<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-18001
THE PRESLEY COMPANIES
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
DELAWARE
(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION)
33-0475923
(I.R.S. EMPLOYER IDENTIFICATION NUMBER)
19 CORPORATE PLAZA
NEWPORT BEACH, CALIFORNIA 92660
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (714) 640-6400
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
- --------------------------------------------- ---------------------------------------------
<S> <C>
SERIES A COMMON STOCK, PAR VALUE $.01 PER NEW YORK STOCK EXCHANGE
SHARE
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
Indicate by check mark whether registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of March 6, 1997 was $10,213,750. (This calculation assumes
that all officers and directors of the Company are affiliates.)
The number of shares of Series A and Series B Common Stock outstanding as
of March 6, 1997 was 17,838,535 and 34,357,143, respectively.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of registrant's Proxy Statement for the Annual Meeting of Holders
of Series A Common Stock to be held on May 14, 1997 are incorporated herein by
reference into Part III.
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<PAGE> 2
THE PRESLEY COMPANIES
INDEX
<TABLE>
<CAPTION>
PAGE NO.
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<S> <C> <C>
PART I
Item 1. Business................................................................. 1
Item 2. Properties............................................................... 9
Item 3. Legal Proceedings........................................................ 9
Item 4. Submission of Matters to a Vote of Security Holders...................... 9
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters............................................................... 10
Item 6. Selected Financial Data.................................................. 11
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations......................................................... 12
Item 8. Financial Statements and Supplementary Data.............................. 19
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure............................................................ 20
PART III
Item 10. Directors and Executive Officers of the Registrant....................... 20
Item 11. Executive Compensation................................................... 20
Item 12. Security Ownership of Certain Beneficial Owners and Management........... 20
Item 13. Certain Relationships and Related Transactions........................... 20
PART IV
Item 14. Exhibits, Consolidated Financial Statement Schedules and Reports on Form
8-K................................................................... 21
Index to Consolidated Financial Statements............................... F-1
</TABLE>
<PAGE> 3
PART I
ITEM 1. BUSINESS
GENERAL
The Presley Companies ("Presley" or the "Company") is primarily engaged in
designing, constructing and selling single family detached and attached homes in
California, Arizona, New Mexico and Nevada. Since its founding in 1956, Presley
has sold over 40,000 homes. The Company believes that it was one of the largest
homebuilders in California in terms of both sales and homes delivered in 1996.
Approximately 70% of the Company's home closings were derived from its
California operations. In 1996, the Company had consolidated revenues of $319.0
million and delivered 1,838 homes. Beginning in early 1996, the Company's
homebuilding operations are conducted under the name Presley Homes.
The Company designs, constructs and sells a wide range of homes designed to
meet the specific needs of each of its markets, although it primarily emphasizes
sales to the entry-level and move-up home buyer markets. The Company currently
markets its homes through 22 sales locations in its eight master-planned
communities and 24 sales locations at its other projects. In 1996, the average
sales price for homes delivered was $173,000, with homes priced from $86,000 to
$453,000.
The Company currently owns approximately 5,554 lots and controls an
additional 460 lots on which to construct homes. Substantially all lots are
entitled and approximately 57% are located in the Company's eight master-planned
communities. Prior to 1994, the Company had focused on the development of
master-planned communities as a source of supply of developed lots for its
homebuilding operations. As used in this Annual Report on Form 10-K, "entitled"
land has a Development Agreement and/or Vesting Tentative Map, or a final
recorded plat or map from the appropriate county or city government. Development
Agreements and Vesting Tentative Maps generally provide for the right to develop
the land in accordance with the provisions of the Development Agreement or
Vesting Tentative Map unless an issue arises concerning health, safety or
general welfare. Development of master-planned communities, which generally
takes five to fifteen years from the date of initial land acquisition to
completion, includes selecting sites and acquiring large parcels of undeveloped
land, obtaining all necessary government approvals to build, and developing
land, infrastructure and finished lots. The Company estimates that its current
inventory of land is adequate to supply its homebuilding operations at current
operating levels for approximately two years.
Beginning in 1994, the Company's land acquisition strategy, to the extent
permitted by the Company's financing arrangements, has been to undertake
projects with shorter life-cycles in order to reduce development and market risk
while maintaining an inventory of lots sufficient for construction of homes over
a two or three year period. As part of this strategy, the Company's current
plans are to: (i) acquire and develop parcels of land with up to approximately
300 lots, (ii) expand its homebuilding operations in the Southwest, particularly
in Phoenix, Arizona and Albuquerque, New Mexico where the Company has had, at
various times, a significant market presence, and in Nevada, where the Company
entered the market in 1995 and (iii) continue to evaluate opportunities in land
development and master-planned communities with the intention that any such
projects would be funded in significant part by sources other than the Company.
The Company will continue to utilize its current inventory of lots and
future land acquisitions to conduct its operating strategy which consists of:
(i) offering a diverse product line at a variety of prices to suit a wide range
of consumer tastes, (ii) limiting completed housing inventory exposure, (iii)
emphasizing well-designed cost-effective products, (iv) utilizing market
research to allow for a quick response to local market conditions, (v)
maintaining budget and control systems to facilitate effective cost controls and
(vi) using extensive marketing and sales efforts.
The Company had total revenues from operations of $319.0 million, $285.5
million and $270.2 million for the years ended December 31, 1996, 1995 and 1994,
respectively. Homes closed by the Company were 1,838, 1,425 and 1,442 for the
years ended December 31, 1996, 1995 and 1994, respectively.
Presley's operations are dependent to a significant extent on debt
financing. The Company's principal credit sources are 12 1/2% Senior Notes, a
Working Capital Facility and various Joint Venture Facilities. The Company filed
with the Securities and Exchange Commission a Registration Statement on Form S-1
for the
1
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sale of $200.0 million of 12 1/2% Senior Notes which became effective on June
23, 1994. The offering closed on June 29, 1994 and was fully subscribed and
issued. The Working Capital Facility is a revolving line of credit facility with
a maximum commitment of $72.0 million. The Working Capital Facility is secured
by substantially all of the Company's assets. At December 31, 1996, the
outstanding principal amount under the Working Capital Facility was $12.0
million. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Financial Condition and Liquidity" and Notes 2 and 5 of
"Notes to Consolidated Financial Statements."
The Company's principal executive offices are located at 19 Corporate
Plaza, Newport Beach, California 92660 and its telephone number is (714)
640-6400. The Company was incorporated in the State of Delaware on August 7,
1991.
THE COMPANY'S MARKETS
The Company is currently operating through five geographic regions: the
Southern California Region, the Northern California Region, the New Mexico
Region, the Arizona Region and the Nevada Region. Larger regions have area
offices which allow for closer management of a diverse geographical market
within a region. Each of the regions/areas has responsibility for the Company's
homebuilding and development operations as well as new land acquisitions within
the geographic boundaries of the region/area.
The following table sets forth sales from real estate operations
attributable to each of Presley's homebuilding regions during the preceding
three fiscal years:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
(DOLLARS IN THOUSANDS)
----------------------------------------------------------
1996 1995 1994
---------------- ---------------- ----------------
DOLLAR % OF DOLLAR % OF DOLLAR % OF
AMOUNT TOTAL AMOUNT TOTAL AMOUNT TOTAL
-------- ----- -------- ----- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Southern California(1)......... $168,952 53% $183,442 64% $180,035 67%
Northern California(2)......... 68,100 21% 84,943 30% 71,512 26%
Arizona(3)..................... 57,065 18% 2,778 1% 3,015 1%
New Mexico(4).................. 16,180 5% 14,342 5% 14,306 5%
Nevada(5)...................... 8,700 3% -- 0% -- 0%
Illinois(6).................... -- 0% -- 0% 1,300 1%
-------- --- -------- --- -------- ---
$318,997 100% $285,505 100% $270,168 100%
======== === ======== === ======== ===
</TABLE>
- ---------------
(1) The Southern California Region consists of operations in Los Angeles,
Orange, Riverside, San Bernardino and San Diego Counties.
(2) The Northern California Region consists of operations in Alameda, Contra
Costa, El Dorado, Sacramento and San Joaquin Counties.
(3) The Arizona Region consists of operations in Phoenix and Tucson, Arizona.
(4) The New Mexico Region consists of operations in Albuquerque and Santa Fe,
New Mexico.
(5) The Nevada Region consists of operations in the Las Vegas area.
(6) Operations in Illinois have been discontinued and are in the process of
winding down.
2
<PAGE> 5
HOMEBUILDING
The Company currently has a wide variety of product lines which enables it
to meet the specific needs of each of its markets. The Company's products
include entry-level, move-up and luxury homes and lots for custom homes,
although it primarily emphasizes sales to the entry-level and move-up home
markets. The Company believes that this diversified product strategy enables it
to mitigate some of the risks inherent in the homebuilding industry and to meet
a variety of market conditions. In order to reduce exposure to local market
conditions, the Company's sales locations are geographically dispersed. The
Company currently has 46 sales locations, including 22 in its master-planned
communities and 24 at its other projects.
Because the decision as to which product to develop is based on the
Company's assessment of market conditions and the restrictions imposed by
government regulations, homestyles and sizes vary from project to project. The
Company's attached housing ranges in size from 761 to 1,634 square feet, and the
Company's detached housing ranges from 814 to 3,924 square feet.
Due to Presley's product and geographic diversification strategy, the
prices of Presley's homes also vary substantially. Prices for Presley's attached
housing range from approximately $93,000 to $209,000 and prices for detached
housing range from approximately $86,000 to $453,000. The average sales price of
Presley's homes for the year ended December 31, 1996 was $173,000.
The Company generally standardizes and limits the number of home designs
within any given product line. This standardization permits on-site mass
production techniques and bulk purchasing of materials and components, thus
enabling the Company to better control and sometimes reduce construction costs.
Presley contracts with a number of architects and other consultants who are
involved in the design process of Presley homes. Designs are constrained by
zoning requirements, building codes, energy efficiency laws and local
architectural guidelines, among other factors. Engineering, landscaping,
master-planning and environmental impact analysis work are subcontracted to
independent firms which are familiar with local requirements.
Substantially all construction work is done by subcontractors with Presley
acting as the general contractor. The Company manages subcontractor activities
with on-site supervisory employees and management control systems. The Company
does not have long-term contractual commitments with its subcontractors or
suppliers. However, the Company generally has been able to obtain sufficient
materials and subcontractors during times of material shortages. The Company
believes its relationships with its suppliers and subcontractors are good.
DESCRIPTION OF PROJECTS
During the year ended December 31, 1996 approximately 60% of the homes
closed by the Company were in the Company's eight master-planned communities.
Presley's master-planned communities usually involve the development of hundreds
of acres of raw land into a large community providing homeowners with the
opportunity for employment, recreation, shopping and education within the
community or in close proximity to it. The homes within these communities
include a wide variety of detached and attached entry-level, move-up and luxury
homes, and may also contain apartments. Within these communities Presley also
may sell individual lots for custom homes, multiple lots for construction of
homes by other builders and parcels for commercial, industrial and apartment
development. These communities typically offer a variety of recreational
amenities which may include golf courses, equestrian centers, tennis courts and
swimming pools, among others.
The Company's master-planned communities normally take five to fifteen
years to complete depending on the project's size, economic conditions
prevailing at the time, geological conditions at the site and the Company's
strategy for the particular project. Presley's other homebuilding projects
usually take two to five years to develop. Substantially all of the Company's
master-planned communities are in the later stages of land development.
3
<PAGE> 6
The following table presents information by region relating to the
Company's existing projects.
<TABLE>
<CAPTION>
UNITS LOTS HOMES CLOSED
ESTIMATED CLOSED REMAINING FOR YEAR BACKLOG
YEAR OF NUMBER OF AS OF AS OF ENDED AT
PROJECT (COUNTY) FIRST HOMES AT DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, SALES PRICE
PRODUCT DELIVERY COMPLETION(1) 1996 1996 1996 1996(2)(4) RANGE(3)
- ------------------------- --------- ------------- ------------ ------------ ------------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
SOUTHERN CALIFORNIA
Sun Lakes Country Club (Riverside County)
Previously Closed
Products 1987 278 278 0 0 0
Patio-Legend 1987 582 580 2 20 1 $101,900-138,900
Single Family-Resort 1987 817 813 4 18 3 $108,900-154,900
Villa Duplexes 1990 176 166 10 19 0 $ 97,900-124,900
Classic Series 1991 117 117 0 15 0 $163,000-228,000
Veranda 1994 25 20 5 10 1 $ 89,990-125,990
Executive Series 1995 357 44 313 36 4 $108,900-135,900
Promenade 1996 326 4 322 4 2 $112,900-124,900
Atrium 1996 406 9 397 9 1 $134,900-150,900
Terrace 1996 333 3 330 3 2 $160,900-184,900
------ ------ ----- ----- ---
3,417 2,034 1,383 134 14
------ ------ ----- ----- ---
Bridlevale (Riverside County)
Previously Closed
Products 1992 377 377 0 0 0
Country Glen 1992 142 139 3 43 1 $ 95,900-119,900
Sutter Ridge 1995 134 118 16 66 3 $122,900-169,900
------ ------ ----- ----- ---
653 634 19 109 4
------ ------ ----- ----- ---
Horsethief Canyon Ranch (Riverside County)
Cherington 1989 245 245 0 1 0 $116,900-134,900
Prescott 1989 285 285 0 2 0 $109,900-125,900
Springfield 1990 317 317 0 2 0 $ 99,900-119,900
Series "400" 1995 737 40 697 40 6 $110,900-151,900
Series "500" 1995 380 33 347 33 9 $156,400-176,400
------ ------ ----- ----- ---
1,964 920 1,044 78 15
------ ------ ----- ----- ---
Hidden Springs (Riverside County)
Summit 1989 245 245 0 18 0 $ 96,900-149,900
------ ------ ----- ----- ---
Discovery Hills (San Diego County)
Previously Closed
Products 1991 343 343 0 0 0
Glen Arbor 1993 269 237 32 56 10 $153,900-187,900
Woodwind 1994 122 110 12 56 1 $133,900-147,900
Discovery Meadows 1997 143 0 143 0 0 $149,000-162,000
------ ------ ----- ----- ---
877 690 187 112 11
------ ------ ----- ----- ---
Carmel Mountain Ranch (San Diego County)
Previously Closed
Products 1986 4,664 4,664 0 0 0
Collage 1992 260 260 0 13 0 $115,900-140,900
Windham 1994 120 120 0 46 0 $126,900-179,900
Unit 23A 1997 114 0 114 0 0 $200,000-223,000
Unit 23B 1997 86 0 86 0 0 $239,000-279,500
------ ------ ----- ----- ---
5,244 5,044 200 59 0
------ ------ ----- ----- ---
The Highlands (Orange County)
Previously Closed
Products 1989 864 864 0 0 0
Viewpointe North 1992 252 252 0 3 0
Skyline 1992 145 144 1 15 1 $245,000-285,000
Sunset 1992 216 216 0 4 0 $194,900-239,900
New Viewpointe North 1992 104 69 35 69 19 $135,000-174,000
Monaco 1995 408 281 127 125 16 $ 93,000-155,000
Legacy 1995 84 51 33 40 2 $375,000-440,000
Canyon Crest 1995 98 74 24 52 3 $239,900-271,900
Canyon Ridge 1996 69 40 29 40 4 $275,000-315,000
------ ------ ----- ----- ---
2,240 1,991 249 348 45
------ ------ ----- ----- ---
Beltierra (Los Angeles County)
Andora 1991 233 232 1 29 0 $ 92,500-114,500
Cantora 1991 125 125 0 6 0 $ 85,990-115,900
Solana 1991 100 100 0 2 0 $129,990-169,990
Las Brisas 1995 185 73 112 73 5 $100,000-140,000
------ ------ ----- ----- ---
643 530 113 110 5
------ ------ ----- ----- ---
</TABLE>
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<TABLE>
<CAPTION>
UNITS LOTS HOMES CLOSED
ESTIMATED CLOSED REMAINING FOR YEAR BACKLOG
YEAR OF NUMBER OF AS OF AS OF ENDED AT
PROJECT (COUNTY) FIRST HOMES AT DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, SALES PRICE
PRODUCT DELIVERY COMPLETION(1) 1996 1996 1996 1996(2)(4) RANGE(3)
- ------------------------- --------- ------------- ------------ ------------ ----- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Boardwalk - Huntington
Beach - (Orange County) 1996 58 27 31 27 10 $280,000-330,000
------ ------ ----- ----- ---
Park Place - Huntington
Beach - (Orange County) 1996 58 17 41 17 6 $280,000-330,000
------ ------ ----- ----- ---
North Park - Valencia -
(Los Angeles County) 1996 48 0 48 0 3 $221,990-236,900
------ ------ ----- ----- ---
Sycamore Ranch -
Fallbrook - (Riverside
County) 1997 285 0 285 0 0
------ ------ ----- ----- ---
Carey Ranch - Sylmar -
(Los Angeles County) 1997 138 0 138 0 0
------ ------ ----- ----- ---
Other Projects 300 0 300 0 0
------ ------ ----- ----- ---
SOUTHERN CALIFORNIA REGION
TOTAL 16,170 12,132 4,038 1,012 113
====== ====== ===== ===== ===
NORTHERN CALIFORNIA
Oakhurst Country Club (Contra Costa County)
Black Diamond 1989 226 225 1 0 0
Windmill Canyon 1989 259 259 0 8 0 $274,000-314,000
Chaparral Springs 1990 169 169 0 0 0
Eagle Peak 1991 130 130 0 19 0 $324,000-404,000
Falcon Ridge 1996 145 15 130 15 6 $314,500-373,500
Diablo Ridge 1994 136 115 21 55 9 $154,900-209,000
Oak Hollow 1994 143 136 7 53 1 $230,900-270,900
Peacock Creek 1996 110 3 107 3 3 $388,000-453,000
------ ------ ----- ----- ---
1,318 1,052 266 153 19
Prominence (Alameda
County) 1991 151 132 19 32 5 $355,000-428,000
------ ------ ----- ----- ---
Laurel Creek
(Alameda County) 1997 100 0 100 0 0
------ ------ ----- ----- ---
Twin Cities Heritage
(Sacramento County) 1992 107 103 4 17 3 $118,000-154,000
------ ------ ----- ----- ---
Twin Cities Mill Creek
(Sacramento County) 1996 116 12 104 12 8 $109,900-129,900
------ ------ ----- ----- ---
Country Club Village
(Sacramento County) 1992 106 106 0 2 0
------ ------ ----- ----- ---
Mira Lago
(Sacramento County) 1995 57 38 19 33 2 $179,900-239,900
------ ------ ----- ----- ---
Marina Woods
(El Dorado County) 1996 79 29 50 29 13 $243,900-292,900
------ ------ ----- ----- ---
NORTHERN CALIFORNIA REGION
TOTAL 2,034 1,472 562 278 50
====== ====== ===== ===== ===
ARIZONA
Settler's Point
(Maricopa County) 1995 103 65 38 63 7 $125,900-156,900
------ ------ ----- ----- ---
McDowell Mt. Ranch
(Maricopa County) 1995 75 70 5 60 2 $195,900-234,700
------ ------ ----- ----- ---
Tatum Highlands 14
(Maricopa County) 1995 125 101 24 100 14 $116,400-143,900
------ ------ ----- ----- ---
Tatum Highlands 17
(Maricopa County) 1995 87 50 37 49 9 $143,600-188,100
------ ------ ----- ----- ---
Estrella (Maricopa
County) 1995 113 30 83 30 12 $116,900-146,900
------ ------ ----- ----- ---
Eagle Mountain
(Maricopa County) 1996 101 12 89 12 8 $199,900-236,700
------ ------ ----- ----- ---
Continental Ranch
(Pima County) 1995 97 38 59 38 8 $133,900-165,900
------ ------ ----- ----- ---
</TABLE>
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<TABLE>
<CAPTION>
UNITS LOTS HOMES CLOSED
ESTIMATED CLOSED REMAINING FOR YEAR BACKLOG
YEAR OF NUMBER OF AS OF AS OF ENDED AT
PROJECT (COUNTY) FIRST HOMES AT DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, SALES PRICE
PRODUCT DELIVERY COMPLETION(1) 1996 1996 1996 1996(2)(4) RANGE(3)
- ------------------------- --------- ------------- ------------ ------------ ----- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Legend Trail
(Maricopa County) 1996 102 2 100 2 6 $161,700-187,200
------ ------ ----- ----- ---
Williams Centre
(Pima County) 1996 50 0 50 0 4 $174,900-194,900
------ ------ ----- ----- ---
ARIZONA REGION
TOTAL 853 368 485 354 70
====== ====== ===== ===== ===
NEW MEXICO
Las Lomitas
(Bernalillo County) 1992 244 244 0 3 0 $135,000-190,000
------ ------ ----- ----- ---
Willow Wood
(Bernalillo County) 1995 28 28 0 6 0
------ ------ ----- ----- ---
Summerfield
(Bernalillo County) 1995 289 83 206 78 6 $ 85,900-117,900
------ ------ ----- ----- ---
Tierra Vista
(Santa Fe County) 1995 9 9 0 6 0 $183,900-211,900
------ ------ ----- ----- ---
Tuscany (Bernalillo
County) 1996 87 30 57 30 7 $119,900-166,900
------ ------ ----- ----- ---
Tierra Colinas
(Santa Fe County) 1996 24 3 21 3 6 $146,540-262,900
------ ------ ----- ----- ---
Tuscany Hills
(Bernalillo County) 1996 30 0 30 0 0
------ ------ ----- ----- ---
Rancho del Sol
(Santa Fe County) 1996 175 5 170 5 17 $ 90,900-165,900
------ ------ ----- ----- ---
The Courtyards at Park
West (Bernalillo
County) 1996 100 0 100 0 3 $139,900-203,000
------ ------ ----- ----- ---
NEW MEXICO REGION
TOTAL 986 402 584 131 39
====== ====== ===== ===== ===
NEVADA
Mountainside
(Clark County) 1996 158 55 103 55 8 $119,990-147,990
------ ------ ----- ----- ---
Prominence (Clark County) 1996 100 8 92 8 2 $144,990-172,900
------ ------ ----- ----- ---
Camden Park
(Clark County) 1997 150 0 150 0 0
------ ------ ----- ----- ---
NEVADA REGION
TOTAL 408 63 345 63 10
====== ====== ===== ===== ===
GRAND TOTAL 20,451 14,437 6,014 1,838 282
====== ====== ===== ===== ===
</TABLE>
- ---------------
(1) The estimated number of homes to be built at completion is subject to
change, and there can be no assurance that the Company will build these
homes.
(2) Backlog consists of homes sold under sales contracts that have not yet
closed, and there can be no assurance that closings of sold homes will
occur.
(3) Sales price range reflects base price only and excludes any lot premium,
buyer incentive and buyer selected options, which vary from project to
project.
(4) Of the total homes subject to pending sales contracts as of December 31,
1996, 252 represent homes completed or under construction and 30 represent
homes not yet under construction.
SALES AND MARKETING
The management team responsible for a specific project develops marketing
objectives, formulates pricing and sales strategies and develops advertising and
public relations programs for approval of senior management. The Company makes
extensive use of advertising and other promotional activities, including
newspaper advertisements, brochures, television and radio commercials, direct
mail and the placement of
6
<PAGE> 9
strategically located sign boards in the immediate areas of its developments. In
general, the Company's advertising emphasizes Presley's strengths with respect
to the quality and value of its products.
The Company normally builds, decorates, furnishes and landscapes three to
five model homes for each product line and maintains on-site sales offices,
which typically are open seven days a week. Management believes that model homes
play a particularly important role in the Company's marketing efforts.
Consequently, the Company expends a significant amount of effort in creating an
attractive atmosphere at its model homes. Interior decorations vary among the
Company's models and are carefully selected based upon the lifestyles of
targeted buyers. Structural changes in design from the model homes are not
generally permitted, but home buyers may select various other optional
construction and design amenities.
Presley employs in-house commissioned sales personnel and, on a limited
basis, outside brokers in the selling of its homes. Presley typically engages
its sales personnel on a long-term, rather than a project-by-project basis,
which it believes results in a more motivated sales force with an extensive
knowledge of the Company's operating policies and products. Sales personnel are
trained by the Company and attend weekly meetings to be updated on the
availability of financing, construction schedules and marketing and advertising
plans.
The Company strives to provide a high level of customer service during the
sales process and after a home is sold. The participation of the sales
representatives, on-site construction supervisors and the post-closing customer
service personnel, working in a team effort, is intended to foster the Company's
reputation for quality and service, and ultimately lead to enhanced customer
retention and referrals.
In the past, and more so during the recent California recession, Presley
has used a variety of incentives in order to attract buyers. Sales incentives
may include upgrades in interior design features such as carpet or fixtures, or
added amenities such as a fireplace or an outdoor deck. The use of incentives
depends largely on prevailing economic conditions and the Company's success in
marketing its products.
The Company's homes are typically sold before or during construction
through sales contracts which are usually accompanied by a small cash deposit.
Such sales contracts are usually subject to certain contingencies such as the
buyer's ability to qualify for financing. The cancellation rate of buyers who
contracted to buy a home but did not close escrow at Presley's projects was
approximately 22% during 1996. The Company believes its cancellation rate
compares favorably to that of its competitors.
The Company generally provides a one-year limited warranty of workmanship
and materials with each of its homes. From January 1, 1992 through March 31,
1995, the Company provided a five-year limited warranty for certain homes in the
Company's Southern California Region. This five-year warranty exceeded the
warranty offered by competitors and served as a marketing tool for the Company.
The Company normally reserves one percent of the sales price of its homes
against the possibility of future charges relating to its one-year limited
warranty and similar potential claims. The Company's historical experience is
that one-year warranty claims generally fall within the one percent reserve. In
addition, California law provides that consumers can seek redress for patent
defects in new homes within four years from when the defect is discovered, or
should have been discovered, provided that if the defect is latent there is an
outside limit for seeking redress which is ten years from the completion of
construction. In addition, because the Company generally subcontracts its
homebuilding work to qualified subcontractors who generally provide the Company
with an indemnity and a certificate of insurance prior to receiving payment from
the Company for their work, the Company generally has recourse against the
subcontractors or their insurance carriers for claims relating to the
subcontractors' workmanship or materials.
CUSTOMER FINANCING -- PRESLEY MORTGAGE COMPANY
The Company seeks to assist its home buyers in obtaining financing by
arranging with mortgage lenders to offer qualified buyers a variety of financing
options. Substantially all home buyers utilize long-term mortgage financing to
purchase a home and mortgage lenders will usually make loans only to qualified
borrowers. The Company attempts to minimize potential risks relating to customer
financing by acquiring mortgage financing commitments that lock in the
availability of funds and interest costs at specified levels.
7
<PAGE> 10
Presley Mortgage Company, a wholly owned subsidiary, began operations
effective December 1, 1994 and is in operation to service all of the Company's
operating regions. The mortgage company operates as a mortgage broker/loan
correspondent and originates conventional, FHA and VA loans.
SALE OF LOTS AND LAND
In the ordinary course of business, the Company continually evaluates land
sales and has sold, and expects that it will continue to sell, land as market
and business conditions warrant. Presley also sells both multiple lots to other
builders (bulk sales) and improved individual lots for the construction of
custom homes where the presence of such homes adds to the quality of the
community. In addition, the Company may acquire sites with commercial,
industrial and multi-family parcels which will generally be sold to third-party
developers.
INFORMATION SYSTEMS AND CONTROLS
The Company assigns a high priority to the development and maintenance of
its budget and cost control systems and procedures. The Company's regional and
area offices are connected to corporate headquarters through a fully integrated
accounting, financial and operational management information system. Through
this system, management regularly evaluates the status of its projects in
relation to budgets to determine the cause of any variances and, where
appropriate, adjusts its operations to capitalize on favorable variances or to
limit adverse financial impacts.
COMPETITION
The homebuilding industry is highly competitive, particularly in the low
and medium-price range where the Company currently concentrates its activities.
Although Presley is one of California's largest homebuilders, the Company does
not believe it has a significant market position in any geographic area which it
serves due to the fragmented nature of the market. Due in significant part to
the recent recession and its effect on the housing market, the Company has,
since 1990, had to reduce its sales prices and offer greater incentives to
buyers in order to effectively compete for sales in several of its markets. A
number of Presley's competitors have larger staffs, larger marketing
organizations, and substantially greater financial resources than those of
Presley. However, the Company believes that it competes effectively in its
existing markets as a result of its product and geographic diversity,
substantial development expertise, and its reputation as a low-cost producer of
quality homes. Further, the Company sometimes gains a competitive advantage in
locations where changing regulations make it difficult for competitors to obtain
entitlements and/or government approvals which the Company has already obtained.
GOVERNMENTAL REGULATIONS AND ENVIRONMENTAL MATTERS
The Company and its competitors are subject to various local, state and
Federal statutes, ordinances, rules and regulations concerning zoning, building
design, construction and similar matters, including local regulation which
imposes restrictive zoning and density requirements in order to limit the number
of homes that can ultimately be built within the boundaries of a particular
project. The Company and its competitors may also be subject to periodic delays
or may be precluded entirely from developing in certain communities due to
building moratoriums or "slow-growth" or "no-growth" initiatives that could be
implemented in the future in the states in which it operates. Because the
Company usually purchases land with entitlements, the Company believes that the
moratoriums would adversely affect the Company only if they arose from
unforeseen health, safety and welfare issues such as insufficient water or
sewage facilities. Local and state governments also have broad discretion
regarding the imposition of development fees for projects in their jurisdiction.
However, these are normally locked-in when the Company receives entitlements.
The Company and its competitors are also subject to a variety of local,
state and Federal statutes, ordinances, rules and regulations concerning
protection of health and the environment. The particular environmental laws
which apply to any given community vary greatly according to the community site,
the site's environmental conditions and the present and former uses of the site.
These environmental laws may result in delays, may cause the Company and its
competitors to incur substantial compliance and other costs,
8
<PAGE> 11
and may prohibit or severely restrict development in certain environmentally
sensitive regions or areas. The Company's projects in California are especially
susceptible to restrictive government regulations and environmental laws.
However, environmental laws have not, to date, had a material adverse impact on
the Company's operations.
CORPORATE ORGANIZATION AND PERSONNEL
Each of the Company's operating areas has responsibility for the Company's
homebuilding and development operations within the geographical boundaries of
that area. Larger regions have area offices, which allow for closer management
of a diverse geographical market within a region.
The Company's eleven executive officers at the corporate and operating
levels average more than 20 years of experience in the homebuilding and
development industries within California and the Southwest. The Company combines
decentralized management in those aspects of its business where detailed
knowledge of local market conditions is important (such as governmental
processing, construction, land development and sales and marketing), with
centralized management in those functions where the Company believes central
control is required (such as financial, personnel and legal matters). Land
acquisition and certain other strategic decisions combine centralized
management, for financial and strategic control, with decentralized management,
for identification of opportunistic purchases and in-depth knowledge of local
market conditions.
As of December 31, 1996, Presley's real estate development and homebuilding
operations employed approximately 366 full-time and 73 part-time employees,
including corporate staff, supervisory personnel of construction projects,
maintenance crews to service completed projects, as well as persons engaged in
administrative, finance and accounting, engineering, land acquisition, sales and
marketing activities.
Presley believes that its relations with its employees have been good. Some
employees of the subcontractors which Presley utilizes are unionized, but
virtually none of Presley's employees are union members. Although there have
been temporary work stoppages in the building trades in Presley's areas of
operation, to date none has had any material impact upon Presley's overall
operations.
ITEM 2. PROPERTIES
Headquarters
Presley owns a 15,800 square foot building on leased land in Newport Beach,
California which it uses for its corporate headquarters. The Company leases or
owns properties for its area offices, but none of these properties is material
to the operation of Presley's business.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in various legal proceedings, most of which relate
to routine litigation and some of which are covered by insurance. In the opinion
of the Company's management, none of the uninsured claims involve realistic
claims which are material and unreserved or will have a material adverse effect
on the financial condition of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to the Company's stockholders during the fourth
quarter of 1996.
9
<PAGE> 12
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's Series A Common Stock is traded on the New York Stock
Exchange (the "NYSE") under the symbol PDC. Public trading of the Series A
Common Stock commenced on October 11, 1991. Prior to that date, there was no
public market for the Series A Common Stock. The following table sets forth the
high and low sales prices for the Series A Common Stock as reported on the NYSE
for the periods indicated.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
1995
First Quarter................................................ $2 7/8 $1 3/4
Second Quarter............................................... 2 3/8 1 5/8
Third Quarter................................................ 2 5/8 1 3/4
Fourth Quarter............................................... 2 1/4 1 1/4
1996
First Quarter................................................ $1 7/8 $1 1/4
Second Quarter............................................... 1 7/8 1 3/8
Third Quarter................................................ 1 3/4 1 1/8
Fourth Quarter............................................... 1 3/8 7/8
</TABLE>
As of March 6, 1997, the closing price for the Company's Series A Common
Stock as reported on the NYSE was $1 1/8.
As of March 6, 1997, there were 381 holders of record of the Company's
Series A Common Stock.
The Company has not paid any cash dividends on its Common Stock during the
last two fiscal years and expects that for the foreseeable future it will follow
a policy of retaining earnings in order to help finance its business. Payment of
dividends is within the discretion of the Company's Board of Directors and will
depend upon the earnings, capital requirements, general economic conditions and
operating and financial condition of the Company, among other factors. In
addition, the effect of the Company's principal financing agreements currently
prohibits the payment of dividends by the Company. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Financial
Condition and Liquidity" and Notes 2 and 5 of "Notes to Consolidated Financial
Statements."
10
<PAGE> 13
ITEM 6. SELECTED FINANCIAL DATA
The following selected consolidated financial data of the Company have been
derived from the Consolidated Financial Statements of the Company and other
available information. The summary should be read in conjunction with the
Consolidated Financial Statements and the Notes thereto appearing elsewhere
herein.
As described in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and in Note 2 of "Notes to Consolidated
Financial Statements," the consolidated financial statements for 1994, 1995 and
1996 have been prepared after giving retroactive effect as of January 1, 1994 to
a capital restructuring and quasi-reorganization. The restructuring and
quasi-reorganization resulted in a reduction of the book value of the Company's
real estate assets and liabilities as of January 1, 1994, and as a result, cost
of sales and interest expense are lower in 1994, 1995 and 1996 than they would
have been otherwise, affecting comparability of 1994, 1995 and 1996 results to
1993 and prior years.
<TABLE>
<CAPTION>
AS OF AND FOR AS OF AND FOR
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
-------------------------------- JANUARY 1, --------------------
1996 1995 1994 1994(3) 1993 1992
-------- -------- -------- ---------- -------- --------
(IN THOUSANDS EXCEPT NET INCOME (LOSS)
PER COMMON SHARE AMOUNTS AND NUMBER OF HOMES)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales
Homes....................................... $317,366 $231,204 $262,866 $261,672 $220,656
Lots, land and other........................ 1,631 54,301 7,302 9,565 20,414
-------- -------- -------- -------- --------
Total sales.............................. 318,997 285,505 270,168 271,237 241,070
Operating income (loss)(2).................... 163 (41,335) 14,318 (49,397) (10,632)
Income (loss) before income taxes and
extraordinary item.......................... 152 (41,653) 10,232 (67,297) (17,487)
Credit (provision) for income taxes........... -- 1,868 (4,195) 3,041 6,998
Income (loss) before extraordinary item....... 152 (39,785) 6,037 (64,256) (10,489)
Extraordinary item-gain from retirement of
debt, net of applicable taxes............... -- 2,688 -- -- --
Net income (loss)............................. 152 (37,097) 6,037 (64,256) (10,489)
Net income (loss) per common share:
Before extraordinary item................ $ -- $(0.76) $0.11 $(3.47) $(0.57)
Extraordinary item....................... -- 0.05 -- -- --
-------- -------- -------- -------- --------
After extraordinary item................. $ -- $(0.71) $0.11 $(3.47) $(0.57)
Ratio of earnings to fixed charges(1)......... (2) (2) (2) (2) (2)
BALANCE SHEET DATA:
Real estate inventories....................... $304,126 $315,535 $382,055 $374,048 $439,548 $520,139
Total assets.................................. 331,615 340,933 425,637 419,914 485,414 560,095
Notes payable................................. 208,524 224,434 272,717 277,198 372,198 373,313
Stockholders' equity.......................... 84,213 84,061 121,158 110,890 81,390 145,558
OPERATING DATA:
Number of homes sold.......................... 1,804 1,488 1,423 1,509 1,173
Number of homes closed........................ 1,838 1,425 1,442 1,475 1,144
Number of homes in escrow at end of period.... 282 316 253 272 238
Average sales prices of homes closed.......... $173 $162 $182 $177 $193
</TABLE>
- ---------------
(1) Ratio of earnings to fixed charges is calculated by dividing income as
adjusted by fixed charges. For this purpose, "income as adjusted" means
income (loss) before (i) minority partners' interest in consolidated income
(loss) and (ii) income taxes, plus (i) interest expense and (ii)
amortization of capitalized interest included in cost of sales. For this
purpose "fixed charges" means (i) interest expense and (ii) interest
capitalized during the period.
(2) Earnings were not adequate to cover fixed charges by $21.1 million, $67.1
million, $13.9 million, $65.6 million, and $29.7 million for the years ended
December 31, 1996, 1995, 1994, 1993 and 1992, respectively. These deficits,
as well as the operating income (loss), include the effect of an impairment
loss on real estate assets of $16.8 million in 1995 and reductions of real
estate assets to estimated net realizable value of $9.4 million, $46.6
million, and $26.0 million in 1995, 1993, and 1992, respectively.
(3) The amounts at January 1, 1994 include the effects of the capital
restructuring and quasi-reorganization on the consolidated balance sheet as
of December 31, 1993 as described in Note 2 of "Notes to Consolidated
Financial Statements."
11
<PAGE> 14
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion of results of operations and financial condition
should be read in conjunction with the Selected Financial Data and the
Consolidated Financial Statements and Notes thereto appearing elsewhere in this
Annual Report on Form 10-K.
RESULTS OF OPERATIONS
OVERVIEW AND RECENT RESULTS. The Company's performance for the three years
ended December 31, 1996 reflects the severe economic conditions encountered by
the homebuilding industry in the Company's primary homebuilding markets in
California. The declining economic conditions began to affect the Company's
primary homebuilding markets during the fourth quarter of 1989 and continued off
and on through the mid-1990's.
Homes sold, closed and in backlog as of and for the periods presented are
as follows:
<TABLE>
<CAPTION>
AS OF AND FOR YEARS ENDED
DECEMBER 31,
-------------------------
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Number of homes sold........................................ 1,804 1,488 1,423
===== ===== =====
Number of homes closed...................................... 1,838 1,425 1,442
===== ===== =====
Backlog of homes sold but not closed at end of period....... 282 316 253
===== ===== =====
</TABLE>
Homes in backlog are generally closed within three to six months. The
dollar amount of backlog of homes sold but not closed as of December 31, 1996
was $52.7 million as compared to $51.3 million as of December 31, 1995 and $91.5
million as of September 30, 1996. The cancellation rate of buyers who contracted
to buy a home but did not close escrow at the Company's projects was
approximately 22% during 1996.
The number of homes closed in the fourth quarter of 1996 was up 26 percent
to 512 from 405 in the fourth quarter of 1995. Net new home orders for the
quarter ended December 31, 1996 decreased 21 percent to 306 units from 389 for
the quarter ended December 31, 1995. For the fourth quarter of 1996, net new
orders decreased 29 percent to 306 from 429 units in the third quarter of 1996.
The backlog of homes sold as of December 31, 1996 was 282, down 11 percent from
316 units as of December 31, 1995, and down 42 percent from 488 units at
September 30, 1996. The Company's inventory of completed and unsold homes as of
December 31, 1996 increased to 122 units from 110 units as of December 31, 1995.
In March 1995, the Financial Accounting Standards Board (FASB) issued
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of," ("Statement No. 121") which requires
impairment losses to be recorded on assets to be held and used by the Company
when indicators of impairment are present and the undiscounted cash flows
estimated to be generated by those assets (excluding interest) are less than the
carrying amount of the assets. Statement No. 121 also requires that long-lived
assets that are held for disposal be reported at the lower of the assets'
carrying amount or fair value less cost of disposal. Under the new
pronouncement, when an impairment loss is required for assets to be held and
used by the Company, the related assets are adjusted to their estimated fair
value. This was a significant change from the previous accounting standard that
required homebuilders to carry real estate assets at the lower of cost or net
realizable value. Although Statement No. 121 was effective for fiscal years
beginning after December 15, 1995, the Company elected, as encouraged by the new
pronouncement, to adopt its provisions in 1995. Accordingly, the net loss for
the year ended December 31, 1995 included a non-cash charge of $16,118,000 to
record impairment losses on certain of the Company's real estate assets. The new
accounting standard could result in material additional adjustments to the
Company's real estate assets in the future, and materially different results in
the timing and amount of adjustments than would have been the case under the
previous standards.
12
<PAGE> 15
The Company periodically evaluates its real estate assets to determine
whether such assets have been impaired and therefore would be required to be
adjusted to fair value. Fair value represents the amount at which an asset could
be bought or sold in a current transaction between willing parties, that is,
other than in a forced or liquidation sale. The estimation process involved in
determining if assets have been impaired and in the determination of fair value
is inherently uncertain since it requires estimates of current market yields as
well as future events and conditions. Such future events and conditions include
economic and market conditions, as well as the availability of suitable
financing to fund development and construction activities. The realization of
the Company's real estate projects is dependent upon future uncertain events and
conditions and, accordingly, the actual timing and amounts realized by the
Company may be materially different from the estimated fair values as described
herein.
Two of the Company's older master planned communities (Sun Lakes Country
Club and Horsethief Canyon Ranch) are currently realizing substantial operating
losses as a result of declines in the sales value of the homes in those projects
in recent years. As a result of those declines, the Company's future results are
likely to continue to be adversely impacted.
Prior to October 1, 1995, the Company evaluated its real estate inventories
to determine if such assets were stated at the lower of cost or estimated net
realizable value, as required by the then applicable accounting pronouncements.
The evaluations considered the depressed nature of the real estate business in
the Company's principal markets, the reduced demand from prospective homebuyers,
decreased sales prices, increased sales incentives, future costs of development
and holding costs during development. Based on these evaluations, reductions of
certain real estate assets to estimated net realizable value amounting to
$9,400,000 were recorded during 1995.
This Annual Report on Form 10-K does not attempt to discuss or describe all
of the factors that influence or impact the evaluation of an impairment of or
the net realizable value of the Company's real estate assets.
Interest incurred during the period in which real estate projects are not
under development or during the period subsequent to the completion of product
available for sale is expensed in the period incurred. Economic conditions in
the real estate industry can cause a delay in the development of certain real
estate projects and, as a result, can lengthen the periods when such projects
are not under development and, accordingly, have a significant impact on
profitability as a result of expensed interest. Interest expense during 1996,
1995, and 1994 was approximately $2,256,000, $2,226,000, and $6,961,000,
respectively.
In general, housing demand is adversely affected by increases in interest
and housing costs. Interest rates, the length of time that assets remain in
inventory, and the proportion of inventory that is financed affect the Company's
interest cost. If the Company is unable to raise sales prices sufficiently to
compensate for higher costs, which has generally been the case recently, or if
mortgage interest rates increase significantly, affecting prospective buyers'
ability to adequately finance home purchases, the Company's sales, gross margins
and net results may be adversely impacted. To a limited extent, the Company
hedges against increases in interest costs by acquiring interest rate protection
that locks in or caps interest rates for limited periods of time for mortgage
financing for prospective homebuyers.
COMPARISON OF YEARS ENDED DECEMBER 31, 1996 AND 1995. Sales (which
represent recorded revenues from closings) for the year ended December 31, 1996
were $319.0 million, an increase of $33.5 million (11.7%), from sales of $285.5
million for the year ended December 31, 1995. Revenue from sales of homes
increased $86.2 million to $317.4 million in 1996 from $231.2 million in 1995.
This increase was due primarily to an increase in the number of homes closed to
1,838 in 1996 from 1,425 in 1995 and an increase in the average sales prices of
homes to $173,000 in 1996 from $162,000 in 1995. Revenue from lots, land and
other decreased $52.7 million to $1.6 million in 1996 from $54.3 million in
1995.
Total operating income (loss) changed from a loss of $41.3 million in 1995
to income of $0.2 million in 1996. The excess of revenue from sales of homes
over the related cost of sales increased by $17.0 million, to $37.4 million in
1996 from $20.4 million in 1995 primarily due to increased sales prices and an
increase in the number of homes closed as described above and decreases in buyer
incentives. The excess of revenue from
13
<PAGE> 16
sales of lots, land and other over the related cost of sales changed by $1.0
million to a loss of $0.4 million in 1996 from a loss of $1.4 million in 1995.
Impairment losses on real estate assets amounting to $16.8 million were recorded
in 1995 as compared to none in 1996. Reductions of real estate assets to
estimated net realizable value amounting to $9.4 million were recorded in 1995
as compared to none in 1996. Sales and marketing expenses increased by $1.5
million to $22.9 million in 1996 from $21.4 million in 1995 primarily as a
result of increased closing costs (directly related to revenue from increased
closings) in 1996 compared to 1995. General and administrative expenses
increased by $1.3 million to $14.0 million in 1996 from $12.7 million in 1995,
primarily as a result of increased overhead from start-up operations in Arizona
and Nevada. General and administrative expenses as a percentage of sales was
4.4% in both 1996 and 1995.
Total interest incurred during 1996 decreased $2.6 million (7.6%) from 1995
as a result of lower debt balances in 1996. Net interest expense increased
slightly to $2.3 million in 1996 from $2.2 million for 1995.
Other (income) expense, net increased $0.3 million to a net income of $2.2
million in 1996 from a net income of $1.9 million in 1995 primarily as a result
of (i) increased income from recreational facilities and (ii) increased income
from mortgage and design center operations.
COMPARISON OF YEARS ENDED DECEMBER 31, 1995 AND 1994. Sales (which
represent recorded revenues from closings) for the year ended December 31, 1995
were $285.5 million, an increase of $15.3 million (5.7%), from sales of $270.2
million for the year ended December 31, 1994. Revenue from sales of homes
decreased $31.7 million to $231.2 million in 1995 from $262.9 million in 1994.
This decrease was due primarily to a decrease in the number of homes closed to
1,425 in 1995 from 1,442 in 1994 and a decrease in the average sales prices of
homes to $162,000 in 1995 from $182,000 in 1994 which resulted primarily from
reduced sales prices, increased buyer incentives and a change in the mix of
product. Revenue from lots, land and other increased $47.0 million to $54.3
million in 1995 from $7.3 million in 1994, primarily as a result of the
Company's progress in implementing its strategy of becoming primarily a merchant
homebuilder rather than being primarily a developer of master-planned
communities which can take many years to develop. Consistent with this strategy,
during 1995 the Company sold lots and land which in most cases would not have
been used by the Company for homebuilding for several years. The proceeds of
these sales are being used to improve liquidity as well as being redeployed into
acquisitions of lots which can be used in the near term by the Company for
homebuilding.
Total operating income (loss) decreased from income of $14.3 million in
1994 to a loss of $41.3 million in 1995. The excess of revenue from sales of
homes over the related cost of sales decreased by $24.8 million, to $20.4
million in 1995 from $45.2 million in 1994. These decreases were primarily due
to decreased sales prices and a decrease in the number of homes closed as
described above and increases in costs such as interest and development. The
excess of revenue from sales of lots, land and other over the related cost of
sales decreased by $1.8 million to a loss of $1.4 million in 1995 from income of
$0.4 million in 1994. Impairment losses on real estate assets amounting to $16.8
million were recorded in 1995 as compared to none in 1994. Reductions of real
estate assets to estimated net realizable value amounting to $9.4 million were
recorded in 1995 compared to none in 1994. Sales and marketing expenses
increased by $2.4 million (12.6%) to $21.4 million in 1995 from $19.0 million in
1994 primarily as a result of increased advertising and other selling expenses
in 1995 compared to 1994. General and administrative expenses increased by $0.4
million (3.3%) to $12.7 million in 1995 from $12.3 million in 1994, primarily as
the result of additional staffing in expanding operating units in Arizona and
Nevada. General and administrative expenses decreased as a percentage of sales
to 4.4% in 1995 from 4.6% in 1994.
Total interest incurred during 1995 increased $2.0 million (6.2%) from 1994
as a result of increased interest rates in 1995. Net interest expense decreased
to $2.2 million in 1995 from $7.0 million for 1994. This decrease was due
primarily to an increase in development activities in 1995 compared to 1994,
resulting in increased interest capitalization offset by increased interest
rates.
Other (income) expense, net decreased $0.6 million to a net income of $1.9
million in 1995 from a net income of $2.5 million in 1994 primarily as a result
of (i) decreased interest income due in part to lower cash balances in 1995
compared to 1994, (ii) a decrease in management fee income, offset by (iii)
increased income from mortgage operations.
14
<PAGE> 17
FINANCIAL CONDITION AND LIQUIDITY
The Company provides for its ongoing cash requirements from internally
generated funds from the sales of real estate and from outside borrowings. The
Company currently maintains the following major credit facilities: 12 1/2%
Senior Notes (the "Senior Notes"), a secured revolving lending facility (the
"Working Capital Facility"), a revolving line of credit relating to Horsethief
Canyon Partners, its wholly-owned joint venture partnership, a revolving line of
credit relating to Carmel Mountain Ranch, its wholly-owned joint venture
partnership (the latter two facilities collectively the "Joint Venture
Facilities"), and a revolving line of credit relating to construction on certain
real property located in Arizona and New Mexico (the "Other Facility") which are
summarized below.
Capital Restructuring and Quasi-Reorganization
On March 28, 1994 the Company's Board of Directors approved a Plan for
Capital Restructuring, which was approved by the Company's Stockholders at the
Annual Meeting of Stockholders held on May 20, 1994.
In accordance with the Plan for Capital Restructuring, on March 29, 1994
the Company executed a definitive agreement with its lenders to restructure the
Company's $340,000,000 revolving line of credit (the "Revolving Facility"). The
Plan was approved at the Company's Annual Meeting held on May 20, 1994 and on
that date the lender group under the Company's Revolving Facility converted
$95,000,000 of outstanding debt under the Revolving Facility to equity through
the issuance of 43,166,667 shares of a new series of common stock representing
initially 70% of the outstanding shares of all series of common stock of the
Company. As provided in the agreement with its lenders, when the Company
completed its Senior Notes Offering of $200,000,000 on June 29, 1994, as
described below, the lending group returned to the Company a total of 8,809,524
shares of the new series of common stock, reducing their aggregate equity
interest in the Company to 65% from 70%. In order to implement the Plan for
Capital Restructuring, the Company's Certificate of Incorporation was amended to
redesignate existing common stock as Series A Common Stock (the "Series A
Common"), to establish a second series of common stock which was issued to the
lender group (the "Series B Common"), and to increase the number of directors of
the Company to nine, of which six are elected by holders of outstanding shares
of Series A Common, and the remaining three are elected by the holders of
outstanding shares of Series B Common.
Concurrent with the conversion of debt to equity, under the Plan for
Capital Restructuring, the Revolving Facility was reduced by $95,000,000 to a
total of $245,000,000, comprised of a $150,000,000 term facility ("the Term
Facility") and a $95,000,000 working capital facility ("the Working Capital
Facility") (collectively, "the Debt Facilities"). In addition the lender group
increased the Working Capital Facility by $20,000,000 to a total of
$115,000,000. Revolving credit loans under the Working Capital Facility may be
borrowed, repaid and reborrowed from time to time prior to the termination date
of the Working Capital Facility. The lender group had therefore provided Debt
Facilities totaling $265,000,000 to the Company.
As described more fully below, the Company filed with the Securities and
Exchange Commission a Registration Statement on Form S-1 for the sale of
$200,000,000 of Senior Notes which became effective on June 23, 1994. The
offering closed on June 29, 1994 and was fully subscribed and issued. The Term
Facility was repaid in full and the Working Capital Facility was reduced by
$43,000,000 from a portion of the proceeds from the issuance of the Senior
Notes.
The terms of the Working Capital Facility are described more fully below.
The Series B Common ranks pari passu with the Series A Common in any
liquidation of the Company. The Company may not declare or pay any dividends on
the Series A Common unless equal dividends are declared and paid on the Series B
Common.
15
<PAGE> 18
The Series B Common is convertible into Series A Common on a
share-for-share basis at the option of the holder upon the occurrence of any one
of the following: (1) after May 20, 1997; (2) if the holder sells the Series A
Common into which the Series B Common is being converted in a public
distribution or in open market sales under Rule 144, and the holder has made no
arrangement for the purchase of such shares by any purchaser; (3) certain sales
of Series A Common which result in a change of control; and (4) an event of
default under the Working Capital Facility shall occur and be continuing.
As part of the Plan for Capital Restructuring, the Company's Board of
Directors also approved a Plan for Quasi-Reorganization retroactive to January
1, 1994. The Company implemented the quasi-reorganization at that time because
it was implementing a substantial change in its capital structure in accordance
with the Plan for Capital Restructuring. A quasi-reorganization allows certain
companies which are undergoing a substantial change in capital structure to
utilize "fresh start accounting."
Under the Plan for Quasi-Reorganization, the Company implemented an overall
accounting readjustment effective January 1, 1994, which resulted in the
adjustment of assets and liabilities to estimated fair values, and the
elimination of the accumulated deficit. The net amount of such revaluation
adjustments and costs related to the capital restructuring, together with the
accumulated deficit as of the date thereof, was transferred to paid-in capital
in accordance with the accounting principles applicable to
quasi-reorganizations.
The estimation process involved in the determination of the fair value of
those assets as to which an adjustment was made is inherently uncertain since it
required estimates and assumptions as to future events and conditions. Such
future events and conditions include economic and market conditions, the
availability and cost of governmental entitlements necessary to develop and
build product, the cost of financing to fund development and construction
activities, and the availability and cost of labor and materials necessary to
develop, build and sell product.
Because the amount and timing of the realization of the investments by the
Company and its subsidiaries in their respective real estate projects are
dependent upon such future uncertain events and conditions, the actual timing
and amounts may be materially different from the estimates and assumptions used
in determining fair value estimates utilized for purposes of the Plan for
Quasi-Reorganization.
The quasi-reorganization affects the comparability of operating statements
for periods beginning after December 31, 1993 with those for periods beginning
on or before December 31, 1993. Moreover, any income tax benefits resulting from
the utilization of net operating loss and other carryforwards existing at
January 1, 1994 and temporary differences resulting from the
quasi-reorganization, are excluded from the results of operations and credited
to paid-in capital.
Senior Notes
The 12 1/2% Senior Notes due 2001 were offered by The Presley Companies, a
Delaware corporation ("Delaware Presley" or the "Company"), and are
unconditionally guaranteed on a senior basis by Presley Homes (formerly The
Presley Companies), a California corporation and a wholly owned subsidiary of
Delaware Presley ("California Presley"). However, California Presley has granted
liens on substantially all of its assets as security for its obligations under
the Working Capital Facility and other loans. Because the California Presley
guarantee is not secured, holders are effectively junior to borrowings under the
Working Capital Facility with respect to such assets. Delaware Presley and its
consolidated subsidiaries are referred to collectively herein as "Presley" or
the "Company." Interest on the Senior Notes is payable on January 1 and July 1
of each year, commencing January 1, 1995.
Except as set forth in the Indenture Agreement (the "Indenture"), the
Senior Notes are not redeemable by Presley prior to July 1, 1998. Thereafter,
the Senior Notes will be redeemable at the option of Delaware Presley, in whole
or in part, at the redemption prices set forth in the Indenture.
The Senior Notes are senior obligations of Presley and rank pari passu in
right of payment to all existing and future unsecured indebtedness of Presley,
and senior in right of payment to all future indebtedness of the Company which
by its terms is subordinated to the Senior Notes.
16
<PAGE> 19
Upon certain changes of control as described in the Indenture, Presley must
offer to repurchase Senior Notes at a price equal to 101% of the principal
amount plus accrued and unpaid interest, if any, to the date of repurchase.
Presley is required to offer to repurchase certain Senior Notes at a price
equal to 100% of the principal amount plus any accrued and unpaid interest to
the date of repurchase if Delaware Presley's Consolidated Tangible Net Worth is
less than $60,000,000 million for any two consecutive fiscal quarters and from
the proceeds of certain asset sales.
The Indenture governing the Senior Notes restricts, among other things: (i)
the payment of dividends on and redemptions of capital stock by Presley, (ii)
the incurrence of indebtedness by Presley or the issuance of preferred stock by
Delaware Presley's subsidiaries, (iii) the creation of certain liens, (iv)
Delaware Presley's ability to consolidate or merge with or into, or to transfer
all or substantially all of its assets to, another person, and (v) transactions
with affiliates. These restrictions are subject to a number of important
qualifications and exceptions.
The net proceeds of this offering were used to repay amounts outstanding
under the Term Facility and to reduce the outstanding debt and commitment level
under the Working Capital Facility in connection with the Plan for Capital
Restructuring as more fully described above.
The proceeds of the offering were used as follows:
<TABLE>
<S> <C>
Repayment of Term Facility..................... $150,000,000
Reduction of Working Capital Facility.......... 43,000,000
Underwriting discount.......................... 6,000,000
Offering costs................................. 1,000,000
------------
$200,000,000
============
</TABLE>
In April 1995, the Company purchased $10,000,000 principal amount of its
outstanding Senior Notes at a cost of $8,465,000, resulting in a net gain of
$724,000 after giving effect to related deferred loan costs and income taxes.
Although it has no definitive program to purchase outstanding Senior Notes, the
Company may make such purchases from time to time in the future if management
believes such purchases are in the Company's best interest.
As of December 31, 1996, the outstanding 12 1/2% Senior Notes with a face
value of $190,000,000 were valued at $180,500,000, based on discussions with
analysts.
Working Capital Facility
The collateral for the loans provided by the Working Capital Facility
includes substantially all real estate and other assets of the Company
(excluding assets of partnerships and the portion of the partnership interests
in the Carmel Mountain Ranch partnership which are currently pledged to other
lenders). The maximum loan under the Working Capital Facility is limited to
$72,000,000. The principal outstanding under the Working Capital Facility at
December 31, 1996 was $12,000,000.
The Working Capital Facility has a termination date of May 20, 1997, with
two one-year extensions at the Company's option. Upon any extension of the
termination date, the Company would pay an extension fee of 1% of the Working
Capital Facility commitment amount (in addition to the loan fee described below)
for each year extended. Management intends to exercise the Company's option to
extend the termination date of the Working Capital Facility to May 20, 1998.
Pursuant to the terms of the Working Capital Facility, outstanding advances
bear interest at the prime rate plus 2%. An alternate option provides for
interest based on a specified overseas base rate plus 4.44%, but not less than
the prime rate option in effect at December 31, 1993 (8.00%). In addition, the
Company pays a loan fee of 1% per annum, payable quarterly, on the total Working
Capital Facility commitment amount.
The Working Capital Facility now provides that the Company must maintain a
Tangible Effective Net Worth as of the last day of any fiscal quarter of not
less than $70,000,000. The Working Capital Facility also
17
<PAGE> 20
provides that as of the last day of any fiscal quarter the ratio of the
Company's Total Liabilities (excluding non-recourse debt) to Tangible Effective
Net Worth must not exceed 3.75 to 1 and that the ratio of Adjusted Total
Liabilities (the Company's and its unconsolidated partnerships' Total
Liabilities and Letters of Credit) (excluding non-recourse debt) to Tangible
Effective Net Worth must not exceed 4.0 to 1. At December 31, 1996 the Company's
Tangible Effective Net Worth was approximately $79,866,000, the ratio of the
Company's Total Liabilities (excluding non-recourse debt) to Tangible Effective
Net Worth was 3.10 to 1, and the ratio of Adjusted Total Liabilities (excluding
non-recourse debt) to Tangible Effective Net Worth was 3.10 to 1.
The Working Capital Facility requires certain minimum cash flow and pre-tax
and pre-interest tests. The Working Capital Facility also provides for negative
covenants which, among other things, place limitations on the payment of cash
dividends, merger transactions, transactions with affiliates, the incurrence of
additional debt and the acquisition of new land as described in the following
paragraph.
Under the terms of the Working Capital Facility, the Company may acquire
new improved land for development of housing units of no more than 300 lots in
any one location without approval from the lenders if certain conditions are
satisfied. The Company may, however, acquire any new raw land or improved land
provided the Company has obtained the prior written approval of lenders holding
two-thirds of the obligations under the Working Capital Facility.
The Working Capital Facility requires that mandatory prepayments be made to
reduce the outstanding balance of loans to the extent of all funds in excess of
$20,000,000 in the principal operating accounts of the Company.
The Company is obligated under letters of credit, issued under terms of the
Working Capital Facility, which totaled $144,000 at December 31, 1996. These
letters of credit guarantee completion of construction related to various
project improvements.
Joint Venture Facilities
Horsethief Canyon Partners ("HCP"), the partnership that owns the
Horsethief Canyon master-planned community, is a California general partnership
and is 100% owned by The Presley Companies and its wholly-owned subsidiary.
Prior to October 4, 1996, the construction of the project was being financed
through intract loans to prepare finished lots for the construction of homes and
construction loans to finance the construction of homes.
Effective on October 4, 1996, HCP executed a master credit agreement with a
maximum loan commitment of $10,000,000 to finance the development of lots for
residential homes and the construction of single-family attached and detached
production homes. At December 31, 1996, the revolving line of credit had an
outstanding balance of $2,628,000. Interest on the outstanding balance is at
prime plus 1.00% and the loan matures on March 17, 1998. Availability under the
line is subject to a number of limitations. The outstanding balance under this
facility, together with the outstanding balances under the CMR facility and the
Other Facility described below, may not exceed $29,000,000.
Carmel Mountain Ranch ("CMR"), the partnership that owns the Carmel
Mountain Ranch master-planned community, is also a California general
partnership and is 100% owned by The Presley Companies and its wholly-owned
subsidiary. Effective in March 1995, the development and construction of Carmel
Mountain Ranch ("CMR"), a consolidated joint venture, is financed through a
revolving line of credit. The revolving line of credit consists of several
components relating to production units, models and residential lots. At
December 31, 1996, the revolving line of credit had no outstanding balance.
Availability under the line is subject to a number of limitations, but in any
case cannot exceed $29,000,000, and is subject to further limitations as
described in the following paragraph. Interest on the outstanding balance is at
prime plus 1.00% and the loan matures on March 17, 1998.
18
<PAGE> 21
Other Facility
Effective in October 1995, the Company executed a master credit agreement
with a maximum loan commitment of $5,000,000 to finance the development of lots
for residential homes and the construction of single-family attached and
detached production homes on certain real property located in Arizona and New
Mexico. Interest on the outstanding balance is at prime plus 1.00% and the loan
matures on November 30, 1998. The outstanding balance under this facility,
together with the outstanding balance under the CMR facility described in the
preceding paragraph, may not exceed $29,000,000. As of December 31, 1996 the
outstanding balance under this agreement was $3,542,000.
Assessment District Bonds and Seller Financing
In some locations in which the Company develops its projects, assessment
district bonds are issued by municipalities to finance major infrastructure
improvements and fees. Such financing has been an important part of financing
master-planned communities due to the long-term nature of the financing,
favorable interest rates when compared to the Company's other sources of funds
and the fact that the bonds are sold, administered and collected by the relevant
government entity. As a landowner benefited by the improvements, the Company is
responsible for the assessments on its land. When Presley's homes or other
properties are sold, the assessments are either prepaid or the buyers assume the
responsibility for the related assessments.
Another potential source of financing available to the Company is
seller-provided financing for land acquired by the Company. Although the Company
has not used this form of financing significantly in the past few years, it is
possible that such financing may be available and utilized to a greater extent
in the future.
Cash Flows -- Comparison of Years Ended December 31, 1996 and 1995
Net cash provided by operating activities decreased from $27.7 million in
1995 to $15.6 million in 1996. The change was primarily due to reduced proceeds
from reductions in land sales, offset by the net income in 1996 compared to a
net loss in 1995.
Net cash provided by (used in) investing activities changed from a use of
$0.4 million in 1995 to a source of $0.7 million for 1996. The change was due
primarily to a reduction in the issuance of notes receivable, offset by a
reduction in the principal payments on notes receivable and an increase in the
purchase of property and equipment.
Net cash used in financing activities decreased $27.8 million to $15.9
million in 1996 from $43.7 million in 1995. The change was primarily due to the
reduction of debt in 1995.
Cash Flows -- Comparison of Years Ended December 31, 1995 and 1994
Net cash provided by operating activities increased to $27.7 million in
1995 from $0.6 million in 1994. The change was primarily due to a reduction in
the amount invested in real estate inventories, offset by an increase in the net
loss in 1995 compared to 1994.
Net cash (used in) provided by investing activities changed from a source
of $0.5 million in 1994 to a use of $0.4 million in 1995. The change was due
primarily to an increase in the amount of new notes receivable issued, offset by
an increase in principal payments received on notes receivable and a decrease in
purchases of property and equipment.
Net cash used in financing activities increased $36.6 million to $43.7
million in 1995 from $7.1 million in 1994. The change was primarily due to the
reduction of debt.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Presley's consolidated financial statements and the report of the
independent auditors, listed under Item 14, are submitted as a separate section
of this report beginning on page F-1 and are incorporated herein by reference.
19
<PAGE> 22
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
The information required by this item is incorporated by reference from the
Company's Proxy Statement for the 1997 Annual Meeting of Holders of Series A
Common Stock to be held on May 14, 1997.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference from the
Company's Proxy Statement for the 1997 Annual Meeting of Holders of Series A
Common Stock to be held on May 14, 1997.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated by reference from the
Company's Proxy Statement for the 1997 Annual Meeting of Holders of Series A
Common Stock to be held on May 14, 1997.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
20
<PAGE> 23
PART IV
ITEM 14. EXHIBITS, CONSOLIDATED FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K
(a)(1) Financial Statements
The following consolidated financial statements of the Company are included
in a separate section of this Annual Report on Form 10-K commencing on the page
numbers specified below:
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Report of Independent Auditors....................................... F-2
Consolidated Balance Sheets.......................................... F-3
Consolidated Statements of Operations................................ F-4
Consolidated Statements of Stockholders' Equity...................... F-5
Consolidated Statements of Cash Flows................................ F-6
Notes to Consolidated Financial Statements........................... F-7
</TABLE>
(2) Financial Statement Schedules:
Schedules are omitted as the required information is not present, is
not present in sufficient amounts, or is included in the Consolidated
Financial Statements or Notes thereto.
(3) Listing of Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- ----------
<C> <S>
3.1 (1) Certificate of Incorporation of the Company.
3.3 (1) Bylaws of the Company.
4.1 (1) Specimen certificate of Common Stock.
10.1 (1) First Amended and Restated Loan Agreement dated as of December 18, 1989 among
the Company, as Borrower, Security Pacific National Bank, First Interstate
Bank of California, The Bank of California, N.A., California Federal Bank, a
Federal Savings Bank, and Continental Bank, N.A., as the Banks, and Security
Pacific National Bank as the Agent (the "1989 Revolving Facility").
10.2 (1) First Amendment to the 1989 Revolving Facility, dated February 1, 1991.
10.3 (1) Letter, dated December 11, 1990, providing for the extension of the 1989
Revolving Facility.
10.4 (1) Commitment Letter, dated August 19, 1991, among the Banks, the Agent and the
Company relating to the amendment and extension of the 1989 Revolving
Facility.
10.5 (1) Loan Agreement, dated as of September 27, 1988, between Carmel Mountain Ranch,
as Borrower, Security Pacific National Bank, Bank of America National Trust
and Savings Association and Bankers Trust Company, as the Banks, and Security
Pacific National Bank, as the Agent (the "CMR Loan Agreement").
10.6 (1) First Amendment to the CMR Loan Agreement, dated April 3, 1989.
10.7 (1) Second Amendment to the CMR Loan Agreement, dated December 21, 1989.
10.8 (1) Third Amendment to the CMR Loan Agreement, dated January 1, 1991.
10.9 (1) Fourth Amendment to the CMR Loan Agreement, dated March 1, 1991.
10.10 (1) Building Loan Agreement, dated November 4, 1988, between Horsethief Canyon
Partners and First Interstate Bank of California (the "HCP Loan Agreement").
10.11 (1) Note, dated November 4, 1988, in favor of First Interstate Bank of California
by Horsethief Canyon Partners (the "HCP Note").
10.12 (1) Amendment to the HCP Loan Agreement, dated March 28, 1989.
10.13 (1) Modification to the HCP Note, dated November 26, 1990.
10.14 (1) Modification to the HCP Note, dated February 27, 1991.
</TABLE>
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<PAGE> 24
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- ----------
<C> <S>
10.15 (1) Modification to the HCP Note, dated June 18, 1991.
10.16 (1) Additional Funds Agreement, dated June 18, 1991, between Horsethief Canyon
Partners and First Interstate Bank of California.
10.17 (1) Office Building Lease, dated June 1, 1989, between Corporate Plaza and
Associates and the Company.
10.18 (1) Form of Employment Agreement, dated October 17, 1991, between Wade H. Cable
and the Company.
10.19 (1) Form of Employment Agreement, dated October 17, 1991, between David M. Siegel
and the Company.
10.20 (1) Form of Employment Agreement, dated October 17, 1991, between L.C. Albertson,
Jr. and the Company.
10.21 (1) Form of Employment Agreement, dated October 17, 1991, between Peter N.
Hellmann and the Company.
10.22 (1) Form of Employment Agreement, dated October 17, 1991, between Gerald P.
Nordeman and the Company.
10.23 (1) Form of Employment Agreement, dated October 17, 1991, between Charles W.
Reynolds and the Company.
10.24 (1) Form of Employment Agreement, dated October 17, 1991, between Lewis N. Wilmot
and the Company.
10.25 (1) Form of Employment Agreement, dated October 17, 1991, between Nancy M. Harlan
and the Company.
10.26 (1) Form of Employment Agreement, dated October 17, 1991, between Linda L. Foster
and the Company.
10.27 (1) Form of Indemnity Agreement, dated October 18, 1991, between the Company and
Messrs. Lyon and Cable as Directors, and dated December 12, 1991 as to the
other Directors.
10.28 (1) Form of Registration Rights Agreement, dated October 7, 1991, between the
Company and William Lyon.
10.29 (1) Form of Registration Rights Agreement, dated October 7, 1991, between the
Company and each of the existing stockholders other than William Lyon.
10.30 (1) 1991 Stock Option Plan.
10.31 (1) Note and Pledge Agreement, dated February 1, 1990, between the Company and
Wade H. Cable.
10.32 (1) Secured Promissory Note, dated February 1, 1990, made by Wade H. Cable in
favor of the Company.
10.33 (1) Form of Amendment to Note and Pledge Agreement, dated October 17, 1991,
between the Company and Wade H. Cable and Susan M. Cable, Trustees of the
Cable Family Trust Est. 7-11-88.
10.34 (1) Note and Pledge Agreement, dated February 1, 1990, between the Company and
David M. Siegel.
10.35 (1) Secured Promissory Note, dated February 1, 1990, made by David M. Siegel in
favor of the Company.
10.36 (1) Form of Amendment to Note and Pledge Agreement, dated October 17, 1991,
between the Company and David M. Siegel and Linda A. Siegel, Trustees of the
Siegel Family Trust U/D/T Est. 6-20-89.
10.37 (1) Note and Pledge Agreement, dated February 1, 1990, between the Company and
L.C. Albertson, Jr.
</TABLE>
22
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<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- ----------
<C> <S>
10.38 (1) Secured Promissory Note, dated February 1, 1990, made by L.C. Albertson, Jr.
in favor of the Company.
10.39 (1) Form of Amendment to Note and Pledge Agreement, dated October 17, 1991,
between the Company and Lloyd C. Albertson, Jr. and Dorothy K. Albertson,
Trustees of the Lloyd C. Albertson, Jr. Family Trust Est. 6-15-79.
10.40 (1) Note and Pledge Agreement, dated February 1, 1990, between the Company and
Charles W. Reynolds.
10.41 (1) Secured Promissory Note, dated February 1, 1990, made by Charles W. Reynolds
in favor of the Company.
10.42 (1) Form of Amendment to Note and Pledge Agreement, dated October 17, 1991,
between the Company and Charles W. Reynolds.
10.43 (1) Note and Pledge Agreement, dated February 1, 1990 between the Company and
Lewis N. Wilmot.
10.44 (1) Secured Promissory Note, dated February 1, 1990, made by Lewis N. Wilmot in
favor of the Company.
10.45 (1) Form of Amendment to Note and Pledge Agreement, dated October 17, 1991,
between the Company and Lewis N. Wilmot.
10.46 (1) Note and Pledge Agreement, dated February 1, 1990, between the Company and G.
Ross Crawford.
10.47 (1) Secured Promissory Note, dated February 1, 1990, made by G. Ross Crawford in
favor of the Company.
10.48 (1) Form of Amendment to Note and Pledge Agreement, dated October 17, 1991,
between the Company and Gordon Ross Crawford and Carol Georgia Crawford,
Trustees of The Crawford Family Trust Est. 5-26-83.
10.49 (1) Note and Pledge Agreement, dated February 1, 1990, between the Company and
Alan D. Uman.
10.50 (1) Secured Promissory Note, dated February 1, 1990, made by Alan D. Uman in favor
of the Company.
10.51 (1) Form of Amendment to Note and Pledge Agreement, dated October 17, 1991,
between the Company and Alan D. Uman.
10.52 (1) Note and Pledge Agreement, dated February 1, 1990, between the Company and
C. Dean Stewart.
10.53 (1) Secured Promissory Note, dated February 1, 1990, made by C. Dean Stewart in
favor of the Company.
10.54 (1) Form of Amendment to Note and Pledge Agreement, dated October 17, 1991,
between the Company and C. Dean Stewart.
10.55 (1) Note and Pledge Agreement, dated February 1, 1990, between the Company and
Linda L. Foster.
10.56 (1) Secured Promissory Note, dated February 1, 1990, made by Linda L. Foster in
favor of the Company.
10.57 (1) Form of Amendment to Note and Pledge Agreement, dated October 17, 1991,
between the Company and Linda L. Foster.
10.58 (2) Second Amended and Restated Loan Agreement dated as of January 31, 1992
between the Company, as Borrower, Security Pacific National Bank, First
Interstate Bank of California, The Bank of California N.A., California Federal
Bank, a Federal Savings Institution and Continental Bank, N.A., as the Banks,
and Security Pacific Bank, as the Agent (the "Second Amended Loan Agreement").
</TABLE>
23
<PAGE> 26
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- ----------
<C> <S>
10.59 (2) Letter Agreement dated January 31, 1992 between Security Pacific Bank,
individually and as Agent for the Banks, and the Company regarding Section 2.8
of the Second Amended Loan Agreement.
10.60 (3) Agreement for Redemption of Partnership Interest dated December 30, 1992
between Carmel Mountain Ranch, a California general partnership, The Presley
Companies, a California corporation, Presley CMR, Inc., a California
corporation, Home Capital Corporation, a California corporation and Humboldt
Financial Services Corp., a California corporation.
10.61 (3) Letter Waiver dated December 31, 1992 between the Company, as Borrower, Bank
of America National Trust and Savings Association, Continental Bank, N.A., The
Bank of California, N.A., First Interstate Bank of California and California
Federal Bank, a Federal Savings Bank, as the Banks, and Bank of America
National Trust and Savings Association (as successor by merger with Security
Pacific National Bank) as Agent.
10.62 (3) Amended Statement of Partnership of Carmel Mountain Ranch dated December 30,
1992.
10.63 (3) Amendment to Amended and Restated Partnership Agreement of Carmel Mountain
Ranch dated December 29, 1992.
10.64 (3) Commitment Letter Extension Agreement dated January 18, 1993 between
Horsethief Canyon Partners, as Borrower and First Interstate Bank of
California, as Lender.
10.65 (3) Fourth Modification of Note Agreement dated January 18, 1993 between
Horsethief Canyon Partners, as Borrower and First Interstate Bank of
California, as Lender.
10.66 (3) Fifth Modification Agreement dated January 11, 1993 between Carmel Mountain
Ranch, as Borrower and Bank of America National Trust and Savings Association
and The Bank of California, N.A., as Lenders.
10.67 (3) Conditional Forbearance Agreement dated January 29, 1993 between the Company,
as Borrower, Bank of America National Trust and Savings Association,
Continental Bank, N.A., The Bank of California, N.A., First Interstate Bank of
California and California Federal Bank, a Federal Savings Bank, as the Banks,
and Bank of America National Trust and Savings Association (as successor by
merger with Security Pacific National Bank), as Agent (the "Conditional
Forbearance Agreement").
10.68 (3) Amendment to Conditional Forbearance Agreement dated March 26, 1993, effective
March 31, 1993, between the Company, as Borrower, Bank of America National
Trust and Savings Association, Continental Bank, N.A., The Bank of California,
N.A., First Interstate Bank of California and Foothill Capital Corporation, as
the Banks, and Bank of America National Trust and Savings Association (as
successor by merger with Security Pacific National Bank), as Agent (the
"Amendment to Conditional Forbearance Agreement").
10.69 (3) Commitment Letter dated March 30, 1993 between the Company, as Borrower, Bank
of America National Trust and Savings Association, Continental Bank, N.A., The
Bank of California, N.A., First Interstate Bank of California and Foothill
Capital Corporation, as the Banks, and Bank of America National Trust and
Savings Association (as successor by merger with Security Pacific National
Bank), as Agent (the "Commitment Letter").
10.70 (3) Modification of Commitment Letter Extension Agreement dated March 29, 1993
between Horsethief Canyon Partners, as Borrower and First Interstate Bank of
California, as Lender.
10.71 (3) Fifth Modification of Note Agreement dated March 29, 1993 between Horsethief
Canyon Partners, as Borrower and First Interstate Bank of California, as
Lender.
10.72 (3) Commitment Letter dated March 30, 1993 between Horsethief Canyon Partners, as
Borrower and First Interstate Bank of California, as Lender.
</TABLE>
24
<PAGE> 27
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- ----------
<C> <S>
10.73 (4) Second Amendment to Conditional Forbearance Agreement dated April 29, 1993,
between the Company, as Borrower, Bank of America National Trust and Savings
Association, Continental Bank, N.A., The Bank of California, N.A., First
Interstate Bank of California and Foothill Capital Corporation, as the Banks,
and Bank of America National Trust and Savings Association (as successor by
merger with Security Pacific National Bank), as Agent.
10.74 (4) Amendment to Commitment Letter dated April 29, 1993, between the Company, as
Borrower, Bank of America National Trust and Savings Association, Continental
Bank, N.A., The Bank of California, N.A., First Interstate Bank of California
and Foothill Capital Corporation, as the Banks, and Bank of America National
Trust and Savings Association (as successor by merger with Security Pacific
National Bank), as Agent.
10.75 (4) Third Amended and Restated Loan Agreement dated as of May 7, 1993, between the
Company, as Borrower, Bank of America National Trust and Savings Association,
Continental Bank, N.A., The Bank of California, N.A. and Foothill Capital
Corporation, as the Lenders, and Bank of America National Trust and Savings
Association, as the Agent, and Bank of America National Trust and Savings
Association, as the Lead Bank.
10.76 (4) Warrant Certificate dated as of May 7, 1993 for Warrants to Purchase Common
Stock issued to Bank of America Trust and Savings Association.
10.77 (4) Warrant Certificate dated as of May 7, 1993 for Warrants to Purchase Common
Stock issued to Continental Bank, N.A.
10.78 (4) Warrant Certificate dated as of May 7, 1993 for Warrants to Purchase Common
Stock issued to The Bank of California, N.A.
10.79 (4) Warrant Certificate dated as of May 7, 1993 for Warrants to Purchase Common
Stock issued to Foothill Capital Corporation.
10.80 (5) Amended and Restated Loan Agreement dated as of June 1, 1993 among Carmel
Mountain Ranch, a California general partnership, as the Borrower, Bank of
America National Trust and Savings Association and The Bank of California,
N.A., as the Banks and Bank of America National Trust and Savings Association,
as the Agent, and Bank of America National Trust and Savings Association, as
the Lead Bank.
10.81 (5) Commitment Letter Extension Agreement dated July 29, 1993 between Horsethief
Canyon Partners, a California general partnership, as the Borrower, and First
Interstate Bank of California.
10.82 (6) Second Amendment, dated as of September 23, 1993, to Third Amended and
Restated Loan Agreement dated as of May 7, 1993, between The Presley
Companies, a California corporation, as the Borrower, Bank of America National
Trust and Savings Association, Foothill Capital Corporation, Mellon Bank, N.A.
as Trustee of First Plaza Group Trust, a New York trust, and Foothill Capital
Corporation (as successors by assignment of the interest of The Bank of
California, N.A.) and Pearl Street L.P. (c/o Goldman, Sachs & Co.), and
Internationale Nederlanden (U.S.) Capital Corporation (previously known as ING
Bank) (as successors by assignment of the interest of Continental Bank, N.A.),
as the Lenders, and Bank of America National Trust and Savings Association, as
the Agent and the Lead Bank.
10.83 (7) Third Amendment dated as of December 30, 1993 among The Presley Companies, a
California corporation (the Borrower), the lending parties to the Third
Amended and Restated Loan Agreement dated as of May 7, 1993 and Bank of
America National Trust and Savings Association, as agent and lead bank for the
lenders thereunder.
10.84 (7) Fourth Amendment dated as of February 2, 1994 among The Presley Companies, a
California corporation (the Borrower), the lending parties to the Third
Amended and Restated Loan Agreement dated as of May 7, 1993, and Foothill
Capital Corporation, as agent for the lenders thereunder.
</TABLE>
25
<PAGE> 28
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- ----------
<C> <S>
10.85 (7) Fourth Amended and Restated Loan Agreement dated as of March 25, 1994 among
The Presley Companies, a California corporation (the Borrower), Foothill
Capital Corporation ("Foothill"), Continental Illinois Commercial Corporation,
First Plaza Group Trust (Mellon Bank, N.A., acting as trustee as directed by
General Motors Investment Management Corporation), Pearl Street, L.P.,
International Nederlanden (U.S.) Capital Corporation, and Whippoorwill/Presley
Obligations Trust -- 1994 (Continental Stock Transfer & Trust Company, as
trustee under that certain trust agreement dated as of January 11, 1994), as
the lenders, and Foothill, as the Agent for the Lenders under the Loan
Documents.
10.86 (7) Agreement to Issue and Purchase Stock as dated for reference purposes the 25th
day of March, 1994 by and among The Presley Companies, a Delaware corporation,
and Foothill Capital Corporation, Continental Illinois Commercial Corporation,
First Plaza Group Trust (Mellon Bank, N.A., acting as trustee as directed by
General Motors Investment Management Corporation), Pearl Street, L.P.,
International Nederlanden (U.S.) Capital Corporation, and Whippoorwill/Presley
Obligations Trust -- 1994 (Continental Stock Transfer & Trust Company, as
trustee under that certain trust agreement dated as of January 11, 1994).
10.87 (8) First Amendment to the Agreement to Issue and Purchase Stock dated as of April
8, 1994 by and among The Presley Companies, a Delaware corporation, and
Foothill Capital Corporation, Continental Illinois Commercial Corporation,
First Plaza Group Trust (Mellon Bank, N.A., acting as trustee as directed by
General Motors Investment Management Corporation), Pearl Street, L.P.,
International Nederlanden (U.S.) Capital Corporation, and Whippoorwill/
Presley Obligations Trust -- 1994 (Continental Stock Transfer & Trust Company,
as trustee under that certain trust agreement dated as of January 11, 1994).
10.88 (9) First Amendment to the Fourth Amended and Restated Loan Agreement and Second
Amendment to the Agreement to Issue and Purchase Stock dated as of May 20,
1994 by and among The Presley Companies, a Delaware corporation. The Presley
Companies, a California corporation, and Foothill Capital Corporation,
individually and as Agent, Continental Illinois Commercial Corporation, First
Plaza Group Trust (Mellon Bank, N.A., acting as trustee as directed by General
Motors Investment Management Corporation), Pearl Street, L.P., International
Nederlanden (U.S.) Capital Corporation, and Whippoorwill/Presley Obligations
Trust -- 1994 (Continental Stock Transfer & Trust Company, as trustee under
that certain trust agreement dated as of January 11, 1994).
10.89 (9) Second Amendment to the Fourth Amended and Restated Loan Agreement dated as of
May 31, 1994 by and among The Presley Companies, a California corporation,
Foothill Capital Corporation, individually and as agent, First Plaza Group
Trust (Mellon Bank, N.A., acting as trustee as directed by General Motors
Investment Management Corporation), Pearl Street, L.P., International
Nederlanden (U.S.) Capital Corporation, and Whippoorwill/Presley Obligations
Trust -- 1994 (Continental Stock Transfer & Trust Company, as trustee under
that certain trust agreement dated as of January 11, 1994).
10.90 (8) Form of Shareholders' Agreement dated as of May 20, 1994, by and among The
Presley Companies, a Delaware corporation, each of the holders of shares of
the Series B Common Stock and certain holders of shares of the Series A Common
Stock.
10.91 (8) Form of Registration Rights Agreement dated as of May 20, 1994, by and among
The Presley Companies, a Delaware corporation and each of the holders of
shares of the Series B Common Stock.
10.92 (8) Amended and Restated 1991 Stock Option Plan of The Presley Companies, a
Delaware corporation.
10.93 (9) Forms of Stock Option Agreements, dated as of May 20, 1994, between the
Company and Wade H. Cable.
</TABLE>
26
<PAGE> 29
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- ----------
<C> <S>
10.94 (9) Forms of Stock Option Agreements, dated as of May 20, 1994, between the
Company and David M. Siegel.
10.95 (9) Forms of Stock Option Agreements, dated as of May 20, 1994, between the
Company and L.C. Albertson, Jr.
10.96 (9) Form of Stock Option Agreement, dated as of May 20, 1994, between the Company
and Gerald P. Nordeman.
10.97 (9) Form of Stock Option Agreement, dated as of May 20, 1994, between the Company
and Charles W. Reynolds.
10.98 (9) Form of Stock Option Agreement, dated as of May 20, 1994, between the Company
and Lewis N. Wilmot.
10.99 (9) Form of Stock Option Agreement, dated as of May 20, 1994, between the Company
and Nancy M. Harlan.
10.100 (9) Form of Stock Option Agreement, dated as of May 20, 1994, between the Company
and Linda L. Foster.
10.101 (9) Form of Stock Option Agreement, dated as of May 20, 1994, between the Company
and W. Douglass Harris.
10.102 (9) Form of Stock Option Agreement, dated as of May 20, 1994, between the Company
and C. Dean Stewart.
10.103 (9) Form of Stock Option Agreement, dated as of May 20, 1994, between the Company
and G. Ross Crawford.
10.104 (9) Form of Stock Option Agreement, dated as of May 20, 1994, between the Company
and Alan Uman.
10.105 (9) Form of Stock Option Agreement, dated as of May 20, 1994, between the Company
and William Lyon.
10.106 (9) Form of Amended and Restated Employment Agreement, dated as of May 20, 1994,
between Wade H. Cable and the Company.
10.107 (9) Form of Amended and Restated Employment Agreement, dated as of May 20, 1994,
between David M. Siegel and the Company.
10.108 (9) Form of Amended and Restated Employment Agreement, dated as of May 20, 1994,
between L.C. Albertson, Jr. and the Company.
10.109 (9) Form of Amended and Restated Employment Agreement, dated as of May 20, 1994,
between Gerald P. Nordeman and the Company.
10.110 (9) Form of Amended and Restated Employment Agreement, dated as of May 20, 1994,
between Charles W. Reynolds and the Company.
10.111 (9) Form of Amended and Restated Employment Agreement, dated as of May 20, 1994,
between Lewis N. Wilmot and the Company.
10.112 (9) Form of Amended and Restated Employment Agreement, dated as of May 20, 1994,
between Nancy M. Harlan and the Company.
10.113 (9) Form of Amended and Restated Employment Agreement, dated as of May 20, 1994,
between Linda L. Foster and the Company.
10.114 (9) Form of Employment Agreement, dated as of May 20, 1994, between W. Douglass
Harris and the Company.
10.115 (9) Form of Amended and Restated Employment Agreement, dated as of May 20, 1994,
between C. Dean Stewart and the Company.
10.116 (8) Form of Amended and Restated Employment Agreement, dated as of May 20, 1994,
between G. Ross Crawford and the Company.
10.117 (8) Form of Amended and Restated Employment Agreement, dated as of May 20, 1994,
between Alan Uman and the Company.
</TABLE>
27
<PAGE> 30
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- ----------
<C> <S>
10.118(10) Third Amendment of Fourth Amended and Restated Loan Agreement, dated for
reference purposes June 30, 1994, by and among (i) The Presley Companies, a
California corporation, as the borrower, (ii) Foothill Capital Corporation
("Foothill"), First Plaza Group Trust (Mellon Bank, N.A., acting as trustee as
directed by General Motors Investment Management Corporation), Pearl Street,
L.P., International Nederlanden (U.S.) Capital Corporation, and
Whippoorwill/Presley Obligations Trust -- 1994 (Continental Stock Transfer &
Trust Company, as trustee under that certain trust agreement dated as of
January 11, 1994), as the lenders, and Foothill, as the agent for the lenders.
10.119(10) Agreement and Assignment; Mutual Releases, as of August 23, 1994, by and
between Gateway Highlands, a California limited partnership, HSP Inc., a
California corporation and The Presley Companies, a California corporation.
10.120(11) Master Credit Agreement by and between Carmel Mountain Ranch, a California
general partnership and Bank One, Arizona, N.A., a national banking
association dated as of February 15, 1995.
10.121(12) Fifth Amendment to Fourth Amended and Restated Loan Agreement, dated for
reference purposes June 30, 1995, by and among (i) The Presley Companies, a
California corporation, as the borrower, (ii) Foothill Capital Corporation
("Foothill"), First Plaza Group Trust (Mellon Bank, N.A., acting as trustee as
directed by General Motors Investment Management Corporation), Internationale
Nederlanden (U.S.) Capital Corporation, and Whippoorwill/Presley Obligations
Trust -- 1994 (Continental Stock Transfer & Trust Company, as trustee under
that certain trust agreement dated as of January 11, 1994), as the lenders,
and (iii) Foothill, as the Agent for the Lenders.
10.122(13) Commitment Letter and Settlement Agreement dated September 11, 1995 by and
among First Interstate Bank of California, Horsethief Canyon Partners, a
California general partnership ("Borrower"), and The Presley Companies, a
California corporation, the Borrower's managing general partner.
10.123(13) Master Credit Agreement by and between The Presley Companies, a California
corporation, and Bank One, Arizona, NA, a national banking association, dated
as of October 10, 1995.
10.124(13) First Amendment to Master Credit Agreement by and between Carmel Mountain
Ranch, a California general partnership and Bank One, Arizona, NA dated as of
October 10, 1995.
10.125(14) Master Credit Agreement by and between Horsethief Canyon Partners, a
California general partnership ("Borrower"), and Bank One, Arizona, NA, a
national banking association ("Bank"), dated as of October 4, 1996.
10.126(14) Amendment to Master Credit Agreement and Secured Promissory Note by and
between Presley Homes (formerly known as The Presley Companies), a California
corporation ("Borrower"), and Bank One, Arizona, NA, a national banking
association ("Bank"), dated as of October 4, 1996.
10.127(14) Second Amendment to Master Credit Agreement and Secured Promissory Note by and
between Carmel Mountain Ranch, a California general partnership ("Borrower"),
and Bank One, Arizona, NA, a national banking association ("Bank"), dated as
of October 4, 1996.
21.1 List of Subsidiaries of the Company.
27 Financial Data Schedule.
</TABLE>
- ------------
(1) Previously filed in connection with the Company's Registration Statement on
Form S-1, and amendments thereto, (S.E.C. Registration No. 33-42161) and
incorporated herein by this reference.
(2) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarterly period ended March 31, 1992 and incorporated herein
by this reference.
(3) Previously filed as an exhibit to the Company's Annual Report on Form 10-K
for the year ended December 31, 1992 and incorporated herein by this
reference.
28
<PAGE> 31
(4) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarterly period ended March 31, 1993 and incorporated herein
by this reference.
(5) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarterly period ended June 30, 1993 and incorporated herein
by this reference.
(6) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarterly period ended September 30, 1993 and incorporated
herein by this reference.
(7) Previously filed as an exhibit to the Company's Annual Report on Form 10-K
for the year ended December 31, 1993 and incorporated herein by this
reference.
(8) Previously filed as an exhibit to the Company's Proxy Statement for Annual
Meeting of Stockholders held on May 20, 1994 and incorporated herein by
this reference.
(9) Previously filed in connection with the Company's Registration Statement on
Form S-1, and amendments thereto (S.E.C. Registration No. 33-79088) and
incorporated herein by this reference.
(10) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarterly period ended September 30, 1994 and incorporated
herein by this reference.
(11) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarterly period ended March 31, 1995 and incorporated herein
by this reference.
(12) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarterly period ended June 30, 1995 and incorporated herein
by this reference.
(13) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarterly period ended September 30, 1995 and incorporated
herein by this reference.
(14) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarterly period ended September 30, 1996 and incorporated
herein by this reference.
(b) Reports on Form 8-K
No Reports on Form 8-K have been filed by the Company during the
quarter ended December 31, 1996.
29
<PAGE> 32
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
THE PRESLEY COMPANIES
By: DAVID M. SIEGEL
------------------------------------
David M. Siegel
Senior Vice President,
Chief Financial Officer and
Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ------------------------------- ---------------
<C> <S> <C>
WILLIAM LYON Chairman of the Board and March 25, 1997
- --------------------------------------------- Director
William Lyon
WADE H. CABLE Director, Chief Executive March 25, 1997
- --------------------------------------------- Officer and President
Wade H. Cable (Principal Executive Officer)
HOWARD P. ALLEN Director March 25, 1997
- ---------------------------------------------
Howard P. Allen
JAMES E. DALTON Director March 25, 1997
- ---------------------------------------------
James E. Dalton
GREGORY P. FLYNN Director March 25, 1997
- ---------------------------------------------
Gregory P. Flynn
Director March 25, 1997
- ---------------------------------------------
Charles Froland
STEVEN B. SAMPLE Director March 25, 1997
- ---------------------------------------------
Steven B. Sample
KAREN SANDLER Director March 25, 1997
- ---------------------------------------------
Karen Sandler
DAVID M. SIEGEL Director, Senior Vice March 25, 1997
- --------------------------------------------- President, Chief Financial
David M. Siegel Officer and Treasurer
(Principal Financial Officer)
W. DOUGLASS HARRIS Vice President and Corporate March 25, 1997
- --------------------------------------------- Controller (Principal
W. Douglass Harris Accounting Officer)
</TABLE>
30
<PAGE> 33
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
THE PRESLEY COMPANIES
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Report of Independent Auditors........................................................ F-2
Consolidated Balance Sheets........................................................... F-3
Consolidated Statements of Operations................................................. F-4
Consolidated Statements of Stockholders' Equity....................................... F-5
Consolidated Statements of Cash Flows................................................. F-6
Notes to Consolidated Financial Statements............................................ F-7
</TABLE>
REQUIRED SCHEDULES
Schedules are omitted as the required information is not present, is not present
in sufficient amounts, or is included in the Consolidated Financial Statements
or Notes thereto.
F-1
<PAGE> 34
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders
The Presley Companies
We have audited the accompanying consolidated balance sheets of The Presley
Companies (the "Company") as of December 31, 1996 and 1995, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of The Presley
Companies at December 31, 1996 and 1995, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Newport Beach, California
February 18, 1997
F-2
<PAGE> 35
THE PRESLEY COMPANIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT NUMBER OF SHARES AND PAR VALUE PER SHARE)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents........................................... $ 4,550 $ 4,217
Receivables -- Note 3............................................... 4,225 5,304
Real estate inventories -- Notes 1 and 4............................ 304,126 315,535
Property and equipment, less accumulated depreciation of $1,432 and
$850 at December 31, 1996 and 1995, respectively.................. 3,047 2,577
Deferred loan costs -- Note 1....................................... 4,347 5,366
Other assets........................................................ 11,320 7,934
-------- --------
$331,615 $340,933
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable.................................................... $ 18,428 $ 10,551
Accrued expenses.................................................... 20,450 21,887
Notes payable -- Note 5............................................. 18,524 34,434
12 1/2% Senior Notes Due 2001 -- Note 5............................. 190,000 190,000
-------- --------
247,402 256,872
-------- --------
Commitments and contingencies -- Note 9
Stockholders' equity -- Notes 2 and 6
Common stock:
Series A common stock, par value $.01 per share; 100,000,000
shares authorized; 17,838,535 issued and outstanding at
December 31, 1996 and 1995, respectively...................... 178 178
Series B restricted voting convertible common stock, par value
$.01 per share; 50,000,000 shares authorized; 34,357,143
shares issued and outstanding at December 31, 1996 and 1995,
respectively.................................................. 344 344
Additional paid-in capital........................................ 114,599 114,599
Accumulated deficit from January 1, 1994.......................... (30,908) (31,060)
-------- --------
84,213 84,061
-------- --------
$331,615 $340,933
======== ========
</TABLE>
See accompanying notes.
F-3
<PAGE> 36
THE PRESLEY COMPANIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER COMMON SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Sales
Homes................................................. $ 317,366 $ 231,204 $ 262,866
Lots, land and other.................................. 1,631 54,301 7,302
--------- --------- ---------
318,997 285,505 270,168
--------- --------- ---------
Operating costs
Cost of sales -- homes................................ (279,988) (210,808) (217,712)
Cost of sales -- lots, land and other................. (1,991) (55,703) (6,856)
Impairment loss on real estate assets -- Note 1....... -- (16,811) --
Reduction of real estate assets to estimated net
realizable value -- Note 1 ....................... -- (9,400) --
Sales and marketing................................... (22,877) (21,400) (18,958)
General and administrative............................ (13,978) (12,718) (12,324)
--------- --------- ---------
(318,834) (326,840) (255,850)
--------- --------- ---------
Operating income (loss)................................. 163 (41,335) 14,318
Interest expense, net of amounts capitalized -- Note
5..................................................... (2,256) (2,226) (6,961)
Other income (expense), net............................. 2,245 1,908 2,462
Minority partners' interest in consolidated income...... -- -- 413
--------- --------- ---------
Income (loss) before income taxes and extraordinary
item.................................................. 152 (41,653) 10,232
Credit (provision) for income taxes -- Note 7........... -- 1,868 (4,195)
--------- --------- ---------
Income (loss) before extraordinary item................. 152 (39,785) 6,037
Extraordinary item -- gain from retirement of debt, net
of applicable income taxes of $1,868 -- Note 8........ -- 2,688 --
--------- --------- ---------
Net income (loss)....................................... $ 152 $ (37,097) $ 6,037
========= ========= =========
Net income (loss) per common share: -- Note 1
Before extraordinary item............................. $ -- $ (0.76) $ 0.11
Extraordinary item.................................... -- 0.05 --
--------- --------- ---------
After extraordinary item.............................. $ -- $ (0.71) $ 0.11
========= ========= =========
</TABLE>
See accompanying notes.
F-4
<PAGE> 37
THE PRESLEY COMPANIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
RETAINED
COMMON STOCK EARNINGS
--------------------------------- PROMISSORY (ACCUMULATED
NOTES ACCUMULATED DEFICIT)
SERIES A SERIES B ADDITIONAL RELATED TO DEFICIT AT FROM
--------------- --------------- PAID-IN MANAGEMENT DECEMBER 31, JANUARY 1,
SHARES AMOUNT SHARES AMOUNT CAPITAL STOCK 1993 1994 TOTAL
------ ------ ------ ------ ---------- ---------- ------------ ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance -- December 31,
1993..................... 18,500 $185 -- $ -- $155,474 $ (2,991) $(71,278) $ -- $ 81,390
Conversion of debt to
equity through issuance
of shares of Series B
Common Stock -- Note 2... -- -- 43,167 432 94,568 -- -- -- 95,000
Readjustment of the
Company's accounts to
estimated fair values and
the elimination of the
accumulated deficit
against additional
paid-in capital as of
January 1, 1994 -- Note
2........................ -- -- -- -- (136,778) -- 71,278 -- (65,500)
Retirement of 8,809,524
shares of Series B Common
Stock in connection with
issuance of Senior
Notes -- Note 2.......... -- -- (8,810) (88) 88 -- -- -- --
Net income................. -- -- -- -- -- -- -- 6,037 6,037
Income tax benefit of loss
carryforward existing at
date of
quasi-reorganization -- Note
2........................ -- -- -- -- 4,195 -- -- -- 4,195
Principal payments on
promissory notes related
to management stock --
Note 6................... -- -- -- -- -- 36 -- -- 36
Surrender of 661,465 shares
of Series A Common Stock
related to promissory
notes issued in 1990
-- Note 6................ (661) (7) -- -- (2,948) 2,955 -- -- --
------ ---- ------ ---- -------- -------- -------- -------- --------
Balance -- December 31,
1994..................... 17,839 178 34,357 344 114,599 -- -- 6,037 121,158
Net loss................... -- -- -- -- -- -- -- (37,097) (37,097)
------ ---- ------ ---- -------- -------- -------- -------- --------
Balance -- December 31,
1995..................... 17,839 178 34,357 344 114,599 -- -- (31,060) 84,061
Net income................. -- -- -- -- -- -- -- 152 152
------ ---- ------ ---- -------- -------- -------- -------- --------
Balance -- December 31,
1996..................... 17,839 $178 34,357 $344 $114,599 $ -- $ -- $(30,908) $ 84,213
====== ==== ====== ==== ======== ======== ======== ======== ========
</TABLE>
See accompanying notes.
F-5
<PAGE> 38
THE PRESLEY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1996 1995 1994
-------- -------- ---------
<S> <C> <C> <C>
Operating activities
Net income (loss).............................................................. $ 152 $(37,097) $ 6,037
Adjustments to reconcile net income (loss) to net cash provided by operating
activities:
Depreciation and amortization................................................ 585 463 387
Minority partners' interest in consolidated income........................... -- -- (413)
Reduction of certain real estate assets to estimated net realizable value.... -- 9,400 --
Impairment loss on real estate assets........................................ -- 16,811 --
Gain on retirement of debt, before applicable income taxes................... -- (4,556) --
Provision for uncollectible notes receivable................................. 145 -- 170
Net changes in operating assets and liabilities:
Other receivables.......................................................... (778) 2,809 439
Real estate inventories.................................................... 11,409 40,309 (13,140)
Deferred loan costs........................................................ 1,019 1,196 (5,727)
Other assets............................................................... (3,386) (2,270) 512
Accounts payable........................................................... 7,877 1,403 708
Accrued expenses........................................................... (1,437) (727) 7,424
Income taxes payable....................................................... -- -- 4,195
-------- -------- ---------
Net cash provided by operating activities...................................... 15,586 27,741 592
-------- -------- ---------
Investing activities
Issuance of notes receivable................................................... -- (2,175) (530)
Principal payments on notes receivable......................................... 1,712 2,529 2,045
Purchases of property and equipment............................................ (1,055) (794) (1,001)
-------- -------- ---------
Net cash provided by (used in) investing activities............................ 657 (440) 514
-------- -------- ---------
Financing activities
Proceeds from issuance of 12 1/2% Senior Notes................................. -- -- 200,000
Proceeds from borrowings on notes payable...................................... 107,891 75,339 58,160
Principal payments on notes payable............................................ (123,801) (94,851) (262,641)
Retirement of debt............................................................. -- (24,215) --
Principal payments on promissory notes related to management stock............. -- -- 36
Payment for redemption of minority partners' interests in consolidated joint
venture...................................................................... -- -- (2,650)
-------- -------- ---------
Net cash used in financing activities.......................................... (15,910) (43,727) (7,095)
-------- -------- ---------
Net increase (decrease) in cash and cash equivalents............................. 333 (16,426) (5,989)
Cash and cash equivalents -- beginning of period................................. 4,217 20,643 26,632
-------- -------- ---------
Cash and cash equivalents -- end of period....................................... $ 4,550 $ 4,217 $ 20,643
======== ======== =========
Supplemental disclosures of cash flow information
Cash paid during the period for interest, net of amounts capitalized........... $ 2,517 $ 2,018 $ 5,380
======== ======== =========
Cash paid during the period for income taxes................................... $ -- $ -- $ 37
======== ======== =========
</TABLE>
See accompanying notes.
F-6
<PAGE> 39
THE PRESLEY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Operations
The Presley Companies (the "Company") is primarily engaged in designing,
constructing and selling single family detached and attached homes in
California, Arizona, New Mexico and Nevada.
Basis of Presentation
The consolidated financial statements include the accounts of the Company
and all majority-owned or controlled subsidiaries and joint ventures. The equity
interests of other partners are reflected as minority partners' interest. All
significant intercompany accounts and transactions have been eliminated.
Investments in unconsolidated joint ventures in which the Company has less than
a controlling interest are accounted for using the equity method. The accounting
policies of the joint ventures are substantially the same as those of the
Company.
Real Estate Inventories and Related Indebtedness
Real estate inventories are carried at cost net of impairment losses and
real estate valuation adjustments. Real estate inventories consist primarily of
raw land, lots under development, houses under construction and completed
houses. All direct and indirect land costs, offsite and onsite improvements and
applicable interest and other carrying charges are capitalized to real estate
projects during periods when the project is under development. Land and
improvement costs are allocated within a project utilizing a method that
approximates relative value. Selling expenses and other marketing costs are
expensed in the period incurred. A provision for warranty costs relating to the
Company's limited warranty plans is included in cost of sales at the time the
sale of a home is recorded. The Company normally reserves one percent of the
sales price of its homes against the possibility of future charges relating to
its one-year limited warranty and similar potential claims.
Interest incurred under the Working Capital Facility, the Senior Notes and
other notes payable, as more fully discussed in Note 5, is generally first
capitalized to real estate projects under development. Excess interest charges
related to real estate projects not under development are expensed in the period
incurred.
In March 1995, the Financial Accounting Standards Board (FASB) issued
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of," ("Statement No. 121") which requires
impairment losses to be recorded on assets to be held and used by the Company
when indicators of impairment are present and the undiscounted cash flows
estimated to be generated by those assets (excluding interest) are less than the
carrying amount of the assets. Statement No. 121 also requires that long-lived
assets that are held for disposal be reported at the lower of the assets'
carrying amount or fair value less cost of disposal. Under the new
pronouncement, when an impairment loss is required for assets to be held and
used by the Company, the related assets are adjusted to their estimated fair
value. This was a significant change from the previous accounting standard that
required homebuilders to carry real estate assets at the lower of cost or net
realizable value. Although Statement No. 121 was effective for fiscal years
beginning after December 15, 1995, the Company elected, as encouraged by the new
pronouncement, to adopt its provisions in 1995. Accordingly, the net loss for
the year ended December 31, 1995 included a non-cash charge of $16,811,000 to
record impairment losses on certain of the Company's real estate assets. The new
accounting standard could result in material additional adjustments to the
Company's real estate assets in the future, and materially different results in
the timing and amount of adjustments than would have been the case under the
previous standards.
Fair value represents the amount at which an asset could be bought or sold
in a current transaction between willing parties, that is, other than a forced
or liquidation sale. The estimation process involved in determining if assets
have been impaired and in the determination of fair value is inherently
uncertain since it
F-7
<PAGE> 40
THE PRESLEY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
requires estimates of current market yields as well as future events and
conditions. Such future events and conditions include economic and market
conditions, as well as the availability of suitable financing to fund
development and construction activities. The realization of the Company's real
estate projects is dependent upon future uncertain events and conditions and,
accordingly, the actual timing and amounts realized by the Company may be
materially different from the estimated fair values as described herein.
Prior to October 1, 1995, the Company evaluated its real estate inventories
to determine if such assets were stated at the lower of cost or estimated net
realizable value, as required by the then applicable accounting pronouncements.
The evaluations considered the depressed nature of the real estate business in
the Company's principal markets, the reduced demand from prospective homebuyers,
decreased sales prices, increased sales incentives, future costs of development
and holding costs during development. Based on these evaluations, reductions of
certain real estate assets to estimated net realizable value amounting to
$9,400,000 were recorded during 1995.
Interest incurred during the period in which real estate projects are not
under development or during the period subsequent to the completion of projects
are expensed in the period incurred. Economic conditions in the real estate
industry can cause a delay in the development of certain real estate projects
and, as a result, can lengthen the periods when such projects are not under
development and, accordingly, have a significant impact on profitability as a
result of expensed interest. Interest expensed during 1996, 1995, and 1994 was
approximately $2,256,000, $2,226,000 and $6,961,000, respectively.
Property and Equipment
Property and equipment are stated at cost and depreciated using various
methods over their estimated useful lives ranging from three to thirty-five
years. Leasehold improvements are stated at cost and are amortized using the
straight-line method over the shorter of either their estimated useful lives or
term of the lease.
Deferred Loan Costs
Deferred loan costs are amortized over the term of applicable loans using a
method which approximates the interest method. Included in deferred loan costs
at December 31, 1996 and 1995, net of related amortization, are $4,259,000 and
$5,205,000, respectively, of costs associated with the issuance of the Company's
Senior Notes.
Sales and Profit Recognition
A sale is generally recorded and profit recognized when title has passed to
a buyer who has met down payment and continuing investment criteria in
accordance with the provisions of Statement of Financial Accounting Standards
No. 66, "Accounting for Sales of Real Estate." When it is determined that the
earnings process is not complete, unearned profit is deferred for recognition in
future periods.
Income Taxes
Income taxes are accounted for under the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes."
Financial Instruments
Financial instruments that potentially subject the Company to
concentrations of credit risk are primarily cash investments, receivables, and
deposits. The Company typically places its cash investments in investment grade
short-term instruments. Collateral on first trust deed notes receivable is
primarily located in Southern California and Arizona. Deposits, included in
other assets, are due from municipalities or utility companies and are generally
collected from such entities through fees assessed to other developers.
For those instruments, as defined under Statement of Financial Accounting
Standards No. 107, "Disclosures About Fair Value of Financial Instruments," for
which it is practical to estimate fair value,
F-8
<PAGE> 41
THE PRESLEY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
management has determined that the carrying amounts of the Company's financial
instruments approximate their fair value at December 31, 1996, except for the
12 1/2% Senior Notes as described in Note 5.
The Company is an issuer of, or subject to, financial instruments with
off-balance sheet risk in the normal course of business which exposes it to
credit risks. These financial instruments include letters of credit and
obligations in connection with assessment district bonds. These off-balance
sheet financial instruments are described in the applicable Notes.
Cash and Cash Equivalents
Short-term investments with a maturity of three months or less when
purchased are considered cash equivalents.
Net Income (Loss) Per Common Share
Net income (loss) per common share for the years ended December 31, 1996
and 1995 is based on 52,195,678 shares of Series A and Series B common stock
outstanding.
Net income per common share for the year ended December 31, 1994 is based
on 57,197,941 weighted average total shares of Series A and Series B common
stock outstanding after giving retroactive effect to the capital restructuring
described in Note 2.
Use of Estimates
The preparation of the Company's financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of the assets and liabilities
as of December 31, 1996 and 1995 and revenues and expenses for each of the three
years in the period ended December 31, 1996. Accordingly, actual results could
differ from those estimates in the near-term.
NOTE 2 -- CAPITAL RESTRUCTURING AND QUASI-REORGANIZATION
On March 28, 1994 the Company's Board of Directors approved a Plan for
Capital Restructuring, which was approved by the Company's Stockholders at the
Annual Meeting of Stockholders held on May 20, 1994.
In accordance with the Plan for Capital Restructuring, on March 29, 1994
the Company executed a definitive agreement with its lenders to restructure the
Company's $340,000,000 revolving line of credit. The Plan was approved at the
Company's Annual Meeting held on May 20, 1994 and on that date the lender group
under the Company's Revolving Debt Facility (see Note 5) converted $95,000,000
of outstanding debt under the Revolving Facility to equity through the issuance
of 43,166,667 shares of a new series of common stock representing initially 70%
of the outstanding shares of all series of common stock of the Company. As
provided in the agreement with its lenders, when the Company completed its
Senior Notes Offering of $200,000,000 on June 29, 1994, as described below, the
lending group returned to the Company a total of 8,809,524 shares of the new
series of common stock, reducing their aggregate equity interest in the Company
to 65% from 70%. In order to implement the Plan for Capital Restructuring, the
Company's Certificate of Incorporation was amended to redesignate existing
common stock as Series A Common Stock (the "Series A Common"), to establish a
second series of common stock which was issued to the lender group (the "Series
B Common"), and to increase the number of directors of the Company to nine, of
which six are elected by holders of outstanding shares of Series A Common, and
the remaining three are elected by the holders of outstanding shares of Series B
Common.
Concurrent with the conversion of debt to equity, under the Plan for
Capital Restructuring, the Revolving Debt Facility was reduced by $95,000,000 to
a total of $245,000,000, comprised of a $150,000,000 term facility ("the Term
Facility") and a $95,000,000 working capital facility ("the Working Capital
Facility"), each described below (collectively, "the Debt Facilities"). In
addition the lender group increased the Working Capital Facility by $20,000,000
to a total of $115,000,000. Revolving credit loans under the Working Capital
Facility may be borrowed, repaid and reborrowed from time to time prior to the
termination date of the
F-9
<PAGE> 42
THE PRESLEY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Working Capital Facility. The lender group had therefore provided Debt
Facilities totaling $265,000,000 to the Company.
As described more fully in Note 5, the Company filed with the Securities
and Exchange Commission a Registration Statement on Form S-1 for the sale of
$200,000,000 of Senior Notes which became effective on June 23, 1994. The
offering closed on June 29, 1994 and was fully subscribed and issued. The Term
Facility was repaid in full and the Working Capital Facility was reduced by
$43,000,000 from a portion of the proceeds from the issuance of the Senior
Notes.
The terms of the Working Capital Facility are described more fully in Note
5.
The Series B Common ranks pari passu with the Series A Common in any
liquidation of the Company. The Company may not declare or pay any dividends on
the Series A Common unless equal dividends are declared and paid on the Series B
Common.
The Series B Common is convertible into Series A Common on a
share-for-share basis at the option of the holder upon the occurrence of any one
of the following: (1) after May 20, 1997; (2) if the holder sells the Series A
Common into which the Series B Common is being converted in a public
distribution or in open market sales under Rule 144, and the holder has made no
arrangement for the purchase of such shares by any purchaser; (3) certain sales
of Series A Common which result in a change of control; and (4) an event of
default under the Working Capital Facility shall occur and be continuing.
As part of the Plan for Capital Restructuring, the Company's Board of
Directors also approved a Plan for Quasi-Reorganization retroactive to January
1, 1994. The Company implemented the quasi-reorganization at that time because
it was implementing a substantial change in its capital structure in accordance
with the Plan for Capital Restructuring. A quasi-reorganization allows certain
companies which are undergoing a substantial change in capital structure to
utilize "fresh start accounting."
Under the Plan for Quasi-Reorganization, the Company implemented an overall
accounting readjustment effective January 1, 1994, which resulted in the
adjustment of assets and liabilities to estimated fair values, and the
elimination of the accumulated deficit. The net amount of such revaluation
adjustments and costs related to the capital restructuring, together with the
accumulated deficit as of the date thereof, was transferred to paid-in capital
in accordance with the accounting principles applicable to
quasi-reorganizations.
The estimation process involved in the determination of the fair value of
those assets as to which an adjustment was made is inherently uncertain since it
required estimates and assumptions as to future events and conditions. Such
future events and conditions include economic and market conditions, the
availability and cost of governmental entitlements necessary to develop and
build product, the cost of financing to fund development and construction
activities, and the availability and cost of labor and materials necessary to
develop, build and sell product.
Because the amount and timing of the realization of the investments by the
Company and its subsidiaries in their respective real estate projects are
dependent upon such future uncertain events and conditions, the actual timing
and amounts may be materially different from the estimates and assumptions used
in determining fair value estimates utilized for purposes of the Plan for
Quasi-Reorganization.
The quasi-reorganization affects the comparability of operating statements
for periods beginning after December 31, 1993 with those for periods beginning
on or before December 31, 1993. Moreover, any income tax benefits resulting from
the utilization of net operating loss and other carryforwards existing at
January 1, 1994 and temporary differences resulting from the
quasi-reorganization, are excluded from the results of operations and credited
to paid-in capital.
F-10
<PAGE> 43
THE PRESLEY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The effect of the capital restructuring and quasi-reorganization on the
consolidated balance sheet as of December 31, 1993 is as follows as of January
1, 1994 (in thousands except number of shares and par value per share):
<TABLE>
<CAPTION>
HISTORICAL
BALANCE ADJUSTMENTS BALANCE
SHEET ----------------------------------- SHEET
DECEMBER 31, DEBT QUASI- JANUARY 1,
1993 CONVERSION (A) REORGANIZATION (B) 1994
------------ -------------- ------------------ -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents................ $ 26,632 $ -- $ -- $ 26,632
Receivables.............................. 10,591 -- -- 10,591
Real estate inventories.................. 439,548 -- (65,500) 374,048
Property and equipment................... 1,632 -- -- 1,632
Deferred loan costs...................... 835 -- -- 835
Other assets............................. 6,176 -- -- 6,176
-------- -------- ---------- ---------
$485,414 $ -- $ (65,500) $ 419,914
======== ======== ========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable......................... $ 8,440 $ -- $ -- $ 8,440
Accrued expenses......................... 15,190 -- -- 15,190
Notes payable............................ 372,198 (95,000) -- 277,198
Minority partners' interest.............. 8,196 -- -- 8,196
-------- -------- ---------- ---------
404,024 (95,000) -- 309,024
-------- -------- ---------- ---------
Stockholders' equity
Common stock:
Common stock, par value $.01 per
share; 100,000,000 shares
authorized; 18,500,000 shares
issued and outstanding (designated
as Series A common stock at
January 1, 1994).................. 185 -- -- 185
Series B restricted voting
convertible common stock, par
value $.01 per share; 50,000,000
shares authorized; 43,166,667
shares issued and outstanding at
January 1, 1994................... -- 432 -- 432
Additional paid-in capital............. 155,474 94,568 (136,778) 113,264
Promissory notes related to management
stock............................... (2,991) -- -- (2,991)
Retained earnings (accumulated
deficit)............................ (71,278) -- 71,278 --
-------- -------- ---------- ---------
81,390 95,000 (65,500) 110,890
-------- -------- ---------- ---------
$485,414 $ -- $ (65,500) $ 419,914
======== ======== ========== =========
</TABLE>
- ---------------
(A) To reflect the conversion of $95,000,000 of the Company's Revolving Debt
Facility to equity through the issuance of 43,166,667 shares of Series B
common stock.
(B) To reflect the readjustment of the Company's accounts to estimated fair
values and the elimination of the accumulated deficit against additional
paid-in capital as of January 1, 1994.
F-11
<PAGE> 44
THE PRESLEY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3 -- RECEIVABLES
Receivables consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1996 1995
------ ------
<S> <C> <C>
First trust deed notes secured by real estate sold, interest
rates generally ranging from 8.00% to 12.00%................... $ 930 $2,573
Other notes receivable........................................... 228 442
------ ------
1,158 3,015
Other receivables -- primarily escrow proceeds................... 3,067 2,289
------ ------
$4,225 $5,304
====== ======
</TABLE>
Notes receivable as of December 31, 1996 mature through 2010 approximately
as follows (in thousands):
<TABLE>
<S> <C>
1996.................................................................... $ 383
1997.................................................................... 584
1998.................................................................... 150
1999.................................................................... --
2000.................................................................... --
Thereafter.............................................................. 41
------
$1,158
======
</TABLE>
NOTE 4 -- REAL ESTATE INVENTORIES
Real estate inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1996
- --------------------------------------------------------------------------------------------------------
COMPLETED
LAND AND INVENTORY,
CONSTRUCTION INCLUDING COMPLETED
REGION IN PROGRESS LOTS HELD FOR SALE MODELS TOTAL
- ----------------------------------------------- ------------ ------------------- ------ --------
<S> <C> <C> <C> <C>
Southern California............................ $152,845 $16,903 $3,383 $173,131
Northern California............................ 80,729 5,160 3,530 89,419
Arizona........................................ 17,533 3,486 1,098 22,117
New Mexico..................................... 7,643 713 1,256 9,612
Nevada......................................... 6,998 1,477 409 8,884
Illinois....................................... 963 -- -- 963
-------- ------- ------ --------
$266,711 $27,739 $9,676 $304,126
======== ======= ====== ========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1995
- --------------------------------------------------------------------------------------------------------
COMPLETED
LAND AND INVENTORY,
CONSTRUCTION INCLUDING COMPLETED
REGION IN PROGRESS LOTS HELD FOR SALE MODELS TOTAL
- ---------------------------------------------- ------------ ------------------- ------- --------
<S> <C> <C> <C> <C>
Southern California........................... $160,924 $14,917 $12,873 $188,714
Northern California........................... 74,638 6,796 7,385 88,819
Arizona....................................... 23,234 1,785 2,069 27,088
New Mexico.................................... 4,569 1,753 782 7,104
Nevada........................................ 2,916 -- -- 2,916
Illinois...................................... 894 -- -- 894
-------- ------- ------- --------
$267,175 $25,251 $23,109 $315,535
======== ======= ======= ========
</TABLE>
F-12
<PAGE> 45
THE PRESLEY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5 -- 12 1/2% SENIOR NOTES AND NOTES PAYABLE
12 1/2% Senior Notes and notes payable consist of the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1996 1995
-------- --------
<S> <C> <C>
12 1/2% Senior Notes due 2001.................................. $190,000 $190,000
-------- --------
Notes payable:
Working Capital Facility (Revolving Facility)................ 12,000 26,915
Notes payable -- consolidated joint ventures:
Construction loans........................................ -- 2,433
Revolving line of credit.................................. 6,170 2,454
Other notes payable.......................................... 354 2,632
-------- --------
18,524 34,434
-------- --------
$208,524 $224,434
======== ========
</TABLE>
Interest costs relating to the above notes consist of the following (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Interest incurred.................................. $(31,571) $(34,160) $(32,195)
Interest capitalized............................... 29,315 31,934 25,234
-------- -------- --------
Interest expense................................... $ (2,256) $ (2,226) $ (6,961)
======== ======== ========
</TABLE>
Senior Notes
The Company filed with the Securities and Exchange Commission a
Registration Statement on Form S-1 for the sale of $200,000,000 of Senior Notes
which became effective on June 23, 1994. The offering closed on June 29, 1994
and was fully subscribed and issued.
The 12 1/2% Senior Notes due 2001 were offered by The Presley Companies, a
Delaware corporation ("Delaware Presley"), are unconditionally guaranteed on a
senior basis by Presley Homes (formerly The Presley Companies), a California
corporation and a wholly owned subsidiary of Delaware Presley ("California
Presley"). However, California Presley has granted liens on substantially all of
its assets as security for its obligations under the Working Capital Facility
and other loans. Because the California Presley guarantee is not secured,
holders are effectively junior to borrowings under the Working Capital Facility
with respect to such assets. Delaware Presley and its consolidated subsidiaries
are referred to collectively herein as "Presley" or the "Company." Interest on
the Senior Notes is payable on January 1 and July 1 of each year, commencing
January 1, 1995.
Except as set forth in the Indenture Agreement (the "Indenture"), the
Senior Notes are not redeemable by Presley prior to July 1, 1998. Thereafter,
the Senior Notes will be redeemable at the option of Delaware Presley, in whole
or in part, at the redemption prices set forth in the Indenture.
The Senior Notes are senior obligations of Presley and rank pari passu in
right of payment to all existing and future unsecured indebtedness of Presley,
and senior in right of payment to all future indebtedness of the Company which
by its terms is subordinated to the Senior Notes.
F-13
<PAGE> 46
THE PRESLEY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Upon a Change of Control as described in the Indenture, Presley must offer
to repurchase Senior Notes at a price equal to 101% of the principal amount plus
accrued and unpaid interest, if any, to the date of repurchase.
Presley is required to offer to repurchase certain Senior Notes at a price
equal to 100% of the principal amount plus any accrued and unpaid interest to
the date of repurchase if Delaware Presley's Consolidated Tangible Net Worth is
less than $60,000,000 for any two consecutive fiscal quarters and from the
proceeds of certain asset sales.
The Indenture governing the Senior Notes restricts, among other things: (i)
the payment of dividends on and redemptions of capital stock by Presley, (ii)
the incurrence of indebtedness by Presley or the issuance of preferred stock by
Delaware Presley's subsidiaries, (iii) the creation of certain liens, (iv)
Delaware Presley's ability to consolidate or merge with or into, or to transfer
all or substantially all of its assets to, another person, and (v) transactions
with affiliates. These restrictions are subject to a number of important
qualifications and exceptions.
The net proceeds of this offering were used to repay amounts outstanding
under the Term Facility and to reduce the outstanding debt and commitment level
under the Working Capital Facility in connection with the Plan for Capital
Restructuring as more fully described in Note 2.
The proceeds of the offering were used as follows:
<TABLE>
<S> <C>
Repayment of Term Facility............................. $150,000,000
Reduction of Working Capital Facility.................. 43,000,000
Underwriting discount.................................. 6,000,000
Offering costs......................................... 1,000,000
------------
$200,000,000
============
</TABLE>
In April 1995, the Company purchased $10,000,000 principal amount of its
outstanding Senior Notes at a cost of $8,465,000, resulting in a net gain of
$724,000 after giving effect to related deferred loan costs and income taxes.
Although it has no definitive program to purchase outstanding Senior Notes, the
Company may make such purchases from time to time in the future if management
believes such purchases are in the Company's best interests.
As of December 31, 1996, the outstanding 12 1/2% Senior Notes with a face
value of $190,000,000 have a fair value of $180,500,000, based on discussions
with analysts.
Working Capital Facility
The collateral for the loans provided by the Working Capital Facility
includes substantially all real estate and other assets of the Company
(excluding assets of partnerships and the portion of the partnership interests
in the Carmel Mountain Ranch partnership which are currently pledged to other
lenders). The borrowing base is calculated based on specified percentages of
book values of real estate assets. The borrowing base at December 31, 1996 was
approximately $190,000,000; however, the maximum loan under the Working Capital
Facility is limited to $72,000,000. The principal outstanding under the Working
Capital Facility at December 31, 1996 was $12,000,000.
The Working Capital Facility has a termination date of May 20, 1997, with
two one-year extensions at the Company's option. Upon any extension of the
termination date, the Company would pay an extension fee of 1% of the Working
Capital Facility commitment amount (in addition to the loan fee described below)
for each year extended. Management intends to exercise the Company's option to
extend the termination date of the Working Capital Facility to May 20, 1998.
F-14
<PAGE> 47
THE PRESLEY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Pursuant to the terms of the Working Capital Facility, outstanding advances
bear interest at the prime rate plus 2%. An alternate option provides for
interest based on a specified overseas base rate plus 4.44%, but not less than
the prime rate option in effect at December 31, 1993 (8.00%). In addition, the
Company pays a loan fee of 1% per annum, payable quarterly, on the total Working
Capital Facility commitment amount.
The Working Capital Facility now provides that the Company must maintain a
Tangible Effective Net Worth as of the last day of any fiscal quarter of not
less than $70,000,000. The Working Capital Facility also provides that as of the
last day of any fiscal quarter the ratio of the Company's Total Liabilities
(excluding non-recourse debt) to Tangible Effective Net Worth must not exceed
3.75 to 1 and that the ratio of Adjusted Total Liabilities (the Company's and
its unconsolidated partnerships' Total Liabilities and Letters of Credit)
(excluding non-recourse debt) to Tangible Effective Net Worth must not exceed
4.0 to 1. At December 31, 1996 the Company's Tangible Effective Net Worth was
approximately $79,866,000, the ratio of the Company's Total Liabilities
(excluding non-recourse debt) to Tangible Effective Net Worth was 3.10 to 1, and
the ratio of Adjusted Total Liabilities (excluding non-recourse debt) to
Tangible Effective Net Worth was 3.10 to 1.
The Working Capital Facility requires certain minimum cash flow and pre-tax
and pre-interest tests. The Working Capital Facility also provides for negative
covenants which, among other things, place limitations on the payment of cash
dividends, merger transactions, transactions with affiliates, the incurrence of
additional debt and the acquisition of new land as described in the following
paragraph.
Under the terms of the Working Capital Facility, the Company may acquire
new improved land for development of housing units of no more than 300 lots in
any one location without approval from the lenders if certain conditions are
satisfied. The Company may, however, acquire any new raw land or improved land
provided the Company has obtained the prior written approval of lenders holding
two-thirds of the obligations under the Working Capital Facility.
The Working Capital Facility requires that mandatory prepayments be made to
reduce the outstanding balance of loans to the extent of all funds in excess of
$20,000,000 in the principal operating accounts of the Company.
The Company is obligated under letters of credit, issued under terms of the
Working Capital Facility, which totaled $144,000 at December 31, 1996. These
letters of credit guarantee completion of construction related to various
project improvements.
Joint Venture Facilities
Horsethief Canyon Partners ("HCP"), the partnership that owns the
Horsethief Canyon master-planned community, is a California general partnership
and is 100% owned by The Presley Companies and its wholly-owned subsidiary.
Prior to October 4, 1996, the construction of the project was being financed
through intract loans to prepare finished lots for the construction of homes and
construction loans to finance the construction of homes.
Effective on October 4, 1996, HCP executed a master credit agreement with a
maximum loan commitment of $10,000,000 to finance the development of lots for
residential homes and the construction of single-family attached and detached
production homes. At December 31, 1996, the revolving line of credit had an
outstanding balance of $2,628,000. Interest on the outstanding balance is at
prime plus 1.00% and the loan matures on March 17, 1998. Availability under the
line is subject to a number of limitations. The outstanding balance under this
facility, together with the outstanding balances under the CMR facility and the
Other Facility described below, may not exceed $29,000,000.
Effective in March 1995, the development and construction of Carmel
Mountain Ranch ("CMR"), a consolidated joint venture, is financed through a
revolving line of credit. The revolving line of credit consists of
F-15
<PAGE> 48
THE PRESLEY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
several components relating to production units, models and residential lots. At
December 31, 1996, the revolving line of credit had no outstanding balance.
Availability under the line is subject to a number of limitations, but in any
case cannot exceed $29,000,000, and is subject to further limitations, as
described in the preceding and following paragraphs. Interest on the outstanding
balance is at prime plus 1.00% and the loan matures on March 17, 1998.
Other Facility
Effective in October 1995, the Company executed a master credit agreement
with a maximum loan commitment of $5,000,000 to finance the development of lots
for residential homes and the construction of single-family attached and
detached production homes on certain real property located in Arizona and New
Mexico. Interest on the outstanding balance is at prime plus 1.00% and the loan
matures on November 30, 1998. The outstanding balance under this facility,
together with the outstanding balances under the CMR facility and the HCP
facility described in the preceding paragraphs, may not exceed $29,000,000. As
of December 31, 1996 the outstanding balance under this agreement was
$3,542,000.
The prime rate averaged 8.27%, 8.83% and 7.14% for 1996, 1995 and 1994,
respectively, and was 8.25% and 8.50% at December 31, 1996 and 1995,
respectively.
NOTE 6 -- STOCKHOLDERS' EQUITY AND INCENTIVE COMPENSATION
Management Stock
In 1990, California Presley and certain members of management
("Management") entered into an agreement wherein common stock was issued to
Management in place of a then-existing incentive compensation plan. California
Presley issued 15,875 shares of common stock (approximately 1,574,800 equivalent
shares of Delaware Presley) to Management for $10,670,000, comprised of
$6,935,000 in cash and $3,735,000 in promissory notes. A portion of the stock
issued was pledged back to the Company as security for the promissory notes. The
promissory notes bore interest at 10%, were payable in installments over 30
years and were classified as a reduction of stockholders' equity in the
consolidated balance sheets. Principal payments have been reflected as
reductions of the promissory notes when received; $36,000 was received in 1994.
Effective December 30, 1994, Management surrendered the pledged shares back
to the Company in satisfaction of the promissory note obligations. Because the
unpaid principal of the notes had been carried as a reduction of stockholders'
equity in the consolidated balance sheets, no charge against income resulted
from the transaction. The total principal cancelled was $2,955,000 and 661,465
shares of Series A Common Stock were surrendered back to the Company.
Stock Option Plan
Effective May 20, 1994, Delaware Presley amended the 1991 Stock Option Plan
(the "Plan") to increase the number of shares authorized for options to be
granted to 2,642,000 shares of Series A Common Stock. Under the Plan, options
may be granted from time to time to key employees, officers, directors,
consultants and advisors of the Company. The Plan is administered by the Stock
Option Committee of the Board of Directors (the "Committee"). The Committee is
generally empowered to interpret the Plan, prescribe rules and regulations
relating thereto, determine the terms of the option agreements, amend them with
the consent of the optionee, determine the employees to whom options are to be
granted, and determine the number of shares subject to each option and the
exercise price thereof. The per share exercise price for options will not be
less than 100% of the fair market value of a share of the Series A Common Stock
on the date the option is granted. The options will be exercisable for a term
determined by the Committee, not to exceed ten years from the date of grant or
upon a change of control.
F-16
<PAGE> 49
THE PRESLEY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
On May 20, 1994, Delaware Presley issued options to purchase a total of
2,035,000 shares of Series A Common Stock at $2.875 per share. The options
outstanding at December 31, 1996 vest at various times and will be fully vested
on May 20, 1997 and expire five years from the date of vesting. In connection
with a new incentive compensation plan (as described below), 725,000 stock
options currently outstanding were repriced effective January 1, 1997 from
$2.875 to $1.00.
Pursuant to the provisions of Statement of Financial Accounting Standards
No. 123, "Accounting and Disclosure of Stock-Based Compensation", issued in
October 1995, the Company has elected to continue applying the methodology
prescribed by APB Opinion 25 and related interpretations to account for
outstanding stock options. Accordingly, no compensation cost has been recognized
in the financial statements related to stock options awarded to officers,
directors and employees under the Stock Option Plan. As required by Statement
No. 123, for disclosure purposes only, the Company has measured the amount of
compensation cost which would have been recognized related to stock options had
the fair value of the options at the date of grant been used for accounting
purposes. Based on such calculations, net income and earnings per share amounts
would be approximately the same as the amounts reported by the Company. The
Company estimated the fair value of the stock options at date of grant using a
Black-Scholes option pricing model with the following weighted average
assumptions: risk-free interest rate of 6.25%; a dividend yield of 0.00%, a
volatility factor for the market price of the Company's common stock of 0.514;
and a weighted average expected life of four years for the stock options.
Incentive Compensation Plan
Effective on January 1, 1997, the Company's Board of Directors approved a
new incentive compensation plan for all of the Company's full-time, salaried
employees -- including the Chief Executive Officer ("CEO") and Chief Financial
Officer ("CFO"), Executives, Managers, Field Construction Supervisors, and
certain other employees. Under the terms of this new plan, the CEO and CFO will
be eligible to receive bonuses at the discretion of the Compensation Committee
of the Board; in addition, the stock options currently outstanding and held by
the CEO and CFO (totaling 725,000 options) were repriced from $2.875 to $1.00.
In addition, the 1997 Executive Bonus Plan stipulates annual setting of
individual bonus targets, expressed as a percent of each executive's salary,
with awards based on performance against goals pertaining to each participant's
operating area.
All awards will be prorated downward if the sum of all calculated awards
for the entire Company exceeds 20% of the Company's consolidated pre-tax income
before bonuses. Awards will be paid out over three years, with 50% paid
following the determination of bonus awards, 25% paid one year later and 25%
paid two years later. The deferred amounts will be forfeited in the event of
termination for any reason except retirement, death or disability.
F-17
<PAGE> 50
THE PRESLEY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7 -- INCOME TAXES
The following summarizes the credit (provision) for income taxes (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Current
Federal.......................................... $ -- $ -- $ --
State............................................ (4) (4) (2)
------- ------- -------
(4) (4) (2)
------- ------- -------
Deferred
Federal.......................................... -- 1,448 (3,206)
State............................................ 4 424 (987)
------- ------- -------
4 1,872 (4,193)
------- ------- -------
Credit (provision) for income taxes before
extraordinary item.................................. -- 1,868 (4,195)
Tax provision on extraordinary item................... -- (1,868) --
------- ------- -------
$ -- $ -- $(4,195)
======= ======= =======
</TABLE>
Income taxes differ from the amounts computed by applying the applicable
Federal statutory rates due to the following (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1996 1995 1994
------- -------- -------
<S> <C> <C> <C>
Credit (provision) for Federal income taxes at the
statutory rate..................................... $ (53) $ 14,578 $(3,479)
(Provision) credit for state income taxes, net of
Federal income tax benefits........................ (20) 2,517 (660)
Valuation allowance for deferred tax asset........... (15,385) --
Extraordinary item -- gain from retirement of debt... -- (1,868) --
Other................................................ 73 158 (56)
------- -------- -------
$ -- $ -- $(4,195)
======= ======== =======
</TABLE>
Temporary differences giving rise to deferred income taxes consist of the
following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1996 1995
-------- --------
<S> <C> <C>
Deferred tax assets
Reserves deducted for financial reporting purposes not
allowable for tax purposes................................ $ 13,996 $ 35,230
Compensation deductible for tax purposes when paid........... 300 437
Net operating loss and alternative minimum tax credit
carryovers................................................ 59,189 37,453
Valuation allowance.......................................... (67,637) (65,223)
State income tax provisions deductible when paid for Federal
tax purposes.............................................. 10,917 8,622
Other........................................................ 149 147
-------- --------
16,914 16,666
-------- --------
Deferred tax liabilities
Interest capitalized for financial reporting purposes and
deducted currently for tax purposes....................... (17,134) (16,080)
Effect of book/tax differences for joint ventures............ 220 (586)
-------- --------
(16,914) (16,666)
-------- --------
$ -- $ --
======== ========
</TABLE>
F-18
<PAGE> 51
THE PRESLEY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
At December 31, 1996 the Company has net operating loss carryforwards for
Federal tax purposes of approximately $111,997,000, of which $5,066,000 expires
in 2007, $17,543,000 expires in 2008, $27,378,000 expires in 2009, $35,840,000
expires in 2010 and $26,170,000 expires in 2011. Due to the transactions
discussed in Note 2, the future benefits associated with the utilization of the
net operating loss carryforwards may be substantially limited.
NOTE 8 -- GAIN FROM RETIREMENT OF DEBT
In April 1995, the Company purchased $10,000,000 principal amount of its
outstanding Senior Notes at a cost of $8,465,000, resulting in a net gain of
$724,000 after giving effect to related deferred loan costs and income taxes.
Although it has no definitive program to purchase outstanding Senior Notes, the
Company may make such purchases from time to time in the future if management
believes such purchases are in the Company's best interests.
In September 1995, the Company retired a land acquisition and development
loan at its wholly-owned partnership, Horsethief Canyon Partners, resulting in a
net gain of $1,964,000, after giving effect to income taxes.
NOTE 9 -- COMMITMENTS AND CONTINGENCIES
In some jurisdictions in which the Company develops and constructs
property, assessment district bonds are issued by municipalities to finance
major infrastructure improvements. As a land owner benefited by these
improvements, the Company is responsible for the assessments on its land. When
properties are sold, the assessments are either prepaid or the buyers assume the
responsibility for the related assessments. Assessment district bonds issued
after May 21, 1992 are accounted for under the provisions of 91-10, "Accounting
for Special Assessment and Tax Increment Financing Entities" issued by the
Emerging Issues Task Force of the Financial Accounting Standards Board on May
21, 1992, and recorded as liabilities in the Company's consolidated balance
sheet, if the amounts are fixed and determinable.
The Company's commitments and contingent liabilities include the usual
obligations incurred by real estate developers in the normal course of business.
In the opinion of management, these matters will not have a material effect on
the Company's consolidated financial position.
The Company is a defendant in various lawsuits related to its normal
business activities. In the opinion of management, disposition of the various
lawsuits will have no material effect on the consolidated financial statements
of the Company.
NOTE 10 -- UNAUDITED SUMMARIZED QUARTERLY FINANCIAL INFORMATION
Summarized quarterly financial information for the years ended December 31,
1996, 1995 and 1994 is as follows (in thousands except per common share
amounts):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1996 1996 1996 1996 TOTAL
---------- -------- ------------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Sales.................................. $ 61,071 $ 82,219 $ 79,550 $ 96,157 $ 318,997
Costs and expenses, net................ (63,392) (81,852) (78,867) (94,734) (318,845)
-------- -------- --------- --------- ---------
Income (loss) before income taxes...... (2,321) 367 683 1,423 152
Credit (provision) for income taxes.... -- -- -- -- --
-------- -------- --------- --------- ---------
Net income (loss)...................... $ (2,321) $ 367 $ 683 $ 1,423 $ 152
======== ======== ========= ========= =========
Net income (loss) per common share --
Note 1............................... $ (0.04) $ 0.01 $ 0.01 $ 0.03 $ --
======== ======== ========= ========= =========
</TABLE>
F-19
<PAGE> 52
THE PRESLEY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1995 1995 1995 1995 TOTAL
---------- -------- ------------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Sales.................................. $ 67,920 $ 60,216 $ 65,668 $ 91,701 $ 285,505
Costs and expenses, net................ (73,300) (73,572) (68,304) (111,982) (327,158)
-------- -------- --------- ---------- ---------
Income (loss) before income taxes and
extraordinary item................... (5,380) (13,356) (2,636) (20,281) (41,653)
Credit (provision) for income taxes.... 2,206 2,492 1,365 (4,195) 1,868
-------- -------- --------- ---------- ---------
Income (loss) before extraordinary
item................................. (3,174) (10,864) (1,271) (24,476) (39,785)
Extraordinary item -- gain from
retirement of debt, net of applicable
taxes --
Note 8............................... -- 724 1,964 -- 2,688
-------- -------- --------- ---------- ---------
Net income (loss)(1)(2)................ $ (3,174) $(10,140) $ 693 $ (24,476) $ (37,097)
======== ======== ========= ========== =========
Net income (loss) per common share --
Note 1
Before extraordinary item............ $ (0.06) $ (0.21) $ (0.02) $ (0.47) $ (0.76)
Extraordinary item................... -- 0.02 0.03 -- 0.05
-------- -------- --------- ---------- ---------
After extraordinary item............. $ (0.06) $ (0.19) $ 0.01 $ (0.47) $ (0.71)
======== ======== ========= ========== =========
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1994 1994 1994 1994 TOTAL
---------- -------- ------------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Sales.................................. $ 68,124 $ 62,364 $ 71,305 $ 68,375 $ 270,168
Costs and expenses, net................ (65,642) (60,688) (67,700) (65,906) (259,936)
-------- -------- --------- ---------- ---------
Income (loss) before income taxes...... 2,482 1,676 3,605 2,469 10,232
Credit (provision) for income taxes.... (1,017) (687) (1,515) (976) (4,195)
-------- -------- --------- ---------- ---------
Net income (loss)...................... $ 1,465 $ 989 $ 2,090 $ 1,493 $ 6,037
======== ======== ========= ========== =========
Net income (loss) per common share --
Note 1............................... $ 0.02 $ 0.02 $ 0.04 $ 0.03 $ 0.11
======== ======== ========= ========== =========
</TABLE>
- ---------------
(1) Results for the three months ended June 30, 1995 were adversely affected by
a $9,400,000 reduction of certain real estate assets to their estimated net
realizable value as described in Note 1.
(2) Results for the three months ended December 31, 1995 were adversely affected
due to recognition of an impairment loss on real estate assets amounting to
$16,811,000 as described in Note 1.
F-20
<PAGE> 53
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ---------- ---------------------------------------------------------------- -------------
<C> <S> <C>
3.1 (1) Certificate of Incorporation of the Company.....................
3.3 (1) Bylaws of the Company...........................................
4.1 (1) Specimen certificate of Common Stock............................
10.1 (1) First Amended and Restated Loan Agreement dated as of December
18, 1989 among the Company, as Borrower, Security Pacific
National Bank, First Interstate Bank of California, The Bank of
California, N.A., California Federal Bank, a Federal Savings
Bank, and Continental Bank, N.A., as the Banks, and Security
Pacific National Bank as the Agent (the "1989 Revolving
Facility")......................................................
10.2 (1) First Amendment to the 1989 Revolving Facility, dated February
1, 1991.........................................................
10.3 (1) Letter, dated December 11, 1990, providing for the extension of
the 1989 Revolving Facility.....................................
10.4 (1) Commitment Letter, dated August 19, 1991, among the Banks, the
Agent and the Company relating to the amendment and extension of
the 1989 Revolving Facility.....................................
10.5 (1) Loan Agreement, dated as of September 27, 1988, between Carmel
Mountain Ranch, as Borrower, Security Pacific National Bank,
Bank of America National Trust and Savings Association and
Bankers Trust Company, as the Banks, and Security Pacific
National Bank, as the Agent (the "CMR Loan Agreement")..........
10.6 (1) First Amendment to the CMR Loan Agreement, dated April 3,
1989............................................................
10.7 (1) Second Amendment to the CMR Loan Agreement, dated December 21,
1989............................................................
10.8 (1) Third Amendment to the CMR Loan Agreement, dated January 1,
1991............................................................
10.9 (1) Fourth Amendment to the CMR Loan Agreement, dated March 1,
1991............................................................
10.10 (1) Building Loan Agreement, dated November 4, 1988, between
Horsethief Canyon Partners and First Interstate Bank of
California (the "HCP Loan Agreement")...........................
10.11 (1) Note, dated November 4, 1988, in favor of First Interstate Bank
of California by Horsethief Canyon Partners (the "HCP Note")....
10.12 (1) Amendment to the HCP Loan Agreement, dated March 28, 1989.......
10.13 (1) Modification to the HCP Note, dated November 26, 1990...........
10.14 (1) Modification to the HCP Note, dated February 27, 1991...........
10.15 (1) Modification to the HCP Note, dated June 18, 1991...............
10.16 (1) Additional Funds Agreement, dated June 18, 1991, between
Horsethief Canyon Partners and First Interstate Bank of
California......................................................
10.17 (1) Office Building Lease, dated June 1, 1989, between Corporate
Plaza and Associates and the Company............................
10.18 (1) Form of Employment Agreement, dated October 17, 1991, between
Wade H. Cable and the Company...................................
10.19 (1) Form of Employment Agreement, dated October 17, 1991, between
David M. Siegel and the Company.................................
10.20 (1) Form of Employment Agreement, dated October 17, 1991, between
L.C. Albertson, Jr. and the Company.............................
</TABLE>
<PAGE> 54
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ---------- ---------------------------------------------------------------- -------------
<C> <S> <C>
10.21 (1) Form of Employment Agreement, dated October 17, 1991, between
Peter N. Hellmann and the Company...............................
10.22 (1) Form of Employment Agreement, dated October 17, 1991, between
Gerald P. Nordeman and the Company..............................
10.23 (1) Form of Employment Agreement, dated October 17, 1991, between
Charles W. Reynolds and the Company.............................
10.24 (1) Form of Employment Agreement, dated October 17, 1991, between
Lewis N. Wilmot and the Company.................................
10.25 (1) Form of Employment Agreement, dated October 17, 1991, between
Nancy M. Harlan and the Company.................................
10.26 (1) Form of Employment Agreement, dated October 17, 1991, between
Linda L. Foster and the Company.................................
10.27 (1) Form of Indemnity Agreement, dated October 18, 1991, between the
Company and Messrs. Lyon and Cable as Directors, and dated
December 12, 1991 as to the other Directors.....................
10.28 (1) Form of Registration Rights Agreement, dated October 7, 1991,
between the Company and William Lyon............................
10.29 (1) Form of Registration Rights Agreement, dated October 7, 1991,
between the Company and each of the existing stockholders other
than William Lyon...............................................
10.30 (1) 1991 Stock Option Plan..........................................
10.31 (1) Note and Pledge Agreement, dated February 1, 1990, between the
Company and Wade H. Cable.......................................
10.32 (1) Secured Promissory Note, dated February 1, 1990, made by Wade H.
Cable in favor of the Company...................................
10.33 (1) Form of Amendment to Note and Pledge Agreement, dated October
17, 1991, between the Company and Wade H. Cable and Susan M.
Cable, Trustees of the Cable Family Trust Est. 7-11-88..........
10.34 (1) Note and Pledge Agreement, dated February 1, 1990, between the
Company and David M. Siegel.....................................
10.35 (1) Secured Promissory Note, dated February 1, 1990, made by David
M. Siegel in favor of the Company...............................
10.36 (1) Form of Amendment to Note and Pledge Agreement, dated October
17, 1991, between the Company and David M. Siegel and Linda A.
Siegel, Trustees of the Siegel Family Trust U/D/T Est.
6-20-89.........................................................
10.37 (1) Note and Pledge Agreement, dated February 1, 1990, between the
Company and L.C. Albertson, Jr. ................................
10.38 (1) Secured Promissory Note, dated February 1, 1990, made by L.C.
Albertson, Jr. in favor of the Company..........................
10.39 (1) Form of Amendment to Note and Pledge Agreement, dated October
17, 1991, between the Company and Lloyd C. Albertson, Jr. and
Dorothy K. Albertson, Trustees of the Lloyd C. Albertson, Jr.
Family Trust Est. 6-15-79.......................................
10.40 (1) Note and Pledge Agreement, dated February 1, 1990, between the
Company and Charles W. Reynolds.................................
10.41 (1) Secured Promissory Note, dated February 1, 1990, made by Charles
W. Reynolds in favor of the Company.............................
10.42 (1) Form of Amendment to Note and Pledge Agreement, dated October
17, 1991, between the Company and Charles W. Reynolds...........
</TABLE>
<PAGE> 55
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ---------- ---------------------------------------------------------------- -------------
<C> <S> <C>
10.43 (1) Note and Pledge Agreement, dated February 1, 1990 between the
Company and Lewis N. Wilmot.....................................
10.44 (1) Secured Promissory Note, dated February 1, 1990, made by Lewis
N. Wilmot in favor of the Company...............................
10.45 (1) Form of Amendment to Note and Pledge Agreement, dated October
17, 1991, between the Company and Lewis N. Wilmot...............
10.46 (1) Note and Pledge Agreement, dated February 1, 1990, between the
Company and G. Ross Crawford....................................
10.47 (1) Secured Promissory Note, dated February 1, 1990, made by G. Ross
Crawford in favor of the Company................................
10.48 (1) Form of Amendment to Note and Pledge Agreement, dated October
17, 1991, between the Company and Gordon Ross Crawford and Carol
Georgia Crawford, Trustees of The Crawford Family Trust Est.
5-26-83.........................................................
10.49 (1) Note and Pledge Agreement, dated February 1, 1990, between the
Company and Alan D. Uman........................................
10.50 (1) Secured Promissory Note, dated February 1, 1990, made by Alan D.
Uman in favor of the Company....................................
10.51 (1) Form of Amendment to Note and Pledge Agreement, dated October
17, 1991, between the Company and Alan D. Uman..................
10.52 (1) Note and Pledge Agreement, dated February 1, 1990, between the
Company and C. Dean Stewart.....................................
10.53 (1) Secured Promissory Note, dated February 1, 1990, made by C. Dean
Stewart in favor of the Company.................................
10.54 (1) Form of Amendment to Note and Pledge Agreement, dated October
17, 1991, between the Company and C. Dean Stewart...............
10.55 (1) Note and Pledge Agreement, dated February 1, 1990, between the
Company and Linda L. Foster.....................................
10.56 (1) Secured Promissory Note, dated February 1, 1990, made by Linda
L. Foster in favor of the Company...............................
10.57 (1) Form of Amendment to Note and Pledge Agreement, dated October
17, 1991, between the Company and Linda L. Foster...............
10.58 (2) Second Amended and Restated Loan Agreement dated as of January
31, 1992 between the Company, as Borrower, Security Pacific
National Bank, First Interstate Bank of California, The Bank of
California N.A., California Federal Bank, a Federal Savings
Institution and Continental Bank, N.A., as the Banks, and
Security Pacific Bank, as the Agent (the "Second Amended Loan
Agreement").....................................................
10.59 (2) Letter Agreement dated January 31, 1992 between Security Pacific
Bank, individually and as Agent for the Banks, and the Company
regarding Section 2.8 of the Second Amended Loan Agreement......
10.60 (3) Agreement for Redemption of Partnership Interest dated December
30, 1992 between Carmel Mountain Ranch, a California general
partnership, The Presley Companies, a California corporation,
Presley CMR, Inc., a California corporation, Home Capital
Corporation, a California corporation and Humboldt Financial
Services Corp., a California corporation........................
</TABLE>
<PAGE> 56
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ---------- ---------------------------------------------------------------- -------------
<C> <S> <C>
10.61 (3) Letter Waiver dated December 31, 1992 between the Company, as
Borrower, Bank of America National Trust and Savings
Association, Continental Bank, N.A., The Bank of California,
N.A., First Interstate Bank of California and California Federal
Bank, a Federal Savings Bank, as the Banks, and Bank of America
National Trust and Savings Association (as successor by merger
with Security Pacific National Bank) as Agent...................
10.62 (3) Amended Statement of Partnership of Carmel Mountain Ranch dated
December 30, 1992...............................................
10.63 (3) Amendment to Amended and Restated Partnership Agreement of
Carmel Mountain Ranch dated December 29, 1992...................
10.64 (3) Commitment Letter Extension Agreement dated January 18, 1993
between Horsethief Canyon Partners, as Borrower and First
Interstate Bank of California, as Lender........................
10.65 (3) Fourth Modification of Note Agreement dated January 18, 1993
between Horsethief Canyon Partners, as Borrower and First
Interstate Bank of California, as Lender........................
10.66 (3) Fifth Modification Agreement dated January 11, 1993 between
Carmel Mountain Ranch, as Borrower and Bank of America National
Trust and Savings Association and The Bank of California, N.A.,
as Lenders......................................................
10.67 (3) Conditional Forbearance Agreement dated January 29, 1993 between
the Company, as Borrower, Bank of America National Trust and
Savings Association, Continental Bank, N.A., The Bank of
California, N.A., First Interstate Bank of California and
California Federal Bank, a Federal Savings Bank, as the Banks,
and Bank of America National Trust and Savings Association (as
successor by merger with Security Pacific National Bank), as
Agent (the "Conditional Forbearance Agreement").................
10.68 (3) Amendment to Conditional Forbearance Agreement dated March 26,
1993, effective March 31, 1993, between the Company, as
Borrower, Bank of America National Trust and Savings
Association, Continental Bank, N.A., The Bank of California,
N.A., First Interstate Bank of California and Foothill Capital
Corporation, as the Banks, and Bank of America National Trust
and Savings Association (as successor by merger with Security
Pacific National Bank), as Agent (the "Amendment to Conditional
Forbearance Agreement").........................................
10.69 (3) Commitment Letter dated March 30, 1993 between the Company, as
Borrower, Bank of America National Trust and Savings
Association, Continental Bank, N.A., The Bank of California,
N.A., First Interstate Bank of California and Foothill Capital
Corporation, as the Banks, and Bank of America National Trust
and Savings Association (as successor by merger with Security
Pacific National Bank), as Agent (the "Commitment Letter")......
10.70 (3) Modification of Commitment Letter Extension Agreement dated
March 29, 1993 between Horsethief Canyon Partners, as Borrower
and First Interstate Bank of California, as Lender..............
10.71 (3) Fifth Modification of Note Agreement dated March 29, 1993
between Horsethief Canyon Partners, as Borrower and First
Interstate Bank of California, as Lender........................
10.72 ((3) Commitment Letter dated March 30, 1993 between Horsethief Canyon
Partners, as Borrower and First Interstate Bank of California,
as Lender.......................................................
</TABLE>
<PAGE> 57
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ---------- ---------------------------------------------------------------- -------------
<C> <S> <C>
10.73 (4) Second Amendment to Conditional Forbearance Agreement dated
April 29, 1993, between the Company, as Borrower, Bank of
America National Trust and Savings Association, Continental
Bank, N.A., The Bank of California, N.A., First Interstate Bank
of California and Foothill Capital Corporation, as the Banks,
and Bank of America National Trust and Savings Association (as
successor by merger with Security Pacific National Bank), as
Agent...........................................................
10.74 (4) Amendment to Commitment Letter dated April 29, 1993, between the
Company, as Borrower, Bank of America National Trust and Savings
Association, Continental Bank, N.A., The Bank of California,
N.A., First Interstate Bank of California and Foothill Capital
Corporation, as the Banks, and Bank of America National Trust
and Savings Association (as successor by merger with Security
Pacific National Bank), as Agent................................
10.75 (4) Third Amended and Restated Loan Agreement dated as of May 7,
1993, between the Company, as Borrower, Bank of America National
Trust and Savings Association, Continental Bank, N.A., The Bank
of California, N.A. and Foothill Capital Corporation, as the
Lenders, and Bank of America National Trust and Savings
Association, as the Agent, and Bank of America National Trust
and Savings Association, as the Lead Bank.......................
10.76 (4) Warrant Certificate dated as of May 7, 1993 for Warrants to
Purchase Common Stock issued to Bank of America Trust and
Savings Association.............................................
10.77 (4) Warrant Certificate dated as of May 7, 1993 for Warrants to
Purchase Common Stock issued to Continental Bank, N.A. .........
10.78 (4) Warrant Certificate dated as of May 7, 1993 for Warrants to
Purchase Common Stock issued to The Bank of California, N.A. ...
10.79 (4) Warrant Certificate dated as of May 7, 1993 for Warrants to
Purchase Common Stock issued to Foothill Capital Corporation....
10.80 (5) Amended and Restated Loan Agreement dated as of June 1, 1993
among Carmel Mountain Ranch, a California general partnership,
as the Borrower, Bank of America National Trust and Savings
Association and The Bank of California, N.A., as the Banks and
Bank of America National Trust and Savings Association, as the
Agent, and Bank of America National Trust and Savings
Association, as the Lead Bank...................................
10.81 (5) Commitment Letter Extension Agreement dated July 29, 1993
between Horsethief Canyon Partners, a California general
partnership, as the Borrower, and First Interstate Bank of
California......................................................
10.82 (6) Second Amendment, dated as of September 23, 1993, to Third
Amended and Restated Loan Agreement dated as of May 7, 1993,
between The Presley Companies, a California corporation, as the
Borrower, Bank of America National Trust and Savings
Association, Foothill Capital Corporation, Mellon Bank, N.A. as
Trustee of First Plaza Group Trust, a New York trust, and
Foothill Capital Corporation (as successors by assignment of the
interest of The Bank of California, N.A.) and Pearl Street L.P.
(c/o Goldman, Sachs & Co.), and Internationale Nederlanden
(U.S.) Capital Corporation (previously known as ING Bank) (as
successors by assignment of the interest of Continental Bank,
N.A.), as the Lenders, and Bank of America National Trust and
Savings Association, as the Agent and the Lead Bank.............
</TABLE>
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10.83 (7) Third Amendment dated as of December 30, 1993 among The Presley
Companies, a California corporation (the Borrower), the lending
parties to the Third Amended and Restated Loan Agreement dated
as of May 7, 1993 and Bank of America National Trust and Savings
Association, as agent and lead bank for the lenders
thereunder......................................................
10.84 (7) Fourth Amendment dated as of February 2, 1994 among The Presley
Companies, a California corporation (the Borrower), the lending
parties to the Third Amended and Restated Loan Agreement dated
as of May 7, 1993, and Foothill Capital Corporation, as agent
for the lenders thereunder......................................
10.85 (7) Fourth Amended and Restated Loan Agreement dated as of March 25,
1994 among The Presley Companies, a California corporation (the
Borrower), Foothill Capital Corporation ("Foothill"),
Continental Illinois Commercial Corporation, First Plaza Group
Trust (Mellon Bank, N.A., acting as trustee as directed by
General Motors Investment Management Corporation), Pearl Street,
L.P., International Nederlanden (U.S.) Capital Corporation, and
Whippoorwill/Presley Obligations Trust -- 1994 (Continental
Stock Transfer & Trust Company, as trustee under that certain
trust agreement dated as of January 11, 1994), as the lenders,
and Foothill, as the Agent for the Lenders under the Loan
Documents.......................................................
10.86 (7) Agreement to Issue and Purchase Stock as dated for reference
purposes the 25th day of March, 1994 by and among The Presley
Companies, a Delaware corporation, and Foothill Capital
Corporation, Continental Illinois Commercial Corporation, First
Plaza Group Trust (Mellon Bank, N.A., acting as trustee as
directed by General Motors Investment Management Corporation),
Pearl Street, L.P., International Nederlanden (U.S.) Capital
Corporation, and Whippoorwill/Presley Obligations Trust -- 1994
(Continental Stock Transfer & Trust Company, as trustee under
that certain trust agreement dated as of January 11, 1994)......
10.87 (8) First Amendment to the Agreement to Issue and Purchase Stock
dated as of April 8, 1994 by and among The Presley Companies, a
Delaware corporation, and Foothill Capital Corporation,
Continental Illinois Commercial Corporation, First Plaza Group
Trust (Mellon Bank, N.A., acting as trustee as directed by
General Motors Investment Management Corporation), Pearl Street,
L.P., International Nederlanden (U.S.) Capital Corporation, and
Whippoorwill/Presley Obligations Trust -- 1994 (Continental
Stock Transfer & Trust Company, as trustee under that certain
trust agreement dated as of January 11, 1994)...................
10.88 (9) First Amendment to the Fourth Amended and Restated Loan
Agreement and Second Amendment to the Agreement to Issue and
Purchase Stock dated as of May 20, 1994 by and among The Presley
Companies, a Delaware corporation. The Presley Companies, a
California corporation, and Foothill Capital Corporation,
individually and as Agent, Continental Illinois Commercial
Corporation, First Plaza Group Trust (Mellon Bank, N.A., acting
as trustee as directed by General Motors Investment Management
Corporation), Pearl Street, L.P., International Nederlanden
(U.S.) Capital Corporation, and Whippoorwill/Presley Obligations
Trust -- 1994 (Continental Stock Transfer & Trust Company, as
trustee under that certain trust agreement dated as of January
11, 1994).
</TABLE>
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10.89 (9) Second Amendment to the Fourth Amended and Restated Loan
Agreement dated as of May 31, 1994 by and among The Presley
Companies, a California corporation, Foothill Capital
Corporation, individually and as agent, First Plaza Group Trust
(Mellon Bank, N.A., acting as trustee as directed by General
Motors Investment Management Corporation), Pearl Street, L.P.,
International Nederlanden (U.S.) Capital Corporation, and
Whippoorwill/Presley Obligations Trust -- 1994 (Continental
Stock Transfer & Trust Company, as trustee under that certain
trust agreement dated as of January 11, 1994).
10.90 (8) Form of Shareholders' Agreement dated as of May 20, 1994, by and
among The Presley Companies, a Delaware corporation, each of the
holders of shares of the Series B Common Stock and certain
holders of shares of the Series A Common Stock.
10.91 (8) Form of Registration Rights Agreement dated as of May 20, 1994,
by and among The Presley Companies, a Delaware corporation and
each of the holders of shares of the Series B Common Stock.
10.92 (8) Amended and Restated 1991 Stock Option Plan of The Presley
Companies, a Delaware corporation.
10.93 (9) Forms of Stock Option Agreements, dated as of May 20, 1994,
between the Company and Wade H. Cable.
10.94 (9) Forms of Stock Option Agreements, dated as of May 20, 1994,
between the Company and David M. Siegel.
10.95 (9) Forms of Stock Option Agreements, dated as of May 20, 1994,
between the Company and L.C. Albertson, Jr.
10.96 (9) Form of Stock Option Agreement, dated as of May 20, 1994,
between the Company and Gerald P. Nordeman.
10.97 (9) Form of Stock Option Agreement, dated as of May 20, 1994,
between the Company and Charles W. Reynolds.
10.98 (9) Form of Stock Option Agreement, dated as of May 20, 1994,
between the Company and Lewis N. Wilmot.
10.99 (9) Form of Stock Option Agreement, dated as of May 20, 1994,
between the Company and Nancy M. Harlan.
10.100 (9) Form of Stock Option Agreement, dated as of May 20, 1994,
between the Company and Linda L. Foster.
10.101 (9) Form of Stock Option Agreement, dated as of May 20, 1994,
between the Company and W. Douglass Harris.
10.102 (9) Form of Stock Option Agreement, dated as of May 20, 1994,
between the Company and C. Dean Stewart.
10.103 (9) Form of Stock Option Agreement, dated as of May 20, 1994,
between the Company and G. Ross Crawford.
10.104 (9) Form of Stock Option Agreement, dated as of May 20, 1994,
between the Company and Alan Uman.
10.105 (9) Form of Stock Option Agreement, dated as of May 20, 1994,
between the Company and William Lyon.
10.106 (9) Form of Amended and Restated Employment Agreement, dated as of
May 20, 1994, between Wade H. Cable and the Company.
10.107 (9) Form of Amended and Restated Employment Agreement, dated as of
May 20, 1994, between David M. Siegel and the Company.
</TABLE>
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10.108 (9) Form of Amended and Restated Employment Agreement, dated as of
May 20, 1994, between L.C. Albertson, Jr. and the Company.
10.109 (9) Form of Amended and Restated Employment Agreement, dated as of
May 20, 1994, between Gerald P. Nordeman and the Company.
10.110 (9) Form of Amended and Restated Employment Agreement, dated as of
May 20, 1994, between Charles W. Reynolds and the Company.
10.111 (9) Form of Amended and Restated Employment Agreement, dated as of
May 20, 1994, between Lewis N. Wilmot and the Company.
10.112 (9) Form of Amended and Restated Employment Agreement, dated as of
May 20, 1994, between Nancy M. Harlan and the Company.
10.113 (9) Form of Amended and Restated Employment Agreement, dated as of
May 20, 1994, between Linda L. Foster and the Company.
10.114 (9) Form of Employment Agreement, dated as of May 20, 1994, between
W. Douglass Harris and the Company.
10.115 (9) Form of Amended and Restated Employment Agreement, dated as of
May 20, 1994, between C. Dean Stewart and the Company.
10.116 (8) Form of Amended and Restated Employment Agreement, dated as of
May 20, 1994, between G. Ross Crawford and the Company.
10.117 (8) Form of Amended and Restated Employment Agreement, dated as of
May 20, 1994, between Alan Uman and the Company.
10.118(10) Third Amendment of Fourth Amended and Restated Loan Agreement,
dated for reference purposes June 30, 1994, by and among (i) The
Presley Companies, a California corporation, as the borrower,
(ii) Foothill Capital Corporation ("Foothill"), First Plaza
Group Trust (Mellon Bank, N.A., acting as trustee as directed by
General Motors Investment Management Corporation), Pearl Street,
L.P., International Nederlanden (U.S.) Capital Corporation, and
Whippoorwill/Presley Obligations Trust -- 1994 (Continental
Stock Transfer & Trust Company, as trustee under that certain
trust agreement dated as of January 11, 1994), as the lenders,
and Foothill, as the agent for the lenders.
10.119(10) Agreement and Assignment; Mutual Releases, as of August 23,
1994, by and between Gateway Highlands, a California limited
partnership, HSP Inc., a California corporation and The Presley
Companies, a California corporation.
10.120(11) Master Credit Agreement by and between Carmel Mountain Ranch, a
California general partnership and Bank One, Arizona, N.A., a
national banking association dated as of February 15, 1995.
10.121(12) Fifth Amendment to Fourth Amended and Restated Loan Agreement,
dated for reference purposes June 30, 1995, by and among (i) The
Presley Companies, a California corporation, as the borrower,
(ii) Foothill Capital Corporation ("Foothill"), First Plaza
Group Trust (Mellon Bank, N.A., acting as trustee as directed by
General Motors Investment Management Corporation),
Internationale Nederlanden (U.S.) Capital Corporation, and
Whippoorwill/Presley Obligations Trust -- 1994 (Continental
Stock Transfer & Trust Company, as trustee under that certain
trust agreement dated as of January 11, 1994), as the lenders,
and (iii) Foothill, as the Agent for the Lenders.
</TABLE>
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10.122(13) Commitment Letter and Settlement Agreement dated September 11,
1995 by and among First Interstate Bank of California,
Horsethief Canyon Partners, a California general partnership
("Borrower"), and The Presley Companies, a California
corporation, the Borrower's managing general partner.
10.123(13) Master Credit Agreement by and between The Presley Companies, a
California corporation, and Bank One, Arizona, NA, a national
banking association, dated as of October 10, 1995.
10.124(13) First Amendment to Master Credit Agreement by and between Carmel
Mountain Ranch, a California general partnership and Bank One,
Arizona, NA dated as of October 10, 1995.
10.125(14) Master Credit Agreement by and between Horsethief Canyon
Partners, a California general partnership ("Borrower"), and
Bank One, Arizona, N.A., a national banking association
("Bank"), dated as of October 4, 1996.
10.126(14) Amendment to Master Credit Agreement and Secured Promissory Note
by and between Presley Homes (formerly known as The Presley
Companies), a California corporation ("Borrower"), and Bank One,
Arizona, NA, a national banking association ("Bank"), dated as
of October 4, 1996.
10.127(14) Second Amendment to Master Credit Agreement and Secured
Promissory Note by and between Carmel Mountain Ranch, a
California general partnership ("Borrower"), and Bank One,
Arizona, NA, a national banking association ("Bank"), dated as
of October 4, 1996.
21.1 List of Subsidiaries of the Company.
27 Financial Data Schedule.
</TABLE>
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(1) Previously filed in connection with the Company's Registration Statement on
Form S-1, and amendments thereto, (S.E.C. Registration No. 33-42161) and
incorporated herein by this reference.
(2) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarterly period ended March 31, 1992 and incorporated herein
by this reference.
(3) Previously filed as an exhibit to the Company's Annual Report on Form 10-K
for the year ended December 31, 1992 and incorporated herein by this
reference.
(4) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarterly period ended March 31, 1993 and incorporated herein
by this reference.
(5) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarterly period ended June 30, 1993 and incorporated herein
by this reference.
(6) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarterly period ended September 30, 1993 and incorporated
herein by this reference.
(7) Previously filed as an exhibit to the Company's Annual Report on Form 10-K
for the year ended December 31, 1993 and incorporated herein by this
reference.
(8) Previously filed as an exhibit to the Company's Proxy Statement for Annual
Meeting of Stockholders held on May 20, 1994 and incorporated herein by
this reference.
(9) Previously filed in connection with the Company's Registration Statement on
Form S-1, and amendments thereto (S.E.C. Registration No. 33-79088) and
incorporated herein by this reference.
(10) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarterly period ended September 30, 1994 and incorporated
herein by this reference.
(11) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarterly period ended March 31, 1995 and incorporated herein
by this reference.
(12) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarterly period ended June 30, 1995 and incorporated herein
by this reference.
(13) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarterly period ended September 30, 1995 and incorporated
herein by this reference.
(14) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarterly period ended September 30, 1996 and incorporated
herein by this reference.
<PAGE> 1
EXHIBIT 21.1
LIST OF SUBSIDIARIES
Presley Homes (formerly The Presley Companies)
State of Incorporation: California
Presley CMR, Inc.
State of Incorporation: California
HSP Inc.
State of Incorporation: California
Presley Mortgage Company
State of Incorporation: California
Presley Southwest, Inc.
State of Incorporation: Arizona
Other names under which The Presley Companies conducts business:
Presley of Southern California
Presley of Northern California
Presley of San Diego
Presley of Central California
Presley of Arizona
Presley of Illinois
Presley of New Mexico
Presley of Nevada
Presley of the Southwest
Carmel Mountain Ranch
Presley Sports Management Group
Palm Desert Resorter
Horsethief Canyon Partners
BCED/Presley Corona Hills
Sun Lakes Country Club
American Self Storage
Oakhurst Country Club
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Consolidated Balance Sheet and Consolidated Statement of Operations included in
Annual Report on Form 10K for the year ended December 31, 1996. And is
qualified in its entirety by reference to such Annual Report on Form 10K for
the year ended December 31, 1996.
</LEGEND>
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 4550
<SECURITIES> 0
<RECEIVABLES> 4225
<ALLOWANCES> 0
<INVENTORY> 304126
<CURRENT-ASSETS> 0
<PP&E> 4479
<DEPRECIATION> 1432
<TOTAL-ASSETS> 331615
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 522
<OTHER-SE> 83691
<TOTAL-LIABILITY-AND-EQUITY> 331615
<SALES> 318997
<TOTAL-REVENUES> 318997
<CGS> 281979
<TOTAL-COSTS> 281979
<OTHER-EXPENSES> 34610
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2256
<INCOME-PRETAX> 152
<INCOME-TAX> 0
<INCOME-CONTINUING> 152
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 152
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
