SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[x] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e) (2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
International American Homes, Inc.
(Name of Registrant as Specified In Its Charter)
N/A
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11. N/A
(1) Title of each class of securities to which transaction
applies: N/A
(2) Aggregate number of securities to which transaction
applies: N/A
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined): N/A
(4) Proposed maximum aggregate value of transaction: N/A
(5) Total fee paid: N/A
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Note: The Registrant is filing a Rule 13e-3 Transaction Statement
concurrently with the Preliminary Proxy Statement.
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Notice of Annual Meeting of
Stockholders
and
Proxy Statement
of
International American Homes, Inc.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR
MERITS OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION
CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
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NOTICE OF 1999 ANNUAL MEETING OF STOCKHOLDERS
to be held
September __, 1999
---------------------------------------------------------------
To our Stockholders:
Notice is hereby given that the Annual Meeting of Stockholders of
International American Homes, Inc., a Delaware corporation (the "Company" or
"IAH")), will be held at 10:00 A.M. on ________, September __, 1999 at the
Radisson Hotel, 10221 Princess Palm Avenue, Tampa, Florida, for the purpose of
considering and acting upon the following matters as set forth in the
accompanying Proxy Statement:
1. To elect two Class I Directors to hold office for three-year terms as
specified in the accompanying Proxy Statement.
2. To act on a proposal to amend the Company's Restated Certificate of
Incorporation (i) to effect a 1 for 500 reverse stock split and to
provide that the price to be paid in lieu of issuing fractional shares
to any IAH stockholder, who, following the reverse stock split, would
hold less than one share of IAH Common Stock of record in any discrete
account, shall be an amount equal to the product obtained by
multiplying (a) 500 times the weighted average trading price per share
of all IAH Common Stock sold during the period beginning January 1,
1999 and ending on the twelfth business day next following the date of
this Notice of Annual Meeting, as reported or expected to be reported
by the BLOOMBERG(R)service, by (b) a fraction, the numerator of which
shall be the number of shares of IAH Common Stock owned by such
stockholder of record in such stockholder's account immediately prior
to the reverse stock split and the denominator of which shall be 500,
and (ii) reduce the total number of shares of capital stock which the
Company shall have authority to issue to eleven thousand (11,000), of
which ten thousand (10,000) shall be shares of Common Stock with a par
value of $.01 per share and one thousand (1,000) shall be shares of
Preferred Stock with a par value of $.01 per share.
3. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
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Only stockholders of record at the close of business on July 28, 1999 are
entitled to notice of and to vote at the meeting or any adjournment or
postponement thereof. Your shares cannot be voted unless they are represented by
proxy or you make other arrangements to have them represented at the meeting.
Please vote your shares.
By Order of the Board of Directors,
Robert I. Antle
Executive Vice President, Secretary and Chief Financial Officer
August __, 1999
Whether or not you intend to be present at the meeting, please mark, sign,
date and return the enclosed proxy card and mail it promptly in the enclosed
postage-paid, addressed envelope. You may nevertheless vote in person if you
attend the meeting.
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International American Homes, Inc.
9950 Princess Palm Avenue
Suite 112
Tampa, Florida 33619
(813) 664-1100
PROXY STATEMENT
- --------------------------------------------------------------------------------
GENERAL INFORMATION
We are delivering these proxy materials to solicit proxies on behalf of the
Board of Directors of International American Homes, Inc. (which we refer to as
"IAH," the "Company," "we," or "us"), for the 1999 Annual Meeting of
Stockholders, including any adjournment or postponement (the "Annual Meeting").
The meeting will be held on September , 1999, in Tampa, Florida.
We are mailing this proxy statement, together with a form of proxy and the
Company's Form 10-K Annual Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the Fiscal Year ended March 31, 1999 (the
"1999 10-K Annual Report"), starting July , 1999, to stockholders entitled to
vote at the meeting.
Stockholders Entitled to Vote at the Meeting
If you are a registered stockholder at the close of business on the record
date, July 28, 1999, you are entitled to receive this notice and to vote at the
meeting. There were 869,214 shares of common stock, par value $.01, of the
Company (the "Common Stock") outstanding on the record date. You will have one
vote for each share of Common Stock you own on each matter properly brought
before the meeting.
How to Vote Your Shares
Your vote is important. Your shares can be voted at the annual meeting only
if you are present in person or represented by proxy. Even if you plan to attend
the meeting, we urge you to vote. If you own your shares in record name, you may
cast your vote in the following way:
o Simply mark your proxy card, and then date, sign, and return it in the
postage-paid envelope provided.
Stockholders who hold their shares beneficially in street name through a
nominee (such as a bank or broker) may be able to vote by telephone or the
Internet as well as by mail. You should follow the instructions you receive from
your nominee to vote these shares.
How to Revoke Your Proxy
You may revoke your proxy at any time before it is voted at the meeting by:
o properly executing and delivering a
later-dated proxy;
o voting by ballot at the meeting; or
o sending a written notice of revocation to the inspectors of election
in care of the Secretary of the Company at the address listed above.
Voting at the Annual Meeting
The method by which you vote will in no way limit your right to vote at the
meeting if you later decide to attend in person. If you hold your shares in
street name, you must obtain a proxy executed in your favor from your nominee
(such as a bank or broker) to be able to vote at the meeting.
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Your shares will be voted at the meeting as directed by the instructions on
your proxy card if: (1) you are entitled to vote, (2) your proxy was properly
executed, (3) we received your proxy prior to the Annual Meeting, and (4) you
did not revoke your proxy prior to the meeting.
The Board's Recommendations
If you send a properly executed proxy card without specific voting
instructions, your shares represented by that proxy will be voted as recommended
by the Board of Directors:
o FOR the election of the nominated slate of directors (see pages 22 to
29); and
o FOR the approval of the amendment (the "Amendment") to IAH's Restated
Certificate of Incorporation (the "Charter") to (i) effect a 1 for 500
reverse split of IAH's Common Stock and to provide that the price to be
paid in lieu of issuing fractional shares to any IAH stockholder, who,
following the reverse stock split, would own less than one share of IAH
Common Stock of record in any discrete account, shall be an amount
equal to the product obtained by multiplying (a) 500 times the weighted
average trading price per share of all IAH Common Stock sold during the
period beginning January 1, 1999 and ending on the twelfth business day
next following the date of this Notice of Annual Meeting, as reported
or expected to be reported by the BLOOMBERG(R) service by (b) a
fraction, the numerator of which shall be the number of shares of IAH
Common Stock owned by such stockholder in such account immediately
prior to the reverse stock split and the denominator of which shall be
500 (the "Reverse Stock Split Proposal") and (ii) to reduce the total
number of shares of capital stock which the Company shall have
authority to issue to eleven thousand (11,000), of which ten thousand
(10,000) shall be shares of Common Stock with a par value of $.01 per
share and one thousand (1,000) shall be shares of Preferred Stock with
a par value of $.01 per share. (See pages 5 to 19 and 30 to 44).
Votes Required to Approve Each Item
The presence at the meeting (in person or by proxy) of the holders of at
least a majority of the shares outstanding on the record date, July 28, 1999, is
necessary to have a quorum allowing us to conduct business at the meeting.
The following votes are required to approve each item of business at the
meeting:
o Election of Directors: A plurality of the votes cast at the meeting (in
person or by proxy) is required to approve the election of directors
(Proposal 1).
o Reverse Stock Split Proposal; Reduction in Number of Authorized Shares:
Approval of the proposed amendment to the Company's Charter to (i)
effect the 1 for 500 reverse stock split and to set forth the formula
for computing the price to be paid in lieu of issuing fractional shares
to stockholders who, following the reverse stock split, would hold of
record in any discrete account, less than one share of IAH Common Stock
and (ii) reduce the number of authorized shares of capital stock of the
Company requires the affirmative vote of the holders of a majority of
the shares outstanding and entitled to vote at the meeting
(Proposal 2).
o Other Items: A majority of the votes cast at the meeting (in person or
by proxy) is required to approve any other items of business that may
properly come before the meeting.
Broker "no-votes" and abstentions have no effect on the outcome of the vote
for the election of directors or any other items, except that they
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will have the effect of a negative vote on the proposal to amend IAH's Charter
(Item 2). Broker "no-votes" occur when a nominee (such as a bank or broker)
returns a proxy, but does not have the authority to vote on a particular
proposal because it has not received voting instructions from the beneficial
owner.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Proxy Statement and the 1999 10-K Annual Report that accompanies
it contain certain statements which constitute "forward-looking statements"
including, most importantly, information concerning possible or assumed effects
of the Reverse Stock Split set forth under "Special Factors," "Proposal
2--Effect of the Reverse Stock Split Proposal on IAH Stockholders" and "--Effect
of the Reverse Stock Split Proposal on IAH" and those preceded by, followed by
or that include the words "may," "believes," "expects," and "anticipates" or the
negation thereof, or similar expressions. The achievement of the outcomes
described in such forward- looking statements is subject to both known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the industry or locality in which the
Company operates generally, and of the Company in particular, to be materially
different from any outcomes expressed or implied by such forward-looking
statements. Such forward-looking statements include discussions of expectations
concerning future operations, margins, profitability, liquidity and capital
resources and the expected effects on the Company and its stockholders if the
Reverse Stock Split Proposal is adopted. For those statements, the Company
claims protection of the safe harbor for forward-looking statements contained in
the Private Securities Litigation Reform Act of 1995. Although the Company
believes that such forward-looking statements are reasonable, it can give no
assurance that any forward-looking statements will prove to be correct. Such
factors include, among others, the demographic trends and other conditions
(including weather) impacting the housing market in the areas in which the
Company operates, competition in such areas, the availability of financing,
litigation outcomes, general economic and business conditions which may impact
levels of disposable income of potential home buyers, the outcome of the
shareholder vote to approve the reverse stock split, the number of stockholders
remaining after the reverse stock split, and the ability of the Company to
reorganize resources to benefit from de-registration from the Securities
Exchange Act of 1934, as amended.
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SPECIAL FACTORS
Background of the Proposed Reverse Stock Split Proposal
International American Homes, Inc. 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.
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. On August 12, 1992, the Bankruptcy Court entered an
order confirming the Company's Plan of Reorganization (the "Plan").
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 holders of certain
creditors' claims $1,250,000 (the "Dividend Restriction"). The payments to such
creditors required to release the Dividend Restriction have not been made. 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.
Of the Company's approximately 2,350 current record stockholders,
approximately 2,068 hold fewer than 100 shares, representing less than 4.2% of
the outstanding Common Stock and 185 hold between 100 and 499 shares
representing less than 4.5% of the outstanding Common Stock. Collectively, the
2,253 record holders of Common Stock holding fewer than 500 shares of Common
Stock (approximately 96% of all record holders) own an aggregate of 74,511
shares representing less than 8.7% of the outstanding Common Stock. The Company
does not have direct knowledge of the number of shares of its Common Stock that
are owned beneficially (but not of record) by persons who own fewer than 500
shares of its Common Stock in nominee name, but based on the number of sets of
proxy materials that the Company is requested to provide annually to brokers,
dealers, etc., the Company estimates that there are at least 500 such holders
owning beneficially at least 75,000 shares of its Common Stock. Accordingly, the
Company estimates that there are at least 150,000 shares of its Common Stock
being held by stockholders of record or beneficially in discrete accounts of
fewer than 500 shares. In making the computations presented elsewhere in this
Proxy Statement (including the preparation of the pro forma financial statements
included herein), the Company has assumed that substantially all beneficial
owners of fewer than 500 shares will convert their holdings to record ownership
prior to the effective date of the reverse stock split. The Board and the
Company's management are of the view that the recurring expense and burden of
maintaining so many small stockholder accounts coupled with the costs associated
with maintaining registration of the Company's Common Stock under Section 12 of
the Securities Exchange Act of 1934, as amended (the "1934 Act") is not cost
efficient for an enterprise the size of the Company.
Twice previously the Company effected reverse stock splits in an effort
to attain an acceptable per share price and encourage development of an active
market for the Common Stock. At the Annual Meeting of Stockholders held on
September 13, 1994, the stockholders approved a proposal to amend the Company's
Restated Certificate of Incorporation (i) to effect a 1-for- 10 reverse stock
split of the Company's issued and outstanding Common Stock and (ii) to reduce
the number of authorized shares of Common Stock from 30 million to 10 million.
The amendments did not change the par value of the
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Common Stock which remained at $.01 per share. The stated purpose of that
reverse stock split was to decrease the number of shares outstanding and
presumably increase the per share market price of the Common Stock. At the time,
the Company's Common Stock was considered to be a "penny stock" and as such was
more difficult to trade through stockbrokers. The Company also then intended
that if the market price per share of Common Stock increased sufficiently, and
if the other requirements for listing were satisfied, it would apply for listing
on NASDAQ or the American Stock Exchange. The Company also recognized at that
time the benefits of eliminating the cost of maintaining certain of its smaller
stockholder accounts and the ability of the reverse stock split to enable
stockholders owning of record fewer than ten shares to dispose of their
investment without brokerage charges. The amendments became effective on May 31,
1995 with the filing of a Certificate of Amendment with the Secretary of State
of Delaware.
Subsequently, 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. This amendment did not change the par value of the Common Stock which
remained at $.01 per share or the number of authorized shares which remained at
10 million. The stated purpose of that reverse stock split was to decrease the
number of shares outstanding and to increase the per share market price of the
Common Stock. At the time, the Company's Common Stock was considered to be a
"penny stock" and as such was more difficult to trade through stockbrokers and
would not qualify for margin accounts at most brokerage firms. The amendment
became effective on December 1, 1998 with the filing of a Certificate of
Amendment with the Secretary of State of Delaware.
In addition, promptly following the 1998 Annual Meeting of
Stockholders, on September 17, 1998 the Company's Board of Directors authorized
the repurchase by the Company of up to 15% of the Company's outstanding Common
Stock, at such prices and at such times as the Company's officers concluded that
it were to be in the best interests of the Company and its stockholders to do
so. The repurchases were to be made in market transactions as well as in block
and other negotiated transactions at prices that might be at, above or below
then current market prices for the Company's Common Stock.
Since the institution of the stock repurchase program, the Company has
purchased an aggregate of 36,769 shares of Common Stock from four different
stockholders, each of whom then held in excess of five hundred shares. The total
cost to the Company for such shares was $189,391, or approximately $5.15 per
share. The Company was not able to purchase shares from any stockholder holding
fewer than 500 shares of Common Stock.
At present, the Company has approximately 2,068 stockholders of record
with fewer than 100 shares of Common Stock (not including beneficial owners
whose shares may be registered in "street" name), 1,319 of whom have not made
the exchange of stock certificates provided for in connection with the 1995
reverse stock split, and an additional 345 of whom have not made the exchange of
stock certificates provided for in connection with the 1998 reverse stock split.
Furthermore, of the 185 stockholders owning of record between 100-499 shares of
Common Stock, 92 have not made the exchange of stock certificates provided for
in the 1995 reverse stock split and another 48 have not made the exchange of
stock certificates provided for in the 1998 reverse stock split. In sum, of the
Company's 2,253 stockholders with fewer than 500 shares of record, the Company
may have lost effective contact with all but 449 of them.
The Company is concerned that it may have lost effective contact with
many of its stockholders. The Company is also sensitive to the fact that some
stockholders' may believe (wrongly) that their Common Stock in the Company is of
so little value that brokerage commissions and administrative
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inconvenience deter them from selling shares. Prior to 1999 the Board sought to
maintain the public status of the Company in part to help encourage the
development of an active public market for such shares and make them more
liquid. However, that market has not proved to be as active or liquid as the
Board had hoped. Moreover, there has been a change in the Company's focus. With
its withdrawal from the Metropolitan Washington, D.C. real estate market
(completed earlier this year), the Company has become just one of many home
builders serving Greater Tampa and surrounding Florida communities.
Consequently, the Board has come to believe that the Company, as such, derives
little benefit from the continued registration of its Common Stock under the
1934 Act. Accordingly, the Board has decided to present the Reverse Stock Split
Proposal to its stockholders for their consideration and approval as a means of
providing liquidity for the holdings of those stockholders who own fewer than
500 shares of record in any discrete account and, incident thereto and as the
primary purposes thereof, to deregister the Company's Common Stock under the
1934 Act and reduce the recurring expenses resulting from the Company's public
status.
In making this determination, the Board of Directors considered other
means of achieving this result, but rejected these alternatives because the
Board of Directors believed that the Reverse Stock Split Proposal would be
simpler and less costly. These alternatives were:
(a) A tender offer at a similar price per share, but the Board believed
it would not result in shares being tendered by a sufficient number of record
stockholders so as to accomplish the going private objective and reducing
recurring costs. In addition to the apparent loss of effective contact with many
of the record holders, it was thought unlikely that many holders of small
numbers of shares would make the effort to tender their shares;
(b) A purchase of shares in the open market. There has been modest
trading activity in the Company's shares and the Company's existing stock
repurchase program had not been met with high stockholder response; therefore,
it would be highly unlikely that shares could be acquired by the Company from a
sufficient number of holders to accomplish the Board's objectives; and
(c) A statutory merger into a new company, but this procedure would not
only involve the same issues as the Reverse Stock Split Proposal, but also the
possibility of multiple costly appraisal proceedings which the Board felt would
be disruptive and unpredictable as to outcomes. Moreover, these added costs
would only reduce further the amount of Company assets available to be paid to
the stockholders.
The Reverse Stock Split Proposal is being made at this time because the
sooner the proposal can be implemented, the sooner the Company will cease to
incur the expenses and burdens and the sooner stockholders who are to receive
cash in lieu of fractional shares of Common Stock will receive and be able to
reinvest or otherwise make use of such cash payments. Moreover, because the
Company's 1999 10-K Annual Report is current and the Reverse Stock Split
Proposal will be considered and voted upon at the Company's Annual Meeting of
Stockholders, the expense to be incurred by the Company in connection with the
proposal is expected to be less than it would be if the proposal were to be made
at a different time.
As management continued to consider the Company's options, it became
apparent that the Reverse Stock Split Proposal was the best choice for the
stockholders and the Company. The Board deemed a tender offer to all holders to
be imprudent due to potential expenditures associated with it and the lack of
assurance that an adequate number of stockholders with fewer than 500 shares
would tender their shares in a tender offer, thus thwarting the Company's
intended purpose of reducing costs and terminating the registration of the
Company's Common Stock under the 1934 Act. Significantly, by setting the
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reverse stock split ratio at 500-to-1, the Company estimates that following the
proposed reverse stock split fewer than 100 stockholders of record will remain,
comfortably below the maximum of 300 shareholders of record necessary to
de-register from the 1934 Act[^].
On June 24, 1999, the Board having heard proposals from members of
management determined to proceed with the transaction and to submit the Reverse
Stock Split Proposal to the stockholders for approval.
The Effects of the Reverse Stock Split and Reduction in Authorized Stock
(1) Reduction in the Number of Stockholders and the Number of
Outstanding Shares. The Company believes that the reverse stock split will
reduce the number of record stockholders from approximately 2,350 to fewer than
100. As noted earlier, in addition to the approximately 74,511 shares held by
stockholders of record with fewer than 500 shares in their account, the Company
assumes that beneficial owners of approximately 75,000 shares will transfer such
shares into record accounts containing fewer than 500 shares prior to the
Effective Date. Accordingly, the number of outstanding shares of present Common
Stock will change from 869,214 to approximately 719,214 (or approximately 1,438
post-reverse stock split shares). The Company also believes that completion of
the reverse stock split will cause the public market for shares of Common Stock
to be eliminated.
(2) Transfer of Book Value. Because (i) the Company expects that the
price to be paid to holders of record of fewer than 500 shares of present Common
Stock will approximate $6.00 per share of present Common Stock, (ii) the number
of shares of present Common Stock expected to be cashed out as a result of
adoption of the Reverse Stock Split Proposal is estimated to approximate
150,000, (iii) the costs to the Company (including expenses) of effecting the
reverse stock split and making payments in lieu of fractional shares is expected
to approximate $1,050,000, and (iv) at March 31, 1999, aggregate stockholders'
equity in the Company approximated $8,546,000, or $9.97 per share, it is
expected that
o aggregate stockholders' equity in the Company will be reduced
from approximately $8,546,000 to approximately $7,496,000;
o The book value per share of present Common Stock that is not
being cashed out in the reverse stock split (719,214 shares)
will increase from $9.97 per share of present Common Stock to
approximately $10.42 per share ($5,213 per post reverse stock
split share);
o Net income per share of present Common Stock (including
non-recurring income) will increase from $2.47 to $3.01 ($2.45
to $2.98 on a fully-diluted basis) in each case assuming that
the Company's future aggregate net income (including
non-recurring income) will be the same as in fiscal 1999; and
o Net income per share of present Common Stock (excluding
non-recurring income) will increase from $1.02 to $1.27 ($1.01
to $1.26 on a fully-diluted basis) in each case assuming that
the Company's future aggregate net income (excluding
non-recurring income) will be the same as in fiscal 1999.
(3) Termination of Exchange Act Registration. The Common Stock is
currently registered under the 1934 Act. Such registration may be terminated by
the Company if the Common Stock is no longer held by 300 or more stockholders of
record. Termination of registration of the Common Stock under the 1934 Act would
substantially reduce the information required to be furnished by the Company
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to its stockholders and to the Commission and would make certain provisions of
the 1934 Act, such as the short-swing profit recovery provisions of Section
16(b) of the 1934 Act, proxy statement disclosure in connection with
stockholders meetings and the related requirement of an annual report to
stockholders, no longer applicable to the Company. Accordingly, for a total
expenditure by the Company of approximately $1,050,000 the Company estimates it
will eliminate costs and expenses associated with continuance of the 1934 Act
registration, which the Company estimates approximates [^] $150,000 [^] on an
annual basis. The Company intends to apply for such termination as soon as
practicable following completion of the Reverse Stock Split.
One related benefit from the termination of registration of the Common
Stock under the 1934 Act will be the retention of certain proprietary
information of the Company. While historically the Company conducted activities
in a number of metropolitan markets, it currently operates only in the greater
Tampa market. Accordingly, the disclosure mandated in the Company's 1934 Act
filings can be readily analyzed by the Company's competitors, rendering IAH at a
competitive disadvantage since it does not have access to similar information of
its rivals who operate in more than one market.
With respect to the executive officers and directors of the Company, in
the event the registration of the Common Stock is terminated under the 1934 Act:
(a) executive officers, directors and other affiliates would no longer be
subject to many of the reporting requirements and restrictions of the 1934 Act,
including without limitation the reporting and short-swing profit provisions of
Section 16, and (b) executive officers and directors of the Company may be
deprived of the ability to dispose of shares of Common Stock pursuant to Rule
144, as amended under the Securities Act of 1933.
(4) Effect on Market for Shares. The Company's Common Stock is
currently traded in the over-the-counter market and last sales prices are
reported on the OTC Bulletin Board(R) ("OTCBB") which is a regulated quotation
service that displays real time quotes, last sales prices and volume information
in over-the-counter equity securities. There are presently four known market
makers in the Company's Common Stock. It is unlikely that the market makers in
the Common Stock will continue to act in that capacity after the reverse stock
split and termination of the registration of the Company's Common Stock. Upon
termination of the registration of the Common Stock under the 1934 Act, the
reduction in public information concerning the Company and the termination of
the Company's status as a reporting company may adversely affect the liquidity
and market value of the Common Stock. In addition, the increase in the per share
price of the Common Stock and the decrease in the number of shares of Common
Stock outstanding as a result of the reverse stock split may also adversely
affect the liquidity and market value of the Common Stock.
(5) Reduction in Number of Authorized Shares. The amendment to the
Company's Restated Certificate of Incorporation will reduce the number of
authorized shares of Common Stock from 10,000,000 shares to 10,000 shares and
the number of authorized shares of preferred stock from 4,000,000 to 1,000
shares. With the exception of the number of authorized shares, the terms of the
preferred stock and Common Stock before and after the reverse stock split will
remain the same. The reduction in the number of authorized shares is expected to
result in a substantial reduction in the annual franchise taxes payable by the
Company.
The par value of the Common Stock and Preferred Stock will remain $.01
per share following consummation of the reverse stock split.
If the Reverse Stock Split Proposal is effected, the Compensation
Committee of the Board of Directors will take such action as it deems necessary
to make equitable adjustments to any outstanding employee stock options.
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Potential Detriments of the Reverse Stock Split Proposal to Stockholders;
Accretion in Ownership and Control of Certain Stockholders
Stockholders owning fewer than 500 shares of record in any discrete
account immediately prior to the Effective Date of the reverse stock split will,
after the reverse stock split takes place, no longer have any equity interest in
the Company and therefore will not participate in its future potential earnings
or growth. It will not be possible for cashed out stockholders to re-acquire an
equity interest in the Company unless they purchase an interest from the
remaining stockholders. Transfers by the remaining stockholders of their shares
to third parties are not anticipated.
Potential detriments to Company stockholders who remain as stockholders
if the reverse stock split is effected include decreased access to information
and decreased liquidity. If the Reverse Stock Split Proposal is effected, the
Company intends to terminate the registration of its Common Stock under the 1934
Act. As a result of such termination, the Company will no longer be subject to
the periodic reporting requirements and the proxy rules of the 1934 Act. The
liquidity and market value of the shares of Common Stock held by unaffiliated
stockholders may be adversely affected by the reverse stock split and by
termination of the registration of the Common Stock under the 1934 Act.
As a result of the reverse stock split, it is expected that (a) the
percentage of ownership of Common Stock of the Company held by officers and
directors of the Company as a group will increase from 41.94% to 50.69%, and (b)
the collective book value of the shares of Common Stock held by officers and
directors as a group will increase from $3,601,000 to $3,821,000.
The Board of Directors did not retain either an investment bank or
other financial adviser to render a report or opinion with respect to the
fairness of the Reverse Stock Split Proposal to the Company or its stockholders
or an unaffiliated representative to represent the unaffiliated stockholders of
the Company in negotiating the terms of the Reverse Stock Split Proposal.
Financial Effect of the Reverse Stock Split
The reverse stock split and the use of approximately $1,050,000 cash to
complete the reverse stock split, which includes professional fees and other
expenses related to the transaction and payments to be made in lieu of issuing
fractional shares, are not expected to have any material adverse effect on the
Company's capitalization, liquidity, results of operations or cash flow. Because
the actual number of fractional shares which will be purchased by the Company
and the price to be paid in lieu of fractional shares to stockholders who,
following the reverse stock split, would hold of record in any discrete account
less than one share of Common Stock, are unknown at this time, the total cash to
be paid to holders by the Company is unknown, but is estimated to be $900,000.
The Company expects to be able to finance the Reverse Stock Split
Proposal through a combination of working capital and draws upon its existing
revolving line of credit with NationsBank of Florida, N.A. The Company is
generally entitled to finance its home construction costs up to 75% of the value
of each particular home unit but has recently been borrowing significantly less
and instead funding out of its working capital. Accordingly, the Company has a
reserve in its construction line of credit which can be drawn down, and the
Company may do so prior to the reverse stock split, increasing the amount of
working capital from which it will fund the reverse stock split. Amounts
borrowed under this line of credit have an interest rate of prime plus 1/2%, and
are secured by the Company's work-in-progress. No specific plans or arrangements
have been made concerning the repayment of amounts to be drawn upon.
10
<PAGE>
The following pro forma financial information presents the effect on
the Company's historical financial position of the reverse stock split,
including expenses of the transactions described herein and the cash payments to
Cashed Out Stockholders estimated to aggregate $1,050,000. The unaudited pro
forma balance sheets reflect the transaction as if it occurred on the balance
sheet dates. The unaudited pro forma statements of operations reflect the
transaction as if it had occurred at the beginning of the periods presented.
The unaudited pro forma balance sheets are not necessarily indicative
of what the Company's financial position would have been if the reverse stock
split had been effected on the dates indicated, or will be in the future. The
information shown on the unaudited pro forma statements of operations is not
necessarily indicative of the results of future operations.
The unaudited pro forma financial statements should be read in
conjunction with the historical financial statements and accompanying footnotes
of the Company which are incorporated by reference into this Proxy Statement.
See "Incorporation of Certain Documents by Reference."
11
<PAGE>
INTERNATIONAL AMERICAN HOMES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
MARCH 31, 1999
Historical Pro forma
---------- ---------
Receivables $ 1,626 $ 1,626
Collateral for bonds payable 3,199 3,199
Real estate inventory 18,247 18,247
Total assets 24,768 24,768
Mortgage notes and loans payable 8,571 9,621
Bonds payable 3,068 3,068
Total liabilities 16,222 17,272
Stockholders' equity 8,546 7,496
Book Value Per Share 9.97 10.60
12
<PAGE>
INTERNATIONAL AMERICAN HOMES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS [^]
(Dollars in thousands)
MARCH 31, 1999
Historical Pro forma
---------- ---------
Revenues: $49,992 $49,992
Home sales
335 335
---------- ---------
Interest and other income 50,347 50,347
---------- ---------
Costs and expenses:
Cost of home sales 42,236 42,236
Selling, general and administrative 6,144 5,994
Interest 373 460
Depreciation 88 88
Reversal of creditor liability (1,322) (1,322)
---------- ---------
47,519 47,456
---------- ---------
Income before income taxes 2,828 2,891
Provision for income taxes 583 604
---------- ---------
Net income $2,245 2,287
========== =========
Per Common Share:
Basic net income $2.47 $3.01
========== =========
Weighted average number of shares used in
basic net income (loss) per share data, as
adjusted for the Reverse Stock Splits 908,550 758,550
========== =========
Diluted net income $2.45 $2.98
========== =========
Weighted average number of common and common
equivalent shares 917,350 767,350
========== =========
Ratio of Earnings to Fixed Charges 3.25:1 3.15:1
========== =========
Recommendation of the Board of Directors; Fairness of the Reverse Stock Split
Proposal
The Board believes that the Reverse Stock Split Proposal, taken as a
whole, is fair to, and in the best interests of the Company and its
stockholders, including those who will receive cash in lieu of fractional
shares, those who will receive shares of new Common Stock and those who will
receive both cash and shares. The Board also believes that the process by which
the transaction is to be approved is fair. The Board recommends that the
stockholders vote for approval and adoption of the Reverse Stock Split Proposal
and the Amendment as described above. Each member of the Board and each officer
of the Company who owns shares of Common Stock has advised the Company that he
intends to vote his shares in favor of the Reverse Stock Split Proposal.
The Board has retained for itself the absolute authority to reject (and
not implement) the Reverse Stock Split Proposal (even after approval thereof) if
it determines subsequently that the Reverse Stock Split Proposal is not then in
the best interests of the Company and its stockholders. The Company did not
obtain an independent fairness opinion in connection with the proposed Reverse
Stock Split Proposal. The Board unanimously approved the Reverse Stock Split
Proposal.
13
<PAGE>
The Board considered a number of factors in determining whether it was
in the best interests of the Company and its stockholders to undertake a
transaction to reduce the number of stockholders to fewer than 300 persons in
order to terminate the registration of its Common Stock under the 1934 Act. The
Board of Directors reviewed and discussed with management of the Company
materials which had been prepared by management and distributed to the Board
relating to cost savings to be achieved by terminating the registration of the
Common Stock. The Board of Directors determined that cost savings of
approximately $150,000 per year could be achieved if the Company terminated the
registration. The Board of Directors also considered the time and effort
currently required of management to comply with the reporting and other
requirements associated with continued registration of the Common Stock under
the 1934 Act. The Board of Directors considered the effect that terminating the
registration of the Common Stock might have on the market for the Common Stock
and the ability of stockholders to buy and sell shares. The Board also
considered the competitive disadvantage the Company currently faces since the
mandated disclosure under the 1934 Act filings can be easily analyzed by
competitors as being derived from operations in a single housing market. The
Board of Directors determined that the cost savings, reduced burden on
management and increased confidentiality of proprietary information to be
achieved by terminating registration of the Common Stock under the 1934 Act
outweighed any potential detriment from termination of registration.
The Board of Directors considered several alternative transactions to
accomplish the reduction in the number of stockholders to fewer than 300 persons
but, ultimately determined the Reverse Stock Split Proposal was the preferred
method. See "--Background of the Proposed Reverse Stock Split Proposal."
The Board considered numerous factors, discussed below, in reaching its
conclusion as to fairness of the Reverse Stock Split Proposal to those
stockholders whose shares of Common Stock would be purchased for cash because
they did not own at least 500 shares of Common Stock. The Board did not assign
any specific weights to the factors listed below but, in reaching the conclusion
as to the fairness of the Reverse Stock Split Proposal to holders of record of
fewer than 500 shares of Common Stock, more emphasis was placed on "Current and
historical prices of the Company's Common Stock" and the "Purchase Price paid in
Previous Purchases" than on any other factors. Moreover, in their considerations
individual directors may have given differing weights to different factors.
(1) Current and historical market prices of the Company's Common Stock.
The Company's Common Stock is not listed on any stock exchange or quoted in the
National Association of Securities Dealers Automated Quotation (NASDAQ) system;
rather, it is traded on the over-the-counter market and actual transactions are
reported on the OTCBB. The Company knows of only [^] four (4) market makers with
respect to its Common Stock. The Common Stock is thinly traded: according to the
records of the Bloomberg service, on average only approximately 5,300 shares
have been traded monthly from January 1, 1999 through June 30, 1999. The
cumulative weighted average reported price of such shares traded was $5.78
according to the Bloomberg service.
The Board also reviewed high and low bid prices for the Common Stock
(as adjusted for prior reverse stock splits) from April 1, 1997 to June 30,
1999, which ranged from $2.63 to $7.50 per share. See "Price Range of Common
Stock; Dividends; Trading Volume." The price as quoted by the Bloomberg service
in the Company's Common Stock on July 1, 1999, was $5.00 bid and $7.00 asked.
The Board noted, however, the historical illiquidity of the shares,
which it believes results from the traditionally extreme spread between the bid
and asked price, which it attributes to control by a limited number of market
makers on the bid side.
14
<PAGE>
(2) Net Book Value. As of March 31, 1999, the net book value per share
of outstanding Common Stock was approximately $9.97. For a number of reasons,
the Board did not give significant importance to book value. First, the Board is
cognizant that stated book value must be adjusted to reflect appropriately the
fact that the Plan requires that before the Company can pay any dividends to
stockholders it must first pay $1,250,000 to holders of certain creditors'
claims. Second, the Company's assets consist primarily of
construction-in-progress, finished building lots, undeveloped land and deposits
on lot purchase commitments. Since the company has financed substantially all of
its acquisitions of real estate assets with loan commitments, it is highly
leveraged. All of the Company's financing arrangements are secured by the
related real estate inventory. In addition, homebuilding is a cyclical industry
with economic conditions (in addition to weather) having a substantial impact on
operating performance. Accordingly, external factors which could cause the
Company to default on its loan commitments could result in the forfeiture of
certain underlying real estate assets, and other factors which interfere with
the Company's ability to satisfy its commitments to purchase finished building
lots may result in the Company's forfeiture of substantial deposits related to
the purchase thereof. Third, the Board is of the opinion that net book value is
not necessarily a true measure of value but rather is an accounting concept
based upon the historical prices paid for assets of the Company, and that the
Company may be more or less valuable as a going concern. Although book value was
a factor that was considered by the Board among others in determining a cash-out
price, the Board determined that it was not directly relevant.
(3) Going Concern Value. While the Board fully anticipates the Company
to continue as a going concern, the experience of the Company during the
previous ten (10) years has educated the Company's management as to the
fragility of the Company's business. In particular, the bankruptcy of the
Company in 1990 and the need in 1998 to abandon operations in the Metropolitan
Washington, D.C. housing market have taught management and the Board not to be
overly confident concerning the future viability of the Company, notwithstanding
its relative current health and other positive financial indicia. The cyclical
nature of the homebuilding industry and other factors which may interfere with
the Company's financing commitments could quickly cause the Company's financial
health to shift precariously. In addition, the Board has engaged in a
comparable, publicly traded company analysis wherein such companies' ratios of
market values relative to earnings per share, price-to-earnings ratio, book
value, revenues, return on investment, return on assets, net margin and sales
per share were applied to the Company's financial results. In the opinion of the
Board, no publicly traded companies analyzed in the Company's industry are truly
comparable to the Company. There are a number of reasons the Board reached this
conclusion. First, most of the publicly traded companies in IAH's industry have
substantially greater revenues (from 4 to more than 25 times) than IAH. Second,
most of such companies are geographically diverse, which shields them from local
economic fluctuation, as distinguished from the Company, whose activity is
concentrated in the greater Tampa area. Relatedly, the Tampa housing market has
historically been a low margin market as compared to other geographic areas.
Third, most of the other companies have substantially higher net worth, as
opposed to the Company which had a net worth on March 31, 1999 of $8,546,000.
Fourth, while IAH trades over-the-counter, most of the comparable publicly
traded companies are listed on the New York Stock Exchange or on The NASDAQ
National Market, which promotes an orderly and liquid trading market with much
higher volume than the Company's shares normally encounter. Fifth, most of the
comparable companies have market capitalizations from 5 to 100 times that of
IAH's, with most in the upper end of the range. Sixth, performance ratios
measuring return on equity, return on assets and net margin are almost uniformly
greater than those for the Company, which the Board believes may be explained,
in part, due to the Company's higher employment costs and inability to absorb
certain costs, such as reporting requirement overhead, as easily as its larger
competitors. Seventh, the Company's lenders have historically required and
currently require the president of the Company personally to guarantee certain
indebtedness of the Company. See "Certain Relationships and Related
Transactions." And, eighth, it is necessary to take into consideration in
evaluating the Company's net income for the fiscal year ended March 31, 1999,
15
<PAGE>
which was $923,000, excluding $1,322,000 of non-recurring income resulting from
the reversal of an estimated liability to creditors established during the year
ended March 31, 1993 for which no payment was required.
(4) Earnings. The Board reviewed the earnings of the Company for the
previous three fiscal years, although ultimately it did not place much weight on
this factor due to the existence of non-recurring charges and credits which make
it difficult to predict future results with any degree of certainty. For the
three years ended March 31, 1999 the Company reported net income (loss) of
$2,245,000, ($704,000) and $650,000, respectively. During the fiscal year ended
March 31, 1999 income of $1,322,000 resulting from the reversal of a creditor
liability was realized. During the fiscal year ended March 31, 1998 a charge of
$1,840,000 associated with the termination of operations in Metropolitan
Washington D.C. was recorded. Both the income and the charge are considered to
be non-recurring. Adjusted net income eliminating the above two non-recurring
items for the three fiscal years ended March 31, 1999 would be $923,000,
$510,000 and $650,000, respectively. The average adjusted net income for the
three fiscal years ended March 31, 1999, excluding non-recurring items, was
$694,000.
(5) Liquidation Value. The Company has no current plan to effect any
liquidation of the Company. See "--Conduct of the Company's Business after the
Reverse Stock Split." As described above under the caption "Book Value", the
Company's primary assets are construction in progress, finished building lots
and undeveloped land. The Board believes that the Company would not be able to
realize the full value of these assets upon liquidation because (a) the Company
would incur wind-down expenses, (b) operating costs and construction and
administrative overheads would be disproportionate to the revenue stream, (c)
deposits on land purchase agreements would be forfeited, (d) inventory of
finished building lots would have to be disposed of, (e) a percentage of
contracts for the purchase of new homes would probably be canceled by customers,
while others would be subject to additional price incentives as an inducement to
close, (f) continuing obligations to provide warranty service would extend the
Company's obligations well into the future and (g) cancellation of lease
agreements would obligate the Company to additional costs. The Board believed
that a liquidation would not result in any increased value over book value, and
possibly a lesser amount for the reasons noted above. The Board believed a
realistic expectation for liquidation value per share would be between $6.00 and
$7.00.
(6) Purchase Prices Paid in Previous Purchases. Between April 1, 1997
and June 30, 1999 the Company purchased an aggregate of 40,102 shares (adjusted
for previous reverse stock splits) of Common Stock of the Company at prices
(similarly adjusted) ranging from $4.56 to $5.25 per share, and affiliates of
the Company purchased an aggregate of 37,651 shares (adjusted for previous
reverse stock splits) of Common Stock of the Company at prices (similarly
adjusted) ranging from $1.50 to $4.75 per share. The average purchase price
(adjusted for previous stock splits) paid by the Company and the Affiliates,
respectively, during such each quarter during such period was as follows:
16
<PAGE>
<TABLE>
<CAPTION>
No. of Shares (adjusted) Average Purchase Price Paid (adjusted)
Quarter Ended By Company By Affiliates By Company By Affiliates
------------- ---------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
1997
June 30 0 0 $0 $0
September 30 0 0 0 0
December 31 0 13,998 0 3.95
1998
March 31 0 5,323 0 3.76
June 30 3,333 4,999 4.56 4.65
September 30 0 0 0 0
December 31 0 0 0 0
1999
March 31 33,601 0 5.17 0
June 30 3,168 13,331 5.00 3.89
</TABLE>
Furthermore, in the nine months since the institution of the stock
repurchase program, the Company has been able to purchase only 36,769 shares of
Common Stock in negotiated transactions with four different stockholders, each
holding more than 500 shares of Common Stock. The total cost to the company for
these shares of stock was $189,391, equal to $5.15 per share.
(7) Absence of Offers for Alternative Transactions. The Company has not
sought, and has not received, any proposals from any unaffiliated persons during
the preceding eighteen months for the merger or consolidation of the Company
with such person, or for the sale or other transfer of all or any substantial
portion of the Company's assets, or for securities of the Company that would
enable the holder thereof to exercise control of the Company.
(8) Opportunity to Liquidate Shares of Common Stock. In addition to
that discussed above, the Board considered the opportunity presented by the
Reverse Stock Split Proposal for stockholders owning fewer than 500 shares of
record to liquidate their holdings without incurring brokerage costs,
particularly given the relatively illiquid market for shares of the Company's
Common Stock.
The Board decided that a market-based valuation was more appropriate in
setting the price because net book value, liquidation value, and going concern
value were of limited relevance to such a valuation. After consideration of all
this information, the Board of Directors determined that a fair price to be paid
in lieu of issuing fractional shares to any IAH stockholder, who, following the
reverse stock split, would hold less than one share of IAH Common Stock of
record in any discrete account, shall be an amount equal to the product obtained
by multiplying (i) 500 times the weighted average trading price per share of all
IAH Common Stock traded during the period beginning January 1, 1999 and ending
on the twelfth business day next following the date of this Notice of Annual
Meeting and Proxy Statement, as reported by the Bloomberg service, by (ii) a
fraction, the numerator of which shall be the number of shares of present IAH
Common Stock owned by such stockholder of record in such stockholder's account
immediately prior to the reverse stock split and the denominator of which shall
be 500 (the "Fractional Share Cash-Out Amount").
17
<PAGE>
The transaction is not structured so that approval of at least a
majority of unaffiliated stockholders is required. No independent committee of
the Board of Directors has reviewed the fairness of the Reverse Stock Split
Proposal. No unaffiliated representative acting solely on behalf of the
stockholders for the purpose of negotiating the terms of the Reverse Stock Split
Proposal or preparing a report covering the fairness of the Reverse Stock Split
Proposal was retained by the Company or by a majority of directors who are not
employees of the Company. The Company did not obtain any report, opinion or
appraisal from an outside party relating to the consideration or the fairness of
the consideration to be paid to stockholders holding fewer than 500 shares of
Common Stock of record in any one account or the fairness of the Reverse Stock
Split Proposal to the Company and its remaining unaffiliated stockholders. The
Board determined that the cost of obtaining a fairness opinion would be
prohibitively high given the small number of shares involved in the transaction.
The Reverse Stock Split Proposal is expected to result in the cash-out of
approximately 150,000 shares of Common Stock at the Fractional Share Cash-Out
Amount, for a total purchase price approximating $900,000. The Board of
Directors believes that the transaction is fair notwithstanding the absence of
such a committee, representative or appraisal. The Board believes that the
transaction is procedurally fair because after consideration of all aspects of
the proposed transaction as described above, all of the directors, including the
directors who are not employees of the Company, approved the Reverse Stock Split
Proposal. The reverse stock split is being effected in accordance with all
requirements under Delaware law.
Conduct of the Company's Business after the Reverse Stock Split
Since the Company expects to borrow the approximately $1,050,000 that
is expected will be needed to complete the reverse stock split, the net
stockholder equity will decline by the same amount, and the annual interest cost
on that amount (estimated to be $57,000) will have a negative impact on the net
income of the Company. Otherwise, the Company expects its business and
operations to continue as they are currently being conducted and, except as
disclosed below, the reverse stock split is not anticipated to have any effect
upon the conduct of such business. If the reverse stock split is consummated,
all persons owning fewer than 500 shares of record at the Effective Date of the
reverse stock split will no longer have any equity interest in, and will not be
stockholders of, the Company and therefore will not participate in its future
potential or earnings and growth. Instead, each such beneficial owner of Common
Stock will have the right to receive the Fractional Share Cash-Out Amount per
share in cash, without interest.
If the Reverse Stock Split Proposal is effected, the Company believes
that, based on the Company's stockholder records, fewer than 100 stockholders of
record will remain. In addition, individuals who are members of the Board of
Directors and of management of the Company now owning approximately 41.94% of
the Common Stock will own approximately 50.69% of the Common Stock after the
Reverse Stock Split. See "Stock Ownership--Security Ownership of Certain
Beneficial Owners and Management."
The Company plans, as a result of the reverse stock split, to become a
privately held company. The registration of the Common Stock under the 1934 Act
will be terminated. In addition, because the Common Stock will no longer be
publicly held, the Company will be relieved of the obligation to comply with the
proxy rules of Regulation 14A under Section 14 of the 1934 Act, and its officers
and directors and stockholders owning more than 10% of the Common Stock will be
relieved of certain obligations under the 1934 Act. See "--The Effects of the
Reverse Stock Split--Termination of Exchange Act Registration." The Company
estimates that termination of the registration of the Common Stock under the
1934 Act will save the Company approximately $150,000 per year in legal,
accounting and other expenses.
18
<PAGE>
The Amendment will decrease the number of authorized shares of Common
Stock from 10,000,000 to 10,000 shares. With the exception of the number of
authorized shares, the terms of the Common Stock before and after the reverse
stock split will remain the same. Furthermore, the amendment to the Company's
Restated Certificate of Incorporation will reduce authorized shares of preferred
stock from 4,000,000 to 1,000. As stated throughout this Proxy Statement, the
Company believes that there are significant advantages in effecting the Reverse
Stock Split Proposal and "going private" and the Company plans to avail itself
of any opportunities it may hereafter have as a private Company, including, but
not limited to, making itself a more viable candidate with respect to a merger
or acquisition transaction with any one of its competitors or entering into some
type of joint venture or other arrangement. Although management does not
presently have an interest in any such transaction nor is management currently
in negotiations with respect to any such transaction, there is always a
possibility that the Company may enter into such an arrangement in the future
and the remaining stockholders of the Company may receive payment for their
shares in any such transaction lower than, equal to or in excess of the
Fractional Share Cash-Out Amount which will be paid to stockholders in lieu of
fractional shares in the reverse stock split.
Other than as described in this Proxy Statement, neither the Company nor
its management has any current plans or proposals to effect any extraordinary
corporate transaction; such as a merger, reorganization or liquidation; to sell
or transfer any material amount of its assets; to change its Board of Directors
or management; to change materially its indebtedness or capitalization; or
otherwise to effect any material change in its corporate structure of business.
19
<PAGE>
STOCK OWNERSHIP
- --------------------------------------------------------------------------------
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding the
beneficial ownership, as defined in the regulations of the Commission, of the
Common Stock as of June 30, 1999 held by (i) each director of the Company, (ii)
each person who is known by the Company to be the beneficial owner of more than
five percent (5%) of the issued and outstanding shares of Common Stock and (iii)
all directors and executive officers as a group. Except as noted, the
individuals named in the table have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them:
<TABLE>
<CAPTION>
Number of Approximate
Percent of Shares to be Percentage of
Number of Shares Shares Owned Owned Shares to be
Owned Prior to Prior to Following Owned Following
Name Beneficially Owned Reverse Split Reverse Split Reverse Split Reverse-Split
---------------------------- -------------------- ------------------- ----------------- --------------------
<S> <C> <C> <C> <C>
Robert J. Suarez 290,478 33.42% 580.956 40.39%
Robert I. Antle 8,181 * 16.362 1.14%
Peter A. Davis (2)(5) 58,859 6.77% 117.718 8.18%
William D. Aiken (1) 2,221 * 4.442 *
Dionel Cotanda (1) 7,803 * 15.606 1.08%
James G. Farr (1) 2,221 * 4.442 *
Jeffrey D. Prol (2) 2,554 * 5.108 *
Ronald I. Heller (4) 67,190 7.66% 134.380 9.34%
Ina J. Davis (5) 46,483 5.35% 92.966 6.46%
All current directors and 372,317 42.45% 744.634 51.21%
executive officers as a group
(7 persons) (3)
</TABLE>
- ---------------------------
* Less than one percent (1%).
(1) Includes 2,221 shares (4.442 shares after the Reverse Stock Split) of
Common Stock which each director, to whom this note applies, has the
right to acquire within sixty (60) days through the exercise of options.
Such shares are deemed to be outstanding for the purpose of computing
the percentage of class beneficially owned by each of those directors,
but not for the purpose of computing the percentage of class
beneficially owned by any other person.
(2) Includes 555 shares (1.11 shares after the Reverse Stock Split) of
Common Stock which each director, to whom this note applies, has the
right to acquire within sixty (60) days through the exercise of options.
Such shares are deemed to be outstanding for the purpose of computing
the percentage of class beneficially owned by each of those directors,
but not for the purpose of computing the percentage of class
beneficially owned by any other person.
(3) Includes 7,773 (15.546 shares after the Reverse Stock Split) shares of
Common Stock which current officers and directors have the right to
acquire within sixty (60) days through the exercise of options. Such
shares are deemed to be outstanding for the purpose of computing the
percentage of class beneficially owned by the directors and executive
officers as a group, but not for the purpose of computing the percentage
of class beneficially owned by any other group.
20
<PAGE>
(4) Mr. Ronald I. Heller filed a schedule 13D on December 9, 1996 disclosing
ownership of 65,894 shares. Mr. Heller is not affiliated with the
company or its subsidiaries in any capacity. At March 31, 1998, Mr.
Heller reported ownership of 67,190 shares.
(5) Peter A. Davis and Ina J. Davis each disclaims any beneficial interest
in respect of shares held by the other person.
21
<PAGE>
- --------------------------------------------------------------------------------
PROPOSAL 1
ELECTION OF TWO CLASS I DIRECTORS
(Item 1 on Proxy Card)
- --------------------------------------------------------------------------------
Pursuant to the Charter, the number of Directors shall not be less than
7 nor more than 15 as may be determined from time to time by affirmative vote of
the majority of the Board of Directors. On June 18, 1998 the Board of Directors
voted unanimously to reduce the number of Directors from nine to seven.
Directors are divided into three classes, designated class I, class II and class
III. At the Annual Meeting of Stockholders held on September 17, 1998, class I
directors were originally elected for a one-year term, class II directors were
originally elected for a two-year term and class III directors for a three-year
term. At each subsequent annual meeting of stockholders, successors to the class
of directors whose term expires at that annual meeting are elected for a term of
three years.
Proxies solicited by the Board will be voted for the election of the
nominees, unless you withhold your vote on your proxy card. The Board has no
reason to believe that these nominees will be unable to serve. However, if any
one of them should become unavailable, the board may reduce the size of the
board or designate a substitute nominee. If the Board designates a substitute,
shares represented by proxies will be voted for the substitute nominee.
The Board recommends that you vote FOR each of the following two nominees for
election as a director:
Class I--Nominees for Terms Expiring in 2002:
IAH's Board of Directors has proposed the following nominees for
election as Class I directors at the annual meeting. Each of the nominees has
consented to serve a three-year term.
William D. Aiken, 42, has served as a director since 1992. Mr. Aiken
was appointed to the Board of Directors by the IAH Creditors Committee. Mr.
Aiken is also a Director of Suarez Housing Corporation. Mr. Aiken is a Certified
Public Accountant who has been engaged in private practice in Lake Worth,
Florida since 1992. Prior to 1992, and for a period of more than five years, Mr.
Aiken was the Chief Financial Officer of Pope Associates, Tru-Line Industries,
and ADP Lumber, which were primarily engaged in the businesses of retail
building materials and roof and floor truss manufacturing in Southeastern
Florida.
Jeffrey D. Prol, 36, has served as a director since 1994. Mr. Prol is
an attorney and for a period of more than five years has been associated with
and became member of the law firm of Ravin, Sarasohn, Cook, Baumgarten, Fisch &
Rosen, P.C. ("Ravin, Sarasohn") of Roseland, New Jersey. Ravin, Sarasohn served
as counsel to the Company in connection with the Chapter 11 bankruptcy filings.
Mr. Prol was one of the principal attorneys involved in that matter.
Directors Whose Terms of Office Continue
The individuals listed below are presently serving as directors and
will be continuing their terms of office.
22
<PAGE>
Class II--Terms Expire in 2000:
Dionel Cotanda, 61, has served as a director since 1992. Mr. Cotanda
was appointed to the Board of Directors by the Official Creditors Committee in
the Reorganization Cases of International American Homes, Inc., Inland Pacific
Communities, Inc., Porten Sullivan Corporation of Florida, Suarez Housing
Corporation, Beacon Hill Farm Associates II and Lakeview Professional Park (the
"IAH Creditors Committee"). Mr. Cotanda is also a Director of Suarez Housing
Corporation. Mr. Cotanda has been President, Chief Executive Officer and
Director of Robbins Engineering, Inc. since its organization in 1990. In
addition, Mr. Cotanda has for a period of more than five years been Vice
President and since 1993 been a Director of Robbins Manufacturing Company.
Robbins Engineering, Inc. is a supplier of engineering services, metal plate
connectors and software to the metal plate connected wood truss industry.
Robbins Manufacturing Company is a supplier of metal plate connected wood
trusses, lumber and related building material products. Robbins Engineering,
Inc. and Robbins Manufacturing Company are both located in Tampa, Florida.
James G. Farr, 50, has served as a director since 1996. Mr. Farr is an
attorney and has for a period of more than five years been the President and
Chief Executive Officer of Paramount Title Corporation, a company of which he is
the sole stockholder. Paramount Title Corporation conducts a transactional real
estate practice and title insurance business in Tampa, Florida.
Class III--Term Expires in 2001:
Robert J. Suarez, 50, has served as a director since 1992. Mr. Suarez
was appointed Chairman and President of the Company in September 1992. He
co-founded Suarez Housing Corporation in 1974. Mr. Suarez has for more than five
years served as Chairman and President of Suarez Housing Corporation.
Robert I. Antle, 44, has served as a director since 1996. Mr. Antle has
been employed by Suarez Housing Corporation as Vice President, Chief Financial
Officer and Secretary for a period of more than five years. He currently serves
as Executive Vice President, Treasurer, Secretary and Chief Financial Officer of
the Company.
Peter A. Davis, 62, has served as a director since 1994. Mr. Davis
became a Vice President of the Company and Suarez Housing Corporation in
September 1998. Prior thereto he had been a consultant to the Company since
November 1992. Mr. Davis is a Certified Public Accountant.
The Board of Directors
The Board of Directors oversees the overall performance of the Company
on your behalf. Members of the Board stay informed of the Company's business
through discussions with the Chairman and other members of management and staff,
by reviewing materials provided to them, and by participating in board and
committee meetings. The Board met three times during the fiscal year ended March
31, 1999. All of the Directors attended at least 75% of those meetings.
Committees of the Board
IAH's Board of Directors has four committees: the Audit Committee, the
Compensation Committee, the Nominating Committee and the Executive Committee.
23
<PAGE>
Audit Committee: This committee meets with management to review the
adequacy of the Company's internal controls, accounting policies, financial
reporting, and the scope and results of the audit engagement. In addition, the
Audit Committee:
o meets with appropriate Company financial personnel and independent
auditors in connection with these reviews; and
o recommends the appointment of the Company's independent auditors to
the board.
Members of the Audit Committee are Mr. Aiken, Mr. Davis and Mr. Antle.
Two Audit Committee meetings were held during the fiscal year ended March 31,
1999.
Compensation Committee: This committee makes recommendations to the
Board of Directors regarding the amount of and form of compensation awarded to
the executive officers of the Company and to the employees of the Company whose
annual salaries exceed $75,000 per year. The committee also administers the
Company's Non-Qualified Stock Option Plan. Members of the Compensation Committee
are Mr. Cotanda, Mr. Davis, Mr. Aiken and Mr. Prol. One meeting of the
Compensation Committee was held during the fiscal year ended March 31, 1999.
Nominating Committee: This committee establishes procedures for the
selection, retention, and performance evaluation of directors; reviews board
governance procedures; and reviews the Company's ethics and compliance program.
The committee also reviews the composition of IAH's Board of Directors and the
qualifications of persons identified as prospective directors, recommends the
candidates to be nominated for election as directors, and, in the event of a
vacancy on the board, recommends any successors. The Committee also will
consider nominations by stockholders submitted in writing to the Chairman of the
Board of Directors. Members of the Nominating Committee are Mr. Antle, Mr.
Cotanda and Mr. Farr. The Nominating Committee recommended this year's director
nominations at its June 1999 meeting.
Executive Committee: This committee has the authority to review and
approve all land acquisitions by the Company's subsidiaries and all guarantees
by the Company of loans to the Company's subsidiaries. Members of the Executive
Committee are Mr. Suarez, Mr. Antle, Mr. Cotanda, Mr. Davis and Mr. Farr. The
Executive Committee did not meet separately from the Board of Directors during
the fiscal year ending March 31, 1999.
Compensation of Directors
Directors who are employees of the Company receive no additional
remuneration for their services as directors. Non-employee directors--those
directors not entitled to receive any salary from the Company or its
subsidiaries--receive for each Board or committee meeting attended a fee of
$3,000 and reasonable travel and other out-of-pocket expenses incurred.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors and persons who own more than ten percent of
the Company's Common Stock (the "Reporting Persons"), to file reports of
ownership and changes in ownership of such securities with the Securities and
Exchange Commission. Officers, directors and greater than ten percent beneficial
owners are required by applicable regulations to furnish the Company with copies
of all Section 16(a) forms they file. The Company is not
24
<PAGE>
aware of any beneficial owner of more than ten percent of its Common Stock other
than Mr. Robert J. Suarez.
Based solely upon review of the copies of the forms furnished to the
Company, or written representations from certain Reporting Persons, the Company
believes that during the fiscal year ended March 31, 1999 all filings required
to be made by Reporting Persons were made on a timely basis.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
- --------------------------------------------------------------------------------
General
The Compensation Committee administers the Company's executive
compensation program and makes specific recommendations to the Board of
Directors regarding the amount and form of compensation awarded to the executive
officers of the Company and to other employees of the Company whose annual
salaries exceed $75,000 per year. The Compensation Committee also administers
the Company's Non-Qualified Stock Option Plan. The Compensation Committee is
composed of three non-employee directors and one employee-director. See
"Proposal 1--The Board of Directors" and "--Committees of the Board."
The Company's executive compensation program is intended to enable the
Company to attract, retain and motivate highly qualified executives for the
Company and to create an incentive to increase stockholder value. This policy is
implemented through the payment of salaries and bonuses and the granting of
stock options.
Compensation of the Chief Executive Officer
In accordance with the terms of the Plan, on August 12, 1992 Suarez
Housing Corporation entered into an employment agreement with Robert J. Suarez
pursuant to which he serves as Chairman and President of Suarez Housing
Corporation. See "Executive Compensation -- Employment Agreement." This
employment agreement, which was approved by the Bankruptcy Court, governed the
terms of Mr. Suarez' employment including his compensation and covered the
period from August 12, 1992 through August 12, 1995. On June 22, 1995, the
Compensation Committee recommended and the Board of Directors approved a
three-year renewal of Mr. Suarez' employment agreement with an annual salary of
$290,000 subject to annual CPI adjustments. On June 18, 1998, the Compensation
Committee recommended and the Board of Directors approved a three year renewal
of Mr. Suarez employment agreement with an annual salary of $325,000 subject to
annual CPI adjustments. Factors that were considered in making this
recommendation included the performance of the Company and its principal
subsidiary, his agreement to guaranty certain bank loans for Suarez Housing
Corporation, and the compensation received by Chief Executive Officers of
comparable companies. The market value of the Company's stock was not a factor
considered in determining the Chief Executive Officer's compensation. All of Mr.
Suarez' compensation is received from Suarez Housing Corporation. He does not
receive any compensation directly from the Company. During the fiscal year ended
March 31, 1997 a stock option was granted to Robert J. Suarez in the amount of
33,333 shares. The exercise price of $3.9375 was the fair market value on the
date the option was granted.
25
<PAGE>
Compensation of Other Executive Officers
The Compensation Committee made recommendations regarding the
compensation of the Company's other executive officers. In those instances Mr.
Suarez, the Chairman and President, who was recognized to be most familiar with
the individual employees, made recommendations to the Committee as to the amount
of the proposed remuneration. Factors considered with respect to each component
of compensation were subjective, such as perceptions of the Company's and the
individual's performance and any changes or planned changes in functional
responsibility. Also considered were the prevailing levels of compensation
within the markets where the Company operates. The market value of the Company's
stock was not a factor considered in setting executive officer compensation.
Members of the Compensation Committee:
Dionel Cotanda
Peter A. Davis
William D. Aiken
Jeffrey D. Prol
26
<PAGE>
EXECUTIVE COMPENSATION
- --------------------------------------------------------------------------------
Summary Compensation Table
The following table sets forth a summary of annual and long-term
compensation paid by the Company during the fiscal years ended March 31, 1999,
1998, and 1997 to the Chief Executive Officer of the Company and to the other
executive officers of the Company whose total compensation for the fiscal year
ended March 31, 1999 was in excess of $100,000.
Summary Compensation Table (1)
<TABLE>
<CAPTION>
Annual Compensation
-------------------------------------------
Name and Salary Bonus
Principal Position Year ($) ($)
- -------------------------------- ---------------- ------------------- -------------------
<S> <C> <C> <C>
Robert J. Suarez, (2) 1999 $318,004 $200,000
Chairman and President 1998 303,456 100,000
1997 295,888 50,000
Robert I. Antle, (2) 1999 $186,308 $120,000
Executive Vice President, 1998 167,526 66,000
Treasurer, Chief 1997 162,276 33,000
Financial
Officer and Secretary
Peter A. Davis, (3) 1999 $78,501 $30,000
Vice President 1998 0 0
1997 0 0
</TABLE>
- --------------------------------------------
(1) The columns designated for the reporting of other annual compensation,
restricted stock awards, long-term incentive plan payouts, and long-term
compensation awards have been omitted because no compensation of a type
required to be reported under such columns was paid to the named
executive officers during the period covered by the table. The Company
does not grant stock appreciation rights of any kind.
(2) Upon the confirmation of the Plan of Reorganization on August 12, 1992,
Suarez Housing Corporation entered into an employment agreement with
Robert J. Suarez. See "Employment Agreement" below. Subsequently, in
September 1992, Mr. Suarez and Mr. Antle were appointed to their
positions as Chairman and President, and as Vice President and
Secretary, of the Company, respectively. Mr. Antle was subsequently
elevated to the position of Executive Vice President, Treasurer and
Chief Financial Officer. Accordingly, the compensation appearing on the
table above represents all compensation received by the named executive
officers from Suarez Housing Corporation during the fiscal years ended
March 31, 1999, 1998, and 1997. The named executive officers do not
receive compensation directly from the Company.
27
<PAGE>
(3) Peter A. Davis was appointed to his position in September, 1998. Prior
thereto he served as a consultant to Suarez Housing Corporation and the
Company. Accordingly, the compensation appearing in the table includes
all payments made to Mr. Davis during the fiscal year ended March 31,
1999.
Stock Options
During the fiscal year ended March 31, 1999 a stock option was granted
to Peter A. Davis for 10,000 shares at an exercise price of $5.00 per share,
which was the fair market value on the date the option was granted.
The following table sets forth certain information with respect to the
named executive officers concerning the exercise of stock options during the
fiscal year ended March 31, 1999 and the value of unexercised stock options held
as of March 31, 1999.
Aggregated Option Exercises in Fiscal Year 1999 and Year-End Option Values
<TABLE>
<CAPTION>
Number of Securities Value of Securities Underlying
Shares Value Underlying Unexercised Unexercised In-the-Money
Acquired on Realized Options at Fiscal Year end Options at Fiscal Year End ($)(1)
Exercise (#) ($) --------------------------------- ---------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ------------ ---------------- -------------- --------------- ----------------- --------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Robert J. ---- ---- 9,999 23,334 $39,396 $91,936
Suarez
Robert I. ---- ---- 1,666 15,000 $7,497 $67,500
Antle
Peter A. ---- ---- 1,666 11,666 $4,998 $7,497
Davis
</TABLE>
(1) The fair market value of the Common Stock at the Company's fiscal year
end, March 31, 1999, was $4.75 per share based upon the last trade price
as reported by the Bloomberg service.
Employment Agreement
In accordance with the terms of the Plan, the Company entered into an
employment agreement with Robert J. Suarez. The employment agreement was
approved by the Bankruptcy Court as part of the Plan and became effective as of
the date of confirmation of the Plan, August 12, 1992. Mr. Suarez is currently
employed by the Company as Chairman and President. He is also employed by Suarez
Housing Corporation as Chairman and President. The employment agreement
originally was to expire on August 12, 1995 and was extended by the Board in
June 1995 and June 1998 for three additional years, subject to certain
modifications, so that it now expires on August 12, 2001. The employment
agreement provided for base compensation during the initial three-year term of
$250,000 per annum to be adjusted annually in accordance with changes in the
Consumer Price Index ("CPI"). Mr. Suarez' base compensation was increased to
$290,000 on August 12, 1995 and to $325,000 on August 12, 1998 and will be
adjusted thereafter annually in accordance with changes in the CPI. The
employment agreement can be terminated at any time for cause, without any
further payment. If the employment agreement is
28
<PAGE>
terminated without cause, Mr. Suarez shall be entitled to additional
compensation equal to six months' pay. The employment agreement, as extended,
provides that in the event Mr. Suarez' employment agreement is not renewed on
substantially the same terms and conditions, the Company will pay Mr. Suarez six
months' base compensation in return for his consulting services during such
period. Mr. Suarez agreed, for a number of months (such number of months to
coincide with the number of months of termination or non-renewal benefit) after
any termination of his employment, not to engage in any business enterprise
involving the sale and/or construction of residential housing in direct
competition with the Company. Mr. Suarez also agreed, for one year after any
termination of his employment, not to induce any employee of the Company to
render any services, absent the Company's prior written approval, to or for any
person or entity in direct competition with the Company's then existing
construction activities.
Compensation Committee Interlocks and Insider Participation
Mr. Dionel Cotanda, a member of the Compensation Committee of the Board
of Directors, is President, Chief Executive Officer, and Director of Robbins
Engineering, Inc. and Vice President and Director of Robbins Manufacturing
Company. During the year ended March 31, 1999, Robbins Engineering, Inc. and
Robbins Manufacturing Company sold engineering services, metal plate connected
wood trusses, lumber, and related building material products in the amount of
approximately $4,625,000 to Suarez Housing Corporation.
Mr. Peter A. Davis, a member of the Compensation Committee of the Board
of Directors, had served as a consultant to the Company since November 1992. The
Company entered into a one-year consulting agreement with Mr. Davis commencing
November 1, 1992. This agreement was subsequently renewed under similar terms
and conditions for five additional one-year terms which expired on November 1,
1998. The agreement provided for Mr. Davis to assist the Company in a broad
range of areas. Mr. Davis received compensation at the rate of $1,000 per day
with a minimum compensation of $42,000 per year. During the fiscal year ended
March 31, 1999, Mr. Davis became a Vice President of the Company.
29
<PAGE>
- --------------------------------------------------------------------------------
PROPOSAL 2
DIRECTORS' PROPOSAL TO AMEND THE COMPANY'S
RESTATED CERTIFICATE OF INCORPORATION TO (i)
EFFECT A REVERSE STOCK SPLIT OF IAH'S COMMON STOCK
AND TO SET FORTH THE FORMULA FOR COMPUTING THE
PRICE TO BE PAID IN LIEU OF ISSUING FRACTIONAL SHARES
TO STOCKHOLDERS WHO, FOLLOWING THE REVERSE
STOCK SPLIT, WOULD HOLD OF RECORD IN ANY
DISCRETE ACCOUNT, LESS THAN ONE SHARE OF IAH COMMON STOCK AND (ii)
REDUCE THE NUMBER OF AUTHORIZED SHARES OF CAPITAL STOCK OF THE
COMPANY
(Item 2 on Proxy Card)
- --------------------------------------------------------------------------------
Summary
The Board of Directors has authorized, and recommends for your approval,
a proposal (the "Reverse Stock Split Proposal") to amend the Company's Restated
Certificate of Incorporation (i) to effect a 1 for 500 reverse stock split and
to provide that the price to be paid in lieu of issuing fractional shares to any
IAH stockholder, who, following the reverse stock split, would hold less than
one share of IAH Common Stock of record in any discrete account, shall be an
amount equal to the product obtained by multiplying (a) 500 times the weighted
average trading price per share of all sales of IAH Common Stock made during the
period beginning January 1, 1999 and ending on the twelfth business day next
following the date of the attached Notice of Annual Meeting and this Proxy
Statement as reported or expected to be reported by the BLOOMBERG service, by
(b) a fraction, the numerator of which shall be the number of shares of IAH
Common Stock owned by such stockholder of record in such stockholder's account
immediately prior to the reverse stock split and the denominator of which shall
be 500, and (ii) reduce the total number of shares of capital stock which the
Company shall have authority to issue to eleven thousand (11,000), of which ten
thousand (10,000) shall be shares of Common Stock with a par value of $.01 per
share and one thousand (1,000) shall be shares of Preferred Stock with a par
value of $.01 per share. Stockholders of record ("record stockholders") whose
shares of Common Stock are converted into less than 1 share in the reverse stock
split will receive cash payments equal to the fair value (computed as
hereinabove provided) of those fractional interests, while registered
stockholders whose shares of Common Stock are converted into greater than 1
share will receive stock reflecting any fractional interest to which they are
entitled. We also sometimes refer to our record stockholders whose shares of IAH
Common Stock are registered in their names as "registered stockholders."
If approved, the reverse stock split will take place on the date of
filing with the Secretary of State of Delaware of a Certificate of Amendment,
unless the Company specifies otherwise (the "Effective Date"). In order to
complete the Reverse Stock Split Proposal, a majority of the stockholders
entitled to vote at the annual meeting must approve amendments to the Company's
Restated Certificate of Incorporation, as heretofore amended (the "Charter"). We
attach the proposed amendments to the Company's Charter to this proxy statement
as Appendix A.
The highlights of the Reverse Stock Split Proposal are as follows.
30
<PAGE>
Effect on Stockholders:
If approved at the annual meeting, the Reverse Stock Split Proposal will
affect IAH stockholders as follows after completion:
<TABLE>
<CAPTION>
Stockholder as of Effective Date Net Effect After Reverse Stock Split
-------------------------------- ------------------------------------
<S> <C>
Registered stockholders holding 500 or more Shares of Common Stock will be converted on a
shares of IAH Common Stock in a record account 1 for 500 basis, including fractional shares.
Registered stockholders holding fewer than 500 Shares of Common Stock will be cashed out at a
shares of IAH Common Stock in a record account price based on the weighted average trading price
of the Common Stock during the period beginning on
January 1, 1999 and ending on the twelfth business
day following the date of this Proxy Statement (see
"Fractional Share Cash-Out Amount" below). You will
not have to pay any commissions or other fees on
this cash-out. Holders of these shares will not
have any continuing equity interest in IAH.
Stockholders holding IAH Common Stock in The company does not intend the reverse stock
street name through a nominee (such as a bank or split to affect stockholders holding IAH Common
broker) Stock in street name through a nominee (such as
a bank or broker). However, nominees may have
different procedures and IAH stockholders holding
IAH stock in street name should contract their
nominees to determine whether they will be affected
by the reverse stock split.
</TABLE>
31
<PAGE>
Reasons for the Transaction:
The Board recommends that the stockholders approve the Reverse Stock
Split Proposal and reduction in number of authorized shares for the following
reasons, among other things (as described in detail under "--Purpose of the
Reverse Stock Split" below):
<TABLE>
<CAPTION>
Problem Solution
<S> <C>
The Company has approximately 2,350 holders of The reverse stock split will reduce the number of
record of its Common Stock of whom registered stockholders with small accounts and,
approximately 2,253 own fewer than 500 shares. by reducing the number of stockholders of record
In the aggregate, the shares held by these record to fewer than 300, permit the Company to de-
holders comprise less than 8.7% of the register its Common Stock under the 1934 Act
outstanding Common Stock. Furthermore, the and result in significant annual cost savings for
Company is faced annually with administrative IAH.
burden and cost of filing reports and otherwise
complying with the requirements of registration
under the 1934 Act, which amounts to direct and
indirect annual costs to the Company of $150,000.
</TABLE>
Structure of the Reverse Stock Split
The transaction is a reverse stock split of IAH common stock. If the
Reverse Stock Split Proposal is approved and occurs, the reverse stock split
will occur on the date of filing with the Secretary of State of Delaware of a
Certificate of Amendment, unless the Company specifies otherwise (the "Effective
Date"). Assuming stockholder approval of the proposal is obtained, the Company
plans to file the Certificate of Amendment at a time to be determined by the
officers of the Company, but in any event not later than September 30, 1999. The
Board, however, has retained for itself the absolute authority to reject (and
not implement) the Reverse Stock Split Proposal (even after approval thereof),
if it subsequently determines that the Reverse Stock Split Proposal is not then
in the best interests of the Company and its stockholders. All registered
stockholders on the Effective Date will receive 1 share of IAH common stock for
every 500 shares of IAH stock held of record in their accounts at that time. Any
registered stockholder who holds fewer than 500 shares of IAH stock in a record
account (also referred to as a "Cashed-Out Stockholder"), will receive a cash
payment instead of a fractional shares. This cash payment will be based on the
average weighted historical trading value of the cashed-out share. (See
"Fractional Share Cash-Out Amount" below for a description of how the historical
trading value will be determined upon completion of the reverse stock split.)
32
<PAGE>
In general, the Reverse Stock Split Proposal can be illustrated by the
following examples:
<TABLE>
<CAPTION>
Hypothetical Scenario Result
--------------------- ------
<S> <C>
Ms. Smith is a registered stockholder who holds Instead of receiving a fractional share (4/5 of a
400 shares of IAH stock in her record account on share) of IAH stock after the reverse split,
the Effective Date. At that time, assume the Ms. Smith's 400 shares will be converted into the
Fractional Share Cash-Out Amount is $6 (see right to receive cash. Using the hypothetical
"Fractional Share Cash-Out Amount" below). Fractional Share Cash-Out Amount of
$6 per share, Ms. Smith will receive $2,400
($6 x 400 shares).
Note: If Ms. Smith wants to continue her
investment in IAH, she can buy at least 100 more
shares of IAH stock and hold it in her record
account, as applicable. Ms. Smith would have to
act far enough in advance of the Effective Date so
that the purchase is complete by the close of
business on that date.
Mrs. Jones has 2 record accounts. As of the Mrs. Jones will receive cash payments equal to
Effective Date, she holds 250 shares of IAH stock the trading value of her shares of IAH stock in
in one account and 350 shares of IAH stock in each record account instead of receiving fractional
the other. All of the shares are registered in her shares (1/2 share and 7/10 share). Assuming a
name only. hypothetical trading value of IAH stock of $6 per
share, Mrs. Jones would receive two checks
totaling $3,600 (250 x $6 = $1,500; 350 x $6 =
$2,100; $1,500 + $2,100 = $3,600).
Note: If Mrs. Jones wants to continue her
investment in IAH, she can consolidate/transfer her
two record accounts prior to the Effective Date. In
that case, her holdings will not be cashed out in
connection with the reverse stock split because she
will hold at least 500 shares in one record
account. She would have to act far enough in
advance so that the consolidation is complete by
the close of business on the Effective Date. Mr.
Taylor holds 775 shares of IAH stock in his After
the Reverse Stock Split, Mr. Taylor will record
account as of the Effective Date. hold 1.55 shares
of IAH stock in his record account (775 / 500 =
1.55).
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
Hypothetical Scenario Result
--------------------- ------
<S> <C>
Mr. Updike holds shares of IAH stock in a IAH does not intend that the Reverse Stock Split
brokerage account as of the Effective Date. will affect stockholders holding IAH stock in
street name through a nominee (such as a bank or
broker). However, nominees may have different
procedures and IAH stockholders holding IAH stock
in street name should contact their nominees to
determine whether they will be affected by the
Reverse Stock Split Proposal. Note: If Mr. Updike
holds fewer than 500 shares and desires to have his
shares cashed out in the reverse stock split, he
should contact his broker to transfer them to his
record name prior to the Effective Date. He would
have to act far enough in advance so that the
transfer is complete by the close of business on
the Effective Date.
</TABLE>
The Company is aware that many of its stockholders are in possession of
stock certificates bearing dates prior to either of the Company's two prior
reverse stock splits. The hypotheticals and results set forth below illustrate
how the Reverse Stock Split Proposal will affect such holders.
<TABLE>
<CAPTION>
Hypothetical Scenario Result
--------------------- ------
<S> <C>
Mr. Brown holds a certificate, dated prior to For his shares, Mr. Brown will receive a cash
May 31, 1995 (the effective date of the first prior payment (based on a hypothetical weighted value
reverse stock split), which is registered in his of $6.00 per present share) of $276, i.e., 1400 /
name and on its face purports to represent 1400 10 (first reverse stock split) = 140 / 3 (second
shares of Common Stock. reverse stock split) = 46 x 6.00 = $276, plus any
payment to which he would have been entitled in
lieu of issuance of the 66/100 of a fractional
share that would have been cashed out incident to
the second reverse stock split.
Ms. Green holds a certificate, dated prior to For her shares, Ms. Green will receive 1.06
May 31, 1995 (the effective date of the first prior shares, i.e., 16,000 / 10 (first reverse stock
reverse stock split), which is registered in her split) = 1600 / 3 (second prior reverse stock
name and on its face purports to represent 16,000 split) = 533 / 500 = 1.066 share after giving
shares of Common Stock. effect to the Reverse Stock Split Proposal, plus
any payment to which she would have been entitled
in lieu of issuance of the 33/100 of a fractional
share that would have been cashed out incident to
the second reverse stock split.
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
Hypothetical Scenario Result
--------------------- ------
<S> <C>
Mr. Blue holds a certificate dated subsequent to For his shares, Mr. Blue will receive a cash
May 31, 1995 (the effective date of the first prior payment (based on a hypothetical weighted
reverse stock split) but prior to December 1, 1998 trading value of $6.00 per present share) of
(the effective date of the second prior reverse $2,796.00, i.e., 1400 / 3 (second prior reverse
stock split), which is registered in his name and stock split) = 466 x $6.00, plus any payment to
on its face purports to represent 1400 shares of which he would have been entitled in lieu of
Common Stock. issuance of the 66/100 of a fractional share that
would have been cashed out incident to the
second reverse stock split.
Ms. Gray holds a certificate dated subsequent to For her shares, Ms. Gray will receive 1.2 shares,
May 31, 1995 (the effective date of the first prior i.e,. 1800 / 3 (second prior reverse stock split)
reverse stock split) but prior to December 1, 1998 = 600 / 500 = 1.20 shares of Common Stock
(the effective date of the second prior tax split) after giving effect to the Reverse Stock Split
which is registered in her name and on its face Proposal.
purports to represent 1800 shares of Common Stock.
</TABLE>
In connection with the proposed Reverse Stock Split Proposal, the
Company has filed a Rule 13e-3 Transaction Statement on Schedule 13E-3 (the
"Schedule 13E-3") with the Securities and Exchange Commission.
Purpose of the Reverse Stock Split
The purpose of the Reverse Stock Split Proposal is to cash-out the
equity interests in the Company of the approximately 2,253 record holders of
Common Stock that, as of Effective Date, own fewer than 500 shares of Common
Stock in any discrete account at a price determined to be fair by the entire
Board of Directors in order (i) to eliminate the cost of maintaining small
stockholder accounts, (ii) to permit small stockholders to receive cash for
their shares without having to pay brokerage commissions, and (iii) to reduce
the number of stockholders of record of the Company to fewer than 300 persons in
order to relieve the Company of the administrative burden and cost and
competitive disadvantages associated with filing reports and otherwise complying
with the requirements of registration under the '34 Act, by deregistering its
Common Stock under the 1934 Act. See "Special Factors--Background of the
Proposed Reverse Stock Split Proposal" and "--The Effects of the Reverse Stock
Split" for a discussion regarding the burden of continued registration of the
Common Stock and the intended benefits to the Company of the Reverse Stock Split
Proposal. If the Reverse Stock Split is implemented, the officers and directors
of the Company (and other holders of more than 500 shares) will benefit by an
increase in their percentage ownership of the Company's Common Stock and in the
net book value of their holdings; but, following the deregistration of the
Company's Common Stock under the '34 Act, there will be no public market for
transactions in such stock.
The Transaction will provide those registered stockholders with fewer
than 500 shares in a discrete account with a cost-effective way to cash out
their investments, because IAH will pay all transaction costs in connection with
the Reverse Stock Split Proposal. See "Special Factors--Recommendation of the
Board of Directors; Fairness of the Reverse Stock Split Proposal--Opportunity to
Liquidate Shares of Common Stock." Moreover, IAH will benefit from substantial
cost savings as a result of the Reverse
35
<PAGE>
Stock Split Proposal. See "Special Factors--The Effects of the Reverse Stock
Split--Termination of Exchange Act Registration."
The Board believes that the disadvantages of having the Company
continue to be a public company outweigh any advantages. The Board has no
present intention to raise capital through sales of securities in a public
offering in the future or to acquire other business entities using stock as the
consideration for any such acquisition. Accordingly, the Company is not likely
to make use of any advantage (for raising capital, effecting acquisitions or
other purposes) that the Company's status as a reporting company may offer.
The Company incurs direct and indirect costs associated with compliance
with the Commission's filing and reporting requirements imposed on public
companies. The Company also incurs substantial indirect costs as a result of,
among other things, the executive time expended to prepare and review such
filings. Since the Company has relatively few executive personnel, these
indirect costs can be substantial. The Company's direct and indirect costs are
estimated to approximate $150,000 annually as follows:
Independent Auditors: $ 10,000
SEC Counsel 12,000
Printing and Mailing 14,000
Internal Compliance Costs 40,000
Transfer Agent 15,000
Outside Directors 30,000
Directors and Officers Insurance 25,000
Miscellaneous Costs 4,000
--------
$ 150,000
In light of the company's size and resources, the Board does not believe such
costs are justified.
In light of these disproportionate costs, the board believes that it is
in the best interests of the Company and its stockholders as a whole to
eliminate the administrative burden and costs associated with these small record
accounts.
Although all of these factors have existed for some time, the Company
began to consider the Reverse Stock Split Proposal during calendar year 1999,
and based upon an analysis of its options, risks and expenses relating to
remaining a public company which is detailed in this Proxy Statement, led it to
this Reverse Stock Split Proposal. Another reason for making the Reverse Stock
Split Proposal is the continued illiquidity of the stock despite the previous
attempts to encourage trading. See "Special Factors--Background of the Proposed
Reverse Stock Split Proposal."
The Board has determined that the Reverse Stock Split Proposal is the
most expeditious and economical way of liquidating the holdings of small
stockholders and changing the Company's status from that of a reporting company
to that of a more closely held, non-reporting company. See "Special
Factors--Recommendation of the Board of Directors; Fairness of the Reverse Stock
Split Proposal." The Board has determined the reverse split ratio to be 500 to
1. The Board believes that it would be in the best interests of the stockholders
to maximize the number of common stockholders who would receive fair value for
their shares. Several factors were considered in reaching its determination. See
"Special Factors--Recommendation of the Board of Directors; Fairness of the
Reverse Stock Split Proposal."
36
<PAGE>
The Reverse Stock Split Proposal, if approved, will have divergent
effects depending on whether you hold more, or fewer, than 500 shares of IAH
Common Stock in a record account immediately prior to the reverse stock split.
See "Special Factors--Potential Detriments of the Reverse Stock Split Proposal
to Stockholders; Accretions in Ownership and Control of Certain Stockholders";
"--Recommendation of the Board of Directors; Fairness of the Reverse Stock Split
Proposal"; and "Proposal 2--Effect of the Reverse Stock Split Proposal on IAH
Stockholders."
The reverse stock split is structured to be a "going private"
transaction as defined in Rule 13e-3 promulgated under the Exchange Act because
it is intended to, and, if completed, will likely terminate the Company's
reporting requirements under Section 12(g) of the 1934 Act. In connection with
the Reverse Stock Split Proposal, the Company has filed with the Commission a
Schedule 13E-3 pursuant to Rule 13e-3 under the 1934 Act.
Effect of the Reverse Stock Split Proposal on IAH Stockholders
Registered Stockholders With Fewer Than 500 Shares:
If the Reverse Stock Split Proposal is implemented and you are a
Cashed-Out Stockholder (i.e., a stockholder holding fewer than 500 shares of IAH
common stock in a discrete record account immediately prior to the reverse stock
split):
o You will not receive a fractional share of IAH stock as a
result of the reverse split.
o Instead of receiving a fractional share of IAH stock, you will
receive cash equal to the Fractional Share Cash-out Amount for
your share.
o After the reverse split, you will have no further interest in
the Company with respect to your cashed-out shares, and you
will no longer be entitled to vote as a stockholder or share
in the Company's assets, earnings, or profits. Your only right
will be to receive cash for these shares.
o You will not have to pay any service charges or brokerage
commissions in connection with the reverse stock split.
o As soon as practicable after the Effective Date, you will
receive cash for the IAH common stock you held in your record
account immediately prior to the reverse split in accordance
with the procedures described below.
Stockholders With Certificated Shares:
* If you are a Cashed-Out Stockholder with a stock
certificate representing your cashed-out shares, you
will receive a transmittal letter from IAH as soon as
practicable after the Effective Date. The letter of
transmittal will contain instructions on how to
surrender your existing certificate(s) to the
Company's transfer agent, First Union National Bank,
for your cash payment. You will not receive your cash
payment until you surrender your outstanding
certificate(s) to First Union National Bank, together
with a completed and executed copy of the letter of
transmittal. Please do not send your certificates
until you receive your letter of transmittal.
37
<PAGE>
o All amounts owed to you will be subject to applicable federal
and state income taxes and state abandoned property laws.
o You will not receive any interest on cash payments owed to you
as a result of the Reverse Stock Split Proposal.
NOTE: If you want to continue to hold IAH stock after the reverse stock split,
you may do so by taking either of the following actions far enough in advance so
that it is complete by the Effective Date:
(1) purchase a sufficient number of shares of IAH stock on the open market
and have them registered in your name so that you hold at least 500
shares in your record account immediately prior to the reverse split; or
(2) if applicable, consolidate your record accounts so that you hold at
least 500 shares of IAH stock in one record account immediately prior to
the reverse split.
Registered Stockholders With 500 or More Shares:
If you are a registered stockholder with 500 or more shares of Common
Stock in your record account as of the Effective Date, we will convert your
shares into one-five hundredth (1/500) of the number of shares you held
immediately prior to the reverse split. For example, if you were a registered
owner of 1250 shares of IAH stock immediately prior to the reverse split, your
shares would be converted to 2.5 shares in the reverse split.
Beneficial Owners of IAH Stock:
IAH does not intend to have the reverse stock split affect stockholders
holding IAH stock in street name through a nominee (such as a bank or broker).
However, nominees may have different procedures and stockholders holding IAH
stock in street name should contact their nominees to determine whether they
will be affected by the reverse stock split.
NOTE: If you are a beneficial owner of fewer than 500 shares of IAH Common Stock
and want to have your shares exchanged for cash in the reverse stock split, you
should instruct your nominee to transfer your shares into a record account in
your name in a timely manner so that you will be considered a holder of record
immediately prior to the reverse split.
Fractional Share Cash-Out Amount
In order to reduce the number of IAH stockholders of record to below
300, the Company will pay cash for fractional shares owned by registered
stockholders who would hold less than one share in a record account after the
reverse stock split. If stockholders approve the Reverse Stock Split Proposal at
the Annual Meeting and the reverse stock split is completed, the Company will
pay cash for the fractional shares based on the average weighted trading price
of the IAH Common Stock that is cashed out (the "Fractional Share Cash-Out
Amount"). The details of the manner of determining the Fractional Share Cash-Out
Amount is summarized in the following chart:
38
<PAGE>
<TABLE>
<CAPTION>
Action Determination of Fractional Share Cash-Out Amount
<S> <C>
Cash-Out of Fractional Each Cashed-Out Stockholder will receive cash in an amount
Shares: In lieu of the equal to the product obtained by multiplying (i) 500 times the
issuance of fractional shares weighted average trading price per share of all reported trades
to Cashed-Out Stockholders, of IAH Common Stock made during the period beginning
the Company will make cash January 1, 1999 and ending on the twelfth business day next
payments based on the following the date of this Proxy Statement as reported by the
weighted average trading Bloomberg service, by (ii) a fraction, the numerator of which
prices. shall be the number of shares of IAH Common Stock owned
by such stockholder of record in such
account immediately prior to the reverse
stock split and the denominator of which
shall be 500.
</TABLE>
Effect of the Reverse Stock Split Proposal on IAH
The Reverse Stock Split Proposal will affect the public registration of
IAH's common stock with the SEC under the Securities Exchange Act of 1934, as
amended, as the Company intends to apply for such termination as soon as
practicable after approval by stockholders.
IAH's Charter currently authorizes the issuance of 10 million shares of
common stock and 4 million shares of Preferred Stock. As a result of the Reverse
Stock Split Proposal, the number of authorized shares of Common Stock will be
reduced to 10,000 and the number of authorized shares of Preferred Stock will be
reduced to 1,000 shares. The Reverse Stock Split Proposal, if approved and
effected, will reduce significantly the number of IAH stockholders and the
number of outstanding shares. See "Special Factors--The Effects of the Reverse
Stock Split--Reduction in the Number of Stockholders and the Number of
Outstanding Shares." The Company believes that completion of the Reverse Stock
Split and the deregistration of the Company's Common Stock under the '34 Act
will cause the public market for shares of Common Stock to be eliminated.
The Company has no current plans to issue Common Stock other than
pursuant to the Company's existing stock option plans, but the Company reserves
the right to do so at any time and from time to time at such prices and on such
terms as the Company's Board determines to be in the best interests of the
Company and its then stockholders. Persons who continue as stockholders
following implementation of the Reverse Stock Split Proposal will not have any
preemptive or other preferential rights to purchase any of IAH's stock that may
be issued by the Company in the future, unless such rights are specifically
granted to the stockholders.
The total number of shares that will be purchased and the total cash to
be paid by the Company are unknown. Based upon the reported trades during the
period January 1, 1999 through June 30, 1999, the Company estimates that the
Fractional Share Cash-out Amount will approximate $6.00 per cashed-out present
share. The Company believes that approximately 150,000 shares of Common Stock
will have to be canceled by the Company. This assumes that in addition to the
approximately 74,511 shares held by stockholders of record with fewer than 500
shares in their accounts, beneficial owners of approximately 75,000 shares will
transfer such shares into record accounts containing fewer than 500 shares prior
to the Effective Date. The actual amounts will depend on the number of
Cashed-Out Stockholders on the Effective Date, which may vary from the number of
such stockholders on June 30, 1999. In addition, at this time we do not know
what the Fractional Share Cash-Out Amount will be.
39
<PAGE>
The estimated $6.00 Fractional Share Cash-Out Amount has been determined
from the following data obtained from the Bloomberg service: in January 1999,
there were 4 days on which there were trades involving 4,600 total shares and a
cumulative dollar value of $32,100; in February 1999, there were 3 days on which
there were trades involving 700 total shares and a cumulative dollar value of
$3,500; in March 1999, there were 3 days on which there were trades involving
10,300 total shares and a cumulative dollar value $50,150; in April 1999, there
were 8 days on which there were trades involving 3,400 total shares and a
cumulative dollar value of $21,500; in May 1999, there were 3 days on which
there were trades involving 4,400 total shares and a cumulative dollar value of
$27,200; and in June 1999, there were 5 days on which there were trades
involving 8,500 total shares and a cumulative dollar value of $49,900.
Accordingly, for the period January 1, 1999 through June 30, 1999, there were 26
days on which there were trades involving 31,900 total shares and a cumulative
dollar value of $184,350, for a weighted average price of $5.78.
Stock Certificates
If the Company's stockholders approve the Reverse Stock Split Proposal,
it is the present intention of the Company to file a Certificate of Amendment to
its Restated Certificate of Incorporation with the Secretary of State of the
state of Delaware. The reverse stock split will become effective on the date of
that filing. Assuming stockholder approval of the proposal is obtained, the
Company plans to file the Certificate of Amendment at a time to be determined by
the officers of the Company, expected to be as promptly as possible, but in any
event not later than September 30, 1999. First Union National Bank has been
appointed exchange agent (the "Transfer Agent") to carry out the exchange of
certificates for new Common Stock and/or cash.
On the Effective Date, each 500 shares of "old" Common Stock will
automatically be combined and changed into one share of "new" Common Stock. No
additional action on the part of the Company or any stockholder will be required
in order to effect the reverse stock split. Stockholders of record with greater
than 499 shares in any discrete account will be requested to exchange their
certificates representing shares of Common Stock held prior to the reverse stock
split for new certificates representing shares of Common Stock issued as a
result of the reverse stock split. Such stockholders will be furnished the
necessary materials and instructions to effect such exchange promptly following
the Effective Date by the Company's transfer agent. Certificates representing
shares of "old" Common Stock subsequently presented for transfer will not be
transferred on the books and records of the Company until the certificates
representing the shares of "old" Common Stock have been exchanged for
certificates representing shares of "new" Common Stock. Stockholders should not
submit any certificates until requested to do so. In the event any certificate
representing shares of "old" Common Stock is not presented for exchange upon
request by the Company, any dividends that may be declared after the Effective
Date with respect to the Common Stock represented by such certificate will be
withheld by the Company until such certificate has been properly presented for
exchange, at which time all such withheld dividends which have not yet been paid
to the public official pursuant to relevant abandoned property laws will be paid
to the holder thereof or his designee, without interest.
In connection with the Reverse Stock Split Proposal, IAH's Common Stock
will be identified by a new Committee On Uniform Security Identification
Procedures ("CUSIP") number. This new CUSIP number will appear on any stock
certificates representing shares of IAH common stock after the Effective Date.
The Reverse Stock Split Proposal will not affect any certificates representing
shares of Common Stock or the book-entry account records held by registered
stockholders owning 500 or more shares immediately prior to the reverse split.
Old certificates held by any of these stockholders will continue to evidence
ownership of one-five-hundredth of the number of shares now represented by such
certificates.
40
<PAGE>
As described above, any Cashed-Out Stockholder with share certificates
will receive a letter of transmittal after the reverse stock split is completed.
These stockholders must complete and sign the letter of transmittal and return
it with their stock certificate(s) to IAH's transfer agent before they can
receive cash payment for those shares.
No service charges will be payable by stockholders in connection with
the exchange of certificates or the payment of cash in lieu of issuing
fractional shares, all expenses of which will be borne by the Company.
Certain Federal Income Tax Consequences
We summarize below certain federal income tax consequences to the
Company and stockholders resulting from the Reverse Stock Split Proposal. This
summary is based on existing U.S. federal income tax law, which may change, even
retroactively. This summary does not discuss all aspects of federal income
taxation which may be important to you in light of your individual
circumstances. Many stockholders (such as financial institutions, insurance
companies, broker-dealers, tax-exempt organizations, and foreign persons) may be
subject to special tax rules. Other stockholders may also be subject to special
tax rules, including but not limited to: stockholders who received IAH stock as
compensation for services or pursuant to the exercise of an employee stock
option, or stockholders who have held, or will hold, stock as part of a
straddle, hedging, or conversion transaction for federal income tax purposes. In
addition, this summary does not discuss any state, local, foreign, or other tax
considerations.
This summary assumes that you are a one of the following: (1) a citizen
or resident of the United States; (2) a corporation or other entity taxable as a
corporation created or organized under U.S. law (federal or state); (3) an
estate the income of which is subject to U.S. federal income taxation regardless
of its sources; (4) a trust if a U.S. court is able to exercise primary
supervision over administration of the trust and one or more U.S. persons have
authority to control all substantial decisions of the trust; or (5) any other
person whose worldwide income and gain is otherwise subject to U.S. federal
income taxation on a net basis. This summary also assumes that you have held and
will continue to hold your shares as capital assets for investment purposes
under the Internal Revenue Code of 1986, as amended.
You should consult your tax advisor as to the particular federal, state,
local, foreign, and other tax consequences, in light of your specific
circumstances.
We believe that the Reverse Stock Split Proposal will be treated as a
tax-free "recapitalization" for federal income tax purposes. This will result in
no material federal income tax consequences to the Company.
Federal Income Tax Consequences to Stockholders Who Are Not Cashed Out by the
Reverse Stock Split:
If you (1) continue to hold IAH stock immediately after the reverse
stock split, and (2) you receive no cash as a result of the reverse stock split,
you will not recognize any gain or loss in the reverse stock split and you will
have the same adjusted tax basis and holding period in your IAH stock as you had
in such stock immediately prior to the reverse stock split.
41
<PAGE>
Federal Income Tax Consequences to Cashed-Out Stockholders:
If you receive cash as a result of the reverse stock split, your tax
consequences will depend on whether, in addition to receiving cash, you or a
person or entity related to you continues to hold IAH stock immediately after
the reverse stock split, as explained below.
a. Stockholders Who Exchange All of Their IAH Stock for Cash as a
Result of the Reverse Stock Split.
If you (1) receive cash in exchange for a fractional share as a result
of the reverse stock split, (2) you do not continue to hold any IAH stock
immediately after the reverse stock split, and (3) you are not related to any
person or entity which holds IAH stock immediately after the reverse stock
split, you will recognize capital gain or loss. The amount of capital gain or
loss you recognize will equal the difference between the cash you receive for
your cashed-out stock and your aggregate adjusted tax basis in such stock.
If you are related to a person or entity who continues to hold IAH stock
immediately after the reverse stock split, you will recognize gain or loss in
the same manner as set forth in the previous paragraph, provided that your
receipt of cash either (1) is "not essentially equivalent to a dividend," or (2)
is a "substantially disproportionate redemption of stock," as described below.
o "Not Essentially Equivalent to a Dividend." You will satisfy
the "not essentially equivalent to a dividend" test if the
reduction in your proportionate interest in the Company
resulting from the reverse stock split is considered a
"meaningful reduction" given your particular facts and
circumstances. The Internal Revenue Service has ruled that a
small reduction by a minority stockholder whose relative stock
interest is minimal and who exercises no control over the
affairs of the corporation will meet this test.
o "Substantially Disproportionate Redemption of Stock." The
receipt of cash in the reverse stock split will be a
"substantially disproportionate redemption of stock" for you if
the percentage of the outstanding shares of IAH stock owned by
you immediately after the reverse stock split is less than 80%
of the percentage of shares of IAH stock owned by you
immediately before the reverse stock split.
In applying these tests, you will be treated as owning shares actually
or constructively owned by certain individuals and entities related to you. If
your receipt of cash in exchange for IAH stock does not give rise to capital
gain or loss under any of the tests, it will be treated first as ordinary
dividend income to the extent of your ratable share of IAH's undistributed
earnings and profits, then as a tax-free return of capital to the extent of your
aggregate adjusted tax basis in your shares, and any remaining amount will be
treated as capital gain. See "Capital Gain and Loss" below.
b. Stockholders Who Both Receive Cash and Continue to Hold IAH
Stock Immediately After the Reverse Stock Split.
If you both receive cash as a result of the reverse stock split and
continue to hold IAH stock immediately after the reverse stock split, you
generally will recognize gain, but not loss, in an amount equal to the lesser of
(1) the excess of the sum of aggregate fair market value of your shares of IAH
stock plus the cash received over your adjusted tax basis in the shares, or (2)
the amount of cash received in the reverse stock split. In determining whether
you continue to hold stock immediately after the reverse stock split, you will
be treated as owning shares actually or constructively owned by certain
individuals
42
<PAGE>
and entities related to you. Your aggregate adjusted tax basis in your shares of
IAH stock held immediately after the reverse stock split will be equal to your
aggregate adjusted tax basis in your shares of IAH stock held immediately prior
to the reverse stock split, increased by any gain recognized in the reverse
stock split, and decreased by the amount of cash received in the reverse stock
split.
Any gain recognized in the reverse stock split will be treated, for
federal income tax purposes, as capital gain, provided that your receipt of cash
either (1) is "not essentially equivalent to a dividend" with respect to you, or
(2) is a "substantially disproportionate redemption of stock" with respect to
you. (Each of the terms in quotation marks in the previous sentence is discussed
above under the heading "--Stockholders Who Exchange All of Their IAH Stock for
Cash as a Result of the Reverse Stock Split.") In applying these tests, you may
possibly take into account sales of shares of IAH stock that occur substantially
contemporaneously with the reverse stock split. If your gain is not treated as
capital gain under any of these tests, the gain will be treated as ordinary
dividend income to you to the extent of your ratable share of IAH's
undistributed earnings and profits, then as a tax-free return of capital to the
extent of your aggregate adjusted tax basis in your shares, and any remaining
gain will be treated as a capital gain. See "Capital Gain and Loss" below.
Capital Gain and Loss:
For individuals, net capital gain (defined generally as your total
capital gains in excess of capital losses for the year) recognized upon the sale
of capital assets that have been held for more than 12 months generally will be
subject to tax at a rate not to exceed 20%. Net capital gain recognized from the
sale of capital assets that have been held for 12 months or less will continue
to be subject to tax at ordinary income tax rates. In addition, capital gain
recognized by a corporate taxpayer will continue to be subject to tax at the
ordinary income tax rates applicable to corporations. There are limitations on
the deductibility of capital losses.
Backup Withholding:
Stockholders will be required to provide their social security or other
taxpayer identification numbers (or, in some instances, additional information)
to the Transfer Agent in connection with the Reverse Stock Split to avoid backup
withholding requirements that might otherwise apply. The letter of transmittal
will require each stockholder to deliver such information when the Common Stock
certificates are surrendered following the Effective Date. Failure to provide
such information may result in backup withholding.
As explained above, the amounts paid to you as a result of the reverse
stock split may result in dividend income, capital gain income, or some
combination of dividend and capital gain income to you depending on your
individual circumstances. You should consult your tax advisor as to the
particular federal, state, local, foreign, and other tax consequences of the
transaction, in light of your specific circumstances.
Appraisal Rights
No appraisal rights are available under the Delaware General Corporation
Law or under the Company's Charter or Bylaws to any stockholder who dissents
from the proposal to approve the Reverse Stock Split Proposal. There may exist
other rights or actions under state law for stockholders who are aggrieved by
reverse stock splits generally. Although the nature and extent of such rights or
actions are uncertain and may vary depending upon the facts or circumstances,
stockholder challenges to corporate
43
<PAGE>
action in general are related to the fiduciary responsibilities of corporate
officers and directors and to the fairness of corporate transactions.
Reservation of Rights
Although the Board of Directors requests stockholder approval of the
proposed Amendment to the Restated Certificate of Incorporation, the Board
reserves the right to decide, in its discretion, to withdraw the proposed
amendment from the agenda of the annual stockholders' meeting prior to any
stockholder vote thereon or to abandon the Reverse Stock Split Proposal after
such vote and before the Effective Date even if the proposal is approved.
Although the Board presently believes that the proposed Amendment is in the best
interests of the Company and its stockholders, and thus has recommended a vote
for the proposed amendment, the Board nonetheless believes that it is prudent to
recognize that, between the date of this Proxy Statement and the Effective Date,
factual circumstances could possibly change such that it might not be
appropriate or desirable to effect the Reverse Stock Split Proposal at that
time. If the Board decides to withdraw the proposed Amendment from the agenda of
the Annual Meeting, the Board will notify the stockholders of such decision
promptly by mail and by announcement at the meeting. If the Board decides to
abandon the Reverse Stock Split Proposal after the meeting and before the
Effective Date, the Board will notify the stockholders of such decision promptly
by mail.
The board recommends that you vote FOR this proposal. Proxies solicited
by the Board of Directors will be voted FOR this proposal, unless you specify
otherwise in your proxy.
44
<PAGE>
The following performance graph and report of the Board's Compensation
Committee shall not be deemed filed or incorporated by reference into any other
Company filing under the Securities Act of 1933 or the Securities Exchange Act
of 1934, except to the extent we specifically incorporate this information by
reference into such filing.
PERFORMANCE GRAPH
- --------------------------------------------------------------------------------
The following graph compares, on a cumulative basis, the yearly
percentage change during the five years ended March 31, 1999 in (i) the total
stockholder return on Common Stock of the Company with (ii) the total return on
the Standard & Poor's 500 Index and with (iii) the total return on the Standard
& Poor's Homebuilding Group Index. Such yearly percentage change has been
measured by dividing (i) the sum of (a) the amount of dividends for the
measurement periods, assuming dividend reinvestment, and (b) the price per share
at the end of the measurement period less the price per share at the beginning
of the measurement period, by (ii) the price per share at the beginning of the
measurement period. The price of each unit has been set at $100 on March 31,
1994 for preparation of the graph.
TOTAL SHAREHOLDER RETURNS
[GRAPHIC OMITTED]
INDEXED RETURNS
<TABLE>
<CAPTION>
Base
Period Years Ending
Company / Index Mar94 Mar95 Mar96 Mar97 Mar98 Mar99
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INTL AMERICAN HOMES 100 65.79 72.37 62.47 80.58 83.33
S&P 500 INDEX 100 115.54 152.51 182.70 270.39 320.30
HOMEBUILDING-500 100 75.18 94.68 91.29 185.39 144.71
</TABLE>
45
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the fiscal year ending March 31, 1999, a portion of a financing
agreement with a maximum aggregate amount of $19,500,000 including a specific
indemnification of certain environmental conditions was guaranteed by the
Company's Chairman and President, Mr. Suarez. In consideration thereof the
Company agreed to pay a guaranty fee to Mr. Suarez equal to the lesser of
$80,000 or 1% of the amount guaranteed. The obligations of the Company's
Chairman and President continue during the term of the loan agreement subject to
certain ratios and financial performance of the Company which have been
satisfied as of March 31, 1999. The Company has agreed to indemnify the
President and Chairman in the event that this personal guarantee is called.
A member of the Board of Directors, Mr. Dionel Cotanda, is Vice
President and Director of a company which during the year ended March 31, 1999
sold lumber and certain other building material products in the amount of
approximately $4,625,000 to Suarez Housing Corporation, a subsidiary of the
Company. Suarez Housing Corporation purchases all of its requirements for those
products from this company.
A member of the Board of Directors, Mr. James G. Farr, is the sole
stockholder and President and Chief Executive Officer of Paramount Title
Corporation. During the years ended March 31, 1999, 1998 and 1997, Paramount
Title Corporation provided settlement and title insurance services for
substantially all the homes sold by Suarez Housing Corporation.
Upon the completion of the reverse stock split, the directors and
executive officers of IAH will own approximately 729 post-reverse stock split
shares of Common Stock, or approximately 50.69% of the then issued and
outstanding shares, as compared to 364,544 shares and 41.94%, respectively,
prior to the reverse stock split. Furthermore, such directors and executive
officers will benefit from an increase in book value of the pre-reverse stock
split shares from $9.88 to approximately $10.48. See "Special Factors --
Potential Determents of the Reverse Stock Split Proposal to Stockholders;
Accretion In Ownership and Control of Certain Stockholders."
PRICE RANGE OF COMMON STOCK; DIVIDENDS; TRADING VOLUME
The Company's Common Stock is traded over-the-counter. On July 1, 1999,
the bid price for the Common Stock as reported by the BLOOMBERG service was
$5.00 per share.
As of June 1, 1999 the Company had approximately 2,323 holders of record
of its Common Stock. The Company believes there are approximately 900 beneficial
owners of the Company's Common Stock.
There are four (4) market makers in the Company's stock. As of June 30,
1999, there were 869,214 shares outstanding. The high and low bid prices of the
stock for each quarter during the past two full fiscal years and the first
quarter of the current fiscal year as reported by the National Quotation Bureau
through March 1999 and the BLOOMBERG service since April 1999 (which reflect
inter-dealer prices, without retail mark-up, mark-down or commission, and may
not necessarily represent actual transactions) were:
46
<PAGE>
High Low
---- ---
Fiscal 1997
- -----------
April 1997-June 1997.................................. $4.68 $3.57
July 1997-September 1997.............................. $4.50 $4.14
October 1997-December 1997............................ $4.50 $4.14
January 1998-March 1998............................... $4.50 $4.50
Fiscal 1998
- -----------
April 1998-June 1998.................................. $4.50 $3.47
July 1998-September 1998.............................. $5.25 $2.63
October 1998-December 1998............................ $6.38 $3.93
January 1999-March 1999............................... $7.50 $4.75
Fiscal 1999
- -----------
April 1999-June 1999.................................. $8.00 $5.00
July 1, 1999-.........................................
Stock Repurchases by Company
The Company made the following purchases of Common Stock during each
quarter of the past two full fiscal years and the first quarter of the 1999
fiscal year:
<TABLE>
<CAPTION>
Number of Average
Securities Range of Purchase
Purchased Prices Paid Price
--------------------- -------------------- --------------------
<S> <C> <C> <C>
Fiscal 1997
- -----------
April 1997-June 1997................................. 0 NA NA
July 1997-September 1997............................. 0 NA NA
October 1997-December 1997........................... 0 NA NA
January 1998-March 1998.............................. 0 NA NA
Fiscal 1998
- -----------
April 1998-June 1998................................. 3,333 $4.56-$4.56 $4.56
July 1998-September 1998............................. 0 NA NA
October 1998-December 1998........................... 0 NA NA
January 1999-March 1999.............................. 33,601 $4.78-$5.25 $5.17
Fiscal 1999
- -----------
April 1999-June 1999................................. 3,168 $5.00-$5.00 $5.00
</TABLE>
The Company has not paid any dividends on its Common Stock and does not
foresee that it will pay dividends on its Common Stock in the near future. Under
the terms of the Plan, the Company must
47
<PAGE>
pay to certain holders of creditors' claims $1,250,000 before it can pay any
dividends to stockholders. No dividends are payable unless declared by the Board
of Directors.
OTHER MATTERS
The Board does not know of other matters which are likely to be brought
before the Annual Meeting. However, in the event that any other matters properly
come before the Annual Meeting, the persons named in the enclosed proxy are
expected to vote the shares represented by such proxy on such matters in
accordance with their best judgment.
The cost of preparing, assembling and mailing this Proxy Statement, the
Notice of Meeting and the enclosed proxy is to be borne by the Company.
ADDITIONAL INFORMATION
Financial Information
The Company hereby incorporates by reference (a) the Financial
Statements and the notes thereto contained on pages F-1 through F-20 of the
Company's 1999 10-K Annual Report included as an Annex to this Proxy Statement,
(b) the report of independent certified public accountants thereon contained on
page F-1 of the 1999 10-K Annual Report, (c) the Financial Statement Schedule
contained on page 22 of the 1999 10-K Annual Report, (d) Selected Financial Data
contained on pages 10 and 11 of the 1999 10-K Annual Report and (e) Management's
Discussion and Analysis of Financial Condition and Results of Operations
contained on pages 12 through 21 of the 1999 10-K Annual Report.
In addition, the following sets forth certain financial information for
the Company and its subsidiaries for and as of the following periods and dates:
Year Ended
March 31, 1999 March 31, 1998
-------------------- --------------------
Ratio of Earnings 3.25 to 1 .16 to 1
to Fixed Charges
Book Value Per Share $9.97 $6.92
The number of common shares deemed outstanding for purposes of the
calculation of book value per common share at March 31, 1999 was 857,385 shares
and at March 31, 1998 was 930,298 shares.
Cost of Proxy Solicitation and the Reverse Stock Split
The cost of preparing, assembling and mailing this proxy soliciting
material and Notice of Annual Meeting of Stockholders will be paid by the
Company. The Company may retain Corporate Investor Communication, Inc., a
professional soliciting organization, to assist in soliciting proxies for a fee
based on the number of telephone calls made plus reimbursement of reasonable
out-of-pocket expenses.
48
<PAGE>
Solicitation by mail, telephone, facsimile, or personal solicitation may also be
done by directors, executive officers, or regular employees of the Company and
its subsidiaries, for which they will receive no additional compensation.
Brokerage houses and other nominees, fiduciaries, and custodians nominally
holding shares of the Company's stock as of the record date will be requested to
forward proxy soliciting material to the beneficial owners of such shares, and
will be reimbursed by the Company for their reasonable expenses.
The following is an estimate of the costs incurred or expected to be
incurred by the Company in connection with the Reverse Stock Split Proposal
excluding payments to be made to Cashed-Out Stockholders. Amounts shown below
exclude the cost of paying for fractional shares after the reverse stock split
is effected. Final costs of the transaction may be more or less than the
estimates shown below.
Professional Fees $ 65,000
Transfer and exchange agent fees 17,000
Printing, mailing and Proxy Solicitation
costs 36,000
Internal Document Preparation 15,000
Other costs including commission filing
fees 17,000
-------
Total $ 150,000
=======
These expenses include the normal costs of preparing and mailing proxy
materials and conducting the Annual Meeting of Stockholders.
The Company intends to indirectly finance the reverse stock split
(including the cost of paying for fractional shares after the reverse stock
split is effected) by using funds available to it under its line of credit
facility at NationsBank of Florida, N.A. (See also "Special Factors--Financial
Effects of the Reverse Stock Split.")
Independent Public Accountants
Representatives of Arthur Andersen LLP, the Company's independent
accountants for the fiscal year ended March 31, 1999, are not expected to be
present at the Annual Meeting. No accountant has been selected or recommended by
the Company for the fiscal year ending March 31, 2000, as the Company and its
current accountants have not yet reached agreement on appropriate levels of
compensation.
Stockholder Proposals for 2000 Annual Meeting
From time to time, stockholders present proposals which may be proper
subjects for inclusion in the Proxy Statement and for consideration at the
Annual Meeting of Stockholders. If the Company's Common Stock has not been
deregistered prior to 2000, proposals of stockholders of the Company intended to
be presented at the Annual Meeting of Stockholders of the Company in 2000 must
be received by the Secretary of the Company at 9950 Princess Palm Ave, Suite
112, Tampa, Florida 33619 not later than April __, 2000 and must otherwise
comply with the rules of the Securities and Exchange Commission to be eligible
for inclusion in the Proxy Statement and proxy for the Annual Meeting in 2000.
If the date of such meeting is changed by more than thirty (30) days from its
currently contemplated date, proposals must be received a reasonable time before
solicitation of proxies for such meeting is made.
49
<PAGE>
Available Information
The Company is subject to the informational requirements of the 1934 Act
and in accordance therewith files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information can be inspected and copied at the public reference facilities of
the Commission at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza,
Washington, D.C. 20549 and at the regional offices of the Commission located at
7 World Trade Center, 13th Floor, Suite 1300, New York, New York 10048 and Suite
1400, Citicorp Center, 14th Floor, 500 West Madison Street, Chicago, Illinois
60661. Copies of such material can also be obtained at prescribed rates by
writing to the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Judiciary Plaza, Washington, D.C. 20549. In addition, such reports, proxy
statements and other information are available from the Edgar filings obtained
through the Commission Internet Website (http://www.sec.gov.)
The Company's Annual Report on Form 10-K
The Company's 1999 10-K Annual Report including the financial statements
and schedules thereto, which the Company has filed with the Securities and
Exchange Commission, is being mailed to all stockholders of record together with
the Proxy Statement.
Additional copies of the 1999 10-K Annual Report will be provided
without charge upon the written request of any stockholder. Such requests may be
sent to Robert I. Antle, Executive Vice President, Secretary and Chief Financial
Officer, International American Homes, Inc., 9950 Princess Palm Ave, Suite 112,
Tampa, Florida 33619.
Incorporation of Certain Documents by Reference
The Annual Report on Form 10-K for the fiscal year ended March 31, 1999,
filed with the Commission by the Company File No. 0-13800, is incorporated by
reference in this Proxy Statement.
All documents and reports filed by the Company with the Commission
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the 1934 Act after the date of
this Proxy Statement and prior to the date of the Annual Meeting shall be deemed
to be incorporated by reference in this Proxy Statement and prior to be a part
hereof from the respective dates of the filing of such documents or reports.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Proxy Statement to the extent that a statement contained
herein (or in any other subsequently filed documents which also is deemed to be
incorporated by reference herein) modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Proxy Statement.
July ___, 1999
By Order of the Board of Directors
Robert I. Antle
Executive Vice President, Secretary and Chief
Financial Officer
50
<PAGE>
Stockholders who desire to have their stock voted at the Meeting are
requested to mark, sign and date the enclosed proxy card and return it promptly
in the enclosed postage-paid envelope. Stockholders may revoke their proxies at
any time prior to the Annual Meeting and stockholders who are present at the
Annual Meeting may revoke their proxies and vote, if they so desire, in person.
51
<PAGE>
EXHIBIT A
CERTIFICATE OF AMENDMENT
OF THE
RESTATED CERTIFICATE OF INCORPORATION
OF
INTERNATIONAL AMERICAN HOMES, INC.
-----------------------------------------------------------------------
Pursuant to Section 242 of the General
Corporation Law of the State of Delaware
-----------------------------------------------------------------------
INTERNATIONAL AMERICAN HOMES, INC., a Delaware corporation, does hereby
certify as follows:
FIRST: The first paragraph of Paragraph 5 of the Corporation's Restated
Certificate of Incorporation is hereby amended to read in its entirety as set
forth below:
"The total number of shares of capital stock which the
Corporation shall have authority to issue is eleven thousand (11,000),
of which ten thousand (10,000) shall be shares of common stock with a
par value of $.01 per share (the "Common Stock") and one thousand
(1,000) shall be shares of preferred stock with a par value of $.01 per
share (the "Preferred Stock"). Each share of Common Stock issued and
outstanding or issued and held in the treasury of the Corporation as of
the close of business on the date (the "Effective Date") on which the
amendment to the Restated Certificate of Incorporation of the
Corporation adding this sentence shall become effective, is hereby
automatically and without further action reclassified, converted, and
changed into one-five hundredth (1/500th) of a share of Common Stock,
par value $.01 per share, provided that no fractional shares shall be
issued to any stockholder of record holding less than one (1) share of
Common Stock pursuant to and immediately after such reclassification,
conversion and change. In lieu of issuing fractional shares to any
stockholder of the Corporation, who, following the reverse stock split,
would hold less than one share of Common Stock of record in any discrete
account, shall be paid an amount equal to the product obtained by
multiplying (i) 500 times the weighted average trading price per share
of all sales of Common Stock made during the period beginning January 1,
1999 and ending on the twelfth business day next following the date of
the Notice of Annual Meeting and Proxy Statement relating to the
amendment to the Restated Certificate of Incorporation of the
Corporation adding this sentence, by (ii) a fraction, the numerator of
which shall be the number of shares of Common Stock owned by such
stockholder of record in such account immediately prior to the reverse
stock split and the denominator of which shall be 500. Each certificate
for Common Stock outstanding or held in treasury on the Effective Date
shall thereupon and thereafter evidence the number of shares of Common
Stock, and/or the right to receive cash into which such shares shall
have been reclassified, converted and changed, and may be surrendered to
the Corporation for cancellation in exchange for new certificates
representing such number of shares and/ or such cash."
A-1
<PAGE>
SECOND: The foregoing amendments were duly adopted in accordance with
Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the undersigned has caused this Certificate to be
duly executed in its corporate name this ___ day of ________, 1999.
INTERNATIONAL AMERICAN HOMES, INC.
By: ______________________________
Title:
ATTEST:
By: ______________________________
Title:
A-2
<PAGE>
INTERNATIONAL AMERICAN HOMES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS SEPTEMBER __, 1999
Whether or not you expect to attend the meeting, you are urged to
execute and return this proxy, which may be revoked at any time prior to its
use.
The undersigned hereby appoints Robert J. Suarez and Robert I. Antle
individually as Proxies, each with the power to appoint his substitute, and
hereby authorizes each of them to represent and to vote, as designated below,
all of the shares of Common Stock of International American Homes, Inc. (the
"Company") held of record by the undersigned on July 28, 1999 at the annual
meeting of stockholders to be held on September __, 1999 or at any adjournment
or postponement thereof.
(Continued, and to be dated and signed on the reverse side.)
<PAGE>
1. PROPOSAL ONE - ELECTION OF DIRECTORS NOMINATED AND LISTED BELOW
<TABLE>
<CAPTION>
<S> <C> <C>
FOR ALL nominees listed below [ ] WITHHOLD AUTHORITY to vote [ ] Exception [ ]
or all nominees listed below
</TABLE>
Class I (terms expiring in 2002) nominees:
William D. Aiken and Jeffrey D. Prol;
*(Instruction: To withhold authority to vote for any individual nominee, mark
the Exception Box and write that nominee's name in the space provided below)
2. PROPOSAL TWO - Approval of amendment to the Restated Certificate of
Incorporation of the Company (a) to effect a 1-for-500 reverse stock split of
the Company's issued and outstanding common stock, par value $.01 per share and
to provide a formula for computing the price to be paid in lieu of issuing
fractional shares to holders of record of fewer than 500 shares in any discrete
account and (b) to reduce the total number of shares of authorized capital stock
of the Company to eleven thousand (11,000), of which ten thousand (10,000) shall
be shares of Common Stock and one thousand (1,000) shall be shares of Preferred
Stock.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, the Proxies are authorized to vote upon such
other business as may properly come before the meeting and any adjournment or
postponement thereof.
Address Change
and/or Comments [ ]
PROXY TABULATION
NOTE: Signatures should agree with the name specified herein. When signing as
attorney, executor, administrator, trustee or guardian, please give full title
as such. For joint accounts or co-fiduciaries, all joint owners or
co-fiduciaries should sign.
THIS PROXY WHEN PROPERLY EXECUTED
WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED
STOCKHOLDERS. IF NO DIRECTION IS
MADE, THE PROXY WILL BE VOTED FOR
PROPOSAL 1 AND PROPOSAL 2.
Dated________________________, 1999
-----------------------------------
Signature
-----------------------------------
Signature, if held jointly
SIGN, DATE AND RETURN THE PROXY CARD Votes MUST be indicated (x) in
PROMPTLY USING THE ENCLOSED ENVELOPE. Black or Blue ink.
<PAGE>
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------
FORM 10-K
-----------------
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED] For the Fiscal Year Ended March 31, 1999
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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
incorporation or organization) Identification Number)
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
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12 (g) of the Act:
Title of class
--------------
Common Stock, $.01 par value
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss.229.405 of this chapter) 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
or any amendment to this Form 10-K. |X|
As of June 1, 1999, the number of shares outstanding of the registrant's common
stock, $.01 par value, was 855,883. As of June 1, 1999 the aggregate market
value of the registrant's common stock held by non-affiliates was $2,625,000.
APPLICABLE ONLY TO REGISTRANTS 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
================================================================================
<PAGE>
INTERNATIONAL AMERICAN HOMES, INC.
----------------------------------
AND SUBSIDIARIES
----------------
FORM 10-K
---------
Index
-----
Page
----
Part I.
Item 1. Business .................................................. 3
Item 2. Properties ................................................ 7
Item 3. Legal Proceedings ......................................... 7
Item 4. Submission of Matters to a Vote of Security Holders ....... 7
Part II.
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters ....................................... 8
Item 6. Selected Financial Data ................................... 10
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations ................................. 12
Item 8. Financial Statements and Supplementary Data ............... 21
Item 9. Change in and Disagreements with Accountants on Accounting
and Financial Disclosure .................................. 21
Part III.
Item 10. Directors and Executive Officers of the Registrant ........ 21
Item 11. Executive Compensation .................................... 21
Item 12. Security Ownership by Certain Beneficial Owners
and Management ............................................ 21
Item 13. Certain Relationships and Related Transactions ............ 21
Part IV.
Item 14. Exhibits, Financial Statements, Schedules, and
Reports on Form 8-K ....................................... 22
Signatures .................................................................. 25
Page 2
<PAGE>
PART I
Item 1. Business
General Description
- -------------------
International American Homes, Inc. (the "Company") was incorporated under the
laws of the State of Delaware on April 27, 1983. The Company, through a
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. See Notes 1 and 11 in Notes to Consolidated
Financial Statements of the Company appearing elsewhere in this report.
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 expired on August 12, 1998. See Notes 1 and
7 in Notes to Consolidated Financial Statements of the Company appearing
elsewhere in this report.
Financing Arrangements
- ----------------------
The Company, through its subsidiary, obtains financing from commercial banks for
a portion of the cost of acquiring finished building lots and undeveloped land
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. All of the Company's financing arrangements
are secured by the related real estate inventory.
Management believes that the Company currently has adequate financing and
liquidity to meet its financial obligations and will be able to fund the
acquisition and construction of inventory to support modest growth. However,
there is no assurance that 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.
Page 3
<PAGE>
Markets
- -------
During the three fiscal years ended March 31, 1999, the Company built and
delivered 1,163 homes realizing $170,549,000 in revenues. The following tables
summarize, by market area, the Company's sales revenues and number of homes
delivered, respectively, for its last three fiscal years.
Home Sales Revenue
(Dollars in thousands)
Year Ended March 31,
-------------------------------------------
1999 1998 1997
---------- ---------- ----------
Market Area
-----------
Greater Tampa, Florida $ 49,992 $ 42,102 $ 40,282
Metropolitan Washington, D.C. * 0 12,299 25,874
---------- ---------- ---------
Total * $ 49,992 $ 54,401 $ 66,156
========== ========== =========
Number of Homes Delivered
Year Ended March 31,
-------------------------------------------
1999 1998 1997
---------- ---------- ----------
Market Area
-----------
Greater Tampa, Florida 354 321 309
Metropolitan Washington, D.C. * 0 56 123
---------- ---------- ---------
Total * 354 377 432
========== ========== =========
* Includes home sales revenue and number of homes delivered prior to the
restructuring of operations during the year ended March 31, 1998.
The Company is currently offering single-family homes and villas in six
communities at prices ranging from $102,000 to $210,000. Purchasers of the
Company's homes include both entry-level and move-up buyers. The average sales
price of the homes delivered in the year ended March 31, 1999 was $ 141,000.
Page 4
<PAGE>
Land Acquisition and Development
- --------------------------------
The Company generally acquires finished building lots under contracts which
spread the acquisition of those lots over a period of time that roughly
coincides with the estimated time required for the construction and sale of the
homes on those lots. At March 31, 1999 the Company had commitments to purchase
635 finished building lots at a total purchase price of approximately
$17,270,000 over a four-year period. These commitments assure a continuing
supply of finished building lots in the near future. Substantial 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 March 31, 1999, the Company had developed 257 of those lots into
finished building lots and delivered 148 homes on those lots in prior periods up
to and including March 31, 1999. The Company is not engaged in any other land
development activities.
Subcontractors and Suppliers
- ----------------------------
The Company constructs homes utilizing subcontractors who operate under the
supervision of the Company's staff. The subcontracts are generally fixed-price,
short-term agreements. Building materials and subcontractors are readily
available in the areas where the Company constructs its homes. Although the
Company believes that no relationship with any particular supplier or
subcontractor is material to its operations, the Company purchases substantially
all of its requirements for lumber and certain other building material products
for the homes that it builds in Greater Tampa, Florida from one supplier. The
Company does not believe that this relationship results in any significant risk
to the Company.
Warranties
- ----------
The Company provides warranties to all of its customers. The Company provides a
written ten-year warranty through an independent warranty program which insures
performance by the Company. The warranties cover major structural defects for
ten years, limited structural and mechanical defects for one to two years, and
all defects for one year.
Seasonal Nature of Business
- ---------------------------
Due to its product mix, the Company's operations have not been seasonal in
nature.
Backlog
- -------
The following comparative backlog information excludes the results from
restructured operations (i.e. exiting from the Metropolitan Washington, D.C.
market).
As of March 31, 1999 and 1998 the Company had a backlog of signed non-contingent
contracts for 105 homes with aggregate sales prices of $15,168,000 and 107 homes
with aggregate sales prices of $14,676,000, respectively.
Page 5
<PAGE>
Sales and Marketing
- -------------------
The Company generally sells its homes through its own sales personnel who work
in on-site model homes. Sales personnel are compensated through a combination of
salary and commission. A significant portion of those sales are initiated by
independent real estate brokers who are compensated on a commission basis.
The Company advertises in local and regional newspapers and publications and
provides prospective purchasers with illustrated brochures and floor plans. The
Company's customers may select custom options to be incorporated into their
homes at additional cost.
The Company requires a cash deposit from purchasers at the time a contract of
sale is executed. Such deposits are held in trust, escrow, or segregated bank
accounts. Purchasers are permitted to cancel their contract and receive a refund
of their deposit under certain limited circumstances including their inability
to obtain permanent mortgage financing or to sell their existing home. For the
years ended March 31, 1999, 1998 and 1997, the Company experienced cancellation
rates of 15%, 21%, and 21%, respectively.
Although the Company attempts to limit its inventory of unsold homes, it may
commence construction of homes prior to obtaining sales contracts. The Company
frequently discounts the purchase price of these homes or provides various
options and other sales incentives to purchasers.
Customer Financing
- ------------------
The Company assists customers in arranging permanent mortgage financing by
providing information regarding potential mortgage lenders. There currently is
an adequate supply of competitively priced permanent mortgages available from
unrelated sources to satisfy the needs of homebuyers.
The Company receives in cash, at closing, the full sales price for its homes,
less any financing subsidies, deposits, closing costs, and loan repayments.
Competition
- -----------
The homebuilding industry is highly competitive and fragmented. The Company
competes in the geographic area in which it operates with numerous residential
construction companies ranging from small local builders to large regional and
national builders. The Company's competitors include: Pulte Corporation, Centex
Corporation, U.S. Home Corporation and Lennar Corporation. The national builders
and many of the local and regional companies have higher sales and greater
financial resources than the Company. The Company considers all homes, whether
offered for sale or rent (including apartment and condominium housing), to be
competitive with its homes in each local area in which the Company operates. The
Company competes primarily on the basis of quality, location, price, design, and
reputation.
Page 6
<PAGE>
Regulation
- ----------
The Company's business is affected by various local, state, and Federal
statutes, ordinances, rules, and regulations concerning zoning, building design
and construction, home sales, environmental protection, and other matters.
Changes in governmental regulations may adversely affect the Company's business.
Many of the homes built by the Company are approved for FHA or VA financing.
Where required, all construction is inspected by local government inspectors
and, on FHA and VA approved homes, by FHA or VA building inspectors.
Employees
- ---------
The Company employed 34 persons as of March 31, 1999 of whom 3 were executive
officers, 11 were sales personnel, 9 were administrative and clerical personnel
and 11 were involved in construction and supervision of construction. The
Company believes its employee relations are satisfactory.
Item 2. Properties
As of March 31, 1999, the Company occupied leased office facilities in Tampa,
Florida totaling approximately 3,170 square feet. See Notes 1 and 7 in Notes to
Consolidated Financial Statements of the Company appearing elsewhere in this
report.
Item 3. Legal Proceedings
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 expired on August 12, 1998.
The Company is involved from time to time in other litigation arising in the
ordinary course of business which is not expected to have a material adverse
effect on the Company's financial position or its results of operations. See
Note 7 in Notes to Consolidated Financial Statements of the Company appearing
elsewhere in this report.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of shareholders during the fourth quarter of
the fiscal year covered by this report.
Page 7
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
At the 1994 Annual Meeting of Stockholders the stockholders approved a proposal
to adopt certain amendments (the "Amendments"), to the Company's Restated
Certificate of Incorporation (i) to effect a 1-for-10 reverse stock split of the
Company's issued and outstanding common stock (the "Reverse Stock Split"), and
(ii) to change the number of authorized shares of common stock from 30 million
to 10 million. The Amendments did not change the par value of the common stock
which remained at $.01 per share. The Amendments became effective on May 31,
1995 with the filing of a Certificate of Amendment with the Secretary of State
of Delaware.
At the 1998 Annual Meeting of Stockholders the stockholders approved a proposal
to adopt an amendment (the "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. This Amendment did not change the par value of the
common stock which remained at $.01 per share or the number of authorized shares
which remained at 10 million. The Amendment became effective on December 1, 1998
with the filing of a Certificate of Amendment with the Secretary of State of
Delaware.
The effect of the reverse stock splits as set forth above has been retroactively
reflected in this report.
Shares of the Company's common stock are traded in the over-the-counter market.
The trading symbol is "IAHM".
The following table sets forth the range of high and low bid prices for the
periods indicated as reported by the National Quotation Bureau (which reflect
inter-dealer prices, without retail mark-up, mark-down or commission, and may
not necessarily represent actual transactions).
High Low
---- ---
Calendar Year 1997
- ------------------
First Quarter $ 4.89 $ 3.57
Second Quarter 4.68 3.57
Third Quarter 4.50 4.14
Fourth Quarter 4.50 4.14
Calendar Year 1998
- ------------------
First Quarter 4.50 4.50
Second Quarter 4.50 3.47
Third Quarter 5.25 2.63
Fourth Quarter 6.38 3.93
Calendar Year 1999
- ------------------
First Quarter 7.50 4.75
Page 8
<PAGE>
As of June 1, 1999, there were 2,323 stockholders of record.
The Company has never declared or paid any cash dividends. Although in all other
respects the Plan has expired, the Company may not pay any cash dividends to
stockholders until it has first paid an additional $1,250,000 to the creditors
pursuant to a continuing obligation under the Plan.
Page 9
<PAGE>
Item 6. Selected Financial Date
Selected Consolidated Statements of Operations (1)
(Dollars in thousands)
<TABLE>
<CAPTION>
Year Ended March 31,
---------------------------------------------------------------------
1999 (2) 1998 (3) 1997 1996 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Revenues:
Home sales $ 49,992 $ 54,401 $ 65,156 $ 55,983 $ 50,347
Interest and other income 335 482 617 792 878
--------- --------- --------- --------- ---------
50,347 54,883 66,773 56,775 51,225
--------- --------- --------- --------- ---------
Costs and expenses:
Cost of home sales 42,236 47,359 57,712 48,425 43,455
Restructuring provision - 1,840 - - -
Selling, general and
administrative 6,144 6,137 7,455 6,541 5,673
Interest 373 473 545 747 857
Depreciation 88 158 131 59 81
Reversal of creditor liability(2) (1,322) - - - -
--------- --------- --------- --------- ---------
47,519 55,967 65,843 55,772 50,066
--------- --------- --------- --------- ---------
Income(loss) before income 2,828 (1,084) 930 1,003 1,159
taxes
--------- --------- --------- --------- ---------
Provision(benefit) for income 583 (380) 280 60 72
taxes
--------- --------- --------- --------- ---------
Net income(loss) $2,245 ($704) $650 $943 $1,087
========= ========= ========= ========= =========
Per Common Share:
Basic net income(loss) $2.47 ($.76) $.71 $1.04 $1.20
========= ========= ========= ========= =========
Weighted average n umber of
shares used in basic net
income(loss) per share data, as 908,550 928,525 921,675 908,132 908,132
Adjusted for the Reverse Stock
Splits
========= ========= ========= ========= =========
Diluted net income(loss) $2.45 ($.76) $.70 $1.02 $1.18
Weighted average number of
common and common 917,350 928,525 929,345 920,637 920,099
equivalent shares
========= ========= ========= ========= =========
</TABLE>
Page 10
<PAGE>
Selected Consolidated Balance Sheet Data (1)
(Dollars in thousands)
<TABLE>
<CAPTION>
March 31, March 31, March 31, March 31, March 31,
1999 1998 (3) 1997 1996 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Receivables $1,626 $ 532 $ 949 $1,223 $ 444
Collateral for bonds payable 3,199 4,500 4,972 5,871 7,620
Real estate inventory 18,247 20,964 22,654 21,860 16,997
Total assets 24,768 28,183 31,757 31,527 27,668
Mortgage notes and loans payable 8,571 11,246 13,967 13,814 9,724
Bonds payable 3,068 4,341 4,800 5,660 7,362
Total liabilities 16,222 21,749 24,623 25,073 22,177
Stockholders' equity 8,546 6,434 7,134 6,454 5,511
</TABLE>
--------------------------------------------
(1) In conjunction with the Reorganization, the Company adopted fresh start
reporting pursuant to which all assets and assumed liabilities are restated
to reflect their reorganization value whiich approximates their fair value
at the date of reorganization. Accordingly, the Selected Consolidated
Statements of Operations for the period March 31, 1995 through March 31,
1999 and the Selected Consolidated Balance Sheet Data as of March 31, 1995
through March 31, 1999 are not comparable to the related statements for any
prior period and as of any prior date.
(2) The Selected Consolidated Statement of Operations for the year ended March
31, 1999 includes income of $1,322,000 resulting from the reversal of an
estimated liability to creditors established during the year ended March
31, 1993 for which no payment was required.
(3) The Selected Consolidated Statement of Operations and Selected Consolidated
Balance Sheet Data for the year ended March 31, 1998 include a charge for
the restructuring of operations of $1,840,000 (i.e. exiting from the
Washington, D.C. market).
Page 11
<PAGE>
Item 7. 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 Annual Report on Form
10-K. Certain statements in this "Management's Discussion and Analysis of
Financial Condition and Results of Operations" are forward-looking statements.
See "Special Note Regarding Forward-Looking Statements".
During 1996 and 1997 an adverse 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 poorly performing were abandoned. Notwithstanding those
changes, lower operating margins and higher selling expenses continued to
adversely affect the Company's ability to restore profitability in the
Metropolitan Washington, D.C. market. Accordingly during the quarter ended
December 31, 1997 the Board of Directors of the Company approved management's
plan to discontinue the building and sale of homes and effect an orderly
withdrawal from the Metropolitan Washington, D.C. housing market. 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 only remaining
activities are the administrative functions associated with the wind-down of the
subsidiary.
Liquidity and Capital Resources
- -------------------------------
The consolidated financial statements for the year ended March 31, 1998 include
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. (See Notes 1 and 11 in Notes to the Consolidated
Financial Statements of the Company appearing elsewhere in this report). The
Company believes that it has sufficient cash flow and cash on hand to absorb any
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 generally limit the portion of each home that can be
financed to approximately 75% of its value. Since the Company must use 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's subsidiary currently has financing agreements in the aggregate
amount of $19,900,000 with commercial banks located in the area in which it
operates. The terms of these financing agreements vary, are each for one year or
more from their date of origination (with expiration dates ranging from July,
1999 to October, 2000), are generally guaranteed by the Company, and are all
secured by the related real estate inventory. During the fiscal year
Page 12
<PAGE>
ended March 31, 1999 a portion of these agreements up to an aggregate maximum
amount of $19,500,000 along with a specific indemnification of certain
environmental conditions were guaranteed by the Company's Chairman and
President. In consideration thereof the Company agreed to pay a guaranty fee
equal to the lessor of $80,000 or 1% of the amount guaranteed. The obligations
of the Company's Chairman and President continue during the term of the loan
agreement subject to certain ratios and financial performance of the Company
which have been satisfied as of March 31, 1999.
The Company generally acquires finished building lots under contracts which
spread the acquisition of such lots over a period of time that roughly coincides
with the estimated time required for the construction and sale of homes on those
lots. At March 31, 1999, the Company had commitments to purchase 635 finished
building lots at a total purchase price of approximately $17,270,000 over a
four-year period. These commitments assure a continuing supply of finished
building lots in the near future. Substantial 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. Through March 31, 1999, the Company had developed 257 of those lots
into finished building lots and had delivered 148 homes on those lots. 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 expenditures but would be impacted by the inability to renew certain of
the financing agreements when they mature. The strength of the housing market in
the area where the Company will continue operations and the ability of the
Company to maintain a continual 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 financial obligations
and will be able to fund the acquisition and construction of inventory to
support modest growth. However, there is no assurance that such financing will
be available to the Company in the future.
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.
Page 13
<PAGE>
Accordingly, no distribution to creditors was required. At June 30, 1998, the
Company reversed the estimated liability and recognized income of $1,322,000.
Results of Operations
- ---------------------
The following table and the paragraphs that follow set forth certain information
with respect to homes delivered and homes sold during the periods presented
(dollars in thousands). For comparative purposes, the information has been
restated to eliminate the results from restructured operations (i.e. the exiting
from the Washington, D.C. market).
Year Ended March 31,
-----------------------------------------------------
1999 1998 1997
------------- -------------- --------------
Homes delivered
Units 354 321 309
Home sales revenue $ 49,992 $ 42,102 $ 40,282
Average sales price $ 141.2 $ 131.2 $ 130.4
Homes sold
Units 352 346 322
Sales value $ 50,351 $ 46,244 $ 41,839
Average sales price $ 143.0 $ 133.7 $ 129.9
The increase in home sales revenues for the year ended March 31, 1999 compared
to the year ended March 31, 1998 and the increase in home sales revenues for the
year ended March 31, 1998 compared to the year ended March 31, 1997 both result
from a combination of an increase in the number of units delivered and an
increase in the 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 year
ended March 31, 1999 compared to the year ended March 31, 1998 and an increase
during the year ended March 31, 1998 compared to the year ended March 31, 1997.
The increases are attributable to an increase in the number of product types in
the communities in which the company builds and a greater number of sales in
each community.
The increase in the average sales price of homes sold during the year ended
March 31, 1999 compared to the year ended March 31, 1998 and the increase during
the year ended March 31, 1998 compared to the year ended March 31, 1997 results
from a wider product range and price increases.
Page 14
<PAGE>
The following table sets forth certain information with respect to homes sold
under contract but not delivered ("backlog") at the dates shown (dollars in
thousands). For comparative purposes the information has been restated to
eliminate the results from restructured operations (i.e. the exiting from the
Washington D.C. market).
Year Ended March 31,
-----------------------------------------------------
1999 1998 1997
------------- -------------- --------------
Backlog
Units 105 107 82
Sales value $ 15,168 $ 14,676 $ 10,372
Average sales price $ 144.5 $ 137.2 $ 126.5
There are no contingent contracts in the backlog.
The number of units in the Company's backlog of sales contracts decreased
slightly at March 31, 1999 compared to March 31, 1998. However, the value of its
backlog of sales contracts increased. The decrease in the number of units is not
material. The increase in the value of the backlog is attributed to an increase
in the average sales price per unit resulting from a wider product range and
price increases.
The Company realized an annual increase in the number and value of its backlog
of sales contracts at March 31, 1998 compared to March 31, 1997. This increase
is attributable to a greater number of product types in the communities in which
the company builds homes as well as an increase in the number of sales per
community. The increase in the average sales price results from a wider product
range and price increases.
Page 15
<PAGE>
Year Ended March 31, 1999 Compared to the Year Ended March 31, 1998.
Results of Operations
The following table sets forth, for the periods indicated, certain information
regarding the Company's operations (dollars in thousands). Operations for the
year ended March 31, 1999 are not comparable to the year ended March 31, 1998
because of the restructuring of operations (i.e. the exiting from the
Washington, D.C. market).
<TABLE>
<CAPTION>
Year Ended March 31,
------------------------------------------------------------
1999 1998
----------------------------- -----------------------------
Dollars % Dollars %
-------------- ----------- --------------- ----------
<S> <C> <C> <C> <C>
Home sales revenues $49,992 100.0 $54,401 100.0
Cost of home sales 42,236 84.5 47,359 87.1
Gross profit 7,756 15.5 7,042 12.9
Selling, general and administrative expenses 6,144 12.3 6,137 11.3
Restructuring charge - - 1,840 3.4
Income (loss) before income taxes and reversal 1,506 3.0 (1,084) (2.0)
of creditor liability
Reversal of creditor liability 1,322 2.6 - -
Income (loss) before income taxes 2,828 5.6 (1,084) (2.0)
</TABLE>
Interest and Other Income
Interest and other income includes $337,000 and $423,000 and interest expense
includes $333,000 and $416,000 for the years ended March 31, 1999 and March 31,
1998, respectively, from wholly-owned finance subsidiaries established in prior
years to sell collateralized mortgage obligations through participation in
various multi-builder bond programs. The decrease in both income and expense
results from decreases in mortgages receivable due to payoffs which reduces the
related debt.
Income Taxes
For the year ended March 31, 1999 a provision for income tax of $583,000 was
recorded. For the year ended March 31, 1998 a net income tax benefit of $380,000
was recorded. The effective tax rates for years ended March 31, 1999 and 1998
were 21% and 35%, respectively. The change in the effective tax rate results
primarily from the reversal of creditor liability which is not subject to income
tax .
Page 16
<PAGE>
Restructuring Provision
The year ended March 31, 1998 includes a restructuring charge of $1,840,000
associated with the termination of home-building operations in Metropolitan
Washington, D.C.. The year ended March 31, 1999 did not include any
restructuring charge.
Creditor Liability
The year ended March 31, 1999 includes a reversal of an estimated liability for
potential distributions of cash flow to creditors of $1,322,000. The year ended
March 31, 1998 did not include any reversal of creditor liability.
The following table sets forth, for the periods indicated, certain information
regarding the Company's remaining Florida operations (dollars in thousands).
<TABLE>
<CAPTION>
Year Ended March 31,
------------------------------------------------------------
1999 1998
----------------------------- -----------------------------
Dollars % Dollars %
-------------- ----------- --------------- ----------
<S> <C> <C> <C> <C>
Home sales revenues $49,992 100.0 $42,102 100.0
Cost of home sales 42,236 84.5 35,759 84.9
Gross profit 7,756 15.5 6,343 15.1
Selling, general and administrative expenses 5,690 11.4 4,677 11.1
Income before income taxes 1,931 3.9 1,497 3.6
</TABLE>
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 year ended March 31, 1999
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 higher employment costs and expenses.
The change in pre-tax profit for the year ended March 31, 1999 compared to the
year ended March 31, 1998 is a reflection of the changes in gross profit and in
selling, general, and administrative expenses as discussed above.
Page 17
<PAGE>
Year Ended March 31, 1998 Compared to the Year Ended March 31, 1997.
Results of Operations
The following table sets forth, for the periods indicated, certain information
regarding the Company's operations (dollars in thousands). Operations for the
year ended March 31, 1998 are not comparable to the year ended March 31, 1997
because of the restructuring of operations (i.e. the exiting from the
Washington, D.C. market).
<TABLE>
<CAPTION>
Year Ended March 31,
------------------------------------------------------------
1998 1997
----------------------------- -----------------------------
Dollars % Dollars %
-------------- ----------- --------------- ----------
<S> <C> <C> <C> <C>
Home sales revenues $54,401 100.0 $66,156 100.0
Cost of home sales 47,359 87.1 57,712 87.2
Gross profit 7,042 12.9 8,444 12.8
Selling, general and administrative expenses 6,137 11.3 7,455 11.3
Restructuring provision 1,840 3.4 - -
(Loss) income before income taxes (1,084) (2.0) 930 1.4
</TABLE>
Interest and Other Income
Interest and other income includes $423,000 and $483,000 and interest expense
includes $416,000 and $471,000 for the years ended March 31, 1998 and March 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. The decrease in both income and expense
results from decreases in mortages receivable due to payoffs which reduces the
related debt.
Income Taxes
For the year ended March 31, 1998 a net income tax benefit of $380,000 was
recorded. For the year ended March 31, 1997 a provision for income taxes of
$280,000 was recorded. The effective tax rates for years ended March 31, 1998
and 1997 were 35% and 30%, respectively. The change in the effective tax rate
was the result of a reversal of a prior year tax reserve.
Restructuring Provision
The year ended March 31, 1998 includes a restructuring charge of $1,840,000
associated with the termination of home-building operations in Metropolitan
Washington, D.C.. The year ended March 31, 1997 did not include any
restructuring charge.
Page 18
<PAGE>
The following table sets forth, for the periods indicated, certain information
regarding the Company's remaining Florida operations (dollars in thousands).
<TABLE>
<CAPTION>
Year Ended March 31,
------------------------------------------------------------
1998 1997
----------------------------- -----------------------------
Dollars % Dollars %
-------------- ----------- --------------- ----------
<S> <C> <C> <C> <C>
Home sales revenues $42,102 100.0 $40,282 100.0
Cost of home sales 35,759 84.9 34,172 84.8
Gross profit 6,343 15.1 6,110 15.2
Selling, general and administrative expenses 4,677 11.1 4,123 10.2
Income before income taxes 1,497 3.6 1,874 4.7
</TABLE>
While gross profit increased for the year ended March 31, 1998 compared to the
year ended March 31, 1997, gross profit as a percentage of home sales revenue
decreased slightly. The percentage decrease is not deemed to be material.
Selling, general and administrative expenses for the year ended March 31, 1998
increased in both amount and percentage when compared to the prior comparable
period. The increase in selling, general and administrative expenses is due
principally to higher general and administrative expenses resulting from
increased employment costs. In addition, higher total selling and marketing
expenses were incurred due to the increase in home sales revenues and a small
increase in per unit selling and marketing expenses. The percentage increase in
selling, general and administrative expenses is due to the reasons set forth
above.
The change in pre-tax profit for the year ended March 31, 1998 compared to the
year ended March 31, 1997 is a reflection of the changes in gross profit and in
selling, general, and administrative expenses as discussed above.
Inflation and Business Cycles
General economic conditions in the United States, and particularly the impact of
inflation, availability of funds and other factors on interest rates, affect
both the Company's sales and its costs. Inflation can have a long-term impact on
the Company because increasing costs of land, materials, and labor result in
higher sales prices of its homes. In addition, increases in interest rates on
permanent mortgages generally result in reduced sales rates. The Company's
business is also affected by local economic conditions, such as unemployment
rates and housing demand in the market in which it builds homes. Homebuilding is
a cyclical industry in which economic conditions have 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,
Page 19
<PAGE>
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 commenced its work during the fiscal quarter
ending March 31, 1999 and expects to complete its work prior to September 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 a 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.
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. The Company has
received verbal assurances from these principal suppliers as to their readiness.
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.
Special Note Regarding Forward-Looking Statements
- -------------------------------------------------
Certain statements in this Section and "Business" and elsewhere in this Annual
Report on Form 10-K constitute "forward-looking statements". Such
forward-looking statements
Page 20
<PAGE>
include the discussions of the business strategies of the Company and
expectations concerning future operations, margins, profitability, liquidity and
capital resources. Although the Company believes that such forward-looking
statements are reasonable, it can give no assurance that any forward-looking
statements will prove to be correct. Such forward-looking statements involve
known and unknown risks, uncertainties and other factors, which may cause the
actual results, performance or achievements of the Company to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. Such factors include, among others,
the demographic trends and other conditions impacting the housing market in the
areas in which the Company operates, competition in such areas, the availability
of financing, litigation outcomes, and general economic and business conditions
which may impact levels of disposable income of potential home buyers.
Item 8. Financial Statements and Supplementary Data
The information required under this item is incorporated herein by reference to
the information provided at Pages F-1 through F-20 of this report.
Item 9. Change in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
Information required to be set forth hereunder has been omitted and will be
incorporated by reference, when filed, from the Company's Proxy Statement for
its 1999 Annual Meeting of Stockholders.
Item 11. Executive Compensation
Information required to be set forth hereunder has been omitted and will be
incorporated by reference, when filed, from the Company's Proxy Statement for
its 1999 Annual Meeting of Stockholders.
Item 12. Security Ownership by Certain Beneficial Owners and Management
Information required to be set forth hereunder has been omitted and will be
incorporated by reference, when filed, from the Company's Proxy Statement for
its 1999 Annual Meeting of Stockholders.
Item 13. Certain Relationships and Related Transactions
Information required to be set forth hereunder has been omitted and will be
incorporated by reference, when filed, from the Company's Proxy Statement for
its 1999 Annual Meeting of
Page 21
<PAGE>
Stockholders. See Note 10 in Notes to the Consolidated Financial Statements of
the Company appearing elsewhere in this report.
PART IV
Item 14. Exhibits, Financial Statements, Schedules, and Reports on Form 8-K
(a) Financial Statements. The following consolidated financial statements are
filed as part of this Annual Report on Form 10-K. (All other schedules are
omitted as the required information is inapplicable, or the information is
presented in the financial statements and related notes thereto):
Page
----
INTERNATIONAL AMERICAN HOMES, INC. AND SUBSIDIARIES
Report of Independent Certified Public Accountants .................. F-1
Consolidated Balance Sheets as of March 31, 1999 and 1998 ........... F-2
Consolidated Statements of Operations for the three years
ended March 31, 1999 ................................................ F-4
Consolidated Statements of Changes in Stockholders' Equity
for the three years ended March 31, 1999 ............................ F-5
Consolidated Statements of Cash Flows for the three years
ended March 31, 1999 ................................................ F-6
Notes to Consolidated Financial Statements .......................... F-7
(b) Reports on Form 8-K. No reports on Form 8-K were filed by the Company
during the last quarter of the fiscal year ended March 31, 1999.
(c) Exhibits. The following exhibits are filed as part of this Annual Report:
Exhibit
Number
- ------
2.1 - Second Amended Disclosure Statement dated as of June 29, 1992 and
Third Amended Joint Plan of Reorganization dated June 29, 1992
(incorporated by reference to Exhibit 2.4 to Annual Report on Form
10-K for the fiscal year ended March 31, 1993).
2.2 - Fourth Amended Joint Plan of Reorganization dated November 17, 1992
(incorporated by reference to Exhibit 2.5 to Annual Report on Form
10-K for the fiscal year ended March 31, 1993).
3.1(a) - Restated Certificate of Incorporation of Registrant (incorporated by
reference to Exhibit 4 to Quarterly Report on Form 10-Q for the
quarter ended September 30, 1989).
Page 22
<PAGE>
3.1(b) - Certificate of Amendment to the Restated Certificate of Incorporation
of Registrant dated September 8, 1994 (incorporated by reference to
Exhibit 3.1(b) to Annual Report on Form 10-K for the fiscal year
ended March 31, 1995).
3.1(c) - Certificate of Amendment to the Restated Certificate of Incorporation
of Registrant dated May 22, 1995 (incorporated by reference to
Exhibit 3.1(c) to Annual Report on Form 10-K for the fiscal year
ended March 31, 1995).
3.1(d) - Certificate of Amendment to the Restated Certificate of Incorporation
of Registrant dated November 19, 1998.
3.2 - By-laws of Registrant (incorporated by reference to Exhibit 3.2 to
Annual Report on Form 10-K for the fiscal year ended March 31, 1989).
10.1 - Key Employee Agreement dated August 12, 1992 of Robert J. Suarez
(incorporated by reference to Exhibit 10.17 to Annual Report on Form
10-K for the fiscal year ended March 31, 1993).
10.2 - Non-Qualified Stock Option Agreement dated August 12, 1992 between
Robert J. Suarez and the Registrant (incorporated by reference to
Exhibit 10.19 to Annual Report on Form 10-K for the fiscal year ended
March 31, 1993).
10.3 - Guaranty dated as of January 20, 1993 by Robert J. Suarez to First
Florida Bank, N.A. (incorporated by reference to Exhibit 10.23 to
Annual Report on Form 10-K for the fiscal year ended March 31, 1993).
10.4 - Indemnity Agreement dated as of January 20, 1993 by Suarez Housing
Corporation, the Registrant, and Robert J. Suarez to and for the
benefit of First Florida Bank, N.A. (incorporated by reference to
Exhibit 10.24 to Annual Report on Form 10-K for the fiscal year ended
March 31, 1993).
10.5 - Mortgage Modification Agreement dated as of October 7, 1994 by and
between Barnett Bank of Tampa and Suarez Housing Corporation
(incorporated by reference to Exhibit 10.6 to Annual Report on Form
10-K for the fiscal year ended March 31, 1995).
10.6 - Consulting Agreement dated as of November 1, 1993 between Peter Davis
and the Registrant (incorporated by reference to Exhibit 10.1 to
Quarterly Report on Form 10-Q for the quarter ended December 31,
1993).
10.7 - Amended and Restated Master Loan Agreement dated as of November 17,
1995 between Nations Bank of Florida, N.A. and Suarez Housing
Corporation (filed therewith).
10.8 - Second Amendment to Amended and Restated Loan Agreement and Partial
Release of Guaranty Agreement dated as of October 30, 1995 by and
between Barnett Bank of Tampa and Suarez Housing Corporation (filed
therewith).
Page 23
<PAGE>
21 - List of subsidiaries of the registrant (incorporated by reference to
Exhibit 21 to Annual Report on Form 10-K for the fiscal year ended
March 31, 1994).
27 - Financial Data Schedule (filed herewith).
Page 24
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: June 24, 1999 INTERNATIONAL AMERICAN HOMES, INC.
By: /s/ Robert J. Suarez
----------------------------------
Robert J. Suarez
Chairman of the Board of Directors and President
(Principal Executive Officer)
By: /s/ Robert I. Antle
----------------------------------
Robert I. Antle
Executive Vice President, Secretary,Treasurer, and
Chief Financial Officer
Page 25
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the date indicated.
Signature Title Date
--------- ----- ----
/s/ Robert J. Suarez
- -------------------------
Robert J. Suarez Chairman of the Board of June 24, 1999
Directors and President
/s/ Robert I. Antle
- -------------------------
Robert I. Antle Executive Vice President June 24, 1999
and Director
/s/ Peter A. Davis
- -------------------------
Peter A. Davis Vice President and June 24, 1999
Director
/s/ William D. Aiken
- -------------------------
William D. Aiken Director June 24, 1999
/s/ Dionel Cotanda
- -------------------------
Dionel Cotanda Director June 24, 1999
/s/ James G. Farr
- -------------------------
James G. Farr Director June 24, 1999
/s/ Jeffrey D. Prol
- -------------------------
Jeffrey D. Prol Director June 24, 1999
Page 26
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
--------------------------------------------------
To the Stockholders of International American Homes, Inc.:
We have audited the accompanying consolidated balance sheets of International
American Homes, Inc. (a Delaware corporation) and subsidiaries (collectively,
the "Company") as of March 31, 1999 and 1998, and the related consolidated
statements of operations, changes in stockholders' equity and cash flows for
each of the three years in the period ended March 31, 1999. 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 financial statements referred to above present fairly, in
all material respects, the financial position of International American Homes,
Inc. and subsidiaries as of March 31, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
March 31, 1999, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Tampa, Florida
May 14, 1999
F - 1
<PAGE>
Item 14(a) Financial Statements
INTERNATIONAL AMERICAN HOMES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
ASSETS
March 31, March 31,
1999 1998
--------- ---------
CASH AND CASH EQUIVALENTS-including $40 and $290
restricted, respectively $1,461 $1,461
RECEIVABLES 1,626 532
REAL ESTATE INVENTORY 18,247 20,964
COLLATERAL FOR BONDS PAYABLE 3,199 4,500
PROPERTY AND EQUIPMENT-less accumulated
depreciation of $513 and $544, respectively 49 88
OTHER ASSETS 186 638
--------- ---------
TOTAL ASSETS $24,768 $28,183
========= =========
The accompanying notes are an integral part of these consolidated balance
sheets.
F - 2
<PAGE>
INTERNATIONAL AMERICAN HOMES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, March 31,
1999 1998
--------- ---------
LIABILITIES
MORTGAGE NOTES AND LOANS PAYABLE $ 8,571 $ 11,246
BONDS PAYABLE 3,068 4,341
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 4,403 5,968
CUSTOMER DEPOSITS 180 194
--------- ---------
Total Liabilities 16,222 21,749
--------- ---------
COMMITMENTS AND CONTINGENCIES - -
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 10 10
authorized; 985,955 and 986,947 shares issued,
respectively; 857,385 and 930,298 shares
outstanding, respectively
ADDITIONAL PAID-IN CAPITAL 2,267 2,400
RETAINED EARNINGS 6,270 4,025
TREASURY STOCK, 128,570 and 56,649 shares, respectively (1) (1)
--------- ---------
Total Stockholders' Equity 8,546 6,434
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 24,768 $ 28,183
========= =========
The accompanying notes are an integral part of these consolidated balance
sheets.
F - 3
<PAGE>
INTERNATIONAL AMERICAN HOMES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
Year Ended March 31,
----------------------------------------
1999 1998 1997
------------ ------------ -----------
REVENUES
Home sales $ 49,992 $ 54,401 $ 66,156
Interest and other income 355 482 617
-------- -------- --------
50,347 54,883 66,773
-------- -------- --------
EXPENSES
Cost of home sales 42,236 47,359 57,712
Selling, general and administrative 6,144 6,137 7,455
Interest 373 473 545
Depreciation 88 158 131
Restructuring charge - 1,840 -
Reversal of creditor liability (1,322) - -
-------- -------- --------
47,519 55,967 65,843
-------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES 2,828 (1,084) 930
PROVISION (BENEFIT) FOR INCOME TAXES 583 (380) 280
-------- -------- --------
NET INCOME (LOSS) $ 2,245 $ (704) $ 650
======== ======== ========
BASIC NET INCOME (LOSS) PER SHARE $ 2.47 $ (.76) $ .71
======== ======== ========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
908,550 928,525 921,675
======== ======== ========
DILUTED NET INCOME (LOSS) PER SHARE $2.45 $ (.76) $.70
======== ======== ========
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVALENT
SHARES 917,350 928,525 929,345
======== ======== ========
The accompanying notes are an integral part of these consolidated statements.
F - 4
<PAGE>
INTERNATIONAL AMERICAN HOMES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY
(Dollars in thousands, except share amounts)
<TABLE>
<CAPTION>
Common Stock
--------------- --- -----------
Shares Issued Additional
and Amount Paid-In Retained Treasury Total
Outstanding Capital Earnings Stock
--------------- ----------- ------------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance, March 31, 1996 908,131 $ 9 $ 2,367 $ 4,079 $ (1) $ 6,454
Net income - - - 650 - 650
Options Exercise 20,000 - 30 - - 30
-------------- ---------- ------------ ---------- --------- ----------
Balance, March 31, 1997 928,131 9 2,397 4,729 (1) 7,134
Net loss - - - (704) - (704)
Option exercise 2,167 1 3 - - 4
-------------- ---------- ------------ ---------- --------- ----------
Balance, March 31, 1998 930,298 10 2,400 4,025 (1) 6,434
Net income - - - 2,245 - 2,245
Treasury stock (71,921) - (189) - - (189)
Other (992) - 56 - - 56
============== ========== ============ ========== ========= ==========
Balance, March 31, 1999 857,385 $ 10 $ 2,267 $ 6,270 $ (1) $ 8,546
============== ========== ============ ========== ========= ==========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F - 5
<PAGE>
INTERNATIONAL AMERICAN HOMES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
Year Ended March 31,
---------------------------------------
1999 1998 1997
------------ ------------ -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 2,245 $ (704) $ 650
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation 88 158 131
Changes in operating assets and liabilities:
(Increase) decrease in receivables (1,094) 417 274
Decrease (increase) in real estate inventory 2,717 1,690 (794)
Decrease (increase) in other assets 452 208 (209)
Decrease in collateral for bonds payable 1,301 472 899
(Decrease) increase in accounts payable and accrued liabilities (1,565) 438 168
(Decrease) increase in customer deposits (14) (132) 89
--------- -------- --------
Net cash provided by operating activities 4,130 2,547 1,208
--------- -------- --------
Cash flows from investing activities:
Decrease (increase) in restricted cash 250 284 (24)
Purchase of property and equipment (49) (97) (108)
--------- -------- --------
Net cash provided by (used in) investing activities 201 187 (132)
--------- -------- --------
Cash flows from financing activities:
Proceeds from exercise of options - 4 30
Proceeds from mortgage notes and loans payable 5,185 26,460 38,156
Payments of mortgage notes and loans payable (7,860) (29,181) (38,003)
Repayments of bonds payable - finance subsidiaries (1,273) (459) (860)
Purchase of treasury stock (189) - -
Return of unclaimed bankruptcy distributions 56 - -
--------- -------- --------
Net cash used in financing activities (4,081) (3,176) (677)
--------- -------- --------
Net increase (decrease) in cash and cash equivalents 250 (442) 399
Cash and cash equivalents at beginning of period 1,171 1,613 1,214
--------- -------- --------
Cash and cash equivalents at end of period $ 1,421 $ 1,171 $ 1,613
========= ======== ========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 1,217 $ 1,704 $ 1,886
========= ======== ========
Income taxes $ 65 $ 133 $ 460
========= ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F - 6
<PAGE>
INTERNATIONAL AMERICAN HOMES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 1999, 1998 AND 1997
NOTE 1 - THE COMPANY
International American Homes, Inc. and subsidiaries (the "Company") was
incorporated under the laws of the State of Delaware on April 27, 1983. The
Company, through a 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.
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 expired on August 12, 1998, with the
exception of the continuing dividend restriction (see note 7).
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
International American Homes, Inc. and all subsidiaries. All significant
intercompany transactions and balances have been eliminated.
Revenue Recognition
Revenues from sales are recognized at the time of closing, i.e., when a
sufficient down payment has been made; financing has been arranged with a third
party lender; title, possession and other attributes of ownership have been
transferred to the buyer; and the Company is not obligated to perform
significant additional activities after the sale.
Real Estate Inventory
Real estate inventory is carried at the lower of cost or net realizable value.
Net realizable value is defined as the estimated proceeds upon disposition less
all future costs to complete and expected costs to sell. Construction costs are
accumulated during the period of construction and charged to cost of sales under
specific identification methods. Land and land development
F - 7
<PAGE>
costs are charged to cost of sales under specific identification methods or are
amortized to cost of sales based upon the number of homes to be constructed in
each community.
Interest costs related to projects in progress are capitalized during the
construction period and charged to cost of sales as the related inventories are
sold (see Note 5).
Land option costs are capitalized when incurred and either included as part of
the purchase price when the land is acquired or charged to operations to the
extent of any unrecoverable amount when the Company determines it will not
exercise the option.
Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, receivables, mortgage notes
and loans payable, accounts payable and accrued liabilities, and customer
deposits approximate fair value due to the short-term maturities or variable
interest rates of these instruments.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Depreciation
Depreciation is computed using the straight-line method for all depreciable
assets. Estimated useful lives range from two to five years. Maintenance and
repairs are charged to expense as incurred. Major renewals and improvements are
capitalized and depreciated over their estimated useful lives.
Stock-Based Compensation
The Company adopted Statement of Financial Accounting Standard ("SFAS") No. 123,
"Accounting for Stock-Based Compensation " during fiscal year 1997. The Company
has elected to continue to measure compensation costs using Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" and
therefore the adoption of this statement did not have any effect on the
financial results of the Company (see Note 8).
Compensation expense related to common stock options issued to directors and
employees is recognized at the time the options are granted in an amount equal
to the excess of the current trading price of the common shares over the
option's exercise price.
F - 8
<PAGE>
Concentration of Credit Risk
Financial instruments which potentially expose the Company to concentration of
credit risk consist primarily of accounts receivable. Credit risk arising from
receivables is minimal due to the large number of clients comprising the
Company's customer base. Credit losses in the past have not been material.
Earnings per Share
In the fourth quarter of fiscal year 1998, the Company adopted SFAS No. 128,
"Earnings per Share". This statement requires the computation and reporting of
both "basic" and "diluted" earnings per share.
"Basic earnings per share" is computed as net income divided by the weighted
average number of shares outstanding. "Diluted earnings per share" reflects the
potential dilution that could occur if securities and other contracts to issue
common stock were exercised or converted into common stock.
The following table provides a reconciliation of the numerator and denominator
of basic EPS to diluted EPS.
<TABLE>
<CAPTION>
For the Year Ended March 31,
1999 1998 1997
--------------------------------- -------------------------------- --------------------------------
Income Shares Per Income Shares Per Income Shares Per
(loss) Share (loss) Share (loss) Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- ------ ----------- ------------- ------ ----------- ------------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Basic EPS
Income (loss) available to
Common stockholders $2,245,000 $908,550 $2.47 ($704,000) 928,525 ($.76) $650,000 921,675 $.71
Effect Of Dilutive
Securities
Options 8,800 N/A 7,670
---------- -------- ----- --------- ------- ----- -------- ------- ----
Diluted EPS
Income(loss)
available to common
stockholders
$2,245,000 $917,350 $2.45 ($704,000) 928,525 ($.76) $650,000 929,345 $.70
========== ======== ===== ========= ======= ===== ======== ========= ====
</TABLE>
As of March 31, 1998 there were 61,661 options outstanding which were not
included in the calculation of diluted net loss per share because the effect
would be antidilutive.
F - 9
<PAGE>
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.
New Accounting Pronouncements
During fiscal year 1998, the Company adopted the provisions of SFAS No. 129,
"Disclosure of Information about Capital Structure". The adoption of SFAS No.
129 did not have a material effect on the Company's financial statements.
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
adopted SFAS No. 131 in fiscal year 1999 and the impact was not significant.
NOTE 3 - REAL ESTATE INVENTORY
Real estate inventory consists of the following (in thousands):
<TABLE>
<CAPTION>
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
Accumulated costs of construction completed and in progress $ 8,468 $ 10,286
Land and land development costs 9,610 10,510
Land options and deposits 169 168
------------ -------------
$18,247 $ 20,964
============ =============
</TABLE>
From time to time as part of the normal operations of the business, a subsidiary
of the Company has bought lots or land which another subsidiary of the Company
was obligated to buy from a third party seller or which the other subsidiary of
the Company owned. Such transactions were at prices approximating fair market
value and were not material to the financial statements taken as a whole. The
year ended March 31, 1998 included real estate inventory for home-building
operations in Metropolitan Washington, D.C..
F - 10
<PAGE>
NOTE 4 - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities consist of the following (in
thousands):
<TABLE>
<CAPTION>
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
Accounts payable - trade $2,238 $ 2,488
Accrued liabilities 2,165 2,158
Accrued estimated future cash distribution to creditors - 1,322
----------- ------------
$4,403 $ 5,968
=========== ============
</TABLE>
Accounts payable and accrued liabilities as of March 31, 1999 and March 31,
1998, include liabilities of approximately $40 and $41 respectively, which
represent cash to be distributed to the creditors pursuant to the Plan of
Reorganization (See Note 7) and accrued expenses related to the bankruptcy. The
accrued estimated future cash distribution to creditors at March 31, 1998 was an
estimate of future cash distributions to creditors as defined by the Plan of
Reorganization established during the year ended March 31, 1993. This liability
was reversed during the year ended March 31, 1999 as no payment was required.
F - 11
<PAGE>
NOTE 5 - MORTGAGE NOTES AND LOANS PAYABLE
Mortgage notes and loans payable consist of the following (in thousands):
<TABLE>
<CAPTION>
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
Acquisition and construction loans payable secured by
real estate inventory, with interest at .50% above
prime at March 31, 1999 $ 8,571 $ 11,246
=========== =============
</TABLE>
The weighted average principal amount outstanding during the year ended March
31, 1999 was approximately $8,762,000. The maximum principal amount outstanding
during the year ended March 31, 1999 was approximately $11,246,000. The weighted
average interest rate during the year ended March 31, 1999 was 8.25%. The
weighted average interest rate at March 31, 1999 was 8.66%. The prime rate of
interest at March 31, 1999 was 7.75%.
Acquisition and construction loans payable at March 31, 1999 are due as follows
(in thousands):
Year Ending
March 31, Amount
----------- ------
2000 $8,171
2001 400
------
Total $8,571
======
The acquisition and construction loans payable are principally payable from the
sales proceeds of real estate inventory, generally provide for extensions, and
are all secured by real estate inventory. As of March 31, 1999, the Company had
approximately $11,329,000 of undrawn commitments for additional construction and
land acquisition financing. Interest on the acquisition and construction loans
payable is payable monthly.
The Company's loan commitments limit the portion of each home that can be
financed to approximately 75% of its value.
The Company capitalized interest of approximately $708,000, $1,153,000 and
$1,373,000 for the years ended March 31, 1999, 1998 and 1997, respectively.
NOTE 6 - INCOME TAXES
The Company has adopted SFAS No. 109, "Accounting for Income Taxes". SFAS No.
109 is an asset and liability approach that requires the recognition of deferred
tax assets and liabilities for the expected future tax consequences of events
that have been recognized in the Company's financial statements or tax returns.
In estimating future tax consequences, SFAS No. 109 generally considers all
expected future events other than enactments of changes in the tax law or rates.
F - 12
<PAGE>
The income tax provision (benefit) consists of the following (in thousands):
Year Ended March 31,
---------------------------------------
1999 1998 1997
-------------- ------------ ------------
Current
Federal $ - $ (105) $ 280
State 83 73 69
--------- ---------- --------
83 (32) 349
--------- ---------- --------
Deferred
Federal 500 (348) (69)
State - - -
--------- ---------- --------
500 (348) (69)
--------- ---------- --------
Provision (benefit) for income taxes $ 583 $ (380) $ 280
========= ========== ========
The provision (benefit) for income taxes at the effective rate of 21% differs
from the Federal statutory corporate tax rate as follows (in thousands):
Year Ended March 31,
---------------------------------------
1999 1998 1997
-------------- ------------ ------------
Federal income tax at 34% statutory rate $ 962 $ (393) $ 316
State income tax, net of Federal benefit 55 48 37
Reversal of creditor liability (449) - -
Other 15 (35) (73)
--------- ---------- --------
$ 583 $ (380) $ 280
========= ========== ========
F - 13
<PAGE>
Temporary differences and carryforwards which give rise to a significant portion
of deferred tax assets and liabilities for March 31, 1999 and 1998 are as
follows (in thousands):
<TABLE>
<CAPTION>
Deferred
March 31, 1998 Expense (Benefit) March 31, 1999
------------------ ----------------- ------------------
<S> <C> <C> <C>
Differences in the tax basis and the book basis
of -
Real Estate Inventory $ (54) $ (3) $ (57)
Installment sales 179 (51) 128
Other (397) 250 (147)
Loss carryforwards (756) 304 (452)
Valuation allowance 486 0 486
----------------- ----------------- ----------------
Net Deferred Tax Asset $(542) $ 500 $ (42)
================= ================= ================
</TABLE>
At March 31, 1999, the Company had Federal income tax loss carryforwards of
approximately $1,250,000 that expire at approximately $150,000 per year through
2008.
The Company has provided a valuation allowance on the net deferred tax assets
which primarily results from the restricted use of net operating loss
carryforwards.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
At March 31, 1999, the Company had commitments to purchase 635 finished building
lots, providing for an aggregate purchase price of approximately $17,270,000
over a four-year period. Substantial deposits will be forfeited if the Company
is unable to satisfy these commitments.
Suarez Housing Corporation, a subsidiary of the Company, has an employment
agreement with the Company's Chairman and President expiring August 12, 2001,
currently providing for base compensation of $325,000 per annum.
At March 31, 1999, the Company had open letters of credit and guarantees
totaling approximately $1,361,000 to secure performance obligations.
The Company currently occupies office space under an operating lease agreement
expiring September 30, 2004. The Company also leases storage space on a
month-to-month basis. Prior to the year ending March 31, 1999, the Company had
leased model home furniture under other operating lease agreements. The total
rental expense incurred under these leases was approximately $60,000, $349,000,
and $299,000 for the years ended March 31, 1999, 1998, and 1997, respectively.
F - 14
<PAGE>
The future minimum rental payments under these operating leases as of March 31,
1999 are as follows:
Year Ending
March 31, Amount
----------- --------
2000 $ 57,040
2001 60,066
2002 61,757
2003 63,448
2004 65,139
Thereafter 32,992
--------
Total $340,442
========
The Plan of Reorganization provided for distributions 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 Company calculated the cash flow (as defined
in the Plan) for the six year period ended June 30, 1998 and determined that
there was no excess cash flow (as defined in the Plan) for that six year period
and accordingly no distribution to creditors was required. During the year ended
March 31, 1993, the Company estimated the initial liability for these potential
distributions in the amount of $1,322,000 and such amount was included in
Accounts Payable and Accrued Liabilities on the accompanying consolidated
balance sheets (See Note 4). During the year ended March 31, 1999, the Company
reversed the estimated liability and recognized income of $1,322,000.
The Plan also required that before the Company can pay any dividends to
stockholders it must first pay to certain holders of creditor's 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.
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 results of operations.
F - 15
<PAGE>
NOTE 8 - COMMON STOCK AND STOCK OPTIONS
On February 13, 1997, an option for 33,333 shares of common stock at a purchase
price of $3.94 per share was granted to the Chairman and President of the
Company. The exercise price equaled the market price on the date of grant. The
option is exercisable over a four-year period commencing one year after the date
granted on a cumulative basis of 10%, 30%, 60% and 100%, respectively, for each
year subsequent to the grant date. All shares must be purchased by February 12,
2007.
On August 11, 1997, an option for 16,666 shares of common stock at a purchase
price of $4.50 per share was granted to the Executive Vice President of the
Company. The exercise price equaled the market price on the date of grant. The
option is exercisable over a four-year period commencing one year after the date
granted on a cumulative basis of 10%, 30%, 60% and 100%, respectively, for each
year subsequent to the grant date. All shares must be purchased by August 10,
2007.
At the 1998 Annual Meeting of Stockholders the stockholders approved a proposal
to adopt an amendment (the "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 or the number of authorized shares
which remained at 10 million. The Amendment became effective on December 1, 1998
with the filing of a Certificate of Amendment with the Secretary of State of
Delaware. The effect of the reverse stock split has been retroactively reflected
in the consolidated statements for all periods presented.
On February 11, 1999, an option for 10,000 shares of common stock at a purchase
price of $5.00 per share was granted to a Vice President of the Company. The
exercise price equals the market price on the date of grant. The option is
exercisable over a four-year period commencing one year after the date granted
on a cumulative basis of 10%, 30%, 60% and 100%, respectively, for each year
subsequent to the grant date. All shares must be purchased by February 11, 2009.
The Company has a Non-Qualified Stock Option Plan for which 50,000 shares of
common stock have been reserved for issuance under this plan. All grants of
options pursuant to this plan must be approved by the Board of Directors and the
exercise price equals the market price at the date of grant. There are 43,001
shares available to be issued pursuant to the Non-Qualified Stock Option Plan.
At the 1995 Annual Meeting of Stockholders the stockholders approved a proposal
to adopt a Non-Employee Directors Stock Option Plan. Pursuant to the
Non-Employee Directors Stock Option Plan, options to purchase 1,666 shares of
common stock were granted to each of the Company's non-employee Directors. Four
Directors received options to purchase 1,666 shares each in June 1995, two
Directors received options to purchase 1,666 shares each in September 1995 and
one Director received an option to purchase 1,666 shares in September 1996 upon
election as a Director. Five Directors received options to purchase 1,666 shares
each in September 1998. These options are exercisable 33% one year from the date
of grant, 33% two years from the date of grant, and 34% three years from the
date of grant. All options expire 5
F - 16
<PAGE>
years from the date of grant. All options granted must be approved by the Board
of Directors and exercise price equals market at the date of grant.
A summary of the status of the Company's stock option plans and options granted
at March 31, 1999, 1998 and 1997 and changes during the years then ended is
presented in the table and narrative below:
<TABLE>
<CAPTION>
1999 Fiscal Year 1998 Fiscal Year 1997 Fiscal Year
----------------------- ----------------------- ---------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
----------- -------- ----------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding,
beginning of period 61,661 $4.20 48,328 $ 3.90 33,333 $ 2.46
Granted 18,330 $4.77 16,666 $ 4.50 34,995 $ 3.93
Exercised - - (2,166) $(1.50) (20,000) $(1.56)
Expired - - (1,167) $(1.50) - -
----------- ----------- ---------
Outstanding, end of period 79,991 $4.33 61,661 $ 4.20 48,328 $ 3.90
=========== =========== =========
Exercisable at end of 22,772 $4.28 13,883 $ 4.44 9,933 $ 3.57
period
Weighted average
fair value of options
granted 18,330 $3.22 16,666 $ 4.14 34,995 $ 3.90
</TABLE>
The 79,991 options outstanding at March 31, 1999 have exercise prices between
$3.00 and $5.44, with a weighted average exercise price of $4.33 and a weighted
average remaining contractual life of 6.8 years. There are 22,772 of these
options exercisable with a weighted average exercise price of $4.28.
The Company accounts for its stock-based compensation plans under Accounting
Principles Board Opinion No. 25 ("APB 25"), under which no compensation expense
has been recognized. In October 1995, the FASB issued SFAS No. 123, "Accounting
for Stock-Based Compensation" ("SFAS 123"), which was effective for fiscal years
beginning after December 15, 1995. SFAS 123 allows companies to continue
following the accounting guidance of APB 25, but requires pro forma disclosure
of net income and earnings per share for the effects on compensation expense had
the accounting guidance of SFAS 123 been adopted. The Company has adopted SFAS
123 for disclosure purposes.
For SFAS 123 purposes, the fair value of each option grant is estimated on the
date of grant using the Black- Scholes option pricing model with the following
weighted average assumptions used for grants in fiscal years 1999, 1998 and
1997, respectively: risk-free rates of return of 5.26%, 6.36% and 6.42%;
expected dividend yields of 0.00%, 0.00%, and 0.00%;
F - 17
<PAGE>
expected lives of 7.27 years, 10 years and 9.76 years and expected volatility of
65.86%, 101.03% and 153.45%.
Had the compensation cost for these plans been determined consistent with SFAS
No. 123, the Company's net income and earnings per share would have been reduced
to the following pro forma amounts:
Year Ended March 31,
1999 1998 1997
---- ---- ----
Net income (loss): As Reported $2,245,000 $(704,000) $650,000
Pro Forma $2,223,000 $(777,000) $582,000
Basic net income As Reported $2.47 $(0.76) $0.71
(loss) per share:
Pro Forma $2.45 $(0.84) $0.63
Diluted net income As Reported $2.45 $(0.76) $0.70
(loss) per share:
Pro Forma $2.42 $(0.84) $0.63
NOTE 9 - 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 which
comprise the collateral for bonds payable, roughly equate with the interest
rates on the related bonds payable.
F - 18
<PAGE>
Condensed financial information is as follows (in thousands):
Condensed Balance Sheets
(Unaudited)
March 31, 1999 March 31, 1998
-------------- --------------
Assets:
Collateral for bonds payable $ 3,199 $ 4,500
Other assets 3 6
----------- ------------
Total Assets $ 3,202 $ 4,506
=========== ============
Liabilities and Equity:
Bonds payable $ 3,068 $ 4,341
Equity and intercompany advances 134 165
----------- ------------
Total Liabilities and Equity $ 3,202 $ 4,506
=========== ============
Condensed Statements of Income
(Unaudited)
Year Ended March 31,
-------------------------------------------
1999 1998 1997
------------ ------------ ------------
Revenues $ 337 $ 423 $ 483
============ ============ ============
Income before income taxes $ 4 $ 7 $ 12
============ ============ ============
F - 19
<PAGE>
NOTE 10 - RELATED PARTY TRANSACTIONS
During the fiscal year ending March 31, 1999, a portion of a financing agreement
with a maximum aggregate amount of $19,500,000 including a specific
indemnification of certain environmental conditions was guaranteed by the
Company's Chairman and President. In consideration thereof the Company agreed to
pay a guaranty fee equal to the lessor of $80,000 or 1% of the amount
guaranteed. The obligations of the Company's Chairman and President continue
during the term of the loan agreement subject to certain ratios and financial
performance of the Company which have been satisfied as of March 31, 1999. The
Company has agreed to indemnify the President and Chairman in the event that
this personal guarantee is called.
A member of the Board of Directors is Vice President and Director of a company
which during the year ended March 31, 1999 sold lumber and certain other
building material products in the amount of approximately $4,625,000 to Suarez
Housing Corporation, a subsidiary of the Company. Suarez Housing Corporation
purchases all of its requirements for those products from this company.
A member of the Board of Directors is the sole stockholder and President and
Chief Executive Officer of Paramount Title Corporation. During the years ended
March 31, 1999, 1998 and 1997, Paramount Title Corporation provided settlement
and title insurance services for substantially all the homes sold by Suarez
Housing Corporation.
NOTE 11- RESTRUCTURING CHARGE
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 in the Metropolitan Washington, D.C. market. Accordingly during
the quarter ended December 31, 1997 the Board of Directors of the Company
approved management's plan to discontinue the building and sale of homes and
affect an orderly withdrawal from the Metropolitan Washington, D.C. housing
market.
The consolidated financial statements for the year ended March 31, 1998 include
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 charge of $1,840,000 includes
the following: $701,000 for selling expenses; $277,000 for write-off of deferred
charges; $327,000 for loss on remaining homes; and $535,000 for administrative
and other. At March 31, 1999 $6,000 of the restructuring charge is included in
Accounts Payable and Accrued Liabilities.
F - 20
State of Delaware
PAGE 1
OFFICE OF THE SECRETARY OF STATE
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
AMENDMENT OF "INTERNATIONAL AMERICAN HOMES, INC.", FILED IN THIS OFFICE ON THE
NINETEENTH DAY OF NOVEMBER, A.D. 1998, AT 9 O'CLOCK A.M.
AND I DO HEREBY FURTHER CERTIFY THAT THE EFFECTIVE DATE OF THE
AFORESAID CERTIFICATE OF AMENDMENT IS THE FIRST DAY OF DECEMBER, A.D. 1998.
A FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS.
[SEAL]
/s/ Edward J. Freel
-----------------------------------
Edward J. Freel, Secretary of State
2007623 8100 AUTHENTICATION: 9416415
981446729 DATE: 11-19-98
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 11/19/1998
981446729 - 2007623
CERTIFICATE OF AMENDMENT
OF THE
RESTATED CERTIFICATE OF INCORPORATION
OF
INTERNATIONAL AMERICAN HOMES, INC.
----------------------------------
Pursuant to Section 242 of the General
Corporation Law of the State of Delaware
----------------------------------
INTERNATIONAL AMERICAN HOMES, INC., a Delaware corporation, does hereby certify
as follows:
FIRST: The first paragraph of Paragraph 5 of the Corporation's Restated
Certificate of Incorporation is hereby amended to read in its entirety as set
forth below:
"The total number of shares of capital stock which the Corporation shall have
authority to issue is fourteen million (14,000,000), of which ten million
(10,000,000) shall be shares of common stock with a par value of $.01 per share
(the "Common Stock"), and four million (4,000,000) shall be shares of preferred
stock with a par value of $.01 per share (the "Preferred Stock"). Each share of
Common Stock issued and outstanding or issued and held in the treasury of the
Corporation as of the close of business on the date (the "Effective Date") on
which the amendment to the Restated Certificate of Incorporation adding this
sentence shall become effective, is hereby automatically and without further
action reclassified, converted, and changed into one-third (1/3rd) of a share of
Common Stock, par value $.01 per share, provided that no fractional shares shall
be issued pursuant to such reclassification, conversion and change. The
Corporation shall pay to each stockholder who would otherwise be entitled to a
fractional share as a result of such reclassification, conversion and change,
the cash value of such fractional share based on the average closing bid prices
of the Common Stock for a period of ten trading days immediately preceding the
Effective Date, as reported by the National Quotation Bureau. Each certificate
for Common Stock outstanding or held in treasury on the Effective Date shall
thereupon and thereafter evidence the number of shares of Common Stock, and/or
the right to receive cash into which such shares shall have been reclassified,
converted and changed, and may be surrendered to the Corporation for
cancellation in exchange for new certificates representing such number of shares
and/or such cash".
SECOND: The foregoing amendments were duly adopted in accordance with Section
242 of the General Corporation Law of the State of Delaware.
<PAGE>
2
THIRD: The within amendment of the Certificate of Incorporation shall take
effect at 8:00 a.m., Eastern Standard Time, on December 1, 1998.
IN WITNESS WHEREOF, the undersigned has caused this Certificate to be duly
executed in its corporate name this 18th day of November, 1998.
INTERNATIONAL AMERICAN HOMES, INC.
By: /s/ Robert J. Suarez
-----------------------------
Title: President
ATTEST:
By: /s/ Robert I. Antle
-----------------------------
Title: Executive Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 1461
<SECURITIES> 0
<RECEIVABLES> 1626
<ALLOWANCES> 0
<INVENTORY> 18247
<CURRENT-ASSETS> 0
<PP&E> 562
<DEPRECIATION> 513
<TOTAL-ASSETS> 24768
<CURRENT-LIABILITIES> 0
<BONDS> 11639
0
0
<COMMON> 10
<OTHER-SE> 8536
<TOTAL-LIABILITY-AND-EQUITY> 24768
<SALES> 49992
<TOTAL-REVENUES> 50347
<CGS> 42236
<TOTAL-COSTS> 47519
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2828
<INCOME-TAX> 583
<INCOME-CONTINUING> 2245
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2245
<EPS-BASIC> 2.47
<EPS-DILUTED> 2.45
</TABLE>
