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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 September 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 333-44515-04
Fox Ridge Homes, Inc.
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(Exact name of registrant as specified in its charter)
Tennessee 62-1715049
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(State or other jurisdiction of (IRS employer identification
incorporation or organization) number)
5115 Maryland Way
Brentwood, Tennessee 37027
(615) 377-6840
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(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
(Not Applicable)
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(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
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As of November 4, 1998 there were 100 total shares of common stock outstanding.
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 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 No
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FOX RIDGE HOMES, INC.
FORM 10-Q
INDEX
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Page
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PART I FINANCIAL INFORMATION
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<S> <C> <C>
Item 1. Balance Sheets at September 30, 1998 (unaudited)
and December 31, 1997............................................................. 3
Statements of Income for the
Three Months Ended September 30, 1998 (unaudited)
and September 30, 1997 (unaudited) and the
Nine Months Ended September 30, 1998 (unaudited)
and September 30, 1997 (unaudited)................................................ 4
Statements of Cash Flows for the Nine
Months Ended September 30, 1998 (unaudited) and
September 30, 1997 (unaudited).................................................... 5
Notes to Financial Statements..................................................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................................... 7
PART II OTHER INFORMATION
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Item 6. Exhibits and Reports on Form 8-K.................................................. 8
Exhibit Index..................................................................... 9
Signature......................................................................... 11
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PART I
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ITEM 1.
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FOX RIDGE HOMES, INC.
Balance Sheets
(dollars in thousands)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
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(unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ - $ -
Accounts receivable 217 192
Inventory, net 22,652 19,879
Investment in FRP, LP 96 179
Property and equipment, net 242 228
Goodwill, net 9,933 10,753
Other 434 122
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TOTAL ASSETS $33,574 $31,353
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LIABILITIES AND SHAREHOLDER'S EQUITY
Notes payable - lot acquisitions $ 900 $ 900
Notes payable - acquisition note 4,659 4,750
Accounts payable 3,143 2,281
Due to affiliate 5,712 8,012
Accrued expenses and other liabilities 2,086 637
Deferred taxes 281 281
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TOTAL LIABILITIES 16,781 16,861
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COMMITMENTS AND CONTINGENCIES
SHAREHOLDER'S EQUITY:
Common stock, $.01 par, 100,000 shares
authorized; 100 shares issued and outstanding - -
Additional paid in capital 14,250 14,250
Retained earnings 2,543 242
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Total shareholder's equity 16,793 14,492
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TOTAL LIABILITIES AND SHAREHOLDER'S
EQUITY $33,574 $31,353
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</TABLE>
See notes to financial statements.
3
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FOX RIDGE HOMES, INC.
Statements of Income
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR* SUCCESSOR PREDECESSOR*
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THREE MONTHS ENDED SEPT. 30, NINE MONTHS ENDED SEPT. 30,
------------------------------ -----------------------------
1998 1997 1998 1997
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<S> <C> <C> <C> <C>
REVENUES:
Revenues $19,813 $14,072 $45,183 $34,055
Other income 34 20 59 56
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Total Revenues 19,847 14,092 45,242 34,111
EXPENSES:
Cost of sales 16,491 12,006 37,783 28,830
Interest expense 258 237 802 682
Selling, general and administrative 840 758 2,528 2,328
Amortization of goodwill 273 - 820 -
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Total expenses 17,862 13,001 41,933 31,840
Income before income tax expense 1,985 1,091 3,309 2,271
Income tax expense (481) (98) (1,008) (161)
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NET INCOME $ 1,504 $ 993 $ 2,301 $ 2,110
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</TABLE>
* Period is prior to the date that the Company was acquired by NVR, Inc. (see
note 1)
See notes to financial statements.
4
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FOX RIDGE HOMES, INC.
Statements of Cash Flows
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
(SUCCESSOR) (PREDECESSOR)*
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, 1998 SEPTEMBER 30, 1997
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,301 $ 2,110
Adjustments to reconcile net income
to net cash provided (used) by
operating activities:
Depreciation and amortization 925 127
Equity earnings in FRP, LP (70) (58)
Net change in assets and liabilities:
Increase in inventories (2,773) (2,907)
Increase in receivables (25) (1,051)
(Decrease) increase in accounts payable
and accrued liabilities 2,311 (1,057)
Other, net (312) 13
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Net cash provided (used) by operating activities 2,357 (2,823)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant & equipment (119) (139)
Dividends from FRP, LP 153 94
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Net cash provided (used) by investing
activities 34 (45)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of dividends - (1,991)
Decrease in advances from affiliates (2,300) -
Net borrowings (repayments) under notes payable (91) 5,042
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Net cash provided (used) by financing activities (2,391) 3,051
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Net decrease in cash - (183)
Cash, beginning of the period - 660
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Cash, end of period $ - $ 843
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid during the period $ 519 $ 608
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Taxes paid during the period
(net of refunds) $ 200 $ 187
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</TABLE>
* Period is prior to the date that the Company was acquired by NVR, Inc. (see
note 1)
See notes to financial statements.
5
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FOX RIDGE HOMES, INC.
Notes to Financial Statements
(dollars in thousands)
1. BASIS OF PRESENTATION
Fox Ridge Homes, Inc. ("Fox Ridge" or the "Successor"), a wholly owned
subsidiary of NVR, Inc. ("NVR"), was formed in 1997 to purchase substantially
all of the assets and assume certain liabilities (the "Purchase Transaction") of
Fox Ridge Homes, Inc. ("FRH" or the "Predecessor"), a home builder in Nashville,
Tennessee, which occurred on October 31, 1997 (the "Purchase Date"). The
accompanying unaudited financial statements include the accounts of the
Successor for the three and nine months ending September 30, 1998, and include
the accounts of the Predecessor for the three and nine months ending September
30, 1997. As a result, the financial statements for periods subsequent to the
Purchase Date are not comparable to the financial statements for periods prior
to the Purchase Date. The statements are provided pursuant to Fox Ridge's status
as a guarantor of NVR's 11% Senior Notes due 2003. The statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Regulation S-X.
Accordingly, they do not include all of the information and footnotes 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. Operating results for the nine-month period ended September 30, 1998
are not necessarily indicative of the results that may be expected for the year
ending December 31, 1998.
2. ADOPTION OF NEW ACCOUNTING PRINCIPLES
During the quarter ended March 31, 1998, Fox Ridge adopted Statement of
Financial Accounting Standards ("SFAS") No. 130, Reporting Comprehensive Income.
SFAS No. 130 establishes standards for reporting and display of comprehensive
income and its components in a full set of general purpose financial statements.
Comprehensive income is defined as the change in equity of a business enterprise
during a period from transactions and other events and circumstances from non-
owner sources. It includes all changes in equity during a period except those
resulting from investments by owners and distributions to owners. For the three
and nine months ended September 30, 1998 and 1997, comprehensive income equaled
net income; therefore, a separate statement of comprehensive income is not
included in the accompanying financial statements.
Fox Ridge will also implement SFAS No. 131, Disclosures about Segments of
an Enterprise and Related Information in 1998. SFAS No. 131 establishes
standards for the way that public enterprises report information about operating
segments in annual and interim financial statements. Because Fox Ridge has only
one reportable operating segment pursuant to the guidance of SFAS No. 131, the
implementation of SFAS No. 131 has no impact on Fox Ridge's financial
statements.
6
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ITEM 2.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(dollars in thousands, except per share and share data)
FORWARD-LOOKING STATEMENTS
Some of the statements in this Form 10-Q, as well as statements made by the
Company in periodic press releases, constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
Certain, but not necessarily all, of such forward-looking statements can be
identified by the use of forward-looking terminology, such as "believes,"
"expects," "may," "will," "should," or "anticipates" or the negative thereof or
other variations thereof or comparable terminology, or by discussion of
strategies, each of which involves risks and uncertainties. All statements
other than of historical facts included herein, including those regarding market
trends, the Company's financial position, business strategy, projected plans and
objectives of management for future operations, are forward-looking statements.
Such forward-looking statements involve known and unknown risks, uncertainties
and other factors that may cause the actual results or performance of the
Company to be materially different from any future results, performance or
achievements expressed or implied by the forward-looking statements. Such risk
factors include, but are not limited to, general economic and business
conditions, interest rate changes, competition, the availability and cost of
land and other raw materials used by the Company in its homebuilding operations,
shortages of labor, weather related slow downs, building moratoria, governmental
regulation, the ability of the Company to integrate any acquired business,
technological problems encountered with year 2000 issues, certain conditions in
financial markets and other factors over which the Company has little or no
control.
RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND
1997
Fox Ridge Homes, Inc. ("Fox Ridge" or the "Successor"), a wholly owned
subsidiary of NVR, Inc. ("NVR"), was formed during 1997 to purchase
substantially all of the assets and assume certain liabilities (the "Purchase
Transaction") of Fox Ridge Homes, Inc. ("FRH" or the "Predecessor"), a home
builder in Nashville, Tennessee. The analysis below of the results of operations
is a comparison of the Predecessor's financial results for the three and nine
months ended September 30, 1997 and the Successor's financial results for the
three and nine months ended September 30, 1998.
THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
Income before income tax expense increased $894 to $1,985 in the third
quarter of 1998 from $1,091 in the third quarter of 1997. The increase is a
direct result of a higher number of settlements in the current quarter as
compared to the prior year quarter, coupled with improved gross margins, and
offset by goodwill amortization which resulted from the Purchase Transaction.
Fox Ridge settled 131 units during the third quarter of 1998 compared with 101
units settled in the third quarter of 1997. New orders increased by 25.3% from
87 units in the quarter ended September 30, 1997 to 109 units in the quarter
ended September 30, 1998. SG&A dollars have increased slightly due to the
higher revenues.
Backlog units and dollars were 218 and $33,137, respectively, at September
30, 1998 compared to 150 and $21,169, respectively, at September 30, 1997. The
increase in backlog units and dollars is primarily attributable to a 29.6%
increase in new orders for the six month period ended September 30, 1998
compared to the same 1997 period.
7
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NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
Income before income tax expense increased $1,038 to $3,309 for the first
nine months of 1998 from $2,271 for the first nine months of 1997. The increase
is a direct result of a higher number of settlements in the current year period
as compared to the prior year period, coupled with improved gross margins,
offset by goodwill amortization, which resulted from the Purchase Transaction.
In addition, SG&A dollars have increased slightly due to the higher revenues.
Fox Ridge settled 299 units during the first nine months of 1998 compared with
244 units settled in the first nine months of 1997. New orders increased by
36.9% from 279 units in the nine months ended September 30, 1997 to 382 units in
the nine months ended September 30, 1998.
LIQUIDITY AND CAPITAL RESOURCES
Fox Ridge generally provides for its working capital cash requirements
using cash generated from operations and advances from NVR. Insofar as NVR's
ability to make advances is not impaired, Fox Ridge believes that internally
generated cash and borrowings available from NVR will be sufficient to satisfy
near and long term cash requirements.
YEAR 2000 ISSUE
The Year 2000 Issue is the risk that computer programs using two-digit date
fields will fail to properly recognize the year 2000, with the result being
business interruptions due to computer system failures by the Company's software
or hardware or that of government entities, service providers and vendors. In
response to the Year 2000 Issue, the Company has completed its initial review to
assess the Company's exposure to Year 2000 Issues, and has developed a detailed
plan to remediate areas of exposure. Implementation of the remediation plan has
commenced, and the Company expects that remediation will be completed prior to
January 1, 2000. Based on the Company's continuing assessment, Management does
not believe that the Company's exposure to Year 2000 Issues will have a material
effect on its financial position or results of operations.
8
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PART II
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
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A. The Company did not file any reports on Form 8-K during the
quarter ended September 30, 1998.
B. Financial Data Schedule
9
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EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION PAGE
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27 Financial Data Schedule 12
10
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SIGNATURE
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.
November 4, 1998 Fox Ridge Homes, Inc.
By: /s/ Paul C. Saville
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Paul C. Saville
Executive Vice President
11
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FOX RIDGE
HOMES, INC.'S CONSOLIDATED FINANCIAL STATEMENTS INCLUDED IN FORM 10-Q FOR THE
SIX MONTHS ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 217
<ALLOWANCES> 0
<INVENTORY> 22,652
<CURRENT-ASSETS> 0
<PP&E> 242
<DEPRECIATION> 0
<TOTAL-ASSETS> 33,574
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 14,250
<OTHER-SE> 2,543
<TOTAL-LIABILITY-AND-EQUITY> 33,574
<SALES> 45,183
<TOTAL-REVENUES> 45,242
<CGS> 37,783
<TOTAL-COSTS> 40,311
<OTHER-EXPENSES> 820<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 802
<INCOME-PRETAX> 3,309
<INCOME-TAX> 1,008
<INCOME-CONTINUING> 2,301
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,301
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Item represents the non-cash amortization of goodwill.
</FN>
</TABLE>
