SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A-1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) November 18, 1994
CONTINENTAL HOMES HOLDING CORP.
(Exact name of registrant as specified in its charter)
Delaware 0-14830 86-0554624
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
7001 North Scottsdale Road, Suite 2050
Scottsdale, Arizona 85253
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (602) 483-0006
Not Applicable
------------------------------------------------------------
(Former name or former address, if changed since last report)
Item 7. Financial Statements and Exhibits
(a) 1. Financial Statements of Heftler Realty Co.
Report of Independent Public Accountants
Balance Sheets - May 31, 1994 and 1993.
Statements of Income - years ended May 31, 1994 and 1993.
Statements of Stockholders' Equity - years ended May 31, 1994 and 1993.
Statements of Cash Flows - years ended May 31, 1994 and 1993.
Notes to Financial Statements.
Balance Sheet - August 31, 1994. (Unaudited)
Statements of Income for the three months ended August 31,
1994 and 1993. (Unaudited)
Statements of Cash Flows for the three months ended August 31,
1994 and 1993. (Unaudited)
Notes to Unaudited Financial Statements.
(b) 1. Pro Forma Consolidated Financial Statements of
Continental Homes Holding Corp. and Subsidiaries.
Pro Forma Consolidated Balance Sheet - August 31, 1994.
(Unaudited)
Pro Forma Consolidated Statements of Income - year ended May
31, 1994 and three months ended August 31, 1994. (Unaudited)
Notes to Unaudited Pro Forma Consolidated Financial Statements
HEFTLER REALTY CO.
FINANCIAL STATEMENTS
MAY 31, 1994 AND 1993
TOGETHER WITH REPORT OF
INDEPENDENT PUBLIC ACCOUNTANTS
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Continental Homes Holding Corp.:
We have audited the accompanying balance sheets of HEFTLER REALTY CO. (a Florida
Subchapter S corporation) as of May 31, 1994 and 1993, and the related
statements of income, stockholders' equity and cash flows for the years then
ended. 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 Heftler Realty Co. as of May
31, 1994 and 1993, and the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Phoenix, Arizona,
January 13, 1995.
<PAGE>
<TABLE>
<CAPTION>
HEFTLER REALTY CO.
BALANCE SHEETS
MAY 31, 1994 AND 1993
1994 1993
------------ ------------
ASSETS
<S> <C> <C>
CASH AND CASH EQUIVALENTS (Note 2) ............................................. $ 11,312,455 $ 2,803,183
ACCOUNTS RECEIVABLE ............................................................ 37,446 19,419
MORTGAGE NOTE RECEIVABLE (Note 2) .............................................. -- 5,000,000
HOMES, LOTS AND IMPROVEMENTS IN
PRODUCTION (Notes 2 and 3) ..................................................... 17,498,279 20,399,648
PROPERTY AND EQUIPMENT, net (Notes 2 and 6) .................................... 54,479 356,944
PREPAID EXPENSES AND OTHER ASSETS .............................................. 451,920 1,519,968
------------ ------------
Total assets ............................................................ $ 29,354,579 $ 30,099,162
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
ACCOUNTS PAYABLE AND OTHER LIABILITIES (Note 2) ................................ $ 3,734,562 $ 5,596,467
DIVIDEND PAYABLE ............................................................... 481,000 --
NOTES PAYABLE TO MAJORITY STOCKHOLDER,
interest at prime (7.25% and 6.0% at
May 31, 1994 and 1993, respectively),
due on demand, unsecured ..................................................... 2,309,950 4,259,097
DEFERRED GAIN (Notes 2 and 6) .................................................. 155,775 1,737,500
------------ ------------
Total liabilities .......................................................... 6,681,287 11,593,064
------------ ------------
COMMITMENTS AND CONTINGENCIES (Notes 2, 3, 4, 5, 6 and 7)
STOCKHOLDERS' EQUITY:
Common stock, $1 par value, 10,000 shares authorized,
1,000 shares issued and outstanding .......................................... 1,000 1,000
Treasury stock, at cost (10 shares) ............................................ (94,005) (94,005)
Capital in excess of par value ................................................. 1,109,283 1,109,283
Retained earnings .............................................................. 21,657,014 17,572,100
------------ ------------
Total stockholders' equity ................................................ 22,673,292 18,588,378
Less: Unamortized deferred compensation expense ............................... -- (82,280)
------------ ------------
Net stockholders' equity .................................................. 22,673,292 18,506,098
------------ ------------
Total liabilities and stockholders' equity ................................ $ 29,354,579 $ 30,099,162
============ ============
<FN>
The accompanying notes to financial statements are an integral part
of these balance sheets.
</TABLE>
<PAGE>
HEFTLER REALTY CO.
STATEMENTS OF INCOME
FOR THE YEARS ENDED MAY 31, 1994 AND 1993
1994 1993
----------- -----------
REVENUES (Note 2):
Home sales ................................ $49,014,004 $30,386,109
Land sales ................................ 5,238,000 3,758,000
Interest income ........................... 350,780 195,392
Gain on sale of office building (Note 6) .. 385,786 --
Other, net ................................ 150,689 9,238
----------- -----------
Total revenues ............. 55,139,259 34,348,739
----------- -----------
COSTS AND EXPENSES:
Cost of home sales ........................ 41,041,370 25,178,793
Cost of land sales ........................ 3,460,742 2,620,691
Inventory writedown ....................... 411,584 --
Selling, general and administrative ....... 2,110,649 2,097,594
----------- -----------
Total costs and expenses ... 47,024,345 29,897,078
----------- -----------
NET INCOME ................................... $ 8,114,914 $ 4,451,661
============ ===========
The accompanying notes to financial statements are an integral part
of these statements.
<PAGE>
<TABLE>
<CAPTION>
HEFTLER REALTY CO.
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED MAY 31, 1994 AND 1993
Common Stock Treasury Stock Capital in
-------------- --------------- Excess of Deferred Retained
Shares Amount Shares Amount Par Value Compensation Earnings Total
------ ------ ------ ------ ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, May 31, 1992 1,000 $1,000 - $ - $1,109,283 $(328,880) $14,395,439 $15,176,842
Amortization of
deferred compensation - - - - - 246,600 - 246,600
Purchase of treasury
stock - - (10) (94,005) - - - (94,005)
Dividend declared - - - - - - (1,275,000) (1,275,000)
Net income - - - - - - 4,451,661 4,451,661
------ ------ ------ -------- ----------- ------------ ----------- -----------
BALANCE, May 31, 1993 1,000 1,000 (10) (94,005) 1,109,283 (82,280) 17,572,100 18,506,098
Amortization of
deferred compensation - - - - - 82,280 - 82,280
Dividend declared - - - - - - (4,030,000) (4,030,000)
Net income - - - - - - 8,114,914 8,114,914
------ ------- ------ --------- ----------- ------------ ----------- ------------
BALANCE, May 31, 1994 1,000 $1,000 (10) $(94,005) $1,109,283 $ - $21,657,014 $ 22,673,292
====== ======= ====== ========= =========== ============ =========== ============
<FN>
The accompanying notes to financial statements are an integral part
of these statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
HEFTLER REALTY CO.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MAY 31, 1994 AND 1993
1994 1993
------------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ........................................................................ $ 8,114,914 $ 4,451,661
Adjustments to reconcile net income to net cash
provided by operating activities-
Depreciation and amortization ................................................. 10,664 38,873
Amortization of deferred compensation ......................................... 82,280 246,600
Gain on sale of land .......................................................... (1,737,500) --
Gain on sale of office building ............................................... (385,786) --
Inventory writedown ........................................................... 411,584 --
Changes in operating assets and liabilities-
(Increase) decrease in accounts receivable .................................. (18,027) 38,300
Decrease (increase) in prepaid expenses and other assets .................... 1,068,048 (1,283,613)
Decrease (increase) in homes, lots and improvements
in production ............................................................. 2,489,785 (5,887,705)
(Decrease) increase in accounts payable and other
liabilities ............................................................... (1,861,905) 2,793,050
------------ ------------
Net cash provided by operating activities .............................. 8,174,057 397,166
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets .......................................................... (3,156) (84,531)
Proceeds from sale of land ........................................................ 1,035,000 --
Proceeds from sale of office building ............................................. 836,518 --
Proceeds from maturity of investments ............................................. -- 2,000,000
------------ ------------
Net cash provided by investing activities .............................. 1,868,362 1,915,469
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (payments) on notes payable to majority
stockholder ..................................................................... 1,737,853 (1,169,087)
Dividend paid ..................................................................... (3,271,000) (997,000)
Purchase of treasury stock ........................................................ -- (94,005)
------------ ------------
Net cash used in financing activities .................................. (1,533,147) (2,260,092)
------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS ............................................ 8,509,272 52,543
CASH AND CASH EQUIVALENTS, beginning of year ......................................... 2,803,183 2,750,640
------------ ------------
CASH AND CASH EQUIVALENTS, end of year ............................................... $ 11,312,455 $ 2,803,183
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid during the year, net of amounts capitalized ....................... $ -- $ --
NONCASH FINANCING AND INVESTING TRANSACTIONS:
Assignment of note receivable to majority
stockholder (Note 2) ............................................................ 3,965,000 --
Dividend added to notes payable to majority stockholder ........................... 278,000 278,000
Mortgage note received on sale of land (Note 2) ................................... -- 5,000,000
<FN>
The accompanying notes to financial statements are an integral part
of these statements.
</TABLE>
<PAGE>
HEFTLER REALTY CO.
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1994 AND 1993
(1) NATURE OF BUSINESS:
Heftler Realty Co. (the Company), a Florida Subchapter S corporation, is a
builder of single family homes in the markets of Dade and Broward counties in
southeast Florida.
(2) ACCOUNTING POLICIES:
SALES RECOGNITION
The Company recognizes income from home and land sales in accordance with
Statement of Financial Accounting Standards No. 66. This ordinarily occurs at
the close of escrow. Sales of undeveloped land or finished lots are recognized
when title passes to the buyer, a specified down payment has been received and
there is reasonable assurance that any remaining receivables will be collected.
During May 1993, the Company sold land to a third party for $7,500,000
consisting of $2,500,000 in cash and a $5,000,000 note receivable. The gain
recognized in fiscal 1993 totaled $1,262,500. The remaining gain of $1,737,500
was deferred at May 31, 1993, and was recognized as income during the year ended
May 31, 1994, when the remaining balance on the note receivable of $3,965,000
was used to satisfy a portion of certain notes payable to the majority
stockholder. This transaction has been reflected in the accompanying statements
of income as follows:
1994 1993
---------- ----------
Land sales ........................... $5,000,000 $2,500,000
Cost of land sales ................... 3,262,500 1,237,500
---------- ----------
$1,737,500 $1,262,500
========== ==========
CASH AND CASH EQUIVALENTS
The Company considers all financial instruments with initial maturities of 90
days or less to be cash equivalents. Included in cash and cash equivalents at
May 31, 1994 and 1993, is $463,000 and $1.2 million, respectively, in restricted
escrow deposits and $10.1 million and $1.5 million, respectively, of uninsured
bank deposits secured by U.S. Treasury Notes.
HOMES, LOTS AND IMPROVEMENTS IN PRODUCTION
Homes, lots and improvements in production are stated at the lower of
accumulated cost or net realizable value. Interest and certain project overhead
costs (employee related costs) incurred during construction or development
activities are capitalized and subsequently charged to cost of home sales as the
units associated with such costs are sold. Interest and other costs capitalized
totaled $2,059,000 and $1,737,000 during fiscal 1994 and 1993, respectively.
Capitalized interest and other costs related to homes sold and charged to cost
of home sales totaled $2,159,000 and $1,938,000 during fiscal 1994 and 1993,
respectively.
The components of homes, lots and improvements in production are as follows as
of May 31:
1994 1993
----------- -----------
Homes, lots and improvements in production,
including capitalized interest and overhead
of $329,000 and $429,000, respectively ......... $15,936,074 $18,425,858
Land held for development or sale ................ 1,562,205 1,973,790
----------- -----------
$17,498,279 $20,399,648
=========== ===========
Included in homes, lots and improvements in production at May 31, 1994, are
$5,300,000 of land and development costs paid during 1994 which represent the
Company's 37.9% interest in a Land Trust Agreement (the Agreement). There are
two other unrelated homebuilders which are beneficiaries of the Trust. A bank
serves as trustee to the Agreement. On August 1, 1994, the Company provided a
$2,275,000 letter of credit related to the funding of future development costs
associated with this development. On January 10, 1995, each homebuilder was
deeded their respective land parcels from the Trust.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost and consists primarily of office
furniture and equipment. Depreciation expense is provided using accelerated
methods over the estimated useful lives of the assets (5 to 7 years). The costs
of maintenance and repairs are charged to expense as incurred.
ACCOUNTS PAYABLE AND OTHER LIABILITIES
Accounts payable and other liabilities consisted of the following as of May 31:
1994 1993
---------- ----------
Customer deposits .................... $1,920,912 $3,949,761
Accounts payable ..................... 1,248,740 945,925
Accrued expenses ..................... 564,910 700,781
---------- ----------
$3,734,562 $5,596,467
========== ==========
INCOME TAXES
As of August 1, 1987, the Company elected to be taxed under the provisions of
Subchapter S of the Internal Revenue Code, wherein its income is taxable to its
stockholders and not to the Company. Accordingly, no provision for income taxes
has been recorded in the accompanying financial statements.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents, accounts receivable, accounts
payable and other liabilities approximate fair value because of the short
maturity of these financial instruments. The value of the Company's notes
payable to the majority stockholder approximates fair value as it bears interest
at the prime rate.
Fair value estimates are made at a specific point in time, based on relevant
market information and information about the financial instrument. These
estimates are subjective in nature and involve uncertainties and matters of
significant judgment, and therefore, cannot be determined with precision.
Changes in assumptions could significantly affect estimates.
(3) LINES OF CREDIT:
As of May 31, 1994, the Company had available a $5 million line of credit with a
bank. Amounts borrowed under the line bear interest at prime plus .25% to 1%, as
defined, and are secured by land as defined in the agreement. The line matures
in May 1995. No amounts were outstanding under the line as of May 31, 1994, and
no amounts were borrowed during the year. During 1993 the Company did not have a
line of credit.
Subsequent to May 31, 1994, the Company entered into two line of credit
agreements with two banks. The lines permit borrowings of up to $30 million for
construction lending and letters of credit, limited to the Company's calculated
borrowing base, as defined in the agreements. Amounts borrowed under the new
lines of credit bear interest at prime plus .5% and are secured by homes, lots
and improvements in production. The new lines mature in August 1996 and November
1996.
The above lines require the Company to maintain compliance with certain
restrictive covenants, including the maintenance of a minimum net worth and
liquidity and certain ratios, as defined in the agreements. Subsequent to
year-end, the Company borrowed approximately $18 million under these lines of
credit, including approximately $10 million which was used to purchase land
which was acquired from the acquiring party described in Note 7.
(4) STOCK INCENTIVE PLAN:
Effective September 9, 1988, the Company adopted a stock incentive plan (the
Plan) which reserved 250 shares of common stock for issuance to certain
employees in recognition of past and future service under a deferred
compensation arrangement. Under the terms of the Plan, 233 shares of the
Company's common stock were awarded to certain employees subject to restrictions
as defined in the Plan. The shares vested 20% per year over five years. These
shares are subject to a buy/sell agreement which could require the Company to
repurchase the shares for Adjusted Book Value, as defined (see Note 7).
(5) EMPLOYEE BENEFIT PLAN:
Effective August 1, 1988, the Company adopted the Heftler Realty Co. Retirement
Plan (the Retirement Plan). Employees become eligible upon reaching age 21 and
performing one year of service (defined as 1,000 hours). Employees may
contribute a percentage of their income, subject to certain limitations. The
Company matches 50% of employee contributions up to 6% of the employee's salary
and may make a yearly discretionary contribution. Employees become fully vested
in employer matching contributions after six years of service or upon
termination of the Retirement Plan. Employer matching contributions during the
fiscal years ended May 31, 1994 and 1993, amounted to approximately $30,000 and
$21,000, respectively.
(6) COMMITMENTS AND CONTINGENCIES:
In management's opinion, the Company is not involved in any legal proceedings
which would have a material effect on the Company's financial position or
results of operations.
In November 1993, the Company sold its 13,300 square foot office facility for
net cash proceeds of $836,518 and leased back 5,270 square feet under a three
year operating lease. The sale resulted in a gain of $572,716. The portion of
this gain representing the present value of the minimum leaseback payments of
$186,930 has been deferred and will be recognized ratably over the remaining
term of the lease as a reduction of rental expense. At May 31, 1994, the
unamortized portion of the gain amounted to $155,775.
Rental expense for the years ended May 31, 1994 and 1993, was not material.
Future minimum rental payments due under the office leaseback are as follows as
of May 31, 1994:
1995 .............. $ 69,000
1996 .............. 69,000
1997 .............. 35,000
--------
$173,000
========
At May 31, 1994 and 1993, the Company had letters of credit outstanding totaling
approximately $697,000 and $536,000, respectively.
(7) SUBSEQUENT EVENT:
On September 12, 1994, the stockholders of the Company signed a letter of intent
to sell 100% of the issued and outstanding stock to an unrelated party. On
November 18, 1994, the sale was consummated. Total consideration received by the
stockholders consisted of $28.5 million in cash paid at closing. Effective with
the close of the sale, all agreements between the stockholders and the Company,
including the Plan discussed in Note 4, were terminated.
<PAGE>
HEFTLER REALTY CO.
BALANCE SHEET (UNAUDITED)
AUGUST 31, 1994
ASSETS
Cash and cash equivalents .................................. $ 6,466,696
Accounts receivable ........................................ 12,187
Homes, lots and improvements in production ................. 32,601,452
Property and equipment ..................................... 45,200
Prepaid expenses and other assets .......................... 276,531
------------
Total assets .......................................... $ 39,402,066
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and other liabilities ..................... $ 4,650,945
Dividend payable ........................................... 1,188,404
Notes payable .............................................. 11,349,793
Deferred gain .............................................. 140,197
------------
Total liabilities ..................................... 17,329,339
------------
Commitments and contingencies
Stockholders' equity:
Common stock, $1 par value,
10,000 shares authorized, 1,000 shares
issued and outstanding ................................. 1,000
Treasury stock, at cost (10 shares) ...................... (94,005)
Capital in excess of par value ........................... 1,109,283
Retained earnings ........................................ 21,056,449
------------
Total stockholders' equity ............................ 22,072,727
------------
Total liabilities and stockholders' equity ............ $ 39,402,066
============
The accompanying notes to unaudited financial statements are
an integral part of this unaudited balance sheet.
<PAGE>
HEFTLER REALTY CO.
STATEMENTS OF INCOME (UNAUDITED)
Three months ended
August 31,
-------------------------------
1994 1993
------------ ------------
Revenues:
Home sales ............................... $ 5,413,345 $ 13,329,889
Interest income .......................... 45,042 116,217
Other, net ............................... (509) (3,649)
------------ ------------
Total revenues ......................... 5,457,878 13,442,457
------------ ------------
Costs and expenses:
Cost of homes sales ...................... 4,481,181 11,151,955
Selling, general and administrative ...... 469,858 540,028
------------ ------------
Total costs and expenses ............... 4,951,039 11,691,983
------------ ------------
Net Income ................................ $ 506,839 $ 1,750,474
============ ============
The accompanying notes to unaudited financial statements are
an integral part of these unaudited statements.
<PAGE>
HEFTLER REALTY CO.
STATEMENTS OF CASH FLOWS (UNAUDITED)
Three months ended
August 31,
--------------------------------
1994 1993
------------ ------------
Cash flows from operating activities:
Net income ................................. $ 506,839 $ 1,750,474
Adjustments to reconcile net income
to net cash provided (used) by
operating activities:
Depreciation and amortization ............ (6,299) 11,849
Amortization of deferred compensation .... -- 61,650
Changes in operating assets
and liabilities:
Decrease (increase) in
accounts receivable .................. 25,259 (80,881)
Decrease (increase) in
prepaids and other assets ............ 175,389 (17,802)
Decrease (increase) in homes,
lots and improvements in
production ........................... (15,103,173) 1,990,462
Increase in accounts payable
and other liabilities ................ 916,383 311,429
------------ ------------
Net cash provided (used)
by operating activities .......... (13,485,602) 4,027,181
------------ ------------
Cash flows from investing activities:
Purchase of fixed assets ................. -- (3,155)
------------ ------------
Net cash used by
investing activities ............. -- (3,155)
------------ ------------
Cash flows from financing activities:
Increase in notes payable to
financial institutions ................. 8,005,500 --
Net borrowings on notes payable to
majority stockholder ................... 1,034,343 64,736
Dividends paid ........................... (400,000) (500,000)
------------ ------------
Net cash provided (used)
by financing activities .......... 8,639,843 (435,264)
------------ ------------
Net increase (decrease) in cash and
cash equivalents ......................... (4,845,759) 3,588,762
Cash and cash equivalents,
beginning of period ...................... 11,312,455 2,803,183
------------ ------------
Cash and cash equivalents,
end of period ............................ $ 6,466,696 $ 6,391,945
------------ ------------
Supplemental disclosures of
cash flow information:
Interest paid during the period,
net of amounts capitalized ............. -- --
Noncash financing and investing
transactions:
Dividends declared, not paid ............. $ 707,404 --
The accompanying notes to unaudited financial statements are
an integral part of these unaudited statements.
<PAGE>
HEFTLER REALTY CO.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
August 31, 1994
Note 1. Basis of Presentation
The financial statements include the accounts of Heftler Realty Co.
("Heftler"). In the opinion of Heftler, the accompanying unaudited
financial statements contain all adjustments (consisting of only normal
recurring adjustments) necessary to present fairly Heftler's financial
position, results of operations and cash flows for the periods
presented.
These statements should be read in conjunction with the financial
statements and the related disclosures contained in Heftler's audited
financial statements as of and for the years ended May 31, 1994 and
1993 included in this Form 8-K/A-1.
The results of operations for the three months ended August 31, 1994
are not necessarily indicative of the results to be expected for the
full year.
<PAGE>
CONTINENTAL HOMES HOLDING CORP. AND SUBSIDIARIES
PRO FORMA FINANCIAL STATEMENTS
(UNAUDITED)
The following unaudited Pro Forma Consolidated Balance Sheet gives
effect to the acquisition of Heftler as if the transaction had occurred on
August 31, 1994. The following unaudited Pro Forma Consolidated Statements of
Income for the year ended May 31, 1994, and the quarter ended August 31, 1994
combine the historical results of operations of Continental Homes Holding Corp.
and Subsidiaries ("Company"), Milburn Investments, Inc. and Subsidiaries
("Milburn") and Heftler and assumes that the acquisitions had been effective as
of the beginning of each period. The Milburn acquisition was completed July
29, 1993. The Heftler acquisition will be accounted for as a purchase. The pro
forma adjustments are based upon the estimated fair value of the assets and
liabilities of Heftler as of August 31, 1994 and are based on preliminary
estimates, evaluations and other data which are currently available and may
change as a result of events subsequent to August 31, 1994.
The Pro Forma Statements of Income are not necessarily indicative of
the actual results which would have occurred had the acquisitions been
consummated at the beginning of each such period or of future consolidated
operations of the Company. The pro forma financial information has been prepared
by the Company and all calculations have been made by the Company based upon
assumptions deemed appropriate by the Company. Certain of these assumptions are
set forth under the Notes to the Unaudited Pro Forma Consolidated Financial
Statements. These statements should be read in conjunction with the historical
consolidated financial statements and the notes thereto of the Company included
in the Company's latest annual report on Form 10-K, the Company's latest
quarterly report on Form 10-Q and the historical financial statements and the
notes thereto of Heftler filed with this Form 8-K/A-1.
<PAGE>
<TABLE>
<CAPTION>
CONTINENTAL HOMES HOLDING CORP. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET (UNAUDITED)
August 31, 1994
(In thousands)
Pro Forma
Company Heftler Adjustments Pro Forma
---------- --------- ------------- ---------
<S> <C> <C> <C> <C>
ASSETS
Homebuilding:
Cash ............................................... $ 14,672 $ 6,467 $ (21,032)(a) $ 107
Receivables ........................................ 8,165 12 -- 8,177
Homes, lots and improvements in
production ....................................... 229,793 32,539 3,000 (b) 265,332
Property and equipment, net ........................ 1,916 45 -- 1,961
Prepaid expenses and other assets .................. 14,688 339 (62)(c) 14,965
Excess of cost over related net
assets acquired .................................. 6,488 -- 4,719 (d) 11,207
--------- --------- --------- ---------
275,722 39,402 (13,375) 301,749
--------- --------- --------- ---------
Mortgage banking and title operations:
Mortgage loans held for sale ....................... 12,319 -- -- 12,319
Mortgage loans held for long-term
investment, net .................................. 18,687 -- -- 18,687
Other assets ....................................... 1,445 -- -- 1,445
--------- --------- --------- ---------
32,451 -- -- 32,451
--------- --------- --------- ---------
Total assets ....................................... $ 308,173 $ 39,402 $ (13,375) $ 334,200
========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Homebuilding:
Accounts payable and other
liabilities ...................................... $ 36,470 $ 5,979 $ (1,188)(e) $ 41,261
Notes payable, senior and
convertible debt ................................. 144,058 11,350 8,656 (f) 164,064
Deferred income taxes .............................. 3,100 -- 1,230 (b) 4,330
--------- --------- --------- ---------
183,628 17,329 8,698 209,655
--------- --------- --------- ---------
Mortgage banking and title operations:
Notes payable ...................................... 1,350 -- -- 1,350
Bonds payable ...................................... 19,044 -- -- 19,044
Other .............................................. 1,427 -- -- 1,427
--------- --------- --------- ---------
21,821 -- -- 21,821
--------- --------- --------- ---------
Total liabilities .................................. 205,449 17,329 8,698 231,476
--------- --------- --------- ---------
Commitments and contingencies
Stockholders' equity
Preferred stock, $.01 par value:
Authorized - 2,000,000 shares
Issued - none .................................... -- -- -- --
Common stock, $.01 par value:
Authorized - 20,000,000 shares
Issued - 7,080,900 shares ........................ 71 1 (1)(g) 71
Treasury stock, at cost - 118,130 shares............ (83) (94) 94 (g) (83)
Capital in excess of par value ..................... 59,610 1,109 (1,109)(g) 59,610
Retained earnings .................................. 43,126 21,057 (21,057)(g) 43,126
--------- --------- --------- ---------
Total stockholders' equity ......................... 102,724 22,073 (22,073) 102,724
--------- --------- --------- ---------
Total liabilities and
stockholders' equity ............................. $ 308,173 $ 39,402 $ (13,375) $ 334,200
========= ========= ========= =========
<FN>
The accompanying notes to the unaudited pro forma consolidated
financial statements are an integral part of this
unaudited consolidated balance sheet.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONTINENTAL HOMES HOLDING CORP. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
Year ended May 31, 1994
(In thousands, except per share data)
Milburn Heftler
Pro Forma Pro Forma
Company Milburn(l) Heftler Adjustments Adjustments Pro Forma
--------- -------- --------- ------------ ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Home sales ................... $ 340,031 $ 17,661 $ 49,014 -- -- $ 406,706
Land sales ................... 1,095 -- 5,238 -- (5,000)(k) 1,333
Mortgage banking ............. 6,967 851 -- -- -- 7,818
Other income, net ............ 527 731 537 -- (629)(k) 1,166
--------- --------- --------- --------- --------- ---------
Total revenues ............. 348,620 19,243 54,789 -- (5,629) 417,023
--------- --------- --------- --------- --------- ---------
COSTS AND EXPENSES
Homebuilding:
Cost of home sales ........... 277,878 12,974 41,041 917(b) 2,548(b) 335,358
Cost of land sales ........... 1,499 -- 3,461 -- (3,263)(k) 1,697
Selling, general and
administrative expenses .... 37,065 3,678 2,111 175(h) 880(h) 43,909
Interest, net ................ 4,456 209 (351) 365(i) 1,420(i) 6,099
Inventory writedown .......... -- -- 412 -- -- 412
Mortgage banking and title
operations:
Selling, general and
administrative expenses .... 4,818 404 -- -- -- 5,222
Interest, net ................ (233) 4 -- -- -- (229)
--------- --------- --------- --------- --------- ---------
Total costs and
expenses ................. 325,483 17,269 46,674 1,457 1,585 392,468
--------- --------- --------- --------- --------- ---------
Income before income taxes ..... 23,137 1,974 8,115 (1,457) (7,214) 24,555
Income taxes ................... 10,054 730 -- (654)(j) 702(j) 10,832
--------- --------- --------- --------- --------- ---------
Net income ..................... $ 13,083 $ 1,244 $ 8,115 $ (803) $ (7,916) $ 13,723
========= ========= ========= ========= ========= =========
Earnings per common share $ 2.11 $ 2.21
Earnings per common share
assuming full dilution $ 1.88 $ 1.97
<FN>
The accompanying notes to the unaudited pro forma consolidated financial
statements are an integral part of this unaudited consolidated statement.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONTINENTAL HOMES HOLDING CORP. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
Three months ended August 31, 1994
(In thousands, except per share data)
Pro Forma
Company Heftler Adjustments Pro Forma
--------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
REVENUES
Home sales ................................ $ 105,100 $ 5,413 -- $ 110,513
Mortgage banking .......................... 1,866 -- -- 1,866
Other income, net ......................... 77 -- -- 77
---------- ---------- ---------- ----------
Total revenues .......................... 107,043 5,413 -- 112,456
---------- ---------- ---------- ----------
COSTS AND EXPENSES
Homebuilding:
Cost of home sales ........................ 85,617 4,481 615(b) 90,713
Cost of land sales ........................ 75 -- -- 75
Selling, general and
administrative expenses ................. 11,118 470 135(h) 11,723
Interest, net ............................. 938 (45) 301(i) 1,194
Mortgage banking and title operations:
Selling, general and
administrative expenses ................. 1,439 -- -- 1,439
Interest, net ............................. (173) -- -- (173)
---------- ---------- ---------- ----------
Total costs and expenses ................ 99,014 4,906 1,051 104,971
---------- ---------- ---------- ----------
Income before income taxes .................. 8,029 507 (1,051) 7,485
Income taxes ................................ 3,513 -- (175)(j) 3,338
---------- ---------- ---------- ----------
Net income .................................. $ 4,516 $ 507 $ (876) $ 4,147
========== ========== ========== ==========
Earnings per common share $ .65 $ .60
Earnings per common share assuming
full dilution $ .58 $ .53
<FN>
The accompanying notes to the unaudited pro forma consolidated
financial statements are an integral part of this unaudited
consolidated statement.
</TABLE>
<PAGE>
CONTINENTAL HOMES HOLDING CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL STATEMENTS
Note 1. Reclassifications
Certain reclassifications have been made to Heftler's historical
financial statements to conform to the Company's classifications.
Note 2. Pro Forma Adjustments
(a) To reflect consideration paid for the purchase of Heftler and
related net incurrence of debt.
(b) To record the profit of acquired inventories and the related
tax effect.
(c) Adjusted to eliminate assets not purchased.
(d) To reflect the excess purchase price over the underlying
value of net assets acquired.
(e) To reflect payment of dividend.
(f) To record net adjustments to indebtedness.
(g) To adjust Heftler equity.
(h) To amortize the excess purchase price over the underlying
value of net assets acquired.
(i) To record additional interest on acquisition indebtedness.
(j) To adjust income taxes for the pro forma adjustments.
(k) To eliminate non-recurring operations.
(l) Represents the historical results of Milburn from June 1,
1993 to July 29, 1993, the date the Company acquired Milburn.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CONTINENTAL HOMES HOLDING CORP.
Date: January 25, 1995 /s/ Kenda B. Gonzales
-------------------- -----------------------------
Kenda B. Gonzales
Secretary and Treasurer
(Chief Financial Officer)
