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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1998
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 Number 0-13800
INTERNATIONAL AMERICAN HOMES, INC.
(Exact name of registrant as specified in its charter)
Delaware 22-2472608
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
9950 Princess Palm Ave., Suite 112, Tampa, FL 33619
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (813) 664-1100
Not Applicable
(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 (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 [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes [X] No [ ]
As of January 31, 1999, the number of shares outstanding of the registrant's
common stock, par value $.01, was 906,361.
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Total number of pages: 21
PAGE 1
<PAGE>
INTERNATIONAL AMERICAN HOMES, INC.
----------------------------------
AND SUBSIDIARIES
----------------
Index
-----
Page
----
Part I. Financial Information:
Item 1. Financial Statements
Consolidated Balance Sheets (Unaudited) as of December
31, 1998 and March 31, 1998................................. 3
Consolidated Statements of Income and Retained Earnings
(Unaudited) for the three months ended December 31,
1998 and 1997............................................... 5
Consolidated Statements of Income and Retained Earnings
(Unaudited) for the nine months ended December 31,
1998 and 1997............................................... 6
Consolidated Statements of Cash Flows (Unaudited) for
the nine months ended December 31, 1998 and 1997............ 7
Notes to Consolidated Financial Statements (Unaudited)...... 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations ..................................12
Item 3. Quantitative and Qualitative Disclosures About Market Risk..20
Part II. Other Information:
Item 2. Changes in Securities and Use of Proceeds...................20
Item 6. Exhibits and Reports on Form 8-K............................20
Signatures ...................................................................21
PAGE 2
<PAGE>
Part I. Financial Information
ITEM 1
FINANCIAL STATEMENTS
INTERNATIONAL AMERICAN HOMES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
ASSETS
December 31, 1998 March 31, 1998
------------------- -------------------
CASH AND CASH EQUIVALENTS $ 683 $ 1,461
($40 and $290 restricted)
RECEIVABLES 1,377 532
REAL ESTATE INVENTORY 17,045 20,964
COLLATERAL FOR BONDS PAYABLE 3,717 4,500
PROPERTY AND EQUIPMENT - less
accumulated depreciation of
$504 and $544, respectively 10 88
OTHER ASSETS 436 638
------------------- -------------------
TOTAL ASSETS $ 23,268 $ 28,183
=================== ===================
The accompanying notes are an integral part of these consolidated balance
sheets.
PAGE 3
<PAGE>
INTERNATIONAL AMERICAN HOMES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31, 1998 March 31, 1998
------------------- -------------------
LIABILITIES
MORTAGE NOTES AND LOANS PAYABLE $ 7,353 $ 11,246
BONDS PAYABLE 3,580 4,341
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 3,604 5,968
CUSTOMER DEPOSITS 189 194
------------------- -------------------
Total Liabilities 14,726 21,749
------------------- -------------------
STOCKHOLDERS' EQUITY
PREFERRED STOCK - $.01 par value; 4,000,000
shares authorized; none issued or
outstanding - -
COMMON STOCK - $.01 par value; 10,000,000
shares authorized; 985,955 and 986,947
shares issued, respectively; 906,361
and 930,298 shares outstanding,
respectively 10 10
ADDITIONAL PAID-IN CAPITAL 2,440 2,400
RETAINED EARNINGS 6,093 4,025
TREASURY STOCK - 79,594 and 56,649 shares,
respectively (1) (1)
------------------- -------------------
Total Stockholders' Equity 8,542 6,434
------------------- -------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 23,268 $ 28,183
=================== ===================
The accompanying notes are an integral part of these consolidated balance
sheets.
PAGE 4
<PAGE>
INTERNATIONAL AMERICAN HOMES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(Dollars in thousands, except per share amounts)
(Unaudited)
Three Months Ended December 31,
-----------------------------------
1998 1997
---------------- ----------------
REVENUES
Home sales $ 12,817 $ 10,396
Interest and other income 84 109
---------------- ----------------
12,901 10,505
---------------- ----------------
COSTS AND EXPENSES
Cost of home sales 10,840 8,795
Selling, general and administrative 1,674 1,231
Interest 88 111
Depreciation 24 30
Restructuring charge - 1,500
---------------- ----------------
12,626 11,667
---------------- ----------------
INCOME (LOSS) BEFORE INCOME TAXES 275 (1,162)
PROVISION (BENEFIT) FOR INCOME TAXES 101 (384)
---------------- ----------------
NET INCOME (LOSS) 174 (778)
RETAINED EARNINGS, BEGINNING OF PERIOD 5,919 4,939
---------------- ----------------
RETAINED EARNINGS, END OF PERIOD $ 6,093 $ 4,161
================ ================
PER SHARE DATA (Basic and Diluted)
Net income (loss) $ .19 $ (.84)
================ ================
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
Basic and diluted (as adjusted for the
reverse stock split effective on December
1, 1998) 906,361 928,131
================ ================
The accompanying notes are an integral part of these consolidated statements.
PAGE 5
<PAGE>
INTERNATIONAL AMERICAN HOMES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(Dollars in thousands, except per share amounts)
(Unaudited)
Nine Months Ended December 31,
-----------------------------------
1998 1997
---------------- ----------------
REVENUES
Home sales $ 38,854 $ 45,013
Interest and other income 242 412
---------------- ----------------
39,096 45,425
---------------- ----------------
COSTS AND EXPENSES
Cost of home sales 32,801 39,319
Selling, general and administrative 4,719 4,905
Interest 256 390
Depreciation 72 106
Restructuring charge - 1,500
Reversal of creditor liability (1,322) -
---------------- ----------------
36,526 46,220
---------------- ----------------
INCOME (LOSS) BEFORE INCOME TAXES 2,570 (795)
PROVISION (BENEFIT) FOR INCOME TAXES 502 (227)
---------------- ----------------
NET INCOME (LOSS) 2,068 (568)
RETAINED EARNINGS, BEGINNING OF PERIOD 4,025 4,729
---------------- ----------------
RETAINED EARNINGS, END OF PERIOD $ 6,093 $ 4,161
================ ================
PER SHARE DATA (Basic and Diluted)
Net income (loss) $ 2.25 $ (.61)
================ ================
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
Basic and diluted (as adjusted for the
reverse stock split effective on December
1, 1998) 920,097 928,131
================ ================
The accompanying notes are an integral part of these consolidated statements.
PAGE 6
<PAGE>
INTERNATIONAL AMERICAN HOMES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended December 31,
-----------------------------------
1998 1997
---------------- ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $2,068 $(568)
Adjustments to reconcile net income to net cash provided by operating
activities:
Reversal of creditor liability (1,322) -
Depreciation 72 106
Changes in operating assets and liabilities
(Increase) Decrease in receivables (845) 661
Decrease in real estate inventory 3,919 1,852
Decrease in collateral for bonds payable 783 562
(Decrease) Increase in accounts payable and accrued liabilities (1,042) 153
Decrease in customer deposits (5) (135)
Decrease in other assets 202 266
---------------- ----------------
Net cash provided by operating activities 3,830 2,897
---------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease in restricted cash 250 264
Property and equipment, net 6 (15)
---------------- ----------------
Net cash provided by investing activities 256 249
---------------- ----------------
CASH FLOWS USED IN FINANCING ACTIVITIES:
Proceeds from mortgage notes and loans payable 3,835 22,333
Payments of mortgage notes and loans payable (7,728) (24,009)
Repayments of bonds payable - finance subsidiaries (761) (556)
Purchase of treasury stock (20) -
Return of unclaimed bankruptcy distributions 60 -
---------------- ----------------
Net cash used in financing activities (4,614) (2,232)
---------------- ----------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (528) 914
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,171 1,613
---------------- ----------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 643 $2,527
================ ================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 935 $1,353
================ ================
Income taxes $ 65 $ 138
================ ================
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
PAGE 7
<PAGE>
INTERNATIONAL AMERICAN HOMES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
International American Homes, Inc. (the "Company") was incorporated under the
laws of the State of Delaware on April 27, 1983. The Company, through its
subsidiary, designs, builds, and sells single-family homes and villas and
develops finished building lots, primarily in middle income communities in
suburban residential areas in Greater Tampa, Florida.
During the fiscal year ended March 31, 1998, and in prior years, the Company
also conducted home building activities in Metropolitan Washington, D.C.. Such
activities have been terminated and a plan for the orderly withdrawal from that
market was adopted. During the quarter ended December 31, 1997, the sale of new
homes in that market was ceased. Homes for which the Company had entered into
non-contingent contracts have been completed and model homes and excess lot
inventory have been sold.
The interim consolidated financial statements have been prepared without audit
and pursuant to the rules and regulations of the Securities and Exchange
Commission. In the opinion of management, all adjustments for interim periods
presented have been made (which include only normal recurring accruals and
deferrals) for a fair presentation of consolidated financial position, results
of operations, and cash flows. The consolidated financial statements and
condensed notes should be read in conjunction with the Consolidated Financial
Statements and Notes thereto included in the Company's latest Annual Report on
Form 10-K. Results for interim periods are not necessarily indicative of the
results which might be expected for a full year.
The interim Consolidated Financial Statements for the quarter ended December 31,
1998 are not comparable with any prior period because of the restructuring of
operations (i.e. exiting from the Washington, D.C. market).
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information," which is
effective for fiscal years beginning after December 15, 1997. The Company plans
to adopt SFAS No. 131 in the fiscal year that began April 1, 1998 and has not
determined the impact of adoption.
NOTE 2 - CASH AND CASH EQUIVALENTS
For purposes of the statements of cash flows, the Company generally considers
all highly liquid instruments purchased with an original maturity of three
months or less to be cash equivalents.
PAGE 8
<PAGE>
NOTE 3 - PLAN OF REORGANIZATION
On April 16, 1990, the Company and certain of its wholly-owned subsidiaries
filed voluntary petitions for relief under Chapter 11, Title 11 of the United
States Bankruptcy Code in the United States Bankruptcy Court for the District of
New Jersey (the "Bankruptcy Court"). On August 12, 1992, the Bankruptcy Court
entered an order confirming the Company's Plan of Reorganization (the "Plan" or
"Plan of Reorganization").
The Plan provided for distributions to creditors equal to 50 percent of future
cash flows (as defined in the Plan), if any, for the periods ending June 30,
1993 through June 30, 1998. The plan also requires that before the Company can
pay any dividends to stockholders it must first pay to certain holders of
creditors' claims $1,250,000. The plan also contained other restrictive
covenants regulating various aspects of the Company's operations. With the
exception of the dividend restriction which continues, all other restrictive
covenants expired on August 12, 1998.
During the year ended March 31, 1993 the Company provided an estimated liability
for potential distributions of cash flow to creditors of $1,322,000. The Company
has calculated the cash flow (as defined in the plan) for the cumulative six
year period ended June 30, 1998 and has determined that there was no cash flow
(as defined in the plan) for that period. Accordingly, no distribution to
creditors was required. At June 30, 1998, the Company reversed the estimated
liability and recognized income of $1,322,000.
NOTE 4 - PROVISION FOR RESTRUCTURING
The Consolidated Financial Statements for the year ended March 31, 1998 included
a restructuring charge of $1,840,000 ($1,214,000 after benefit for federal
income tax) associated with the termination of home-building operations in
Metropolitan Washington, D.C.. The restructuring has resulted in cumulative
charges of $1,809,000 through the quarter ended December 31, 1998. All
construction activities have been completed. However, administrative and
warranty services are expected to continue to be incurred in the future.
Although the Company believes that the remaining restructuring reserve is
sufficient based on current period estimates, the actual cost of restructuring
may be greater or less. The Company also believes that it has sufficient cash
flow and cash on hand to absorb the remaining costs associated with the
restructuring.
NOTE 5 - REAL ESTATE INVENTORY
Real estate inventory consists of the following (in thousands):
December 31, 1998 March 31, 1998
------------------- -------------------
Accumulated costs of construction
completed and in progress $ 6,973 $10,286
Land and land development costs 9,903 10,510
Land options and deposits 169 168
------------------- -------------------
$17,045 $20,964
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PAGE 9
<PAGE>
NOTE 6 - CONDENSED FINANCIAL STATEMENTS OF CONSOLIDATED FINANCE SUBSIDIARIES
The Company's wholly-owned finance subsidiaries were established to sell
collateralized mortgage obligations through participation in various
multi-builder bond programs. In these sales, which last occurred in 1987, the
Company originated and pooled mortgage loans which were then pledged as
collateral for bonds payable. The interest rates on the mortgage loans that
comprise the collateral for bonds payable roughly equate with the interest rates
on the related bonds payable.
Condensed financial information is as follows (in thousands):
Condensed Balance Sheets
(Unaudited)
December 31, 1998 March 31, 1998
------------------- -------------------
Assets:
Collateral for bonds payable $ 3,717 $ 4,500
Other Assets 8 6
------------------- -------------------
Total Assets $ 3,725 $ 4,506
=================== ===================
Liabilities and Equity:
Bonds payable $ 3,580 $ 4,341
Equity and intercompany advances 145 165
------------------- -------------------
Total Liabilities and Equity $ 3,725 $ 4,506
=================== ===================
Condensed Statements of Operations
(Unaudited)
Three Months Ended December 31,
-----------------------------------------
1998 1997
------------------- -------------------
Revenues - Interest and other income $ 78 $ 114
=================== ===================
(Loss) Income before income taxes ($ 1) $ 3
=================== ===================
Condensed Statements of Operations
(Unaudited)
Nine Months Ended December 31,
-----------------------------------------
1998 1997
------------------- -------------------
Revenues - Interest and other income $ 249 $ 347
=================== ===================
Income before income taxes $ 5 $ 9
=================== ===================
PAGE 10
<PAGE>
NOTE 7 - COMMITMENTS AND CONTINGENCIES
The interim Consolidated Financial Statements for the quarter ended December 31,
1998 reflect a liability of $31,000 representing the remaining balance of the
restructuring provision associated with the termination of home-building
operations in Metropolitan Washington, D.C. (See note 4). Although the Company
believes that the remaining provision is sufficient based on current period
estimates, the actual cost may be greater or less than the remaining provision.
At December 31, 1998, the Company had commitments to purchase 614 finished
building lots in the Greater Tampa area at a total purchase price of
approximately $17,607,000 over a two-year period. Substantial deposits will be
forfeited if the Company is unable to satisfy these commitments. See Management
Discussion and Analysis of Financial Condition and Results of Operations-
Liquidity and Capital Resources.
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 financial position or the results of operations.
NOTE 8 - COMMON STOCK
At the 1998 Annual Meeting of Stockholders, which was held on September 17,
1998, the stockholders approved a proposal to adopt an amendment to the
Company's Restated Certificate of Incorporation to effect a 1-for-3 reverse
stock split of the Company's issued and outstanding common stock. The Amendment
did not change the par value of the common stock which remained at $.01 per
share. The Amendment became effective with the filing of a Certificate of
Amendment with the Secretary of State of Delaware on December 1, 1998. The
effect of the Reverse Stock Split has been retroactively reflected in the
statements for all periods presented.
PAGE 11
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with, and is qualified in
its entirety by, the Consolidated Financial Statements and the notes thereto and
other financial information included elsewhere in this Quarterly Report on Form
10-Q. Certain statements in the Notes to Consolidated Financial Statements and
in this "Management's Discussion and Analysis of Financial Condition and Results
of Operations" are forward-looking statements. Such statements are subject to
and dependent upon a number of risks and uncertainties as discussed therein
and/or herein and in the Company's prior reports filed with the Securities and
Exchange Commission, which statements, individually or collectively, could cause
actual results to differ materially.
During the past several years a competitive housing market in Metropolitan
Washington, D.C., especially in the areas in which the Company conducted home
building operations, resulted in continued operating losses in the Company's
Metropolitan Washington, D.C. subsidiary. Management changes were made and
administrative costs were reduced in order to minimize the loss. In addition,
several communities in which operations had been performing poorly were
abandoned. Notwithstanding those changes, lower operating margins and higher
selling expenses continued to adversely affect the Company's ability to restore
profitability. Accordingly during the quarter ended December 31, 1997, the Board
of Directors of the Company approved management's plan to cease the building and
sale of homes and effect an orderly withdrawal from the Metropolitan Washington,
D.C. housing market. The restructuring has been substantially completed. All
construction activities have been completed. However, administrative and
warranty services are expected to continue to be incurred in the future (see
note 4).
LIQUIDITY AND CAPITAL RESOURCES
The interim Consolidated Financial Statements for the quarter ended December 31,
1998 reflect a liability of $31,000 representing the remaining balance of the
restructuring provision associated with the termination of home-building
operations in Metropolitan Washington, D.C. (see note 4). The actual cost may be
greater or less than the remaining provision. The Company believes that it has
sufficient cash flow on hand to absorb the remaining costs associated with the
restructuring.
The Company, through its subsidiary, obtains financing from commercial banks for
a portion of the cost of acquiring finished building lots and for most of the
costs of the construction of homes. This financing is generally available for
homes that are subject to a contract of sale and also for a limited number of
homes in advance of sale. The Company's loan commitments as well as current
banking regulations limit the portion of each home that can be financed to
approximately 75% of its value. Since the Company uses its own capital resources
to fund those costs that cannot be financed, the Company's future growth will be
limited by the amount of such resources. As a result of the use of these
financing arrangements, the Company is currently, and expects to continue to be,
highly leveraged.
The Company currently has financing agreements in the aggregate amount of
$19,900,000 with commercial banks located in the areas in which its subsidiary
operates. The terms of these financing agreements vary, are each for one year or
more from their date of origination, are generally guaranteed by the Company,
and are all secured by the related real estate inventory. The Company's Chairman
and President has agreed to personally guarantee, subject to the provisions of
the respective agreements, certain of these obligations up to an aggregate
maximum amount of $13,000,000. At December 31, 1998, the guarantee by the
Company's Chairman and President was not needed as certain loan conditions had
been satisfied.
PAGE 12
<PAGE>
The Company generally acquires finished building lots under contracts which
spread the time for acquisition of such lots over a period of time that roughly
coincides with the estimated time required for the sale of the homes on those
lots. At December 31, 1998, the Company had commitments to purchase 614 finished
building lots in the Greater Tampa area at a total purchase price of
approximately $17,607,000 over a two-year period. These commitments assure a
continuing supply of finished building lots in the future. In conjunction
therewith $169,000 of land options and deposits have been paid. A substantial
portion of those deposits will be forfeited if the Company is unable to satisfy
these commitments.
During the year ended March 31, 1996, the Company purchased a parcel of land in
Greater Tampa, Florida containing approximately 360 lots of which 300 were
undeveloped. At December 31, 1998, the Company had developed 257 of those
undeveloped lots into finished building lots and delivered 132 homes on those
lots in prior periods up to and including December 31, 1998. The Company
obtained financing from a commercial bank to fund a portion of the cost of
acquiring and developing the land.
The Company's short-term liquidity and its ability to operate over the short
term are reasonably assured by the financing agreements in place, by the
Company's backlog of sales contracts, and by the commitments to acquire finished
building lots. The Company's long-term liquidity is not affected by any material
capital expenditure but would be impacted by the inability to renew certain of
the financing agreements when they mature. The strength of the housing markets
in the areas where the Company operates and the ability of the Company to
maintain a continued supply of finished building lots will also affect the
Company's long-term liquidity. Management believes that the Company currently
has adequate financing and liquidity to meet its short-term financial
obligations and to fund the short-term acquisition and construction of
inventory. However, there is no assurance that such financing will be available
to the Company in the future. In addition, homebuilding is a cyclical industry
with economic conditions having a substantial impact on operating performance.
YEAR 2000
The Company believes that Year 2000 issues are not material to its business and
that the consequences of such issues would not have a material effect on the
Company's business, results of operations or financial condition without taking
into account the Company's efforts to avoid those consequences. Nevertheless
management is taking what it believes to be all necessary steps to become Year
2000 compliant.
Substantially all of the Company's computer equipment is relatively new and,
when purchased, was and is Year 2000 compliant. To bring its mainframe computer
into compliance, the Company has engaged Pro Data Business Computers ("Pro
Data") to make the changes in its mainframe computer which are necessary to make
it Year 2000 compliant. Pro Data expects to commence its work during the fiscal
quarter ending March 31, 1999 and to complete its work prior to June 30, 1999.
The Company estimates that the necessary work will cost approximately $5,000.
The costs for such work will be expensed. Only limited testing of the Company's
computer systems is expected to be necessary.
The costs of purchasing existing Year 2000 compliant computer equipment was
approximately $10,000, all of which was financed from working capital and
capitalized with provision for amortization over a period of two years.
The Company believes that its existing software programs are capable of being
modified to conform to Year 2000 requirements. The estimated costs of
modification of the Company's software programs and the purchase of comparable
Year 2000 compliant software will not exceed $5,000. Costs of modifying and
purchasing software will be expensed as incurred.
PAGE 13
<PAGE>
Most of the materials used by the Company in connection with its home-building
activities are purchased from local suppliers for whom Year 2000 issues as they
relate to the Company are either non-existent or immaterial. The Company has
made inquiries of its principal suppliers, i.e., those firms from whom it
purchases appliances (General Electric Company), concrete (CSR/Rinker
Materials), lumber (Hillsborough Builders Supply) and windows (Norandex) but as
yet is not in a position to assess the Year 2000 readiness of such suppliers.
Because the Company is a relatively modest customer of the suppliers of certain
of those items, management believes that it will have only limited opportunities
to engage in interactive testing with such suppliers for the purpose of
determining Year 2000 readiness for transactions with them.
Because of the nature of the Company's relationship with its home-buyer
customers, Year 2000 issues are not directly relevant to such relationships.
The Company has not formulated any contingency plan with respect to its failure
or the failure of any of its suppliers to be Year 2000 compliant prior to
December 31, 1999. The Company does not believe that a failure by the Company or
any of its suppliers to be Year 2000 compliant by that date will have a material
adverse effect on its business.
PAGE 14
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth certain information with respect to homes
delivered and homes sold during the periods presented, as well as homes sold
under contract but not delivered ("Backlog") at the dates shown (dollars in
thousands). For comparative purposes, 1997 information has been restated to
eliminate the results from restructured operations (i.e. the exiting from the
Washington, D.C. market).
Three Months Ended Nine Months Ended
December 31, December 31,
---------------------- ----------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
(restated) (restated)
Homes delivered
Units 89 79 277 250
Home sales revenue $12,817 $10,396 $38,854 $32,714
Average sales price $144.0 $131.6 $140.3 $130.9
Homes sold
Units 82 66 264 239
Sales value $11,822 $8,694 $37,325 $31,502
Average sales price $144.2 $131.7 141.4 $131.8
December 31,
----------------------
1998 1997
---------- ----------
(restated)
Backlog
Units 94 71
Sales value $13,257 $9,285
Average sales price $141.0 $130.8
The increase in home sales revenues for the three months ended December 31, 1998
compared to the three months ended December 31, 1997 results from an increase in
the number of units delivered and an increase in average sales price of the
units delivered. The increase in the number of units delivered results generally
from a greater number of operating communities and timing factors. The increase
in the average sales price results from a wider product range and price
increases.
The Company realized an increase in the number of homes sold during the three
months ended December 31, 1998 compared to the three months ended December 31,
1997. The increase is attributed to an increase in the number of operating
communities and a greater number of sales in each community.
The increase in the average sales price of homes sold during the three months
ended December 31, 1998 compared to the three months ended December 31, 1997
results from a wider product range and price increases.
PAGE 15
<PAGE>
The increase in home sales revenues for the nine months ended December 31, 1998
compared to the nine months ended December 31, 1997 results from the combination
of an increase in the number of units delivered and an increase in the average
sales price of units delivered. The increase in the number of units delivered
results generally from a greater number of operating communities and timing
factors. The increase in average sales prices results from a wider product range
and price increases.
The number of homes sold during the nine months ended December 31, 1998
increased when compared to the nine months ended December 31, 1997. The increase
is attributable to an increase in the number of operating communities and a
greater number of sales in each community.
The increase in the average sales price of homes sold during the nine months
ended December 31, 1998 compared to the nine months ended December 31, 1997
results from a wider product range and price increases.
THREE MONTHS ENDED DECEMBER 31, 1998 COMPARED TO THREE MONTHS ENDED DECEMBER 31,
1997
The following table sets forth, for the periods indicated, certain information
regarding the Company's operations (dollars in thousands).
Operations for the three months ended December 31, 1998 are not comparable to
the three months ended December 31, 1997 because of the restructuring of
operations (i.e. the exiting from the Washington, D.C. market).
Three Months Ended December 31,
---------------------------------------------
1998 1997
----------------------- ---------------------
Dollars % Dollars %
----------- ----------- ----------- ---------
Home sales revenues $12,817 100.0 $10,396 100.0
Cost of home sales 10,840 84.6 8,795 84.6
Gross profit 1,977 15.4 1,601 15.4
Selling, general and administrative
expenses 1,674 13.1 1,231 11.8
Restructuring Provision - - 1,500 14.4
Income (loss) before income taxes 275 2.1 (1,162) (11.2)
For the three months ended December 31, 1998 a provision for income taxes of
$101,000 was recorded. For the three months ended December 31, 1997 a net income
tax benefit of $384,000 was recorded. For both periods the rates were calculated
at statutory rates.
Interest and other income includes $78,000 and $114,000 and interest expense
includes $79,000 and $111,000 for the three months ended December 31, 1998 and
December 31, 1997, respectively, from wholly-owned finance subsidiaries
established in prior years to sell collateralized mortage obligations through
participation in various multi-builder bond programs.
PAGE 16
<PAGE>
THREE MONTHS ENDED DECEMBER 31, 1998 COMPARED TO THE THREE MONTHS ENDED DECEMBER
31, 1997
The following table sets forth, for the periods indicated, certain information
regarding the Company's remaining operations (dollars in thousands).
Three Months Ended December 31,
---------------------------------------------
1998 1997 (restated)
----------------------- ---------------------
Dollars % Dollars %
----------- ----------- ----------- ---------
Home sales revenues $12,817 100.0 $10,396 100.0
Cost of home sales 10,840 84.6 8,795 84.6
Gross profit 1,977 15.4 1,601 15.4
Selling, general and administrative
expenses 1,674 13.1 1,275 12.3
Income before income taxes 275 2.1 295 2.8
Gross profit increased for the three months ended December 31, 1998 while gross
profit as a percentage of home sales revenue remained constant. The increase in
gross profit is attributed to greater homes sales revenues.
Selling, general and administrative expenses for the three months ended December
31, 1998 increased in amount and as a percentage of home sales revenues over the
prior comparable period. The increase in selling expenses is primarily
attributable to the higher home sales revenues. The increase in general and
administrative expenses is attributed to the full absorption of all corporate
charges which in the past had been allocated to both of the Company's
Subsidiaries (see note 4, "provision for restructuring"), higher employment
costs and expenses incurred in settlement of litigation involving a former
officer.
The change in income before income taxes for the three months ended December 31,
1998 compared to the three months ended December 31, 1997 reflects the changes
in all the components of income and expense set forth above.
PAGE 17
<PAGE>
NINE MONTHS ENDED DECEMBER 31, 1998 COMPARED TO THE NINE MONTHS ENDED DECEMBER
31, 1997
The following table sets forth, for the periods indicated, certain information
regarding the Company's operations (dollars in thousands).
Operations for the nine months ended December 31, 1998 are not comparable to the
nine months ended December 31, 1997 because of the restructuring of operations
(i.e. the exiting from the Washington, D.C. market).
Nine Months Ended December 31,
---------------------------------------------
1998 1997
----------------------- ---------------------
Dollars % Dollars %
----------- ----------- ----------- ---------
Home sales revenues $38,854 100.0 $45,013 100.0
Cost of home sales 32,801 84.4 39,319 87.4
Gross profit 6,053 15.6 5,694 12.6
Selling, general and administrative
expenses 4,719 12.1 4,905 10.9
Restructuring provision - - 1,500 3.3
Income before income taxes and
reversal of creditor liability 1,248 3.2 (795) (1.8)
Reversal of creditor liability 1,322 3.4 - -
Income before income taxes 2,570 6.6 (795) (1.8)
For the nine months ended December 31, 1998 a provision for income taxes of
$502,000 was recorded. For the nine months ended December 31, 1997 a net income
tax benefit of $227,000 was recorded. The reversal of the creditor liability
does not have an income tax effect. For both periods the rates were calculated
at statutory rates.
Interest and other income includes $249,000 and $347,000 and interest expense
includes $244,000 and $338,000 for the nine months ended December 31, 1998 and
December 31, 1997, respectively, from wholly-owned finance subsidiaries
established in prior years to sell collateralized mortgage obligations through
participation in various multi-builder bond programs.
PAGE 18
<PAGE>
NINE MONTHS ENDED DECEMBER 31, 1998 COMPARED TO THE NINE MONTHS ENDED DECEMBER
31, 1997
The following table sets forth, for the periods indicated, certain information
regarding the Company's remaining operations (dollars in thousands).
Nine Months Ended December 31,
---------------------------------------------
1998 1997 (restated)
----------------------- ---------------------
Dollars % Dollars %
----------- ----------- ----------- ---------
Home sales revenues $38,854 100.0 $32,714 100.0
Cost of home sales 32,801 84.4 27,719 84.7
Gross profit 6,053 15.6 4,995 15.3
Selling, general and administrative
expenses 4,719 12.1 3,745 11.4
Income before income taxes 1,248 3.2 1,146 3.5
Gross profit increased in amount and as a percentage of home sales revenues over
the prior comparable period. The increase in gross profit is attributed
primarily to higher home sales revenues and a decrease in cost of home sales as
a percentage of home sales revenues.
Selling, general and administrative expenses for the nine months ended December
31, 1998 increased in amount and as a percentage of home sales revenues over the
prior comparable period. The increase in selling expenses is primarily
attributed to the higher home sales revenues. The increase in general and
administrative expenses is attributed to the full absorption of all corporate
charges which in the past had been allocated to both of the Company's
Subsidiaries (see note 4, "provision for restructuring"), higher employment
costs and expenses incurred in settlement of litigation involving a former
officer.
The change in income before income taxes for the nine months ended December 31,
1998 compared to the nine months ended December 31, 1997 reflects the changes in
all the components of income and expense set forth above.
PAGE 19
<PAGE>
ITEM 3
- ------
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None
Part II. Other Information
ITEM 2
- ------
CHANGES IN SECURITIES AND USE OF PROCEEDS
(a) On December 1, 1998 the Company effected a 1-for-3 reverse stock
split combination of its shares of common stock.
ITEM 6
- ------
EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
Reports on Form 8-K
None
PAGE 20
<PAGE>
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.
INTERNATIONAL AMERICAN HOMES, INC.
Date: February 11, 1999 By: /s/ Robert J. Suarez
--------------------
Robert J. Suarez
President
Date: February 11, 1999 By: /s/ Robert I. Antle
--------------------
Robert I. Antle
Executive Vice President, Treasurer, and
Chief Financial Officer
PAGE 21
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> DEC-31-1998
<CASH> 683
<SECURITIES> 0
<RECEIVABLES> 1377
<ALLOWANCES> 0
<INVENTORY> 17045
<CURRENT-ASSETS> 0<F1>
<PP&E> 514
<DEPRECIATION> 504
<TOTAL-ASSETS> 23268
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 10933
0
0
<COMMON> 10
<OTHER-SE> 8532
<TOTAL-LIABILITY-AND-EQUITY> 23268
<SALES> 12817
<TOTAL-REVENUES> 12901
<CGS> 10840
<TOTAL-COSTS> 12626
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 275
<INCOME-TAX> 101
<INCOME-CONTINUING> 174
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 174
<EPS-PRIMARY> .19
<EPS-DILUTED> .19
<FN>
<F1> The Company does not present a classified balance sheet
</FN>
</TABLE>
