<PAGE> 1
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
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, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 001-09911
------------------------
CAPITAL PACIFIC HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 95-2956559
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
</TABLE>
4100 MACARTHUR BLVD., SUITE 200, NEWPORT BEACH, CA 92660
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(949) 622-8400
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
------------------------
Indicate by check mark whether the Registrant (1) 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.
<TABLE>
<CAPTION>
CLASS AND TITLE OF SHARES OUTSTANDING AS OF
CAPITAL STOCK SEPTEMBER 29, 2000
------------------ ------------------------
<S> <C>
Common Stock, $.10 Par Value 13,767,911
</TABLE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE> 2
CAPITAL PACIFIC HOLDINGS, INC.
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements........................................ 1
Consolidated Balance Sheets -- August 31, 2000 and February
29, 2000.................................................... 1
Consolidated Statements of Income for the Three and Six
Months Ended August 31, 2000 and 1999....................... 2
Consolidated Statements of Cash Flows for the Six Months
Ended August 31, 2000 and 1999.............................. 3
Notes to Consolidated Financial Statements.................. 4
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition.......................... 8
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
</TABLE>
i
<PAGE> 3
PART 1 -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CAPITAL PACIFIC HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
AUGUST 31, FEBRUARY 29,
2000 2000
------------ ------------
(UNAUDITED)
<S> <C> <C>
Cash and cash equivalents................................... $ 8,203 $ 19,389
Restricted cash............................................. 918 1,373
Accounts and notes receivable............................... 21,975 22,862
Real estate projects........................................ 277,869 282,497
Property, plant and equipment............................... 8,279 8,536
Investment in and advances to unconsolidated joint
ventures.................................................. 15,229 15,379
Prepaid expenses and other assets........................... 9,183 8,245
--------- ---------
Total assets...................................... $ 341,656 $ 358,281
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued liabilities.................... $ 38,426 $ 39,600
Notes payable............................................... 131,669 125,809
Senior unsecured notes payable.............................. 59,792 88,392
--------- ---------
Total liabilities................................. 229,887 253,801
--------- ---------
Minority Interest........................................... 36,170 33,594
--------- ---------
Stockholders' equity:
Common stock, par value $.10 per share, 30,000,000 shares
authorized; 13,769,111 and 13,815,911 shares issued and
outstanding, respectively.............................. 1,500 1,500
Additional paid-in capital................................ 211,888 211,888
Accumulated deficit....................................... (134,410) (139,243)
Treasury stock............................................ (3,379) (3,259)
--------- ---------
Total stockholders' equity........................ 75,599 70,886
--------- ---------
Total liabilities and stockholders' equity........ $ 341,656 $ 358,281
========= =========
</TABLE>
See accompanying notes to financial statements.
1
<PAGE> 4
CAPITAL PACIFIC HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
AUGUST 31, AUGUST 31,
------------------ -------------------
2000 1999 2000 1999
-------- ------- -------- --------
<S> <C> <C> <C> <C>
Sales of homes and land............................. $ 96,215 $67,383 $161,249 $129,357
Cost of sales....................................... 73,322 54,890 123,968 105,560
-------- ------- -------- --------
Gross margin................................... 22,893 12,493 37,281 23,797
Income (loss) from unconsolidated joint ventures.... (54) 516 (43) 1,552
Selling, general and administrative expenses........ (10,885) (7,387) (18,542) (13,607)
Interest expense.................................... (8,776) (4,385) (13,559) (8,886)
-------- ------- -------- --------
Income from operations......................... 3,178 1,237 5,137 2,856
Interest and other income, net...................... 567 278 1,012 291
Minority Interest................................... (1,122) (407) (1,846) (893)
-------- ------- -------- --------
Income before income taxes and extraordinary
item......................................... 2,623 1,108 4,303 2,254
Provision for income taxes.......................... 524 208 860 534
-------- ------- -------- --------
Income before extraordinary item............... 2,099 900 3,443 1,720
Extraordinary gain for debt retired at less than
face value, net of minority interest and taxes.... 445 200 1,390 200
-------- ------- -------- --------
Net income................................... $ 2,544 $ 1,100 $ 4,833 $ 1,920
======== ======= ======== ========
Net income per share -- basic and diluted:
Income per share before extraordinary item........ $ 0.15 $ 0.06 $ 0.25 $ 0.12
Extraordinary gain for debt retired at less than
face value, net of minority interest and
taxes.......................................... 0.03 0.02 0.10 0.02
-------- ------- -------- --------
Net income per share.............................. $ 0.18 $ 0.08 $ 0.35 $ 0.14
======== ======= ======== ========
Weighted average number of common
shares -- basic................................ 13,769 13,938 13,778 13,968
======== ======= ======== ========
Weighted average number of common
shares -- diluted.............................. 13,834 14,007 13,853 14,001
======== ======= ======== ========
</TABLE>
See accompanying notes to financial statements.
2
<PAGE> 5
CAPITAL PACIFIC HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS ENDED
AUGUST 31,
--------------------
2000 1999
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................. $ 4,833 $ 1,920
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Gain on retirement of senior unsecured notes payable...... (1,390) (200)
Depreciation and amortization............................. 747 1,136
Change in restricted cash................................. 455 (175)
(Increase) decrease in real estate projects............... 4,628 (10,355)
Decrease in receivables, prepaid expenses and other
assets................................................. (471) (2,039)
Decrease in accounts payable and accrued liabilities...... (1,522) (12,119)
Minority interest......................................... 1,846 1,203
-------- --------
Net cash provided by (used in) operating
activities...................................... 9,126 (20,629)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment, net.................... (490) (474)
Distributions to minority interest.......................... (90) (83)
Decrease in investment in and advances to unconsolidated
joint ventures............................................ 150 3,268
-------- --------
Net cash provided by (used in) investing
activities...................................... (430) 2,711
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings (payments) on notes payable, net................. 5,860 16,959
Retirement of senior unsecured notes payable................ (25,622) (1,770)
Repurchase of common stock.................................. (120) (410)
-------- --------
Net cash provided by (used in) financing
activities...................................... (19,882) 14,779
-------- --------
Net decrease in cash and cash equivalents................... (11,186) (3,139)
Cash and cash equivalents at beginning of period............ 19,389 5,782
-------- --------
Cash and cash equivalents at end of period.................. $ 8,203 $ 2,643
======== ========
</TABLE>
See accompanying notes to financial statements.
3
<PAGE> 6
CAPITAL PACIFIC HOLDINGS, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The unaudited financial statements presented herein have been prepared in
accordance with the instructions to Form 10-Q and do not include all of the
information and note disclosures required by generally accepted accounting
principles. These statements should be read in conjunction with the consolidated
financial statements, and notes thereto, included in the Form 10-K for the
fiscal year ended February 29, 2000, of Capital Pacific Holdings, Inc. (the
"Company"). In the opinion of management, the financial statements presented
herein include all adjustments (which are solely of a normal recurring nature)
necessary to present fairly the Company's financial position and results of
operations. The results of operations for the six month period ended August 31,
2000, are not necessarily indicative of the results that may be expected for the
year ending February 28, 2001. The consolidated financial statements include the
accounts of the Company, wholly owned subsidiaries and certain majority owned
joint ventures, as well as the accounts of Capital Pacific Holdings, LLC ("CPH
LLC") of which the Company owns a majority interest. The accompanying
consolidated balance sheets (See Note 3), include the capital accounts of CPH
LLC totaling $107 million, $35 million of which is required to be presented as
minority interest. All other investments are accounted for on the equity method.
All significant intercompany balances and transactions have been eliminated in
consolidation.
2. RECLASSIFICATIONS
Certain items in prior period financial statements have been reclassified
in order to conform with current year presentation.
3. COMPANY ORGANIZATION AND OPERATIONS
The Company is a regional builder and developer with operations throughout
selected metropolitan areas of Southern California, Nevada, Texas, Arizona and
Colorado. The Company's principal business activities are to build and sell
single-family homes and to develop and build commercial and mixed-use projects.
The Company's single-family homes are targeted to entry-level, move-up and
luxury buyers. The acquisition and development of commercial and mixed-use
projects, as well as ownership of existing commercial properties is accomplished
primarily through non-majority investments in limited liability companies.
In fiscal year 1998, the Company consummated an equity and restructuring
transaction whereby the Company and certain of its subsidiaries transferred to
CPH LLC substantially all of their respective assets and CPH LLC assumed all the
liabilities of the Company and its subsidiaries. At the current time, the
Company, together with its subsidiaries, has a 67.93% interest in CPH LLC. An
unaffiliated investment company, California Housing Finance, L.P. ("CHF") holds
a 32.07% minority interest in CPH LLC as a result of a cash investment in CPH
LLC. Subject to adjustment and exceptions under certain circumstances, at the
current time, CHF has the same interest in all future business of the Company,
all of which will be conducted either within CPH LLC or through project specific
entities. Assets under management, including unconsolidated joint ventures,
totaled $725 million at August 31, 2000 in 61 residential and commercial
properties. At August 31, 2000, CPH LLC had $250 million in assets and a net
worth of $107 million. In addition, the Company has interests in unconsolidated
joint ventures which have total assets of $384 million and a combined net worth
of $317 million at August 31, 2000. The Company is the sole managing member of
CPH LLC. The Company maintains certain licenses and other assets as are
necessary to fulfill its obligations as managing member. The Company and its
subsidiaries perform their respective management functions for CPH LLC as well
as other project-specific entities of which the Company is the managing member
pursuant to management agreements, which include provisions for the
reimbursement of Company and subsidiary costs, a management fee and
indemnification by CPH LLC and the project-specific entities.
4
<PAGE> 7
CAPITAL PACIFIC HOLDINGS, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
References to the Company are, unless the context indicates otherwise, also
references to CPH LLC and the project-specific entities. At the current time,
all material financing transactions and arrangements are incurred either by CPH
LLC or by the project-specific entities.
4. INVESTMENTS IN UNCONSOLIDATED ENTITIES
The Company is a general partner or a direct or indirect managing member
and has a 50 percent or less ownership in 14 unconsolidated entities at August
31, 2000. The Company's net investment in and advances to unconsolidated
entities are as follows at August 31, 2000 and February 29, 2000 (in thousands):
<TABLE>
<CAPTION>
AUGUST 31, FEBRUARY 29,
2000 2000
---------- ------------
<S> <C> <C>
JMP Canyon Estates, L.P............................... $ 162 $ 159
JMP Harbor View, L.P.................................. 607 621
Grand Coto Estates, L.P............................... 89 (633)
M.P.E. Partners, L.P.................................. 1,605 1,710
RPV Associates, LLC................................... 711 2,759
CPH Dana Point, LLC................................... 121 266
CPH Monarch Beach, LLC................................ 241 445
CPH Resorts I, LLC.................................... 5,641 4,700
CPH Vista Palisades, LLC.............................. 532 435
Atlanta Huntington Beach, LLC......................... 736 1,259
CPH Dos Pueblos, LLC.................................. 4,249 3,595
CPH Airport Office Building, LLC...................... 4 7
CPH Redhill Office Building, LLC...................... 31 56
LB/L-CPH Providence, LLC.............................. 500 --
------- -------
$15,229 $15,379
======= =======
</TABLE>
The Company's ownership interests in the above entities vary. Generally,
the Company receives a percentage of earnings although a preferred return on
invested capital is provided. Typically, the majority of capital is provided by
capital partners. The Company is typically a general partner or managing member
in each of the above entities and is the managing entity pursuant to the terms
of each venture's agreement. The Company's carrying amount in each of the
entities equals the underlying equity and reimbursable advances, and there are
generally no significant amounts of undistributed earnings. The Company provides
for income taxes currently on its share of distributed and undistributed
earnings and losses from the investments.
The Company uses the equity method of accounting for its investments in
these unconsolidated 50 or less percent-owned entities. The accounting policies
of the entities are substantially the same as those of the Company.
5
<PAGE> 8
CAPITAL PACIFIC HOLDINGS, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Following is summarized, combined financial information for the
unconsolidated entities at August 31, 2000 and February 29, 2000 and for the
three and six month periods ended August 31, 2000 and August 31, 1999 (in
thousands):
ASSETS
<TABLE>
<CAPTION>
AUGUST 31, FEBRUARY 29,
2000 2000
---------- ------------
<S> <C> <C>
Cash.................................................. $ 3,101 $ 11,225
Real estate projects.................................. 324,086 281,402
Commercial buildings.................................. 20,963 21,071
Other assets.......................................... 35,405 31,281
-------- --------
$383,555 $344,979
======== ========
</TABLE>
LIABILITIES AND EQUITY
<TABLE>
<CAPTION>
AUGUST 31, FEBRUARY 29,
2000 2000
---------- ------------
<S> <C> <C>
Accounts payable and other liabilities................ $ 26,270 $ 25,724
Notes payable......................................... 40,125 37,722
-------- --------
66,395 63,446
-------- --------
Equity................................................ 317,160 281,533
-------- --------
$383,555 $344,979
======== ========
</TABLE>
INCOME STATEMENT
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------------ ------------------------
AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31,
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Sales of homes and land....... $ 8,027 $ 8,968 $28,122 $19,871
Interest and other income,
net......................... 2,926 2,636 5,761 4,938
------- ------- ------- -------
10,953 11,604 33,883 24,809
Costs and expenses............ 10,314 10,062 32,100 21,931
------- ------- ------- -------
Net income.......... $ 639 $ 1,542 $ 1,783 $ 2,878
======= ======= ======= =======
</TABLE>
5. NOTES PAYABLE
Notes payable at August 31, 2000 and February 29, 2000, are summarized as
follows (in thousands):
<TABLE>
<CAPTION>
AUGUST 31, FEBRUARY 29,
2000 2000
---------- ------------
<S> <C> <C>
Notes payable to banks, including interest varying
from LIBOR plus two to thirteen percent, maturing
between October 15, 2000 and February 3, 2003,
secured by certain real estate projects on a
non-recourse basis.................................. $117,300 $105,951
Notes payable to banks, including interest at prime
with the terms of the commitment reducing commencing
August 1, 2002, secured by certain real estate
projects on a recourse basis........................ 13,969 19,281
Other................................................. 400 577
-------- --------
$131,669 $125,809
======== ========
</TABLE>
6
<PAGE> 9
CAPITAL PACIFIC HOLDINGS, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
6. NET INCOME PER COMMON SHARE
Effective February 28, 1998 the Company adopted SFAS No. 128. This
statement requires the presentation of both basic and diluted net income per
share for financial statement purposes. Basic net income per share is computed
by dividing income available to common stockholders by the weighted average
number of common shares outstanding. Diluted net income per share includes the
effect of the potential shares outstanding, including dilutive securities using
the treasury stock method. The table below reconciles the components of the
basic net income per share calculation to diluted net income per share (in
thousands, except per share data):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------------------------
AUGUST 31, 2000 AUGUST 31, 1999
------------------------- -------------------------
INCOME SHARES EPS INCOME SHARES EPS
------ ------ ----- ------ ------ -----
<S> <C> <C> <C> <C> <C> <C>
Basic net income per share:
Income available to common
stockholders before
extraordinary item........ $2,099 13,769 $0.15 $900 13,938 $0.06
Effect of dilutive securities:
Warrants..................... -- -- -- -- 22 --
Stock options................ -- 65 -- -- 47 --
------ ------ ----- ---- ------ -----
Diluted net income per share
before extraordinary item.... $2,099 13,834 $0.15 $900 14,007 $0.06
====== ====== ===== ==== ====== =====
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
------------------------------------------------------
AUGUST 31, 2000 AUGUST 31, 1999
------------------------- -------------------------
INCOME SHARES EPS INCOME SHARES EPS
------ ------ ----- ------ ------ -----
<S> <C> <C> <C> <C> <C> <C>
Basic net income per share:
Income available to common
stockholders before
extraordinary item........ $3,443 13,778 $0.25 $1,720 13,968 $0.12
Effect of dilutive securities:
Warrants..................... -- -- -- -- -- --
Stock options................ -- 75 -- -- 33 --
------ ------ ----- ------ ------ -----
Diluted net income per share
before extraordinary item.... $3,443 13,853 $0.25 $1,720 14,001 $0.12
====== ====== ===== ====== ====== =====
</TABLE>
7. COMMON STOCK REPURCHASE PROGRAM
The Company has announced a stock repurchase program whereby up to
1,000,000 shares of the Company's outstanding common stock may be repurchased by
CPH LLC. As of August 31, 2000, approximately 536,400 shares have been
repurchased under this program.
7
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
FORWARD-LOOKING INFORMATION IS SUBJECT TO RISK AND UNCERTAINTY
Certain statements in the financial discussion and analysis by management
contain "forward-looking" information (as defined in the Private Securities
Litigation Reform Act of 1995 and within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934,
as amended) that involves risk and uncertainty, including projections and
assumptions regarding the business environment in which the Company operates.
Actual future results and trends may differ materially depending on a variety of
factors, including the Company's successful execution of internal performance
strategies; changes in general national and regional economic conditions, such
as levels of employment, consumer confidence and income, availability to
homebuilders of financing for acquisitions, development and construction,
availability to homebuyers of permanent mortgages, interest rate levels, the
demand for housing and office space and commercial lease rates; supply levels of
land, labor and materials; difficulties in obtaining permits or approvals from
governmental authorities; difficulties in marketing homes; regulatory changes
and weather and other environmental uncertainties; competitive influences; and
the outcome of pending and future legal claims and proceedings.
RESULTS OF OPERATIONS -- GENERAL
As is noted in footnote 1 to the financial statements presented herein, the
Company is reporting its results on a consolidated basis with the results of CPH
LLC. References to the Company in this Item 2 are, unless the context indicates
otherwise, also references to CPH LLC. At the current time, all material
financing transactions and arrangements are incurred either by CPH LLC or by
project-specific entities.
The following table illustrates the actual and pro forma results of the
Company's operations for the three and six months ended August 31, 2000 and
1999. The pro forma results reflect the inclusion of the operating results of
the Company's unconsolidated joint ventures, including the portion attributable
to the Company's joint venture partners, and are used throughout this discussion
for comparative purposes wherever the phrase "pro forma" is utilized.
RESULTS OF OPERATIONS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------------------------------------------
AUGUST 31, 2000 AUGUST 31, 1999
------------------------------ ------------------------------
PRO FORMA WITH PRO FORMA WITH
CONSOLIDATED JOINT VENTURES CONSOLIDATED JOINT VENTURES
------------ -------------- ------------ --------------
<S> <C> <C> <C> <C>
Sales of homes and land................ $96,215 $104,242 $67,383 $76,351
Cost of sales.......................... 73,322 80,405 54,890 61,653
------- -------- ------- -------
Gross margin................. $22,893 $ 23,837 $12,493 $14,698
======= ======== ======= =======
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
----------------------------------------------------------------
AUGUST 31, 2000 AUGUST 31, 1999
------------------------------ ------------------------------
PRO FORMA WITH PRO FORMA WITH
CONSOLIDATED JOINT VENTURES CONSOLIDATED JOINT VENTURES
------------ -------------- ------------ --------------
<S> <C> <C> <C> <C>
Sales of homes and land................ $161,249 $189,371 $129,357 $149,228
Cost of sales.......................... 123,968 149,191 105,560 121,431
-------- -------- -------- --------
Gross margin................. $ 37,281 $ 40,180 $ 23,797 $ 27,797
======== ======== ======== ========
</TABLE>
Since the financial restructuring in October 1997, the Company, together
with its financial partners, has invested over $440 million in 12 new joint
ventures. The Company typically is required to fund a small percentage of the
capital requirements of each joint venture, which amount is included in
investments in and advances to unconsolidated joint ventures in the Company's
consolidated balance sheets.
8
<PAGE> 11
OPERATING DATA
The following table shows new home deliveries, lot deliveries, net new
orders and average sales prices for each of the Company's operations, including
unconsolidated joint ventures:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------------ ------------------------
AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31,
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
New homes delivered:
California....................... 18 8 22 29
Texas............................ 125 116 252 228
Nevada........................... 72 80 135 163
Arizona.......................... 51 97 115 173
Colorado......................... 48 -- 98 --
---------- ---------- ---------- --------
Subtotal...................... 314 301 622 593
Unconsolidated Joint Ventures
(California).................. 5 7 23 18
---------- ---------- ---------- --------
Total homes delivered.... 319 308 645 611
Lot deliveries..................... 501 341 530 347
---------- ---------- ---------- --------
Total homes and lots delivered..... 820 649 1,175 958
========== ========== ========== ========
Net new orders..................... 302 364 677 713
========== ========== ========== ========
Average home sales price:
California....................... $1,248,000 $1,027,000 $1,278,000 $821,000
Texas............................ 190,000 187,000 186,000 187,000
Nevada........................... 217,000 211,000 209,000 209,000
Arizona.......................... 175,000 146,000 159,000 145,000
Colorado......................... 200,000 -- 195,000 --
Combined......................... 271,000 221,000 263,000 230,000
</TABLE>
The following table shows backlog in units and dollars at August 31, 2000
and 1999 for each of the Company's operations, including unconsolidated joint
ventures:
<TABLE>
<CAPTION>
ENDING BACKLOG
--------------------------------------
AUGUST 31, 2000 AUGUST 31, 1999
----------------- -----------------
UNITS ($000S) UNITS ($000S)
----- -------- ----- --------
<S> <C> <C> <C> <C>
California..................................... 84 $128,500 37 $ 37,600
Texas.......................................... 265 65,000 263 52,200
Nevada......................................... 65 14,100 118 23,100
Arizona........................................ 99 15,500 145 19,400
Colorado....................................... 117 24,700 36 5,700
--- -------- --- --------
Total................................ 630 $247,800 599 $138,000
=== ======== === ========
</TABLE>
Second Quarter of Fiscal 2001 (ended August 31, 2000) Compared to Second
Quarter of Fiscal 2000 (ended August 31, 1999)
The Company reported net income of $2.6 million or $0.18 per share, in the
second quarter of fiscal 2001, as compared to net income of $1.1 million, or
$0.08 per share, in the second quarter of fiscal 2000. Net income included an
extraordinary gain of $445,000, or $0.03 per share, for the second quarter of
fiscal 2001, as compared to $200,000, or $0.02 per share for the second quarter
of fiscal 2000, as a result of the retirement of debt at less than face value.
Sales of homes and land including unconsolidated joint ventures were $104.2
million for the second quarter of fiscal 2001 compared to $76.4 million for the
second quarter of fiscal 2000. On a consolidated basis, sales of homes and land
increased to $96.2 million from $67.4 million for the respective quarters. These
9
<PAGE> 12
increases are due to an increase in home closings, as well as an increase in
Company's average sales price per home to $271,000 in the second quarter of
fiscal 2001 from $221,000 in the second quarter of fiscal 2000. Revenues for the
second quarter of fiscal 2001 also included approximately $13 million from a
single large land sale. Total home closings increased from 308 in the second
quarter of fiscal 2000 to 319 in the second quarter of fiscal 2001, including 7
and 5 homes, respectively, closed in unconsolidated joint ventures.
The Company's actual gross margin on home and lot closings increased to
23.8% for the second quarter of fiscal 2001 as compared to 18.5% for the second
quarter of fiscal 2000. The Company's pro forma gross margin on home and lot
closings also increased to 22.9% during the second quarter of fiscal 2001 as
compared to 19.3% for the second quarter of fiscal 2000. These increases are due
in part to stronger demand experienced in the Company's markets in the current
year.
Selling, general and administrative expense of $10.9 million for the second
quarter of fiscal 2001 increased $3.5 million or 47.4% as compared to the second
quarter of fiscal 2000. As a percentage of revenue, selling, general and
administrative expense increased from 11.0% to 11.3% between quarters, primarily
due to development and other activities undertaken in certain projects prior to
the generation of revenues.
Income (loss) from unconsolidated joint ventures decreased from income of
$516,000 in the second quarter of fiscal 2000 to a loss of $54,000 in the second
quarter of fiscal 2001. The Company was recording profit participation on the
older joint ventures which reported closings in fiscal 2000, while the profits
on the newer joint ventures with closings to date in fiscal 2001 are primarily
allocated to cover preferred return on the partners' invested capital during the
current period.
Interest and other income increased from $278,000 in the second quarter of
fiscal 2000 to $567,000 in the second quarter of fiscal 2001.
Minority interest of $1.1 million for the second quarter of fiscal 2001 and
$407,000 for the second quarter of fiscal 2000 primarily represents the share of
CPH LLC's income attributable to CHF.
Interest incurred was $6.8 million in the second quarter of fiscal 2001, as
compared to $5.5 million in the second quarter of fiscal 2000, while interest
expensed was $8.8 million during the second quarter of fiscal 2001, as compared
to $4.4 million in the second quarter of fiscal 2000.
The Company recorded a provision for income taxes of $524,000 in the second
quarter of fiscal 2001, as compared to $208,000 in the second quarter of fiscal
2000.
First Six Months of Fiscal 2001 (ended August 31, 2000) Compared to First Six
Months of Fiscal 2000 (ended August 31, 1999)
The Company reported net income of $4.8 million, or $0.35 per share, for
the first six months of fiscal 2001, as compared to $1.9 million, or $0.14 per
share, for the six months ended August 31, 1999. Net income included an
extraordinary gain of $1.4 million, or $0.10 per share, for the six months ended
August 31, 2000, as compared to $200,000, or $0.02 per share, for the six months
ended August 31, 1999, as a result of the retirement of debt at less than face
value.
Sales of homes and land including unconsolidated joint ventures were $189.4
million for the first six months of fiscal 2001 compared to $149.2 million for
the first six months of fiscal 2000. On a consolidated basis, sales of homes and
land increased from $129.4 million to $161.2 million for the respective
quarters. These increases are due to an increase in home closings from 611 units
to 645 units between periods, an increase in average sales price per unit from
$230,000 to $263,000 and the closing of certain land sales in the current year.
The Company's actual gross margin increased from 18.4% for the first six
months of fiscal 2000 to 23.1% for the first six months of fiscal 2001. The
Company's pro forma gross margin was 21.2% for the first six months of fiscal
2001 as compared to 18.6% for the first six months of fiscal 2000. The reason
for the increase in the gross margins between periods is due in part to stronger
demand in several of the Company's markets in the current year. The Company
closed a total of 23 homes in unconsolidated joint ventures in the six months
ended August 31, 2000, as compared to 18 homes during the first six months of
fiscal 2000.
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<PAGE> 13
Selling, general and administrative expense of $18.5 million for the first
six months of fiscal 2001 increased $4.9 million, or 36.3% as compared to the
first six months of fiscal 2000. As a percentage of revenue, selling, general
and administrative expense increased from 10.5% for the first six months of
fiscal 2000 to 11.5% for the first six months of fiscal 2001, primarily due to
development and other activities undertaken in certain projects prior to the
generation of revenues.
Income (loss) from unconsolidated joint ventures decreased from income of
$1.6 million in the first six months of fiscal 2000 to a loss of $43,000 for the
six months ended August 31, 2000. The Company was recording profit participation
on the older joint ventures which reported closings in fiscal 2000, while the
profits on the newer joint ventures with closings to date in fiscal 2001 are
primarily allocated to cover preferred return on the partners' invested capital
during the current period.
Interest and other income increased from $291,000 in the first six months
of fiscal 2000 to $1.0 million in the first six months of fiscal 2001.
Minority interest of $1.8 million and $893,000 for the six months ended
August 31, 2000 and 1999, respectively, primarily represents the share of CPH
LLC's income attributable to CHF.
Interest incurred for the first six months of fiscal 2001 was $13.0
million, as compared to $10.2 million for the first six months of fiscal 2000.
Interest expensed was $13.6 million for the first six months of fiscal 2001
compared to $8.9 million in the first six months of fiscal 2000.
The Company recorded a provision for income taxes of $860,000 for the first
six months of fiscal 2001, as compared to $534,000 for the first six months of
fiscal 2000.
LIQUIDITY AND CAPITAL RESOURCES
At the current time, all material financing transactions and arrangements
are incurred either by CPH LLC or by certain project specific entities. As of
August 31, 2000, the Company has in place several credit facilities totaling
$243 million (the "Facilities") with various bank lenders (the "Banks"), of
which $132 million was outstanding. The Facilities are secured by liens on
various completed or under construction homes and lots held by CPH LLC and
certain consolidated joint ventures. Pursuant to the Facilities, CPH LLC is
subject to certain covenants, which require, among other things, the maintenance
of a consolidated liabilities to net worth ratio, minimum liquidity, minimum net
worth and loss limitations, all as defined in the documents that evidence the
Facilities. At August 31, 2000, CPH LLC was in compliance with these covenants.
The Facilities also define certain events that constitute events of default. As
of August 31, 2000, no such event had occurred. Commitment fees are payable
annually on some of the Facilities.
Homebuilding activity is being financed out of CPH LLC cash, bank
financing, and the existing joint ventures, including joint ventures with
institutional investors, including CHF, the investor in CPH LLC. In addition,
development work undertaken in certain of the Company's joint ventures is
financed through various non-recourse lending arrangements. The Company
anticipates that it will continue to utilize both third party financing and
joint ventures to cover financing needs in excess of internally generated cash
flow.
In May, 1994 the Company completed the sale of $100 million of 12 3/4%
Senior Notes ("Senior Notes") including 790,000 warrants to purchase common
stock. The proceeds from the offering were used to repay certain debt of the
Company, acquire certain properties and for general working capital and
construction purposes. The obligations associated with the Senior Notes have
been transferred from the Company to CPH LLC. The Senior Notes mature in May,
2002. As of August 31, 2000, Senior Notes with a face value of $40.2 million
have been repurchased by the Company.
The indenture to which the Senior Notes are subject (the "Indenture")
contains restrictions on CPH LLC on the incurring of indebtedness, which affect
the availability of the Facilities based on various measures of the financial
performance of CPH LLC. Subject to such restrictions, the Facilities are
available to augment cash flow from operations and joint venture financing to
fund CPH LLC's operations.
11
<PAGE> 14
Management expects that cash flow generated from operations and from
additional financing permitted by the terms of the Indenture will be sufficient
to cover the debt service and to fund CPH LLC's current development and
homebuilding activities for the reasonably foreseeable future, and expects that
capital commitments from its joint venture partners and other bank facilities
will provide sufficient financing for the operation of its joint ventures.
MARKET RISK EXPOSURE
The "Market Risk Exposure" paragraphs are presented to provide an update
about material changes to the "Quantitative and Qualitative Disclosures about
Market Risk" paragraphs included in the Company's 2000 Annual Report on Form
10-K filed with the Securities and Exchange Commission and should be read in
conjunction with those paragraphs.
The Company is exposed to market risks related to fluctuations in interest
rates on its debt. The Company does not use interest rate swaps, forward or
option contracts on foreign currencies or commodities, or other types of
derivative financial instruments.
The Company uses debt financing primarily for the purpose of acquiring and
developing land and constructing and selling homes. Historically, the Company
has made short-term borrowings under its revolving credit facilities to fund
those expenditures. In addition, the Company has previously issued $100 million
in fixed-rate Senior Notes to provide longer-term financing. At August 31, 2000,
$59.8 million of the Senior Notes remain outstanding.
For fixed rate debt, changes in interest rates generally affect the fair
market value, but not the Company's earnings or cash flows. Conversely, for
variable rate debt, changes in interest rates generally do not impact fair
market value, but do affect the Company's future earnings and cash flows. The
Company does not have an obligation to prepay fixed rate debt prior to maturity,
and as a result, interest rate risk and changes in fair market value should not
have a significant impact on such debt until the Company would be required to
refinance such debt. Based upon the amount of variable rate debt outstanding at
the end of the current quarter, and holding the variable rate debt balance
constant, each one percentage point increase in interest rates occurring on the
first day of an annual period would result in an increase in interest incurred
for the coming year of approximately $1.3 million.
The Company does not believe that future market interest rate risks related
to its debt obligations will have a material impact on the Company's financial
position, results of operations or liquidity.
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<PAGE> 15
PART II -- OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Shareholders of the Company held on July 13, 2000,
the following directors were elected: Hadi Makarechian, Karlheinz M. Kaiser,
Allan L. Acree, William A. Funk and Paul P. Makarechian. 13,604,266 shares were
voted for the election of the named nominees for directors and 43,870 shares
were voted withholding authority for such nominees.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION METHOD OF FILING
------- ----------- ----------------
<C> <S> <C>
27 Financial Data Schedule............................ Filed with this document
</TABLE>
(b) Reports on Form 8-K
None Filed
13
<PAGE> 16
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.
Date: October 13, 2000 By: /s/ HADI MAKARECHIAN
------------------------------------
Hadi Makarechian
Chairman of the Board,
Chief Executive Officer and
President
(Principal Executive Officer)
Date: October 13, 2000 By: /s/ STEVEN O. SPELMAN, JR.
------------------------------------
Steven O. Spelman, Jr.
Chief Financial Officer and
Corporate Secretary
(Principal Financial Officer)
14
<PAGE> 17
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
27 Financial Data Schedule
</TABLE>
15
