<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------------
FORM 10-K/A-2
Annual Report pursuant to Section 13 of The Securities Exchange Act of 1934
For the fiscal year ended December 31, 1995
File No. 1-6963
ORIOLE HOMES CORP.
------------------
1690 South Congress Avenue, Suite 200, Delray Beach, Florida 33445
(407) 274-2000
Florida 59-1228702
- ------------------------------------ ----------------------------
(State of Incorporation) (I.R.S. Employer I.D.)
Securities registered pursuant of Section 12(b) of
the act:
Name of Each Exchange on
Title of Each Class Which Registered
- ------------------------------------ ------------------------
Class A Common Stock, $.10 par Value American Stock Exchange
Class B Common Stock, $.10 par Value American Stock Exchange
12 1/2% Senior Notes due 2003
-------------------------
The Registrant (1) HAS filed all reports required to be filed by
Section 13 of the Securities Exchange Act of 1934 during the preceding twelve
months; and (2) HAS been subject to the filing requirements for at least the
past 90 days.
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K/A or any
amendment to this form 10-K/A [X].
As of March 11, 1996, the Company had outstanding 1,891,249 shares of
its Class A Common Stock and 2,734,275 shares of its Class B Common Stock.
The aggregate market value of voting stock held by non-affiliates of
the Registrant is $24,173,243 as of March 11, 1996.
Part II is partially incorporated by reference from the Registrant's Annual
Report to Shareholders for the year ended December 31, 1995, and Part III is
incorporated by reference from the Registrant's Proxy statement for the 1996
Annual Meeting.
<PAGE> 2
ITEM 8 Item 8 is hereby amended by deleting the Consolidated Statements of
Operations Table contained in the Company's 1995
Form 10-K and substituting the following table in lieu thereof:
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ORIOLE HOMES CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
ASSETS LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Cash and cash equivalents $ 3,275,615 $ 14,609,489
Receivables
Mortgage notes (Note B) 280,562 1,098,688
Due at closing 114,700 167,609
Income taxes (Note I) 1,660,846 --
------------ ------------
2,056,108 1,266,297
------------ ------------
Inventories (Notes A and C)
Land 103,435,218 112,721,638
Houses and condominiums completed or under
construction 48,306,006 40,497,339
Model houses and condominiums 3,386,194 2,199,908
------------ ------------
155,127,418 155,418,885
Less estimated costs of completion included
in inventories 23,699,916 28,592,120
------------ ------------
131,427,502 126,826,765
------------ ------------
Property and equipment (at cost) (Notes A, H and O)
Land 7,168,046 7,170,113
Buildings 22,283,655 22,473,045
Furniture, fixtures and equipment 5,445,387 5,432,784
------------ ------------
34,897,088 35,075,942
Less accumulated depreciation 10,892,078 10,447,207
------------ ------------
24,005,010 24,628,735
------------ ------------
Other
Prepaid expenses 2,378,932 1,990,535
Unamortized debt issuance costs 2,098,760 2,277,529
Investment in and advances to joint ventures (Note E) 5,625,000 7,000,000
Land held for investment (at cost) 3,001,783 2,996,901
Deferred income taxes (Note I) 458,375 --
Other assets 5,151,232 3,061,755
------------ ------------
18,714,082 17,326,720
------------ ------------
Total assets $179,478,317 $184,658,006
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 3
ORIOLE HOMES CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Liabilities
Line of credit (Note G) $ 8,500,000 $ -
Mortgage notes payable (Note H) 15,041,573 17,419,250
Accounts payable 7,328,804 6,464,417
Dividends payable -- 993,409
Customer deposits (Note J) 6,072,046 4,975,199
Accrued expenses and other liabilities (Note K) 8,393,132 7,820,330
Deferred income taxes (Note I) -- 1,104,706
Senior notes (Note L) 66,481,313 66,457,682
------------ ------------
Total liabilities 111,816,868 105,234,993
------------ ------------
Shareholders' equity (Notes L, M and N)
Class A common stock, $.10 par value
Authorized - 10,000,000 shares
Issued - 1,891,249 in 1995 and
1,893,349 in 1994 189,125 189,335
Class B common stock, $.10 par value
Authorized - 10,000,000 shares
Issued - 2,734,275 in 1995 and
2,732,175 in 1994 273,428 273,218
Additional paid-in capital 19,267,327 19,267,327
Retained earnings 47,931,569 59,693,133
------------ ------------
Total shareholders equity 67,661,449 79,423,013
------------ ------------
Total liabilities and shareholders' equity $179,478,317 $184,658,006
============ ============
</TABLE>
<PAGE> 4
ORIOLE HOMES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1995 1994 1993
----------------- ----------------- ------------------
<S> <C> <C> <C>
Revenues
Sales of houses and condominiums $ 73,409,093 $ 110,116,572 $ 98,302,003
Sales of land 1,610,441 1,959,779 891,041
Other operating revenues 3,070,455 3,365,024 3,600,196
Gain on sales of property and land held for
investment, net 173,619 202,374 42,258
Interest, rentals and other income (Note O) 3,972,662 4,333,548 3,260,305
------------- ------------- -------------
82,236,270 119,977,297 106,095,803
------------- ------------- -------------
Costs and expenses
Cost of houses and condominiums sold 62,232,488 91,778,577 80,682,884
Non-recurring write-down of inventory (Note C) 13,917,025 -- --
Cost of land sold 1,384,516 1,726,119 772,020
Costs relating to other operating revenues 3,180,214 2,804,767 2,517,756
Selling, general and administrative
expenses 15,532,512 16,313,685 16,001,923
Interest costs incurred 10,653,413 10,430,616 10,154,739
Interest capitalized (deduct) (9,898,999) (9,736,452) (9,997,908)
------------- ------------- -------------
97,001,169 113,317,312 100,131,414
------------- ------------- -------------
Income (loss) before provision for (benefit
from) income taxes and extraordinary
charge (14,764,899) 6,659,985 5,964,389
Provision for (benefit from) income taxes
(Note I) (3,003,335) 2,523,065 2,324,023
------------- ------------- -------------
Income (loss) before extra-
ordinary charge (11,761,564) 4,136,920 3,640,366
Extraordinary charge - loss on early retire-
ment of debt, net of income taxes -- -- (999,288)
------------- ------------- -------------
Net income (loss) $ (11,761,564) $ 4,136,920 $ 2,641,078
============= ============= =============
Net income (loss) per common share before
extraordinary charge $ (2.54) $ .89 $ .79
Extraordinary charge -- -- (.22)
------------- ------------- -------------
Net income (loss) per Class A and Class B
common share $ (2.54) $ .89 $ .57
============= ============= =============
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 5
ORIOLE HOMES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Increase (decrease) in cash
Cash flows from operating activities
Net income (loss) $ (11,761,564) $ 4,136,920 $ 2,641,078
Adjustments to reconcile net income (loss) to net cash
(used in) provided by operating activities
Depreciation 1,258,516 1,234,118 1,265,836
Amortization 437,006 474,897 333,062
Deferred income taxes (1,563,081) 382,344 (11,748)
Gain on sales of property and equipment and
other assets (173,619) (202,374) (42,258)
Loss on early retirement of debt -- -- 1,602,194
Changes in assets and liabilities
(Increase) decrease in receivables (789,811) 356,362 250,624
(Increase) decrease in inventories (4,596,546) 1,575,418 (10,058,507)
(Increase) in other assets (2,477,874) (2,512,938) (650,765)
Increase (decrease) in accounts payable 864,387 (43,474) 1,256,048
Increase (decrease) in customer deposits 1,096,847 (1,116,371) 1,110,379
Increase (decrease) in accrued expenses
and other liabilities 572,802 (113,292) 3,773,250
------------- ------------- -------------
Total adjustments (5,371,373) 34,690 (1,171,885)
------------- ------------- -------------
Net cash (used in) provided by
operating activities (17,132,937) 4,171,610 1,469,193
------------- ------------- -------------
Cash flows from investing activities
Return of (investment in) joint ventures 1,375,000 (3,500,000) (3,500,000)
Land held for investment (4,882) (205,451) --
Capital expenditures (1,212,533) (702,466) (416,120)
Proceeds from sales of property and equipment 747,170 780,966 152,771
------------- ------------- -------------
Net cash provided by (used in) investing
activities 904,755 (3,626,951) (3,763,349)
------------- ------------- -------------
Cash flows from financing activities
Proceeds from mortgage notes 345,508 3,444,962 --
Payment of mortgage notes (2,723,185) (425,191) (160)
Borrowings under line of credit agreement 20,500,000 9,500,000 196,317
Repayments under line of credit agreement (12,000,000) (9,596,317) (13,100,000)
Payment of term loan -- -- (22,000,000)
Repurchase of debentures -- -- (18,563,000)
Proceeds from issuance of 12 1/2% senior notes -- -- 68,069,400
Repurchase of senior notes (126,000) (1,910,000) --
Issuance costs (108,606) (75,000) (2,681,514)
Dividends paid (993,409) (1,524,156) (1,918,458)
------------- ------------- -------------
Net cash provided by (used in) financing
activities 4,894,308 (585,702) 10,002,585
------------- ------------- -------------
Net (decrease) increase in cash (11,333,874) (41,043) 7,708,429
Cash and cash equivalents at beginning of year 14,609,489 14,650,532 6,942,103
------------- ------------- -------------
Cash and cash equivalents at end of year $ 3,275,615 $ 14,609,489 $ 14,650,532
============= ============= =============
Supplemental disclosures of cash flow information
Cash paid during the year for:
Interest (net of amount capitalized) $ 610,777 $ 624,828 $ --
Income taxes $ 643,049 $ 3,268,315 $ 1,501,243
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 6
ORIOLE HOMES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
Common Stock
--------------------------------------------------------------
Class A Class B Additional
-------------------------- -------------------------- Paid-in Retained
Shares Amount Shares Amount Capital Earnings
------ ------ -------- ------ ------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1,1993 1,895,564 $ 189,557 2,729,960 $ 272,996 $ 19,267,327 $ 57,351,158
Net income for 1993 -- -- -- -- -- 2,641,078
Stock conversion (15) (2) 15 2 -- --
Cash dividends
Class A common stock $.55
per share -- -- -- -- -- (1,042,555)
Class B common stock $.60
per share -- -- -- -- -- (1,637,981)
------------ ------------ ------------ ------------ ------------ ------------
Balance at December 31,1993 1,895,549 189,555 2,729,975 272,998 19,267,327 57,311,700
Net income for 1994 -- -- -- -- -- 4,136,920
Stock conversion (2,200) (220) 2,200 220 -- --
Cash dividends
Class A common stock $.35
per share -- -- -- -- -- (663,002)
Class B common stock $.40
per share -- -- -- -- -- (1,092,485)
------------ ------------ ------------ ------------ ------------ ------------
Balance at December 31, 1994 1,893,349 189,335 2,732,175 273,218 19,267,327 59,693,133
Net loss for 1995 -- -- -- -- -- (11,761,564)
Stock conversion (2,100) (210) 2,100 210 -- --
------------ ------------ ------------ ------------ ------------ ------------
Balance at December 31, 1995 1,891,249 $ 189,125 2,734,275 $ 273,428 $ 19,267,327 $ 47,931,569
============ ============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 7
ORIOLE HOMES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER
INFORMATION
Principles of Consolidation
The accompanying Consolidated Financial Statements include the
accounts of Oriole Homes Corp. and all wholly-owned subsidiaries (the
"Company"). Significant intercompany accounts and transactions have been
eliminated in consolidation.
Operations
The Company, a Florida corporation, is engaged principally in the design,
construction, marketing and sale of single and multi-family residential
homes (including condominiums) primarily in southeast (Palm Beach, Broward
and Martin Counties) Florida. The Company also has developments in Naples
and Ocala, Florida.
Revenue Recognition
The Company records revenues and profits from sales of real estate in
accordance with generally accepted accounting principles governing profit
recognition for real estate transactions.
Inventories
Inventories are carried at cost, plus accumulated development and
construction costs (including capitalized interest and real estate taxes).
House and condominium inventories which are completed and being held for
sale aggregate approximately $13,275,000 in 1995 and $12,152,000 in 1994.
The accumulated costs of land, houses and condominiums are not in excess of
estimated net realizable value. Estimated net realizable value is based
upon sales achieved and backlog in the normal course of business less
estimated cost to complete and dispose of the property. The Company's
management, on an on-going basis, reviews individual projects in inventory
for impairment.
Interest Capitalization
The Company follows the practice of capitalizing certain interest costs
incurred on land under development and houses and condominiums under
construction. Such capitalized interest is included in cost of house and
condominium sales when the units are delivered. During the years 1995,
1994, and 1993 respectively, the Company capitalized interest in the amount
of $9,898,999, $9,736,452 and $9,997,908 and expensed as a component of
cost of goods sold $6,270,173, $9,313,121 and $10,036,456.
<PAGE> 8
ORIOLE HOMES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER
INFORMATION - Continued
Depreciation
The Company provides for depreciation of property and equipment by the
straight-line and accelerated methods over the following estimated useful
lives of the various classes of depreciable assets:
Buildings 25 to 27 years
Furniture, fixtures and equipment 5 to 7 years
Debt Issuance Costs and Unamortized Discount
Costs incurred in connection with obtaining debt have been deferred and are
being amortized by the interest method over the term of the debt.
Cash Equivalents
Cash equivalents consist of highly liquid investments with maturities of
three months or less when purchased.
Concentration of Credit Risk
The Company's cash and cash equivalents are placed mainly with one
institution with a high credit rating. The carrying amount approximates
fair value due to the short maturity of these instruments.
Net Income Per Share
Earnings (loss) per common share is computed by dividing net income (loss)
by the weighted average number of shares outstanding during each year:
4,625,524 shares in 1995, 1994 and 1993.
Advertising
The Company expenses advertising costs as incurred, except for sales
brochures and site plans which are accounted for in "Other Assets." Sales
brochures and site plans are expensed as the materials are used or
distributed to customers. Advertising expense for the years ended December
31, 1995, 1994 and 1993 was $1,411,412, $1,713,158 and $1,989,756,
respectively.
(continued)
<PAGE> 9
ORIOLE HOMES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION -
Continued
Estimates
In preparing financial statements in conformity with generally accepted
accounting principles, management makes estimates and assumptions (i.e.
estimated costs to complete for construction inventory or estimated net
realizable value) that affect the reported amounts and disclosures of
assets and liabilities at the date of the financial statements, as well as
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Income Taxes
The Company accounts for income taxes under the asset and liability method.
Deferred tax assets and liabilities are recognized for future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
tax bases. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled.
Financial Statement Reclassification
Certain amounts reflected in the consolidated financial statements for the
year ended December 31, 1994 have been reclassified to conform to the
presentation for the year ended December 31, 1995.
NOTE B - MORTGAGE NOTES
First and second mortgage notes receivable bear interest at rates ranging
from 7% to 10%. The Company's receivables are primarily mortgages which are
collateralized by real estate. Minimum payments required on the first and
second mortgage notes in each of the five years subsequent to December 31,
1995 are: 1996 - $3,546; 1997 - $3,844; 1998 - $4,167; 1999 - $266,234 and
2000 - $2,771.
NOTE C - SPECIAL CHARGE
The Company recorded, in the fourth quarter, a non-recurring charge of
$13,917,025 ($11,079,381, net of tax benefit, or $2.40 per common share)
related to the write-down of certain land inventory to its estimated net
realizable value. The write-down pertains to land inventory for
approximately 360 unsold housing units located in three developments. These
three developments were originally purchased in 1989 and 1991.
<PAGE> 10
ORIOLE HOMES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE D - LIFE INSURANCE
The Company purchased life insurance on the lives of two of its
officers and their spouses (officers) who own significant shares of common
stock of the Company. An irrevocably designated trustee of the officers is
the beneficiary. The accumulated premiums on the above policies during the
years ended December 31, 1995 and 1994 were $641,352 and $427,568,
respectively, and are classified as other assets.
Upon the death of the officers or termination of the policies, the Company
shall receive an amount equal to the aggregated premiums paid less any
policy loans and unpaid interest or cash withdrawals received by the
Company.
In connection with the policies, the Company has an option with the
officers to acquire all or any part of the Class A or Class B common stock
of the Company owned by such individuals at the market price of such
securities at the time of their death.
NOTE E - INVESTMENT IN AND ADVANCES TO JOINT VENTURES
The Company entered into three joint venture agreements during 1995 and
1994. The first two joint ventures construct and sell homes. The third
joint venture provides mortgage financing for the Company's home sales. The
joint ventures are accounted for using the cost method. The Company's
investment and advances are as follows:
<TABLE>
<CAPTION>
1995 1994
--------------- ---------------
<S> <C> <C>
Advances $ - $ 1,350,000
Investment 5,625,000 5,650,000
--------------- ---------------
$ 5,625,000 $ 7,000,000
=============== ===============
</TABLE>
<PAGE> 11
ORIOLE HOMES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE F - MORTGAGE SUBSIDIARY
South Florida Residential Mortgage Company (SFRMC), a wholly-owned
subsidiary of the Company, provides mortgage financing services. Summarized
financial information for SFRMC is as follows:
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Assets
First mortgage notes receivable $ - $ 513,465
Other assets 43,058 20,645
Due from parent company 848,940 414,875
------------ ------------
Total assets $ 891,998 $ 948,985
============ ============
Liabilities and shareholder's equity
Other liabilities $ 6,735 $ 29,787
Shareholder's equity 885,263 919,198
------------ ------------
Total liabilities and shareholder's
equity $ 891,998 $ 948,985
============ ============
Revenues $ 50,138 $ 293,734
Expenses 104,547 264,720
------------ ------------
Income (loss) before provision
for (benefit from) income taxes (54,409) 29,014
Provision for (benefit from) income taxes (20,474) 10,918
------------ ------------
Net income (loss) $ (33,935) $ 18,096
============ ============
</TABLE>
NOTE G - LINE OF CREDIT
A revolving loan agreement (line of credit) with a bank, collateralized by
land, provides up to $15,000,000 of borrowings, of which $6,500,000 is
available at December 31, 1995, at an interest rate of prime plus 1.5%. On
January 12, 1996, the line of credit was increased to $20,000,000. The
agreement expires July 1, 1997.
The line of credit can be used to finance ongoing development and
construction of residential real estate and short-term capital needs and
will only require monthly interest payments. The credit agreement has no
compensating balance arrangements and contains typical restrictions and
covenants, the most restrictive of which include the following:
a. The Company shall maintain, at all times through the life of the
loan, its consolidated tangible net worth at not less than
$60,000,000.
b. The Company's ability to incur additional debt is restricted by
covenants in the agreement.
(continued)
<PAGE> 12
ORIOLE HOMES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE G - LINE OF CREDIT - Continued
Average interest rates and balances outstanding, for revolving lines of
credit payable to banks, based on a weighted average are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
------------ ------------- -------------
<S> <C> <C> <C>
Daily average outstanding
borrowings $ 7,045,000 $ 1,805,944 $ 2,962,230
Average interest rate during the
period 8.2% 8.6% 6.2%
Interest rate at the end
of the period 10.0% 10.0% 7.5%
Maximum outstanding during the
year $ 12,500,000 $ 7,010,000 $ 35,000,000
</TABLE>
NOTE H - MORTGAGE NOTES PAYABLE
Mortgage notes payable at December 31, 1995 and 1994, are summarized as follows:
<TABLE>
<CAPTION>
1995 1994
----------- ----------
<S> <C> <C>
Mortgage note, interest at 8.875%, requires
monthly interest payments of $51,031 with
principal balance due on February 1, 1996;
collateralized by land, buildings and
equipment (1) $6,900,000 $6,900,000
Mortgage note, interest at 9.2%, requires
monthly payments of $63,965 including
interest, matures on February 1, 1996;
collateralized by land, buildings, equipment
and rents (1) 7,446,065 7,499,304
Mortgage note, interest at 10%, requires
monthly payments of $25,766, including
interest, matured on July 1, 1995;
collateralized by land -- 2,669,946
</TABLE>
(continued)
<PAGE> 13
ORIOLE HOMES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE H - MORTGAGE NOTES PAYABLE - Continued
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Mortgage note, interest at prime plus
3.25%, requires interest with principal
payments as land is sold, matures
May 31, 1996; collateralized by land $ 695,508 $ 350,000
------------ ------------
$ 15,041,573 $ 17,419,250
============ ============
</TABLE>
(1) On February 20, 1996, the Company consolidated and refinanced
the mortgage notes under the following terms: maturity date of
March 1, 2003; interest rate at 7.15%; monthly principal and
interest payment of $91,696.
NOTE I - INCOME TAXES
Deferred income taxes and benefits are provided for significant income and
expense items recognized in different years for tax and financial reporting
purposes. Temporary differences which give rise to significant deferred tax
assets (liabilities) follow:
<TABLE>
<CAPTION>
1995 1994
------------ -------------
<S> <C> <C>
State net operating loss carryforward $ 310,986 $ --
Inventory write-down adjustment 5,232,802 --
Warranties on houses and condominiums 770,245 925,592
Percentage of completion 174,878 342,490
Uniform cost capitalization 184,757 178,463
------------ ------------
Total deferred tax assets, before
valuation allowance 6,673,668 1,446,545
Less: valuation allowance 2,706,144 --
------------ ------------
Total deferred tax assets, net of
valuation allowance 3,967,524 1,446,545
------------ ------------
Installment sales -- (13,990)
Deferred expenses (3,333,765) (2,315,641)
Accelerated depreciation (175,384) (221,620)
------------ ------------
Total deferred tax liabilities (3,509,149) (2,551,251)
------------ ------------
Net deferred tax asset (liability) $ 458,375 $ (1,104,706)
============ ============
</TABLE>
(continued)
<PAGE> 14
ORIOLE HOMES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE I - INCOME TAXES - Continued
The Company files consolidated income tax returns. The components of the
provision for (benefit from) income taxes are as follows:
<TABLE>
<CAPTION>
Current Deferred Total
------- -------- -----
<S> <C> <C> <C>
Year Ended December 31, 1995,
Federal $ (1,440,254) $ (1,582,344) $ (3,022,598)
State -- 19,263 19,263
------------- ------------- -------------
$ (1,440,254) $ (1,563,081) $ (3,003,335)
============= ============= =============
Year Ended December 31, 1994,
Federal $ 1,848,612 $ 305,537 $ 2,154,149
State 292,109 76,807 368,916
------------- ------------- -------------
$ 2,140,721 $ 382,344 $ 2,523,065
============= ============= =============
Year Ended December 31, 1993,
Federal $ 1,478,474 $ (3,500) $ 1,474,974
State 254,391 (8,248) 246,143
------------- ------------- -------------
$ 1,732,865 $ (11,748) $ 1,721,117
============= ============= =============
</TABLE>
The reasons for the difference between the total tax expense and the amount
computed by applying the statutory federal income tax rate to income before
income taxes are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---------------- ------------- -------------
<S> <C> <C> <C>
Provision for (benefit from) taxes
at statutory rates (34%) $ (5,020,066) $ 2,264,395 $ 1,483,147
State income taxes, net of federal
tax benefit (811,999) 241,644 158,193
Other 122,586 17,026 79,777
------------- ------------- -------------
Tax expense (benefit), before
valuation allowance (5,709,479) 2,523,065 1,721,117
Valuation allowance 2,706,144 -- --
------------- ------------- -------------
Net tax expense (benefit) $ (3,003,335) $ 2,523,065 $ 1,721,117
============= ============= =============
</TABLE>
<PAGE> 15
ORIOLE HOMES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE I - INCOME TAXES - Continued
The Company has a Federal net operating loss carryback and a State net
operating loss carryforward of $4,236,558. The Federal net operating loss
will be carried back and fully absorbed in 1992. The State net operating
loss carryforward expires in the year 2010.
Deferred income tax provision results from temporary differences in the
recognition of revenues and expenses for tax and financial statement
purposes. The sources of these differences are as follows:
<TABLE>
<CAPTION>
Years ended December 31,
-------------------------------------------------------
1995 1994 1993
------------- ------------- -------------
<S> <C> <C> <C>
Net effect of inventory write-down
adjustment $ (5,232,802) $ -- $ --
Net effect of development and other
costs 1,018,124 589,052 (80,256)
Net profit realized, applicable to sales
reported on the installment basis for
tax purposes (13,990) (14,165) (10,938)
Net of State net operating loss carry-
forward (310,986) -- --
Net effect of (increase) decrease in
reserve for warranties on houses and
condominiums 155,347 (73,756) (156,920)
Net effect of uniform cost capitalization
and percentage of completion 161,318 (61,254) 218,765
Net effect of depreciation (46,236) (57,533) 17,601
------------- ------------- -------------
(4,269,225) 382,344 (11,748)
Less: valuation allowance 2,706,144 -- --
------------- ------------- -------------
$ (1,563,081) $ 382,344 $ (11,748)
============= ============= =============
</TABLE>
<PAGE> 16
ORIOLE HOMES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE J - CUSTOMER DEPOSITS
Certain customer deposits, pursuant to statutory regulations of the State
of Florida or by agreement between the buyer and seller, are held in
segregated bank accounts. At December 31, 1995 and 1994, cash in the
amounts of approximately $289,000 and $253,000, respectively, was so
restricted.
The Company entered into an escrow agreement with a bank and the Division
of Florida Land Sales and Condominiums which allowed the Company to use
customer deposits which were previously maintained in an escrow account.
Deposits of up to $1,100,000 in 1995 and $1,900,000 in 1994, which could be
released to the Company, are guaranteed by performance bonds aggregating
$5,000,000 for 1995 and 1994.
NOTE K - ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities include the following:
<TABLE>
<CAPTION>
1995 1994
------------ -------------
<S> <C> <C>
Accrued interest $ 3,893,771 $ 3,899,765
Reserve for warranties on houses and
condominiums 1,983,202 2,419,218
Accrued real estate and property taxes 1,648,948 11,756
Income taxes payable -- 296,904
Other accrued liabilities 867,211 1,192,687
------------ ------------
$ 8,393,132 $ 7,820,330
============ ============
</TABLE>
NOTE L - SENIOR NOTES
Senior Notes are comprised as follows:
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
12 1/2% senior notes due January 15,
2003 with an effective interest rate of
13.02% $ 70,000,000 $ 70,000,000
Repurchase of senior notes to be
used as part of sinking fund (2,036,000) (1,910,000)
Unamortized discount (1,482,687) (1,632,318)
------------ ------------
$ 66,481,313 $ 66,457,682
============ ============
</TABLE>
(continued)
<PAGE> 17
ORIOLE HOMES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE L - SENIOR NOTES - Continued
On January 13, 1993, the Company issued 12 1/2% senior notes ("Notes"), due
January 15, 2003. The Notes have a face value of $70,000,000 and were
issued at a discount of $1,930,000. The notes are senior unsecured
obligations of the Company subject to redemption at the Company's option on
or after January 15, 1998 at 105% of the principal amount and thereafter at
prices declining annually to 100% of the principal amount on or after
January 15, 2001.
The indenture under which senior notes were issued requires sinking fund
payments of $17,500,000 on January 15, 2001 and January 15, 2002. The
indenture, contains provisions restricting the amount and type of
indebtedness the Company may incur, the purchase by the Company of its
stock and the payment of cash dividends. At December 31, 1995, dividend
payments are restricted and will be restricted until the Company posts
cumulative net income in excess of $20,500,000.
NOTE M - STOCK OPTIONS
The Company adopted two stock option plans: one for employees and one for
nonemployee directors, both effective in 1994. Under the stock option plan
for employees (the "1994 Stock Option Plan"), 400,000 shares of Class B
common stock are reserved for issuance upon exercise of stock options.
Under the stock option plan for non-employee directors (the "1994 Stock
Option Plan for Nonemployee Directors"), 20,000 shares of class B common
stock are available for issuance. The stock option plans are accounted for
under APB Opinion 25 and related Interpretations. Statement of Financial
Accounting Standards No. 123 ("SFAS No.123"), "Accounting for Stock-Based
Compensation," effective for the Company in 1996, will require additional
disclosures regarding the fair value of options. The Company does not
expect the implementation of SFAS No.123 to have a material effect on the
Company's financial position or results of operations.
Both plans provide for the granting of incentive stock options on such
terms and at such prices as may be determined by the Board of Directors.
The per share exercise price of incentive stock options cannot be less than
the fair market value per share of the Class B common stock on the date of
the grant. Accordingly, no compensation cost has been recognized for the
plans. Each option is exercisable after the period or periods specified in
the option agreement, but no option may be exercised more than five years
after the date of the grant for the 1994 Stock Option Plan and no more than
ten years for the 1994 Stock Option Plan for Nonemployee Directors.
(continued)
<PAGE> 18
ORIOLE HOMES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE M - STOCK OPTIONS - Continued
The following table summarizes options granted and/or exercised during the
years ended December 31, 1995 and 1994. At December 31, 1995 and 1994,
1,800 and -0- options, respectively, were eligible for exercise under the
terms of the various option plans.
<TABLE>
<CAPTION>
1994 Stock
Option Plan
1994 for
Stock Nonemployee
Option Plan Directors
----------- ---------
<S> <C> <C>
Granted -- 3,600(2)
Exercised -- --
Forfeited -- --
------------ ------------
Outstanding 12/31/94 -- 3,600
Granted 38,000(1) 3,600(3)
Exercised -- --
Forfeited -- --
------------ ------------
Outstanding 12/31/95 38,000 7,200
============ ============
1) Exercise price $ 6.875 --
2) Exercise price $ 8.62 --
3) Exercise price $ 7.50 --
</TABLE>
NOTE N - COMMON STOCK
Class A common stock and Class B common stock have identical dividend
rights with the exception that the Class B common stock is entitled to a
$.025 per share additional dividend. Class A common stock is entitled to
one vote per share, while Class B common stock is entitled to one-tenth
vote per share. Holders of Class B common stock are entitled to elect 25%
of the Board of Directors as long as the number of outstanding shares of
Class B common stock is at least 10% of the number of outstanding shares of
both classes of common stock. At the option of the holder of record, each
share of Class A common stock may be converted at any time into one share
of Class B common stock.
<PAGE> 19
ORIOLE HOMES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE O - LEASING ARRANGEMENTS
Rental properties
In connection with certain housing developments, the Company leases
recreation facilities. The Company also leases rental units. These leases
are accounted for as operating leases.
The following schedule provides an analysis of the Company's property under
operating leases (included in property and equipment) by major classes as
of December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
------------ -----------
<S> <C> <C>
Land $ 7,168,046 $ 7,170,113
Buildings 22,283,655 22,473,045
Furniture, fixtures and
equipment 965,277 986,134
------------ ------------
30,416,978 30,629,292
Less accumulated depreciation 7,216,168 6,697,665
------------ ------------
$ 23,200,810 $ 23,931,627
============ ============
</TABLE>
The following is a schedule of approximate future minimum rental income
required under these leases as of December 31, 1995:
<TABLE>
<S> <C>
1996 $ 2,368,000
1997 638,000
1998 638,000
1999 638,000
2000 638,000
Thereafter 54,007,000
-----------
$58,927,000
===========
</TABLE>
(continued)
<PAGE> 20
ORIOLE HOMES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE O - LEASING ARRANGEMENTS - Continued
Offices and Warehouse
The Company leases its offices and warehouse under lease agreements
extending through 1997, with options to renew for up to five years,
accounted for as operating leases. The following is a schedule, by years,
of the approximate future minimum rental payments as of December 31, 1995:
<TABLE>
<S> <C>
1996 $ 167,000
1997 135,000
---------------
$ 302,000
</TABLE> ===============
Total rent expense for each of the years ended December 31, 1995, 1994 and
1993 amounted to approximately $200,000.
NOTE P - DEFERRED COMPENSATION PLAN
The Company has a defined contribution plan established pursuant to Section
401(K) of the Internal Revenue Code. Employees contribute to the plan a
percentage of their salaries, subject to certain dollar limitations, and
the Company matches a portion of the employees' contributions. The
Company's contribution to the plan amounted to $63,121 in 1995, $63,685 in
1994 and $60,851 in 1993.
NOTE Q - FINANCIAL INSTRUMENTS
The financial statements include various estimated fair value information
as of December 31, 1995 and 1994, as required by Statement of Financial
Accounting Standards 107, "Disclosures about Fair Value of Financial
Instruments". Such information, which pertains to the Company's financial
instruments, is based on the requirements set forth in that Statement and
does not purport to represent the aggregate net fair value of the Company.
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to
estimate that value:
Cash and Cash Equivalents
The carrying amount approximates fair value because of the short maturity
of those instruments.
(continued)
<PAGE> 21
ORIOLE HOMES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE Q - FINANCIAL INSTRUMENTS - Continued
Receivables and Payables
The carrying amount approximates fair value because of the short maturity
of those instruments.
Notes Payable, Mortgage Notes Payable and Senior Notes
Quoted market prices offered to the Company for debt are used to estimate
the fair value of the Company's long-term debt. The carrying amounts of
notes and mortgage notes payable approximate fair value due to the length
of the maturities, the interest rates being tied to market indices and/or
due to the interest rates not being significantly different from the
current market rates available to the Company.
All of the Company's financial instruments are held for purposes other than
trading. The carrying amounts in the table below are the amounts at which
the financial instruments are reported in the financial statements.
The estimated fair values of the Corporation's financial instruments, at
December 31, where the carrying value does not approximate fair value, are
as follows:
<TABLE>
<CAPTION>
1995 1994
----------------------------------- -----------------------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
-------------- --------------- -------------- -----------------
<S> <C> <C> <C> <C>
Senior notes $ 66,481,313 $ 55,730,000 $ 66,457,682 $ 59,919,000
</TABLE>
NOTE R - CONTINGENCIES
The Company is involved, from time to time, in litigation arising in the
ordinary course of business, none of which is expected to have a material
adverse effect on the Company's consolidated financial position or results
of operations.
<PAGE> 22
GRANT THORNTON
REPORT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
Board of Directors
Oriole Homes Corp.
We have audited the accompanying consolidated balance sheets of Oriole Homes
Corp. and Subsidiaries as of December 31, 1995 and 1994, and the related
consolidated statements of operations, shareholders' equity, and cash flows for
each of the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Oriole
Homes Corp. and Subsidiaries at December 31, 1995 and 1994, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally accepted accounting
principles.
S/ GRANT THORNTON, LLP
Miami, Florida
February 16, 1996 (except for Note H, as
to which the date is February 20, 1996)
<PAGE> 23
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act of
1934, the Registrant has duly caused this Amendment to the Annual Report to be
signed on its behalf by the undersigned, thereunto duly authorized.
ORIOLE HOMES CORP.
Date: 11-14-96 s/ R. D. Levy
- ---------------------------------- --------------------------------
R. D. Levy, Chairman of the Board
Chief Executive Officer, Director
Date: 11-14-96 s/ A. Nunez
- ---------------------------------- --------------------------------
A. Nunez, Senior Vice President
Treasurer, Chief Financial Officer,
Chief Accounting Officer, Director
