<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
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)
Delaware 21-0718930
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1800 West Loop South, Houston, Texas 77027
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 877-2311
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (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 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
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at July 31, 1998
Common stock, $.01 par value 13,674,463 shares
<PAGE> 2
U.S. HOME CORPORATION
INDEX
Page
Number
Part I. Financial Information
Item 1. Financial Statements
Consolidated Condensed Balance Sheets--
June 30, 1998 and December 31, 1997 3
Consolidated Condensed Statements of
Operations--Three and Six Months Ended
June 30, 1998 and 1997 5
Consolidated Condensed Statements of
Cash Flows--Six Months Ended June 30, 1998
and 1997 6
Notes to Consolidated Condensed Financial
Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 13
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security
Holders 14
Item 5. Other Information 20
Item 6. Exhibits and Reports on Form 8-K 21
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
U.S. HOME CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
ASSETS
------
June 30, December 31,
1998 1997
------------ -------------
(Unaudited)
HOUSING:
<S> <C> <C>
Cash (including restricted funds) ........ $ 11,790 $ 6,270
Receivables, net ......................... 53,465 42,595
Single-Family Housing Inventories ........ 943,188 789,236
Option Deposits on Real Estate ........... 84,091 90,155
Other Assets ............................. 82,935 54,006
---------- ----------
1,175,469 982,262
---------- ----------
FINANCIAL SERVICES:
Cash (including restricted funds) ........ 6,599 5,492
Residential Mortgage Loans ............... 75,333 69,209
Other Assets ............................. 9,689 10,151
---------- ----------
91,621 84,852
---------- ----------
$1,267,090 $1,067,114
========== ==========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
<PAGE> 4
U.S. HOME CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in Thousands, Except Per Share Data)
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
------------- -------------
(Unaudited)
HOUSING:
<S> <C> <C>
Accounts Payable ........................ $ 112,653 $ 92,160
Accrued Expenses and Other Current
Liabilities ........................... 77,649 68,848
Revolving Credit Facility ............... 104,000 29,000
Long-Term Debt .......................... 419,189 395,918
---------- ---------
713,491 585,926
---------- ---------
FINANCIAL SERVICES:
Accrued Expenses and Other Current
Liabilities ........................... 34,008 21,067
Revolving Credit Facility ............... 31,032 40,343
---------- ---------
65,040 61,410
---------- ---------
Total Liabilities ..................... 778,531 647,336
---------- ---------
STOCKHOLDERS' EQUITY:
Common Stock, $.01 par value,
authorized 50,000,000 shares,
outstanding 13,674,395 shares at
June 30, 1998 and 11,762,518
shares at December 31, 1997 ........... 137 119
Capital In Excess of Par Value .......... 402,717 368,277
Retained Earnings ....................... 87,327 57,358
Unearned Compensation on Restricted
Stock ................................. (1,622) (1,770)
---------- ----------
488,559 423,984
Less Treasury Stock, at cost, no shares
at June 30, 1998 and 157,743 shares at
December 31, 1997 .................... -- 4,206
---------- ----------
Total Stockholders' Equity ............ 488,559 419,778
---------- ----------
$1,267,090 $1,067,114
========== ==========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
<PAGE> 5
U.S. HOME CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- -------------------
1998 1997 1998 1997
-------- -------- -------- -----
HOUSING:
<S> <C> <C> <C> <C>
Operating Revenues ............... $ 359,383 $ 334,011 $ 686,826 $ 644,659
--------- --------- --------- ---------
Operating Costs and Expenses -
Cost of products sold .......... 293,279 275,641 558,124 531,221
Selling, general and
administrative ............... 34,540 31,203 67,845 60,890
Interest ....................... 10,172 8,902 19,348 16,782
--------- --------- --------- ---------
337,991 315,746 645,317 608,893
--------- --------- --------- ---------
Housing Operating Income ......... 21,392 18,265 41,509 35,766
--------- --------- --------- ---------
FINANCIAL SERVICES:
Operating Revenues ............... 8,124 6,530 15,226 11,915
General, Administrative and
Other Expenses ................. 5,048 4,190 9,750 8,065
--------- --------- --------- ---------
Financial Services Operating
Income ......................... 3,076 2,340 5,476 3,850
-------- --------- --------- ---------
CORPORATE GENERAL AND ADMINISTRATIVE 3,141 3,092 6,475 6,003
--------- --------- --------- ---------
INCOME BEFORE INCOME TAXES AND
EXTRAORDINARY LOSS ............... 21,327 17,513 40,510 33,613
--------- --------- --------- ---------
PROVISION FOR INCOME TAXES:
Federal and State Income Taxes ... 7,891 6,480 14,989 12,437
Tax Benefit ...................... -- -- (7,474) --
--------- --------- --------- ---------
7,891 6,480 7,515 12,437
--------- --------- --------- ---------
INCOME BEFORE EXTRAORDINARY LOSS.... 13,436 11,033 32,995 21,176
EXTRAORDINARY LOSS FROM EARLY
RETIREMENTOF DEBT, NET OF INCOME
TAX BENEFIT ...................... 1,496 -- 3,026 --
--------- --------- --------- ---------
NET INCOME ......................... $ 11,940 $ 11,033 $ 29,969 $ 21,176
========= ========= ========= =========
</TABLE>
<PAGE> 6
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
BASIC EARNINGS PER SHARE:
Income Before Extraordinary Loss . $ 1.11 $ .96 $ 2.76 $ 1.84
Extraordinary loss ............... $ (.12) $ -- $ (.25) $ --
Net income ....................... $ 99 $ .96 $ 2.51 $ 1.84
DILUTED EARNINGS PER SHARE:
Income Before Extraordinary Loss . $ 1.01 $ .82 $ 2.49 $ 1.57
Extraordinary Loss ............... $ (.11) $ -- $ (.23) $ --
Net Income ....................... $ .90 $ .82 $ 2.26 $ 1.57
</TABLE>
The accompanying notes are an integral part of these statements
<PAGE> 7
U.S. HOME CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-----------------------
1998 1997
--------- ---------
<S> <C> <C>
Net Cash Used by Operating Activities .......... $(106,833) $ (18,685)
--------- ---------
Net Cash Flows From Investing Activities:
Increase in restricted cash ................... (2,190) (11,337)
Principal collections on investments in
mortgage loans .............................. 2,030 5,046
Purchase of property, plant and equipment,
net of disposals ............................ (4,166) (1,506)
Other ......................................... (739) 51
--------- ---------
Net cash used by investing activities ......... (5,065) (7,746)
--------- ---------
Net Cash Flows From Financing Activities:
Proceeds from revolving credit
facilities, net of repayments ............... 65,689 29,744
Net proceeds from sale of senior notes ........ 98,237 --
Proceeds from exercise of Class B warrants .... 36,748 --
Purchase of senior notes ...................... (82,980) --
Repayment of notes and mortgage notes payable . (1,897) (2,587)
Repurchase of common stock and Class B warrants -- (2,529)
Redemption of convertible preferred stock ..... -- (203)
Other ......................................... 538 --
--------- ---------
Net cash provided by financing activities ..... 116,335 24,425
--------- ---------
Net Increase (Decrease) in Cash ................. 4,437 (2,006)
Cash At Beginning of Period ..................... 6,466 8,138
--------- ---------
Cash At End of Period ........................... $ 10,903 $ 6,132
========= =========
Supplemental Disclosure:
Interest paid, before amount capitalized -
Housing ..................................... $ 18,285 $ 17,073
Financial Services .......................... 815 666
--------- ---------
$ 19,100 $ 17,739
========= =========
Income taxes paid ............................. $ 14,002 $ 15,023
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 8
U.S. HOME CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
June 30, 1998
(Dollars in Thousands)
(Unaudited)
(1) PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The accompanying consolidated condensed balance sheet as of
December 31, 1997, which has been derived from audited financial
statements, and the accompanying unaudited consolidated condensed
financial statements have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain
information and note disclosures normally included in annual
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to
those rules and regulations. Although the Company believes that the
disclosures made are adequate to ensure that the information
presented is not misleading, it is suggested that these
consolidated condensed financial statements should be read in
conjunction with the financial statements and notes thereto
included in the Company's latest Annual Report on Form 10-K.
The preparation of consolidated condensed financial statements
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 financial
statements and revenues and expenses during the reporting period.
Management's estimates and assumptions are reflective of, among
other things, prevailing market conditions, expected market
conditions based on published economic forecasts, 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.
In the opinion of the Company, the accompanying consolidated
condensed financial statements contain all adjustments (all of
which were normal and recurring adjustments) necessary to present
fairly the Company's financial position as of June 30, 1998 and
December 31, 1997 and its results of operations for the three and
six month periods ended June 30, 1998 and 1997 and cash flows for
the six month periods ended June 30, 1998 and 1997.
Because of the seasonal nature of the Company's business, the
results of operations for the three and six month periods ended
June 30, 1998 and 1997 are not necessarily indicative of the
results for the full year.
<PAGE> 9
(2) INVENTORIES
The components of single-family housing inventories are as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
--------- -----------
<S> <C> <C>
Housing completed and under construction . $ 351,181 $ 302,258
Models ................................... 85,449 83,943
Finished lots ............................ 134,339 138,747
Land under development ................... 100,991 75,959
Land held for development or sale ........ 271,228 188,329
--------- ---------
$ 943,188 $ 789,236
========= =========
</TABLE>
(3) REVOLVING CREDIT FACILITIES AND LONG-TERM DEBT
Housing -
The housing revolving credit facility and long-term debt consist of
the following:
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
-------- ------------
<S> <C> <C>
Revolving credit facility .............. $104,000 $ 29,000
-------- --------
7.95% Senior notes due 2001 ............ 75,000 75,000
9.75% Senior notes due 2003 ............ -- 79,703
8.25% Senior notes due 2004 ............ 100,000 100,000
7.75% Senior notes due 2005 ............ 99,754 --
8.88% Senior subordinated notes due 2007 125,000 125,000
Notes and mortgage notes payable ....... 19,435 16,215
-------- --------
419,189 395,918
-------- --------
$523,189 $424,918
======== ========
</TABLE>
<PAGE> 10
The Company has an unsecured revolving credit facility (the "Credit
Facility") with a group of banks. The Credit Facility provides for
borrowings of up to a maximum of $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 receivable less the 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 June 30, 1998, $61,955 of the Credit Facility
commitment was available for borrowing. Borrowings bear interest at
a premium over the London Interbank Offered Rate ("LIBOR") or the
rate announced by the agent bank. The Credit Facility 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 incurring additional debt, creation of liens and
levels of land and housing inventories maintained by the Company
and a prohibition on the payment of dividends, other than stock
dividends.
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 June 30, 1998, 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 Credit Facility borrowings.
In January 1998, the Company completed the sale of $100,000
principal amount of its 7.75% senior notes due 2005 (the "2005
Senior Notes") for the purpose of raising proceeds to redeem the
balance of its 9.75% senior notes due 2003 (the "2003 Senior
Notes") which were first callable in June 1998. The 2005 Senior
Notes were issued at original issue discount of $263, which is
being amortized over the term of the notes. Interest is payable
semi-annually commencing on July 15, 1998. On or after January 15,
2003, the 2005 Senior Notes may be redeemed at the option of the
Company, in whole or in part, at prices ranging from 101.29% during
the 12 month period beginning January 15, 2003 to 100% (on or after
January 15, 2004) of the principal amount thereof, together with
accrued and unpaid interest. Upon a change of control of the
Company, holders of the 2005 Senior Notes will have the right to
require the Company to redeem their Notes at a price of 101% of the
principal amount thereof, together with accrued and unpaid
interest. There can be no assurance that sufficient funds will be
available at the time of a change of control to make any required
repurchases.
<PAGE> 11
In June 1998, the Company redeemed $43,109 principal amount of the
2003 Senior Notes and in the first quarter of 1998, purchased in
open market transactions $36,594 principal amount of the 2003
Senior Notes. The early retirement of the 2003 Senior Notes
resulted in an extraordinary loss of $1,496, net of income tax
benefit of $878, in the three month period ended June 30, 1998 and
an extraordinary loss of $3,026, net of income tax benefit of
$1,777, in the six month period ended June 30, 1998.
Financial Services -
The Company's mortgage banking subsidiary, U.S. Home Mortgage
Corporation ("Mortgage"), may borrow up to $80,000 under a
revolving line of credit (the "Mortgage Credit Facility"), as
amended. The Mortgage Credit Facility is secured by residential
mortgage loans, is not guaranteed by the Company, matures on August
31, 1999 and bears interest at a premium over the LIBOR rate.
(4) INCOME TAXES
In connection with the Internal Revenue Service (the "IRS")
examination of the Company's 1993 and 1992 federal income tax
returns, the IRS disallowed certain previously reserved deductions
taken by the Company in its 1993 tax return. In March 1998, the
Company was informed that its appeal of the IRS decision to
disallow these deductions had been resolved in favor of the
Company. As a result of the favorable ruling, the Company reduced
its deferred tax liability and recognized an income tax benefit
totaling $7,474 related to these deductions in 1998. The decrease
in the deferred tax liability increased basic and diluted earnings
per share in the six month period ended June 30, 1998, by $.63 per
share and $.56 per share, respectively.
(5) INVESTMENT
In April 1998, th Company purchased a 13.3% interest in a Mexican
home building company, headquartered near the City of Guadalajara,
Mexico for $12,759, which amount is included in "other assets" in
the accompanying consolidated condensed balance sheets. The Company
accounts for its investment using the cost method of accounting. As
part of this agreement, the Company and the Mexican company agreed
to form a joint venture to, among other things, develop, construct
and sell affordable housing communities initially in Texas and
Arizona.
<PAGE> 12
(6) INTEREST
A summary of housing interest for the three and six month periods
ended June 30, 1998 and 1997 follows:
<TABLE>
<CAPTION>
Three Month Period
------------------
1998 1997
-------- --------
<S> <C> <C>
Capitalized at beginning of period ........ $ 64,728 $ 59,239
Capitalized ............................... 11,619 8,980
Previously capitalized interest included in
interest expense ........................ (10,172) (8,902)
Other ..................................... (20) 79
-------- --------
Capitalized at end of period .............. $ 66,155 $ 59,396
======== ========
</TABLE>
<TABLE>
<CAPTION>
Six Month Period
----------------
1998 1997
-------- --------
<S> <C> <C>
Capitalized at beginning of period ........ $ 62,950 $ 58,566
Capitalized ............................... 22,580 17,555
Previously capitalized interest included in
interest expense ........................ (19,348) (16,782)
Other ..................................... (27) 57
-------- --------
Capitalized at end of period .............. $ 66,155 $ 59,396
======== ========
</TABLE>
<PAGE> 13
Financial services interest expense for the three and six month
periods ended June 30, 1998 and 1997, which is included in "general,
administrative and other expenses" in the accompanying consolidated
condensed statements of operations follows:
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Three month period $ 426 $ 354
Six month period 837 663
</TABLE>
(7) EARNINGS PER SHARE
Basic earnings per share includes the weighted average number of
common shares outstanding for the periods. Diluted earnings per
share includes (i) the assumed exercise of stock options, (ii) the
dilutive effect of the Class B warrants through their exercise and
expiration in June 1998 and the convertible redeemable preferred
stock through its redemption and conversion in March 1997, and
(iii) the assumed conversion of the 4.875% convertible subordinated
debentures through their redemption and conversion in September
1997. The following table summarizes the basic earnings per share
and diluted earnings per share computations for the three and six
month periods ended June 30, 1998 and 1997:
<PAGE> 14
<TABLE>
<CAPTION>
Three Month Period - 1998 1997
------------ ------------
Basic earnings per share:
<S> <C> <C>
Income before extraordinary loss ..... $ 13,436 $ 11,033
Extraordinary loss ................... 1,496 --
------------ ------------
Net Income ........................... $ 11,940 $ 11,033
------------ ------------
Weighted average number of common shares 12,053,537 11,542,469
============ ============
Earnings per share -
Income before extraordinary loss ... $ 1.11 $ .96
Extraordinary loss ................. $ (.12) $ --
New income ......................... $ .99 $ .96
Diluted earnings per share:
Income before interest applicable to
convertible subordinated debentures
and extraordinary loss ............. $ 13,436 $ 11,033
Interest applicable to convertible
subordinated debentures, net of
income taxes ....................... -- 654
------------ ------------
Income before extraordinary loss,
assuming dilution .................. 13,436 11,687
Extraordinary loss ................... 1,496 --
------------ ------------
Net income, assuming dilution ........ $ 11,940 $ 11,687
============ ============
Weighted average number of common shares 12,053,537 11,542,469
Incremental shares from assumed
conversions -
Contingent common shares ........... 8,881 15,181
Stock options ...................... 420,049 75,895
Class B warrants ................... 853,012 423,539
Convertible subordinated debentures -- 2,253,521
------------ ------------
Adjusted weighted average number of
common shares ...................... 13,335,479 14,310,605
============ ============
Earnings per share -
Income before extraordinary loss ... $ 1.01 $ .82
Extraordinary loss ................. $ (.11) $ --
Net income ......................... $ .90 $ .82
</TABLE>
<PAGE> 15
<TABLE>
<CAPTION>
Six Month Period - 1998 1997
------------ ------------
<S> <C> <C>
Basic earnings per share:
Income before extraordinary loss ..... $ 32,995 $ 21,176
Extraordinary loss ................... 3,026 --
------------ ------------
Net Income ............................. $ 29,969 $ 21,176
------------ ------------
Weighted average number of common shares 11,929,703 11,521,343
============ ============
Earnings per share -
Income before extraordinary loss ..... $ 2.76 $ 1.84
Extraordinary loss ................... $ (.25) $ --
New income ........................... $ 2.51 $ 1.84
Diluted earnings per share:
Income before interest applicable to
convertible subordinated debentures
and extraordinary loss ............... $ 32,995 $ 21,176
Interest applicable to convertible
subordinated debentures, net of
income taxes ......................... -- 1,309
------------ ------------
Income before extraordinary loss,
assuming dilution .................... 32,995 22,485
Extraordinary loss ..................... 3,026 --
------------ ------------
Net income, assuming dilution .......... $ 29,969 $ 22,485
============ ============
Weighted average number of common shares 11,929,703 11,521,343
Incremental shares from assumed
conversions -
Convertible preferred stock .......... -- 38,455
Contingent common shares ............. 10,181 14,691
Stock options ........................ 421,184 81,692
Class B warrants ..................... 907,045 442,213
Convertible subordinated debentures .. -- 2,253,521
------------ ------------
Adjusted weighted average number of
common shares ........................ 13,268,113 14,351,915
============ ============
Earnings per share -
Income before extraordinary loss ..... $ 2.49 $ 1.57
Extraordinary loss ................... $ (.23) $ --
Net income ........................... $ 2.26 $ 1.57
</TABLE>
<PAGE> 16
(8) CLASS B WARRANTS
In 1993, the Company issued Class B warrants to acquire an
aggregate of 1,904,757 shares of common stock for $20 per share.
Prior to their expiration in June 1998, 1,837,406 warrants were
exercised in 1998 for total proceeds of $36,748.
(9) FUTURE ACCOUNTING REQUIREMENTS
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, Accounting
For Derivative Instruments and Hedging Activities ("SFAS No.
133"), with an effective date for all fiscal years beginning after
June 15, 1999. SFAS No. 133 establishes accounting and reporting
standards for derivative instruments and hedging activities and
requires that a company recognize all derivative instruments as
either assets or liabilities and measure those instruments at fair
value. Although the Company has not completed its review of SFAS
No. 133, it does not expect the adoption of SFAS No. 133 to have a
material effect on its financial position or results of operations
or on the presentation of its financial statements.
<PAGE> 17
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
- ---------------------
Housing
-------
The following table sets forth certain financial information for the
periods indicated (dollars in thousands, except average sales price):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- -------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues -
Single-family homes .......... $354,921 $329,697 $679,321 $638,510
Land and other ............... 4,462 4,314 7,595 6,149
-------- -------- -------- --------
Total ...................... $359,383 $334,011 $686,826 $644,659
======== ======== ======== ========
Single-family homes -
Gross margin amount .......... $ 64,906 $ 57,404 126,106 $112,229
Gross margin percentage ...... 18.3% 17.4% 18.6% 17.6%
Units delivered .............. 2,053 1,930 3,952 3,799
Average sales price .......... $172,900 $170,800 $171,900 $168,100
New orders taken ............. 2,311 1,923 5,807 4,663
Backlog at end of period:
Aggregate sales amount ..... $962,742 $686,231
Units ...................... 5,290 3,902
Selling, general and
administrative expenses as a
percentage of housing revenues 9.6% 9.3% 9.9% 9.4%
Interest -
Paid or accrued .............. $ 11,619 $ 8,980 $ 22,580 $ 17,555
Percentage capitalized ....... 100.0% 100.0% 100.0% 100.0%
Previously capitalized
interest included in
interest expense ........... $ 10,172 $ 8,902 $ 19,348 $ 16,782
Percentage of housing revenues 2.8% 2.7% 2.8% 2.6%
</TABLE>
<PAGE> 18
Revenues and Sales -
- --------------------
Revenues from sales of single-family homes for the three and six month
periods ended June 30, 1998 increased 8% and 6% compared to the three and
six month periods ended June 30, 1997. The increases resulted primarily
from 6% and 4% increases in the number of housing units delivered and 1%
and 2% increases in the average sales price. The average sales price is
impacted by product mix, geographical mix and changing prices on units
delivered. The change in the average sales price in 1998 compared to 1997
reflects the proportionate increase in deliveries of Inaugural Series homes
(affordable, lower priced homes).
New orders taken for the three and six month periods ended June 30, 1998
increased 20% and 25% compared to the same periods in 1997. The increases
in new orders in 1998 reflect the continued demand for new single-family
homes which the Company believes was brought about by strong consumer
confidence and the downward trend of mortgage interest rates from mid 1997
that has continued through the second quarter of 1998. The Company does not
believe that new orders taken for the remainder of 1998 will continue at
the pace for the first six months due to possible future fluctuations in
economic activity, interest rates and consumer confidence. See Part II,
"Item 5 - Other Information" on page 20 for a table of unit activity by
market for the three and six month periods ended June 30, 1998 and 1997.
Gross Margins -
- ---------------
The increases in the gross margin percentages for the three and six month
periods ended June 30, 1998 from the same periods in 1997 were primarily
due to the continuation of strong overall market conditions and gross
margin improvements in certain of the Company's markets. In addition,
during 1997, gross margins were negatively impacted by 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 price.
Backlog -
- ---------
The aggregate amount of sales backlog at June 30, 1998 increased 40%
compared to June 30, 1997. The increase in the value of the backlog
reflects the increase in the number of units under contract and in the
average sales price. Substantially all of the Company's backlog units at
June 30, 1998, net of cancellations, are expected to result in revenues
prior to June 30, 1999.
<PAGE> 19
Selling, General and Administrative Expenses -
- ----------------------------------------------
As a percentage of housing revenues, selling, general and administrative
expenses for the three and six month periods ended June 30, 1998 increased
when compared to the same periods in 1997. Actual selling, general and
administrative expenses for the three and six month periods ended June 30,
1998 increased $3.3 million and $7.0 million when compared to the three and
six month periods in June 30, 1997. These increases were primarily due to
increases in volume-related expenses resulting from increased deliveries in
1998 and increased payroll costs and marketing expenses resulting from
increased activities, including increased activities in the retirement and
active-adult communities.
Interest -
- ----------
Interest paid or accrued for the three and six month periods ended June 30,
1998 increased approximately 29% for both periods compared to the same
periods in 1997. These increases in 1998 were primarily due to increases in
the average outstanding debt which was primarily incurred in connection
with the increases in housing inventories resulting from increased
activities.
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 period 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.
Previously capitalized interest amounts charged to interest expense in the
three and six month periods ended June 30, 1998 increased 14% and 15%
compared to the three and six month periods ended June 30, 1997. These
increases were attributable to the increase in the number of housing units
delivered and an increase in the average interest expense per housing unit
delivered (which was primarily due to more deliveries in 1998 on finished
lots developed by the Company and less deliveries on finished lots acquired
under rolling lot options than in 1997).
<PAGE> 20
Financial Services
------------------
Revenues -
- ----------
Revenues for the financial services segment for the periods indicated were
as follows (dollars in thousands):
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
June 30, June 30,
---------------- -----------------
1998 1997 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
U.S. Home Mortgage Corporation and
Subsidiary ...................... $ 7,107 $ 5,569 $13,186 $ 9,956
Other financial services operations 1,017 961 2,040 1,959
------- ------- ------- -------
$ 8,124 $ 6,530 $15,226 $11,915
======= ======= ======= =======
</TABLE>
The increases in U.S. Home Mortgage Corporation's ("Mortgage") revenues for
the three and six month periods ended June 30, 1998 when compared to the
three and six month periods ended June 30, 1997 were primarily due to the
increases in mortgage loan originations and increases in income from the
sale of mortgage loans and servicing rights.
Mortgage's "capture rate" for providing financing to buyers of homes
delivered by the Company improved to 82% for the three and six month
periods ended June 30, 1998 compared to 77% and 72% for the same periods in
1997.
Other
-----
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 for both the three and six month periods ended June 30, 1998
remained the same when compared to the same periods in 1997. Actual
corporate general and administrative expenses for the three and six month
periods ended June 30, 1998 were $3.1 million and $6.5 million, compared to
$3.1 million and $6.0 million for the three and six month periods ended
June 30, 1997.
<PAGE> 21
Income Taxes -
- --------------
In connection with the Internal Revenue Service (the "IRS") examination of
the Company's 1993 and 1992 federal income tax returns, the IRS disallowed
certain previously reserved deductions taken by the Company in its 1993 tax
return. In March 1998, the Company was informed that its appeal of the IRS
decision to disallow these deductions had been resolved in favor of the
Company. As a result of the favorable ruling, the Company reduced its
deferred tax liability and recognized an income tax benefit totaling $7.5
million related to these deductions in 1998. The decrease in the deferred
tax liability increased basic and diluted earnings per share in the six
month period ended June 30, 1998 by $.63 per share and $.56 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. Sales 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 January 1998, the Company
sold $100 million principal amount of its 2005 Senior Notes for the purpose
of raising funds to redeem the balance of its 2003 Senior Notes which were
first callable in June 1998. In June 1998, the Company redeemed $43.1
million principal amount of the 2003 Senior Notes and,in the first quarter
of 1998, purchased in open market transactions $36.6 million principal
amount of the 2003 Senior Notes. See Note 3 of Notes to Consolidated
Condensed Financial Statements.
The Company's Class B warrants expired in June 1998. Prior to their
expiration, 1,837,406 warrants were exercised in 1998, including 1,832,384
warrants exercised in the second quarter, for total proceeds of $36.7
million.
<PAGE> 22
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 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 majority of
the finished lots for these communities are developed on land owned by the
Company. 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 1998 from 1997 was primarily the result of increased
activities, including the increased activities in the Company's retirement
and active-adult communities.
The Company has financed, and expects to continue to finance, its working
capital needs from operations and borrowings, including those made under
the 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. See Note 3 of Notes to Consolidated Condensed Financial
Statements.
<PAGE> 23
The net cash provided or used by the operating, investing and financing
activities of the housing operations for the six month periods ended June
30, 1998 and 1997 is summarized below (dollars in thousands):
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Net cash provided (used) by:
Operating activities ................. $(118,911) $ (28,194)
Investing activities ................. (5,596) (12,417)
Financing activities ................. 125,646 34,681
--------- ---------
Net increase (decrease) in cash ........ $ 1,139 $ (5,930)
========= =========
</TABLE>
Housing operating activities are, at any time, affected by a number of
factors, including the number of housing units under construction and
housing units delivered. Cash flows from housing operating activities for
1998 used more cash than 1997 primarily due to an increase in construction
and land asset activities, offset in part by increased profitability and
the timing of payments related to these activities.
Cash flow from investing activities for 1998 used less cash than 1997
primarily due to a decrease of $9.1 million in restricted cash.The
restricted cash in 1997 included a $11.0 million escrow deposit for the
purchase of land for a retirement and active-adult community which closed
in July 1997.
Cash flow from housing financing activities for 1998 provided cash
reflecting the sale of the Company's 2005 Senior Notes, the exercise of the
Company's Class B warrants and net borrowings under the Credit Facility,
offset by the redemption and purchases of the Company's 2003 Senior Notes.
Cash flow from housing financing activities in 1997 provided cash primarily
from net borrowings under the Credit Facility.
The Company has received a commitment to amend the Credit Facility, which
it expects will close in the third quarter of 1998, to increase the amount
of available borrowings. The Company believes that cash flow from
operations and amounts available under the amended Credit Facility will be
sufficient to meet its working capital obligations and other needs.
Financial Services
------------------
Mortgage's activities represent a substantial portion of the financial
services segment's activities. As loan originations by Mortgage are
primarily from housing units delivered 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.
<PAGE> 24
Financial services operating activities are affected primarily by
Mortgage's loan originations which result in the sale of mortgage loans and
related servicing rights to third party investors. Cash flows from
financial services operating activities are also affected by the timing of
the sales of loans and servicing rights which generally are sold to
investors within 30 days after homes are delivered. In this regard, cash
flows from financial services operating activities for 1998 used less cash
compared to 1997 primarily due to increased profitability and the timing of
payments related to Mortgage's origination activities.
The Company finances its financial services operations primarily from
internally generated funds, such as from the origination and sale of
residential mortgage loans and related servicing rights, and a secured
revolving line of credit (the "Mortgage Credit Facility"). As more fully
discussed in Note 3 of Notes to Consolidated Condensed Financial
Statements, Mortgage may borrow up to $80 million under the Mortgage Credit
Facility. 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 the internally generated
funds and the Mortgage Credit Facility will be sufficient to provide for
Mortgage's working capital needs.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The annual meeting of stockholders of the Company was held on
April 22, 1998. The following persons were re-elected to the
Company's Board of Directors to hold office until the annual
meeting of stockholders in 1999 and until their respective
successors are duly elected and qualified:
<TABLE>
<CAPTION>
Director In Favor Withheld
----------------------- ---------- ---------
<S> <C> <C>
Glen Adams .......... 10,896,813 37,425
Steven G. Gerard .... 10,897,234 37,004
Kenneth J. Hanau, Jr 10,895,756 38,482
Isaac Heimbinder .... 10,896,797 37,441
Malcolm T. Hopkins .. 10,896,267 37,971
Charles A. McKee .... 10,895,238 39,000
George A. Poole, Jr . 10,896,657 37,581
Herve Repault ....... 10,896,354 37,884
James W. Sight ...... 10,897,376 36,862
Robert J. Strudler .. 10,896,396 37,842
</TABLE>
<PAGE> 25
Additional items voted upon by the Company's stockholders at the
meeting:
(a) the Company's 1998 Non-Employee Directors' Stock Option Plan;
(b) the Company's Non-Employee Director Stock Plan;
(c) amendments to the Company's Amended and Restated Employee Stock
Payment Plan; and
(d) the ratification of the appointment of Arthur Andersen
LLP, independent public accountants, to examine the
Company's financial statements for 1998.
The votes of the Company's stockholders on these itmes were as
follows:
<TABLE>
<CAPTION>
Broker
Item In Favor Opposed Abstained Non-Vote
----------- ----------- --------- --------- --------
<S> <C> <C> <C> <C>
(a) ...... 9,833,236 1,078,498 22,504 --
(b) ...... 8,870,150 2,041,794 22,297 --
(c) ...... 10,703,915 209,406 20,917 --
(d) ...... 10,907,322 17,583 9,333 --
</TABLE>
<PAGE> 26
Item 5. Other Information
Additional Operating Data -
The following table provides information (expressed in number of
housing units) with respect to new orders taken, deliveries to
purchasers of single-family homes and backlog by state for the
three and six month periods ended June 30, 1998 and 1997:
<TABLE>
<CAPTION>
States New Orders Deliveries
------------------- -------------- --------------
1998 1997 1998 1997
----- ----- ----- -----
Three Month Period -
<S> <C> <C> <C> <C>
Arizona ......... 312 225 261 193
California ...... 262 150 168 167
Colorado ........ 286 215 346 395
Florida ......... 574 603 661 578
Maryland/Virginia 128 99 78 87
Minnesota ....... 146 136 105 75
Nevada .......... 69 70 80 97
New Jersey ...... 122 120 81 85
Ohio/Indiana (1) 41 34 29 40
Texas ........... 371 271 244 213
----- ----- ----- -----
2,311 1,923 2,053 1,930
===== ===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
States New Orders Deliveries Backlog
---------------- -------------- -------------- ------------
1998 1997 1998 1997 1998 1997
----- ----- ----- ----- ----- -----
Six Month Period -
<S> <C> <C> <C> <C> <C> <C>
Arizona ......... 715 476 480 400 553 345
California ...... 564 347 294 281 495 215
Colorado ........ 870 753 692 739 764 655
Florida ......... 1,651 1,554 1,267 1,199 1,710 1,388
Maryland/Virginia 319 215 149 162 274 153
Minnesota ....... 295 239 197 122 272 224
Nevada .......... 196 178 152 192 152 120
New Jersey ...... 289 251 193 203 256 227
Ohio/Indiana (1) 93 78 52 85 73 77
Texas ........... 815 572 476 416 741 498
------ ------ ----- ----- ----- -----
5,807 4,663 3,952 3,799 5,290 3,902
====== ====== ===== ===== ===== =====
</TABLE>
(1) In 1997, the Company made the decision to discontinue its
Indiana operations.
<PAGE> 27
Cautionary Disclosure Regarding Forward-Looking Statements -
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.
Such matters involve risks and uncertainties, including general
economic conditions, fluctuations in interest rates, the impact of
competitive products and prices, the supply of raw materials and
prices, levels of consumer confidence and other risks referred to
under the caption "Management's Discussion and Analysis of
Financial Condition and Results of Operations, Other -- Cautionary
Disclosure Regarding Forward-Looking Statements" in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31,
1997.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 10-1 - Second Amended and Restated Employee Stock Payment
Plan
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
No Current Report on Form 8-K was filed by the Company during
April, May or June 1998.
<PAGE> 28
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
U.S. HOME CORPORATION
Date: August 10, 1998 /s/ Isaac Heimbinder
--------------------
Isaac Heimbinder
President, Co-Chief Executive Officer
and Chief Operating Officer
Date: August 10, 1998 /s/ Chester P. Sadowski
-----------------------
Chester P. Sadowski
Senior Vice President, Controller
and Chief Accounting Officer
<PAGE> 29
INDEX OF EXHIBITS
-----------------
Sequential
Exhibit Numbered
Number Page
- ------- ----------
10-1 Second Amended and Restated Employee Stock Payment Plan 30
27 Financial Data Schedule 37
<PAGE> 30
EXHIBIT 10.1
U.S. HOME CORPORATION
SECOND AMENDED AND RESTATED
EMPLOYEE STOCK PAYMENT PLAN
1. Purpose.
The purpose of the U.S. Home Corporation Second Amended
and Restated Employee Stock Payment Plan (the "Plan") is to increase the
ownership stake of key employees of U.S. Home Corporation and its
subsidiaries or divisions (the "Company") by paying a percentage of such
employees' annual incentive compensation in shares of Stock (as defined
herein) in lieu of cash.
2. Administration.
(a) The board of directors of the Company (the "Board")
will (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 Stock 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 Compensation and Stock
Option Committee of the Board, which will be comprised of at least three
members, all of whom are non-employee directors (as defined herein), 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 members of the Committee may be appointed from time to
time by the Board and serve at the pleasure of the Board. The Board or the
Committee, as applicable, will hereinafter be referred to as the
"Administrator."
(c) For the purposes of this Section 2, a "non-employee
director" is a director who, on a given date, is a non-employee director
within the meaning of Rule 16b-3 promulgated under the Securities Exchange
Act of 1934, as amended (the "Exchange Act").
3. Stock.
The stock (the "Stock") which is the subject of the Plan
will be the shares of common stock of the Company, $.01 par value per
share, whether authorized and unissued or treasury stock. The total number
of shares of Stock which may be issued under the Plan will not exceed, in
the aggregate, 250,000, subject to adjustment in accordance with the
provisions of Section 7 hereof.
<PAGE> 31
4. Award of Stock.
(a) All employees of the Company, including, but not
limited to, corporate officers, presidents of operations and division
presidents (each an "Employee" and collectively, "Employees"), are eligible
to receive Stock in accordance with the terms hereof.
(b) Up to 25%, which amount may be subject to change from
time to time by the Administrator, of the annual incentive compensation
(i.e., all amounts other than Base Salary (as defined herein)) payable to
an Employee pursuant to any incentive compensation plans or the incentive
compensation provisions of any employment or compensation agreement may be
payable in shares of Stock under the Plan.
(c) (i) Up to 50%, which amount may be subject to change
from time to time by the Administrator, of the annual amount of Stock
awarded to an Employee pursuant to Section 4(b) hereof may, at the sole
discretion of the Administrator, vest not later than two years after the
end of the incentive compensation year applicable to such award of Stock
and, unless otherwise specified by the Administrator, shall not vest and
will expire in the event the Employee is not employed by the Company on or
prior to the date on which the Stock vests with the Employee due to (A)
voluntary termination by the Employee or (B) termination by the Company for
Cause (as defined herein). Notwithstanding the foregoing, Stock awarded to
an Employee which remains subject to a vesting period hereunder will
immediately vest upon the retirement of such Employee after attaining the
age of 65.
(ii) For purposes of the Plan, a voluntary termination
by an Employee will not be deemed to occur in the event such Employee is
Constructively Terminated (as defined herein).
(iii) In the event an Employee dies while in the
employ of the Company, all Stock awarded to such Employee which remains
subject to a vesting period hereunder will immediately vest and be
delivered to such Employee's estate as soon as practicable after such
Employee's death.
(iv) For purposes of the Plan:
(A) "Cause" shall mean (1) an Employee's
continuing willful failure to perform his duties with respect to the
Company (other than as a result of total or partial incapacity due to
physical or mental illness), (2) gross negligence or malfeasance by an
Employee in the performance of his duties with respect to the Company,
(3) an act or acts on an Employee'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
such Employee at the expense of the Company or (4) any other circumstances
set forth in an employment agreement between the Company and such Employee
which would constitute grounds for the Company to terminate the employment
of such Employee for cause (as defined in the applicable employment
agreement).
<PAGE> 32
(B) "Constructively Terminated" shall mean (1) a
reduction in an amount equal to or greater than 15 percent of an Employee's
Base Salary (as defined herein), (2) a material reduction in an Employee's
job function, duties or responsibilities or (3) a required relocation oF
an Employee of more than 50 miles from such Employee's current job location;
provided, however, that the employment with the Company or its divisions or
subsidiaries of a President of Operations will not be deemed to be
Constructively Terminated in the event he or she is required to be a
Division Chairman or Division President with the Company or its divisions
or subsidiaries and has job functions, duties or responsibilities of a
Division Chairman or Division President and/or is required to relocate in
connection with such change in position; provided, further, that the
employment with the Company or its divisions or subsidiaries of a Division
Chairman or Division President will not be deemed to be Constructively
Terminated in the event he or she is required to be a Division Chairman
or Division President of a division other than the division he or she
is currently employed by and has job functions, duties or responsibilities
of a Division Chairman or Division President and/or is required to relocate
in connection with such change in position; provided, further, that the
employment of an Employee will not be deemed Constructively Terminated
unless such Employee actually terminates his or her employment with the
Company within 60 days after the occurrence of an event specified in clause
(1), (2) or (3) above.
(C) "Base Salary" shall mean an amount equal to
an Employee's maximum annual base salary in effect at any time after
the effective date of the Plan, excluding any incentive compensation
or bonus payable or paid to an Employee.
(D) "Change of Control" shall mean any of the
following: (i) a report on Schedule 13D is filed with the Securities and
Exchange Commission pursuant to Section 13(d) of the Exchange Act,
disclosing that any person or group of persons (within the meaning of
Section 13(d) of the Exchange Act), other than the Company (or one of its
subsidiaries) or any employee benefit plan sponsored by the Company (or one
of its subsidiaries), is the beneficial owner (as such term is defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of fifty
percent (50%) or more of the combined voting power of the then outstanding
equity of the Company (as determined under paragraph (d) of Rule 13d-3
under the Exchange Act, in the case of rights to acquire the Stock, (ii)
any transaction or a series of related transactions (as a result of a
tender offer, merger, consolidation or otherwise whether or not the
Company is the continuing or surviving entity) that results in, or that
is in connection with, any person or group of persons (within the
meaning of Section 13(d) of the Exchange Act), other than the Company
(or one of its subsidiaries) or any employee benefit plan sponsored by
the Company (or one of its subsidiaries), acquiring beneficial ownership
(as such term is defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of fifty percent (50%) or more of the combined voting
power of the then outstanding equity of the Company (as determined under
paragraph (d) of Rule 13d-3 under the Exchange Act, in the case of rights
to acquire the Stock) or of any person or group of persons (within the
<PAGE> 33
meaning of Section 13(d) of the Exchange Act) that possesses beneficial
ownership (as such term is defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of fifty percent (50%) or more of the combined
voting power of the then outstanding equity of the Company; (iii) the sale,
lease, exchange or other transfer of all or substantially all of the assets
of the Company to any person or group of persons (within the meaning of
Section 13(d) of the Exchange Act) in one transaction or a series of
related transactions; provided, that a transaction where the holders of all
classes of the then outstanding equity of the Company immediately prior to
such transaction own, directly or indirectly, fifty percent (50%) or more
of the aggregate voting power of all classes of equity of such person or
group immediately after such transaction will not be a Change of Control
under this clause (iii); (iv) the liquidation or dissolution of the
Company; provided, that a liquidation or dissolution of the Company which
is part of a transaction or series of related transactions that does not
constitute a Change of Control under the "provided" clause of clause (iii)
above will not constitute a Change of Control under this clause (iv); or
(v) a change in a majority of the members of the Board of Directors of the
Company within a 12-month period, unless the election or nomination for
election by the Company's stockholders of each new director during such
12-month period was approved by the vote of two-thirds of the directors
then still in office who were directors at the beginning of such 12-month
period.
(d) (i) All Stock awarded to Employees hereunder but not
subject to vesting pursuant to Section 4(c) hereof shall be delivered to
such Employees within 30 days after the determination of the price of the
Stock pursuant to Section 5 hereof.
(ii) Subject to Section 4(c) hereof, all Stock awarded
to Employees hereunder which is subject to a vesting period hereunder
shall be delivered to such Employees within 31 days after the expiration
of such vesting period.
(e) In the event of a Change in Control (as defined
herein), all Stock awarded to an Employee which remains subject to a
vesting period hereunder will immediately vest and be delivered to such
Employee as soon as practicable.
5. Price and Valuation.
(a) The Stock will be issued to Employees in
consideration of services rendered to the Company by such Employees as
reflected in any incentive compensation plans or the incentive compensation
provisions of any employment or compensation agreement.
(b) For purposes of determining the number of shares of
Stock to be issued to an Employee hereunder in lieu of cash compensation,
the Administrator shall divide the amount of cash that would otherwise be
distributed to such Employee by the following as determined by the
Administrator:
<PAGE> 34
(i) with respect to the incentive compensation
plans of the Company or incentive agreements which are based on
the financial results of the Company's fiscal year, the average
closing price of the Stock on the New York Stock Exchange (the
"NYSE") for the 10 consecutive trading days immediately following
the date on which the Company releases such financial results for
such fiscal year;
(ii) with respect to any other incentive
compensation plans of the Company or incentive agreements, the
average closing price of the Stock on the NYSE for the later to
occur of the (A) last 10 trading days of the month immediately
following the conclusion of the specified period for such
incentive compensation program and (B) 10 consecutive trading days
immediately following the date on which the Company releases its
financial results for its most recent fiscal year; or
(iii) the closing price of the Stock on the NYSE
on the last trading day of the most recent fiscal year.
(c) The closing price of the Stock, as of any particular
day, will be as reported in The Wall Street Journal; provided, however,
that if the Stock is not listed on the NYSE on any applicable day, the
closing price for such day will be not less than the fair market value of
the Stock on such day, as determined by the Administrator based on such
empirical evidence as it deems to be necessary under the circumstances.
6. Term and Effective Date.
The Plan will become effective upon (i) approval by the
Board, and (ii) solely with respect to Employees subject to Section 16 of
the Exchange Act, approval by the affirmative vote of a majority of the
shares of voting capital stock of the Company present or represented and
entitled to vote at the 1994 annual meeting of the Company's stockholders.
When so approved, the Plan shall be deemed to have been in effect as of
January 1, 1994 and shall terminate on December 31, 2008.
7. Stock Adjustments.
(a) The total amount of Stock reserved and issuable under
the Plan and Stock awarded but not yet vested will 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, a reclassification of the Stock,
or 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 will not be the surviving corporation, or
after any consolidation of the Company and one or more other corporations,
each Employee who is entitled to Stock hereunder will be entitled to
receive, in lieu of the number of shares of Stock as to which such Employee
<PAGE> 35
was previously entitled, the number and class of shares of stock or other
securities or other consideration to which such Employee 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 Employee
had been a holder of record of a number of shares of Stock equal to the
number of shares for which such Employee was then entitled to receive
subject to vesting. Comparable rights will accrue to each Employee in the
event of successive mergers or consolidations of the character described
above.
(c) The adjustments described in this Section 7 and the
manner of application of the foregoing provisions will be determined by the
Administrator in its sole discretion. Any such adjustment may provide for
the elimination of fractional shares.
8. Transferability.
An Employee who acquires Stock hereunder will only
transfer such Stock in compliance with applicable federal and state
securities laws. Employees who are affiliates of the Company may generally
dispose of their shares in accordance with Rule 144 promulgated under the
Securities Act of 1933, as amended. Employees may not transfer or assign
any interest in any Stock awarded hereunder until such Stock is vested with
such Employee other than by will or the laws of descent and distribution.
9. Rights as a Stockholder.
Any Employee entitled to receive Stock hereunder will
have no rights as a stockholder with respect to any share of Stock until
such Employee has become the holder of record of such share of Stock upon
vesting, and, except for stock dividends as provided in Section 7 hereof,
no adjustment will 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 such Employee will become the holder of record thereof.
10. Investment Purpose.
At the time of issuance of any Stock, the Company may, if
it will deem it necessary or desirable for any reason, require an Employee
to represent in writing to the Company that it is such Employee's then
intention to acquire the Stock for investment purposes and not with a view
to the distribution thereof.
11. Right to Terminate Employment.
Nothing contained herein will restrict the right of the
Company to terminate the employment of any Employee at any time.
12. Finality of Determinations.
Each determination, interpretation, or other action made
or taken pursuant to the provisions of the Plan by the Administrator will
be final and be binding and conclusive for all purposes.
<PAGE> 36
13. Subsidiary and Parent Corporations.
Unless the context requires otherwise, references under
the Plan to the Company will be deemed to include any subsidiary
corporations and parent corporations of the Company, as those terms are
defined in Section 425 of the Internal Revenue Code, as amended.
14. Governing Law.
The Plan will be governed by the laws of the State of
Delaware.
15. Amendment and Termination.
The Administrator may at any time terminate, amend or
modify the Plan in any respect it deems suitable; provided, however, that,
solely with respect to persons subject to Section 16 of the Exchange Act,
no such action of the Administrator, without the approval of the
stockholders of the Company, may (i) materially increase the benefits
accruing to employees eligible to receive Stock under the Plan, (ii)
materially increase the total amount of Stock which may be awarded under
the Plan or (iii) materially modify the requirements for participation in
the Plan; provided, further, that no amendment, modification or termination
of the Plan may in any manner affect (A) any Stock (whether vested or not)
theretofore awarded under the Plan without the consent of the Employee to
whom Stock has been awarded or (B) modify the award of Stock to the
Employee designated by the Administrator.
16. Override.
(a) 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.
(b) All transactions pursuant to terms of the Plan,
including, without limitation, awards and vesting of Stock, shall only be
effective at such time as counsel to the Company shall have determined that
such transaction will not violate federal or state securities or other
laws. The Administrator may, in its sole discretion, defer the
effectiveness of such transaction to pursue whatever actions may be
required to ensure compliance with such federal or state securities or
other laws.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule Contains Summary Financial Information Extracted From The
Consolidated Condensed Financial Statements As Of June 30, 1998 And For
The Six Months Then Ended And Is Qualified In Its Entirety By Reference
To Such Financial Statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 18,389
<SECURITIES> 0
<RECEIVABLES> 128,798
<ALLOWANCES> 0
<INVENTORY> 943,188
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,267,090
<CURRENT-LIABILITIES> 0
<BONDS> 419,189
0
0
<COMMON> 137
<OTHER-SE> 488,422
<TOTAL-LIABILITY-AND-EQUITY> 1,267,090
<SALES> 0
<TOTAL-REVENUES> 702,052
<CGS> 558,124
<TOTAL-COSTS> 634,882
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20,185
<INCOME-PRETAX> 40,510
<INCOME-TAX> 7,515
<INCOME-CONTINUING> 32,995
<DISCONTINUED> 0
<EXTRAORDINARY> 3,026
<CHANGES> 0
<NET-INCOME> 29,969
<EPS-PRIMARY> 2.51
<EPS-DILUTED> 2.26
</TABLE>
