SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended: October 31, 1996.
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF SECURITIES EXCHANGE ACT OF 1934
Commission file number: 1-7643
WASHINGTON HOMES, INC.
(Exact name of registrant as specified in its charter)
MARYLAND 52-0818872
(State or other jurisdiction of (IRS Employer
Incorporation or organization) Identification No.)
1802 Brightseat Road, Landover, MD 20785-4235
(Address of principal executive offices) (Zip Code)
(301) 772-8900
(Registrant's telephone number including area code)
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
--- ---
Number of shares of each of the registrant's classes of common stock outstanding
at October 31, 1996:
Class Number of Shares
----- ----------------
Common Stock (voting), $.01 par value 7,000,000
Common Stock (non-voting), $.01 par value 942,763
<PAGE>
WASHINGTON HOMES, INC.
FORM 10-Q
TABLE OF CONTENTS
Page
----
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets
- October 31, 1996 and July 31, 1996 (Unaudited) 3
Condensed Consolidated Statements of Net Earnings
- Three Months Ended October 31, 1996 and 1995 (Unaudited) 4
Condensed Consolidated Statement of Shareholders' Equity
- Three Months Ended October 31, 1996 (Unaudited) 5
Condensed Consolidated Statements of Cash Flows
- Three Months Ended October 31, 1996 and 1995 (Unaudited) 6
Notes to Condensed Consolidated Financial Statements (Unaudited) 7
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
2
<PAGE>
PART 1. ITEM 1. Financial Statements
WASHINGTON HOMES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
October 31, July 31,
ASSETS 1996 1996
---- ----
(in thousands)
<S> <C> <C>
Cash and cash equivalents $ 11,918 $ 15,384
Residential inventories 122,717 125,033
Excess of costs over net assets acquired, net 16,425 16,553
Investment in joint ventures 2,996 2,751
Other 10,517 10,506
-------- --------
Total Assets $164,573 $170,227
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Notes and loans payable $ 75,210 $ 74,282
Trade accounts payable 12,484 17,572
Income taxes payable 645 408
Deferred income taxes 4,692 5,233
Other 2,842 4,963
-------- --------
Total Liabilities 95,873 102,458
Shareholders' Equity
Common Stock
15,000,000 shares voting common stock
authorized, 7,000,000 shares issued
and outstanding; 70 70
1,100,000 shares non-voting common stock
authorized, 942,763 shares issued and
outstanding; 9 9
Additional paid-in capital 35,147 35,147
Retained earnings 33,474 32,543
-------- --------
Total Shareholders' Equity 68,700 67,769
-------- --------
Total Liabilities and Shareholders' Equity $164,573 $170,227
======== ========
</TABLE>
See accompanying Notes.
3
<PAGE>
WASHINGTON HOMES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF NET EARNINGS
(Unaudited)
(in thousands except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
October 31,
------------------
1996 1995
---- ----
<S> <C> <C>
Revenues
Homebuilding $44,021 $37,397
Land sales 1,676 64
Other income 965 366
------- -------
Total revenues 46,662 37,827
Expenses
Cost of sales - homebuilding 35,954 29,847
Cost of sales - land sales 1,470 55
Selling, general and administrative 6,150 5,383
Interest 968 906
Financing fees 197 204
Amortization and depreciation expense 194 187
------- -------
Total expenses 44,933 36,582
------- -------
Earnings before income taxes 1,729 1,245
Income tax expense 798 536
------- -------
Net earnings $ 931 $ 709
======= =======
Earnings per common share, based on
7,942,763 shares outstanding $0.12 $0.09
===== =====
</TABLE>
See accompanying Notes.
4
<PAGE>
WASHINGTON HOMES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Three months ended October 31, 1996
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Common Stock Additional Total
------------------- Paid-in Retained Shareholders'
Voting Non voting Capital Earnings Equity
------ ---------- ------- -------- ------
<S> <C> <C> <C> <C> <C>
Balance, August 1, 1996 $70 $9 $35,147 $32,543 $67,769
Net earnings -- -- -- 931 931
--- -- ------- ------- -------
Balance, October 31, 1996 $70 $9 $35,147 $33,474 $68,700
=== == ======= ======= =======
</TABLE>
See accompanying Notes.
5
<PAGE>
WASHINGTON HOMES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended October 31,
------------------------------
1996 1995
---- ----
(in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 931 $ 709
Adjustments to reconcile net earnings to
net cash used in operating activities:
Amortization and depreciation 193 187
Deferred income taxes (540) (340)
Changes in assets and liabilities:
Residential inventories 2,318 (2,610)
Other assets (50) 89
Trade accounts payable (5,088) (4,734)
Income taxes payable 238 (66)
Other liabilities (2,121) (1,489)
------- -------
Net cash used in operating activities (4,119) (8,254)
Cash flows from investing activities:
Purchases of property and equipment, net
of disposals (28) (31)
Advances to joint ventures (246)
------- -------
Net cash used in investing activities (274) (31)
Cash flows from financing activities:
Proceeds from notes and loans payable 27,271 31,188
Repayments of notes and loans payable (26,344) (26,792)
------- -------
Net cash provided by financing activities 927 4,396
Net decrease in cash and cash equivalents (3,466) (3,889)
Cash and cash equivalents, beginning of period 15,384 15,111
------- -------
Cash and cash equivalents, end of period $11,918 $11,222
======= =======
</TABLE>
See accompanying Notes.
6
<PAGE>
WASHINGTON HOMES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Basis of Presentation
The unaudited condensed consolidated financial statements include the
accounts of Washington Homes, Inc. and its wholly-owned subsidiaries (the
"Company").
The Company is principally engaged in the business of the construction and
sale of residential housing. All significant intercompany balances and
transactions have been eliminated in consolidation.
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and SEC regulations. Accordingly, they do not
include all of the information and notes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting only of normal recurring accruals)
considered necessary for a fair presentation have been included. These condensed
consolidated financial statements should be read in conjunction with the
financial statements and notes thereto in the Company's Annual Report for the
year ended July 31, 1996. Operating results for the three months ended October
31, 1996 are not necessarily indicative of the results that may be expected for
the year ending July 31, 1997.
2. Shareholders' Equity
Common Stock. The Company has 15,000,000 shares of Common Stock (voting)
authorized of which 7,000,000 shares were outstanding at October 31, 1996. Such
shares entitle the holder to one vote for each share of Common Stock held.
Non-voting Common Stock. The Company has 1,100,000 shares of non-voting
common stock authorized of which 942,763 were outstanding at October 31, 1996.
Except for voting rights, the non-voting common stock is substantially the same
as the Company's voting common stock. The non-voting common stock can be
converted into voting common stock on a share-for-share basis.
3. Earnings Per Share
Earnings per common share are based on the weighted average number of
shares of common stock and common stock equivalents outstanding during each
period.
4. Notes and Loans Payable
Notes and loans payable consist of the following:
<TABLE>
<CAPTION>
October 31, July 31,
1996 1996
---- ----
(dollars in thousands)
<S> <C> <C>
Senior Notes $43,000 $43,000
Revolving Credit Facilities 25,842 23,759
Land Acquisition and Other 6,368 7,523
------- -------
$75,210 $74,282
======= =======
</TABLE>
7
<PAGE>
Senior Notes. In April 1994, the Company issued $43,000,000 principal
amount of Senior Notes. Two series of Senior Notes were issued: $30,000,000 with
a fixed rate of 8.61% per annum, with interest payable semi-annually beginning
in October 1994 and $13,000,000 with a floating rate of LIBOR plus 2.4% (8.02%
at October 31, 1996), with interest payable July 1994 and either quarterly or
semi-annually thereafter at the option of the Company. Principal repayments are
due in three equal annual installments commencing in October 1998 and continuing
to October 2000.
Revolving Credit Facilities. Revolving Credit Facilities at October 31,
1996, consist of three secured seasonal revolving loan commitments totaling
$51,200,000 to fund acquisition of finished building lots, home construction and
model homes. In addition, the Revolving Credit Facilities provide aggregate
letters of credit in the amount of $8,000,000 principally for finished building
lot contract deposits and bonding to municipalities for land development. The
facilities have maturity dates (which may be extended) of June 1997, July 1997
and October 1997. Borrowings under the facilities bear interest at prime (8.25%
at October 31, 1996), prime plus 1% or LIBOR (30 day LIBOR at October 31, 1996
was 5.375) plus either 1.97% or 2.50% and are collateralized by inventory.
Land Acquisition Loans. The Company has loans with various land sellers and
lenders for the acquisition of land which bear interest at fixed rates ranging
from 8.0% to 10% or variable rates of prime to prime plus 1% and are
collateralized by the related land under development.
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Annual Operating Cycle
The homebuilding industry in general and the operations of the Company are
seasonal in nature. The number of new orders signed is generally higher in the
period from February through May compared to the balance of the year. Deliveries
peak in the fiscal quarter ending July 31 as a substantial portion of homes for
which contracts are written during the fiscal quarter ending April 30 are
delivered. Delivery volume is relatively constant during the remainder of the
year. Backlog is the number of homes under contract but not delivered at the end
of the period. Revenue is recognized upon the delivery of finished homes. The
following table, which sets forth the quarterly operating results for the
Company during the last five fiscal quarters illustrates this cycle:
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------------------------------------
October 31, January 31, April 30, July 31, October 31,
1995 1996 1996 1996 1996
---- ---- ---- ---- ----
(dollars in thousands)
Selected Operating Data
- -----------------------
<S> <C> <C> <C> <C> <C>
Revenues-homebuilding $37,397 $34,178 $ 36,908 $59,337 $ 44,021
Number of homes delivered 246 219 245 377 281
Number of net new orders 251 218 410 248 327
Number of homes in backlog 566 565 730 601 647
Sales value of backlog $92,700 $92,119 $119,188 $97,625 $107,881
</TABLE>
8
<PAGE>
Geographic Breakdown of Operations
Set forth below is information for the Company's operations by geographic
markets:
Three Months Ended
October 31,
-----------
Net New Orders 1996 1995
- -------------- ---- ----
Washington/Baltimore 204 152
North Carolina 97 93
Nashville 14 0
Pittsburgh 12 6
--- ---
327 251
=== ===
Three Months Ended
October 31,
-----------
Homes Delivered 1996 1995
- --------------- ---- ----
Washington/Baltimore 179 153
North Carolina 86 87
Nashville 6 0
Pittsburgh 10 6
--- ---
281 246
=== ===
October 31,
-----------
Backlog of Sold Homes 1996 1995
- --------------------- ---- ----
Washington/Baltimore 436 423
North Carolina 162 130
Nashville 25 0
Pittsburgh 24 13
--- ---
647 566
=== ===
Results of Operations
Three Months Ended October 31, 1996 Compared to Three Months Ended
October 31, 1995
Total revenues from homes delivered increased by 17.7% to $44.0 million
during the three months ended October 31, 1996 as compared to $37.4 million
during the same three month period ended October 31, 1995 as the number of homes
delivered increased to 281 homes in the first quarter of fiscal 1997 from 246
9
<PAGE>
homes in the first quarter of fiscal 1996. The increase in units was due, in
part, to the sale and leaseback of 20 model homes. The average sales price of
homes delivered increased to $156,600 for the first quarter of fiscal 1997 from
$152,000 for the first quarter of fiscal 1996. Changes in the average selling
price of homes delivered may vary from period to period based on product mix and
pricing of specific communities.
Revenues and gross profit from land sales were $1.7 million and $206,000
for the three months ended October 31, 1996 as compared to $64,000 and $9,000
during the same three month period in fiscal 1996.
Other income increased $599,000 to $965,000 during the three months ended
October 31, 1996 as compared to $366,000 in the same three month period in
fiscal 1996, principally due to the gain on sale of investment securities and
income from joint ventures.
Gross profit as a percentage of revenues from homes delivered decreased to
18.3% during the three months ended October 31, 1996 compared to 20.2% during
the same three month period in fiscal 1996. The decrease in gross profit is a
result of delivering 20 model homes with lower than average gross profit margins
and the Company's pricing strategy to increase inventory turnover.
Selling, general and administrative expenses increased $767,000 to $6.1
million during the three month period ended October 31, 1996 as compared to $5.4
million in the same three month period in fiscal 1996, primarily due to costs
associated with increased revenues. In addition, selling, general and
administrative expenses decreased slightly as a percentage of homebuilding
revenues to 14.0% in the three months ended October 31, 1996 compared to 14.4%
for the same period in fiscal 1996.
Operating income (earnings before interest, financing fees and taxes)
increased to $2.9 million in the three months ended October 31, 1996 as compared
to $2.4 million for the same period in fiscal 1996 and increased as a percentage
of homebuilding revenues to 6.6% from 6.3% for the same period in fiscal 1996.
Interest and financing fees increased slightly to $1.2 million during the
three months ended October 31, 1996 as compared to $1.1 million in the same
three month period in fiscal 1996.
Capital Resources and Liquidity
Funding for the Company's residential building and land development
activities is provided principally by cash flows from operations and borrowings
from banks and other financial institutions. The Company's capital needs depend
upon its sales volume, asset turnover, land purchases and inventory levels.
At October 31, 1996, the Company had cash and cash equivalents of $11.9
million of which $563,000 was restricted to collateralize customer deposits and
other escrows. The remaining $11.3 million was available to the Company.
The Company had $100.6 million in borrowing availability from various
lending institutions and land sellers of which $75.2 million was outstanding at
October 31, 1996.
The Company believes that it will be able to fund its activities through
fiscal 1997 through a combination of operating cash flow, existing cash balances
and borrowings from banks and other lending institutions. Except for ordinary
expenditures for the construction of homes and acquisition and development of
land, the Company does not have any material commitments for capital
expenditures at the present time.
10
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27. Financial Data Schedule
(b) Reports on Form 8-K
The registrant did not file any reports on Form 8-K during the
quarter ended October 31, 1996.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WASHINGTON HOMES, INC.
(Registrant)
Date: December 5, 1996 By: /s/ GEATON A. DECESARIS, JR.
--------------------------------
Geaton A. DeCesaris, Jr.
President and Chief Executive Officer
Date: December 5, 1996 By: /s/ CLAYTON W. MILLER
-------------------------
Clayton W. Miller
Principal Accounting Officer
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S CONDENSED CONSOLIDATED BALANCE SHEET AND CONDENSED CONSOLIDATED
STATEMENT OF NET EARNINGS AT AND FOR THE PERIOD ENDED OCTOBER 31, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-END> OCT-31-1996
<CASH> 11,918
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 122,717
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 164,573
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 79
<OTHER-SE> 68,621
<TOTAL-LIABILITY-AND-EQUITY> 164,573
<SALES> 45,697
<TOTAL-REVENUES> 46,662
<CGS> 37,424
<TOTAL-COSTS> 43,768
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,165
<INCOME-PRETAX> 1,729
<INCOME-TAX> 798
<INCOME-CONTINUING> 931
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 931
<EPS-PRIMARY> .12
<EPS-DILUTED> .12
</TABLE>
