1
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, 1997
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, 1997:
Class Number of
Shares
Common Stock (voting), $.01 par 7,914,433
value
Common Stock (non-voting), $.01 28,330
par value
<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, 1997 and July 31, 1997 3
(Unaudited)
Condensed Consolidated Statements of Net Earnings
- - Three Months Ended October 31, 1997 and 1996 4
(Unaudited)
Condensed Consolidated Statement of Shareholder's
Equity 5
- - Three Months Ended October 31, 1997 (Unaudited)
Condensed Consolidated Statement of Cash Flows
- Three Months Ended October 31, 1997 and 6
1996 (Unaudited)
Notes to Condensed Consolidated Financial 7
Statements (Unaudited)
ITEM 2. Management's Discussion and Analysis
of Financial Condition and 8
Results of Operations
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
<PAGE>
PART 1. ITEM 1. Financial Statements
WASHINGTON HOMES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS October 31, July 31,
1997 1997
(in thousands)
Cash and cash equivalents $ 8,669 $ 10,313
Residential inventories 114,512 111,520
Excess of cost over net assets 6,165 6,216
acquired, net
Investment in joint ventures 3,068 3,058
Other 12,441 11,735
Total Assets $144,855 $142,842
LIABILITIES AND SHAREHOLDER'S EQUITY
Liabilities
Notes and loans payable $72,191 $65,569
Trade accounts payable 12,074 16,231
Income taxes 1,941 2,056
Other 3,433 4,506
Total Liabilities 89,639 88,362
Shareholders' Equity
Common Stock
15,000,000 shares voting common
stock authorized, 79 70
7,914,433 and 7,015,025 shares
issued and outstanding;
1,100,000 shares non-voting common
stock authorized, 0 9
28,330 and 927,738 shares issued
and outstanding;
Additional paid - in capital 35,147 35,147
Retained earnings 19,990 19,254
Total Shareholders' Equity 55,216 54,480
Total Liabilities and Shareholders' $144,855 $142,842
Equity
[FN]
See accompanying Notes.
</FN>
<PAGE>
WASHINGTON HOMES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF NET EARNINGS
(Unaudited)
(in thousands except per share amounts)
Three Months Ended
October 31,
1997 1996
Revenues
Homebuilding $41,037 $44,021
Land sales 1,192 1,676
Other income 577 965
Total revenues 42,806 46,662
Expenses
Cost of sales - homebuilding 33,276 35,954
Cost of sales - land 841 1,470
Selling, general and administrative 6,135 6,150
Interest 937 968
Financing fees 135 197
Amortization and depreciation 98 194
expense
Total expenses 41,422 44,933
Earnings before income taxes 1,384 1,729
Income tax expense 648 798
Net earnings $ 736 $ 931
Earnings per common share,
7,942,763 weighted average $ 0.09 $ 0.12
shares outstanding
[FN]
See accompanying Notes.
</FN>
<PAGE>
WASHINGTON HOMES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Three months ended October 31, 1997
(Unaudited)
(in thousands)
<TABLE>
<CAPTION> Addition Total
al
Common Stock Paid -in Retaine Shareholder
d s'
Voting Non voting Capital Earning Equity
s
<S> <C> <C> <C> <C> <C>
Balance, August 1, 1997 $70 $9 $35,147 $19,254 $54,480
Convert Non-voting to
Voting
Net Earnings -- -- -- 736 736
Balance, October 31, $70 $9 $35,147 $19,990 $55,216
1997
</TABLE>
[FN]
See accompanying Notes.
</FN>
<PAGE>
WASHINGTON HOMES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION> Three Months Ended
October 31,
1997 1996
(in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 736 $ 931
Adjustments to reconcile net earnings to
net cash used in operating activities:
Amortization and depreciation 98 193
Deferred income taxes (55) (540)
Changes in assets and liabilities:
Residential inventories (2,992) 2,318
Other assets (735) (50)
Trade accounts payable (4,157) (5,088)
Income taxes payable (60) 238
Other liabilities (1,073) (2,121)
Net cash used in operating activities (8,238) (4,119)
Cash flows from investing activities:
Purchases of property and equipment, net of (18) (28)
disposals
Advances to joint ventures (10) (246)
Net cash used in investing activities (28) (274)
Cash flows from financing activities:
Proceeds from notes and loans payable 25,392 27,271
Repayments of notes and loans payable (18,770) (26,344)
Net cash provided by financing activities 6,622 927
Net decrease in cash and cash equivalents (1,644) (3,466)
Cash and cash equivalents, beginning of period 10,313 15,384
Cash and cash equivalents, end of period $ 8,669 $11,918
</TABLE>
[FN]
See accompanying Notes.
</FN>
<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 to
Shareholders for the year ended July 31, 1997. Operating results for the three
months ended October 31, 1997 are not necessarily indicative of the results that
may be expected for the year ending July 31, 1998.
2. Shareholders' Equity
Common Stock. The Company has 15,000,000 shares of Common Stock (voting)
authorized of which 7,914,433 shares were outstanding at October 31, 1997. 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 28,330 were outstanding at October 31, 1997.
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. During the
quarter, 899,408 shares of non-voting common stock were converted to voting
common stock.
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:
October 31, July 31,
1997 1997
(dollars in thousands)
Senior Notes $43,000 $43,000
Revolving Credit 26,345 19,455
Facilities
Land Acquisition and 2,846 3,114
Other
$72,191 $65,569
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% (5.824% at October 31, 1997), 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 Facility. At October 31, 1997, the Company had a $70
million facility to fund land acquisition and home construction, letters of
credit, and the initial principal repayment on its Senior Notes. The facility
has a maturity date (which may be extended) of October 30, 1999. At October 31,
1997, $26.3 million was outstanding. Borrowings under the facility bear
interest at 30 day LIBOR (5.824% at October 31, 1997) plus either 1.55% or1.75%,
depending upon the mix of collateral and are secured by the related 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 January April July October
31, 1996 31, 1997 30, 31, 31, 1997
1997 1997
<S> (dollars in thousands)
Selected Operating <C> <C> <C> <C> <C>
Data
Revenues -homebuilding $44,021 $46,336 $41,431 $74,789 $41,037
Number of homes 281 298 258 478 265
delivered
Number of net new 327 312 438 228 289
orders
Number of homes in 647 661 841 591 615
backlog
Sales value of backlog $107,881 $109,436 $135,04 $96,343 $101,227
2
</TABLE>
<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 1997 1996
Maryland 87 131
Virginia 69 73
North Carolina 100 97
Nashville 20 14
Pittsburgh 13 12
289 327
Three Months
Ended
October 31,
Homes Delivered 1997 1996
Maryland 78 122
Virginia 59 57
North Carolina 100 86
Nashville 18 6
Pittsburgh 10 10
265 281
Three Months
Ended
October 31,
Backlog of Sold Homes 1997 1996
Maryland 237 236
Virginia 148 200
North Carolina 185 162
Nashville 18 25
Pittsburgh 27 24
615 647
Results of Operations
Three Months Ended October 31, 1997 Compared to Three Months Ended October 31,
1996
Total revenues from homes delivered decreased by 6.8% to $41.0 million
during the three months ended October 31, 1997 as compared to $44.0 million
during the same three month period ended October 31, 1996 as the number of homes
delivered decreased to 265 in the first quarter of fiscal 1998 from 281 homes in
the first quarter of fiscal 1997. These decreases resulted from lower
deliveries and a decline in other revenues. The average sales price of homes
delivered decreased to $154,857 for the first quarter of fiscal 1998 from
$156,657 for the first quarter of fiscal 1997. 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 $1.2 million and $351,000
for the three months ended October 31, 1997 as compared to $1.7 million and
$206,000 during the same three month period in fiscal 1997.
Other income decreased $388,000 to $577,000 during the three months ended
October 31, 1997 as compared to $965,000 in the same three month period in
fiscal 1997, principally due to the one time benefit from a sale of securities
during fiscal 1997.
Gross profit as a percentage of revenues from homes delivered increased to
18.9% during the three months ended October 31, 1997 compared to 18.3% during
the same three month period in fiscal 1997. The increase in gross profit
margins is due to a better geographic mix as fewer deliveries were from the
lower margin communities in suburban Maryland.
Selling, general and administrative expenses remained relatively constant,
however, as a result of the decrease in revenues, expenses as a percentage of
homebuilding revenues increased to 14.9% in the three months ended October
31,1997 compared to 14.0% for the same period in fiscal 1997.
Operating income (earnings before interest, financing fees and taxes)
decreased to $2.5 million in the three months ended October 31, 1997 as compared
to $2.9 million for the same period in fiscal 1997 and decreased as a percentage
of homebuilding revenues to 6.0% from 6.6% for the same period in fiscal 1997.
Interest and financing fees decreased slightly to $1.1 million during the
three months ended October 31, 1997 as compared to $1.2 million in the same
three month period in fiscal 1997.
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, 1997, the Company had cash and cash equivalents of $8.7
million of which $118,375 was restricted to collateralize customer deposits and
other escrows. The remaining $8.6 million was available to the Company.
The Company had $103 million in borrowing availability from various lending
institutions and land sellers of which $72.2 million was outstanding at October
31, 1997.
The Company believes that it will be able to fund its activities through
fiscal 1998 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.
<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, 1997.
<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 12, 1997 By:/s/ GEATON A. DECESARIS, JR.
Geaton A. DeCesaris, Jr.
President and Chief Executive Officer
Date: December 12, 1997 By:/s/ CLAYTON W. MILLER
Clayton W. Miller
Principal Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACRED FROM THE
REGISTRANTS'S CONDENSED CONSOLIDATED BALANCE SHEET AND CONDENSED CONSOLIDATED
STATEMENT OF NET EARNINGS AT AND FOR THE PERIOD ENDED OCTOBER 31, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERNECE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-END> OCT-31-1997
<CASH> 8,669
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 114,512
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 144,855
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 79
<OTHER-SE> 55,137
<TOTAL-LIABILITY-AND-EQUITY> 144,855
<SALES> 42,229
<TOTAL-REVENUES> 42,806
<CGS> 34,117
<TOTAL-COSTS> 40,350
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,072
<INCOME-PRETAX> 1,384
<INCOME-TAX> 648
<INCOME-CONTINUING> 736
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 736
<EPS-PRIMARY> .09
<EPS-DILUTED> .09
</TABLE>
