<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 NOVEMBER 30, 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 DECEMBER 29, 2000
------------------ ------------------------
<S> <C>
Common Stock, $.10 Par Value 13,767,311
</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 -- November 30, 2000 and
February 29, 2000........................................... 1
Consolidated Statements of Income for the Three and Nine
Months Ended November 30, 2000 and 1999..................... 2
Consolidated Statements of Cash Flows for the Nine Months
Ended November 30, 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 6. Exhibits and Reports on Form 8-K............................ 12
</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>
NOVEMBER 30, FEBRUARY 29,
2000 2000
------------ ------------
(UNAUDITED)
<S> <C> <C>
Cash and cash equivalents................................... $ 6,787 $ 19,389
Restricted cash............................................. 857 1,373
Accounts and notes receivable............................... 13,667 22,862
Real estate projects........................................ 275,844 282,497
Property, plant and equipment............................... 8,106 8,536
Investment in and advances to unconsolidated joint
ventures.................................................. 18,259 15,379
Prepaid expenses and other assets........................... 15,781 8,245
--------- ---------
Total assets...................................... $ 339,301 $ 358,281
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued liabilities.................... $ 40,459 $ 39,600
Notes payable............................................... 129,030 125,809
Senior unsecured notes payable.............................. 55,592 88,392
--------- ---------
Total liabilities................................. 225,081 253,801
--------- ---------
Minority Interest........................................... 36,927 33,594
--------- ---------
Stockholders' equity:
Common stock, par value $.10 per share, 30,000,000 shares
authorized; 13,767,911 and 13,815,911 shares issued and
outstanding, respectively.............................. 1,500 1,500
Additional paid-in capital................................ 211,888 211,888
Accumulated deficit....................................... (132,580) (139,243)
Treasury stock............................................ (3,515) (3,259)
--------- ---------
Total stockholders' equity........................ 77,293 70,886
--------- ---------
Total liabilities and stockholders' equity........ $ 339,301 $ 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 NINE MONTHS ENDED
NOVEMBER 30, NOVEMBER 30,
------------------- -------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Sales of homes and land.............................. $84,583 $63,430 $245,832 $192,787
Cost of sales........................................ 63,145 49,293 187,113 154,853
------- ------- -------- --------
Gross margin.................................... 21,438 14,137 58,719 37,934
Income from unconsolidated joint ventures............ 56 315 13 1,867
Selling, general and administrative expenses......... (9,183) (7,077) (27,725) (20,684)
Interest expense..................................... (9,454) (5,950) (23,013) (14,836)
------- ------- -------- --------
Income from operations.......................... 2,857 1,425 7,994 4,281
Interest and other income, net....................... 364 207 1,376 498
Minority Interest.................................... (990) (508) (2,836) (1,401)
------- ------- -------- --------
Income before income taxes and extraordinary
item.......................................... 2,231 1,124 6,534 3,378
Provision for income taxes........................... 472 312 1,332 846
------- ------- -------- --------
Income before extraordinary item................ 1,759 812 5,202 2,532
Extraordinary gain for debt retired at less than face
value, net of minority interest and taxes.......... 71 -- 1,461 200
------- ------- -------- --------
Net income...................................... $ 1,830 $ 812 $ 6,663 $ 2,732
======= ======= ======== ========
Net income per share -- basic and diluted:
Income per share before extraordinary item......... $ 0.13 $ 0.06 $ 0.38 $ 0.18
Extraordinary gain for debt retired at less than
face value, net of minority interest and
taxes........................................... -- -- 0.10 0.02
------- ------- -------- --------
Net income per share............................... $ 0.13 $ 0.06 $ 0.48 $ 0.20
======= ======= ======== ========
Weighted average number of common shares --basic... 13,768 13,884 13,775 13,940
======= ======= ======== ========
Weighted average number of common
shares -- diluted............................... 13,904 13,884 13,885 13,957
======= ======= ======== ========
</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
NINE MONTHS ENDED
NOVEMBER 30,
--------------------
2000 1999
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................. $ 6,663 $ 2,732
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Gain on retirement of senior unsecured notes payable...... (1,461) (200)
Depreciation and amortization............................. 1,124 1,472
Change in restricted cash................................. 516 (222)
(Increase) decrease in real estate projects............... 6,653 (29,703)
Decrease in receivables, prepaid expenses and other
assets................................................. 1,197 6,446
Increase (decrease) in accounts payable and accrued
liabilities............................................ 494 (16,224)
Minority interest......................................... 2,836 1,514
-------- --------
Net cash provided by (used in) operating activities.... 18,022 (34,185)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment, net.................... (694) (674)
Contributions (distributions) to minority interest.......... (365) 106
Decrease in investment in and advances to unconsolidated
joint ventures............................................ (2,880) 7,992
-------- --------
Net cash provided by (used in) investing activities.... (3,939) 7,424
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings (payments) on notes payable, net................. 3,221 24,967
Retirement of senior unsecured notes payable................ (29,650) (1,770)
Repurchase of common stock and warrants..................... (256) (532)
-------- --------
Net cash provided by (used in) financing activities.... (26,685) 22,665
-------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS................... (12,602) (4,096)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 19,389 5,782
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 6,787 $ 1,686
======== ========
</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 nine month period ended November
30, 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 $103 million, $33 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 $766 million at November 30, 2000 in 61 residential and commercial
properties. At November 30, 2000, CPH LLC had $250 million in assets and a net
worth of $103 million. In addition, the Company has interests in unconsolidated
joint ventures which have total assets of $426 million and a combined net worth
of $352 million at November 30, 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 15 unconsolidated entities at November
30, 2000. The Company's net investment in and advances to unconsolidated
entities are as follows at November 30, 2000 and February 29, 2000 (in
thousands):
<TABLE>
<CAPTION>
NOVEMBER 30, FEBRUARY 29,
2000 2000
------------ ------------
<S> <C> <C>
JMP Canyon Estates, L.P. ........................... $ 162 $ 159
JMP Harbor View, L.P. .............................. 609 621
Grand Coto Estates, L.P. ........................... 480 (633)
M.P.E. Partners, L.P. .............................. 1,675 1,710
RPV Associates, LLC................................. 573 2,759
CPH Dana Point, LLC................................. 150 266
CPH Monarch Beach, LLC.............................. 519 445
CPH Resorts I, LLC.................................. 7,660 4,700
CPH Vista Palisades, LLC............................ 418 435
Atlanta Huntington Beach, LLC....................... 743 1,259
CPH Dos Pueblos, LLC................................ 4,416 3,595
CPH Airport Office Building, LLC.................... 2 7
CPH Redhill Office Building, LLC.................... 41 56
LB/L-CPH Providence, LLC............................ 600 --
CPH Orange Office Building, LLC..................... 211 --
------- -------
$18,259 $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 November 30, 2000 and February 29, 2000 and for the
three and nine month periods ended November 30, 2000 and November 30, 1999 (in
thousands):
ASSETS
<TABLE>
<CAPTION>
NOVEMBER 30, FEBRUARY 29,
2000 2000
------------ ------------
<S> <C> <C>
Cash................................................ $ 5,120 $ 11,225
Real estate projects................................ 361,351 281,402
Commercial buildings................................ 24,455 21,071
Other assets........................................ 35,464 31,281
-------- --------
$426,390 $344,979
======== ========
</TABLE>
LIABILITIES AND EQUITY
<TABLE>
<CAPTION>
NOVEMBER 30, FEBRUARY 29,
2000 2000
------------ ------------
<S> <C> <C>
Accounts payable and other liabilities.............. $ 40,138 $ 25,724
Notes payable....................................... 33,911 37,722
-------- --------
74,049 63,446
-------- --------
Equity.............................................. 352,341 281,533
-------- --------
$426,390 $344,979
======== ========
</TABLE>
INCOME STATEMENT
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
---------------------------- ----------------------------
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Sales of homes and
land.................. $11,577 $2,272 $39,699 $22,143
Interest and other
income, net........... 4,437 3,258 10,198 8,196
------- ------ ------- -------
16,014 5,530 49,897 30,339
Costs and expenses...... 8,529 3,860 40,629 25,791
------- ------ ------- -------
Net income............ $ 7,485 $1,670 $ 9,268 $ 4,548
======= ====== ======= =======
</TABLE>
5. NOTES PAYABLE
Notes payable at November 30, 2000 and February 29, 2000, are summarized as
follows (in thousands):
<TABLE>
<CAPTION>
NOVEMBER 30, FEBRUARY 29,
2000 2000
------------ ------------
<S> <C> <C>
Notes payable to banks, including interest varying from
LIBOR plus two to thirteen percent, maturing between
February 9, 2001 and February 3, 2003, secured by certain
real estate projects on a non-recourse basis.............. $104,785 $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............................................ 20,462 19,281
Other....................................................... 3,783 577
-------- --------
$129,030 $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
------------------------------------------------------
NOVEMBER 30, 2000 NOVEMBER 30, 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.............................. $1,759 13,768 $0.13 $812 13,884 $0.06
Effect of dilutive securities:
Warrants............................. -- -- -- -- -- --
Stock options........................ -- 136 -- -- -- --
------ ------ ----- ---- ------ -----
Diluted net income per share before
extraordinary item................... $1,759 13,904 $0.13 $812 13,884 $0.06
====== ====== ===== ==== ====== =====
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
------------------------------------------------------
NOVEMBER 30, 2000 NOVEMBER 30, 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.............................. $5,202 13,775 $0.38 $2,532 13,940 $0.18
Effect of dilutive securities:
Warrants............................. -- -- -- -- -- --
Stock options........................ -- 110 -- -- 17 --
------ ------ ----- ------ ------ -----
Diluted net income per share before
extraordinary item................... $5,202 13,885 $0.38 $2,532 13,957 $0.18
====== ====== ===== ====== ====== =====
</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 November 30, 2000, approximately 537,600 shares have been
repurchased under this program. In addition, the Company has repurchased 176,739
of the warrants originally issued in connection with the issuance of the Senior
Notes.
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 nine months ended November 30, 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
----------------------------------------------------------------
NOVEMBER 30, 2000 NOVEMBER 30, 1999
------------------------------ ------------------------------
PRO FORMA WITH PRO FORMA WITH
CONSOLIDATED JOINT VENTURES CONSOLIDATED JOINT VENTURES
------------ -------------- ------------ --------------
<S> <C> <C> <C> <C>
Sales of homes and land....... $84,583 $96,160 $63,430 $65,702
Cost of sales................. 63,145 70,350 49,293 49,785
------- ------- ------- -------
Gross margin........ $21,438 $25,810 $14,137 $15,917
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
----------------------------------------------------------------
NOVEMBER 30, 2000 NOVEMBER 30, 1999
------------------------------ ------------------------------
PRO FORMA WITH PRO FORMA WITH
CONSOLIDATED JOINT VENTURES CONSOLIDATED JOINT VENTURES
------------ -------------- ------------ --------------
<S> <C> <C> <C> <C>
Sales of homes and land....... $245,832 $285,531 $192,787 $214,930
Cost of sales................. 187,113 216,541 154,853 171,216
-------- -------- -------- --------
Gross margin........ $ 58,719 $ 68,990 $ 37,934 $ 43,714
======== ======== ======== ========
</TABLE>
Since the financial restructuring in October 1997, the Company, together
with its financial partners, has invested over $500 million in 13 new joint
ventures. The Company typically is required to fund a small percentage of the
capital requirements of each joint venture, typically approximately one percent,
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 NINE MONTHS ENDED
---------------------------- ----------------------------
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
New homes delivered:
California.................... 20 12 42 41
Texas......................... 88 113 340 341
Nevada........................ 46 87 181 250
Arizona....................... 50 67 165 240
Colorado...................... 46 9 144 9
---------- ---------- ---------- --------
Subtotal................... 250 288 872 881
Unconsolidated Joint Ventures
(California)............... 10 3 33 21
---------- ---------- ---------- --------
Total homes
delivered........... 260 291 905 902
Lot deliveries.................. 133 -- 663 347
---------- ---------- ---------- --------
Total homes and lots
delivered........... 393 291 1,568 1,249
========== ========== ========== ========
Net new orders.................. 290 380 967 1,093
========== ========== ========== ========
Average home sales price:
California.................... $1,370,000 $1,087,000 $1,315,000 $886,000
Texas......................... 222,000 186,000 195,000 187,000
Nevada........................ 204,000 191,000 208,000 203,000
Arizona....................... 162,000 148,000 160,000 145,000
Colorado...................... 222,000 211,000 204,000 211,000
Combined...................... 340,000 226,000 285,000 229,000
</TABLE>
The following table shows backlog in units and dollars at November 30, 2000
and 1999 for each of the Company's operations, including unconsolidated joint
ventures:
<TABLE>
<CAPTION>
ENDING BACKLOG
--------------------------------------
NOVEMBER 30, 2000 NOVEMBER 30, 1999
----------------- -----------------
UNITS ($000S) UNITS ($000S)
----- -------- ----- --------
<S> <C> <C> <C> <C>
California............................. 93 $129,500 58 $ 61,200
Texas.................................. 272 70,000 280 55,300
Nevada................................. 50 13,000 124 25,700
Arizona................................ 101 14,900 137 19,200
Colorado............................... 144 22,000 89 15,400
--- -------- --- --------
Total........................ 660 $249,400 688 $176,800
=== ======== === ========
</TABLE>
THIRD QUARTER OF FISCAL 2001 (ENDED NOVEMBER 30, 2000) COMPARED TO THIRD QUARTER
OF FISCAL 2000 (ENDED NOVEMBER 30, 1999)
The Company reported net income of $1.8 million or $0.13 per share, in the
third quarter of fiscal 2001, as compared to net income of $812,000, or $0.06
per share, in the third quarter of fiscal 2000. Net income included an
extraordinary gain of $71,000 for the third quarter of fiscal 2001, as a result
of the retirement of debt at less than face value.
Sales of homes and land including unconsolidated joint ventures were $96.2
million for the third quarter of fiscal 2001 compared to $65.7 million for the
third quarter of fiscal 2000. On a consolidated basis, sales of homes and land
increased to $84.6 million from $63.4 million for the respective quarters. These
increases are
9
<PAGE> 12
due to an increase in unit closings, as well as an increase in Company's average
sales price per home to $340,000 in the third quarter of fiscal 2001 from
$226,000 in the third quarter of fiscal 2000. Total home closings decreased from
291 in the third quarter of fiscal 2000 to 260 in the third quarter of fiscal
2001, including 3 and 10 homes, respectively, closed in unconsolidated joint
ventures. Revenues were supplemented by the delivery of 133 lots in the third
quarter of fiscal 2001, reflecting additional revenues of $3.3 million.
The Company's actual gross margin on home and lot closings increased to
25.3% for the third quarter of fiscal 2001 as compared to 22.3% for the third
quarter of fiscal 2000. The Company's pro forma gross margin on home and lot
closings also increased to 26.8% during the third quarter of fiscal 2001 as
compared to 24.2% for the third 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 $9.2 million for the third
quarter of fiscal 2001 increased $2.1 million or 29.8% as compared to the third
quarter of fiscal 2000. As a percentage of revenue, selling, general and
administrative expense decreased slightly from 11.2% to 10.9% between quarters.
Income from unconsolidated joint ventures decreased from $315,000 in the
third quarter of fiscal 2000 to $56,000 in the third 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.
Interest and other income increased from $207,000 in the third quarter of
fiscal 2000 to $364,000 in the third quarter of fiscal 2001.
Minority interest of $990,000 for the third quarter of fiscal 2001 and
$508,000 for the third quarter of fiscal 2000 primarily represents the share of
CPH LLC's income attributable to CHF.
Interest incurred was $6.6 million in the third quarter of fiscal 2001, as
compared to $6.6 million in the third quarter of fiscal 2000, while interest
expensed was $9.5 million during the third quarter of fiscal 2001, as compared
to $6.0 million in the third quarter of fiscal 2000.
The Company recorded a provision for income taxes of $472,000 in the third
quarter of fiscal 2001, as compared to $312,000 in the third quarter of fiscal
2000.
FIRST NINE MONTHS OF FISCAL 2001 (ENDED NOVEMBER 30, 2000) COMPARED TO FIRST
NINE MONTHS OF FISCAL 2000 (ENDED NOVEMBER 30, 1999)
The Company reported net income of $6.7 million, or $0.48 per share, for
the first nine months of fiscal 2001, as compared to $2.7 million, or $0.20 per
share, for the nine months ended November 30, 1999. Net income included an
extraordinary gain of $1.5 million, or $0.10 per share, for the nine months
ended November 30, 2000, as compared to $200,000, or $0.02 per share, for the
nine months ended November 30, 1999, as a result of the retirement of debt at
less than face value.
Sales of homes and land including unconsolidated joint ventures were $285.5
million for the first nine months of fiscal 2001 compared to $214.9 million for
the first nine months of fiscal 2000. On a consolidated basis, sales of homes
and land increased from $192.8 million to $245.8 million for the respective
quarters. These increases are due to an increase in home closings from 902 units
to 905 units between periods, an increase in average sales price per unit from
$229,000 to $285,000 and the closing of certain land sales in the current year.
The Company closed a total of 33 homes in unconsolidated joint ventures in the
nine months ended November 30, 2000, as compared to 21 homes during the first
nine months of fiscal 2000.
The Company's actual gross margin increased from 19.7% for the first nine
months of fiscal 2000 to 23.9% for the first nine months of fiscal 2001. The
Company's pro forma gross margin was 24.2% for the first nine months of fiscal
2001 as compared to 20.3% for the first nine 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.
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Selling, general and administrative expense of $27.7 million for the first
nine months of fiscal 2001 increased $7.0 million, or 34.0% as compared to the
first nine months of fiscal 2000. As a percentage of revenue, selling, general
and administrative expense increased from 10.7% for the first nine months of
fiscal 2000 to 11.3% for the first nine months of fiscal 2001, primarily due to
development and other activities undertaken in certain projects prior to the
generation of revenues.
Income from unconsolidated joint ventures decreased from $1.9 million in
the first nine months of fiscal 2000 to $13,000 for the nine months ended
November 30, 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.
Interest and other income increased from $498,000 in the first nine months
of fiscal 2000 to $1.4 million in the first nine months of fiscal 2001.
Minority interest of $2.8 million and $1.4 million for the nine months
ended November 30, 2000 and 1999, respectively, primarily represents the share
of CPH LLC's income attributable to CHF.
Interest incurred for the first nine months of fiscal 2001 was $19.6
million, as compared to $16.8 million for the first nine months of fiscal 2000.
Interest expensed was $23.0 million for the first nine months of fiscal 2001
compared to $14.8 million in the first nine months of fiscal 2000.
The Company recorded a provision for income taxes of $1.3 million for the
first nine months of fiscal 2001, as compared to $846,000 for the first nine
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
November 30, 2000, the Company has in place several credit facilities totaling
$246 million (the "Facilities") with various bank lenders (the "Banks"), of
which $125 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 November 30, 2000, CPH LLC and the consolidated joint ventures
were in compliance with these covenants. The Facilities also define certain
events that constitute events of default. As of November 30, 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 November 30, 2000, Senior Notes with a face value of $44.4 million
have been repurchased by the Company. In addition, 176,739 warrants have been
repurchased.
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.
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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 November 30,
2000, $55.6 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 $1.2 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.
PART II -- OTHER INFORMATION
ITEM 5. OTHER INFORMATION
CHF filed with the SEC an amendment to its Schedule 13D on November 7, 2000
to reflect its interest in acquiring, in exchange for a reduction in its
holdings in CPH, LLC, the Company's interests in the majority of the
unconsolidated entities listed in footnote 4 to the financial statements
included in Item 1 of this report. Discussions between the Company and CHF are
ongoing with respect to CHF's expression of interest. There can be no assurance
that any transaction will be entered into. If such a transaction is entered
into, the Company will make a separate detailed disclosure at the appropriate
time.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None Filed
(b) Reports on Form 8-K
None Filed
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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.
<TABLE>
<S> <C>
Date: January 16, 2001 By: /s/ HADI MAKARECHIAN
----------------------------------------------------
Hadi Makarechian
Chairman of the Board,
Chief Executive Officer and President
(Principal Executive Officer)
Date: January 16, 2001 By: /s/ STEVEN O. SPELMAN, JR.
----------------------------------------------------
Steven O. Spelman, Jr.
Chief Financial Officer and Corporate Secretary
(Principal Financial Officer)
</TABLE>
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