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: April 30, 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, Maryland 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 May 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
<TABLE>
<CAPTION>
Page
----
PART I. FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
- April 30, 1996 and July 31, 1995 (Unaudited) 3
Condensed Consolidated Statements of Net Earnings
- Three Months and Nine Months Ended April 30, 1996 and 1995 (Unaudited) 4
Condensed Consolidated Statements of Cash Flows
- Nine Months Ended April 30, 1996 and 1995 (Unaudited) 5
Notes to Condensed Consolidated Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
</TABLE>
2
<PAGE>
PART 1. ITEM 1. Financial Statements
WASHINGTON HOMES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
April 30, July 31,
ASSETS 1996 1995
---- ----
(in thousands)
<S> <C> <C>
Cash and cash equivalents $8,943 $ 15,111
Residential inventories 127,096 119,652
Excess of costs over net assets acquired, net 16,681 17,064
Investment in joint venture 2,675 2,276
Other 12,000 9,960
------ -----
Total Assets $167,395 $164,063
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Notes and loans payable $80,413 $ 72,608
Trade accounts payable 12,757 16,934
Income taxes payable 578 705
Deferred income taxes 4,391 5,211
Other 3,525 4,583
----- -----
Total Liabilities 101,664 100,041
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 30,505 28,796
------ ------
Total Shareholders' Equity 65,731 64,022
------ ------
Total Liabilities and Shareholders' Equity $167,395 $164,063
======== ========
</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 Nine Months Ended
April 30, April 30,
------------------ -----------------
1996 1995 1996 1995
---- ---- ---- ----
Revenues
<S> <C> <C> <C> <C>
Homebuilding $36,908 $36,961 $108,483 $112,684
Land sales 1,714 2,326 2,074 5,225
Other income 782 343 1,556 928
--- --- ----- ---
Total revenues 39,404 39,630 112,113 118,837
Expenses
Cost of sales - homebuilding 29,329 29,487 86,373 90,474
Cost of sales - land sales 1,515 1,126 1,850 3,767
Selling, general and administrative 6,073 5,499 16,827 16,138
Interest 999 951 2,853 2,721
Financing fees 200 152 599 556
Amortization and depreciation expense 199 214 564 589
-------- -------- -------- --------
Total expenses 38,315 37,429 109,066 114,245
Earnings before income taxes 1,089 2,201 3,047 4,592
Income tax expense 475 908 1,338 1,941
Net earnings $614 $1,293 $1,709 $2,651
==== ====== ====== ======
Earnings per common share, based on
7,942,763 shares outstanding $0.08 $0.16 $0.22 $0.33
========= ======= ===== =====
</TABLE>
See accompanying Notes.
4
<PAGE>
WASHINGTON HOMES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
April 30,
-----------------
1996 1995
---- ----
(in thousands)
Cash flows from operating activities:
<S> <C> <C>
Net earnings $1,709 $2,651
Adjustments to reconcile net earnings to
net cash used in operating
activities:
Amortization and depreciation 564 589
Deferred income taxes (820) (1,481)
Changes in assets and liabilities:
Residential inventories (7,445) (17,420)
Other assets (1,951) (2,018)
Trade accounts payable (4,178) (1,506)
Income taxes payable (126) (244)
Other liabilities (1,057) (2,245)
------- -------
Net cash used in operating activities (13,304) (21,674)
Cash flows from investing activities:
Purchases of property and equipment,
net of disposals (266) 5
Investment in joint venture (399) --
Proceeds from joint venture -- 6,847
------- -------
Net cash provided by (used in) investing activities (665) 6,852
Cash flows from financing activities:
Proceeds from notes and loans payable 80,773 60,386
Repayments of notes and loans payable (72,972) (54,352)
Dividends -- (397)
------- -------
Net cash provided by financing activities 7,801 5,637
------- -------
Net decrease in cash and cash equivalents (6,168) (9,185)
Cash and cash equivalents, beginning of period 15,111 20,076
------- -------
Cash and cash equivalents, end of period $8,943 $10,891
======= =======
</TABLE>
See accompanying Notes.
5
<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, 1995. Operating results for the three and nine months ended
April 30, 1996 are not necessarily indicative of the results that may be
expected for the year ending July 31, 1996.
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 April
30, 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 shares were outstanding at
April 30, 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:
April 30, July 31,
1996 1995
---- ----
(dollars in thousands)
Senior Notes $43,000 $43,000
Revolving Credit Facilities 29,378 18,607
Land Acquisition and Other 8,035 11,001
------ -------
$80,413 $72,608
======= =======
Senior Notes. In April 1994, the Company issued $43,000,000
principal amount of Senior Notes
6
<PAGE>
due October 2000. 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% (8.03% at
April 30, 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.
Revolving Credit Facilities. Revolving Credit Facilities at
April 30, 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 are due in October 1996, June 1997 and July 1997.
Borrowings under the facilities bear interest at prime (8.25% at April 30,
1996), prime plus 1% or LIBOR (30 day LIBOR at April 30, 1996 was 5.438) plus
1.90% to 2.50% depending upon the composition of collateral, 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
--------------------------------------------------------------------
April 30, July 31, October 31, January 31, April 30,
1995 1995 1995 1996 1996
---- ---- ---- ---- ----
(dollars in thousands)
Selected Operating Data
- -----------------------
<S> <C> <C> <C> <C> <C>
Revenues-homebuilding $36,961 $63,925 $37,397 $34,178 $36,908
Number of net new orders 436 263 251 218 410
Number of homes delivered 244 423 246 219 245
Number of homes in backlog 721 561 566 565 730
Sales value of backlog $114,928 $91,062 $92,700 $92,119 $119,188
</TABLE>
7
<PAGE>
Geographic Breakdown of Operations
Set forth below is information for the Company's operations by geographic
markets:
Three Months Ended Nine Months Ended
April 30, April 30,
--------- ---------
Net New Orders 1996 1995 1996 1995
- -------------- ---- ---- ---- ----
Washington/Baltimore 255 314 521 594
North Carolina 142 118 332 253
Nashville 4 0 4 0
Pittsburgh 9 4 22 14
--- --- --- ---
410 436 879 861
=== === === ===
Three Months Ended Nine Months Ended
April 30, April 30,
--------- ---------
Homes Delivered 1996 1995 1996 1995
- --------------- ---- ---- ---- ----
Washington/Baltimore 163 182 447 567
North Carolina 79 58 248 163
Pittsburgh 3 4 15 14
--- --- --- ---
245 244 710 744
=== === === ===
April 30,
---------
Backlog of Sold Homes 1996 1995
- --------------------- ---- ----
Washington/Baltimore 498 558
North Carolina 208 147
Nashville 4 0
Pittsburgh 20 16
--- ---
730 721
=== ===
Results of Operations
Three Months Ended April 30, 1996 Compared to Three Months Ended April 30, 1995
Total revenues from homes delivered was not significantly
different at $36.9 million during the three months ended April 30, 1996 than the
$37.0 million in revenues during the same three month period ended April 30,
1995 as the number of homes delivered narrowly increased to 245 homes in the
third quarter of fiscal 1996 from 244 homes in the third quarter of fiscal 1995.
Results for the third quarter of fiscal 1996 were negatively impacted by winter
weather conditions early in the quarter which extended production schedules.
During this period
8
<PAGE>
the average sales price of homes delivered decreased to $150,600 in fiscal 1996
from $151,500 in the fiscal 1995 period. 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 $199,000 for the three months ended April 30, 1996 as compared to $2.3
million and $1.2 million during the same three month period in fiscal 1995.
Gross profit as a percentage of revenues from homes delivered
increased to 20.5% during the three months ended April 30, 1996 compared to
20.2% during the same three month period in fiscal 1995. The increase in gross
margins resulted from the proportionate increase in deliveries in North Carolina
where there have been higher margins and a modest increase in the Company's
Washington operations.
Selling, general and administrative expenses increased
$600,000 to $6.1 million during the three month period ended April 30, 1996 as
compared to $5.5 million in the same three month period in fiscal 1995,
primarily due to costs associated with the expansion into new markets. In
addition, selling, general and administrative expenses increased as a percentage
of homebuilding revenues to 16.5% in the three months ended April 30, 1996
compared to 14.9% for the same period in fiscal 1995.
Operating income (earnings before interest, financing fees and
taxes) decreased to $2.3 million in the three months ended April 30, 1996 as
compared to $3.3 million for the same period in fiscal 1995 primarily due to the
decrease of 1.0 million in gross profit from land sales and decreased as a
percentage of homebuilding revenues to 6.2% from 8.9% for the same period in
fiscal 1995.
Interest and financing fees increased slightly to $1.2 million
during the three months ended April 30, 1996 as compared to $1.1 million in the
same three month period in fiscal 1995.
Nine Months Ended April 30, 1996 Compared to Nine Months Ended April 30, 1995
Total revenues from homes delivered decreased $4.2 million
(3.7%) to $108.5 million during the nine months ended April 30, 1996 as compared
to $112.7 million during the same nine month period ended April 30, 1995. The
number of homes delivered decreased 4.6% to 710 homes in the nine month period
of fiscal 1996 from 744 homes in the nine month period of fiscal 1995. During
this period the average sales price of homes delivered increased to $152,800 in
fiscal 1996 from $151,500 in the fiscal 1995 period. 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 $2.1 million
and $224,000 for the nine months ended April 30, 1996 as compared to $5.2
million and $1.5 million during the same nine month period in fiscal 1995.
Gross profit as a percentage of revenues from homes delivered
increased to 20.4% during the nine months ended April 30, 1996 compared to 19.7%
during the same nine month period in fiscal 1995. The increase in gross margins
resulted from the proportional increase in deliveries in North Carolina where
there have been higher margins and a modest increase in the Company's Washington
operations.
Selling, general and administrative expenses increased
$700,000 to $16.8 million during the nine month period ended April 30, 1996 as
compared to $16.1 million for the same nine month period in fiscal 1995. In
addition, selling, general and administrative expenses increased as a percentage
of homebuilding revenues to 15.5% in the nine months ended April 30, 1996
compared to 14.3% for the same period in fiscal 1995 due to the lower volume of
deliveries.
Operating income (earnings before interest, financing fees and
taxes) decreased to $6.5 million in
9
<PAGE>
the nine months ended April 30, 1996 as compared to $7.9 million for the same
period in fiscal 1995 and decreased as a percentage of homebuilding revenues to
6.0% from 7.0% for the same period in fiscal 1995.
Interest and financing fees increased slightly to $3.4 million
during the nine months ended April 30, 1996 compared to $3.3 million in the nine
month period ended April 30, 1995.
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 April 30, 1996, the Company had cash and cash equivalents
of $8.9 million of which $700,000 was restricted to collateralize bank letters
of credit, customer deposits and other escrows. The remaining $8.2 million was
available to the Company.
The Company had $102.2 million in borrowing availability from
various lending institutions and land sellers of which $80.4 million was
outstanding at April 30, 1996.
The Company believes that it will be able to fund its
activities through fiscal 1996 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 April 30, 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: June 4, 1996 By:/s/ GEATON A. DECESARIS, JR.
-------------------------------
Geaton A. DeCesaris, Jr.
President and Chief Executive Officer
Date: June 4, 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 CONSOLID-
ATED STATEMENT OF NET EARNINGS AT AND FOR THE PERIOD ENDED APRIL 30, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000104834
<NAME> WASHINGTON HOMES, INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-END> APR-30-1996
<CASH> 8,943,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 127,096,000
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 167,395,000
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 79,000
<OTHER-SE> 65,652,000
<TOTAL-LIABILITY-AND-EQUITY> 167,395,000
<SALES> 38,622,000
<TOTAL-REVENUES> 39,404,000
<CGS> 30,844,000
<TOTAL-COSTS> 37,116,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,199,000
<INCOME-PRETAX> 1,089,000
<INCOME-TAX> 475,000
<INCOME-CONTINUING> 614,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 614,000
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
