<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended: March 31, 1999 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 5, 1999
- ------------------------------------- -------------------------------------
Common Stock, Class A, par value $.10 1,864,149
Common Stock, Class B, par value $.10 2,761,375
<PAGE> 2
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ORIOLE HOMES CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
------------ ------------
(Unaudited) (Audited)
<S> <C> <C>
Cash and cash equivalents $ 14,263,261 $ 10,557,772
------------ ------------
Receivables
Mortgage notes 264,281 953,284
Inventories
Land 57,117,734 59,059,535
Homes completed or under construction 39,286,974 42,763,798
Model houses and condominiums 4,476,929 4,360,514
------------ ------------
100,881,637 106,183,847
Less estimated costs of completion
included in inventories 9,789,574 9,080,857
------------ ------------
91,092,063 97,102,990
------------ ------------
Property and equipment, at cost
Land 156,506 517,554
Buildings 3,285,188 3,505,343
Furniture, fixtures and equipment 3,544,584 3,445,563
------------ ------------
6,986,278 7,468,460
Less accumulated depreciation 3,992,369 4,070,613
------------ ------------
2,993,909 3,397,847
------------ ------------
Property and equipment held for sale, at cost 11,775,061 11,956,165
Investments in and advances to joint ventures 3,288,596 3,288,596
Land held for investment, at cost -- 2,127,009
Other
Prepaid expenses 1,208,224 1,719,517
Unamortized debt issuance costs 1,000,672 1,111,696
Other assets 3,206,976 3,011,589
------------ ------------
5,415,872 5,842,802
------------ ------------
Total assets $129,093,043 $135,226,465
============ ============
</TABLE>
See notes to the consolidated financial statements
-1-
<PAGE> 3
ORIOLE HOMES CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
------------ ------------
(Unaudited) (Audited)
<S> <C> <C>
Liabilities
Line of credit $ 10,000 $ 10,000
Mortgage notes payable 15,224,997 15,970,385
Accounts payable and accrued liabilities 9,009,345 11,664,858
Customer deposits 3,906,933 5,095,182
Senior notes 52,883,583 55,507,312
------------ ------------
Total liabilities 81,034,858 88,247,737
Shareholders' equity
Class A common stock, $.10 par value
Authorized - 10,000,000 shares,
issued and outstanding -
1,864,149 in 1999 and in 1998 186,415 186,415
Class B common stock, $.10 par value
Authorized - 10,000,000 shares,
issued and outstanding -
2,761,375 in 1999 and in 1998 276,138 276,138
Additional paid-in capital 19,267,327 19,267,327
Retained earnings 28,328,305 27,248,848
------------ ------------
Total shareholders' equity 48,058,185 46,978,728
------------ ------------
Total liabilities and shareholders' equity $129,093,043 $135,226,465
============ ============
</TABLE>
See notes to the consolidated financial statements
-2-
<PAGE> 4
ORIOLE HOMES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------
1999 1998
------------ ------------
<S> <C> <C>
Revenues
Sales of homes $ 24,616,408 $ 25,332,278
Other operating revenues 934,056 970,923
Gain on sales of property and land
held for investment, net 1,867,391 190,913
Interest, rentals and other income 1,043,657 931,519
------------ ------------
28,461,512 27,425,633
------------ ------------
Costs and expenses
Cost of homes sold 22,435,393 22,014,200
Costs relating to other operating revenues 803,015 854,962
Selling, general and administrative expenses 3,996,647 4,216,111
Interest costs incurred 2,049,027 2,318,145
Interest capitalized (deduct) (1,902,027) (2,004,112)
------------ ------------
27,382,055 27,399,306
------------ ------------
Income before provision for income taxes 1,079,457 26,327
Provision for income taxes -- --
------------ ------------
Net income $ 1,079,457 $ 26,327
============ ============
Net income per Class A and B common share
available for common stockholders - Basic $ .23 $ .01
============ ============
Weighted average number of common stock
outstanding - Basic 4,625,524 4,625,524
============ ============
Net income per Class A and B common share
available for common stockholders - Diluted $ .23 $ .01
============ ============
Weighted average number of common stock
outstanding - Diluted 4,625,524 4,714,224
============ ============
</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,
-------------------------------
1999 1998
------------ ------------
<S> <C> <C>
Cash flows from operating activities
Net income $ 1,079,457 $ 26,327
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation 312,902 306,277
Amortization 187,295 261,281
Gain on sale of property and land held for investment, net (1,867,391) (190,913)
(Increase) decrease in operating assets
Receivables 689,003 553
Inventories 6,047,638 8,123,759
Other assets 315,906 532,262
Increase (decrease) in operating liabilities
Accounts payable and accrued liabilities (2,655,513) (4,156,714)
Customer deposits (1,188,249) (201,305)
------------ ------------
Total adjustments 1,841,591 4,675,200
------------ ------------
Net cash provided by operating activities 2,921,048 4,701,527
------------ ------------
Cash flows from investing activities
Return on investment in joint ventures -- 578,687
Capital expenditures (233,890) (285,850)
Proceeds from the sale of property and equipment 4,463,719 421,836
------------ ------------
Net cash provided by investing activities 4,229,829 714,673
------------ ------------
Cash flows (used in) financing activities
Payment of mortgage notes (745,388) (53,067)
Repurchase of senior notes (2,700,000) (3,850,000)
------------ ------------
Net cash (used in) financing activities (3,445,388) (3,903,067)
------------ ------------
Net increase in cash and cash equivalents 3,705,489 1,513,133
Cash and cash equivalents at beginning of period 10,557,772 19,830,523
------------ ------------
Cash and cash equivalents at end of period $ 14,263,261 $ 21,343,656
============ ============
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest (net of amount capitalized) $ 1,894,242 $ 2,471,271
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, 1999 and the related
statements of operations and cash flows for the three months ended March
31, 1999 and 1998 of Oriole Homes Corp. (together with its consolidated
subsidiaries, the "Company") 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, 1998 annual report on Form
10K.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those estimates.
Certain reclassifications have been made to conform to the current year
presentation.
2. The results of operations for the three months ended March 31, 1999 are
not necessarily indicative of the results for the entire year.
3. Backlog of contracts for sales of homes:
<TABLE>
<CAPTION>
March 31, 1999 December 31, 1998
---------------------------- ----------------------------
Units Amounts Units Amounts
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Single-family 100 $17,369,228 129 $22,256,303
Multi-family 90 12,492,456 83 11,297,006
----------- ----------- ----------- -----------
Total 190 $29,861,684 212 $33,553,309
=========== =========== =========== ===========
</TABLE>
4. Senior notes
On January 13, 1993, the Company issued 12 1/2% senior notes ("Senior
Notes"), due January 15, 2003. The Senior Notes have a face value of
$70,000,000 and were issued at a discount of $1,930,600. The Senior 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.
Under the terms of the indenture ("Indenture"), the Company must make
Senior Notes sinking fund payments of $17,500,000 by January 15, 2001 and
January 15, 2002. The Indenture also 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,
1999, the payment of cash dividends is prohibited and will be restricted
until the Company posts cumulative net income in excess of $62,100,000.
During the three months ended March 31, 1999, the Company repurchased
$2,700,000 of Senior Notes to be used as part of the sinking fund and has
accumulated $16,408,000 toward the $17,500,000 payment due January 15,
2001.
-5-
<PAGE> 7
ORIOLE HOMES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Line of credit
The Company may borrow up to $10,000,000 at an interest rate of prime
plus 1.5% under a revolving loan agreement (line of credit) with a bank,
secured by a mortgage on certain real property. At March 31, 1999,
$9,990,000 was available under this line of credit. The loan agreement
expires June 30, 2000.
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 loan agreement contains
typical restrictions and covenants, the most restrictive of which are:
a. the Company shall maintain, at all times through the life of the
loan, a consolidated tangible net worth of not less than
$42,000,000, and;
b. the Company's ability to incur additional debt is restricted.
6. Income taxes
At March 31, 1999, 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 SFAS Statement No. 109
"Accounting for Income Taxes".
7. Segment information
The Company has the following two reportable segments: home building and
rental operations. The homebuilding segment develops and sells
residential properties and planned communities. The rental operations
segment consists of 529 units in two separate properties. Selected
segment information is set forth below (in thousands):
<TABLE>
<CAPTION>
HOME RENTAL
BUILDING OPERATIONS OTHER TOTAL
-------- ---------- -------- --------
<S> <C> <C> <C> <C>
MARCH 31, 1999:
Revenues $ 27,347 $ 934 $ 181 $ 28,462
Segment net income (loss) 844 131 104 1,079
MARCH 31, 1998:
Revenues 26,311 971 144 27,426
Segment net income (loss) (148) 116 58 26
</TABLE>
8. 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.
-6-
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE MONTHS ENDED MARCH 31, 1998
The Company's revenues from home sales decreased $0.7 million (2.8%) to
$24.6 million during the first quarter of 1999 as compared to the comparable
quarter of 1998. Oriole delivered 164 homes in the 1999 first quarter compared
to 151 in the same period in 1998. The average selling price of homes delivered
decreased from $167.8 to $150.1. The number of contracts signed at 142 and the
aggregate dollar value of those contracts at $20.9 million decreased in the 1999
first quarter from 164 and $25.8 million, respectively, from the same period in
1998.
Non-homebuilding revenues increased $1.7 million during the quarter
ended March 31, 1999 compared to the same period in 1998, primarily due to the
sale of certain properties which had been held for investment.
Interest, rentals and other income increased $0.4 million during the
first quarter of 1999 compared to the same period in 1998 as the result of a one
time gain recognized on the repurchase of senior notes.
Cost of home sales increased to $22.4 million (1.9%) in 1999 from $22.0
million in 1998. As a percentage of home sales, cost of sales increased to 91.1%
from 86.9% in the first quarter of 1998. This increase was primarily the result
of the write-off of certain deferred costs of approximately $0.3 million
associated with the redesign of product.
Selling, general and administrative expenses reflected a decrease of
$0.2 million in the 1999 period as compared to the 1998 first quarter. These
expenses decreased as a percentage of revenues to 14.0% from 15.4% for the same
period in 1998.
Earnings before interest, taxes, depreciation and amortization (EBITDA)
increased $1.4 million (55.7%) to $3.9 million in the first quarter of 1999 as
compared to the same period in 1998 primarily due to the increase in
non-homebuilding revenues during this period.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash requirements vary from period to period depending
upon changes in inventory, land acquisition and development requirements,
construction in progress and, to a lesser extent, the Company's current net
income. The Company obtains funds for its cash requirements from operations, the
sale of investment property and borrowings. In connection with land acquisitions
and development, the Company may borrow money secured by land and improvements.
During the first quarter of 1999, the Company used a portion of
available cash provided by operations to purchase $2.7 million of senior notes.
At March 31, 1999, the Company had approximately $14.2 million in cash and cash
equivalents and the availability of substantially all of it's $10.0 million
revolving line of credit. The Company believes that these resources are
sufficient to provide for its cash requirements through March 31, 2000.
FORWARD LOOKING STATEMENTS
Certain statements made in this document, including certain statements
made in Management's Discussion and Analysis, contain "forward looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended,
regarding the expectations of management with respect to revenues,
profitability, marketplace conditions, adequacy of funds from operations and
regulatory conditions applicable to the Company, among other things.
-7-
<PAGE> 9
Management cautions the these statements are qualified by their terms
and/or important factors, many of which are outside the control of the Company,
that could cause actual results and events to differ materially from the
statements made herein, including, but not limited to the following: changes in
consumer preferences, increases in interest rates, a reduction in labor
availability, increases in the cost of labor and materials, changes in the
regulatory environment particularly as relates to zoning and land use,
competitive pricing pressures and the general state of the economy, both
nationally and in the Company's market.
YEAR 2000
The Company has assessed, and formulated a plan to resolve, its
information technology ("IT") and non-IT system year 2000 issues. The Company is
in the process of replacing its software systems and applications in their
entirety. The Company had been advised that both the new replacement systems and
applications, as well as the upgraded systems and applications will cause its IT
system to be fully year 2000 compliant. The Company expects to test its systems
and applications for year 2000 compliance in conjunction with its cost of its
new or upgraded software systems and applications during July, 1999. The Company
does not consider any other IT or any non-IT systems of the Company to be
critical to Company operations and if non-capable for year 2000, the only effect
would be inconvenience. There will be no incremental additional cost for
acquiring a software and applications system that is year 2000 compliant and the
Company does not anticipate that testing or any other measure relating to
implementing its plan for year 2000 compliance will result in costs that would
have a material impact on future earnings.
The Company has and is consulting with its subcontractors and suppliers
regarding their year 2000 readiness and has been advised that they will be year
2000 compliant in all material respects. In any event, the Company believes that
it would not be difficult to find alternative subcontractors and suppliers in
the event that one of its existing subcontractors and suppliers are unable to
satisfactorily perform as the result of failure to be year 2000 compliant.
-8-
<PAGE> 10
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits and Reports on Form 8K
(a) Exhibits
Exhibit 27-Financial Data Schedule
(b) There were no reports on Form 8-K filed for the three months ended
March 31, 1999.
-8-
<PAGE> 11
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: May 13, 1999 /s/ R.D. Levy
- -------------------- ---------------------------------------
R.D. Levy,
Chairman of the Board,
Chief Executive Officer,
Director
DATE: May 13, 1999 /s/ J. Pivinski
- -------------------- ---------------------------------------
J. Pivinski, Vice President - Finance,
Treasurer, Chief Financial Officer
-10-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 14,263,261
<SECURITIES> 0
<RECEIVABLES> 264,281
<ALLOWANCES> 0
<INVENTORY> 91,092,063
<CURRENT-ASSETS> 0
<PP&E> 25,783,253
<DEPRECIATION> 11,014,283
<TOTAL-ASSETS> 129,093,043
<CURRENT-LIABILITIES> 0
<BONDS> 68,108,580
0
0
<COMMON> 462,553
<OTHER-SE> 47,595,632
<TOTAL-LIABILITY-AND-EQUITY> 129,093,043
<SALES> 24,616,408
<TOTAL-REVENUES> 28,461,512
<CGS> 22,435,393
<TOTAL-COSTS> 23,238,408
<OTHER-EXPENSES> 3,996,647
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 147,000
<INCOME-PRETAX> 1,079,457
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,079,457
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,079,457
<EPS-PRIMARY> .23
<EPS-DILUTED> .23
</TABLE>
