due 2007 (the "Senior Subordinated Notes") in August 1997,
offset in part by the redemption and conversion of the Company's 4.875%
convertible subordinated debentures due 2005 (the "Debentures") and the purchase
of a portion of the Company's 9.75% senior notes due 2003 (the "2003 Senior
Notes") in September 1997. The increase in 1996 was primarily due to the sale of
the Company's 7.95% senior notes due 2001 (the "2001 Senior Notes") in February
1996, offset in part by a decrease in the average borrowings under the Company's
Credit Facility.
The Company capitalizes interest cost into housing inventories and charges
the previously capitalized interest to interest expense when the related
inventories are delivered. The amount of interest capitalized and previously
capitalized interest expensed in any one year is a function of the amount of
housing assets, land sales and the number of housing units delivered, average
outstanding debt levels and average interest rates. Capitalized interest amounts
charged to interest expense in 1997 were greater than 1996 and 1996 were greater
than 1995 primarily due to the increase in the number of housing units delivered
and higher average debt levels, offset in part by an increase in the amount of
housing assets qualifying for interest capitalization.
15
<PAGE> 16
FINANCIAL SERVICES
REVENUES --
Revenues for the financial services segment for the periods indicated were
as follows (dollars in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
U.S. Home Mortgage Corporation and Subsidiary.......... $21,648 $16,363 $12,477
Other financial services subsidiaries.................. 4,004 3,881 3,185
------- ------- -------
$25,652 $20,244 $15,662
======= ======= =======
</TABLE>
U.S. Home Mortgage Corporation ("Mortgage") provides financing primarily to
purchasers of homes sold by the Company's housing operations through origination
of residential mortgage loans and engages in the sale of such mortgages and
related servicing rights to unaffiliated investors. Mortgage's operations are
affected, among other things, by general economic conditions, consumer
confidence and interest rate volatility. These factors, together with the number
of homes delivered by the Company, affect the volume of loan originations which
in turn impact the resulting volume of mortgages and servicing rights for sale.
Approximately 81%, 83% and 82% of the housing units delivered by the
Company in 1997, 1996 and 1995, respectively, were purchased using mortgage
financing. Of the total housing units financed, 76%, 61% and 57% in 1997, 1996
and 1995, respectively, were financed by Mortgage.
The increase in Mortgage's revenues in 1997 from 1996 and in 1996 from 1995
was primarily due to an increase in mortgage loan originations and income from
the sales of mortgage loans and servicing rights.
OTHER
IMPAIRMENT OF LAND INVENTORIES --
During the fourth quarter of 1996, in conjunction with the completion of
the 1997 business plan, the Company completed its annual detailed evaluation of
the intended use of its land inventories to insure that the primary and planned
use reflected the appropriate economic value for the Company's intended use. It
was determined during the evaluation that based on economic forecasts for 1997
the current best use of certain land inventories located primarily in Florida,
Maryland and Texas had changed from the Company's previous intended use. Based
on the change in intended use, the Company revised its cash flow estimates and
determined the cash flow expected to be generated from the new intended use
would be less than the cost of the land. Accordingly, the Company recorded a
non-cash provision for impairment of approximately $13.0 million ($8.2 million,
net of income taxes) to reduce the carrying value of the land to its current
fair value, which amount has been included in "provision for impairment of land
inventories" in the Consolidated Statements of Operations. The provision for
impairment reduced basic and diluted earnings per common share in 1996 by $.72
per share and $.58 per share, respectively.
CORPORATE GENERAL AND ADMINISTRATIVE --
Corporate general and administrative includes the operations of the
Company's corporate office. As a percentage of total revenues, such expenses
were .9%, 1.0% and 1.1% for 1997, 1996 and 1995, respectively. Actual corporate
overhead expenses for 1997 totaled $11.7 million compared with $11.7 million and
$11.8 million, respectively, for 1996 and 1995.
INCOME TAXES --
During the fourth quarter of 1996, the Internal Revenue Service (the "IRS")
completed an examination of the Company's federal income tax returns for the
years ended December 31, 1993 and 1992. The results of
16
<PAGE> 17
this examination allowed certain previously reserved deductions taken by the
Company in its 1993 tax return. At the conclusion of this examination, the
Company reduced its deferred tax liability and recognized an income tax benefit
totaling $8.7 million related to the deductions allowed by the IRS. The Company
appealed the IRS decision to disallow certain other deductions. These deductions
remain reserved as a deferred tax liability as of December 31, 1997. The
decrease in the deferred tax liability increased basic and diluted earnings per
common share in 1996 by $.76 per share and $.61 per share, respectively.
FINANCIAL CONDITION AND LIQUIDITY
HOUSING
The Company is significantly affected by the cyclical nature of the
homebuilding industry, which is sensitive to fluctuations in economic activity
and interest rates and the level of consumer confidence. Sale of new homes are
also affected by market conditions for rental properties and by the condition of
the resale market for used homes, including foreclosed homes. For example, an
oversupply of resale units depresses prices and reduces the margins available on
sales of new homes. The sale of new homes and profitability from sales are
heavily influenced by the level and expected direction of interest rates.
Increases in interest rates tend to have a depressing effect on the market for
new homes in view of increased monthly mortgage costs to potential home buyers.
The Company's most significant needs for capital resources are land and
finished lot purchases, land development and housing construction. The Company's
ability to generate cash adequate to meet these needs is principally achieved
from the sale of homes and the margins thereon, the utilization of Company-owned
lots and borrowings under its financing facilities, including the Credit
Facility.
In 1997, the Company completed a refinancing of a substantial portion of
its public debt. In August 1997, the Company sold $100 million principal amount
of its 2004 Senior Notes and $125 million principal amount of its Senior
Subordinated Notes for the purpose of raising funds to redeem its Debentures and
purchase its 2003 Senior Notes. In September 1997, the Company redeemed $69.2
million principal amount of its Debentures and purchased $120.3 million
principal amount of its 2003 Senior Notes (through a tender offer and subsequent
open market purchase) for $198.8 million in the aggregate. Also in September
1997, $10.8 million principal amount of the Debentures was converted into
302,866 shares of the Company's common stock. See Note 2 of Notes to
Consolidated Financial Statements.
In January 1998, the Company sold $100 million principal amount of its
7.75% senior notes due 2005 ("2005 Senior Notes"). The net proceeds will be used
to redeem the balance of the 2003 Senior Notes ($79.7 million) which are first
callable in June 1998. Also in January and February 1998, the Company used a
portion of the proceeds to purchase, in open market transactions, $26.7 million
principal amount of the 2003 Senior Notes. The Company currently intends to
redeem the balance of these notes, though it may purchase such notes in the open
market or in privately negotiated transactions prior to such date. See Note 2 of
Notes to Consolidated Financial Statements. Pending redemption or other
purchases of the remaining 2003 Senior Notes, the Company intends to use the
proceeds from the sale of the 2005 Senior Notes to reduce the Company's
outstanding borrowings under the Credit Facility and for general corporate
purpose, including land and other investments and joint ventures.
The refinancing strengthens the Company's capital structure by extending a
substantial portion of its public debt maturities, which were due in 2003 and
2005, to due dates of 2004, 2005 and 2007.
Access to quality land and lot locations is an integral part of the
Company's success. Typically, in order to secure the rights to quality locations
and provide sufficient lead time for development, the Company must acquire land
rights well in advance of when orders for housing units are expected to occur.
Primarily in its affordable and move-up home communities,the Company attempts to
minimize its exposure to the cyclical nature of the housing market and its use
of working capital by employing rolling lot options, which enable the Company to
initially pay a small portion of the total lot cost and then purchase the lots
on a scheduled basis. However, with the increase in the number of retirement and
active adult communities, the use of rolling lot options as a percentage of the
Company's total finished lot needs has and will continue to decrease since the
17
<PAGE> 18
majority of the finished lots for these communities are developed on land owned
by the Company. In 1997, 1996 and 1995, respectively, 37%, 44% and 43%, of the
units delivered have been on lots acquired under rolling lot option agreements.
The retirement and active adult communities are generally long-term projects and
require greater investments by the Company than are required for its affordable
and move-up home communities. These communities generally include more units
than the affordable and move-up communities and generally have more extensive
amenities, including golf courses and club houses, which require substantial
capital investment. The increase in land inventories in 1997 from 1996 and 1996
from 1995 was primarily the result of increased activities, including an
increase in the Company's retirement and active adult communities activities.
The Company has financed, and expects to continue to finance, its working
capital needs from operations and borrowings, including those made under the
Company's Credit Facility. The Credit Facility (and previous credit facilities)
have enabled the Company to meet peak operating needs. In August 1997, the
Company entered into an interest rate swap agreement which has effectively fixed
the interest rate on $50 million of its Credit Facility borrowings until August
2000. In October 1997, the Credit Facility borrowing commitment was increased
from $130 million to $180 million. See Note 2 of Notes to Consolidated Financial
Statements.
Also, certain of the properties owned or under option by the Company may be
located within community development districts ("Districts") formed by
municipalities to construct and finance certain infrastructure/improvements on
property in the Districts' area. The Districts utilize ad valorem and assessment
revenue bonds to fund improvements and repay the bonds by annual tax assessments
on District property based on the property's relative value to other District
property. The Company provides no credit support for and is not liable for the
debt of the Districts, except to the extent of actual assessments made by the
Districts. The Company may utilize Districts to a greater extent in the future.
However, there can be no assurance that it will do so.
The net cash provided or used by the operating, investing and financing
activities of the housing operations for the years ended December 31, 1997, 1996
and 1995 is summarized below (dollars in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Net cash provided (used by):
Operating activities...................................... $(44,622) $(28,091) $(13,752)
Investing activities...................................... (2,493) (3,684) (2,041)
Financing activities...................................... 41,068 36,694 5,216
-------- -------- --------
Net increase (decrease) in cash............................. $ (6,047) $ 4,919 $(10,577)
======== ======== ========
</TABLE>
Housing operations are, at any time, affected by a number of factors,
including the number of housing units under construction and housing units
delivered. Although housing construction and land asset activities increased in
1997 over 1996 and increased in 1996 over 1995, the amount of the increase in
1997 was less than the increase in 1996 and as a result 1997 activities used
less cash than 1996 activities. Housing operating activities for 1997 used more
cash than 1996 primarily due to an increase in housing proceeds receivables and
the timing of payments related to construction and land asset activities, offset
in part by the decrease in construction and land asset activities described
above and the increase in the number of housing units delivered. Housing
operating activities for 1996 used more cash than in 1995 primarily due to an
increase in these activities offset in part by increased profitability and the
timing of payments related to these activities.
Cash flow from housing financing activities for 1997 provided cash
reflecting the sale of the Company's 2004 Senior Notes and Senior Subordinated
Notes and net borrowings under the Credit Facility, offset by the purchase of
the Company's 2003 Senior Notes and Debentures and repurchase of common stock
and Class B warrants. Cash flow from housing financing activities in 1996
provided cash reflecting the sale of the Company's 2001 Senior Notes, partially
offset by the repayment of the amounts outstanding under the Credit Facility.
18
<PAGE> 19
The Company believes that cash flow from operations and amounts available
under the Credit Facility will be sufficient to meet its current working capital
obligations and other needs. However, should the Company require capital in
excess of that which is currently available, there can be no assurance that it
will be available.
FINANCIAL SERVICES
Mortgage's activities represent a substantial portion of the financial
services segment's activities. As loan originations by Mortgage are primarily
from homes sold by the Company's home building operations, Mortgage's financial
condition and liquidity are to a significant extent dependent upon the financial
condition of the Company.
Financial services operating activities are affected primarily by the
volume of Mortgage's loan originations and the timing of the sale of mortgage
loans and related servicing rights to third party investors. Loans and servicing
rights are generally sold to investors within 30 days after homes are delivered.
Cash flow from financial services operating activities for 1997 provided more
cash compared to 1996 primarily due to increased profitability, offset in part
by an increase in residential mortgage loans receivable. Cash flow from
financial services operating activities for 1996 provided less cash compared to
1995 primarily due to an increase in residential mortgage loan receivables.
The Company finances its financial services operations primarily from
short-term debt which is repaid with internally generated funds, such as from
the origination and sale of residential mortgage loans and related servicing
rights. As more fully discussed in Note 2 of Notes to Consolidated Financial
Statements, the short-term debt consists of a $65 million secured revolving line
of credit (the "Mortgage Credit Facility") which matures on August 31, 1998.
While the Mortgage Credit Facility contains numerous covenants, including a debt
to tangible net worth ratio and a minimum tangible net worth requirement, these
covenants are not anticipated to significantly limit Mortgage's operations.
The Company has no obligation to provide funding to its financial services
operations, nor does it guarantee any of its financial services subsidiaries'
debt. The Company believes that internally generated funds and the Mortgage
Credit Facility will be sufficient to provide for Mortgage's working capital
needs.
OTHER
IMPACT OF INFLATION --
Inflation not only affects interest rates on funds borrowed by the Company,
but also affects the affordability of permanent mortgage financing available to
prospective customers. Increased construction costs associated with rising
interest rates, as well as increased material costs, compress gross margins in
the short-term, but may be recovered in the long-term through increases in sales
prices, although such increases may reduce sales volume. In recent years,
inflation has not had a significant adverse effect on the Company.
CAUTIONARY DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS --
The Company desires to take advantage of the "safe harbor" provisions of
the Private Securities Litigation Reform Act of 1995 and is including this
disclosure in order to do so.
Certain statements contained herein, in the Company's press releases, oral
communications and other filings with the Securities and Exchange Commission
that are not historical facts are, or may be considered to be, forward-looking
statements within the meaning of Section 21E of the Securities Exchange Act of
1934, as amended. Given the risks, uncertainties and contingencies of the
Company's business, the actual results may differ materially from those
expressed or implied by such forward-looking statements. Further, certain
forward-looking statements are based on assumptions concerning future events
which may not prove to be accurate.
19
<PAGE> 20
Forward-looking statements by the Company regarding results of operations
and, ultimately, financial condition, are subject to numerous risk and
assumptions, including the following:
o General economic and business conditions, the level and direction of
interest rates and the level of consumer confidence have significant
impact on the willingness and ability of purchasers to enter into
contracts for homes and to consummate purchases of such homes under
contract (backlog), as well as on the performance of Mortgage, the
Company's principal subsidiary.
o The development of many of the Company's communities, particularly its
retirement and active adult communities, result from a lengthy, complex
series of events involving land purchase, regulatory compliance, capital
availability, marketing and sales, any of which can materially affect the
financial results for a community.
o The Company is in a highly competitive and fragmented industry, which
places constant pressure on price (including the ability of the Company
to respond to increases in prices from its suppliers), quality and
marketing and particularly challenges the Company upon any entry into new
geographic markets.
o The Company faces numerous regulatory hurdles in its development efforts,
such as laws and regulations regarding zoning, environmental protection,
building design and construction, density and rate of development.
o The Company's access to capital sufficient to fund its development
activities is affected by the Company's financial leverage and by the
willingness of the capital markets and banks to absorb equity or debt of
the Company.
o The Company may encounter other contingencies, including labor shortages,
work stoppages, product liability, litigation, natural risks such as
floods or hurricanes and other factors over which the Company has little
or no control.
20
<PAGE> 21
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
U.S. HOME CORPORATION AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
FINANCIAL STATEMENTS:
Report of Independent Public Accountants....................
Consolidated Balance Sheets -- December 31, 1997 and 1996...
Consolidated Statements of Operations -- For the Years Ended
December 31, 1997,
1996 and 1995.............................................
Consolidated Statements of Stockholders' Equity -- For the
Years Ended December 31, 1997,
1996 and 1995.............................................
Consolidated Statements of Cash Flows -- For the Years Ended
December 31, 1997, 1996 and 1995..........................
Notes to Consolidated Financial Statements..................
</TABLE>
21
<PAGE> 22
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To U.S. Home Corporation:
We have audited the accompanying consolidated balance sheets of U.S. Home
Corporation (a Delaware corporation) and subsidiaries as of December 31, 1997
and 1996, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the three years in the period ended December
31, 1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of U.S. Home
Corporation and subsidiaries as of December 31, 1997 and 1996, and the results
of their operations and cash flows for each of the three years in the period
ended December 31, 1997, in conformity with generally accepted accounting
principles.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Houston, Texas
February 6, 1998
22
<PAGE> 23
U.S. HOME CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
1997 1996
---------- --------
<S> <C> <C>
HOUSING:
Cash (including restricted funds of $1,655 and $1,578).... $ 6,270 $ 8,786
Receivables, net.......................................... 42,595 28,028
Single-Family Housing Inventories......................... 789,236 709,344
Option Deposits on Real Estate............................ 90,155 70,688
Other Assets.............................................. 54,006 49,036
---------- --------
982,262 865,882
---------- --------
FINANCIAL SERVICES:
Cash (including restricted funds of $3,641 and $3,533).... 5,492 4,463
Residential Mortgage Loans................................ 69,209 63,656
Other Assets.............................................. 10,151 13,410
---------- --------
84,852 81,529
---------- --------
$1,067,114 $947,411
========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
HOUSING:
Accounts Payable.......................................... $ 92,160 $ 96,594
Accrued Expenses and Other Current Liabilities............ 68,848 50,972
Revolving Credit Facility................................. 29,000 --
Long-Term Debt............................................ 395,918 362,887
---------- --------
585,926 510,453
---------- --------
FINANCIAL SERVICES:
Accrued Expenses and Other Current Liabilities............ 21,067 20,854
Revolving Credit Facility................................. 40,343 42,414
---------- --------
61,410 63,268
---------- --------
Total Liabilities................................. 647,336 573,721
---------- --------
STOCKHOLDERS' EQUITY:
Convertible Preferred Stock, $25 per share redemption
value, none outstanding at December 31, 1997 and
117,863 shares outstanding at December 31, 1996........ -- 2,947
Common Stock, 11,762,518 and 11,453,290 shares outstanding
at December 31, 1997 and 1996.......................... 119 114
Capital in Excess of Par Value............................ 368,277 353,830
Retained Earnings......................................... 57,358 18,821
Unearned Compensation on Restricted Stock................. (1,770) (2,022)
---------- --------
423,984 373,690
---------- --------
Less Treasury Stock, at cost, 157,743 shares of common
stock at December 31, 1997............................. (4,206) --
---------- --------
Total Stockholders' Equity........................ 419,778 373,690
---------- --------
$1,067,114 $947,411
========== ========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
23
<PAGE> 24
U.S. HOME CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
HOUSING:
Operating Revenues................................... $1,294,100 $1,191,206 $1,092,283
---------- ---------- ----------
Operating Costs and Expenses --
Cost of products sold............................. 1,059,571 971,896 891,163
Selling, general and administrative............... 123,300 113,352 106,036
Interest.......................................... 33,789 30,786 27,555
---------- ---------- ----------
1,216,660 1,116,034 1,024,754
---------- ---------- ----------
77,440 75,172 67,529
Provision for Impairment of Land Inventories......... -- 12,965 --
---------- ---------- ----------
Housing Operating Income............................. 77,440 62,207 67,529
---------- ---------- ----------
FINANCIAL SERVICES:
Operating Revenues................................... 25,652 20,244 15,662
General, Administrative and Other Expenses........... 16,485 14,850 12,329
---------- ---------- ----------
Financial Services Operating Income.................. 9,167 5,394 3,333
---------- ---------- ----------
CORPORATE GENERAL AND ADMINISTRATIVE................... 11,707 11,700 11,790
---------- ---------- ----------
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY LOSS...... 74,900 55,901 59,072
---------- ---------- ----------
PROVISION FOR INCOME TAXES --
Federal and State Income Taxes....................... 27,713 20,404 22,152
Tax Benefit.......................................... -- (8,691) --
---------- ---------- ----------
27,713 11,713 22,152
---------- ---------- ----------
INCOME BEFORE EXTRAORDINARY LOSS....................... 47,187 44,188 36,920
EXTRAORDINARY LOSS FROM EARLY RETIREMENT OF DEBT, NET
OF INCOME TAX BENEFIT OF $5,080...................... 8,650 -- --
---------- ---------- ----------
NET INCOME............................................. $ 38,537 $ 44,188 $ 36,920
========== ========== ==========
BASIC EARNINGS PER COMMON SHARE:
Income Before Extraordinary Loss..................... $ 4.08 $ 3.88 $ 3.29
Extraordinary Loss................................... $ (.75) $ - $ -
Net Income........................................... $ 3.33 $ 3.88 $ 3.29
DILUTED EARNINGS PER COMMON SHARE:
Income Before Extraordinary Loss..................... $ 3.50 $ 3.28 $ 2.78
Extraordinary Loss................................... $ (.62) $ - $ -
Net Income........................................... $ 2.88 $ 3.28 $ 2.78
</TABLE>
The accompanying notes are an integral part of these statements.
24
<PAGE> 25
U.S. HOME CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
CAPITAL IN UNEARNED
CONVERTIBLE EXCESS OF COMPENSATION
COMMON PREFERRED PAR ON RESTRICTED RETAINED TREASURY
STOCK STOCK VALUE STOCK EARNINGS STOCK
------ ----------- ---------- ------------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1994.................... $109 $12,969 $340,673 $ -- $(62,287) $ --
Conversion of convertible redeemable preferred
stock to common stock (198,536 shares)........ 2 (4,963) 4,961 -- -- --
Issuance of common stock under restricted stock
plan (144,547 shares)......................... 1 -- 2,599 (2,600) -- --
Other........................................... -- (25) 344 289 -- --
Net income for the year......................... -- -- -- -- 36,920 --
---- ------- -------- ------- -------- -------
BALANCE AT DECEMBER 31, 1995.................... 112 7,981 348,577 (2,311) (25,367) --
Conversion of convertible redeemable preferred
stock to common stock (201,391 shares)........ 2 (5,034) 5,032 -- -- --
Other........................................... -- -- 221 289 -- --
Net income for the year......................... -- -- -- -- 44,188 --
---- ------- -------- ------- -------- -------
BALANCE AT DECEMBER 31, 1996.................... 114 2,947 353,830 (2,022) 18,821 --
Conversion of convertible redeemable preferred
stock to common stock (106,501 shares)........ 1 (2,663) 2,662 -- -- --
Redemption of convertible redeemable preferred
stock (11,352 shares)......................... -- (284) -- -- -- --
Conversion of 4.875% convertible subordinated
debentures to common stock (302,866 shares)... 3 -- 10,659 -- -- --
Purchase of common stock (157,743 shares)....... -- -- -- -- -- (4,206)
Other........................................... 1 -- 1,126 252 -- --
Net income for year............................. -- -- -- -- 38,537 --
---- ------- -------- ------- -------- -------
BALANCE AT DECEMBER 31, 1997.................... $119 $ -- $368,277 $(1,770) $ 57,358 $(4,206)
==== ======= ======== ======= ======== =======
</TABLE>
The accompanying notes are an integral part of these statements.
25
<PAGE> 26
U.S. HOME CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996 1995
--------- -------- --------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net income................................................ $ 38,537 $ 44,188 $ 36,920
Adjustments to reconcile net income to net cash provided
(used) by operating activities --
Extraordinary loss..................................... 8,650 -- --
Provision for impairment of land inventories........... -- 12,965 --
Provision for deferred income taxes.................... 2,151 635 19,886
Tax benefit............................................ -- (8,691) --
Other, net (principally depreciation and
amortization)........................................ 9,044 8,680 4,579
Changes in assets and liabilities --
Increase in receivables.............................. (20,229) (15,291) (24,456)
Increase in inventories.............................. (68,691) (91,111) (46,913)
Increase in other assets............................. (28,648) (14,608) (9,241)
Increase (decrease) in accounts payable and accrued
liabilities....................................... 17,618 23,524 (4,963)
--------- -------- --------
Net cash used by operating activities..................... (41,568) (39,709) (24,188)
--------- -------- --------
Cash Flows From Investing Activities:
Purchase of property, plant and equipment, net of
disposals.............................................. (3,056) (2,657) (2,526)
Decrease (increase) in restricted cash.................... (185) (773) 327
Principal collections on investments in mortgage loans.... 4,136 1,989 1,687
Other..................................................... 4 (677) (661)
--------- -------- --------
Net cash provided (used) by investing activities.......... 899 (2,118) (1,173)
--------- -------- --------
Cash Flows From Financing Activities:
Proceeds from revolving credit facilities, net of
repayments............................................. 26,929 (16,957) 41,804
Net proceeds from sale of senior and senior subordinated
notes.................................................. 220,937 73,406 --
Purchase of senior notes and convertible subordinated
debentures............................................. (198,831) -- --
Repayment of notes and mortgages payable.................. (6,128) (12,712) (12,265)
Repurchase of common stock and Class B Warrants........... (4,266) -- --
Other..................................................... 356 -- --
--------- -------- --------
Net cash provided by financing activities................. 38,997 43,737 29,539
--------- -------- --------
Net Increase (Decrease) In Cash............................. (1,672) 1,910 4,178
Cash At Beginning Of Year................................... 8,138 6,228 2,050
--------- -------- --------
Cash At End Of Year......................................... $ 6,466 $ 8,138 $ 6,228
========= ======== ========
Supplemental Disclosure:
Interest paid, before amount capitalized --
Housing................................................ $ 32,063 $ 31,508 $ 31,761
Financial Services..................................... 1,426 1,472 645
--------- -------- --------
$ 33,489 $ 32,980 $ 32,406
========= ======== ========
Income taxes paid......................................... $ 21,490 $ 16,069 $ 2,159
========= ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
26
<PAGE> 27
U.S. HOME CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(1) SIGNIFICANT ACCOUNTING POLICIES
GENERAL
Nature of Operations
The Company is one of the largest single-family home builders in the United
States based on homes delivered. The Company currently builds and sells homes in
more than 220 new home communities in 31 market areas in 11 states. The Company
offers a wide variety of moderately-priced homes that are designed to appeal to
the affordable, move-up and retirement and active adult buyers. In addition to
building and selling single-family homes, the Company provides mortgage banking
services to its customers. The Company originates, processes and sells mortgages
to third-party investors. The Company does not retain or service the mortgages
that it originates but, rather, sells the mortgages and related servicing rights
to investors.
Principles of Consolidation and Basis of Presentation
The accompanying consolidated financial statements include the accounts of
the Company and all wholly-owned subsidiaries after elimination of all
significant intercompany balances and transactions.
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of any contingent assets and liabilities at the date of the
consolidated financial statements and revenues and expenses during the reporting
period. Management's estimates and assumptions are reflective of, among other
things, prevailing and expected market conditions, current operating strategies
and the availability of capital which are all subject to change. Changes to the
aforementioned or other conditions could in turn cause changes to such estimates
and assumptions and, as a result, actual results could differ from the original
estimates.
The Company is engaged in two related industry segments, the on-site
development of single-family residential communities and financial services.
Identifiable assets and the results of operations of the Company's segments are
reported in the consolidated balance sheets and consolidated statements of
operations. Capital expenditures, depreciation and amortization expense for the
years ended December 31, 1997, 1996 and 1995 were insignificant.
New Pronouncements
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 128, Earnings Per Share ("SFAS No. 128"), in February
1997 with an effective date for both interim and annual periods ending after
December 15, 1997. SFAS No. 128 simplifies the standards for computing earnings
per share and replaces the presentation of primary earnings per share and fully
diluted earnings per share with a presentation of basic earnings per share
("basic EPS") and diluted earnings per share ("diluted EPS"). Basic EPS excludes
dilution and is determined by dividing income available to common stockholders
by the weighted average number of common shares outstanding during the period.
Diluted EPS reflects the potential dilution that could occur if securities and
other contracts to issue common stock were exercised or converted into common
stock and is computed similarly to fully diluted earnings per share. The
adoption of SFAS No. 128 resulted in a restatement of earnings per share for all
periods presented in the accompanying consolidated financial statements. See
Note 6.
In June 1997, the Financial Accounting Standard Board issued Statement of
Financial Accounting Standards No. 130, Reporting Comprehensive income ("SFAS
No. 130") with an effective date for fiscal years beginning after December 15,
1997. SFAS No. 130 establishes standards for the reporting of comprehensive
income in a company's financial statements. Comprehensive income includes all
changes in a
27
<PAGE> 28
U.S. HOME CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
company's equity during the period that result from transactions and other
economic events other than transactions with its stockholders.
In the fourth quarter of 1997, the Company elected to early adopt SFAS No.
130 retroactive to January 1, 1997. The adoption of SFAS No. 130 did not affect
the financial reporting in the accompanying consolidated financial statements
because the Company does not have any comprehensive income other than net
income.
Cash Equivalents
The Company considers all short-term investments with an initial maturity
of less than 90 days to be cash equivalents.
Financial Instruments
The Company believes that fair value approximates recorded values for such
financial instruments as cash and cash equivalents, trade receivables and
payables, short-term debt and option deposits because of the typically liquid,
short-term nature, market rate terms and lack of specific concentration of these
instruments.
The fair value of the senior and senior subordinated notes cannot be
determined as none of these instruments are actively traded on the open market.
The Company has been informed that the 9.75% and 8.25% senior notes and the
8.88% senior subordinated notes are currently trading at a nominal premium and
the 7.95% senior notes are currently trading at par; however, the actual amount
of the premium cannot be determined because of the limited activity.
The fair value of the Company's residential mortgage loans approximate
their carrying value as such loans are packaged and sold to investors generally
within 30 days after home delivery. Additionally, a significant portion of the
Company's interest rate risk associated with and generated by these loans is
mitigated by the use of forward delivery contracts and commitments. See Hedging
Contracts below.
Hedging Contracts
From time to time, the Company may utilize interest rate swap agreements to
manage interest costs and hedge against risks associated with changing interest
rates. The Company designates interest rate swaps as hedges of specific debt
instruments and recognizes interest rate differentials as adjustments to
interest paid or accrued as the differentials occur. Counterparties to these
agreements are major financial institutions. The Company believes that the
likelihood of credit loss from counterparty non-performance is remote. At
December 31, 1997, the Company had an interest rate swap agreement outstanding
with a notional amount of $50,000 which will mature in 2000 and effectively
fixed the interest rate on a portion of its revolving credit facility
borrowings. See Note 8.
The Company manages its interest rate market risk on the inventory loans
held for sale and its estimated future commitments to originate and close
mortgage loans at fixed prices ("Loan Quotes") through hedging techniques by
regularly entering into either fixed price mandatory forward delivery contracts
("Forward Contracts") to sell mortgage-backed securities to security dealers or
fixed price forward delivery commitments ("Forward Commitments") to sell
specific whole loans to investors on a mandatory or best efforts basis ("Forward
Contracts" and "Forward Commitments", collectively "Hedging Contracts"). The
Company records the inventory of residential mortgage loans at the lower of cost
or market on an aggregate basis after considering any market value changes in
the inventory loans, Loan Quotes and Hedging Contracts. See Note 8.
28
<PAGE> 29
U.S. HOME CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
HOUSING
Sales and Profit Recognition
Profit is recognized from the sale of real estate at time of closing, i.e.,
when sufficient down payment has been made; any financing has been arranged;
title, possession and other attributes of ownership have been transferred to the
buyer; and the Company is not obligated to perform additional significant
activities after the sale.
Inventories and Valuation
The components of single-family housing inventories are as follows:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Housing completed and under construction.................... $302,258 $280,390
Models...................................................... 83,943 74,167
Finished lots............................................... 138,747 147,893
Land under development...................................... 75,959 59,840
Land held for development or sale........................... 188,329 147,054
-------- --------
$789,236 $709,344
======== ========
</TABLE>
The cost of acquiring and developing land and constructing certain
amenities are allocated to the related parcels. Housing inventories are recorded
using the specific identification method. The Company measures any impairments
on land under development and to be developed at the lower of cost or fair value
and carries land substantially completed and ready for its intended use, land
held for sale and housing inventories at the lower of cost or fair value less
cost to sell. Fair value is the amount at which a property could be bought or
sold in a current transaction between willing parties. The Company monitors the
valuation of its land and housing inventories on a continuous basis with a
detailed review each year in conjunction with the completion of the following
year's business plan. Provisions to reduce land and housing inventories to the
lower of cost or fair value in 1997, 1996 (other than the $12,965 provision for
impairment of land inventories discussed below)and 1995 were not significant.
Total land and housing reserves were $35,839, $40,236 and $36,370 at December
31, 1997, 1996 and 1995, respectively.
During the fourth quarter of 1996, in conjunction with the completion of
the 1997 business plan, the Company completed its annual detailed evaluation of
the intended use of its land inventories to insure that the primary and planned
use reflected the appropriate economic value for the Company's intended use. It
was determined during the evaluation that based on economic forecasts, the
current best use of certain land inventories located primarily in Florida,
Maryland and Texas had changed from the Company's previous intended use. Based
on the change in intended use, the Company determined the cash flow expected to
be generated from the new intended use would be less than the cost of the land.
Accordingly, the Company recorded a non-cash provision for impairment of $12,965
($8,233, net of income taxes) to reduce the carrying value of the land to its
current fair value, which amount has been included in "provision for impairment
of land inventories" in the accompanying consolidated statements of operations.
The provision for impairment reduced basic and diluted earnings per common share
by $.72 per share and $.58 per share, respectively.
During 1997, the Company purchased land in a single transaction of which
$13,151 was seller financed. During 1995, the Company completed exchanges of
land assets with third parties totaling approximately $14,832, in which the
Company received land suitable for single-family detached homes. These
transactions were treated as non-cash transactions for purposes of the
consolidated statements of cash flows.
29
<PAGE> 30
U.S. HOME CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Interest Capitalization
Interest is capitalized on land, finished building lots and single-family
residential housing construction costs during the development and construction
period. Interest is capitalized to eligible assets using an allocation method
based on the Company's actual interest costs. A summary of interest for 1997,
1996 and 1995 follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Capitalized at beginning of year.................... $ 58,566 $ 59,898 $ 56,082
Capitalized......................................... 38,153 33,484 31,995
Previously capitalized interest included in interest
expense........................................... (33,789) (30,786) (27,555)
Included in provision for impaired land inventories
and other......................................... 20 (4,030) (624)
-------- -------- --------
Capitalized at end of year.......................... $ 62,950 $ 58,566 $ 59,898
======== ======== ========
</TABLE>
FINANCIAL SERVICES
Revenue Recognition
The sale of loans and loan servicing rights is recognized when the closed
loans are sold and delivered to an investor. During the years ended December 31,
1997, 1996 and 1995, revenues included net losses from the sale of loans of
$573, $976 and $512, respectively, and net gains from the sale of servicing of
$9,691, $7,294 and $5,467, respectively.
Interest Expense
Interest expense relating to financial services for the years ended
December 31, 1997, 1996 and 1995 was $1,417, $1,507 and $692, respectively, and
is included in "general, administrative and other expenses" in the accompanying
consolidated statements of operations.
Residential Mortgage Loans
Residential mortgage loans held for sale ($45,273 at December 31, 1997) are
included in the accompanying consolidated balance sheets at the lower of cost or
market on an aggregate basis. The Company estimates the fair value of
residential mortgage loans held at December 31, 1997 approximated recorded value
based on quoted market prices for similar loans sold either on a whole loan
basis or pooled and sold as collateral for mortgage-backed securities.
30
<PAGE> 31
U.S. HOME CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(2) REVOLVING CREDIT FACILITIES AND LONG-TERM DEBT
Housing
Revolving credit facilities, senior, senior subordinated and convertible
subordinated debt and notes payable consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
-------- --------
<S> <C> <C>
Revolving credit facility................................... $ 29,000 $ --
-------- --------
7.95% Senior notes due 2001................................. 75,000 75,000
9.75% Senior notes due 2003................................. 79,703 200,000
8.25% Senior notes due 2004................................. 100,000 --
8.88% Senior subordinated notes due 2007.................... 125,000 --
4.875% Convertible subordinated debentures due 2005......... -- 80,000
Notes and mortgage notes payable............................ 16,215 7,887
-------- --------
395,918 362,887
-------- --------
$424,918 $362,887
======== ========
</TABLE>
The Company has an unsecured revolving credit agreement (the "Credit
Facility") with a group of banks. In October 1997, the maximum amount which the
Company may borrow under the Credit Facility was increased from $130,000 to
$180,000, of which up to $20,000 may be used for letter of credit obligations,
subject to a borrowing base limitation. The amount available for borrowing under
the Credit Facility is based on housing inventories, land, finished lots and
closing proceeds receivables less outstanding senior debt borrowings (as
defined), including amounts outstanding under the Credit Facility; as the amount
invested in these categories changes, the amount of available borrowings will
increase or decrease. At December 31, 1997, $140,119 of the Credit Facility
commitment was available for borrowing. Borrowings bear interest at a premium
over the London Interbank Offered Rate ("LIBOR") or the base rate announced by
the agent bank. The Credit Facility, as amended, expires on May 31, 2001, but
may be extended annually beginning in 1999 for successive one-year periods with
the consent of the banks and contains numerous real estate and financial
covenants, including restrictions on the incurrence of additional debt, creation
of liens and the levels of land and housing inventories maintained by the
Company and a prohibition on the payment of dividends, other than stock
dividends.
In August 1997, the Company completed the sale of $100,000 principal amount
of its 8.25% senior notes due 2004 (the "2004 Senior Notes") and $125,000
principal amount of its 8.88% senior subordinated notes due 2007 (the "Senior
Subordinated Notes") for the purpose of raising funds to redeem its 4.875%
convertible subordinated debentures due 2005 (the "Debentures") and purchase its
9.75% senior notes due 2003 (the "2003 Senior Notes"). Interest on the 2004
Senior Notes and Senior Subordinated Notes is payable semi-annually, commencing
on February 15, 1998. On or after August 15, 2002, the Senior Subordinated Notes
may be redeemed at the option of the Company, in whole or in part, at prices
ranging from 104.44% (during the 12-month period beginning August 15, 2002) to
100% (on or after August 15, 2005) of the principal amount thereof, together
with accrued and unpaid interest. The indentures relating to 2004 Senior Notes
and Senior Subordinated Notes contain numerous covenants, including a minimum
tangible net worth requirement and a limitation on the incurrence of additional
debt.
In September 1997, the Company purchased $110,480 principal amount of the
2003 Senior Notes pursuant to a tender offer and, subsequent to the expiration
of the tender offer, purchased in an open market transaction $9,817 principal
amount of the 2003 Senior Notes. Also in September 1997, the Company redeemed
$69,248 principal amount of the Debentures, and $10,752 principal amount of the
Debentures were converted, prior to the redemption date, into 302,866 shares of
the Company's common stock. The early
31
<PAGE> 32
U.S. HOME CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
retirement of the 2003 Senior Notes and redemption of the Debentures resulted in
an extraordinary loss of $8,650, net of income tax benefit of $5,080.
The 7.95% senior notes are due March 1, 2001 and interest is payable
semi-annually. The indenture relating to the 7.95% senior notes contains
numerous covenants, including a minimum tangible net worth requirement and a
limitation on the incurrence of additional debt.
The 2003 Senior Notes are due June 15, 2003 and interest is payable
semi-annually. On or after June 15, 1998, the 2003 Senior Notes may be redeemed
at the option of the Company, in whole or in part, at prices ranging from
103.656% (during the 12-month period beginning June 15, 1998) to 100% (on and
after June 15, 2001) of the principal amount thereof, together with accrued and
unpaid interest. In connection with the purchase of the 2003 Senior Notes
pursuant to the tender offer described above, the indenture for the 2003 Senior
Notes was amended to eliminate certain restrictive covenants, including the
limitation on the incurrence of additional debt, as well as certain events of
default.
In January 1998, the Company completed the sale of $100,000 principal
amount of its 7.75% senior notes due January 15, 2005. Interest is payable
semi-annually commencing on July 15, 1998. The net proceeds from the sale will
be used to redeem the balance of its 2003 Senior Notes which are first callable
in June 1998. Also in January and February 1998, the Company used a portion of
the proceeds to purchase in open market transactions $26,720 principal amount of
the 2003 Senior Notes. The Company currently intends to redeem the balance of
these notes, though it may purchase such notes in the open market or in
privately negotiated transactions prior to such date. Pending redemption or
other purchases of the remaining 2003 Senior Notes, the Company intends to use
the proceeds from the sale of the 7.75% senior notes to reduce the Company's
outstanding borrowings under the Credit Facility and for general corporate
purpose, including land and other investments and joint ventures.
Housing notes and mortgage notes payable are primarily for the acquisition
and development of land, with interest rates ranging from 8.0% to 10.0%. Assets
pledged as collateral under these agreements totaled approximately $56,230 at
December 31, 1997.
Upon a change of control of the Company, holders of the senior notes and
the senior subordinated notes will have the right to require the Company to
redeem the notes at a price of 101% of the principal amount of the notes,
together with accrued and unpaid interest. There can be no assurance that
sufficient funds will be available to make the required repurchases if a change
of control occurs. In addition, the Credit Facility prohibits the Company's
repurchase of any of its subordinated indebtedness and contains a restriction
relating to the Company's repurchase of its capital stock prior to the
termination of the Credit Facility. At December 31, 1997, $26,618 was available
for the repurchase of capital stock. Moreover, the occurrence of a change of
control will trigger an event of default under the Credit Facility.
The maximum amounts of borrowings from banks and other financial
institutions outstanding at any time during 1997, 1996 and 1995 were $81,000,
$64,000 and $67,000, respectively. The average amounts of debt outstanding from
banks and other financial institutions during 1997, 1996 and 1995 were $31,100,
$15,800 and $42,400, respectively, and the weighted average interest rates,
without giving effect to commitment fees, were 7.8%, 8.4% and 9.7%,
respectively. Computations of the weighted average interest rates were based
upon the weighted average of outstanding loan balances during the respective
years.
At December 31, 1997, housing long-term debt matures (with the 2003 Senior
Notes included in 1998 maturities) as follows: $80,905 in 1998, $789 in 1999,
$326 in 2000, $75,146 in 2001, $13,297 in 2002, and $224,455 thereafter.
32
<PAGE> 33
U.S. HOME CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Financial Services
Financial services revolving credit facility consists of an agreement with
a financial institution whereby the Company's mortgage banking subsidiary, U.S.
Home Mortgage Corporation ("Mortgage"), may borrow up to $65,000 under a
revolving line of credit (the "Mortgage Credit Facility") secured by residential
mortgage loans and mortgage notes receivables. The Mortgage Credit Facility is
not guaranteed by the Company, was renewed in August 1997 under substantially
the same terms and conditions as the previous agreement, matures on August 31,
1998 and bears interest at a premium over the LIBOR rate.
The maximum amounts of financial services borrowings from banks and other
financial institutions outstanding at any time during 1997, 1996 and 1995 were
$46,900, $42,400 and $35,400, respectively. The average amounts of short-term
debt outstanding from banks and other financial institutions during 1997, 1996
and 1995 were $20,500, $22,300 and $8,500, respectively, and the weighted
average interest rates, without giving effect to commitment fees, were 6.7%,
6.6% and 7.0%, respectively. Computations of such rates were made based upon the
weighted average of outstanding loan balances during the respective years.
(3) INCOME TAXES
The Company and its subsidiaries file consolidated federal income tax
returns. The components of the provision for income taxes consisted of the
following:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Current --
Federal.............................................. $21,547 $16,943 $ 1,136
State................................................ 4,015 2,826 1,130
------- ------- -------
25,562 19,769 2,266
------- ------- -------
Deferred --
Federal.............................................. 1,762 (8,147) 18,653
State................................................ 389 91 1,233
------- ------- -------
2,151 (8,056) 19,886
------- ------- -------
Total provision........................................ $27,713 $11,713 $22,152
======= ======= =======
</TABLE>
Deferred income taxes are determined based upon the difference between the
financial reporting and tax basis of assets and liabilities. At December 31,
1997, the Company has recorded a net deferred tax asset of $500 which is
comprised of deferred tax assets of $32,800 (including $15,100 relating to
housing reserves which were expensed for financial reporting purposes but
deferred for federal income tax purposes) and deferred tax liabilities of
$32,300 (including $13,700 relating to interest expense capitalized for
financial reporting purposes but expensed for federal income tax purposes and an
amount related to certain deductions taken in the Company's 1993 federal income
tax return). At December 31, 1996, deferred tax assets and deferred tax
liability were $36,200 and $33,400, respectively, and were primarily
attributable to the same items noted above.
During the fourth quarter of 1996, the Internal Revenue Service (the "IRS")
completed an examination of the Company's federal income tax returns for the
years ended December 31, 1993 and 1992. The results of this examination allowed
certain previously reserved deductions taken by the Company in its 1993 tax
return. At the conclusion of this examination, the Company reduced its deferred
tax liability and recognized an income tax benefit totaling $8,691 related to
the deductions allowed by the IRS. The Company appealed the IRS decision to
disallow certain other deductions. These deductions remain reserved as a
deferred tax liability
33
<PAGE> 34
U.S. HOME CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
as of December 31, 1997. The decrease in the deferred tax liability increased
basic and diluted earnings per common share in 1996 by $.76 per share and $.61
per share, respectively.
The following table reconciles the statutory federal income tax rate to the
effective income tax rate for:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1997 1996 1995
----- ------ -----
<S> <C> <C> <C>
Tax provision at statutory rate............................ 35.0% 35.0% 35.0%
Increases (decreases) in taxes resulting from --
State and local income taxes, net of federal income tax
provision................................................ 4.0 4.0 4.0
Tax benefit.............................................. -- (15.5) --
Other, net............................................... (2.0) (2.5) (1.5)
----- ------ -----
Effective rate............................................. 37.0% 21.0% 37.5%
===== ====== =====
</TABLE>
(4) STOCKHOLDERS' EQUITY
As of December 31, 1997, the Company's capital structure consisted of the
following:
Common Stock -- Authorized 50,000,000 shares, par value $.01 per share,
issued 11,920,261 shares and outstanding 11,762,518 shares.
Shares reserved for issuance --
<TABLE>
<S> <C>
Stock plans................................................. 2,073,689
Class B warrants............................................ 1,886,321
---------
3,960,010
=========
</TABLE>
During April 1997, the Company's Board of Directors authorized the
repurchase of up to 750,000 shares of outstanding common stock or Class B
warrants, in the aggregate, from time to time in the open market and/or in
private transactions. In addition, the Board of Directors authorized an odd-lot
repurchase program for holders of less than 100 shares of the Company's common
stock. Through December 31, 1997, the Company had repurchased 157,743 shares of
common stock (including 57,343 shares in the odd-lot program) and 8,100 Class B
warrants for an aggregate purchase price of $4,241. The cost of the repurchased
shares has been included in "Treasury Stock" and the cost of the repurchased
warrants has been deducted from "Capital in Excess of Par Value" in the
accompanying consolidated balance sheets.
Preferred Stock -- Authorized 10,000,000 shares, par value $.10 per share,
including 84,343 convertible redeemable preferred shares, 500,000 Series A
junior non-cumulative preferred shares and 9,415,657 shares undesignated as to
series.
(a) Convertible redeemable preferred stock -- $25 per share
liquidation preference and redemption value, none outstanding. As
of March 10, 1997, all of the Company's outstanding convertible
redeemable preferred stock had been converted into the Company's
common stock or redeemed.
(b) Series A junior non-cumulative preferred stock -- Authorized
500,000 shares, par value $.10 per share. The shares are
authorized for issuance pursuant to certain rights that trade with
the Company's common stock. There are no shares of the Series A
junior non-cumulative preferred stock outstanding; however, all of
the shares have been reserved for issuance upon the exercise of
the stock purchase rights as discussed in "Stockholder Rights
Plan" below.
34
<PAGE> 35
U.S. HOME CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(c) Undesignated as to series -- None outstanding. Shares may be
issued in one or more classes or series with preferences,
limitations and relative rights as determined by the Company's
Board of Directors at the time of issuance. Any shares issued will
rank, as to dividends and liquidation preference, junior to the
convertible redeemable preferred stock, if any shares are
outstanding.
Class B Warrants -- In connection with the Plan of Reorganization,
pre-Effective Date stockholders received Class B warrants to acquire an
aggregate of 1,904,757 shares of common stock for $20 per share, of which 10,336
warrants had been exercised and 8,100 warrants had been repurchased at December
31, 1997. The warrants expire in June 1998.
Stockholder Rights Plan -- On November 7, 1996, the Company adopted a
rights plan and declared a dividend distribution of one preferred stock purchase
right for each outstanding share of the Company's common stock and each
outstanding share of the Company's outstanding convertible redeemable preferred
stock held of record on December 4, 1996. Under certain circumstances, each
right entitles the holder to purchase 1/100th of a share of the Company's Series
A junior non-cumulative preferred stock ("Series A Preferred Stock") at a price
of $80 ("Purchase Price"), subject to certain antidilution provisions. The
rights are not exercisable until the earlier to occur of (i) 10 days following a
public announcement that (a) a person or group has acquired, or has the right to
acquire, 15% or more of the outstanding shares of the Company's common stock or
(b) an institutional stockholder has acquired or has the right to acquire 20% or
more of the outstanding shares of common stock, or (ii) 10 business days
following the commencement of, or announcement of an intention to make, a tender
offer for 15% or more of the then outstanding shares of common stock. In such
event, each holder of a right (other than the acquiring person) shall have the
right to receive, upon exercise, the number of shares of common stock or of
1/100th of a share of Series A Preferred Stock having a value of equal to two
times the Purchase Price. In the event of any merger, consolidation or other
transaction in which the Company's common stock is exchanged, each holder of a
right, upon exercise, will be entitled to receive common stock of the acquiring
company equal to two times the Purchase Price. Unless and until the rights
become exercisable, they will be transferred with the Company's common stock. At
the option of the Company, the rights are redeemable prior to becoming
exercisable at $.01 per right. Unless earlier redeemed or exchanged by the
Company, the rights will expire on November 7, 2006. Until a right is exercised,
the holder will have no rights as a stockholder of the Company, including the
right to vote or receive dividends.
The Credit Facility and each of the senior (other than the 2003 Senior
Notes) and senior subordinated note indentures contain restrictions on the (i)
payment of dividends on the Company's common stock and (ii) purchase,
redemption, retirement or other acquisition of the Company's common stock, other
than upon exercise into the Company's common stock of Class B warrants and
options to acquire common stock issued pursuant to stock options and stock
payment plans.
(5) STOCK PLANS
Stock Option Plans
The Company has three stock option plans for key employees (the "1997
Employee Plan", the "1996 Employee Plan" and the "1993 Employee Plan",
collectively the "Employee Plans") to purchase a maximum of 1,500,000 shares
(500,000 shares for each plan) of the Company's common stock. Under all three
plans, the Company may grant incentive and non-qualified stock options. The
Company also has two stock option plans whereby options may be granted to
non-employee directors (the "1998 Director Plan", which is subject to
stockholder approval which will be sought at the 1998 annual meeting of
stockholders and the "1993 Director Plan", collectively the "Director Plans") to
purchase a maximum of 200,000 shares of the Company's common stock (100,000
shares for each plan). Options under the Director Plans are granted annually in
a fixed amount.
35
<PAGE> 36
U.S. HOME CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Options granted under the Employee Plans will be exercisable at not less
than the closing price of the common stock on date of grant. Options granted
under the Director Plans will be exercisable at not less than the average
closing price of the common stock for the ten consecutive trading days prior to
the date of grant. However, under the 1998 Director Plan, that so long as the
Class B warrants are outstanding, and under the Employee and 1993 Director
Plans, the grant price will not be less than 95% of the average closing price of
the common stock for the 20 consecutive trading days prior to the date of grant.
The options are exercisable as specified in the stock option agreements relating
to the options and may not be exercised later than ten years from the date of
grant and, with respect to the 1998 Director Plan, no options may be exercised
prior to stockholder approval. As permitted by Statement of Financial Accounting
Standards No. 123, Accounting for Stock-Based Compensation ("SFAS No. 123"), the
Company accounts for its stock option plans under the accounting rules
prescribed by Accounting Principles Board Opinion No. 25, under which no
compensation costs are recognized as an expense. Had compensation costs for the
stock options been determined using the fair value method of accounting as
recommended by SFAS No. 123, net income and earnings per share for 1997, 1996
and 1995 would have been reduced to the following proforma amounts:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Net income --
As reported:
Income before extraordinary loss....................... $47,187 $44,188 $36,920
Extraordinary loss..................................... $ 8,650 $ -- $ --
Net income............................................. $38,537 $44,188 $36,920
Proforma:
Income before extraordinary loss....................... $46,420 $43,180 $36,434
Extraordinary loss..................................... $ 8,650 $ -- $ --
Net income............................................. $37,770 $43,180 $36,434
Basic earnings per share --
As reported:
Income before extraordinary loss....................... $ 4.08 $ 3.88 $ 3.29
Extraordinary loss..................................... $ (.75) $ -- $ --
Net income............................................. $ 3.33 $ 3.88 $ 3.29
Proforma:
Income before extraordinary loss....................... $ 4.01 $ 3.85 $ 3.25
Extraordinary loss..................................... $ (.75) $ -- $ --
Net income............................................. $ 3.26 $ 3.85 $ 3.25
Diluted earnings per share --
As reported:
Income before extraordinary loss....................... $ 3.50 $ 3.28 $ 2.78
Extraordinary loss..................................... $ (.62) $ -- $ --
Net income............................................. $ 2.88 $ 3.28 $ 2.78
Proforma:
Income before extraordinary loss....................... $ 3.44 $ 3.26 $ 2.74
Extraordinary loss..................................... $ (.62) $ -- $ --
Net income............................................. $ 2.82 $ 3.26 $ 2.74
</TABLE>
Because the SFAS No. 123 method of accounting was not applied to options
granted prior to January 1, 1995, the resulting proforma compensation cost may
not be representative of that to be expected in future years.
36
<PAGE> 37
U.S. HOME CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A summary of the status of the stock option plans at December 31, 1997, 1996 and
1995 and changes during the years then ended is presented below:
<TABLE>
<CAPTION>
1997 1996 1995
--------------------- ------------------- -------------------
WTD WTD WTD
AVG AVG AVG
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
--------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding at
beginning of year.... 639,500 $22.89 531,169 $22.65 403,500 $21.87
Options granted:
Employee Plans....... 497,000 $28.28 102,000 $24.13 122,000 $25.70
Director Plans....... 9,000 $24.35 9,000 $23.74 9,000 $16.82
Options exercised:
Employee Plans....... (23,108) $18.79 -- $ -- -- $ --
Director Plans....... (9,000) $22.67 -- $ -- -- $ --
Options forfeited:
Employee Plans....... (3,000) $24.36 (2,669) $24.09 (3,331) $24.57
Director Plans....... -- $ -- -- $ -- -- $ --
--------- ------- -------
Options outstanding at
end of year.......... 1,110,392 $25.40 639,500 $22.89 531,169 $22.65
--------- ------- -------
Options exercisable at
end of year.......... 578,069 $22.95 551,179 $23.12 365,537 $23.32
--------- ------- -------
Weighted average fair
value per share of
option granted --
Employee Plans....... $ 8.49 $ 8.39 $ 7.87
Director Plans....... $ 9.64 $ 9.97 $ 7.96
</TABLE>
Options outstanding at December 31, 1997 had exercise prices ranging from
$15.13 to $36.25 per share and a weighted average remaining contractual life of
7.9 years. Options exercisable at December 31, 1997 had a weighted average
remaining contractual life of 7.9 years.
The fair value of each option granted in 1997, 1996 and 1995 was estimated
on the date of grant using the Black-Scholes option pricing model with the
following weighted average assumptions: risk-free interest of 6.1% for 1997,
6.6% for 1996 and 5.9% for 1995; expected lives of 5.5 years in 1997, 7.1 years
for 1996 and 6.1 years for 1995; and expected volatility of 25.0% for all three
years.
Stock Payment Plan
The Company's employee stock payment plan (the "Payment Plan") provides
that up to 25% of a key employee's annual incentive pay (compensation other than
base salary), which is charged to expense when earned, may be payable in shares
of the Company's common stock as determined by the Company's Board of Directors,
of which up to 50% of the shares payable will vest to the employee not later
than two years after the end of the incentive compensation year and will expire
in the event the employee is not employed by the Company on the vesting date.
Shares to be issued under the Payment Plan will be valued at the average closing
price of the common stock for a ten consecutive trading day period as defined in
the Payment Plan, but in no event will the average closing price be less than
95% of the average closing price of the common stock for the 20 consecutive
trading day period as defined in the Payment Plan. The Payment Plan, as extended
(which extension is subject to stockholder approval), has a 15-year term and
commenced on January 1, 1994. In 1997,
37
<PAGE> 38
U.S. HOME CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
18,559 shares were issued to corporate officers and key employees at prices
ranging from $16.74 to $28.21, in 1996, 7,905 shares were issued to officers and
key employees at prices ranging from $25.05 to $27.93 per share and in 1995,
21,731 shares were issued to officers and key employees at prices ranging from
$16.74 to $17.99 per share. As of December 31, 1997, 201,805 shares were
available for issuance under the Payment Plan.
Restricted Stock Plan
The Company has a restricted stock plan (the "Restricted Plan") for
officers and other key employees. Under the Restricted Plan, a maximum of
250,000 shares of the Company's common stock may be granted as restricted stock.
Shares granted under the Restricted Plan will be granted at the average closing
price of the common stock for a ten consecutive trading day period as defined in
the Restricted Plan. Participants in the Restricted Plan may not dispose of any
of the stock granted for five years from date of grant. Restrictions lapse at
the rate of 20% of the stock granted per year, commencing with the end of the
fifth year. As defined in the Restricted Plan, as amended, the lapsing of the
restrictions may be accelerated if certain stipulated improvements in the
Company's return on assets or return on sales over the base years are achieved
or if a change in control occurs.
In 1997 and 1995, a total of 146,008 restricted shares of the Company's
common stock were issued to officers and other key employees. The market value
of the shares issued has been charged to stockholders' equity as Unearned
Compensation on Restricted Stock and is being amortized to expense over the term
of Restricted Plan.
Non-Employee Director Stock Plan
In 1997, the Company adopted a stock plan for non-employee directors (the
"Director Stock Plan"), effective in 1997, but is subject to stockholder
approval which will be sought at the 1998 annual meeting of stockholders. Under
the Director Stock Plan, a maximum of 100,000 shares of the Company's common
stock may be granted to nonemployee directors as compensation for services as a
director. Shares granted under the Director Stock Plan will be granted annually
in an amount equal to each directors' base retainer at the closing price of the
common stock on date of grant; provided, that so long as the Class B warrants
are outstanding the grant price will not be less than 95% of the average closing
price of the common stock for the 20 consecutive trading days prior to the date
of grant.
38
<PAGE> 39
U.S. HOME CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(6) EARNINGS PER SHARE
Basic earnings per common share includes the weighted average number of
common shares outstanding for the periods. Diluted earnings per common share
includes (i) the dilutive effect of the Class B warrants and the convertible
redeemable preferred stock through its redemption and conversion in March 1997,
(ii) the assumed exercise of stock options and (iii) the assumed conversion of
the Debentures through their redemption and conversion in September 1997. The
following table summarizes the basic earnings per common share and diluted
earnings per common share computations for 1997, 1996 and 1995:
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Basic earnings per common share:
Income before extraordinary loss.......... $ 47,187 $ 44,188 $ 36,920
Extraordinary loss........................ 8,650 -- --
----------- ----------- -----------
Net income................................ $ 38,537 $ 44,188 $ 36,920
=========== =========== ===========
Weighted average number of common
shares................................. 11,573,094 11,383,720 11,220,178
=========== =========== ===========
Earnings per common share --
Income before extraordinary loss....... $ 4.08 $ 3.88 $ 3.29
Extraordinary loss..................... $ (.75) $ -- $ --
Net income............................. $ 3.33 $ 3.88 $ 3.29
Diluted earnings per common share:
Income before interest applicable to
convertible subordinated debentures and
extraordinary loss..................... $ 47,187 $ 44,188 $ 36,920
Interest applicable to convertible
subordinated debentures, net of income
taxes.................................. 1,818 2,480 2,006
----------- ----------- -----------
Income before extraordinary loss, assuming
dilution............................... 49,005 46,668 38,926
Extraordinary loss........................ 8,650 -- --
----------- ----------- -----------
Net income, assuming dilution............. $ 40,355 $ 46,668 $ 38,926
=========== =========== ===========
Weighted average number of common
shares................................. 11,573,094 11,383,720 11,220,178
Incremental shares from assumed
conversions --
Convertible preferred stock............ 19,070 185,247 353,240
Contingent common shares............... 29,253 16,888 3,411
Stock options.......................... 208,514 47,372 30,151
Class B warrants....................... 650,259 325,212 166,119
Convertible subordinated debentures.... 1,555,856 2,253,521 2,253,521
----------- ----------- -----------
Adjusted weighted average number of common
shares................................. 14,036,046 14,211,960 14,026,620
=========== =========== ===========
Earnings per common share --
Income before extraordinary loss....... $ 3.50 $ 3.28 $ 2.78
Extraordinary loss..................... $ (.62) $ -- $ --
Net income............................. $ 2.88 $ 3.28 $ 2.78
</TABLE>
For the year ended December 31, 1997, diluted earnings per common share
were based on 14,036,046 common shares (the "shares") which included the
dilutive effect of the weighted average number of shares potentially issuable
(i) for the conversion of the Debentures through their redemption on September
10, 1997 (1,555,856 shares) and (ii) for the exercise of the Class B warrants
(650,259 shares). Diluted earnings per
39
<PAGE> 40
U.S. HOME CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
common share in subsequent periods compared to 1997 will be impacted by the
redemption of the Debentures, which eliminated 1,950,655 shares, net of 302,866
shares issued upon conversion, from dilution and by the potential dilutive
effect of up to 1,236,062 additional shares issuable upon exercise of the Class
B warrants which expire in June 1998.
(7) PROFIT SHARING
The Company has a qualified profit sharing plan for the benefit of its
employees which may be terminated at any time at the option of the Company. The
annual contributions may be made in such amount as the Board of Directors of the
Company determines, limited to 15% of the total compensation (as defined in the
profit sharing plan) of all participating employees. The aggregate amounts
accrued for contribution to the profit sharing plan for distribution to
employees were $1,200 in 1997, $1,051 in 1996 and $991 in 1995.
(8) COMMITMENTS AND CONTINGENCIES
Housing
The Company is significantly affected by the cyclical nature of the home
building industry, which is sensitive to fluctuations in economic activity,
interest rates and the level of consumer confidence. The sale of new homes and
profitability from sales are heavily influenced by the level and expected
direction of interest rates. Increases in interest rates tend to have a
depressing effect on the market for new homes in view of increased monthly
mortgage costs to potential home buyers.
As of December 31, 1997, the Company had refundable and nonrefundable
deposits totaling $33,343 for options and contracts to purchase undeveloped land
and finished lots having a total purchase price of approximately $339,000. The
Company had incurred pre-development costs of $56,812 relating to these
properties. These options expire at various dates through 2006.
At December 31, 1997, the Company, in connection with managing interest
costs, had an interest rate swap agreement outstanding with a notional amount of
$50,000. The fair value of the agreement at December 31, 1997 was $502. The fair
value is based on the estimated termination value and represents the amount the
Company would have to pay to terminate the agreement at December 31, 1997. While
the outstanding balance of the Credit Facility may fluctuate (average balance of
approximately $36,200 for the fourth quarter of 1997), the Company anticipates
that the average balance of the borrowings during the remaining term of the
agreement will generally be in excess of the national amount.
The Company is involved from time to time in litigation arising from the
normal course of business, none of which, in the opinion of the Company, are
expected to have a material adverse effect on the financial position or results
of operations of the Company.
Financial Services
At December 31, 1997, Mortgage, in connection with managing the interest
rate market risk on its inventory loans held for sale of $45,455 and Loan Quotes
of $22,443, had outstanding $41,345 (face amount of $42,000 and estimated fair
value of $41,539) of Forward Contracts and $22,882 of Forward Commitments which
expire over the next three months, when the inventory loans are expected to be
sold and Loan Quotes are expected to close. At December 31, 1997, the estimated
fair value of the inventory loans and Loan Quotes hedged by Forward Contracts
and not covered by the Forward Commitments was $44,130.
Mortgage reduces its risk of nonperformance under the Hedging Contracts by
entering into those contracts with reputable security dealers and investors and
evaluating their financial condition. However, there is a risk if certain of the
Loan Quotes do not close or are renegotiated in a declining interest rate market
and close at lower prices. Mortgage reduces this risk by collecting commitment
fees on certain of the Loan Quotes
40
<PAGE> 41
U.S. HOME CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
along with entering into Forward Commitments to deliver loans to investors on a
best efforts basis and adjusting, from time to time, the estimate of loan
closings covered by Forward Contracts.
(9) UNAUDITED SUMMARIZED CONSOLIDATED QUARTERLY INFORMATION
Summarized quarterly financial information for the years ended December 31,
1997 and 1996 is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1997 1997 1997 1997
--------- -------- ------------- ------------
<S> <C> <C> <C> <C>
Housing --
Operating revenues................ $310,648 $334,011 $330,379 $319,062
Cost of products sold............. $255,580 $275,641 $269,314 $259,036
Operating income.................. $ 17,501 $ 18,265 $ 20,798 $ 20,876
Financial Services --
Operating revenues................ $ 5,385 $ 6,530 $ 6,888 $ 6,849
Operating income.................. $ 1,510 $ 2,340 $ 2,433 $ 2,884
Corporate General and
Administrative.................... $ 2,911 $ 3,092 $ 2,553 $ 3,151
Income before Extraordinary Loss.... $ 10,143 $ 11,033 $ 13,028 $ 12,983
Extraordinary Loss.................. $ -- $ -- $ 8,650 $ --
Net Income.......................... $ 10,143 $ 11,033 $ 4,378 $ 12,983
Basic Earnings Per Common Share:
Income before extraordinary
loss........................... $ .88 $ .96 $ 1.13 $ 1.11
Extraordinary loss................ $ -- $ -- $ (.75) $ --
Net income........................ $ .88 $ .96 $ .38 $ 1.11
Diluted Earnings Per Common Share:
Income before extraordinary
loss........................... $ .75 $ .82 $ .94 $ 1.00
Extraordinary loss................ $ -- $ -- $ (.60) $ --
Net income........................ $ .75 $ .82 $ .34 $ 1.00
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1996 1996 1996 1996
--------- --------- ------------- ------------
<S> <C> <C> <C> <C>
Housing --
Operating revenues............. $267,907 $ 288,428 $312,275 $322,596
Cost of products sold.......... $218,350 $ 235,563 $253,756 $264,227
Operating income............... $ 16,276 $ 17,348 $ 20,644 $ 7,939
Financial Services --
Operating revenues............. $ 4,855 $ 4,808 $ 5,397 $ 5,184
Operating income............... $ 1,154 $ 1,471 $ 1,427 $ 1,342
Corporate General and
Administrative................. $ 2,754 $ 2,993 $ 2,945 $ 3,008
Net Income....................... $ 9,319 $ 10,050 $ 12,145 $ 12,674
Basic Earnings Per Common
Share.......................... $ .83 $ .88 $ 1.06 $ 1.11
Diluted Earnings Per Common
Share.......................... $ .69 $ .75 $ .91 $ .94
</TABLE>
41
<PAGE> 42
U.S. HOME CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(10) RECEIVABLES
The Company had housing and financial services receivables of approximately
$3,679 in 1997 and $1,973 in 1996 that were due after one year. The 1997 balance
due after one year included notes and mortgage notes receivable of $372 with
interest rates ranging from 8.0% to 10.0%. A majority of the balance matures
within six years.
(11) ACCRUED EXPENSES
At December 31, 1997 and 1996, accrued expenses and other current
liabilities consisted of the following:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Housing --
Customer deposits......................................... $28,541 $18,762
Salaries and other compensation........................... 15,985 13,633
Interest.................................................. 10,113 4,023
Taxes, other than income taxes............................ 5,052 3,739
Income taxes.............................................. 3,055 1,910
Other..................................................... 6,102 8,905
------- -------
$68,848 $50,972
======= =======
Financial Services --
Accounts payable.......................................... $14,299 $14,621
Other..................................................... 6,767 6,233
------- -------
$21,066 $20,854
======= =======
</TABLE>
42
<PAGE> 43
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
Financial Disclosure
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information relating to the directors of the Company is incorporated by
reference from the Nominees for Directors Section, pages 2 through 4, of the
Company's Proxy Statement, dated March 13, 1998, for the Annual Meeting of
Stockholders to be held on April 22, 1998, to be filed with the Securities and
Exchange Commission pursuant to Section 14 of the Securities Exchange Act of
1934 (the "1998 Proxy Statement").
ITEM 11. EXECUTIVE COMPENSATION
The information is incorporated by reference from the Executive
Compensation Section, pages 6 through 9 of the 1998 Proxy Statement (see Part
I-Item 4, Executive Officers of the Company).
ITEM 12. COMMON STOCK
The information relating to the security ownership of certain beneficial
owners and management is incorporated by reference from the Security Ownership
of Management and Certain Beneficial Owners Section, pages 16 and 17 of the 1998
Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. and 2. The following financial statements and financial statement
schedules are filed as part of this Report:
See Index to Financial Statements -- Item 8.
(a) 3. Exhibits
<TABLE>
<CAPTION>
<C> <S>
2.1 -- First Amended Consolidated Plan of Reorganization of U.S. Home Corporation and
certain of its affiliates dated April 1, 1993. Incorporated by reference from
exhibit 2.1 to U.S. Home Corporation's Current Report on Form 8-K filed June 9,
1993.
2.2 -- Modification to "USH Debtors' First Amended Consolidated Plan of Reorganization."
Incorporated by reference from exhibit 2.2 to U.S. Home Corporation's Current Report
on Form 8-K filed June 9, 1993.
2.3 -- First Amended Joint Plan of Reorganization of certain affiliates of U.S. Home
Corporation dated April 1, 1993. Incorporated by reference from exhibit 2.3 to U.S.
Home Corporation's Current Report on Form 8-K filed June 9, 1993.
2.4 -- Findings of Fact, Conclusions of Law and Order Confirming the First Amended
Consolidated Plan of Reorganization of U.S. Home Corporation and certain of its
affiliates. Incorporated by reference from exhibit 28.1 to U.S. Home Corporation's
Current Report on Form 8-K filed June 9, 1993.
</TABLE>
43
<PAGE> 44
<TABLE>
<CAPTION>
<C> <S>
2.5 -- Findings of Fact, Conclusions of Law and Order Confirming the First Amended Joint
Plan of Reorganization of certain affiliates of U.S. Home Corporation. Incorporated
by reference from exhibit 28.2 to U.S. Home Corporation's Current Report on Form 8-K
filed June 9, 1993.
3.1 -- Restated Certificate of Incorporation of U.S. Home Corporation effective on June 21,
1993. Incorporated by reference from exhibit 3.1 to Registration Statement on Form
S-3 of U.S. Home Corporation (Registration No. 33-68966).
3.1(i) -- Certificate of Amendment of Restated Certificate of Incorporation as filed with the
State of Delaware on May 13, 1994. Incorporated by reference from exhibit 3.1 to
U.S. Home Corporation's Quarterly Report on Form 10-Q for the period ended June 30,
1994.
3.1(ii) -- Certificate of Retirement, dated as of September 11, 1995. Incorporated by reference
from exhibit 3.1 to U.S. Home Corporation's Quarterly Report on Form 10-Q for the
period ended September 30, 1996.
3.1(iii) -- Certificate of Retirement, dated as of July 31, 1996. Incorporated by reference from
exhibit 3.2 to U.S. Home Corporation's Quarterly Report on 10-Q for the period ended
September 30, 1996.
3.1(iv) -- Certificate of Retirement, dated as of June 16, 1997. Incorporated by reference from
exhibit 3.1 to U.S. Home Corporation's Quarterly Report on Form 10-Q for the period
ended September 30, 1997.
3.2 -- Certificate of Designation, Preferences and Rights of Series A Junior Non-Cumulative
Preferred Stock as filed with the State of Delaware on December 2, 1996.
3.3 -- Amended and Restated By-Laws of U.S. Home Corporation, dated as of October 17, 1996.
Incorporated by reference from exhibit 3.1 (ii) to U.S. Home Corporation's Current
Report on Form 8-K filed November 8, 1996.
10.1 -- Amended and Restated Credit Agreement, dated as of May 28, 1997, between U.S. Home
Corporation and The First National Bank of Chicago, as Agent. Incorporated by
reference from exhibit 10.1 to U.S. Home Corporation's Quarterly Report on Form 10-Q
for period ended June 30, 1997.
10.1(i) -- Consent and First Amendment to Amended and Restated Credit Agreement, dated as of
August 22, 1997, between U.S. Home Corporation and The First National Bank of
Chicago, as Agent. Incorporated by reference to exhibit 10 to U.S. Home
Corporation's Current Report on Form 8-K dated August 25, 1997.
10.1(ii) -- Commitments and Acceptances, each dated October 8, 1997, among U.S. Home
Corporation, as borrower, The First National Bank of Chicago, as Agent, and each of
AmSouth Bank, Credit Lyonnais New York Branch, The First National Bank of Chicago,
Comerica Bank and Guaranty Federal Bank, F.S.B., each as an Accepting Lender
relating to the Amended and Restated Credit Agreement with First National Bank of
Chicago, as Agent. Incorporated by reference from exhibit 10.7 to U.S. Home
Corporation's Quarterly Report on Form 10-Q for the period ended September 30, 1997.
10.1(iii) -- Consent and Second Amendment to Amended and Restated Credit Agreement, dated as of
January 15, 1998 between U.S. Home Corporation and The First National Bank of
Chicago, as Agent. Incorporated by reference to exhibit 10 to U.S. Home
Corporation's Current Report on Form 8-K dated January 15, 1998.
</TABLE>
44
<PAGE> 45
<TABLE>
<CAPTION>
<C> <S>
10.2 -- Trust Indenture, dated as of June 21, 1993, by and between U.S. Home Corporation and
IBJ Schroder Bank & Trust Company, as trustee, relating to U.S. Home Corporation's
9.75% Senior Notes due 2003. Incorporated by reference from exhibit 10.2 to
Registration Statement on Form S-3 of U.S. Home Corporation (Registration No.
33-68966).
10.2(i) -- Supplemental Indenture, dated as of September 23, 1997 between U.S. Home Corporation
and IBJ Schroder Bank & Trust Company, as trustee, with respect to the indenture
relating to the 9.75% Senior Notes due 2003. Incorporated by reference from exhibit
10.5 to U.S. Home Corporation's Quarterly Report on Form 10-Q for the period ended
September 30, 1997.
10.3 -- Senior Indenture, dated as of February 16, 1996, by and between U.S. Home
Corporation and IBJ Schroder Bank & Trust Company, as Trustee, relating to U.S. Home
Corporation's 7.95% Senior Notes due 2001. Incorporated by reference from exhibit
4.1 to U.S. Home Corporation's Quarterly Report on Form 10-Q for the period ended
March 31, 1996.
10.3(i) -- Officers' Certificate, dated February 16, 1996, establishing the form and terms of
the $75 million aggregate principal amount of 7.95% Senior Notes due 2001.
Incorporated by reference from exhibit 4.2 to U.S. Home Corporation's Quarterly
Report on Form 10-Q for the period ended March 31, 1996.
10.4 -- Senior Indenture, dated as of August 28, 1997, by and between U.S. Home Corporation
and IBJ Schroder Bank & Trust Company, as trustee, relating to U.S. Home
Corporation's 8.25% Senior Notes due 2004. Incorporated by reference from exhibit
10.2 to U.S. Home Corporation's Quarterly Report on Form 10-Q for the period ended
September 30, 1997.
10.4(i) -- Officer's Certificate establishing the form and terms of the 8.25% Senior Notes due
2004. Incorporated by reference from exhibit 4.2 to U.S. Home Corporation's Current
Report on Form 8-K dated January 15, 1998.
10.5 -- Senior Subordinated Indenture, dated as of August 28, 1997, by and between U.S. Home
Corporation and IBJ Schroder Bank & Trust Company, as trustee, relating to U.S. Home
Corporation's 8.88% Senior Subordinated Notes due 2007. Incorporated by reference
from exhibit 10.3 to U.S. Home Corporation's Quarterly Report on Form 10-Q for the
period ended September 30, 1997.
10.5(i) -- Officer's Certificate establishing the form and terms of the 8.88% Senior
Subordinated Notes due 2007. Incorporated by reference from exhibit 4.3 to U.S. Home
Corporation's Current Report on Form 8-K dated January 15, 1998.
10.6 -- Officers' Certificate establishing the form and terms of the 7.75% Senior Notes due
2005.
10.7 -- Rights Agreement, dated as of November 7, 1996, between U.S. Home Corporation and
First Chicago Trust Company of New York, and exhibits thereto. Incorporated by
reference from exhibit 4 to U.S. Home Corporation's Current Report on Form 8-K/A
Amendment No. 1 filed November 18, 1996.
10.8 -- Warrant Agreement, dated as of June 21, 1993, between U.S. Home Corporation and
First Chicago Trust Company of New York (as successor to The First National Bank of
Boston) relating to U.S. Home Corporation's Class B Warrants. Incorporated by
reference from exhibit 10.3 to Registration Statement on Form S-3 of U.S. Home
Corporation (Registration No. 33-68966).
10.9 -- U.S. Home Corporation 1997 Employees' Stock Option Plan. Incorporated by reference
from exhibit 10.7 to U.S. Home Corporation's Annual Report on Form 10-K for the year
ended December 31, 1996.
</TABLE>
45
<PAGE> 46
<TABLE>
<CAPTION>
<C> <S>
10.10 -- U.S. Home Corporation Amended and Restated 1996 Employees' Stock Option Plan.
Incorporated by reference from exhibit 10.8 to U.S. Home Corporation's Annual Report
on Form 10-K for the year ended December 31, 1996.
10.11 -- U.S. Home Corporation's Amended and Restated 1993 Employees' Stock Option Plan.
Incorporated by reference from exhibit 10.9 to U.S. Home Corporation's Annual Report
on Form 10-K for the year ended December 31, 1996.
10.12 -- U.S. Home Corporation's Amended and Restated Non-Employee Directors' Stock Option
Plan. Incorporated by reference from exhibit 10.10 to U.S. Home Corporation's Annual
Report on Form 10-K for the year ended December 31, 1996.
10.13 -- U.S. Home Corporation's Amended and Restated Employee Stock Payment Plan.
Incorporated by reference from exhibit 10.11 to U.S. Home Corporation's Annual
Report on Form 10-K for the year ended December 31, 1996.
10.14 -- U.S. Home Corporation's Corporate Officers and President of Operations Restricted
Stock Plan. Incorporated by reference from exhibit 10.8 to U.S. Home Corporation's
Annual Report on Form 10-K for the year ended December 31, 1994.
10.15 -- Non-Employee Director Stock Plan.
10.16 -- U.S. Home Corporation's 1998 Non-Employee Directors' Stock Option Plan.
10.17 -- U.S. Home Corporation's Corporate Officers Incentive Compensation Program for the
Incentive Period January 1, 1998 to December 31, 1998.
10.18 -- U.S. Home Corporation's Key Employees' Severance Plan. Incorporated by reference
from exhibit 10.14 to U.S. Home Corporation's Annual Report on Form 10-K for the
year ended December 31, 1996.
10.19 -- U.S. Home Corporation's Amended and Restated Retirement Plan for Non-Employee
Directors. Incorporated by reference from exhibit 10.6 to U.S. Home Corporation's
Quarterly Report on Form 10-Q for the period ended September 30, 1997.
10.20 -- Corrected copy of Amended and Restated Employment and Consulting Agreement, dated as
of October 17, 1995, between U.S. Home Corporation and Robert J. Strudler.
Incorporated by reference from exhibit 10.3 to U.S. Home Corporation's Quarterly
Report on Form 10-Q for the period ended September 30, 1996.
10.20(i) -- First Amendment to Amended and Restated Employment and Consulting Agreement, dated
as of February 11, 1997, between U.S. Home Corporation and Robert J. Strudler.
Incorporated by reference from exhibit 10.16(i) to U.S. Home Corporation's Annual
Report on Form 10-K for the year ended December 31, 1996.
10.21 -- Corrected copy of Amended and Restated Employment and Consulting Agreement, dated as
of October 17, 1995, between U.S. Home Corporation and Isaac Heimbinder.
Incorporated by reference from exhibit 10.4 to U.S. Home Corporation's Quarterly
Report on Form 10-Q for the period ended September 30, 1996.
10.21(i) -- First Amendment to Amended and Restated Employment and Consulting Agreement, dated
as of February 11, 1997, between U.S. Home Corporation and Isaac Heimbinder.
Incorporated by reference from exhibit 10.17(i) to U.S. Home Corporation's Annual
Report on Form 10-K for the year ended December 31, 1996.
10.22 -- Registration Rights Agreement, dated as of June 21, 1993, between U.S. Home
Corporation and Loomis, Sayles & Company Incorporated, on behalf of certain holders
of the common stock of U.S. Home Corporation. Incorporated by reference from exhibit
10.10 to Registration Statement on Form S-3 of U.S. Home Corporation (Registration
No. 33-68966).
</TABLE>
46
<PAGE> 47
<TABLE>
<CAPTION>
<C> <S>
10.23 -- Trust Agreement, dated December 18, 1986, between U.S. Home Corporation, as Grantor,
and Kenneth J. Hanau, Jr., as Trustee, with respect to retirement benefits for Isaac
Heimbinder. Incorporated by reference from exhibit 10.25 to U.S. Home Corporation's
Annual Report on Form 10-K for the year ended December 31, 1986.
10.24 -- Trust Agreement, dated December 18, 1986, between U.S. Home Corporation, as Grantor,
and Kenneth J. Hanau, Jr., as Trustee, with respect to retirement benefits for
Robert J. Strudler. Incorporated by reference from exhibit 10.26 to U.S. Home
Corporation's Annual Report on Form 10-K for the year ended December 31, 1986.
10.25 -- Letter, dated as of March 20, 1990, between U.S. Home Corporation and William E.
Reichard, as Successor Trustee, with respect to Trust Agreements dated December 18,
1986 between U.S. Home Corporation, as Grantor, Kenneth J. Hanau, Jr., as Trustee,
with respect to retirement benefits for Robert J. Strudler and Isaac Heimbinder.
Incorporated by reference from exhibit 10.19 to U.S. Home Corporation's Annual
Report on Form 10-K for the year ended December 31, 1992.
10.26 -- First Amended and Restated Warehousing Credit and Security Agreement (single-family
mortgage loans), dated as of August 31, 1995, between U.S. Home Mortgage Corporation
and Residential Funding Corporation. Incorporated by reference from exhibit 10.2 to
U.S. Home Corporation's Quarterly Report on Form 10-Q for the period ended September
30, 1995.
10.26(i) -- First Amendment to First Amended and Restated Warehousing Credit and Security
Agreement (single-family mortgage loans), dated as of December 27, 1995, between
U.S. Home Mortgage Corporation and Residential Funding Corporation. Incorporated by
reference from exhibit 10.19(I) to U.S. Home Corporation's Annual Report on Form
10-K for the year ended December 31, 1995.
10.26(ii) -- Second Amendment to First Amended and Restated Warehousing Credit and Security
Agreement (single-family mortgage loans), dated as of August 30, 1996, between U.S.
Home Mortgage Corporation and Residential Funding Corporation. Incorporated by
reference from exhibit 10.2 to U.S. Home Corporation's Quarterly Report on Form 10-Q
for the period ended September 30, 1996. Incorporated by reference from exhibit
10.22(ii) to U.S. Home Corporation's Annual Report on Form 10-K for the year ended
December 31, 1996.
10.26(iii) -- Third Amendment to First Amended and Restated Warehousing Credit and Security
Agreement (single-family mortgage loans), dated as of January 2, 1997, between U.S.
Home Mortgage Corporation and Residential Funding Corporation. Incorporated by
reference from exhibit 10.22 (iii) to U.S. Home Corporation's Annual Report on Form
10-K for the year ended December 31, 1996.
10.26(iv) -- Fourth Amendment to First Amended and Restated Warehousing Credit and Security
Agreement (single family mortgage loans), dated as of June 25, 1997 between U.S.
Home Mortgage Corporation and Residential Funding Corporation. Incorporated by
reference from exhibit 10.2 to U.S. Home Corporation's Quarterly Report on Form 10-Q
for the period ended June 30, 1997.
10.26(v) -- Fifth Amendment to First Amended and Restated Warehousing Credit and Security
Agreement (single family mortgage loans), dated as of August 28, 1997 between U.S.
Home Mortgage Corporation and Residential Funding Corporation. Incorporated by
reference from exhibit 10.1 to U.S. Home Corporation's Quarterly Report on Form 10-Q
for the period ended September 30, 1997.
10.27 -- U.S. Home Corporation's Amortizing Incentive Plan. Incorporated by reference from
exhibit 4.2 to Registration Statement on Form S-8 of U.S. Home Corporation
(Registration No. 33-64712).
</TABLE>
47
<PAGE> 48
<TABLE>
<CAPTION>
<C> <S>
10.28 -- Form of Indemnification Agreement for directors and executive officers. Incorporated
by reference from exhibit 10.15 to Amendment No. 2 to Registration Statement on Form
S-1 of U.S. Home Corporation (Registration No. 33-60638).
21 -- Subsidiaries of U.S. Home Corporation
23 -- Consent of Independent Public Accountants
27 -- Financial Data Schedule
</TABLE>
(b) Report on Form 8-K
No Current Report on Form 8-K was filed by the Company during October,
November or December 1997.
48
<PAGE> 49
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: February 13, 1998 U.S. HOME CORPORATION
By: /s/ ISAAC HEIMBINDER
----------------------------------
Isaac Heimbinder
President, Co-Chief Executive
Officer and Chief Operating
Officer
By: /s/ CHESTER P. SADOWSKI
----------------------------------
Chester P. Sadowski
Vice President, Controller and
Chief Accounting Officer
(principal accounting officer)
By: /s/ THOMAS A. NAPOLI
----------------------------------
Thomas A. Napoli
Vice President-Corporate Finance
and Treasurer (principal financial
officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ ROBERT J STRUDLER Director, Chairman and Co-Chief February 13, 1998
- ----------------------------------------------------- Executive Officer (principal
Robert J Strudler executive officer)
/s/ ISAAC HEIMBINDER Director, President, Co-Chief February 13, 1998
- ----------------------------------------------------- Executive Officer and Chief
Isaac Heimbinder Operating Officer
/s/ GLEN ADAMS Director February 13, 1998
- -----------------------------------------------------
Glen Adams
/s/ STEVEN L. GERARD Director February 13, 1998
- -----------------------------------------------------
Steven L. Gerard
/s/ KENNETH J. HANAU, JR. Director February 13, 1998
- -----------------------------------------------------
Kenneth J. Hanau, Jr.
/s/ MALCOLM T. HOPKINS Director February 13, 1998
- -----------------------------------------------------
Malcolm T. Hopkins
/s/ CHARLES A. MCKEE Director February 13, 1998
- -----------------------------------------------------
Charles A. McKee
</TABLE>
49
<PAGE> 50
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ ------------------------------------ ----------------------
<C> <S> <C>
/s/ GEORGE A. POOLE, JR. Director February 13, 1998
- ------------------------------------------------------
George A. Poole, Jr.
/s/ HERVE RIPAULT Director February 13, 1998
- ------------------------------------------------------
Herve Ripault
/s/ JAMES W. SIGHT Director February 13, 1998
- ------------------------------------------------------
James W. Sight
</TABLE>
50
<PAGE> 51
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
-------
<C> <S>
10.6 -- Officers' Certificate establishing the form and terms of
the 7.75% Senior Notes due 2005
10.15 -- Non-Employee Directors Stock Plan
10.16 -- U.S. Home Corporation's 1998 Non-Employee Directors'
Stock Option Plan
10.17 -- U.S. Home Corporation's Corporate Officers Incentive
Compensation Program for the Incentive Period January 1,
1998 to December 31, 1998
21 -- Subsidiaries of U.S. Home Corporation
23 -- Consent of Independent Public Accountants
27 -- Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 10.6
U.S. HOME CORPORATION
OFFICERS' CERTIFICATE - SENIOR NOTES
Pursuant to Sections 2.01 and 3.01 of the Indenture, dated August 28,
1997 (the "Indenture"), with respect to the 7 3/4% Senior Notes due 2005,
between U.S. Home Corporation, a Delaware corporation (the "Company"), and IBJ
Schroder Bank & Trust Company, as Trustee (the "Trustee"), each of the
undersigned, Robert J. Strudler and Thomas A. Napoli, Chairman of the Board
and Co-Chief Executive Officer, and Vice President-Corporate Finance and
Treasurer of the Company, respectively, hereby certify on behalf of the Company
as follows:
1. Capitalized terms used but not defined herein have the
meanings set forth in the Indenture.
2. The establishment of 7 3/4% Senior Notes due 2005 as a series
of Securities of the Company (the "Senior Notes") has been
approved and authorized in accordance with the provisions of
the Indenture pursuant to resolutions of the Board of
Directors of the Company (a copy of which, certified by an
Assistant Secretary or the Secretary of the Company, is
delivered herewith) duly adopted on January 15, 1998, and
resolutions of the Pricing Committee of the Board of Directors
of the Company (a copy of which, certified by the Assistant
Secretary or the Secretary of the Company, is delivered
herewith) duly adopted on January 15, 1998. Pursuant to such
resolutions and this Officers' Certificate, the terms set
forth below for the Senior Notes to be issued under the
Indenture are authorized and approved. The form of Senior
Note attached hereto as Exhibit A has been approved and
authorized in accordance with the provisions of the Indenture.
3. That he has read and is familiar with the provisions of
Articles 2 and 3 of the Indenture relating to the
establishment of a series of Securities thereunder and the
establishment of forms of Securities representing a series of
Securities thereunder and, in each case, the definitions
therein relating thereto; that he is generally familiar with
the other provisions of the Indenture and with the affairs of
the Company and its acts and proceedings and that the
statements and opinions made by him in this Officers'
Certificate are based upon such familiarity; and that, in his
opinion, he has made such examination or investigation as is
necessary to enable him to express an informed opinion as to
whether or not the conditions and covenants referred to above
have been complied with; and in his opinion, such conditions
and covenants have been complied with.
<PAGE> 2
4. The terms of the series of Securities established pursuant to
this Officers' Certificate shall be as follows:
(a) TITLE. The title of the series of Securities
established hereby is the "7 3/4% Senior Notes due
2005."
(b) AGGREGATE PRINCIPAL AMOUNT. The aggregate principal
amount of the Senior Notes which may be authenticated
and delivered under the Indenture (except for Senior
Notes authenticated and delivered upon registration
of transfer of, or in exchange for, or in lieu of,
other Senior Notes pursuant to Section 3.04, 3.05,
3.06, 4.07 or 13.05 of the Indenture and except for
any Senior Notes which, pursuant to Section 3.03 of
the Indenture, are deemed never to have been
authorized and delivered thereunder) is $100,000,000.
(c) PERSONS TO WHOM INTEREST PAYABLE. Interest on the
Senior Notes shall be payable to the Person in whose
name a Senior Note is registered at the close of
business (whether or not a Business Day) on the
Regular Record Date for such interest payment, except
that default interest shall be payable in the manner
provided in Section 3.07 of the Indenture.
(d) STATED MATURITY. The date on which the principal of
the Senior Notes shall be payable, unless accelerated
pursuant to the Indenture, is January 15, 2005.
(e) RATE OF INTEREST; INTEREST PAYMENT DATES; REGULAR
RECORD DATES.
(i) RATE OF INTEREST. The principal amount of each of
the Senior Notes shall bear simple interest at the
rate of 7 3/4% per annum. The date from which
interest shall accrue for each of the Senior Notes
shall be January 21, 1998. Interest shall be
calculated on the basis of actual days elapsed over a
365- or 366-day year.
(ii) INTEREST PAYMENT DATES. Interest on the Senior Notes
shall be payable semi-annually on January 15 and July
15 of each year, commencing on July 15, 1998.
If any Interest Payment Date or the Maturity of the
Senior Notes falls on a day that is not a Business
Day, the
<PAGE> 3
payment due on such Interest Payment Date or at
Maturity will be made on the following day that is a
Business Day as if it were made on the date such
payment was due and no interest shall accrue on the
amount so payable for the period from and after such
Interest Payment Date or Maturity, as the case may
be.
(iii) REGULAR RECORD DATES. The Regular Record Dates for
interest payable on each January 15 and July 15 will
be the immediately preceding January 1 and July 1
(whether or not a Business Day), respectively.
(f) PLACE OF PAYMENT; REGISTRATION OF TRANSFER AND
EXCHANGE; NOTICES TO THE COMPANY.
(i) PLACE OF PAYMENT. Payment of the principal of and
interest on the Senior Notes will be made at the
Corporate Trust Office of the Trustee in New York,
New York, and at any other office or agency
designated by the Company for such purpose; provided,
however, that at the option of the Company, payment
of interest due (other than at Maturity) may be made
by check mailed to the address of the Person entitled
thereto as such address shall appear in the Security
Register.
(ii) REGISTRATION OF EXCHANGE AND TRANSFER. The Senior
Notes may be presented for exchange and registration
of transfer at the Corporate Trust Office of the
Trustee in New York, New York, or at the office of
any Registrar hereafter designated by the Company for
such purpose.
(iii) NOTICES TO COMPANY. Notices and demands to or upon
the Company in respect of the Senior Notes and the
Indenture may be served at U.S. Home Corporation,
1800 West Loop South, Houston, Texas 77027,
Attention: President.
<PAGE> 4
(g) OPTIONAL REDEMPTION. The Company may redeem all or
any portion of the Senior Notes at any time and from
time to time on and after January 15, 2003 at the
following redemption prices (expressed in percentages
of the principal amount) together, in each case, with
accrued interest to the date of redemption:
If redeemed during the twelve month period beginning
January 15,
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2003 101.29%
2004 and thereafter 100.00%
</TABLE>
of the principal amount thereof.
(h) MANDATORY REDEMPTION/SINKING FUND. The Company shall
not be obligated to make any mandatory sinking fund
payment or redemption of the Senior Notes.
(i) DENOMINATIONS. The Senior Notes shall be issuable in
denominations of $1,000 and any integral multiple
thereof.
(j) ACCELERATION. The principal amount of the Senior
Notes shall be payable upon declaration of
acceleration of the Maturity thereof pursuant to
Section 8.02 of the Indenture.
(k) DEFEASANCE. The Senior Notes shall be defeasible as
provided in Article 11 of the Indenture.
(l) GLOBAL SECURITIES; DEPOSITORY. The Senior Notes
shall be issued in the form of one or more Global
Securities and the Depository for the Global
Securities shall be The Depository Trust Company, a
New York corporation, and the Global Securities shall
be registered in the name of Cede & Co., the nominee
of the Depository.
(m) REGISTRAR; PAYING AGENT. The Company hereby appoints
the Trustee as the initial Registrar and Paying Agent
with respect to the Senior Notes. The books of the
Registrar for the Senior Notes will be initially
maintained at the Corporate Trust Office of the
Trustee.
(n) EVENTS OF DEFAULT. Section 8.01(a)(iii) of the
Indenture shall not be applicable to the Senior
Notes.
<PAGE> 5
IN WITNESS WHEREOF, we have executed this Officers' Certificate on behalf of
the Company this 21st day of January, 1998.
U.S. HOME CORPORATION
By: /s/ Robert J. Strudler
----------------------------------------
Robert J. Strudler
Chairman of the Board and
Co-Chief Executive Officer
By: /s/ Thomas A. Napoli
----------------------------------------
Thomas A. Napoli
Vice President-Corporate Finance
and Treasurer
<PAGE> 6
EXHIBIT A
(FACE OF SECURITY)
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY
OR A NOMINEE OF A DEPOSITORY. THIS GLOBAL SECURITY IS EXCHANGEABLE
FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE
DEPOSITORY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED
IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A
TRANSFER OF THIS SECURITY AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF
THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR
ANOTHER NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN SUCH
LIMITED CIRCUMSTANCES. EVERY SECURITY DELIVERED UPON REGISTRATION OF
TRANSFER OF, OR IN EXCHANGE FOR, OR IN LIEU OF, THIS GLOBAL SECURITY
SHALL BE A GLOBAL SECURITY SUBJECT TO THE FOREGOING, EXCEPT IN THE
LIMITED CIRCUMSTANCES DESCRIBED ABOVE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO
THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE
& CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS TO BE MADE TO CEDE & CO. OR
TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
CUSIP 911920AG1
Cert. No. $
------------- U.S. HOME CORPORATION -------------
Promises to pay to ____________________ or registered assigns the principal sum
of ____________________________________________________ on January 15, 2005.
<PAGE> 7
7 3/4% SENIOR NOTE DUE 2005
Interest Payment Dates: January 15 and July 15
Regular Record Dates: January 1 and July 1
Dated: January 21, 1998
U.S. HOME CORPORATION
By:
---------------------------------
Name:
Title:
By:
---------------------------------
Name:
Title:
[Corporate Seal]
This Security is one of the
Securities of the series designated
herein referred to in the within
mentioned Indenture.
IBJ SCHRODER BANK &
TRUST COMPANY, as Trustee
By:
---------------------------------
Authorized Signatory
<PAGE> 8
(REVERSE OF SECURITY)
U.S. HOME CORPORATION
7 3/4% SENIOR NOTE DUE 2005
1. INTEREST.
U.S. Home Corporation, a Delaware corporation (the "Company"),
promises to pay interest on the principal amount of this Security, which is one
of the Securities of the series designated under the Indenture as the "7 3/4%
Senior Notes due 2005" (the "Senior Notes"), at the rate per annum shown above.
The Company will pay interest semi-annually on January 15 and July 15 of each
year (each, an "Interest Payment Date"), commencing July 15, 1998. Interest on
the Senior Notes will accrue from the most recent date to which interest has
been paid or, if no interest has been paid, from January 21, 1998. Interest
will be computed on the basis of actual days elapsed over a 365- or 366-day
year.
2. METHOD OF PAYMENT.
The Company will pay interest on the Senior Notes (except defaulted
interest, which shall be payable in the manner provided in Section 3.07 of the
Indenture) to the Persons who are Holders of Securities at the close of
business on the January 1 or July 1 next preceding the Interest Payment Date
(the "Regular Record Date"). Holders must surrender Senior Notes to a Paying
Agent to collect principal payments. The Company will pay principal and
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts. However, the Company may pay
principal and interest by its check payable in such money. It may mail, or
cause to be mailed, an interest check to a Holder's address set forth on the
Security Register.
3. PAYING AGENT AND REGISTRAR.
Initially, IBJ Schroder Bank & Trust Company (the "Trustee") will act
as Paying Agent and Registrar. The Company may change any Paying Agent,
Registrar or co-Registrar without notice to any Holder. The Company or any of
its Subsidiaries may act as Paying Agent, Registrar or co-Registrar.
4. INDENTURE.
The Company issued the Senior Notes under an Indenture, dated August
28, 1997 (the "Indenture"), between the Company and the Trustee. The terms of
the Senior Notes include those stated in the Indenture, those made part of the
Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code
Sections 77aaa-77bbbb), as in effect on the date of the Indenture and as may be
amended from time to time (the "TIA") , and those incorporated by reference
into the Indenture pursuant to an Officers' Certificate of the Company, dated
January 21, 1998 (the "Officers' Certificate") delivered pursuant to Sections
2.01 and 3.01 of the Indenture. The Senior Notes are subject to and governed
by all such terms, and Holders are referred to the Indenture, the Officers'
Certificate and the TIA for a statement of them. Capitalized terms used in
this Senior Note and not otherwise defined herein shall have the meanings set
forth in the Indenture and the Officers' Certificate. The Senior Notes are
general unsecured obligations of the Company limited to the aggregate principal
amount of $100,000,000.
<PAGE> 9
5. OPTIONAL REDEMPTION.
The Company may redeem all or any portion of the Senior Notes at any
time and from time to time on and after January 15, 2003 at the following
redemption prices (expressed in percentages of the principal amount) together,
in each case, with accrued interest to the date of redemption:
If redeemed during the twelve month period beginning January 15,
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2003 101.29%
2004 and thereafter 100.00%
</TABLE>
of the principal amount thereof.
6. MANDATORY REDEMPTION/SINKING FUND.
The Company shall not be obligated to make any mandatory sinking fund
payment or redemption of the Senior Notes.
7. MANDATORY REPURCHASE OBLIGATION.
Within 30 days after the occurrence of any Change of Control, the
Company will offer to purchase all Outstanding Senior Notes at a purchase price
equal to 101 percent of the aggregate principal amount thereof, plus accrued
and unpaid interest to the Change of Control Payment Date.
Within 30 days after the date on which the aggregate amount of Excess
Proceeds (from an Asset Sale) equals at any time $10,000,000 or more, the
Company will offer to purchase the maximum principal amount of Senior Notes
that may be purchased out of the Excess Proceeds at a purchase price equal to
100 percent of the principal amount thereof, plus accrued and unpaid interest
to the Asset Sale Offer Date.
Within 30 days after the end of any two consecutive fiscal quarters
during which the Consolidated Tangible Net Worth of the Company is at any time
and from time to time less than $115,000,000, the Company will offer to
purchase 10 percent of the original Outstanding principal amount of the Senior
Notes at a purchase price equal to 100 percent of the original principal amount
thereof, plus accrued and unpaid interest to the Net Worth Offer Date.
A Change of Control Offer or a Net Worth Offer will remain open for
the period specified in the Indenture. Promptly after the termination of a
Change of Control Offer or a Net Worth Offer, subject to the terms of the
Indenture, the Company will purchase and mail, or cause to be mailed, or
deliver, or cause to be delivered, payment for all Senior Notes tendered and
accepted pursuant to such Offer.
A Holder may tender in response to a Change of Control Offer or a Net
Worth Offer all or any portion of its Senior Notes at its discretion by
<PAGE> 10
completing the form entitled "OPTION OF HOLDER TO ELECT PURCHASE" appearing on
the reverse of this Senior Note. Any portion of Senior Notes tendered must be
in an integral multiple of $1,000.
8. DENOMINATIONS, TRANSFER, EXCHANGE.
The Senior Notes are issuable in registered form, without coupons, in
denominations of $1,000 and any amount in excess thereof which is an integral
multiple of $1,000. As provided in the Indenture and subject to certain
limitations therein set forth, Senior Notes are exchangeable for a like
aggregate principal amount of Senior Notes of any authorized denomination, as
requested by the Holder surrendering the same, upon surrender of the Senior
Note to be exchanged at any office or agency where Senior Notes may be
presented for registration of transfer.
As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of Senior Notes is registrable in the Security Register
upon surrender of a Senior Note for registration of transfer at the Corporate
Trust Office of the Trustee in New York, New York, or at the office of any
Registrar hereafter designated by the Company for such purpose, duly endorsed
by, or accompanied by a written instrument of transfer in form satisfactory to
the Company and the Registrar, duly executed by the Holder hereof or his
attorney, duly authorized in writing, and thereupon one or more new Senior
Notes, of authorized denominations and for the same aggregate principal amount,
will be issued to the designated transferee or transferees.
No service charge shall be made by the Company, the Trustee or the
Registrar for any such registration of transfer or exchange, but the Company
may require payment of a sum sufficient to cover any tax, assessment or other
governmental charge payable in connection therewith (other than exchanges
pursuant to Section 3.04, 4.07 or 13.05 of the Indenture, not involving any
transfer).
9. PERSON DEEMED OWNER.
The Holder of a Senior Note may be treated as the owner of it for all
purposes.
10. AMENDMENT, WAIVER.
The Indenture permits, in certain circumstances therein specified, the
amendment thereof without the consent of the Holders. The Indenture also
permits, with certain exceptions as therein provided, the amendment thereof and
the modification of the rights and obligations under the Indenture of the
Company and the rights of Holders at any time by the Company and the Trustee
with the consent of the Holders of a majority in principal amount of the
Senior Notes at the time Outstanding. The Indenture also contains provisions
permitting the Holders of a majority in principal amount of the Senior Notes at
the time Outstanding, on behalf of the Holders of all the Senior Notes, to
waive compliance by the Company with certain provisions of the Indenture. Any
such consent or waiver by the Holders shall be binding upon the Holder of this
Senior Note and upon all future Holders of this Senior Note and of any Senior
Note issued upon the registration of transfer hereof or in exchange hereof or
in lieu hereof, whether or not notation of such consent or waiver is made upon
this Senior Note.
<PAGE> 11
11. SUCCESSOR CORPORATION.
When a successor corporation assumes all the obligations of its
predecessor under the Senior Notes and the Indenture, the predecessor
corporation will be released from those obligations.
12. DEFAULTS AND REMEDIES.
The following are Events of Default: (i) failure by the Company to
pay interest on any Senior Note when the same becomes due and payable and the
continuance of such failure for 30 days; (ii) failure by the Company to pay the
principal of any Senior Note when the same becomes due and payable at Maturity,
upon acceleration or otherwise; (iii) failure by the Company to comply with any
of its agreements or covenants in, or provisions of, the Senior Notes or the
Indenture (other than an agreement or covenant a default in whose performance
or whose breach is elsewhere in Section 8.01 of the Indenture or which has
expressly been included in the Indenture solely for the benefit of a series of
Securities other than the Senior Notes) and such failure continues for 60 days
after notice; (iv) acceleration of any Indebtedness (other than Non-Recourse
Indebtedness) of the Company or any of its Subsidiaries that has an outstanding
principal amount of $10,000,000 or more in the aggregate; provided that, in the
event any such acceleration is withdrawn or otherwise rescinded within a period
of five days after such acceleration by the holders of such Indebtedness, any
Event of Default pursuant to this clause (iv) will be deemed to be cured and
any acceleration under the Indenture will be deemed withdrawn or rescinded; (v)
failure by the Company or any of its Subsidiaries to make any principal or
interest payment in respect of Indebtedness (other than Non-Recourse
Indebtedness) of the Company or any of its Subsidiaries with an outstanding
aggregate amount of $10,000,000 or more within five days of such principal or
interest payment becoming due and payable (after giving effect to any
applicable grace period set forth in the documents governing such
Indebtedness); (vi) a final judgment or judgments that exceed $10,000,000 or
more in the aggregate, for the payment of money, having been entered by a court
or courts of competent jurisdiction against the Company or any of its
Subsidiaries and such judgment or judgments is not satisfied, stayed, annulled
or rescinded within 60 days of being entered; or (vii) certain events of
bankruptcy, insolvency or reorganization, involving the Company or a Material
Subsidiary.
If an Event of Default with respect to the Senior Notes at the time
Outstanding (other than certain Events of Default arising out of certain events
of bankruptcy, insolvency or reorganization involving the Company or a Material
Subsidiary) occurs and is continuing, the Trustee (after receiving indemnities
from the Holders to its satisfaction) by notice to the Company, or the Holders
of at least 25 percent in aggregate principal amount of the Outstanding Senior
Notes by notice to the Company and the Trustee, may declare all Outstanding
Senior Notes to be due and payable immediately. Upon such declaration, the
amounts due and payable on the Senior Notes as determined in Section 8.02(b) of
the Indenture, will be due and payable immediately. If an Event of Default
arising out of certain events of bankruptcy, insolvency or reorganization
involving the Company or a Material Subsidiary occurs, such an
<PAGE> 12
amount will ipso facto become and be immediately due and payable without any
declaration, notice or other act on the part of the Trustee and the Company or
any Holder. The Holders of a majority in aggregate principal amount of the
Outstanding Senior Notes by written notice to the Trustee and the Company may
waive such Event of Default, rescind an acceleration and its consequences
(except an acceleration due to nonpayment of principal or interest on the
Senior Notes) if the rescission would not conflict with any judgment or decree
and if all existing Events of Default have been cured or waived.
Subject to Sections 8.07 and 13.02 of the Indenture, the Holders of a
majority in aggregate principal amount of the Outstanding Senior Notes by
notice to the Trustee may waive an existing Default or Event of Default and its
consequences (including waivers obtained in connection with a tender offer or
exchange offer for Senior Notes), except a continuing Default or Event of
Default in the payment of the principal of or interest on any Senior Note.
Upon any such waiver, such Default will cease to exist, and any Event of
Default arising therefrom will be deemed to have been cured for every purpose
of the Indenture, but no such waiver will extend to any subsequent or other
Default or Event of Default or impair any right consequent thereon.
13. TRUSTEE DEALINGS WITH COMPANY.
IBJ Schroder Bank & Trust Company, the Trustee under the Indenture, in
its individual or any other capacity, may become the owner or pledgee of the
Senior Notes and may otherwise deal with the Company or any of its Affiliates
with the same rights it would have if it were not Trustee. Any Agent may do
the same with like rights. However, the Trustee is subject to Sections 9.10
and 9.11 of the Indenture.
14. NO RECOURSE AGAINST OTHERS.
A director, officer or employee of the Company, as such, shall have no
liability for any obligations of the Company under the Senior Notes or the
Indenture. Each Holder, by accepting a Senior Note, waives and releases all
such liability.
<PAGE> 13
15. AUTHENTICATION.
This Senior Note shall not be valid until the Trustee signs the
certificate of authentication on the other side of this Senior Note.
16. ABBREVIATIONS.
Customary abbreviations may be used in the name of a Holder or an
assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors
Act).
The Company will furnish to any Holder, upon written request and
without charge, a copy of the Indenture. Request may be made to:
U.S. Home Corporation
1800 West Loop South
Houston, Texas 77027
Attention: President
<PAGE> 14
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto
Please insert Social Security or Employer
Identification Number of Assignee
- -------------------------------------------
- -
- -------------------------------------------
- --------------------------------------------------------------------------------
Please Print or Typewrite Name and Address
including Postal Zip Code of Assignee
- --------------------------------------------------------------------------------
the within Senior Note and all rights thereunder, hereby irrevocably
constituting and appointing
_________________________________________________________________ attorney
to Transfer said Senior Note on the books of the Company, with full
power of substitution in the premises.
Dated: Signature
----------------------------- -------------------------
NOTICE: The signature to this assignment must correspond with the name as
it appears upon the face of the within note in every particular,
without alteration or enlargement or any change whatever.
<PAGE> 15
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Senior Note purchased by the
Company pursuant to Section 6.11, 6.16 or 6.20 of the Indenture, check the box
below:
Section 6.11 (Excess Proceeds Offer)
Section 6.16 (Change of Control Offer)
Section 6.20 (Net Worth Offer)
If you want to elect to have only part of the Senior Note
purchased by the Company pursuant to Section 6.11, 6.16 or 6.20 of the
Indenture, as applicable, state the principal amount you elect to have
purchased: $_________. Note: The amount you elect to have purchased must be
an integral multiple of $1,000.
Date: Your signature:
--------------- ----------------------------------
(Sign exactly as your name appears
on the Senior Note)
Signature Guarantee:
---------------------------------------------
<PAGE> 1
EXHIBIT 10.15
U.S. HOME CORPORATION
NON-EMPLOYEE DIRECTOR STOCK PLAN
1. NAME OF PLAN. This plan shall be known as the "U.S. Home Corporation
Non-Employee Director Stock Plan" and is hereinafter referred to as the
"Plan."
2. PURPOSES OF PLAN. The purposes of the Plan are to enable U.S. Home
Corporation, a Delaware corporation (the "Company"), to attract and
retain qualified persons to serve as Directors of the Company
("Directors"), to enhance the equity interest of Directors in the
Company, to solidify the common interests of its Directors and
stockholders, and to encourage the highest level of Director
performance by providing such Directors with a proprietary interest in
the Company's performance and progress, by awarding them annually
shares of the Company's common stock, par value $0.01 per share (the
"Stock").
3. EFFECTIVE DATE AND TERM. The Plan shall be effective as of April 23,
1997, provided that it is approved by the Company's stockholders at
the annual meeting thereof (each such meeting, an "Annual Meeting") in
1998. The Plan shall remain in effect until terminated by action of
the Board of Directors of the Company (the "Board"), or until no
shares of Stock remain available under the Plan, if earlier.
4. ELIGIBLE PARTICIPANTS. Each Director shall be a participant
("Participant") in the Plan during such period as such individual
remains a Director and is not an employee of the Company or any of its
subsidiaries.
5. RECEIPT OF STOCK. (a) Upon stockholder approval of the Plan at the
Annual Meeting held in 1998, Participants (i) who were elected as
Directors at the 1997 Annual Meeting will be issued a number of shares
(rounded to the nearer whole share) of Stock equal to $26,000, divided
by the closing price of the Stock on the New York Stock Exchange on
the date of the 1997 Annual Meeting, and (ii) who are elected as
Directors at the 1998 Annual Meeting will be issued a number of shares
(rounded to the nearer whole share) of Stock equal to $26,000, divided
by the closing price of the Stock on the New York Stock Exchange on
the date of the 1998 Annual Meeting.
(b) On the date of election as a Director at each subsequent Annual
Meeting (or special meeting in lieu of an Annual Meeting), each
Participant shall receive as compensation for services as a
Director for the succeeding year the number of shares (rounded to
the nearer whole share) of Stock equal to the annual cash
retainer payable to each Director for such year, divided by the
closing price of the Stock on the New York Stock Exchange on the
date of such election; provided, that so long as the Company's
Class B Warrants are outstanding, the closing price for the
foregoing calculation shall not be less than 95% of the Current
Market Price (as defined in the Warrant Agreement relating to
such Class B Warrants). If the Stock is not traded on such
Exchange at the
1
<PAGE> 2
time of issuance, the Committee (as defined in Section 11)
shall determine the value of the Stock in good faith.
(c) Participants elected or appointed other than at an Annual Meeting
(or special meeting in lieu of an Annual Meeting) will be issued
a pro rata number of shares of Stock based upon the number of
months to be served in the year between Annual Meetings. After
approval of the Plan by the Company's stockholders, Participants
who voluntarily resign or become employed by the Company prior to
the April 15th immediately following the issuance of such shares
will forfeit their shares of Stock. Participants ceasing to be a
Director for any other reason, including the death or disability
of such Participant, will forfeit a pro rata number of shares of
stock based upon the number of months served in the year between
Annual Meetings. If the Annual Meeting (or special meeting in
lieu of an Annual Meeting) at which the shares are issued is held
earlier than April 15th, then the director must serve until April
15th of the following year.
(d) Other than shares issued pursuant to Section 5(a)(i),
Participants may not transfer, sell, pledge, assign, encumber or
otherwise dispose of shares issued pursuant to this Plan until
the April 15th which immediately follows the issuance of such
shares, or the date on which Participants cease to be Directors,
if earlier; provided, that, if the Annual Meeting (or special
meeting in lieu of an Annual Meeting) is held earlier than April
15th, then shares issued at such meeting pursuant to this Plan
will be so restricted until April 15th of the following year; and
provided further, that a Participant may transfer shares to his
or her spouse or issue or any trust for the benefit of such
Participant, his or her spouse or issue, so long as such
transferee shall take and hold such shares subject to all
obligations and restrictions of this Plan, including, but not
limited to, the forfeiture provisions of paragraph (c) above and
the absolute transfer restriction set forth in the preceding
provisions of this paragraph.
6. DELIVERY OF STOCK. The shares of Stock shall be delivered as soon as
practicable after the date of such Participant's election or
appointment.
7. STOCK CERTIFICATES; VOTING AND OTHER RIGHTS. The certificates for
shares delivered to a Director pursuant to Section 6 shall be issued
in the name of the Director, and the Director shall be entitled to all
rights of a stockholder with respect to Stock for all such shares
issued in his or her name, including the right to vote the shares, and
the Director shall receive all dividends and other distributions paid
or made with respect thereto. The certificates representing the shares
issued hereunder shall bear a legend indicating that such shares are
subject to forfeiture and restrictions on transfer pursuant to Section
5, and the Company's transfer agent shall be given stop transfer
instructions to the same effect.
8. GENERAL RESTRICTIONS. Notwithstanding any other provision of the Plan
or agreements made pursuant thereto, the Company shall not be required
to issue or deliver any certificate or certificates for shares of
Stock under the Plan prior to fulfillment of all of the following
conditions:
(i) Listing or approval for listing upon official notice of
issuance of such shares on the New York Stock Exchange, or
such other securities exchange as may at the time be the
primary market for the Stock;
2
<PAGE> 3
(ii) Any registration or other qualification of such shares under
any state or federal law or regulation, or the maintaining
in effect of any such registration or other qualification
which the Committee shall, in its absolute discretion upon
the advice of counsel, deem necessary or advisable; and
(iii) Obtaining any other consent, approval or permit from any
state or federal governmental agency which the Committee
shall, in its absolute discretion upon the advice of
counsel, determine to be necessary or advisable.
9. STOCK AVAILABLE. Subject to Section 10, the maximum number of shares
of Stock which may be issued pursuant to the Plan is 100,000. Shares
of Stock issuable under the Plan may be taken from authorized but
unissued or treasury shares of the Company or purchased in the open
market.
10. CHANGE IN CAPITAL STRUCTURE; CHANGE OF CONTROL. In the event that
there is any change in the Stock by reason of any stock dividend,
stock split, combination of shares, exchange of shares,
reclassification, recapitalization, merger, consolidation, change of
control, spin-off or other change in capitalization of the Company,
appropriate adjustment shall be made in the restrictions on transfer,
legend requirements, number and kind of shares or other property
subject to the Plan, and any other relevant provisions of the Plan by
the Committee, whose determination shall be binding and conclusive on
all persons.
11. ADMINISTRATION; AMENDMENT. (a) The Plan shall be administered by the
Nominating Committee of the Board (the "Committee"), which shall have
full authority to construe and interpret the Plan, to establish, amend
and rescind rules and regulations relating to the Plan, and to take
all such actions and make all such determinations in connection with
the Plan as it may deem necessary or desirable. Any such action or
determination shall be final and binding.
(b) The Board may at any time terminate, amend or modify the Plan
in any respect it deems suitable without the approval of the
stockholders of the Company, except to the extent that such
stockholder approval is required under applicable law or the
Board determines that such approval is necessary or
desirable; provided, that the Board shall not amend or
modify the Plan without stockholder approval to (i) increase
the maximum number of shares that may be issued pursuant to
the Plan or (ii) change the provisions of Section 5 hereof
with respect to the pricing of the Stock in order to make it
more favorable to Participants.
12. MISCELLANEOUS. (a) Nothing in the Plan shall be deemed to create any
obligation on the part of the Board to nominate any Director for
election by the Company's stockholders or to limit any right to remove
any Director.
(b) The Company shall have the right to require, prior to the
issuance or delivery of any shares of Stock pursuant to the
Plan, that a Director make arrangements satisfactory to the
Committee for the
3
<PAGE> 4
withholding of any taxes required by law to be withheld with
respect to the issuance or delivery of such shares,
including, without limitation, by the withholding of shares
that would otherwise be so issued or delivered, by
withholding from any other payment due to the Director, or
by a cash payment to the Company by the Director.
13. GOVERNING LAW. The Plan and all actions taken thereunder shall be
governed by and construed in accordance with the laws of the State of
Delaware.
14. OVERRIDE. With respect to persons subject to Section 16 of the
Securities Exchange Act of 1934, as amended, transactions under the
Plan are intended to comply with all applicable conditions of Rule
16b-3 thereunder or any successor provision. To the extent any
provision of the Plan or action by the Committee fails to so comply, it
shall be deemed null and void, to the extent permitted by law and
deemed advisable by the Committee.
4
<PAGE> 5
<PAGE> 1
EXHIBIT 10.16
U.S. HOME CORPORATION
1998 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
1. PURPOSES.
The purposes of the U.S. Home Corporation 1998 Non-Employee Directors'
Stock Option Plan (the "Plan") are to attract and retain qualified and
competent persons for service as members of the board of directors (the
"Board") of U.S. Home Corporation (the "Company") by providing a means
whereby such persons acquire an equity interest in the Company and to
secure for the Company and its stockholders the benefit of the
incentives inherent in such equity ownership by persons whose advice
and counsel are important to the Company's future growth and continued
success. The Plan is intended to supplement and provide continuity to
the Amended and Restated Non-Employee Stock Option Plan (the "1993
Plan").
2. ADMINISTRATION.
(a) The Board shall (i) administer the Plan, (ii) establish, subject to
the provisions of the Plan, such rules and regulations as it may deem
appropriate for the proper administration of the Plan and (iii) make
such determinations under, and such interpretations of, and take such
steps in connection with, the Plan or the options issued thereunder as
it may deem necessary or advisable.
(b) The Board may from time to time appoint a Committee (the
"Committee"), which shall initially be the Nominating Committee of the
Board, which shall be comprised of at least three members of the Board,
all of whom are to be non-employee directors (within the meaning of
Rule 16b-3 promulgated under the Securities Act of 1934, as amended
(the "Exchange Act")) and may delegate to the Committee full power and
authority to take any and all action required or permitted to be taken
by the Board under the Plan, whether or not the power and the authority
of the Committee is hereinafter fully set forth. The Board or the
Committee, as applicable, shall hereinafter be referred to as the
"Administrator."
3. STOCK.
The stock (the "Stock") to be made the subject of an option under the
Plan shall be the shares of common stock of the Company, $.01 par
value per share, whether authorized and unissued or treasury stock.
The total amount of Stock for which options may be granted under the
Plan shall not exceed, in the aggregate, 100,000 shares, subject to
adjustment in accordance with the provisions of Section 12 hereof. Any
shares of Stock which were the subject of unexercised portions of any
terminated or expired options may again be subject to the grant of
options under the Plan during the remaining term of the Plan.
5
<PAGE> 2
4. AWARD OF OPTIONS.
(a) Options shall be granted only to non-employee directors of the
Board. No individual who is, at the time of grant, an employee of the
Company shall be eligible to receive options under the Plan.
(b) All options granted under the Plan shall be non-qualified
options not entitled to special tax treatment under Section 422 of the
Internal Revenue Code of 1986, as amended (the "IRC").
(c) Any and all options granted under this Plan shall be granted
not later than 10 years from February 11, 1998, the date the Plan was
adopted by the Board.
(d) All options granted under the Plan shall be evidenced by a
written agreement substantially in the form of Exhibit A annexed hereto
(each an "Option Agreement").
(e) Options shall be granted under the Plan only when awards are
no longer available under the 1993 Plan.
5. NUMBER OF SHARES TO BE GRANTED.
Each person who becomes a non-employee director of the Company after
the adoption of the Plan by the Board shall be granted an option for
5,000 shares of Stock at the time such person first becomes a
non-employee director of the Company (a "New Director Stock Option
Grant"). On the date of each annual meeting or special meeting in lieu
of annual meeting of the stockholders of the Company, each person who
continues to serve as a non-employee director of the Company
immediately after such meeting shall be granted an option for 1,000
additional shares of Stock (an "Annual Stock Option Grant"); provided,
that he or she has served as a non-employee director for at least six
months prior to such meeting. The options shall be deemed automatically
granted at the times, in the amounts and at the option prices set forth
herein without any further action on the part of the Administrator, and
the proper officers of the Company are authorized, empowered and
directed to execute and deliver an Option Agreement to reflect each
such grant at the times, in the amounts and at the option prices
determined in accordance with the Plan.
6. PRICE.
(a) In the case of a New Director Stock Option Grant, the exercise
price of such Option shall be the average closing price of the Stock
on the New York Stock Exchange ("NYSE") for the 10 consecutive trading
days prior to the date of the New Director Stock Option Grant.
Notwithstanding the foregoing, so long as the Company's Class B
Warrants are outstanding, the exercise price of such option will in no
event be less than 95% of the average closing price of the Stock on
the NYSE for the 20 consecutive trading days immediately prior to the
date of the New Director Stock Option Grant.
6
<PAGE> 3
(b) In the case of an Annual Stock Option Grant, the exercise price of
such Option shall be the average closing price of the Stock on the
NYSE for the 10 consecutive trading days prior to the date of the
Annual Stock Option Grant. Notwithstanding the foregoing, so long as
the Company's Class B Warrants are outstanding, the exercise price of
such option will in no event be less than 95% of the average closing
price of the Stock on the NYSE for the 20 consecutive trading days
immediately prior to the date of the Annual Stock Option Grant.
(c) The closing price of the Stock, as of any particular day, shall be
as reported in The Wall Street Journal; provided, however, that if the
Stock is not listed on the NYSE on the dates the option exercise price
is to be determined, the option exercise price shall be not less than
the fair market value of the shares of Stock covered by the option at
the time that the option is granted, as determined by the Administrator
based on such empirical evidence as it deems to be necessary under the
circumstances.
7. TERM.
Subject to Sections 9, 10 and 21 hereof, an option may be exercised by
the holder thereof (a "Holder") in whole at any time or in part from
time to time commencing with the date of grant, but no option may be
exercised in any amount later than 10 years from the date such option
was granted.
8. TRANSFERABILITY.
No option may be transferable by a Holder other than by will or the
laws of descent and distribution. During the lifetime of a Holder, the
option may be exercisable only by such Holder. A Holder who acquires
Stock hereunder may only transfer such Stock in compliance with
applicable federal and state securities laws.
9. TERMINATION OF DIRECTORSHIP.
If, on or after the date an option is granted under the Plan, a Holder
(i) resigns as a director of the Company or (ii) is removed as a
director of the Company by the stockholders of the Company, with or
without cause, the Holder shall have the right, not later than the
earlier of (A) three months after such resignation or removal or (B)
the termination date of the option as set forth in the Option
Agreement, to exercise such option, to the extent the right to exercise
such option shall have accrued at the date of such resignation or
removal, except to the extent that such option theretofore shall have
been exercised.
10. RETIREMENT, DEATH OR DISABILITY.
If a Holder retires at the age of 65 or above, dies, or becomes
disabled (within the meaning of Section 22(e) (3) of the IRC) while a
director of the Company, the Holder, the personal representative of the
Holder or the person or persons to whom the option shall have been
transferred by will or by the laws of descent and distribution, or the
disabled Holder, shall have the right, not later than the earlier of
(i) three years from
7
<PAGE> 4
the date of the Holder's retirement, death or disability or (ii) the
termination date of the option as set forth in the Option Agreement,
to exercise such option to the extent the right to exercise such
option shall have accrued at the date of such retirement, death or
disability, except to the extent such option theretofore shall have
been exercised.
11. PAYMENT FOR STOCK.
(a) The purchase price of Stock issued upon exercise of options granted
hereunder shall be paid in full on the date of purchase. Payment shall
be made either in cash or such other consideration as the Administrator
deems appropriate, including, without limitation, Stock already owned
by the Holder or Stock to be acquired by the Holder upon exercise of
the option having a total fair market value, as determined by the
Administrator, equal to the purchase price, or a combination of cash
and Stock having a total fair market value, as so determined, equal to
the purchase price.
(b) Stock shall not be issued upon the exercise of options unless and
until the aggregate amount of federal, state or local taxes of any kind
required by law to be withheld, if any, with respect to the exercise of
such options have been paid or satisfied or provision for their payment
and satisfaction has been made upon such terms as the Administrator may
prescribe, including, without limitation, payment of any such taxes by
exchanging shares of Stock previously owned by the Holder or acquired
upon the exercise of an option.
12. STOCK ADJUSTMENTS.
(a) The total amount of Stock for which options shall be granted under
the Plan and option terms (both as to the number of shares of Stock and
the price of the option) shall be appropriately adjusted for any
increase or decrease in the number of outstanding shares of Stock
resulting from payment of a stock dividend on the Stock, a subdivision
or combination of the Stock, or a reclassification of the Stock, and
(in accordance with the provisions contained in the following
paragraph) in the event of a consolidation or a merger in which the
Company will be the surviving corporation.
(b) After any merger of one or more corporations into the Company in
which the Company shall be the surviving corporation, or after any
consolidation of the Company and one or more other corporations, each
Holder shall, at no additional cost, be entitled, upon any exercise of
his option, to receive, in lieu of the number of shares of Stock as to
which such option shall then be so exercised, the number and class of
shares of stock or other securities to which such Holder would have
been entitled pursuant to the terms of the applicable agreement of
merger or consolidation if at the time of such merger or consolidation
such Holder had been a Holder of record of a number of shares of Stock
equal to the number of shares for which such option may then be so
exercised. Comparable rights shall accrue to each Holder in the event
of successive mergers or consolidations of the character described
above.
8
<PAGE> 5
(c) In the event of any sale of all or substantially of the assets of
the Company, or any merger of the Company into another corporation, or
any dissolution or liquidation of the Company or, in the discretion of
the Board, any consolidation or other reorganization in which it is
impossible or impracticable to continue in effect any options, all
options granted under the Plan and not previously exercised shall
terminate unless exercised at least one business day before the
scheduled closing of such event; provided, that any such exercise or
termination shall be conditioned on the closing of such transaction;
and provided further, that the Board may, in its discretion, require
instead that all options granted under the Plan and not previously
exercised shall be assumed by such other corporation on the basis
provided in the preceding paragraph to the extent possible or
practical.
(d) The adjustments described in this Section 12 and the manner of
application of the foregoing provisions shall be determined by the
Board in its sole discretion. Any such adjustment may provide for the
elimination of any fractional share which might otherwise become
subject to an option.
13. RIGHTS AS A STOCKHOLDER.
A Holder or a transferee of an option shall have no rights as a
stockholder with respect to any share of Stock covered by such Holder's
option until such Holder has become the holder of record of such share
of Stock, and, except for stock dividends as provided in Section 12
hereof, no adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or
distributions or other rights in respect of such share for which the
record date is prior to the date on which he or she shall become the
holder of record thereof.
14. AMENDMENT AND TERMINATION.
The Board may at any time terminate, amend or modify the Plan in any
respect it deems suitable without the approval of the stockholders of
the Company; provided however, that no such action of the Board,
without the approval of the stockholders of the Company, may (i)
increase the total amount of Stock on which options may be granted
under the Plan, (ii) change the manner of determining the option price,
(iii) change the class of individuals eligible to receive options, (iv)
change the number of options which may be granted to each director or
(v) change the times when such options are granted; provided, further,
that no amendment, modification or termination of the Plan may in any
manner affect any option theretofore granted under the Plan without the
consent of the then Holder. Notwithstanding the foregoing, the Plan may
not be amended more than once in any six-month period except to comply
with changes in the IRC, the Employee Retirement Income Security Act of
1974, as amended ("ERI "), or any rules or regulations promulgated
under either the IRC or ERISA.
9
<PAGE> 6
15. INVESTMENT PURPOSE.
At the time of exercise of any option, the Company may, if it shall
deem it necessary or desirable for any reason, require the Holder to
(i) in the absence of an effective registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), represent in
writing to the Company that it is such Holder's then intention to
acquire the Stock for investment and not with a view to the
distribution thereof or (ii) postpone the date of exercise until such
time as the Company has available for delivery to the Holder a
prospectus meeting the requirements of all applicable securities laws.
16. RIGHT TO REMOVE DIRECTOR.
Nothing contained herein or in any Option Agreement shall restrict the
right of the stockholders of the Company to remove any Holder as
director at any time, with or without cause, or shall constitute or be
evidence of any agreement or understanding, express or implied, that
the Company shall retain a director for any period of time, or at any
particular rate of compensation.
17. FINALITY OF DETERMINATIONS.
Each determination, interpretation, or other action made or taken
pursuant to the provisions of the Plan by the Administrator shall be
final and be binding and conclusive for all purposes.
18. INDEMNIFICATION OF DIRECTORS.
Each director of the Company, solely in his or her capacity as a
director, shall be indemnified by the Company against all costs and
expenses reasonably incurred by such director in connection with any
action, suit or proceeding to which he or she or any of the other
directors may be a party by reason of any action taken or failure to
act under or in connection with the Plan, or any option granted
thereunder, and against all amounts paid in settlement thereof
(provided such settlement shall be approved by independent legal
counsel) or paid in satisfaction of a judgment in any such action, suit
or proceeding, to the extent permitted by Delaware law. Upon the
institution of any such action, suit or proceeding, a director of the
Company shall notify the Company in writing, giving the Company an
opportunity, at its own expense, to handle and defend the same before
such director undertakes to handle it on his or her own behalf.
19. FEDERAL INCOME TAX CONSEQUENCES.
Under the present provisions of the IRC, the federal income tax
consequences of participating in the Plan may be summarized as
follows: This summary is of general application only and its
application to any individual will depend on that individual's
circumstances. The summary does not address the effect of state and
local income tax laws. The Plan is not subject to the provisions of
Section 401 (a) of the IRC or ERISA.
10
<PAGE> 7
The recipient of an option shall not recognize income upon the grant
of the option, but, upon exercise, generally shall recognize ordinary
income in an amount equal to the difference between the fair market
value of the Stock acquired on the exercise date and the option price.
The Company generally shall be entitled to a tax deduction at the same
time and in the same amount as the income recognized.
If an option is exercised within six months of the date of grant and
the Holder is restricted from selling the Stock acquired upon exercise
because of the restrictions of Section 16(b) of the Exchange Act,
unless the Holder elects under Section 83(b) of the IRC to be taxed
immediately, he or she shall recognize ordinary income (and the
Company shall be entitled to a deduction) at the end of the restricted
period imposed by Section 16(b) in an amount equal to the difference
between the fair market value of the Stock at that time and the option
price.
If the Holder pays the option price entirely in cash for tax purposes,
his or her basis in the shares of Stock received shall be equal to
their fair market value on the exercise date (or the date on which the
Section 16(b) period expires, if applicable), and the holding period
for tax purposes shall begin on the day following the exercise date.
20. GOVERNING LAW.
The Plan shall be governed by the laws of the State of Delaware.
21. EFFECTIVE DATE.
The Plan shall become effective upon the date of its adoption by the
Board. However, if the Plan is not approved by the stockholders, the
Plan shall be null and void.
22. OVERRIDE.
With respect to persons subject to Section 16 of the Exchange Act,
transactions under the Plan are intended to comply with all applicable
conditions of Rule 16b-3 or its successors under the Exchange Act. To
the extent any provision of the Plan or action by the Administrator
fails to so comply, it shall be deemed null and void, to the extent
permitted by law and deemed advisable by the Administrator.
11
<PAGE> 8
EXHIBIT A
U.S. HOME CORPORATION
1998 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
STOCK OPTION AGREEMENT
OPTION AGREEMENT, dated as of , 199 between U.S. HOME
CORPORATION, a Delaware corporation (the "Company"), and
(the "Holder").
1. PURPOSE.
The purpose of this Stock Option Agreement (this "Agreement") is to
set forth the terms and conditions of the stock option granted to the
Holder under the 1998 Non-Employee Directors' Stock Option Plan (the
"Plan"). The terms and conditions (including defined terms) of the
Plan are expressly incorporated herein and made a part hereof with the
same force and effect as if fully set forth herein. The acceptance by
the Holder of the Option (as hereinafter defined) granted hereby shall
constitute acceptance of and agreement with all of the terms and
conditions contained in this Agreement and the Plan.
2. GRANT OF OPTION.
The Company hereby grants to the Holder an option (the "Option") to
purchase all or any part of an aggregate of [5,000] [1,000] shares of
the Company's common stock, $.01 par value per share (the "Stock"), at
a price of $ * per share (the "Exercise Price"), subject to adjustment
as herein provided. Such Option is not intended to qualify as an
"incentive stock option" within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "IRC").
3. TERM.
Subject to Sections 4, 5 and 13 hereof, the Option shall be
exercisable in whole or in part at any time on or after the date
hereof; provided, however, that the Option shall expire on the date 10
years from the date hereof. Any exercise shall be accompanied by a
written notice to the Company in substantially the form attached
hereto as Schedule 1.
- ---------------
*To be determined pursuant to Section 6 of the Stock Option Plan.
1
<PAGE> 9
4. TERMINATION OF DIRECTORSHIP.
If, on or after the date the Option is granted, the Holder (i) resigns
as a director of the Company or (ii) is removed as a director of the
Company by the stockholders of the Company, with or without cause, the
Holder shall have the right, not later than the earlier of (A) three
months after such resignation or removal or (B) the termination date
of the Option set forth herein, to exercise the Option, to the extent
the right to exercise the Option shall have accrued at the date of
such resignation or removal, except to the extent that the Option
theretofore shall have been exercised.
5. RETIREMENT, DEATH OR DISABILITY.
If the Holder retires at the age of 65 or above, dies, or becomes
disabled (within the meaning of Section 22(e)(3) of the IRC) while a
director of the Company, the Holder, the personal representative of
the Holder or the person or persons to whom the Option shall have been
transferred by will or by the laws of descent and distribution, or the
disabled Holder, will have the right, not later than the earlier of
(i) three years from the date of the Holder's retirement, death or
disability or (ii) the termination date of the Option set forth
herein, to exercise the Option to the extent the right to exercise the
Option shall have accrued at the date of such retirement, death or
disability, except to the extent the Option theretofore shall have
been exercised.
6. TRANSFERABILITY.
The Option shall not be transferable by the Holder other than by will
or the laws of descent and distribution. During the lifetime of the
Holder, the Option shall be exercisable only by such Holder. If the
Holder acquires Stock hereunder, the Holder shall only transfer such
Stock in compliance with applicable federal and state securities laws.
7. PAYMENT OF EXERCISE PRICE.
Payment for shares of Stock issued upon exercise of the Option shall
be paid in full on the date of purchase. Payment shall be made either
in cash or in such other consideration as the Administrator (as
defined in the Plan) seems appropriate. Notwithstanding the foregoing,
shares of Stock shall not be issued upon exercise of the Option unless
and until the aggregate amount of Federal, state and local taxes of
any kind required to be withheld, if any, with respect to such
exercise have been paid or satisfied or provision for their payment
and satisfaction has been made upon such terms as the Administrator
may prescribe.
8. ADJUSTMENT TO OPTION.
The number of shares of Stock subject to the Option and the Exercise
Price shall be adjusted, as necessary, in accordance with the
provisions of Section 12 of the Plan.
2
<PAGE> 10
9. NO RIGHTS AS STOCKHOLDER.
The Holder shall have no rights as a stockholder with respect to any
Stock covered by the Option until such person has become the holder of
record of such Stock, and, except for stock dividends as provided in
Section 12 of the Plan, no adjustment shall be made for dividends
(ordinary or extraordinary, whether in cash, securities or other
property) or distributions or other rights in respect of such Stock
for which the record date is prior to the date on which he or she
shall become the holder of record thereof.
10. RIGHT TO REMOVE DIRECTOR.
Nothing contained herein or in any Option Agreement shall restrict the
right of the stockholders of the Company to remove any Holder as
director at any time, with or without cause, or shall constitute or be
evidence of any agreement or understanding, express or implied, that
the Company shall retain a director for any period of time, or at any
particular rate of compensation.
11. REPRESENTATIONS.
At the time of any exercise of the Option, the Company may, if it
shall deem it necessary or desirable for any reason, require the
Holder to (i) in the absence of an effective registration statement
under the Securities Act of 1933, as amended, represent in writing to
the Company that it is his then intention to acquire the Stock for
investment and not with a view to the distribution thereof or (ii)
postpone the date of exercise until such time as the Company has
available for delivery to the Holder a prospectus meeting the
requirements of all applicable federal or state securities laws.
12. GOVERNING LAW.
This Agreement shall be governed by the laws of the State of Delaware.
3
<PAGE> 11
13. STOCKHOLDER APPROVAL.
Any Option granted under the Agreement shall not be exercisable unless
or until the Plan shall have been approved by the stockholders of the
Company in accordance with the provisions of Section 21 of the Plan.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
U.S. HOME CORPORATION
By:
------------------------
Name:
----------------------
Title:
---------------------
Holder
---------------------------
Signature
Name:
----------------------
Address:
-------------------
---------------------------
4
<PAGE> 12
SCHEDULE 1
U.S. Home Corporation
1800 West Loop South
Houston, Texas 77252
Attention: Secretary
Re: Notice of Exercise of Stock Option
Dear Sir:
I am the holder of the below-described option to acquire shares of
common stock, $.01 par value per share (the "Common Stock"), of U.S. Home
Corporation (the "Company") granted under the U.S. Home Corporation 1998
Non-Employee Directors' Stock Option Plan:
<TABLE>
<CAPTION>
Number of Shares Exercise Price
DATE OF OPTION Subject to Option per Share
-------------- ----------------- --------------
<S> <C> <C>
</TABLE>
I hereby exercise my option to purchase shares of Common Stock and
tender the purchase price therefor, reserving my right to purchase any remaining
shares of Common Stock subject to the option in accordance with its terms.
Dated:
Very truly yours,
------------------------------
Signature
Name:
------------------------
Address:
---------------------
------------------------------
<PAGE> 1
EXHIBIT 10.17
(10/24/97)
U.S. HOME CORPORATION
CORPORATE OFFICERS'(1)
INCENTIVE COMPENSATION PROGRAM
FOR THE INCENTIVE PERIOD
JANUARY 1, 1998 TO DECEMBER 31, 1998
Set forth below is an outline of the Corporate Officers' Incentive
Compensation Program for the incentive period January 1, 1998 to December 31,
1998 ("Incentive 1998").
Corporate Officers who are employed by the Corporation as of January 1,
1998 will be eligible to participate in the Corporate Officers' Incentive
Compensation Program for the period commencing January 1, 1998 and ending
December 31, 1998. Effective January 1, 1998, base salaries are established as
set forth in Exhibit A hereto.
Under this Program, an incentive compensation pool equal to the lessor
of $850,000 or 2% of the pre-tax profits of the Corporation earned in fiscal
1998, shall be established to be distributed to the Corporate Officers at the
sole discretion and upon approval of a majority of the non-management members of
the Compensation Committee and of the Board of Directors of the Corporation
based on its evaluation of the following factors:
1. The Board of Directors shall review the profit and loss of the Company
for the fiscal year ended December 31, 1998 as compared to the
projected profit and loss for the period January 1, 1998 through
December 31, 1998 as set forth in the 1998 Business Plan as presented
to the Board of Directors.
2. The Board of Directors shall review the cash flow of the Company as
compared to the projected cash flow for the period January 1, 1998
through December 31, 1998 as set forth in the 1998 Business Plan as
presented to the Board of Directors.
3. The Board of Directors shall review the overall performance of the
Company in comparison to competitive industry performance taking into
consideration, an analysis of rates of growth, return on equity and
return on sales.
4. The Board of Directors shall review incentive bonus payments by
competitors in relation to proposed payments to said officers to insure
that they are designed to retain and motivate executives.
5. All other actions by said Officers to maximize the value of
shareholders' equity.
(1) Excludes Chairman and President who are subject to Employment and
Consulting Agreements which govern payment of bonus (see Exhibit A).
<PAGE> 2
Upon the recommendation of the Chairman and President of the Company,
the Board of Directors shall determine, in its sole discretion, the amount each
respective Officer shall receive from the said incentive compensation pool,
provided that the maximum incentive compensation payable to any Senior Vice
President and any Vice President shall not exceed the percentage of their
respective base compensation set forth in Schedule I hereto.
To be entitled to receive a bonus, a Corporate Officer must remain in
the employ of the Company for the entire fiscal year.
Notwithstanding the foregoing, the Corporation shall have the right to
terminate employment of any Corporate Officer covered under this Program at
will, without notice, and without cause, at any time.
The total bonus earned pursuant to the incentive program set forth
herein shall be paid upon approval of the Board of Directors of the Company as
follows:
A. 75% of the aggregate incentive bonus earned by the Corporate Officer
shall be paid in cash within 30 days following receipt of 1998 audited
financial statements.
B. The balance of the aggregate incentive bonus earned by the Corporate
Officer shall be paid as follows:
1. If the respective Corporate Officer shall own of record or
beneficially, as of the last trading day of December, 1998,
shares of common stock of the Corporation which shall have a
market value on such date equal to or in excess of his/her base
salary as of such date, the balance of such incentive bonus shall
be paid in cash within 30 days following receipt of the 1998
audited financial statements.
2. If the respective Corporate Officer shall not own of record
beneficially, as of the last trading day of December, 1998,
shares of common stock of the Corporation which shall have a
market value on such date(1) equal to or in excess of his/her
base salary as of such date, the balance of such incentive bonus
shall be paid in shares of stock as set forth below:
25% of the aggregate incentive bonus earned by the Corporate
Officer shall be paid in shares of U.S. Home Corporation's
common stock, with each share valued at the closing price of
said shares on the New York Stock Exchange, as of the last
trading day of December, 1998, but in no event will such price
of such said shares be less than 95% of the Current Market Price
(as defined in the Warrant Agreement, dated as of June 21, 1994,
as amended, between the Company and The First National Bank of
Chicago, as Warrant Agent). Said shares shall be held in escrow
by the Company to be delivered to the respective Corporate
Officers as follows:
- --------------
(1) Shares earned as part of prior year bonus but not delivered
shall be included. Restricted shares not vested as of such
date shall not be included.
<PAGE> 3
i) 1/2 of such shares shall be delivered to the Corporate
Officer within thirty (30) days following receipt of the
1998 audited financial statements.
ii) 1/2 of such shares shall be delivered to the Corporate
Officer on or prior to January 31, 2001. However, in
order to receive such shares, the Corporate Officer must
remain in the employ of the Corporation as of December 31,
2000.
Notwithstanding the foregoing, in the event that said Corporate
Officer's employment with the Corporation is terminated by the Corporation other
than for "Cause", all remaining shares not previously delivered to the Corporate
Officer shall be delivered to said Corporate Officer within thirty (30) days
following termination. For purposes of this Program, the term "Cause" shall mean
(i) the Officer's continuing, willful failure to perform his/her duties required
of his/her position (other than as a result of total or partial incapacity due
to physical or mental illness), (ii) gross negligence or malfeasance by the
Officer in the performance of his/her duties hereunder, (iii) an act or acts on
the Officer's part constituting a felony under the laws of the United States or
any state thereof which results or was intended to result directly or indirectly
in gain or personal enrichment by the Officer at the expense of the Company, or
(iv) breach of the provisions of Exhibit B hereto pertaining to confidentiality
and competitive activities, but shall not mean (A) the refusal to relocate to
another city more than 50 miles from the Officer's present place of business,
nor (B) a refusal to perform the duties required of his/her position as a result
of either a material change in the scope of his/her job responsibilities or a
reduction in base compensation.
The transfer of said shares by such Corporate Officer shall be required
to conform to all applicable laws and regulations pertaining thereto.
<PAGE> 1
EXHIBIT 21
Subsidiaries of the Company
The following table sets forth the names of U.S. Home's subsidiaries
and the state in which incorporated. All subsidiaries are directly or indirectly
wholly-owned by U.S. Home. Certain insignificant subsidiaries are omitted.
<TABLE>
<CAPTION>
Jurisdiction of
Incorporation
---------------
<S> <C>
Fidelity Guaranty and Acceptance Corporation Delaware
U.S. Home Acceptance Corporation Delaware
U.S. Home Insurors, Inc. Florida
U.S.H. Indemnity Company, Ltd. Bermuda
San Felipe Indemnity Company, Ltd. Bermuda
U.S. Home Mortgage Corporation Florida
USH II Corporation Delaware
</TABLE>
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our report dated February 6, 1998 included in this Form 10-K,
into the Company's previously filed Registration Statements No. 33-64712,
33-52993, 333-02775, 333-25759 and 333-43009.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Houston, Texas
February 13, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS AS OF DECEMBER 31, 1997 AND FOR THE
YEAR THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 11,762
<SECURITIES> 0
<RECEIVABLES> 111,804
<ALLOWANCES> 0
<INVENTORY> 789,236
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,067,114
<CURRENT-LIABILITIES> 0
<BONDS> 395,918
0
0
<COMMON> 119
<OTHER-SE> 419,659
<TOTAL-LIABILITY-AND-EQUITY> 1,067,114
<SALES> 0
<TOTAL-REVENUES> 1,319,752
<CGS> 1,059,571
<TOTAL-COSTS> 1,209,646
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 35,206
<INCOME-PRETAX> 74,900
<INCOME-TAX> 27,713
<INCOME-CONTINUING> 47,187
<DISCONTINUED> 0
<EXTRAORDINARY> 8,650
<CHANGES> 0
<NET-INCOME> 38,537
<EPS-PRIMARY> 3.33
<EPS-DILUTED> 2.88
</TABLE>
