<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended: March 31, 1998 Commission File No. 1-6963
ORIOLE HOMES CORP.
-------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 59-1228702
------------------------------- -------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1690 S. Congress Ave., Suite 200 Delray Beach, Fl. 33445
- ---------------------------------------------------------- -----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (561) 274-2000
- ------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed
since last report.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuers classes of
common stock, as of the close of the period covered by this report.
Class Outstanding at May 11, 1998
---------------------------------------- --------------------------
Common Stock, Class A, par value $.10 1,864,149
Common Stock, Class B, par value $.10 2,761,375
<PAGE> 2
ORIOLE HOMES CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
(Unaudited) (Audited)
------------- ------------
<S> <C> <C>
Cash and cash equivalents $ 21,343,656 $ 19,830,523
------------ ------------
Receivables
Mortgage notes 266,770 267,323
Income taxes 765,437 765,437
------------ ------------
1,032,207 1,032,760
Inventories
Land 54,798,664 58,120,681
Houses and condominiums completed or
under construction 35,196,347 42,007,641
Model houses and condominiums 4,923,455 4,871,304
------------ ------------
94,918,466 104,999,626
Less estimated costs of completed
included in inventories 9,635,535 11,597,567
------------ ------------
85,282,931 93,402,059
------------ ------------
Property and equipment, at cost
Land 654,181 654,936
Buildings 4,335,741 4,338,159
Furniture, fixtures and equipment 3,604,089 3,339,242
------------ ------------
8,594,011 8,332,337
Less accumulated depreciation 4,186,593 4,055,564
------------ ------------
4,407,418 4,276,773
------------ ------------
Property and equipment held for sale, at cost 12,104,889 12,264,126
Investments in and advances to joint ventures 3,916,313 4,495,000
Other
Prepaid expenses 2,186,516 2,275,569
Unamortized debt issuance costs 1,399,493 1,552,227
Land held for investment, at cost 2,127,009 2,354,398
Other assets 3,133,486 3,576,695
------------ ------------
8,846,504 9,758,889
------------ ------------
Total assets $136,933,918 $145,060,130
============ ============
</TABLE>
See notes to consolidated financial statements
-1-
<PAGE> 3
ORIOLE HOMES CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
(Unaudited) (Audited)
------------- ------------
<S> <C> <C>
Liabilities
Line of credit $ 10,000 $ 10,000
Mortgage notes payable 12,385,378 12,438,445
Accounts payable and accrued liabilities 8,984,777 13,141,491
Customer deposits 6,187,840 6,389,145
Senior notes 62,442,621 66,184,074
------------ ------------
Total liabilities 90,010,616 98,163,155
Shareholders' equity
Class A common stock, $.10 par value
Authorized - 10,000,000 shares
Issued and outstanding -
1,864,149 in 1998 and 1,863,349 in 1997 186,415 186,335
Class B common stock, $.10 par value
Authorized - 10,000,000 shares
Issued and outstanding -
2,761,375 in 1998 and 2,762,175, in 1997 276,138 276,218
Additional paid-in capital 19,267,327 19,267,327
Retained earnings 27,193,422 27,167,095
------------ ------------
Total shareholders' equity 46,923,302 46,896,975
------------ ------------
Total liabilities and shareholders' equity $136,933,918 $145,060,130
============ ============
</TABLE>
See notes to consolidated financial statements
-2-
<PAGE> 4
ORIOLE HOMES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OR OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------
1998 1997
------------- ------------
<S> <C> <C>
Revenues
Sales of houses and condominiums $25,332,278 $ 19,778,548
Sales of land -- 5,500
Other operating revenues 880,908 735,378
Interest, rentals and other income 1,021,534 903,505
Gain on sale of property and land held for investment, net 190,913 113
----------- ------------
27,425,633 21,423,044
----------- ------------
Costs and expenses
Cost of houses and condominiums sold 22,014,200 17,798,157
Inventory valuation adjustment -- 8,700,000
Cost of land sold -- 3,246
Costs relating to other operating revenues 788,998 713,423
Selling, general and administrative expenses 4,282,075 4,365,101
Interest costs incurred 2,318,145 2,587,415
Interest capitalized (deduct) (2,004,112) (2,399,802)
----------- ------------
27,399,306 31,767,540
----------- ------------
Income (loss) before benefit from income taxes 26,327 (10,344,496)
Benefit from income taxes -- (649,580)
----------- ------------
Net income (loss) $ 26,327 $ (9,694,916)
=========== ============
Net income (loss) per Class A and B common share
available for common stockholders - Basic $ .01 $ (2.10)
=========== ============
Weighted average number of common stock
outstanding - Basic 4,625,524 4,625,524
=========== ============
Net income (loss) per Class A and B common share
available for common stockholders - Diluted $ .01 $ (2.10)
=========== ============
Weighted average number of common stock
outstanding - Diluted 4,714,224 4,625,524
=========== ============
</TABLE>
See notes to consolidated financial statements
-3-
<PAGE> 5
ORIOLE HOMES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------
1998 1997
------------- ------------
<S> <C> <C>
Cash flows from operating activities
Net income (loss) $ 26,327 $(9,694,616)
Adjustments to reconcile net income (loss) to net
cash provided to (used in) operating activities
Depreciation 306,277 345,571
Amortization 261,281 134,150
Deferred income taxes -- 500,872
Gain on sale of property and land held for investment, net (190,913) (113)
(Increase) decrease in operating assets
Receivables 553 968
Inventories 8,123,759 (3,575,586)
Inventory valuation adjustment -- 8,700,000
Other assets 532,262 (1,978,737)
Increase (decrease) in operating liabilities
Accounts payable and accrued liabilities (4,156,714) (2,441,325)
Customer deposits (201,305) 3,474,399
------------ ------------
Total adjustments 4,675,200 5,160,199
------------ ------------
Net cash provided by (used in) operating activities 4,701,527 (4,534,717)
------------ ------------
Cash flows from investing activities
Return on investment in joint ventures 578,687 266,000
Capital expenditures (285,850) (245,345)
Proceeds from the sale of property and equipment 421,836 69,825
------------ ------------
Net cash provided by investing activities 714,673 90,480
------------ ------------
Cash flows from financing activities
Payment of mortgage note (53,067) (49,415)
Borrowings under line of credit agreement -- 8,100,000
Repayments under line of credit agreement -- (3,500,000)
Repurchase of senior notes (3,850,000) --
------------ ------------
Net cash (used in) provided by financing activities (3,903,067) 4,550,585
------------ ------------
Net increase in cash and cash equivalents 1,513,133 106,348
------------ ------------
Cash and cash equivalents at beginning of period 19,830,523 2,409,376
------------ ------------
Cash and cash equivalents at end of period $ 21,343,656 $ 2,515,724
============ ============
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest (net of amount capitalized) $ 2,471,271 $ 2,254,672
Income taxes $ 2,627 $ --
</TABLE>
See notes to consolidated financial statements
-4-
<PAGE> 6
ORIOLE HOMES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The consolidated balance sheet as of March 31, 1998 and the related
statements of operations and cash flows for the three months ended March
31, 1998 and 1997 of Oriole Homes Corp. and its subsidiaries have been
prepared by the Company without audit. In the opinion of management of
the Company, all adjustments (consisting of normal recurring accruals)
necessary for a fair presentation of the unaudited interim periods have
been reflected herein.
Certain footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have
been omitted. It is suggested that these consolidated financial
statements be read in conjunction with the financial statements and notes
thereto included in the Company's December 31, 1997 annual report on Form
10K.
Certain reclassifications have been made to conform to the current year
presentation.
2. The results of operations for the three months ended March 31, 1998 are
not necessarily indicative of the results for the entire year.
3. Inventory valuation adjustment
Statement of Financial Accounting Standards ("SFAS") No. 121 requires
that long-lived assets held and used by the Company be reviewed for
impairment whenever events or changes indicate that the net book value of
the asset may not be recoverable. An impairment loss is recognized if the
sum of the undiscounted expected future cash flows from the use of the
assets is less than the net book value of the asset. The Company
periodically reviews the carrying value of its assets and, if such
reviews indicate the potential for lack of recovery of the net book
value, adjusts the assets accordingly.
In this regard, the Company recorded in the first quarter of 1997 a
non-cash inventory valuation adjustment totaling $8,700,000 or $1.88 per
common share, reducing certain land inventory to its estimated fair value
less cost to sell. The inventory adjustment pertained to land for
approximately 1,000 unsold housing units located in five developments.
Deteriorating market conditions during the first quarter of 1997 caused
the Company to lower selling prices in order to maintain current sales
levels and move current inventory, resulting in the inventory valuation
adjustment.
4. The inventory adjustment was based in part on management estimates and
assumptions that affected the reported valuation of assets, and amounts
of revenues and expenses. Actual future results could differ from these
estimates.
-5-
<PAGE> 7
ORIOLE HOMES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
5. Backlog of contracts for sales of houses and condominiums
<TABLE>
<CAPTION>
March 31, 1998 December 31, 1997
----------------------------------- -----------------------------
Units Amounts Units Amounts
--------------- --------------- ----------- -------------
<S> <C> <C> <C> <C>
Single-family homes 145 $25,630,732 152 $27,683,438
Multi-family 111 15,246,489 91 12,730,745
--------------- ----------- ----------- -----------
Total 256 $40,877,221 243 $40,414,183
============== =========== =========== ===========
</TABLE>
6. Earnings (loss) per share:
Statement of Financial Accounting Standards ("SFAS") No. 128 " Earnings
Per Share" requires dual presentation of basic and diluted earnings per
share on the face of the income statement. The reconciliation between
the computations is as follows:
<TABLE>
<CAPTION>
Period Income Basic Diluted Diluted
Ending (Loss) Shares Basic EPS Shares EPS
------ ------ ------ --------- --------- -------
<S> <C> <C> <C> <C> <C>
3/31/98 26,327 4,625,524 .01 4,714,224 .01
3/31/97 4,625,52494,916) (2.10) 4,625,524 (2.10)
</TABLE>
Included in diluted shares for March 31, 1998 are common stock
equivalents relating to options of 88,700.
7. Senior notes
On January 13, 1993, the Company issued its 12 1/2% Senior Notes
("Notes"), due January 15, 2003. The Notes had an original face value of
$70,000,000 and were issued at a discount of $1,930,600. 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 the 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 March 31, 1998, dividend
payments are restricted and will be restricted until the Company posts
cumulative net income in excess of $62,200,000.
During the first quarter of 1998, the Company purchased $3,850,000
Notes to be used as part of the sinking fund.
8. Line of credit
A revolving loan agreement (line of credit) with a bank, collateralized
by land, provides up to $10,000,000 of borrowings, at an interest rate of
prime plus 1.5%, of which $9,990,000 is available at March 31, 1998. The
agreement expires June 30, 1999.
The line of credit can be used to finance ongoing development and
construction of residential real estate and short-term capital needs and
only requires monthly interest payments. The agreement has no
compensating balance arrangements and contains typical restrictions and
covenants, the most restrictive of which include that:
a. the Company shall maintain, at all times through the life of
the loan, its consolidated tangible net worth at not less than
$42,000,000, and;
b. the Company's ability to incur additional debt is restricted.
-6-
<PAGE> 8
9. Income taxes
At March 31, 1998, the Company has no deferred tax benefit related to
its net operating loss as the Company's ability to realized these
benefits is not "more likely than not" as defined by FASB Statement No.
109 "Accounting for Income Taxes".
10. New accounting pronouncements
The Financial Accounting Standards Board has issued Statement of
Financial Standards Nos. 130 ("SFAS 130"), "Reporting Comprehensive
Income", and 131 ("SFAS 131"), "Disclosures about Segments of an
Enterprise and Related Information". SFAS 130 prescribes standards for
reporting comprehensive income and its components. SFAS 131 establishes
guidance as to the required disclosure for reporting segment
information. The Company has adopted these standards, which have no
impact on the Company.
11. Commitments and 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.
The Company is also subject to the normal obligations associated with
entering into contracts for the purchase, development and sale of real
estate in the routine conduct of its business.
-7-
<PAGE> 9
Grant Thornton LLP
Certified Public Accountants
200 East Broward Boulvevard, Suite 2000
Fort Lauderdale, Florida 33301
Board of Directors
Oriole Homes Corp.
We have reviewed the accompanying consolidated balance sheet of Oriole Homes
Corp. and Subsidiaries as of March 31, 1998, and the related consolidated
statements of operations and cash flows for the three-month period then ended.
These financial statements are the responsibility of the company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical review procedures to
financial data, and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
Miami, Florida
May 1, 1998
-8-
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH 31, 1997
The Company's revenues from home sales increased $5.6 million (28.1%)
to $25.3 million during the first quarter of 1998 as compared to 1997 primarily
as a result of the number of homes delivered. Oriole delivered 151 homes in the
1998 first quarter compared to 120 in the same period in 1997. The average
selling price of homes delivered in 1998 increased about 2.0%, from $164.8 to
$167.8. The number of contracts signed at 164 and the aggregate dollar value of
those contracts at $25.8 million decreased in the 1998 first quarter from 262
and $40.2 million, respectively, in the same period in 1997.
Other operating revenues and interest, rentals and other income
increased to $1.9 million in the first quarter of 1998 from $1.6 million in 1997
primarily due to an increase in interest earned on available cash.
Cost of home sales increased to $22.0 million in 1998 from $17.8
million in 1997 as a result of an increase in the number of homes delivered. As
a percentage of home sales, however, cost of sales decreased to 86.9% from 90.0%
in the initial quarter of 1997, the threefold result of the increase in average
selling price previously mentioned, a reduction in direct construction costs and
the inventory valuation adjustment recognized in 1997.
Selling, general and administrative expenses decreased to 15.6% of
revenues in the first quarter of 1998 as compared to 20.4% in the same period in
1997. This substantial improvement was the result of the implementation of
certain strategic initiatives designed to enhance operating efficiencies,
including a workforce reduction program and consolidation of facilities.
In the prior year quarter ended March 31, 1997 there was a net loss of
$9.7 million ($2.10 per share) primarily due to a non-cash pre-tax charge of
$8.7 million to write-down the value of certain land inventory. This compares to
net income of $26,327 ($0.01 per share) for the current period ended March 31,
1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company's financing needs depend primarily upon sales volume, asset
turnover, land acquisition, construction volume and the market value of
non-residential parcels of land. In the past, the Company has financed its
working capital needs through funds generated by operations, the sale of
investment property held for resale, the periodic issuance of common stock and
long-term borrowings.
During the first quarter of 1998, the Company used a portion of
available cash provided by increased operating revenues to purchase $3.85
million of senior notes and decrease other liabilities in part by
accelerating payment of payables to its vendors in consideration for discounts
ranging from 2.0% to 6.0%. At March 31, 1998, the Company had approximately
$21.3 million in cash and cash equivalents and the availability of substantially
all of it's $10.0 million revolving line of credit.
Oriole also has an outstanding balance of about $12.4 million of a
purchase money mortgage at an interest rate of 7.15%, collateralized by land and
buildings. Of this balance, $0.2 million is due in 1998 and the balance is
payable by 2003.
The Company had no firm commitments for capital expenditures as of the
balance sheet date. The Company believes that current cash resources, cash from
operations and borrowings under its line of credit will be sufficient to meet
anticipated working capital requirements through March 31, 1999.
-9-
<PAGE> 11
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The March 31, 1998 unaudited Financial Statements included in this form 10-Q
have been reviewed by Grant Thornton LLP in accordance with established
professional standards and procedures for such a review.
Reports on Form 8K
(a) There were no reports on Form 8-K for the three months ended March 31,
1998.
(b) Exhibits
27.0 Financial Data Schedule
-10-
<PAGE> 12
SIGNATURES
Pursuant to the requirements of Section 13, 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.
ORIOLE HOMES CORP.
(Registrant)
DATE: 5/13/98 /s/ R.D. Levy
- -------------------------- -------------------------------------
R.D. Levy,
Chairman of the Board,
Chief Executive Officer,
Director
DATE: 5/13/98 /s/ J. Pivinski
- ------------------------- -------------------------------------
J. Pivinski, Vice President - Finance,
Treasurer, Chief Financial Officer
-11-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 21,343,656
<SECURITIES> 0
<RECEIVABLES> 1,032,207
<ALLOWANCES> 0
<INVENTORY> 85,282,931
<CURRENT-ASSETS> 0<F1>
<PP&E> 26,995,239
<DEPRECIATION> 10,482,932
<TOTAL-ASSETS> 136,933,918
<CURRENT-LIABILITIES> 0
<BONDS> 74,837,999
462,553
0
<COMMON> 0
<OTHER-SE> 46,460,749
<TOTAL-LIABILITY-AND-EQUITY> 136,933,918
<SALES> 25,332,278
<TOTAL-REVENUES> 27,425,633
<CGS> 22,014,200
<TOTAL-COSTS> 22,803,198
<OTHER-EXPENSES> 4,282,075
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 314,033
<INCOME-PRETAX> 26,327
<INCOME-TAX> 0
<INCOME-CONTINUING> 26,327
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,327
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
<FN>
<F1>COMPANY REPORTS ON A NON-CLASSIFIED BALANCE SHEET
</FN>
</TABLE>
