<PAGE>
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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 1999
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 No. l-6830
ORLEANS HOMEBUILDERS, INC.
(Exact name of registrant as specified in its charter)
Delaware 59-0874323
(State or other jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
One Greenwood Square, Suite #101
3333 Street Road
Bensalem, Pennsylvania 19020
(Address of principal executive offices)
Telephone: (215) 245-7500
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (l) 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 outstanding as of May 7, 1999: 11,357,893
(excluding 1,340,238 shares held in Treasury).
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Orleans Homebuilders, Inc. and Subsidiaries
Index to Financial Statements
PAGE
----
PART I - FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements (unaudited)
- -------
Consolidated Balance Sheets at March 31, 1999
and June 30, 1998 1
Consolidated Statements of Operations and Changes
in Retained Earnings for the three months and nine
months ended March 31, 1999 and 1998 2
Consolidated Statements of Cash Flows for the
nine months ended March 31, 1999 and 1998 3
Notes to Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial
- ------ Condition and Results of Operations. 6
PART II - OTHER INFORMATION
---------------------------
Item 6. Exhibits and Reports on Form 8-K 12
- ------
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Orleans Homebuilders, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands)
<TABLE>
<CAPTION>
(Unaudited)
March 31, June 30,
1999 1998
--------- ---------
<S> <C> <C>
Assets
Cash $ 4,640 $ 2,833
Restricted cash - customer deposits 4,791 3,902
Real estate held for development and sale:
Residential properties completed or under construction 50,048 47,209
Land held for development or sale and improvements 58,893 64,044
Property and equipment, at cost, less accumulated depreciation 1,936 1,892
Receivables, deferred charges and other assets 13,122 10,645
--------- ---------
Total Assets $ 133,430 $ 130,525
========= =========
Liabilities and Shareholders' Equity
Liabilities:
Accounts payable $ 13,893 $ 15,378
Accrued expenses 12,453 9,312
Customer deposits 4,791 3,902
Mortgage and other note obligations primarily secured by real
estate held for development and sale 65,788 65,136
Subordinated debentures - 601
Notes payable - related parties 7,087 12,052
Other notes payable 3,087 2,918
Deferred income taxes 2,204 2,961
Minority interests 77 546
--------- ---------
Total Liabilities 109,380 112,806
--------- ---------
Commitments and contingencies
Shareholders' equity:
Preferred stock, $1 par, 500,000 shares authorized:
Series D convertible preferred stock, 7% cumulative annual
dividend, $30 stated value, issued and outstanding 100,000
shares ($3,000,000 liquidation preference) (Note F) 3,000 -
Common stock, $.10 par, 20,000,000 shares authorized,
12,698,131 shares issued at March 31, 1999 and
June 30, 1998, respectively 1,270 1,270
Capital in excess of par value - common stock 17,726 17,726
Retained earnings (deficit) 3,029 (299)
Treasury stock, at cost (1,340,238 shares and 1,342,113 shares
held at March 31, 1999 and June 30, 1998, respectively) (975) (978)
--------- ---------
Total Shareholders' Equity 24,050 17,719
--------- ---------
Total Liabilities and Shareholders' Equity $ 133,430 $ 130,525
========= =========
</TABLE>
See notes to consolidated financial statements
-1-
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Orleans Homebuilders, Inc. and Subsidiaries
Consolidated Statements of Operations
and Changes in Retained Earnings
(Unaudited)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Earned revenues
Residential properties $28,488 $23,661 $102,338 $67,837
Related party (Note G) - - - 1,472
Land sales 2,341 232 3,872 658
Other income 495 393 1,513 1,152
-------- -------- -------- --------
31,324 24,286 107,723 71,119
-------- -------- -------- --------
Costs and expenses
Residential properties 24,065 20,213 86,757 57,806
Related party (Note G) - - - 1,459
Land sales 1,877 222 3,171 549
Other 296 202 802 560
Selling, general and administrative 3,572 3,374 11,055 9,704
Interest
Incurred 1,811 1,855 5,783 5,351
Less capitalized (1,665) (1,666) (5,263) (4,835)
Minority interests - (25) - (129)
-------- -------- -------- --------
29,956 24,175 102,305 70,465
-------- -------- -------- --------
Income from operations before income taxes 1,368 111 5,418 654
Income tax expense 456 42 1,995 248
-------- -------- -------- --------
Net income 912 69 3,423 406
Preferred dividends 53 - 95 -
-------- -------- -------- --------
Net income available for common shareholders 859 69 3,328 406
Retained earnings (deficit), at beginning of period 2,170 (1,630) (299) (1,967)
-------- -------- -------- --------
Retained earnings (deficit), at end of period $ 3,029 $(1,561) $ 3,029 $(1,561)
======== ======== ======== ========
Basic earnings per share $ 0.08 $ 0.01 $ 0.29 $ 0.04
======== ======== ======== ========
Diluted earnings per share $ 0.06 $ 0.01 $ 0.23 $ 0.04
======== ======== ======== ========
</TABLE>
See notes to consolidated financial statements
- 2 -
<PAGE>
Orleans Homebuilders, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
1999 1998
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,328 $ 406
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 236 136
Changes in operating assets and liabilities:
Restricted cash - customer deposits (889) (1,718)
Real estate held for development and sale 2,312 (10,159)
Receivables, deferred charges and other assets (2,477) (2,897)
Accounts payable and other liabilities 886 3,715
Customer deposits 889 1,718
-------- --------
Net cash provided by (used in) operating activities 4,285 (8,799)
-------- --------
Cash flows from investing activities:
Purchases of property and equipment (280) (1,521)
-------- --------
Net cash used in investing activities (280) (1,521)
-------- --------
Cash flows from financing activities:
Borrowings from loans secured by real estate assets 75,070 59,680
Repayment of loans secured by real estate assets (74,418) (49,098)
Repayment of subordinated debentures (601) -
Borrowings from other note obligations 826 1,972
Repayment of other note obligations (2,622) (1,455)
Stock options exercised 3 -
Distribution to minority interests (456) -
-------- --------
Net cash provided by (used in) financing activities (2,198) 11,099
-------- --------
Net increase (decrease) in cash 1,807 779
Cash at beginning of period 2,833 1,582
-------- --------
Cash at end of period $ 4,640 $ 2,361
======== ========
Supplemental disclosure of cash flow activities:
Interest paid, net of amounts capitalized $ 384 $ -
======== ========
Income taxes paid $ 1,101 $ 109
======== ========
</TABLE>
See notes to consolidated financial statements
- 3 -
<PAGE>
ORLEANS HOMEBUILDERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(A) The accompanying unaudited consolidated financial statements are
presented in accordance with the requirements for Form 10-Q and do not
include all the disclosures required by generally accepted accounting
principles for complete financial statements. Reference is made to the
Form 10-K as of and for the year ended June 30, 1998 for Orleans
Homebuilders, Inc. and subsidiaries (the "Company") for additional
disclosures, including a summary of the Company's accounting policies.
In the opinion of management, the consolidated financial statements
contain all adjustments, consisting of normal recurring accruals,
necessary to present fairly the consolidated financial position of the
Company for the periods presented. The interim operating results of the
Company may not be indicative of operating results for the full year.
(B) Basic earnings per common share are computed by dividing net income by
the weighted average number of common shares outstanding. Diluted
earnings per share include additional common shares that would have
been outstanding if the dilutive potential common shares had been
issued. The weighted average number of shares used to compute basic
earnings per common share and diluted earnings per common share, and a
reconciliation of the numerator and denominator used in the computation
for the three months and nine months ended March 31, 1999 and 1998,
respectively, are shown below.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Total common shares issued 12,698,131 12,698,131 12,698,131 12,698,131
Less: Average treasury shares outstanding (1,340,238) (1,342,113) (1,340,963) (1,342,113)
---------- ---------- ----------- -----------
Basic EPS shares 11,357,893 11,356,018 11,357,168 11,356,018
Effect of assumed shares issued under treasury
stock method for stock options 499,175 168,747 448,249 141,439
Effect of assumed conversion of $3 million
Convertible Subordinated 7% Note 2,000,000 - 2,000,000 -
Effect of assumed conversion of $3 million
Series D Preferred Stock 2,000,000 - 1,182,482 -
---------- ---------- ----------- -----------
Diluted EPS shares 15,857,068 11,524,765 14,987,898 11,497,457
Net income available for common shareholders $ 859,000 $ 69,000 $ 3,328,000 $ 406,000
Effect of assumed conversion of $3 million
Convertible Subordinated 7% Note 32,550 - 97,650 -
Effect of assumed conversion of $3 million
Series D Preferred Stock 53,000 - 95,000 -
---------- ---------- ----------- -----------
Adjusted net income for diluted EPS $ 944,550 $ 69,000 $ 3,520,650 $ 406,000
========== ========== =========== ===========
</TABLE>
4
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(C) Supplemental disclosure of non-cash financing activities: As discussed
in Note (F), on October 20, 1998, the Company issued 100,000 shares of
Series D Preferred Stock to Jeffrey P. Orleans, Chairman and Chief
Executive Officer of the Company, in exchange for an aggregate amount
of $3,000,000 in Company notes held by Mr. Orleans.
(D) Residential properties completed or under construction consists of the
following:
(In thousands)
3/31/99 6/30/98
------- -------
Under Contract for Sale $34,033 $32,102
Unsold 16,015 15,107
------- -------
$50,048 $47,209
======= =======
(E) During fiscal 1998, a judgment in the amount of $2,500,000 was rendered
against the Company, and in the amount of $1,250,000 against the Estate
of Marvin Orleans and Jeffrey P. Orleans, trading as Orleans
Construction Company, a partnership (collectively, "O.C.C.") by the
Court of Common Pleas of Bucks County, in an action brought against the
Company, O.C.C. and an unrelated party arising out of injuries to two
workmen at the Company's project during its construction phase. The
plaintiffs have also requested "delay damages" based upon an
allegation, which the Company and O.C.C. will contest, that the Company
and O.C.C. inappropriately delayed the trial. One of the Company's
subcontractors is insured for up to $2,000,000 under two insurance
policies, that subcontractor's insurance company provided a defense to
the Company and O.C.C. and its limits stand in front of the Company's
primary insurance policy. The Company and O.C.C. are insured up to
$1,000,000 under its primary policy in effect at that time, and the
Company and O.C.C. are further insured under an umbrella policy for
$15,000,000.
In May 1999, a settlement was reached. The settlement was completely
satisfied from insurance proceeds. The insurance carriers paid
$3,250,000 on behalf of the Company, and $1,625,000 each on behalf of
O.C.C. and one of the Company's subcontractors. Accordingly, at March
31, 1999, the Company has recorded an increase in accrued expense from
$2,500,000 to $3,250,000 for its portion of the settlement discussed
above. The Company also has recorded an increase in a receivable from
$2,500,000 to $3,250,000, representing the amount the Company will
recover from the various insurance carriers to satisfy its portion of
the settlement.
From time to time, the Company is named as a defendant in legal actions
arising from its normal business activities. Although the amount of any
liability that could arise with respect to currently pending actions
cannot be accurately predicted, in the opinion of the Company any such
liability will not have a material adverse effect on the financial
position or operating results of the Company.
5
<PAGE>
(F) On October 20, 1998, the Company issued 100,000 shares of Series D
Preferred Stock (the "Series D Stock") to Jeffrey P. Orleans in
exchange for an aggregate amount of $3,000,000 in Company notes held by
Mr. Orleans. The Series D Stock was issued from an aggregate of 500,000
shares of Preferred Stock authorized. The Series D Stock has a
liquidation value of $3,000,000, or $30.00 per share, and requires
annual dividends of 7% of the liquidation value. The dividends are
cumulative and are payable quarterly on the first day of March, June,
September and December. The Series D Stock may be redeemed by the
Company at any time after December 31, 2003, in whole or in part, at a
cash redemption price equal to the liquidation value plus all accrued
and unpaid dividends on such shares to the date of redemption. The
Series D Stock is convertible into 2,000,000 shares of Common Stock.
(G) Related party residential property revenues for the nine months ended
March 31, 1998 included 27 low income homes with an aggregate sales
value of $1,472,000 which were purchased by Jeffrey P. Orleans. These
transactions satisfy, in part, the Company's low income housing
requirements in Mount Laurel Township, New Jersey. The selling prices
for these homes which are determined by state statute, are the same as
if the homes had been sold to unaffiliated third parties.
6
<PAGE>
ORLEANS HOMEBUILDERS, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and Results
- ------ of Operations.
Liquidity and Capital Resources
- -------------------------------
The Company requires capital to purchase and develop land, to
construct units, fund related carrying costs and overhead and to fund various
advertising and marketing programs to facilitate sales. These expenditures
include site preparation, roads, water and sewer lines, impact fees and
earthwork, as well as the construction costs of the homes and amenities. The
Company's sources of capital include funds derived from operations, sales of
assets and various borrowings, most of which are secured. At March 31, 1999, the
Company had $60,659,000 available to be drawn under existing secured revolving
and construction loans for planned development expenditures. The Company
believes that the funds generated from operations and financing commitments from
commercial lenders will provide the Company with sufficient capital to meet its
operating needs.
The Company has continued its ongoing land acquisition efforts
during the first nine months of fiscal 1999. During this period, the Company
acquired five additional parcels of land for an aggregate purchase price of
approximately $5,000,000. In addition, as of March 31, 1999, the Company had
agreements to purchase seventeen additional parcels for an aggregate purchase
price of approximately $68,300,000. These purchase agreements are subject to due
diligence review and are contingent upon the receipt of governmental approvals.
The Company expects to utilize purchase money mortgages, secured financings and
existing capital resources to finance these acquisitions. The Company
anticipates completing approximately one-half of these acquisitions over the
next two years.
Results of Operations
- ----------------------
The following table sets forth certain detail as to
residential sales activity for the nine months ended March 31, 1999 and 1998, in
the case of revenues earned and new orders, and at the end of the periods
indicated, in the case of backlog.
Nine Months Ended
March 31, 1999 March 31, 1998
-------------- --------------
(Dollars in thousands)
Revenues Earned: $102,338 $ 69,309
Units 516 386
Average Price Per Unit $ 198 $ 180
New Orders: $120,206 $ 99,192
Units 575 521
Average Price Per Unit $ 209 $ 190
7
<PAGE>
Nine Months Ended
March 31, 1999 March 31, 1998
-------------- --------------
(Dollars in thousands)
Backlog: $ 88,621 $ 68,142
Units 398 345
Average Price Per Unit $ 223 $ 198
Dollar volume of new orders for the nine months ended March
31, 1999 increased by approximately 21% to $120,206,000 on 575 orders, compared
to $99,192,000 on 521 orders during the nine months ended March 31, 1998. The
opening of new communities in Burlington County, New Jersey, was the primary
reason for the increase in new orders when compared to the first nine months of
fiscal 1998. The average price per unit of new orders increased due to an
increase in the number and percentage of higher priced, single family homes sold
in the first nine months of fiscal 1999 compared to the prior fiscal period.
Single family homes sold during the first nine months of fiscal 1999 accounted
for approximately 46% of total unit sales compared with approximately 38% during
the first nine months of fiscal 1998. In addition, the average unit sales price
increased for the majority of communities open during the first nine months of
fiscal 1999 compared with fiscal 1998.
The dollar backlog at March 31, 1999 increased approximately 30% to
$88,621,000 on 398 homes, as compared to the backlog at March 31, 1998, of
$68,142,000 on 345 homes.
Operating Revenues
- ------------------
Earned revenues for the first nine months of fiscal 1999 increased
$36,604,000 to $107,723,000, or 51.5%, compared to the first nine months of
fiscal 1998. Revenues from the sale of residential homes included 516 homes
totaling $102,338,000 during the first nine months of fiscal 1999, as compared
to 386 homes totaling $69,309,000 during the first nine months of fiscal 1998.
Revenues from related parties for the first nine months of fiscal 1998 included
27 low income homes with a sales value of $1,472,000. This sale has satisfied,
in part, the Company's low income housing requirements in Mount Laurel Township,
New Jersey. The selling prices of these homes, which is determined by state
statute, were the same as if the homes had been sold to unaffiliated third
parties. The increase in revenues for the first nine months of fiscal 1999, as
compared to the first nine months of fiscal 1998, is primarily attributable to
the number of units sold which is the result of the expanding geographic scope
of the Company's operations and favorable economic conditions affecting unit
sales volume and price. The average selling price per unit increased to
approximately $198,000 during the first nine months of fiscal 1999, as compared
to approximately $180,000 during the first nine months of fiscal 1998. The
increase in average selling price is partially due to an increase in the base
sale price per unit, option revenue per unit, and an increase over the prior
comparable period in the percentage of single family homes delivered when
compared to total homes delivered for the period.
8
<PAGE>
Earned revenues for the third quarter of fiscal 1999 increased $7,038,000 to
$31,324,000, or 29%, compared to the third quarter of fiscal 1998. The third
quarter fiscal 1999 increase in earned revenues is primarily attributable to an
increase in residential property revenues and an increase in land sales.
Revenues from the sale of residential homes included 134 homes totaling
$28,488,000 during the third quarter of fiscal 1999, as compared to 122 homes
totaling $23,661,000 during the third quarter of fiscal 1998. The average
selling price per unit has increased to approximately $205,000 during the third
quarter of fiscal 1999, as compared to approximately $188,000 during the third
quarter of fiscal 1998. The increase in average selling price is due to an
increase in the base sale price per unit, option revenue per unit, and an
increase over the prior comparable quarter, in the percentage of single family
homes delivered when compared to total homes delivered for the quarter. Land
sales for the third quarter of fiscal 1999 increased primarily due to an
increase in individual lots sold compared to the third quarter of fiscal 1998.
Costs and Expenses
- ------------------
Costs and expenses for the first nine months of fiscal 1999 increased
$31,840,000, or 45.2%, compared with the first nine months of fiscal 1998. The
first nine months of fiscal 1999 cost of residential properties increased
$27,492,000 to $86,757,000, or 46.4%, when compared with the first nine months
of fiscal 1998. This increase in residential property costs is slightly less
than the percentage increase in residential property revenues when compared with
the same period in fiscal 1998. Overall profit margins on residential properties
improved due to positive home pricing and increased sales volume as a result of
strong customer demand. The cost of residential properties as a percentage of
residential property revenues was 84.8% for the first nine months of fiscal 1999
compared with 85.5% for the first nine months of fiscal 1998.
For the first nine months of fiscal 1999, selling, general and
administrative expenses increased $1,351,000 to $9,704,000, or 13.9%, when
compared with the first nine months of fiscal 1998. The year-to-date fiscal 1999
increase in selling, general and administrative expenses is attributable to an
increase in incentives related to the increase in residential property revenues
and profitability. In addition, the Company's advertising costs increased due to
the overall increase in communities open during fiscal 1999 when compared with
the prior fiscal period. Although advertising costs increased, the percentage
increase in advertising costs was significantly less than the percentage
increase in residential property revenues as the Company contained costs by
combined advertising for many new communities located within the Philadelphia
Metropolitan Area. The selling, general and administrative expenses as a
percentage of residential property revenues decreased to 10.8% during the first
nine months of fiscal 1999 compared to 14.3% for the comparable period in the
prior fiscal year.
Costs and expenses for the third quarter of fiscal 1999 increased
$5,781,000, or 23.9%, compared with the third quarter of fiscal 1998. The third
quarter fiscal 1999 cost of residential properties increased $3,852,000 to
$24,065,000, or 19.1%, when compared with the third quarter of fiscal 1998. The
increase in residential property costs is less than the percentage increase in
residential property revenues when compared with the same period in fiscal 1998.
Thus, overall profit margins on residential properties improved due to positive
home pricing and increased sales volume as a result of strong customer demand.
The cost of residential properties as a percentage of residential property
revenues was 84.5% for the third quarter of fiscal 1999 compared with 85.4%
9
<PAGE>
for the third quarter of fiscal 1998. In addition, the cost of land sales for
the third quarter of fiscal 1999 increased $1,655,000 when compared with the
third quarter of fiscal 1998. The increase in the cost of land sales is due to
the overall increase in land sale revenues. The cost of land sales as a
percentage of land sale revenues was 80.2% for the third quarter of fiscal 1999
compared with 95.7% for the third quarter of fiscal 1998.
For the third quarter of fiscal 1999, selling, general and
administrative expenses increased $198,000 to $3,572,000, or 5.9%, when compared
with the third quarter of fiscal 1998. The third quarter fiscal 1999 increase in
selling, general and administrative expenses is attributable to an increase in
advertising and incentives related to the increase in residential property
revenues and profitability. The selling, general and administrative expenses as
a percentage of residential property revenues decreased to 12.5% during the
third quarter of fiscal 1999 compared to 14.3% for the comparable quarter in the
prior fiscal year.
Net Income
- ----------
Net income for the first nine months of fiscal 1999 was $3,328,000
($.29 basic earnings per share, $.23 diluted earnings per share) compared with
$406,000 ($.04 basic and diluted earnings per share) for the first nine months
of fiscal 1998 and net income for the third quarter of fiscal 1999 was $859,000
($.08 basic earnings per share, $.06 diluted earnings per share) compared with
$69,000 ($.01 basic and diluted earnings per share) for the third quarter of
fiscal 1998. This increase in net income is primarily attributable to an
increase in residential property revenues as a result of unit sales volume,
combined with a decrease in selling, general and administrative costs as a
percentage of residential property revenues.
Inflation
- ---------
Inflation can have a significant impact on the Company's liquidity.
Rising costs of land, materials, labor, interest and administrative costs have
generally been recoverable in prior years through increased selling prices. The
Company has been able to increase prices to cover portions of these costs.
However, there is no assurance the Company will be able to continue to increase
prices to cover the effects of inflation in the future.
Year 2000
- ---------
The Company began assessing its Year 2000 ("Y2K") compliance issues at
the beginning of fiscal 1998 and at that time determined that its primary
internal computer hardware and computer software were not Y2K compliant.
Subsequently, the Company determined that it would be more cost efficient to
install a new Y2K compliant software package than to modify the existing
software package. In the first quarter of fiscal 1999, the Company contracted to
purchase a new software package, including several specific enhancements to
modify the software to meet the Company's needs. As part of the Company's
contingency plan, in order to mitigate the risks associated with the possibility
that the software enhancements will not be completed on time, the Company has
required that the base software package be placed in escrow. The Company
believes that implementation of the base software package will require
substantially less time than the enhanced software package.
10
<PAGE>
In addition, in the first quarter of fiscal 1999, the Company upgraded its
primary computer hardware system and installed the base software package of its
new computer system for testing. The Company then began intensive testing of the
new base software package. At the same time, the Company began working closely
with the software vendor to complete the specifications for its required
enhancements to the software. As of April 30, 1999, the enhancements have been
completed and the Company has completed its testing of the base software and the
modifications. In addition, as of April 30, 1999, the Company has converted to
the new software for purchasing and sales related activities, and anticipates
completing the conversion, primarily accounting related activities, by mid-May
of 1999.
Through March 31, 1999, the Company has incurred approximately $500,000
in connection with Y2K readiness, including consulting fees, internal staff
costs and other expenses. The Company expects to incur additional expenditures
of approximately $100,000 through the end of the current fiscal year on its Y2K
compliance project.
The Company is also investigating the Y2K compliance status of its
vendors, subcontractors and suppliers through the Company's own internal vendor
compliance effort. This investigation began in early fiscal 1999 and will
continue through the year 2000 as the Company continues to assess the Y2K
readiness of its vendors, subcontractors and suppliers. Any non-response or
inadequate response from such business partner may cause the Company to
re-evaluate its relationship with such partner. Since the Company does not rely
on any individual vendor, subcontractor or supplier for a significant portion of
its operations, the potential impact of Y2K non-compliance risks by any
individual vendor, subcontractor or supplier is not expected to have any
material effect on the Company.
While the Company believes it is taking all appropriate steps to
achieve internal Y2K compliance, any potential future business interruptions,
costs, damages or losses related thereto, are also dependent upon the Y2K
compliance of third parties. In the event that the Company or a combination of
the Company's vendors, subcontractors or suppliers experience disruptions due to
the Y2K issue, the Company's operations could be adversely affected. The Y2K
issue is universal and complex, as virtually every computer operation will be
affected in some way. Consequently, no assurance can be given that complete Y2K
compliance can be achieved without significant additional costs.
Forward Looking Statement
- -------------------------
The Company's estimates of costs and completion dates for its Y2K
readiness program represent management's best estimates. These estimates are
based upon many assumptions, including the availability of external resources to
assist with systems remediation and replacement efforts, key third party
suppliers, vendors and customers being Y2K compliant and in the event of
non-compliance, the Company's execution of its contingency plan. If any of the
assumptions ultimately prove to have been incorrect, the cost and completion
dates set forth above could be substantially and adversely affected.
11
<PAGE>
Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private
Securities Litigation Reform Act of 1995.
The following important factors could cause Orleans Homebuilders'
actual consolidated results to differ materially from those expressed in any
forward-looking statements made by, or on behalf of, Orleans Homebuilders, Inc.:
o changes in consumer confidence due to perceived uncertainty of future
employment opportunities and other factors;
o competition from national and local homebuilders in the Company's
market areas;
o building material price fluctuations;
o changes in mortgage interest rates charged to buyers of the Company's
homes;
o changes in the availability and cost of financing for the Company's
operations, including land acquisition;
o revisions in federal, state and local tax laws which provide incentives
for home ownership;
o delays in obtaining land development permits as a result of (i)
federal, state and local environmental and other land development
regulations, (ii) actions taken or failed to be taken by governmental
agencies having authority to issue such permits, and (iii) opposition
from third parties; and
o increased cost of suitable development land.
12
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit 27 - Financial Data Schedule (included in
electronic filing format only).
(b) Reports on Form 8-K.
None.
13
<PAGE>
ORLEANS HOMEBUILDERS, INC. AND SUBSIDIARIES
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.
ORLEANS HOMEBUILDERS, INC.
(Registrant)
May 14, 1999 /s/ Michael T. Vesey
----------------------
Michael T. Vesey
President and Chief Operating Officer
May 14, 1999 /s/ Joseph A. Santangelo
----------------------
Joseph A. Santangelo
Treasurer, Secretary and
Chief Financial Officer
14
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> MAR-31-1999
<CASH> 4,640
<SECURITIES> 0
<RECEIVABLES> 4,791
<ALLOWANCES> 0
<INVENTORY> 107,741
<CURRENT-ASSETS> 0
<PP&E> 2,861
<DEPRECIATION> 925
<TOTAL-ASSETS> 133,430
<CURRENT-LIABILITIES> 0
<BONDS> 75,962
0
3,000
<COMMON> 1,270
<OTHER-SE> 19,780
<TOTAL-LIABILITY-AND-EQUITY> 133,430
<SALES> 102,338
<TOTAL-REVENUES> 107,723
<CGS> 89,928
<TOTAL-COSTS> 102,305
<OTHER-EXPENSES> 802
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 520
<INCOME-PRETAX> 5,418
<INCOME-TAX> 1,995
<INCOME-CONTINUING> 3,423
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,423
<EPS-PRIMARY> .29
<EPS-DILUTED> .23
</TABLE>
