SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
----------------------------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-14830
CONTINENTAL HOMES HOLDING CORP.
(Exact name of registrant as specified in its charter)
Delaware 86-0554624
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
7001 N. Scottsdale Road, Suite 2050 85253
Scottsdale, Arizona (Zip Code)
(Address of principal executive offices)
(602) 483-0006
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X No
---- ----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Outstanding at
Class of Common Stock September 30, 1995
--------------------- ------------------
$.01 par value 6,949,715
<PAGE>
CONTINENTAL HOMES HOLDING CORP.
FORM 10-Q
FOR THE QUARTER ENDED
AUGUST 31, 1995
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements:
Consolidated Balance Sheets as of August 31, 1995
and May 31, 1995.................................................3
Consolidated Statements of Income for the three
months ended August 31, 1995 and 1994............................4
Consolidated Statements of Cash Flows for the three
months ended August 31, 1995 and 1994............................5
Notes to unaudited Consolidated Financial
Statements.......................................................6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..............................9
PART II. OTHER INFORMATION
Item 4. Submission of matters to a vote of Security Holders...............13
Item 6. Exhibits and Reports on Form 8-K..................................13
<PAGE>
CONTINENTAL HOMES HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
August 31, May 31,
1995 1995
---------- -------
ASSETS (In thousands)
Homebuilding:
Cash and cash equivalents $ 14,248 $ 12,848
Receivables 9,655 10,108
Homes, lots and improvements
in production 287,183 291,331
Property and equipment, net 2,405 2,456
Prepaid expenses and other assets 23,398 20,516
Excess of cost over related
net assets acquired 12,713 13,400
--------- ---------
349,602 350,659
--------- ---------
Mortgage banking:
Mortgage loans held for sale 16,551 17,593
Mortgage loans held for long-term
investment, net 17,408 17,783
Other assets 1,058 798
--------- ---------
35,017 36,174
--------- ---------
Total assets $ 384,619 $ 386,833
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Homebuilding:
Accounts payable and other
liabilities $ 43,317 $ 39,405
Notes payable, senior and
convertible subordinated debt 187,986 198,814
Deferred income taxes 3,072 2,048
--------- ---------
234,375 240,267
--------- ---------
Mortgage banking:
Notes payable 15,440 16,072
Bonds payable 17,662 17,939
Other 1,719 2,076
--------- ---------
34,821 36,087
--------- ---------
Total liabilities 269,196 276,354
--------- ---------
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 71
Treasury stock, at cost - 150,130
and 156,130 shares (526) (591)
Capital in excess of par value 59,610 59,610
Retained earnings 56,268 51,389
--------- ---------
Total stockholders' equity 115,423 110,479
--------- ---------
Total liabilities and
stockholders' equity $ 384,619 $ 386,833
========= =========
The accompanying notes to consolidated financial statements are an integral part
of these unaudited consolidated balance sheets.
<PAGE>
CONTINENTAL HOMES HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
Three months ended
August 31,
------------------
1995 1994
REVENUES ---- ----
Home sales $ 132,946 $ 105,100
Land sales 10,761 --
Mortgage banking and title operations 2,586 1,866
Other income, net 112 77
----------- -----------
Total revenues 146,405 107,043
----------- -----------
COSTS AND EXPENSES
Homebuilding:
Cost of home sales 108,426 85,617
Cost of land sales 10,831 75
Selling, general and
administrative expenses 14,956 11,118
Interest, net 1,149 938
Mortgage banking and title operations:
Selling, general and
administrative expenses 1,724 1,439
Interest, net 55 (173)
----------- -----------
Total costs and expenses 137,141 99,014
----------- -----------
Income before income taxes 9,264 8,029
Income taxes 4,040 3,513
----------- -----------
Net income $ 5,224 $ 4,516
=========== ===========
Earnings per common share $ .75 $ .65
Earnings per common share
assuming full dilution $ .66 $ .58
Cash dividend per share $ .05 $ .05
Weighted average number of
shares outstanding 6,927,672 6,962,770
=========== ===========
The accompanying notes to consolidated financial statements are an integral part
of these unaudited consolidated statements.
<PAGE>
CONTINENTAL HOMES HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three months ended
August 31,
------------------
1995 1994
---- ----
(In thousands)
Cash flows from operating activities:
Net income $ 5,224 $ 4,516
Adjustments to reconcile
net income to net cash provided
(used) by operating activities:
Depreciation and amortization 840 638
Increase in deferred income taxes 1,024 868
Decrease (increase) in assets
Homes, lots and improvements
in production 4,148 (24,424)
Receivables 1,909 8,498
Prepaid expenses and other assets (3,118) (1,369)
Increase in liabilities
Accounts payable and other liabilities 3,555 1,518
--------- ---------
Net cash provided (used) by
operating activities 13,582 (9,755)
--------- ---------
Cash flows from investing activities:
Net additions of property and equipment (123) (121)
--------- ---------
Net cash used by investing activities (123) (121)
--------- ---------
Cash flows from financing activities:
Decrease in notes payable to financial
institutions (11,468) (2,088)
Retirement of bonds payable (311) (1,821)
Stock options exercised 65 --
Dividends paid (345) (352)
--------- ---------
Net cash used by financing activities (12,059) (4,261)
--------- ---------
Net increase (decrease) in cash 1,400 (14,137)
Cash at beginning of period 12,848 28,809
--------- ---------
Cash at end of period $ 14,248 $ 14,672
========= =========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest, net of amounts capitalized $ 1,958 $ 1,603
Income taxes $ -- $ 675
The accompanying notes to consolidated financial statements are an integral part
of these unaudited consolidated statements.
<PAGE>
CONTINENTAL HOMES HOLDING CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Basis of Presentation
The consolidated financial statements include the accounts of
Continental Homes Holding Corp. and its subsidiaries (the "Company").
In the opinion of the Company, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting of only
normal recurring adjustments) necessary to present fairly the
Company's financial position, results of operations and cash flows for
the periods presented.
These consolidated financial statements should be read in conjunction
with the consolidated financial statements and the related disclosures
contained in the Company's annual report on Form 10-K for the year
ended May 31, 1995, filed with the Securities and Exchange Commission.
The results of operations for the three months ended August 31, 1995
are not necessarily indicative of the results to be expected for the
full year.
Note 2. Interest Capitalization
The Company follows the practice of capitalizing for its homebuilding
operations certain interest costs incurred on land under development
and homes under construction. Such capitalized interest is included in
cost of home sales when the units are delivered. The Company
capitalized such interest in the amount of $4,081,000 and $3,222,000
and expensed as a component of cost of goods sold $3,662,000 and
$2,263,000 in the three months ended August 31, 1995 and 1994,
respectively.
Note 3. Notes Payable, Senior and Convertible Subordinated Debt
Notes payable, senior and convertible subordinated debt for
homebuilding consist of:
August 31, May 31,
1995 1995
---------- -------
(In thousands)
Notes payable $ 43,892 $ 54,729
12% senior notes, due 1999, net of
premium of $1,349 and $1,430 111,349 111,430
6-7/8% convertible subordinated notes,
due 2002, net of discount of $2,255
and $2,345 32,745 32,655
-------- --------
$187,986 $198,814
======== ========
Note 4. Interest, Net
The summary of the components of interest, net is as follows:
Three months ended
August 31,
------------------
1995 1994
---- ----
(In thousands)
Interest expense, homebuilding $1,234 $ 1,087
Interest income, homebuilding (85) (149)
------ -------
$1,149 $ 938
====== =======
Interest expense, mortgage banking $ 724 $ 516
Interest income, mortgage banking (669) (689)
------ -------
$ 55 $ (173)
====== =======
Note 5. Acquisition of Heftler Realty Co. (the "Acquisition")
On November 18, 1994, the Company completed the acquisition of 100% of
the Common Stock of Heftler Realty Co. ("Heftler"), a Miami, Florida
homebuilder, for $29.2 million in cash. The acquisition was accounted for by the
purchase method with the results of operations of Heftler included beginning
November 1, 1994. The excess of cost over related net assets acquired is being
amortized over ten years using the straight-line method.
The following unaudited pro forma combined financial data give effect
to the Heftler Acquisition as if it had occurred on the first day of the August
31, 1994 quarter. This pro forma information has been prepared utilizing the
historical consolidated financial statements of the Company and Heftler. The pro
forma financial data is provided for comparative purposes only and does not
purport to be indicative of the results which would have been obtained if the
Heftler Acquisition had been effected during the period presented. The pro forma
financial information is based on the purchase method of accounting for the
Heftler Acquisition and reflects adjustments to record the profit of acquired
inventories, amortize the excess purchase price over the underlying value of net
assets acquired, record the additional interest on acquisition indebtedness
assumed and adjust income taxes for the pro forma adjustments.
Three Months ended
August 31, 1994
------------------
(In thousands)
Total revenues $ 112,501
Net income 4,147
Earnings per common share .60
Earnings per common share
assuming full dilution .53
CONTINENTAL HOMES HOLDING CORP. AND SUBSIDIARIES
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Results of Operations
- ---------------------
Homebuilding
The following table sets forth, for the periods indicated, unit
activity, average sales price and revenue from home sales for the Company:
Quarters ended
August 31,
--------------
1995 1994
---- ----
Units delivered 1,029 826
Average sales price $129,200 $127,240
Revenue from homes sales (000's) $132,946 $105,100
Percentage increase from prior year 26.5% 36.6%
Change due to volume 24.6% 23.1%
Change due to average sales price 1.9% 13.5%
The volume increase in the quarter ended August 31, 1995 compared to
the quarter ended August 31, 1994 resulted from improved sales in Southern
California, Texas and Phoenix during the fourth fiscal quarter of 1995. Phoenix
sales increased as a result of an increase in the number of subdivisions open
during the third and fourth quarter of fiscal 1995 compared to the third and
fourth quarters of fiscal 1994. Significant volume increases in early fiscal
1994 resulted in the Company selling out of several subdivisions in Phoenix
faster than anticipated. Additionally, the Company believes that relatively low
interest rates contributed to improved sales.
The following table summarizes information related to the Company's
backlog at the dates indicated:
August 31,
-----------------------------------------------------------
(Dollars in thousands)
1995 1994
---- ----
Units Dollars Units Dollars
----- ------- ----- -------
Phoenix 1,003 $126,424 613 $ 79,000
Texas 420 46,733 274 31,004
Miami 118 16,731 -- --
Denver 118 23,901 99 18,109
California 89 20,388 42 11,709
----- -------- ----- -------
Total backlog 1,748 $234,177 1,028 $139,822
===== ======== ===== ========
Average price per unit $134 $136
==== ====
The increase in backlog at August 31, 1995 resulted from improved sales
in each individual market during the first fiscal quarter of 1996 and the
Company's expansion into the Miami, Florida market. The aggregate sales value of
new contracts signed increased 74% in the three months ended August 31, 1995 as
a result of the aforementioned improved sales to $166,183,000 representing 1,284
homes (including $7,784,000 in Miami representing 57 homes) as compared with
$95,768,000 representing 718 homes for the three months ended August 31, 1994.
The following table summarizes information related to cost of home
sales, selling, general and administrative ("SG&A") expenses and interest, net
for homebuilding:
Quarters ended August 31,
-------------------------
1995 1994
---- ----
Dollars % Dollars %
------- ---- ------- ----
(Dollars in thousands)
Revenue from home sales $132,946 100.0% $105,100 100.0%
Cost of home sales 108,426 81.6 85,617 81.5
-------- ----- -------- -----
Gross profit from home sales 24,520 18.4 19,483 18.5
SG&A expenses 14,956 11.2 11,118 10.5
-------- ----- -------- -----
Operating income from homebuilding 9,564 7.2 8,365 8.0
Interest, net 1,149 .9 938 1.0
-------- ----- -------- -----
Pre-tax profit from homebuilding $ 8,415 6.3% $ 7,427 7.0%
======== ==== ======== ====
Gross profit from home sales was 18.4% for the three months ended
August 31, 1995 compared to 18.5% for the corresponding fiscal 1995 period. In
connection with the acquisitions in Texas and Miami, Florida, the Company
capitalized a portion of the purchase price and includes such capitalized
purchase price in the cost of home sales when the related units are delivered
(purchase accounting adjustments). Gross profit from home sales, exclusive of
purchase accounting adjustments was 18.5% in the first quarter of fiscal 1996,
compared to 18.9% in the quarter ended August 31, 1994. The decrease in gross
profit in the quarter ended August 31, 1995 compared to the quarter ended August
31, 1994 was primarily the result of sales price discounts that were offered in
Phoenix during the third and fourth quarter of fiscal 1995 offset, in part, by
improved margins in Southern California as the Company completed its
lower-margin older subdivisions.
The increase in total SG&A expenses for the quarter ended August 31,
1995 compared to the quarter ended August 31, 1994 was due to the addition of
the Miami operation during the second quarter of fiscal 1995. The first fiscal
quarter of 1996 included $882,000 of SG&A expenses from Miami. Additionally, the
Company experienced higher variable marketing costs (sales commissions,
advertising and model furniture amortization) due to the increase in the number
of homes delivered, higher salaries, and higher customer service costs. SG&A
expenses for each home delivered were $14,534 and $13,460 in the first quarter
of fiscal 1996 and 1995, respectively. The Company capitalizes certain SG&A
expenses for homebuilding. Accordingly, total SG&A costs incurred for
homebuilding were $16,980,000 for the three months ended August 31, 1995
compared to $12,660,000 for the corresponding fiscal 1995 period.
The Company capitalizes certain interest costs for its homebuilding
operations and includes such capitalized interest in cost of home sales when the
related units are delivered. Accordingly, total interest incurred by the Company
was $5,315,000 for the three months ended August 31, 1995 compared to $4,309,000
for the three months ended August 31, 1994. Interest, net for homebuilding was
$1,149,000 and $938,000 for the three months ended August 31, 1995 and 1994,
respectively. The increase in interest, both incurred and expensed, for the
quarter ended August 31, 1995 compared to the same quarter of the previous year,
was due to higher debt levels which resulted primarily from the Heftler
acquisition.
The Company's pre-tax profit from homebuilding for the three months
ended August 31, 1995 was $8,415,000 compared to $7,427,000 for the
corresponding quarter ended August 31, 1994. Pre-tax profit increased in the
first quarter of fiscal 1996 due primarily to improved results in Texas and
Southern California partially offset by a decline in Phoenix results and the
negative impact from the inclusion of Miami results. Miami's pre-tax loss was
caused by weather related delays in the opening of a new subdivision and delays
in the municipalities issuing permits.
Mortgage Banking
- ----------------
The Company's mortgage banking operations are conducted through its
wholly-owned subsidiary CH Mortgage Company ("CHMC"). The following table
summarizes operating information for the Company's mortgage banking operations:
Quarters ended
August 31,
--------------
1995 1994
---- ----
(Dollars in thousands)
Number of loans originated 676 548
Loan origination fees $ 645 $ 517
Sale of servicing and marketing gains 1,253 800
Other revenue 161 163
------- -------
Total revenues 2,059 1,480
General and administrative expenses 1,435 1,201
------- -------
Operating income from mortgage banking 624 279
Interest, net 59 (173)
------- -------
Pre-tax profit from mortgage banking $ 565 $ 452
======= =======
Revenues and general and administrative expenses from mortgage banking
increased in the quarter ended August 31, 1995 primarily as a result of an
increase in the percentage of Phoenix and Texas homebuyers utilizing the
Company's mortgage banking operations. Additionally, revenues increased due to
higher servicing release premiums received on the sale of servicing. The Company
retains a portion of the loan servicing of the loans it originates and sells. At
August 31, 1995, the servicing portfolio was approximately $72,066,000 compared
to $70,145,000 at August 31, 1994.
Consolidated Operations
Net income was $5,224,000 ($.75 per share, $.66 fully diluted) for the
three months ended August 31, 1995 compared to $4,516,000 ($.65 per share, $.58
fully diluted) for the period ended August 31, 1994.
Liquidity and Capital Resources
- -------------------------------
The Company's financing needs depend primarily upon sales volume, asset
turnover, land acquisition and inventory balances. The Company has financed, and
expects to continue to finance, its working capital needs through funds
generated by operations and borrowings. Funds for future land acquisitions and
construction costs are expected to be provided primarily by cash flows from
operations and future borrowings as permitted under the 12% Senior Note
Indenture. At August 31, 1995, the Company had unsecured lines of credit from
two lenders for aggregate borrowings (excluding mortgage warehouse lines) of up
to $20,000,000, guaranteed a $10,000,000 secured line of credit for one of its
subsidiaries and, subject to available collateral, a $5,000,000 revolving
purchase money line. Additionally, the Company assumed $55 million of credit
facilities ($15 million of which are unsecured) in connection with the Texas and
Florida acquisitions. At August 31, 1995, there was $43,892,000 outstanding in
the aggregate under these credit lines. The Company's revolving lines of credit
bear interest at rates ranging from LIBOR plus 2 1/4% to prime plus 1%. The
Company believes that amounts generated from operations and such additional
borrowings will provide funds adequate to finance its existing homebuilding
activities and meet its debt service requirements. The Company does not have any
significant current commitments for capital expenditures.
CHMC has a warehouse line of credit for $25,000,000 which is guaranteed
by the Company. Pursuant to the warehouse line of credit, the Company issues
drafts to fund its mortgage loans. The amount represented by a draft is drawn on
the warehouse line of credit when the draft is presented for payment. At August
31, 1995, the amount outstanding under the warehouse line of credit and the
amount of funding drafts that had not been presented for payment was
$15,440,000. The Company believes that this line is sufficient for its mortgage
banking operations.
On November 18, 1994, the Company acquired all of the outstanding
capital stock of Heftler for $29.2 million in cash.
The Company has entered into an agreement with Kathleen and Robert Wade
(the "Wades"), former Co-Chief Executive Officer and President, respectively,
whereby the Company has a right to buy and the Wades have the right to sell,
from now until January 19, 1996, up to 488,000 shares of the Wades' Continental
Homes Holding Corp. Common Stock at $20.50 per share.
<PAGE>
CONTINENTAL HOMES HOLDING CORP. AND SUBSIDIARIES
PART II
OTHER INFORMATION
Item 4. Submission of matters to a vote of Security Holders
---------------------------------------------------
At the Company's Annual Meeting of Stockholders held on August 30,
1995, the stockholders elected the following persons to the Board of Directors:
Nominee For Withheld
------- --- --------
Donald R. Loback 6,065,550 4,378
Kathleen R. Wade 6,065,478 4,450
Robert J. Wade 6,065,250 4,678
W. Thomas Hickcox 6,065,550 4,378
Jo Ann Rudd 6,065,478 4,450
William Steinberg 6,063,978 5,950
Bradley S. Anderson 6,065,578 4,350
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits:
2.1 Agreement dated as of September 18, 1995 between
Robert J. and Kathleen R. Wade and the Company.
10.1 Fifth Modification Agreement dated as of September
26, 1995 between Bank One, Arizona, NA and Milburn
Investments, Inc.
11 Statement of Computation of Earnings Per Share.
27 Financial Data Schedule.
(b) Reports on Form 8-K: There were no reports on
Form 8-K filed for the three months ended
August 31, 1995.
CONTINENTAL HOMES HOLDING CORP. AND SUBSIDIARIES
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CONTINENTAL HOMES HOLDING CORP.
Date: October 9, 1995 By: /s/ Kenda B. Gonzales
---------------------
KENDA B. GONZALES
Secretary and Treasurer
(Chief Financial Officer)
Date: October 9, 1995 By: /s/ Donald R. Loback
--------------------
DONALD R. LOBACK
Chief Executive Officer
EXHIBIT INDEX
Exhibit
Number Description Page
- ------- ----------- ----
2.1 Agreement dated as of September 18,
1995 between Robert J. and Kathleen
R. Wade and the Company.
10.1 Fifth Modification Agreement dated
as of September 26, 1995 between Bank One,
Arizona, NA and Milburn Investments, Inc.
11 Statement of Computation of Earnings
Per Share.
27 Financial Data Schedule.
Exhibit 2.1
AGREEMENT
---------
Parties: Continental Homes Holding Corp., a Delaware corporation ("CHHC"); and
Robert J. and Kathleen R. Wade, his wife (the "Wades").
Date: September 18, 1995
For and in consideration of the promises and undertakings set forth
herein, the parties agree as follows:
1. The Wades have agreed to resign as Directors and Officers of CHHC
and all subsidiaries, joint ventures, limited liability companies and related
companies and entities effective upon execution of this Agreement.
2. To the extent not prohibited by any of CHHC's loan agreements and
upon ten (10) days prior written notice, from and after the date of this
Agreement to and including January 19, 1996, CHHC has the right to buy from the
Wades (in which case the Wades would have an obligation to sell to CHHC) and the
Wades have the right to sell to CHHC (in which case CHHC would have an
obligation to buy from the Wades), up to 488,000 shares of CHHC common Stock at
a purchase price of $20.50 per share. The Wades agree that they will not without
the prior written consent of CHHC sell or offer to sell any other shares of CHHC
Common Stock beneficially owned by them for a period of 270 days from the date
of this Agreement.
3. The Wades agree to act as consultants to CHHC and its related
companies on an as-requested basis from the date of this Agreement through
December 31, 1998 for which CHHC agrees to pay the Wades their current salaries,
but not bonuses, through December 31, 1998, on a bi-weekly basis or as CHHC
otherwise pays its employees. In addition, Robert J. Wade agrees to allow CHHC
and its related companies to use his contractors license(s) or to act as the
designated agent on their license(s) until CHHC or the related entities obtain
substitute licenses or agents, as applicable, which CHHC agrees to expeditiously
pursue>
4. CHHC agrees to maintain and pay for the Wades' benefit all insurance
benefits currently in existence for its employees, subject to CHHC's right to
change its benefit plans, through December 31, 1998. CHHC shall have no
obligation to maintain or pay for the existing "Key-man" life insurance
currently covering the Wades, but will maintain and pay for the "split-dollar"
life insurance coverage for the Wades through December 31, 1998. To the extent
any of the benefit plans covering the Wades has any value, CHHC agrees to assign
these plans to the Wades at their request.
5. CHHC agrees to transfer title to the Wades to the Company cars and
car phones now being driven by the Wades, as soon as practicable after the date
of this Agreement.
6. The Wades agree to surrender to CHHC upon execution of this
Agreement all company credit cards now in the Wades possession.
Executed the date above stated:
Continental Homes Holding Corp.
By: /s/ Donald R. Loback
----------------------------
Its: Chief Executive Officer
----------------------------
/s/ Robert J. Wade
----------------------------
/s/ Kathleen R. Wade
----------------------------
Exhibit 10.1
FIFTH MODIFICATION AGREEMENT
DATE: September 26, 1995
PARTIES: Borrower: MILBURN INVESTMENTS, INC.,
a Texas corporation.
Bank: BANK ONE, ARIZONA, NA,
a national banking association.
RECITALS:
- --------
A. Bank has extended to Borrower credit ("Loan") in the principal amount of
$25,000,000.00 pursuant to the Amended and Restated Loan Agreement, dated
October 28, 1994 ("Loan Agreement"), and evidenced by the Replacement Promissory
Note, dated October 28, 1994 ("Note"). The unpaid principal of the Loan as of
the date hereof is $20,000,000.00.
B. The Loan is secured by, among other things, various Deeds of Trust,
Assignment of Leases and Rents, Security Agreement, and Financing Statements
("Deeds of Trust"), by Borrower, as trustor, for the benefit of Bank, as
beneficiary, recorded in records of Bell, Travis, and Williamson Counties, Texas
(the agreements, documents, and instruments securing the Loan and the Note are
referred to individually and collectively as the "Security Documents").
C. Bank and Borrower have executed and delivered previously the following
agreements ("Modifications") modifying the terms of the Loan, the Note, and the
Loan Agreement: First Modification Agreement, dated December 8, 1994, Second
Modification Agreement, dated March 15, 1995, Third Modification Agreement,
dated May 19, 1995, and Fourth Modification Agreement dated July 28, 1995. (The
Note, the Loan Agreement, any arbitration resolution, any environmental
certification and indemnity agreement, and all other agreements, documents, and
instruments evidencing, securing, or otherwise relating to the Loan, as modified
in the Modifications, are sometimes referred to individually and collectively as
the "Loan Documents". Hereinafter, "Note" and "Loan Agreement" shall mean such
documents as modified in the Modifications.)
D. Borrower has requested that Bank modify the Loan and the Loan
Documents as provided herein. Bank is willing to so modify the Loan and the
Loan Documents, subject to the terms and conditions herein.
AGREEMENT:
- ---------
For good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Borrower and Bank agree as follows:
1. ACCURACY OF RECITALS.
--------------------
Borrower acknowledges the accuracy of the Recitals.
2. MODIFICATION OF LOAN DOCUMENTS.
------------------------------
2.1 The Loan Documents are modified as follows:
2.1.1 The Conversion Date of the Loan and the Note is changed from
September 26, 1995 to November 26, 1995.
2.2 Each of the Loan Documents is modified to provide that it shall be a
default or an event of default thereunder if Borrower shall fail to comply with
any of the covenants of Borrower herein or if any representation or warranty by
Borrower herein or by any guarantor in any related Consent and Agreement of
Guarantor(s) is materially incomplete, incorrect, or misleading as of the date
hereof.
2.3 Each reference in the Loan Documents to any of the Loan Documents shall
be a reference to such document as modified herein.
3. RATIFICATION OF LOAN DOCUMENTS AND COLLATERAL.
---------------------------------------------
The Loan Documents are ratified and affirmed by Borrower and shall remain in
full force and effect as modified herein. Any property or rights to or interests
in property granted as security in the Loan Documents shall remain as security
for the Loan and the obligations of Borrower in the Loan Documents.
4. BORROWER REPRESENTATIONS AND WARRANTIES.
---------------------------------------
Borrower represents and warrants to Bank:
4.1 No default or event of default under any of the Loan Documents as
modified herein, nor any event, that, with the giving of notice or the passage
of time or both, would be a default or an event of default under the Loan
Documents as modified herein has occurred and is continuing.
4.2 There has been no material adverse change in the financial condition of
Borrower or any other person whose financial statement has been delivered to
Bank in connection with the Loan from the most recent financial statement
received by Bank.
4.3 Each and all representations and warranties of Borrower in the Loan
Documents are accurate on the date hereof.
4.4 Borrower has no claims, counterclaims, defenses, or set-offs with
respect to the Loan or the Loan Documents as modified herein.
4.5 The Loan Documents as modified herein are the legal, valid, and binding
obligation of Borrower, enforceable against Borrower in accordance with their
terms.
4.6 Borrower is validly existing under the laws of the State of its
formation or organization and has the requisite power and authority to execute
and deliver this Agreement and to perform the Loan Documents as modified herein.
The execution and delivery of this Agreement and the performance of the Loan
Documents as modified herein have been duly authorized by all requisite action
by or on behalf of Borrower. This Agreement has been duly executed and delivered
on behalf of Borrower.
5. BORROWER COVENANTS.
------------------
Borrower covenants with Bank:
5.1 Borrower shall execute, deliver, and provide to Bank such additional
agreements, documents, and instruments as reasonably required by Bank to
effectuate the intent of this Agreement.
5.2 Borrower fully, finally, and forever releases and discharges Bank and
its successors, assigns, directors, officers, employees, agents, and
representatives from any and all actions, causes of action, claims, debts,
demands, liabilities, obligations, and suits, of whatever kind or nature, in law
or equity of Borrower, whether now known or unknown to Borrower, (i) in respect
of the Loan, the Loan Documents, or the actions or omissions of Bank in respect
of the Loan or the Loan Documents and (ii) arising from events occurring prior
to the date of this Agreement.
5.3 Contemporaneously with the execution and delivery of this Agreement,
Borrower has paid to Bank:
5.3.1 All accrued and unpaid interest under the Note and all amounts,
other than interest and principal, due and payable by Borrower under the Loan
Documents as of the date hereof.
5.3.2 All the internal and external costs and expenses incurred by Bank
in connection with this Agreement (including, without limitation, inside and
outside attorneys, appraisal, appraisal review, processing, title, filing, and
recording costs, expenses, and fees).
6. EXECUTION AND DELIVERY OF AGREEMENT BY BANK.
-------------------------------------------
Bank shall not be bound by this Agreement until (i) Bank has executed and
delivered this Agreement, (ii) Borrower has performed all of the obligations of
Borrower under this Agreement to be performed contemporaneously with the
execution and delivery of this Agreement, (iii) each guarantor(s) of the Loan,
if any, has executed and delivered to Bank a Consent and Agreement of
Guarantor(s), and (iv) if required by Bank, Borrower and any guarantor(s) have
executed and delivered to Bank an arbitration resolution, an environmental
questionnaire, and an environmental certification and indemnity agreement.
7. INTEGRATION, ENTIRE AGREEMENT, CHANGE, DISCHARGE, TERMINATION, OR WAIVER.
------------------------------------------------------------------------
The Loan Documents as modified herein contain the complete understanding and
agreement of Borrower and Bank in respect of the Loan and supersede all prior
representations, warranties, agreements, arrangements, understandings, and
negotiations. No provision of the Loan Documents as modified herein may be
changed, discharged, supplemented, terminated, or waived except in a writing
signed by the parties thereto.
8. BINDING EFFECT.
--------------
The Loan Documents as modified herein shall be binding upon and shall inure to
the benefit of Borrower and Bank and their successors and assigns and the
executors, legal administrators, personal representatives, heirs, devisees, and
beneficiaries of Borrower, provided, however, Borrower may not assign any of its
right or delegate any of its obligation under the Loan Documents and any
purported assignment or delegation shall be void.
9. CHOICE OF LAW.
-------------
This Agreement shall be governed by and construed in accordance with the laws of
the State of Arizona, without giving effect to conflicts of law principles.
10. COUNTERPART EXECUTION.
---------------------
This Agreement may be executed in one or more counterparts, each of which shall
be deemed an original and all of which together shall constitute one and the
same document. Signature pages may be detached from the counterparts and
attached to a single copy of this Agreement to physically form one document.
DATED as of the date first above stated.
MILBURN INVESTMENTS, INC.,
a Texas corporation
By: /s/ Kenda B. Gonzales
--------------------------
Name: Kenda B. Gonzales
-----------------------
Title: Treasurer
-----------------------
BORROWER
BANK ONE, ARIZONA, NA,
a national banking association
By: /s/ Rhonda R. Williams
--------------------------
Name: Rhonda R. Williams
-----------------------
Title: Assistant Vice President
-----------------------
BANK
Exhibit 11
Continental Homes Holding Corp.
Computation of Earnings Per Share
(In thousands, except per share data)
Three months ended
August 31,
------------------
1995 1994
---- ----
Fully diluted:
Net income $ 5,224 $ 4,516
Interest expense on convertible
subordinated notes, net of income taxes 401 401
------- -------
$ 5,625 $ 4,917
======= =======
Weighted average number of shares outstanding 6,928 6,963
Conversion of convertible subordinated notes
(42.55 shares per $1,000 principal
amount of notes) 1,489 1,489
Incremental shares relating to stock
options exercisable 94 50
------- -------
Weighted average number of shares outstanding
assuming full dilution 8,511 8,502
======= =======
Fully diluted net income per share $ .66 $ .58
======= =======
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> JUN-01-1995
<PERIOD-END> AUG-31-1995
<EXCHANGE-RATE> 1
<CASH> 14,248
<SECURITIES> 0
<RECEIVABLES> 43,614
<ALLOWANCES> 0
<INVENTORY> 287,183
<CURRENT-ASSETS> 0
<PP&E> 2,405
<DEPRECIATION> 0
<TOTAL-ASSETS> 384,619
<CURRENT-LIABILITIES> 0
<BONDS> 221,088
<COMMON> 71
0
0
<OTHER-SE> 115,352
<TOTAL-LIABILITY-AND-EQUITY> 384,619
<SALES> 132,946
<TOTAL-REVENUES> 146,405
<CGS> 108,426
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,204
<INCOME-PRETAX> 9,264
<INCOME-TAX> 4,040
<INCOME-CONTINUING> 5,224
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,224
<EPS-PRIMARY> .75
<EPS-DILUTED> .66
</TABLE>
