<PAGE>
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 September 30, 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. 1-6830
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 (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 common stock outstanding as of November 6, 1999: 11,357,893
(excluding 1,340,238 shares held in Treasury).
<PAGE>
Orleans Homebuilders, Inc. and Subsidiaries
Index to Financial Statements
PAGE
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheets at September 30, 1999
and June 30, 1999 1
Consolidated Statements of Operations and Changes
in Retained Earnings for the three nionths ended
September 30, 1999 and 1998 2
Consolidated Statements of Cash Flows for the
three months ended September 30, 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 11
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Orleans Homebuilders, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands)
<TABLE>
<CAPTION>
(Unaudited)
September 30, June 30,
1999 1999
----------------- -----------------
<S> <C> <C>
Assets
Cash $ 4,669 $ 6,738
Restricted cash - customer deposits 6,257 6,128
Real estate held for development and sale:
Residential properties completed or under construction 57,848 51,800
Land held for development or sale and improvements 65,472 59,763
Property and equipment, at cost, less accumulated depreciation 1,936 1,948
Receivables, deferred charges and other assets 9,715 10,160
--------- ---------
Total Assets $ 145,897 $ 136,537
========= =========
Liabilities and Shareholders' Equity
Liabilities:
Accounts payable $ 13,897 $ 15,530
Accrued expenses 12,886 10,353
Customer deposits 6,257 6,128
Mortgage and other note obligations primarily secured by real
estate held for development and sale 74,552 67,129
Notes payable - related parties 5,251 5,999
Other notes payable 3,150 2,952
Deferred income taxes 2,504 2,504
--------- ---------
Total Liabilities 118,497 110,595
--------- ---------
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) 3,000 3,000
Common stock, $.10 par, 20,000,000 shares authorized,
12,698,131 shares issued 1,270 1,270
Capital in excess of par value - common stock 17,726 17,726
Retained earnings 6,379 4,921
Treasury stock, at cost (1,340,238 shares held at
September 30, 1999 and June 30, 1999) (975) (975)
--------- ---------
Total Shareholders' Equity 27,400 25,942
--------- ---------
Total Liabilities and Shareholders' Equity $ 145,897 $ 136,537
========= =========
</TABLE>
See notes to consolidated financial statements
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<PAGE>
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
September 30,
1999 1998
-------- --------
<S> <C> <C>
Earned revenues
Residential properties $ 41,070 $ 34,541
Land sales 405 920
Other income 504 473
-------- --------
41,979 35,934
-------- --------
Costs and expenses
Residential properties 34,838 29,339
Land sales 350 778
Other 211 229
Selling, general and administrative 4,043 3,746
Interest
Incurred 1,785 2,120
Less capitalized (1,692) (1,933)
-------- --------
39,535 34,279
-------- --------
Income from operations before income taxes 2,444 1,655
Income tax expense 933 629
-------- --------
Net income 1,511 1,026
Preferred dividends 53 -
-------- --------
Net income available for common shareholders 1,458 1,026
Retained earnings (deficit), at beginning of period 4,921 (299)
-------- --------
Retained earnings, at end of period $ 6,379 $ 727
======== ========
Basic earnings per share $ 0.13 $ 0.09
======== ========
Diluted earnings per share $ 0.10 $ 0.08
======== ========
</TABLE>
See notes to consolidated financial statements
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<PAGE>
Orleans Homebuilders, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1999 1998
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,511 $ 1,026
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 53 79
Changes in operating assets and liabilities:
Restricted cash - customer deposits (129) (377)
Real estate held for development and sale (11,757) 1,492
Receivables, deferred charges and other assets 445 (900)
Accounts payable and other liabilities 900 983
Customer deposits 129 377
------- -------
Net cash provided by (used in) operating activities (8,848) 2,680
------- -------
Cash flows from investing activities:
Purchases of property and equipment (41) (123)
------- -------
Net cash used in investing activities (41) (123)
------- -------
Cash flows from financing activities:
Borrowings from loans secured by real estate assets 21,720 21,060
Repayment of loans secured by real estate assets (14,297) (23,315)
Repayment of subordinated debentures - (22)
Borrowings from other note obligations 314 42
Repayment of other note obligations (864) (402)
Preferred stock dividend (53) -
Distribution of minority interests - (462)
------- -------
Net cash provided by (used in) financing activities 6,820 (3,099)
------- -------
Net increase (decrease) in cash (2,069) (542)
Cash at beginning of year 6,738 2,833
------- -------
Cash at end of year $ 4,669 $ 2,291
======= =======
Supplemental disclosure of cash flow activities:
Interest paid, net of amounts capitalized $ 67 $ -
======= =======
Income taxes paid $ 999 $ 631
======= =======
</TABLE>
See notes to consolidated financial statements
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<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, 1999 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 ended September 30, 1999 and 1998, respectively,
are shown in the following table.
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1999 1998
--------- ----------
<S> <C> <C>
Total common shares issued 12,698,131 12,698,131
Less: Average treasury shares outstanding (1,340,238) (1,342,113)
---------- ----------
Basic EPS shares 11,357,893 11,356,018
Effect of assumed shares issued under treasury
stock method for stock options 373,384 407,046
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 -
---------- ----------
Diluted EPS shares 15,731,277 13,763,064
========== ==========
Net income available for common shareholders $1,458,000 $1,026,000
Effect of assumed conversion of $3 million
Convertible Subordinated 7% Note 32,550 32,550
Effect of assumed conversion of $3 million
Series D Preferred Stock 52,500 -
---------- -----------
Adjusted net income for diluted EPS $1,543,050 $1,058,550
========== ===========
</TABLE>
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(C) Residential properties completed or under construction consists of the
following:
<TABLE>
<CAPTION>
(In thousands)
September 30, 1999 June 30, 1999
------------------ -------------
<S> <C> <C>
Under contract for sale $ 48,592 $ 41,144
Unsold 9,256 10,656
--------- ---------
$ 57,848 $ 51,800
========= =========
</TABLE>
(D) 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.
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<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, to 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. During the first
quarter of fiscal 2000, the Company purchased land for future development with
an aggregate purchase price of approximately $10,373,000. These land
acquisitions were financed with secured mortgage obligations and available cash.
At September 30, 1999, the Company had approximately $63,648,000 available to be
drawn under existing secured revolving and construction loans for planned
development expenditures. Additionally, the Company had approximately $4,750,000
available to be drawn under existing unsecured line of credit and working
capital arrangements with Jeffrey P. Orleans, Chairman and Chief Executive
Officer of the Company. The Company believes that the funds generated from
operations and financing commitments from available lenders will provide the
Company with sufficient capital to meet its existing operating needs.
Results of Operations
The following table sets forth certain details as to residential sales
activity for the three months ended September 30, 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.
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<PAGE>
Three Months Ended
------------------
September 30, 1999 September 30, 1998
------------------ ------------------
(Dollars in thousands)
Revenues Earned $ 41,070 $34,541
Units 185 188
Average Price Per Unit $ 222 $ 184
New Orders $ 41,834 $32,033
Units 171 161
Average Price Per Unit $ 245 $ 199
Backlog $101,829 $68,486
Units 411 313
Average Price Per Unit $ 248 $ 219
Dollar volume of new orders for the three months ended September 30,
1999 increased by approximately 31% to $41,834,000 on 171 orders, compared to
$32,033,000 on 161 orders during the three months ended September 30, 1998. The
increase in new orders can be attributed to adequate available financing for
home buyers as a result of the overall favorable economic climate throughout the
region in which the Company sells homes. The average price per unit of new
orders increased primarily due to an increase in the average price of single
family homes sold in the first quarter of fiscal 2000, compared to the first
quarter of fiscal 1999. The increase in the average price of single family homes
sold can be primarily attributed to new communities in Bucks County,
Pennsylvania and Somerset County, New Jersey, with an average selling price of
approximately $647,000. In addition, the average unit sales price increased for
the majority of communities open during the first quarter of fiscal 2000, when
compared with the same communities and units offered for sale in the first
quarter of fiscal 1999.
The dollar backlog at September 30, 1999, increased approximately 49%
to $101,829,000 on 411 homes, as compared to the backlog at September 30, 1998
of $68,486,000 on 313 homes. The Company's continued geographic expansion with
its new communities, coupled with favorable economic conditions and consumer
sentiment, resulted in the increased backlog.
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.
However, there is no assurance the Company will be able to continue to increase
prices to cover the effects of inflation in the future.
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<PAGE>
Year 2000
The Company began assessing its Year 2000 ("Y2K") compliance issues
during fiscal 1998 and at that time determined that its primary internal
computer hardware and computer software were not Y2K compliant. During fiscal
1999, the Company purchased a new software package, including several specific
enhancements to modify the software to meet the Company's needs. In addition,
the Company upgraded its primary computer hardware system. The Company then
began intensive testing of the new base software package and, at the same time,
began working closely with the software vendor to complete the specifications
for its required enhancements to the software. During fiscal 1999, the
enhancements were completed and the Company converted to the new enhanced Y2K
compliant software package.
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 during fiscal 1999 and will continue
through calendar 1999 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 any 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 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. If any of the assumptions ultimately
prove to have been incorrect, the completion dates set forth above could be
substantially and adversely affected.
Three Months Ended September 30, 1999 and 1998
Operating Revenues
Earned revenues for the first quarter of fiscal 2000 increased
$6,045,000 to $41,979,000, or 16.8%, compared to the first quarter of fiscal
1999. Revenues from the sale of residential homes
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<PAGE>
included 185 homes totaling $41,070,000 during the first quarter of fiscal 2000,
as compared to 188 homes totaling $34,541,000 during the first quarter of fiscal
1999. The increase in revenues for the first quarter of fiscal 2000, as compared
to the first quarter of fiscal 1999, is primarily attributable to the increase
in the average selling price per unit. The average selling price per unit
increased to approximately $222,000 during the first quarter of fiscal 2000, as
compared to approximately $184,000 during the comparable quarter of the prior
fiscal year. The increase in average selling price is primarily due to an
increase in the base 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.
Costs and Expenses
Costs and expenses for the first quarter of fiscal 2000 increased
$5,256,000 or 15.3%, compared with the first quarter of fiscal 1999. The first
quarter of fiscal 2000 cost of residential properties increased $5,499,000 to
$34,838,000, or 18.7%, when compared with the first quarter of fiscal 1999. This
increase in residential property costs is comparable to the percentage increase
in residential property revenues when compared with the first quarter of fiscal
1999. Overall profit margins on residential properties improved nominally, as
the gross profit of residential properties as a percentage of residential
property revenues was 15.2% for the first quarter of fiscal 2000 compared with
15.1% for the first quarter of fiscal 1999.
For the first quarter of fiscal 2000, selling, general and
administrative expenses increased $297,000 to $4,043,000, or 7.9%, when compared
with the first quarter of fiscal 1999. The first quarter fiscal 2000 increase in
selling, general and administrative expenses is primarily attributable to an
increase in sales incentives as a result of the increase in residential property
revenues. The selling, general and administrative expenses as a percentage of
residential property revenues decreased to 9.8% during the first quarter of
fiscal 2000, compared to 10.8% in the comparable quarter of the prior fiscal
year. The decrease in selling, general and administrative expenses as a
percentage of residential property revenue can be attributed to an increase in
revenues, combined with the fixed portion of costs related to advertising, sales
office expense and administrative office expense, remaining relatively
consistent with the prior year.
Net Income Available for Common Shareholders
Net income available for common shareholders for the first quarter of
fiscal 2000 was $1,458,000 ($.13 basic and $.10 diluted earnings per share),
compared with $1,026,000 ($.09 basic and $.08 diluted earnings per share) for
the first quarter of fiscal 1999. This increase in net income available for
common shareholders is primarily attributable to an increase in residential
revenues as a result of increases in the average selling price per unit,
combined with a decrease in selling, general and administrative costs as a
percentage of residential property revenues.
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<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 units;
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.
- 10 -
<PAGE>
PART II. OTHER INFORMATION
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.
On September 20, 1999, the Company filed a Form 8-K under Item
4 for Changes in Registrant's Certifying Accountants.
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<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)
November 12, 1999 _______________________________
Michael T. Vesey
President and Chief Operating Officer
November 12, 1999 _______________________________
Joseph A. Santangelo
Treasurer, Secretary and
Chief Financial Officer
- 12 -
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 4,669
<SECURITIES> 0
<RECEIVABLES> 6,257
<ALLOWANCES> 0
<INVENTORY> 123,320
<CURRENT-ASSETS> 0
<PP&E> 3,086
<DEPRECIATION> 1,150
<TOTAL-ASSETS> 145,897
<CURRENT-LIABILITIES> 0
<BONDS> 82,953
0
3,000
<COMMON> 1,270
<OTHER-SE> 23,130
<TOTAL-LIABILITY-AND-EQUITY> 145,897
<SALES> 41,475
<TOTAL-REVENUES> 41,979
<CGS> 35,188
<TOTAL-COSTS> 39,535
<OTHER-EXPENSES> 211
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 93
<INCOME-PRETAX> 2,444
<INCOME-TAX> 933
<INCOME-CONTINUING> 1,511
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,511
<EPS-BASIC> .13
<EPS-DILUTED> .10
</TABLE>
