================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A2 (Amendment No. 2)
[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 Identification Number)
incorporation or organization)
9950 Princess Palm Ave., Suite 112, Tampa, FL 33619
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (813) 664-1100
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/A2
This Amendment No. 2 is filed to include the information required by Part III of
Form 10-K. The Registrant originally excluded the information required by Part
III of Form 10-K because the Registrant intended to incorporate that information
by reference to its proxy statement to be filed in connection with the 1999
annual meeting of its stockholders. However, the Registrant will not file its
definitive proxy statement within the required 120 days of the end of its fiscal
year end and, therefore, is required to file this Amendment. Except for the
amended and restated Items 10, 11, 12 and 13, the additional disclosure under
the subparagraph entitled "Subcontractors and Suppliers" of Item 1, the addition
of exhibits 10.9 through 10.13 to Item 14, and additional disclosure under Note
2, Note 9 and Note 11 to the Report of Independent Certified Public Accountants,
no other Item of this Annual Report on Form 10-K has been amended.
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 ....................................25
Item 12. Security Ownership by Certain Beneficial Owners and
Management.................................................28
Item 13. Certain Relationships and Related Transactions ............30
Part IV.
Item 14. Exhibits, Financial Statements, Schedules, and Reports
on Form 8-K............................................... 30
Signatures ................................................................. 35
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)
<TABLE>
<CAPTION>
Year Ended March 31,
---------------------------------------------------------------------------------
1999 1998 1997
---------------------------------------------------------------------------------
Market Area
-----------
<S> <C> <C> <C>
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
---------------------------------------------------------------------------------
</TABLE>
Number of Homes Delivered
<TABLE>
<CAPTION>
Year Ended March 31,
---------------------------------------------------------------------------------
1999 1998 1997
---------------------------------------------------------------------------------
Market Area
-----------
<S> <C> <C> <C>
Greater Tampa, Florida 354 321 309
Metropolitan Washington, D.C. * 0 56 123
---------------------------------------------------------------------------------
Total* 354 377 432
---------------------------------------------------------------------------------
</TABLE>
* 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,
Robbins Manufacturing Company, whose Vice President is Mr. Dionel Cotanda, a
member of the Company's Board of Directors. Mr. Cotanda is also a director of
Robbins Manufacturing Company. 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 home buyers.
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 Data
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 355 482 617 792 878
------------------------------------------------------------------------------------------------
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 taxes 2,828 (1,084) 930 1,003 1,159
------------------------------------------------------------------------------------------------
Provision (benefit) for income taxes 583 (380) 280 60 72
------------------------------------------------------------------------------------------------
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 number of shares
used in basic net income (loss) per
share data, as adjusted for the Reverse 908,550 928,525 921,675 908,132 908,132
================================================================================================
Stock Splits
Diluted net income (loss) $2.45 ($.76) $.70 $1.02 $1.18
Weighted average number of common
and common equivalent shares 917,350 928,525 929,345 920,637 920,099
================================================================================================
</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 which 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 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
Page 12
<PAGE>
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).
<TABLE>
<CAPTION>
Year Ended March 31,
---------------------------------------------------------------------------------
1999 1998 1997
---------------------------------------------------------------------------------
<S> <C> <C> <C>
Home delivered
Units 354 321 309
Home sales revenue $49,992 $42,102 $40,282
Average sales price $ 141.2 $ 131.2 $ 130.4
Home sold
Units 352 346 322
Sales value $50,351 $46,244 $41,839
Average sales price $ 143.0 $ 133.7 $ 129.9
</TABLE>
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).
<TABLE>
<CAPTION>
Year Ended March 31,
---------------------------------------------------------------------------------
1999 1998 1997
---------------------------------------------------------------------------------
<S> <C> <C> <C>
Backlog
Units 105 107 82
Sales value $15,168 $14,676 $10,372
Average sales price $ 144.5 $ 137.2 $ 126.5
</TABLE>
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 of creditor liability 1,506 3.0 (1,084) (2.0)
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 mortgages 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, 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.
Page 19
<PAGE>
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 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
Page 20
<PAGE>
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
The following table sets forth certain information concerning the directors and
executive officers of the Company as of July 31, 1999:
<TABLE>
<CAPTION>
Name Age Position Director's
Term
Ending
- ---------------- -- ----------------------------- ----
<S> <C> <C> <C>
Robert J. Suarez 50 President and Chairman of the 2001
Board of Directors
Robert I. Antle 44 Executive Vice President, 2001
Treasurer, Secretary, Chief
Financial Officer and Director
Peter A. Davis 62 Vice President and Director 2001
William D. Aiken 42 Director 1999 1/
Dionel Cotanda 61 Director 2000
James G. Farr 50 Director 2000
Jeffrey D. Prol 36 Director 1999 2/
</TABLE>
- --------
1/ The Company's Board of Directors has proposed that Mr. Aiken be elected as a
Class I director at the Company's 1999 annual meeting of shareholders. Mr. Aiken
has consented to serve a new three year term expiring in 2002.
2/ The Company's Board of Directors has proposed that Mr. Prol be elected as a
Class I director at the Company's 1999 annual meeting of shareholders. Mr. Prol
has consented
(...continued)
Page 21
<PAGE>
Set forth below are the biographies of the directors and executive officers of
the Company:
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.
William D. Aiken, 42, has served as a director since 1992. Mr. Aiken was
appointed to the Board of Directors by the International American Homes, Inc.
Creditors Committee. Mr. Aiken is also a Director of Suarez Housing Corporation,
a subsidiary of the Company. 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.
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
"International American Homes, Inc. 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 and is a supplier to Robbins Manufacturing Company. Robbins
Manufacturing Company is a supplier of metal plate connected wood trusses,
lumber and related building material products and is a supplier to the Company.
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.
- -----------------
2/ (...continued)
to serve a new three year term expiring in 2002.
Page 22
<PAGE>
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 of the law
firm of Ravin, Sarasohn, Cook, Baumgarten, Fisch & Rosen, P.C. ("Ravin,
Sarasohn") of Roseland, New Jersey of which he became a member on January 1,
1997. 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.
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
The Company's Board of Directors has four committees: the Audit Committee,
the Compensation Committee, the Nominating Committee and the Executive
Committee.
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 The Company'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
Page 23
<PAGE>
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 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.
Item 11. Executive Compensation
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 $100,000.
Page 24
<PAGE>
Summary Compensation Table (1)
<TABLE>
<CAPTION>
Annual Compensation
-------------------
Name and Salary Bonus
Principal Position Year ($) ($)
- ---------------------- ---- -------- --------
<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 1998 167,526 66,000
President, 1997 162,276 33,000
Treasurer, Chief
Financial
Officer and Secretary
Peter A. Davis, (3) 1999 $78,501 $30,000
Vice President 1998 60,000 0
1997 39,000 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.
(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 from Suarez Housing Corporation and the Company
during the fiscal year ended March 31, 1999, 1998 and 1997. Mr. Davis does
not currently receive compensation directly from the Company.
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 $5.00 per share, which
was the fair market value on the date the option was granted.
Page 25
<PAGE>
The following table sets forth certain information with respect to the
named executive officers concerning the exercise of stock options during the
fiscal year ended March 31, 1999 and the value of unexercised stock options held
as of March 31, 1999.
Aggregated Option Exercises in Fiscal Year 1999 and Year-End Option Values
<TABLE>
<CAPTION>
Value of Securities Underlying
Number of Securities Unexercised In-the-Money
Shares Value Underlying Unexercised Options at Fiscal Year End
Acquired on Realized Options at Fiscal Year end ($)(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.
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Company's Board of Directors 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.
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'
Page 26
<PAGE>
employment agreement with an annual salary of $290,000 subject to annual
Consumer Price Index 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
Consumer Price Index 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.
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
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.
Page 27
<PAGE>
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 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.
Item 12. Security Ownership by 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 July 31, 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:
Page 28
<PAGE>
Name Beneficially Owned Number of Shares Percent of
Owned Shares Owned
---------------------------- ---------------------- -------------------
Robert J. Suarez 290,478 33.35%
Robert I. Antle 8,181 *
Peter A. Davis (2)(5) 105,342 12.09%
William D. Aiken (1) 2,221 *
Dionel Cotanda (2) 7,803 *
James G. Farr (1) 2,221 *
Jeffrey D. Prol (2) 2,554 *
Ronald I. Heller (4) 67,190 7.72%
Ina J. Davis (5) 105,342 12.09%
David S. Nagelberg (6) 59,872 6.87%
All current directors and 418,800 47.75%
executive officers as a group
(7 persons) (3)
- ---------------------------
* Less than one percent (1%).
(1) Includes 2,221 shares 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 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 6,107 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.
(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 disclaims any beneficial interest in respect of 46,483 shares
held by Ina J. Davis; Ina J. Davis disclaims any beneficial interest in
respect of 58,859 shares held by Peter A. Davis.
(6) Although the Company is unaware of any filing on Schedule 13D or 13G filed
by Mr. David Nagelberg, pursuant to a list of non-objecting beneficial
owners obtained by the Company, it became aware of Mr. David Nagelberg's
ownership of 54,965 shares in an individual retirement account. In addition,
the Company similarly became aware of 2,100 shares held in custody for
Jeremy Nagelberg, 641 shares held in custody for Justin Nagelberg and 2,166
shares held in custody for Jenna Nagelberg, each of whom the Company
believes is a child of Mr. David Nagelberg. In the absence of a declaration
of the contrary, the Company assumes that Mr. David Nagelberg does not
disclaim beneficial ownership of such shares.
Page 29
<PAGE>
Item 13. 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.
See Note 10 in Notes to the Consolidated Financial Statements of the Company
appearing elsewhere in this report.
Page 30
<PAGE>
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):
INTERNATIONAL AMERICAN HOMES, INC. AND SUBSIDIARIES
Page
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:
<TABLE>
<CAPTION>
Exhibit
Number
<S> <C>
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).
</TABLE>
Page 31
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
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 (incorporated by
reference to Exhibit 10.7 to the Annual Report on Form 10-K for the fiscal year
ended March 31, 1996).
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 (incorporated by reference to Exhibit 10.8
to the Annual Report on Form 10-K for the fiscal year ended March 31, 1996).
</TABLE>
Page 32
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
10.9 - Amendment, dated December 1996, between Suarez Housing Corporation and
NationsBank, N.A. (South), successor by merger to NationsBank of Florida, N.A.,
to the Amended and Restated Master Loan Agreement, dated November 17, 1995,
between Suarez Housing Corporation and NationsBank of Florida, N.A. (incorporated
by reference to Exhibit 10.9 to the Annual Report on Form 10-K/A for the fiscal year
ended March 31, 1999).
10.10 - Amendment, dated December 18, 1997, between Suarez Housing Corporation and
NationsBank, N.A., successor by merger to NationsBank, N.A. (South) to the
Amended and Restated Master Loan Agreement, dated November 17, 1995, between
Suarez Housing Corporation and NationsBank of Florida, N.A. (incorporated by
reference to Exhibit 10.10 to the Annual Report on Form-10-K/A for the fiscal year
ended March 31, 1999).
10.11 - Amended and Restated Master Loan Agreement, dated as of July 2, 1998, between
Barnett Bank, N.A. and Suarez Housing Corporation (incorporated by reference to
Exhibit 10.11 to the Annual Report on Form-10-K/A for the fiscal year ended March
31, 1999).
10.12 - Amendment, dated February 23, 1999, between Suarez Housing Corporation and
NationsBank, N.A., successor by merger to Barnett Bank, N.A. to (i) Amended and
Restated Master Loan Agreement, dated November 17, 1995, between Suarez
Housing Corporation and NationsBank of Florida, N.A. and (ii) Amended and
Restated Master Loan Agreement, dated July 2, 1998, between Suarez Housing
Corporation and Barnett Bank, N.A. (incorporated by reference to Exhibit 10.12 to
the Annual Report on Form-10-K/A for the fiscal year ended March 31, 1999).
10.13 - Amendment, dated July 2, 1999, by and between Suarez Housing Corporation and
Bank of America, N.A., successor by merger to NationsBank, N.A. to (i) Amended
and Restated Master Loan Agreement, dated November 17, 1995, between Suarez
Housing Corporation and NationsBank of Florida, N.A. and (ii) Amended and
Restated Master Loan Agreement, dated July 2, 1998, between Suarez Housing
Corporation and Barnett Bank, N.A. (incorporated by reference to Exhibit 10.13 to
the Annual Report on Form-10-K/A for the fiscal year ended March 31, 1999).
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 (incorporated by reference to Exhibit 27 to the Annual Report
on Form 10-K/A for the fiscal year ended March 31, 1999).
</TABLE>
Page 33
<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: September 17, 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 34
<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 Chairman of the Board of September 17, 1999
- -------------------- Directors and President
Robert J. Suarez
/s/ Robert I. Antle Executive Vice President and September 17, 1999
- -------------------- Director
Robert I. Antle
/s/ Peter A. Davis Vice President and Director September 17, 1999
- --------------------
Peter A. Davis
Director September 17, 1999
- --------------------
William D. Aiken
Director September 17, 1999
- --------------------
Dionel Cotanda
/s/ James G. Farr Director September 17, 1999
- --------------------
James G. Farr
Director September 17, 1999
- --------------------
Jeffrey D. Prol
Page 35
<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
Substantially complete real estate projects are 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 for real estate projects under development are accumulated
during the period of construction and charged to cost of sales under specific
identification methods. Land and land development 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.
F - 7
<PAGE>
Management of the Company monitors real estate inventory to determine if events
or circumstances indicate that its carrying value may not be recoverable on an
individual project basis. No such circumstances existed during the years ended
March 31, 1999 and 1998.
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 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:
F - 16
<PAGE>
<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%; 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
F - 17
<PAGE>
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
============ ============ ============
The collateralized mortgage obligations are considered debt securities held to
maturity as defined by SFAS 115, "Accounting for Certain Investments in Debt and
Equity Securities." At March 31, 1999 and 1998, the fair values of the
securities approximated cost. No unrealized holding gains or losses have been
recorded. Contractual maturities of these securities at March 31, 1999 are as
follows (in thousands):
Amounts Maturing Within:
1 year $ 180
2-5 years 860
6-10 years 1,200
Thereafter 959
----------
$ 3,199
----------
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
<PAGE>
A roll forward of the liability related to the restructuring charge, by
category, is as follows (in thousands):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Administrative Deferred Loss on
Selling Charges Charges remaining homes Total
------- ------- ------- --------------- -----
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
Restructure charge $701 $535 $277 $327 $1,840
- --------------------------------------------------------------------------------------------------------------------
Expenses paid (599) (210) (277) (327) (1,413)
- --------------------------------------------------------------------------------------------------------------------
Restructuring Liability
March 31, 1998 102 $325 - - 427
- --------------------------------------------------------------------------------------------------------------------
Expenses paid (102) (319) - - (421)
- --------------------------------------------------------------------------------------------------------------------
Restructuring Liability
March 31, 1999 - $6 - - $6
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
