SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
x Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Fiscal Year Ended October 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 No. 0-19633
Engle Homes, Inc.
(Exact name of registrant as specified in its charter)
Florida 59-2214791
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
123 N.W. 13th Street
Boca Raton, Florida 33432
(Address of principle executive offices) (Zip Code)
Registrant's telephone number, including area code: (407) 391-4012
Securities Registered Pursuant to Section 12(b) of the Act: None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock (par value $.01 per share)
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicate 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 amendment to this form 10-K. x
The aggregate market value of shares of Common Stock held by non-
affiliates of the Registrant as of December 10, 1996, was approximately
$24,935,000 based on the $8.25 closing price for the Common Stock on the
Nasdaq National Market on such date. For purposes of this computation, all
executive officers and directors of the Registrant have been deemed to be
affiliates. Such determination should not be deemed to be an admission that
such directors and officers are, in fact, affiliates of the Registrant.
The number of shares of Common Stock of the Registrant outstanding as of
December 10, 1996 was 6,929,200.
Documents Incorporated by Reference
Portions of the Registrant's definitive Proxy Statement relating to the
Registrant's 1996 Annual Meeting of Shareholders to be filed with the
Securities and Exchange Commission not later than 120 days after the end of
the fiscal year covered by this report are incorporated by reference into
Part III of this report.
<PAGE>
PART I
Item 1. BUSINESS
General
Engle Homes, Inc. (the "Company" or "Engle" ), a Florida Corporation,
was formed in 1986, commenced business operations through predecessor
entities in 1978. The Company designs, constructs, markets and sells
single-family homes, townhomes, patio homes and condominiums in Florida;
Denver, Colorado; Dallas, Texas; Raleigh, North Carolina; Virginia and
Maryland. The Company entered the Denver market in June 1994 by acquiring
the assets of a homebuilder in Denver, Colorado. In addition, the Company's
subsidiaries include a mortgage company and a title company that provide
ancillary services to homebuyers in its homebuilding divisions.
The Company believes that its success has been due to its market
oriented approach coupled with its emphasis on product and price
diversification that caters to most segments of the home buying public,
a policy that enables the Company to respond more rapidly to changing market
conditions and the cyclical nature of the homebuilding industry.
Operating Policies
The Company follows a number of basic operating policies which it
believes enhances its competitive position and provides maximum flexibility:
Cost Controls. The Company seeks to reduce its costs and risks by (i)
obtaining required zoning entitlements prior to most acquisitions of land,
(ii) using subcontractors to perform home construction and site improvement
work on a fixed price basis and (iii) using its position as a national
homebuilder to obtain volume discounts on construction materials and
favorable pricing from subcontractors.
Criteria for Land Acquisitions. The Company selects its land for
acquisition and development based upon a variety of factors, including (i)
internal and external demographic and marketing studies, (ii) financial and
legal reviews as to the feasibility of the proposed project, (iii) required
governmental approvals, and (iv) senior management's judgment as to the real
estate market, economic trends and the Company's experience in a particular
market.
Product Diversification. The Company's homes are designed to appeal to
a wide variety of home buyers, including entry level and move-up buyers,
retirees and second home seasonal buyers. Accordingly, the Company offers a
number of home styles and price ranges at various locations in each market,
including golf and waterfront communities in certain markets. The Company's
product offerings include semi-custom estate homes, detached single-family
residences, townhomes and semi-detached patio homes/duplexes. Sales prices
presently range from approximately $72,000 to over $400,000, and the average
sales price of homes delivered during fiscal 1996 was approximately
$194,000. Management believes that the Company's long-standing policy
of product diversification enables it to respond more rapidly to changing
market conditions.
Land Acquisition Diversification. As indicated above, the Company
seeks to diversify by developing a number of communities at any one time in
each market, with different products and sales prices, rather than devoting
a substantial portion of its assets to any single project. The Company also
seeks to diversify its land acquisitions by pursuing smaller developed and
undeveloped parcels, primarily through rolling option agreements available
for more immediate construction of homes. Engle also acquires, from time to
time, larger parcels of land suited for master-planned communities,
primarily in South Florida. In addition, the Company sometimes enters into
partnerships or joint ventures to purchase and develop land where such
arrangements are necessary to acquire the land or appear to be otherwise
economically advantageous to the Company.
Land Acquisition and Development
The Company generally acquires improved building lots ready for
construction and, whenever feasible, obtains options enabling it to purchase
improved lots. Whenever option lots are not available in desirable
locations, Engle acquires tracks of land that require site improvements
prior to the start of home construction. The Company also, from time to
time, purchases large tracts of land with the intention of reselling
portions of the tracts to other builders as a source of additional revenue.
Thus, the Company purchased large tracts of land and sold parcels to other
builders in connection with the development of its master planned
communities, including Embassy Lakes, North Passage, Lakeside Green and
currently, Pembroke Falls. Unlike the Company's more typical subdivision
projects, the Company's master-planned communities have involved
significantly larger tracts of land, greater planning and site improvement
activities and the development of more extensive recreational facilities and
related amenities. The Company's master-planned communities normally take
five or more years to complete depending on the project's size, economic
conditions prevailing at the time and the Company's strategy for the
particular project. Engle's more traditional residential developments
usually take two to three years to complete.
Management believes that the Company's Pembroke Falls project
exemplifies the opportunities available to the Company when developing
master-planned communities. In February 1994, the Company acquired this
approximate 1500 acre parcel located in southwest Broward County, Florida, a
rapidly developing housing market. The purchase price for the Pembroke
Falls parcel was $25.7 million, or approximately $17,100 per acre. The
Company expects to build approximately 2000 single-family housing units and
has sold to others all of the approximately 222 acres of land zoned for
commercial and multi-family use. Through October 31, 1996, approximately
$47.0 million in land sales contracts had been written, of which $29.7
million closed through fiscal 1996. Of the remaining $17.3 million in
contracts, $6.5 million are binding contracts, and $10.8 million are
contingent upon completion of an inspection period during the next ninety
days. Management believes that the purchase of this relatively large parcel
enabled the Company to obtain desirable land inventory in its core market
for future development at a lower cost than if the Company had purchased
smaller parcels available for immediate construction of homes.
The Company's land purchase agreements are typically subject to
numerous conditions, including, but not limited to, the Company's ability to
obtain necessary zoning and other governmental approvals for the proposed
subdivision. During the contingency period, the Company also confirms the
availability of utilities, conducts hazardous waste and other environmental
analysis, and completes its marketing feasibility studies.
The Company expends considerable effort in developing a design and
marketing concept for each of its subdivisions, which includes determination
of size, style and price range of the homes and, in certain projects, layout
of streets, layout of individual lots and overall community design. The
product line offered in a particular subdivision depends upon many factors,
including housing generally available in the area, the needs of the
particular market and the Company's costs of lots in the subdivision. The
Company, where necessary, undertakes development activities that include
government approvals, site planning, engineering, as well as constructing
roads, sewer, water and drainage facilities and, where applicable for
recreational facilities and other amenities.
<TABLE>
At October 31, 1996, the Company was marketing 22 subdivisions in South
Florida; 15 in Orlando; 7 in Tampa; 9 in Denver, CO; 7 in Dallas, TX; 6 in
Virginia/Maryland and 4 in Raleigh, NC. The Company's residential real
estate inventory at October 31, 1996 was as follows:
<CAPTION>
<PAGE>
Lots Available
Homes Under Construction for Future Construction
------------------------------- -----------------------------
Total Lots
Division Available Sold (1) Speculative (2) Models Sold(1) Unsold Options
<S> <C> <C> <C> <C> <C> <C> <C>
South Florida 3,268(3) 309 51 17 248 2,137 506
Orlando, FL 996 84 32 6 81 647 146
Tampa, FL 1,205(4) 9 6 1 30 904 255
Naples, FL 59 1 7 3 1 47 0
Denver, CO 808 55 50 2 31 152 518
Dallas, TX 228 58 44 11 32 12 71
Virginia 339 19 23 3 13 115 166
Maryland 17 1 3 - 1 12 0
Raleigh, NC 343 37 13 1 6 70 216
------- ----- ----- ---- ------ ------ -------
Total 7,263 573 229 44 443 4,096 1,878
======= ===== ===== ==== ====== ====== =======
<FN>
(1) Under contract, but not delivered. See the discussion of the Company's
backlog under "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
(2) Speculative units are unsold homes that are completed or under
construction.
(3) Includes 1962 remaining lots in Pembroke Falls.
(4) Includes 911 remaining lots in Lake Bernadette.
</FN>
/TABLE
<PAGE>
Construction
The Company acts as the general contractor for the construction of its
residential developments. Company employees monitor the construction of
each project, participate in all material design and building decisions,
coordinate the activities of subcontractors and suppliers, subject their
work to quality and cost controls and monitor compliance with zoning and
building codes. Subcontractors typically are retained for a specified
project pursuant to a contract which obligates the subcontractor to complete
construction at a fixed price.
The Company does not maintain significant inventories of construction
materials except for work in process materials for homes under construction
and a limited amount of other construction materials. Generally, the
construction materials used in the Company's operations are readily
available from numerous sources.
Marketing and Sales
The Company sells its homes through primarily commissioned employees,
who typically work from sales offices located at the model homes in each
Engle subdivision, as well as cooperating independent brokers. In all
instances, Company personnel are available to assist prospective buyers by
providing them with floorplans, price information, tours of model homes and
the selection of various options and upgrades. Options and upgrades are
generally priced to have a positive effect on profit margins. Sales
personnel are trained by the Company and attend periodic meetings to be
updated on the availability of financing, construction schedules, marketing
and advertising plans.
The Company advertises in newspapers, magazines and on billboards.
Engle also uses out-of-state home shows, radio, video tapes, direct mail
advertising, special promotional events, illustrated brochures and model
homes in its comprehensive marketing program. The Company also uses a
cross-referral program that encourages Company personnel to direct customers
to other Engle subdivisions based on the customers' needs.
Customer Service and Quality Control; Warranties
The Company's customer service department is responsible for
pre-closing and post-closing customer needs. Prior to closing, a Company
employee accompanies the buyer on a home orientation and inspection tour.
The Company is continuing with its objective to provide quality construction
through on going training programs to maintain its high quality construction
standards. The Company also provides home buyers with a limited warranty
program which, in general, provides for a one-year warranty on workmanship
and building materials and a ten-year structural warranty. In addition, the
Company purchases, when required by local or state ordinances, builder
liability insurance for major structural defects.
Financial Services
The Company's financial services subsidiaries provide mortgage banking
and title insurance services.
Mortgage Banking. In April 1992, the Company established Preferred
Home Mortgage Company ("PHMC"). PHMC is a full service mortgage banker
which arranges financing through the origination of mortgage loans to the
Company's homebuyers and to a lesser extent third party loans that are not
associated with homes built by the Company. PHMC is an approved lender by
the Federal National Mortgage Association (FNMA) to deliver loan origination
and servicing of such loans as well as to other investors.
During fiscal 1996, PHMC originated and sold (servicing released)
approximately $113.0 million in mortgage loans, representing approximately
80% of the Company's homebuyers that requested mortgage financing. At
October 31, 1996, PHMC was originating mortgages in all Engle homebuilding
divisions.
PHMC must comply with various federal and state laws and consumer
credit rules and regulations in connection with its mortgage lending
activities. In addition, the mortgage banking industry in the United States
is highly competitive. PHMC competes with other mortgage companies and
financial institutions to provide mortgage financing to both the Company's
customers as well as the general public.
Title Services. In September 1992, the Company purchased all the
outstanding common stock of The Title Store, Inc. In May 1994, the Company
acquired all the capital stock of Universal Land Title, Inc. (ULT), a
company that sells, but does not underwrite, title policies and
simultaneously merged with the Title Store, Inc. to form one company. ULT
currently provides title services to the Company's homebuyers in Florida and
Denver, Colorado, as well as third parties.
Government Regulation and Environmental Matters
In developing housing communities, the Company must obtain the approval
of numerous government authorities regulating such matters as permitted land
uses and levels of density, the installation of utility services such as
water and waste disposal and the dedication of acreage for open space,
parks, schools and other community purposes. Several authorities in Florida
and other states have imposed impact fees as a means of defraying the cost
of providing certain governmental services to developing areas and the
amount of these fees has increased significantly during recent years. Many
state laws require the use of specific construction materials which reduce
the need for energy-consuming heating and cooling systems. Local
governments also, at times, declared moratoriums on the issuance of building
permits and imposed other restrictions in areas where sewage treatment
facilities and other public facilities do not reach minimum standards. To
date, the governmental approval processes and the restrictive zoning and
moratoriums discussed above have not had a material adverse effect on the
Company's development activities. However, there is no assurance that these
and other restrictions will not adversely affect the Company in the future.
The Company is also subject to a variety of Federal, State and local
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, cause the Company to incur
substantial compliance and other costs and prohibit or severely restrict
development in certain environmentally sensitive regions or areas. Prior to
consummating the purchase of land, the Company engages independent
environmental engineers to evaluate such land for the presences of hazardous
or toxic materials, wastes or substances. The Company has not been
materially affected to date by the presence or potential presence of such
materials.
To varying degrees, certain permits and approvals will be required to
complete the residential developments currently being planned by the
Company. The ability of the Company to obtain necessary approvals and
permits for these projects is often beyond the Company's control, and could
restrict or prevent the development of otherwise desirable property. The
length of time necessary to obtain permits and approvals increases the
carrying costs of unimproved property acquired for the purpose of
development and construction. In addition, the continued effectiveness of
permits already granted is subject to factors such as changes in policies,
rules and regulations and their interpretation and application. To minimize
these risks, the Company restricts land purchases to tracts that have zoning
entitlements.
In recent years, regulation by Federal and state authorities relating
to the sale and advertising of residential real estate has also become more
restrictive. In order to advertise and sell condominiums and other
residential real estate in many jurisdictions, the Company has been required
to prepare registration statements or other disclosure documents and, in
some cases, to file such materials with designated regulatory agencies.
Competition and Market Factors
The development and sale of residential properties is highly
competitive and fragmented. The Company competes in each of its markets on
the basis of a number of interrelated factors, including location,
reputation, amenities, design, quality and price, with numerous other
national, regional and local homebuilders, including some builders with
greater financial resources. The Company also competes for residential
sales with individual sales of existing homes, available rental housing and,
to a lesser extent, resales of condominiums. Management believes that the
Company's primary competitive strengths have been (i) the location of its
communities, and (ii) its reputation for service, innovative design and
value pricing.
The housing industry is cyclical and affected by consumer confidence
levels, prevailing economic conditions generally and, in particular, by
interest rate levels. A variety of other factors affect the housing
industry and demand for new homes, including the availability of labor and
materials and increases in the costs thereof, changes in costs associated
with home ownership such as increases in property taxes and energy costs,
changes in consumer preferences, demographic trends and the availability of
and changes in mortgage financing programs.
Employees
At October 31, 1996, the Company employed approximately 490 persons,
including sales and marketing personnel, executive, administrative and
clerical personnel, construction employees and financial services personnel.
Although none of the Company's employees are covered by collective
bargaining agreements, certain of the subcontractors which the Company
engages are represented by labor unions or are subject to collective
bargaining agreements. The Company believes that its relations with its
employees and subcontractors are good.
Item 2. PROPERTIES
The Company's corporate office is located at 123 NW 13th Street,
Suite 300, Boca Raton, Florida 33432 where the Company leases 9,356 square
feet of office space for a term expiring January 2001. Engle's building
divisions, PHMC and ULT branch operations lease additional office space at
various locations for their day-to-day operations. Management believes that
the current leased offices are adequate for its needs for the foreseeable
future. (See Note 4 of Notes to Consolidated Financial Statements for
discussion of sale of commercial properties.)
Item 3. LEGAL PROCEEDINGS
The Company is involved from time to time in litigation arising in the
ordinary course of business, none of which is expected to have a material
adverse effect on the Company's consolidated financial position or results
of operations.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fourth quarter of the Company's 1996 fiscal year.
<PAGE>
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND
RELATED STOCKHOLDER MATTERS
Engle's Common Stock is traded on The Nasdaq National Market under the
symbol "ENGL." The following table sets forth, for the periods indicated,
the high and low closing sales price for the Common Stock, as reported on
The Nasdaq National Market. As of December 10, 1996 there were approximately
95 shareholders of record. The closing sale price of the Company's Common
Stock as reported on The Nasdaq National Market, on December 13, 1996, was
$8.00.
<TABLE>
<CAPTION>
Year Ended October 31,
1996 1995
---- ----
High Low High Low
------ ----- ------ -----
<S> <C> <C> <C> <C>
First Quarter 11.00 8.25 9.00 6.63
Second Quarter 10.25 7.63 8.50 7.00
Third Quarter 9.25 5.50 9.75 7.38
Fourth Quarter 8.50 6.88 9.25 8.00
</TABLE>
The Company has declared per share quarterly dividends as set forth in
the following table.
<TABLE>
Cash Dividend
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
First Quarter $.04 $.04
Second Quarter $.04 $.04
Third Quarter $.04 $.04
Fourth Quarter(a) $.04 $.04
- ------------------
<FN>
(a) Dividends declared in November of 1995 and 1996.
</FN>
</TABLE>
The Company has declared $.04 per share quarterly cash dividends in
each fiscal quarter since the fiscal quarter ended April 30, 1992. The
Company presently intends to continue to declare and pay quarterly cash
dividends equal to $.04 per share of Common Stock. The payment of cash
dividends will be at the discretion of the Board of Directors of the Company
and will depend upon, among other things, results of operations, capital
requirements, the Company's financial condition and such other factors as
the Board of Directors may consider. There can be no assurance as to the
amount, if any, or timing of cash dividends.
The Company's loan agreements currently limit the amount of dividends
that the Company may pay in any year to no more than 50% of the Company's
net income for such year. Generally, the indenture for the Company's Senior
Notes provides that the Company may not declare or pay any dividend or make
certain other payments or take certain other actions (collectively,
Restricted Payments) unless the aggregate amount of all Restricted
Payments declared or made after January 31, 1994 does not exceed the sum of
(i) 50% of the Company's cumulative Consolidated Net Income (as defined in
the indenture) since January 31, 1994 plus (ii) cash proceeds to the Company
from certain issuances of capital stock of the Company plus (iii) $1.0
million.
Item 6. SELECTED FINANCIAL DATA
The following selected financial data as of and for the years ended
October 31, 1996, 1995, 1994, 1993 and 1992 have been derived from the
consolidated financial statements of the Company which have been audited by
BDO Seidman, LLP, independent certified public accountants. The data should
be read in conjunction with the Company's Consolidated Financial Statements,
related notes and other financial information included elsewhere herein.
<PAGE>
<TABLE>
SELECTED FINANCIAL DATA
<CAPTION>
(In thousands, except per share and unit amounts)
Years Ended October 31,
996 1995 1994 1993 1992
-------- -------- -------- -------- ------
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Total revenues $332,088 $244,528 $224,459 $137,386 $94,238
Income before income taxes 13,701 9,536 12,179 10,118 8,512
Provision for income taxes 5,206 3,624 4,604 3,820 2,422
Income before cumulative
effect of change in
accounting for income
taxes 7,575
Cumulative effect of change
in accounting for income
taxes 1,332
Net income $ 8,495 $ 5,912 $ 8,907 $ 6,298 $ 6,090
======== ======= ======== ======= =======
Pro forma income
before income taxes(a) $ 8,512
Pro forma provision
for income taxes(a) 3,073
-------
Pro forma net income(a) $ 5,439
=======
Income per share before
cumulative effect of
change in accounting for
income taxes
Primary $ 1.13
Fully diluted $ .96
Income per share from
cumulative effect
of change in accounting
for income taxes
Primary $ .20
Fully diluted $ .15
Net income per share
Primary $ 1.20 $ .85 $ 1.33 $ .95
Fully diluted $ 1.03 $ .74 $ 1.11 $ .81
Pro forma net income
per share (a) $ .91
Cash dividends (b) $ 1,109 $ 1,109 $ 1,066 $ 1,064 $ 532
======== ======== ======== ======= =======
Weighted average number
of outstanding shares
Primary 7,108 6,989 6,674 6,650 6,003
Fully Diluted (c) 9,251 9,132 8,817 8,131
Selected Operating Data:
Deliveries (in units) 1,567 1,137 1225 797 583
Backlog at end of period (d)
Units 1,016 804 560 687 360
Aggregate sales value $210,300 $161,900 $108,200 $119,491 $62,400
<PAGE>
SELECTED FINANCIAL DATA (Continued)
October 31,
1996 1995 1994 1993 1992
-------- -------- -------- ------- ------
Balance Sheet Data:
Inventories (e) $220,564 $198,664 $138,428 $88,902 $72,306
Total assets 284,789 251,918 188,913 143,991 110,963
Borrowings 152,117 147,454 99,428 63,794 40,519
Total shareholders' equity 81,492 74,106 66,303 58,102 52,710
<FN>
(a) From December 23, 1986, through January 21, 1992 (the effective
date of the Company's initial public offering), the Company was
operated as an S Corporation under the applicable provisions of
the Internal Revenue Code of 1986, as amended, and, accordingly,
the Company's taxable income was taxed directly to the Company's
shareholders. Pro forma net income amounts assume that the
Company was subject to Federal and state income taxes and taxed
as a C Corporation at the effective tax rates in existence for
all periods through January 21, 1992.
(b) In January 1992, prior to the consummation on the Company's
initial public offering, the Company declared certain additional
dividends to its then-existing shareholders, in the aggregate
amount of $6,105,118.
(c) Fully diluted net income per share assumes conversion of the
Company's 7% Convertible Subordinated Notes due 2003 and
elimination of amortized interest related to such Notes,
resulting in an increase in net income and weighted average
number of Common Shares outstanding.
(d) See Item 7 Management's Discussion and Analysis of Financial
Condition and Operations Overview.
(e) See Note 3 of Notes to the Company's consolidated Financial
Statements.
</FN>
</TABLE>
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
General. The following table sets forth for the years indicated
certain items of the Company's Consolidated Financial Statements expressed
as a percentage of the Company's total revenues:
<TABLE>
Percentage of Total Revenues
<CAPTION>
Year Ended October 31,
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Sales of homes 91.5% 88.4% 96.1%
Sales of land 5.3 8.6 1.3
Rent and other .5 .6 .6
Financial services income 2.7 2.4 2.0
Cost of sales-homes 79.3 76.6 82.8
Cost of sales-land 4.7 7.0 1.1
Selling, marketing,
general and administrative expenses 8.8 9.0 8.0
Income before income taxes 4.1 3.9 5.4
Income before cumulative effect of
change in accounting for income taxes 3.4
Cumulative effect of change in
accounting for income taxes .6
Net income 2.6 2.4 4.0
</TABLE>
Backlog. Sales of the Company's homes are generally made pursuant to a
standard contract which requires a down payment of up to 10% of the sales
price. The contract includes a financing contingency which permits the
customer to cancel in the event mortgage financing at prevailing interest
rates (including financing arranged by the Company) is unobtainable within
a specified period, typically four to six weeks. The Company includes an
undelivered home sale in its backlog upon execution of the sales contract
and receipt of the down payment. Revenue is recognized only upon the
closing and delivery of a home. The Company estimates that the average
period between the execution of a purchase agreement for a home and delivery
is approximately six months. The following table sets forth the Company's
backlog for the periods indicated.
The Company's backlog increased approximately 29.9% or $48.4 million
from October 31, 1995 to October 31, 1996 primarily as a result of pre-sale
contract activity at Pembroke Falls and increased sale activities in the all
homebuilding divisions.
<TABLE>
<CAPTION>
October 31,
1996 1995 1994
---- ---- ----
Aggregate
Units Sales Value Units Sales Value Units Sales Value
-------------------- ---------------------- -------------------
<C> <C> <C>
1,016 $210,300,000 804 $161,900,000 560 $108,200,000
</TABLE>
<PAGE>
Results of Operations
Year Ended October 31, 1996 Compared to Year Ended October 31, 1995.
The Company's revenues from home sales during fiscal 1996 increased
$87.9 million (or 40.7%) compared to fiscal 1995. The number of homes
delivered by the Company increased 37.8% (to 1,567 from 1,137) and the
average selling price of homes delivered increased 2.1% (to $194,000 from
$190,000). The increase of revenues and homes delivered is primarily
attributable to the record backlog of homes under contract at the beginning
of fiscal 1996 and improved sales activity in all homebuilding divisions as
compared to fiscal 1995. Management believes that changes in the average
selling price of homes delivered from period to period are attributable to
discrete factors at each of its subdivisions, including product mix and
premium lot availability, and cannot be predicted for future periods with
any degree of certainty.
The Company's revenues from land sales decreased approximately $3.4
million (or 16.2%) during fiscal 1996 as compared to fiscal 1995 primarily
as a result of a decrease in commercial and multi-family land sales at
Pembroke Falls.
Cost of home sales increased approximately $75.9 million (or 40.6 %)
compared to fiscal 1995, primarily due to the related increase in home
sales revenues. Cost of home sales as a percentage of home sales is
consistent with fiscal 1995.
Cost of land sales decreased approximately $1.7 million (or 10.1%)
during fiscal 1996 as compared to fiscal 1995, primarily as a result of the
decrease in land sales. Costs of land sales as a percentage of land sales
revenues increased to 88.7% from 82.7%, which was primarily attributable to
lower margin single family lots available for sale. Margins from land sales
at Pembroke Falls in fiscal 1996 were comparable to fiscal 1995.
The Company's selling, marketing, general and administrative ("S,G&A")
expenses increased approximately $7.3 million (or 32.9%) during fiscal 1996
as compared to fiscal 1995, primarily as a result of selling costs
associated with the greater number of homes closed and an increase in
selling expenditures related to an increase in the number of residential
subdivisions. S, G & A expenses as a percentage of total revenues decreased
from 9.0% in fiscal 1995 to 8.8% in fiscal 1996, primarily due to economies
of scale.
Fiscal 1996 income before income taxes increased $4.2 million
(or 43.7%) as compared to fiscal 1995, primarily due to the increase in home
sales revenues.
Year Ended October 31, 1995 Compared to Year Ended October 31, 1994.
The Company's revenues from home sales during fiscal 1995 is comparable
to fiscal 1994. The number of homes delivered by the Company decreased
7.2% (to 1,137 from 1,225) and the average selling price of homes delivered
increased 7.9% (to $190,000 from $176,000). Management believes that
changes in the average selling price of homes delivered from period to
period are attributable to discrete factors at each of its subdivisions,
including product mix and premium lot availability, and cannot be predicted
for future periods with any degree of certainty. The Company's revenues
from land sales increased approximately $18.0 million (or 615%) during
fiscal 1995 as compared to fiscal 1994 primarily as a result of commercial
and multi-family land sales in the amount of $17.5 million at Pembroke
Falls.
Cost of home sales in dollars and as a percentage of home sales during
fiscal 1995 is comparable to fiscal 1994. Cost of home sales as a
percentage of home sales increased to 86.7% as compared to 86.2% in fiscal
1994.
Cost of land sales increased approximately $14.8 million (or 573%)
during fiscal 1995 as compared to fiscal 1994, primarily as a result of the
increase in land sales. Costs of land sales as a percentage of land sales
decreased to 82.7% from 87.9%, which was primarily attributable to higher
margin land sales at Pembroke Falls.
The Company's selling, marketing, general and administrative ("S,G&A")
expenses increased approximately $4.2 million (or 23.3%) during fiscal 1995
as compared to fiscal 1994, primarily as a result of an increase in selling
expenditures related to an increase in the number of residential
subdivisions. In addition, $1.3 million of this increase was attributable
to general and administrative expenses principally due to costs related to
the startup divisions of Virginia, Maryland, Dallas, Tampa and Raleigh
during fiscal 1995.
Primarily as a result of the increase in the Company's selling,
marketing and general administrative expenses partially offset by the
increased land sales profits, fiscal 1995 income before income taxes
decreased $2.6 million (or 22%) as compared to income before the cumulative
effect of the accounting change for fiscal 1994.
Liquidity and Capital Resources
General. The Company's financing needs depend upon its construction
volume, asset turnover and land acquisitions. Prior to the Company's
initial public offering, the Company's most significant source of funds were
acquisition, development and revolving construction loans provided by
financial institutions and seller financing for land purchases. In January
1992, the Company completed an initial public offering of its Common Stock
and received net proceeds of approximately $27.3 million. In February 1993,
the Company issued an aggregate of $30.0 million principal amount of 7%
Convertible Subordinated Notes due 2003 and received net proceeds of
approximately $28.7 million. In March 1994, the Company issued an aggregate
of $40 million principal amount of 11% Senior Notes due 2000 and received
net proceeds of approximately $38.6 million. The proceeds from these
offerings were generally used for repayment of debt, land acquisition and
general corporate purposes.
In August 1996 the Company entered into two credit agreements
("Agreements") with various lending institutions which provide for a
combined $123.0 million collateralized revolving line of credit. Borrowings
under these three year Agreements bear interest at rates ranging from LIBOR
plus 2.75% to prime plus .05% at the Company's election. Available
borrowings under the Agreements are limited to certain percentages of
finished lots, construction costs, land and land under development. These
Agreements replaced certain credit facilities in place prior to August 1996.
<PAGE>
At October 31, 1996, the Company had outstanding borrowings of
approximately $152.1 million, and aggregate available funds of approximately
$51.0 million pursuant to various credit lines including the Agreements.
The Company believes that funds generated from operations and expected
borrowing availability under existing and future bank credit facilities will
be sufficient to fund the Company's working capital requirements, with the
exception of major land acquisitions during fiscal 1997. For a further
description of the Company's borrowings, see Note 6 of the Company's
Consolidated Financial Statements.
In addition, PHMC has a warehouse line of credit for $18.0 million
which is guaranteed by the Company. At October 31, 1996 the outstanding
balance was $13.0 million to service origination of mortgage loans. The
Company believes that this line is sufficient for its mortgage banking
operation for the 1997 fiscal year.
Land Acquisition and Construction Financing. The Company is
continually exploring opportunities to purchase parcels of land for its
homebuilding operations and is, at any given time, in various stages of
proposing, making offers for, and negotiating the acquisition of various
parcels, whether outright or through options. The Company has continued to
increase its land development and construction activities in response to
current and anticipated demand and expects to pursue additional land
acquisition and development opportunities in the future.
Debt Service. In addition to land acquisition expenditures incurred by
the Company, principal commitments during the next several years relate to
repayment of debt. Scheduled and estimated maturities of the Company's
borrowings aggregate approximately $4.6 million during fiscal 1997 and
approximately $6.2 million in fiscal 1998. The Company anticipates that it
will fund the maturities of its debt and required expenditures relating to
its developments primarily with cash flow from operations and existing
credit lines, new or renewed credit lines or term loans. See Note 6 of
Notes to the Company's Consolidated Financial Statements.
Cash Flows. The Company has experienced negative cash flows from
operating activities during fiscal 1996. This is primarily the result of
increasing land inventory to meet expected sales demand and site
development costs associated with Pembroke Falls. However, cash flows from
operating activities during the fourth quarter of fiscal 1996 increased
$10.1 million as a result of an increase in the deliveries of homes. Cash
flows from investing activities during the fiscal year ended October 31,
1996 increased $8.4 million as compared to 1995 as a result of the sale of
three commercial properties. They included the sales of the Company's
38,000 square foot shopping plaza located in Boca Raton, Florida on December
12, 1995, a 95 unit rental apartment complex in Orlando, Florida on December
29, 1995 and a 60,000 square foot mixed use office building located in Boca
Raton, Florida on July 10, 1996. Cash flow provided from financing
activities totaled $3.6 million in 1996 due to an increase in net bank
borrowings partially offset by distributions to shareholders compared to an
increase of $47.0 million in fiscal 1995. Such activities resulted in a net
increase in cash in the amount of approximately $9.1 million for fiscal
1996.
Management does not anticipate that PHMC's expansion of its operation
will significantly impact the Company's liquidity because the mortgages are
generally sold within a short period of time after their origination to the
Federal National Mortgage Association (FNMA) or other qualified investors.
PHMC has established the capability to retain the servicing of loans,
however, during fiscal 1996 all servicing rights were sold.
Inflation
The Company, as well as the homebuilding industry in general, may be
adversely affected during periods of high inflation, primarily because of
higher land and construction costs. In addition, higher mortgage interest
rates may significantly affect the affordability of permanent mortgage
financing to prospective purchasers. Inflation also increases the Company's
interest costs and costs of labor and materials. The Company attempts to
pass through to its customers any increases in its costs through increased
selling prices and, to date, inflation has not had a material adverse effect
on the Company's results of operations. However, there is no assurance that
inflation will not have a material adverse impact on the Company's future
results of operation.
Interest Rates
The Company's operations are interest rate sensitive. Overall housing
demand is adversely affected by increases in interest costs. If mortgage
interest rates increase significantly, this may negatively impact the
ability of a homebuyer to secure adequate financing. Such results of higher
interest rates may result in adversely affecting the Company's revenues,
gross margins and net income.
Safe Harbor Statement Under the Private Securities Litigation Reform Act of
1995.
Except for the historical information contained herein, the matters
discussed in this annual report and Form 10-K are forward-looking statements
which involve risks and uncertainties, including but not limited to
economic, competitive and governmental factors affecting the Company's
markets, prices and other facets of its operations.
New FASB Pronouncements:
In May 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 122, "Accounting for Mortgage
Servicing Rights". SFAS No. 122, among other provisions, requires the
recognition of originating mortgage servicing rights as assets by allocating
total costs incurred in originating a loan between the loan and the
servicing rights based on their relative fair values. Presently, the cost
of originated mortgage servicing rights is included with the cost of the
related loans and written off against income when the loans are sold. Also,
under SFAS No. 122 all capitalized mortgage servicing rights are evaluated
for impairment based on the excess of the carrying amount of the mortgage
servicing rights over their fair value.
In June 1996, the Financial Accounting Standards Board issued SFAS No.
125 "Accounting for Servicing and Transfers of Financial Assets." This
statement supersedes SFAS No. 122 in establishing standards for resolving
issues relating to the accounting for continuing involvement arising from
the transfer of financial assets. Under SFAS No. 125, each time an entity
undertakes an obligation to service financial assets it shall recognize a
financial asset or servicing liability for that servicing contract. A
servicing asset or liability shall be amortized in proportion to and over
the period of estimated net servicing income (if servicing revenues exceed
servicing costs) or net servicing loss (if servicing costs exceed servicing
revenues). A servicing asset or liability shall be assessed for impairment
or increased obligation based on its fair value.
On October 23, 1995 the Financial Accounting Standards Board issued a
SFAS No. 123 , "Accounting for Stock-Based Compensation," which is
effective for financial statements for fiscal years beginning after December
15, 1995. Statement No. 123 provides a fair value method of accounting for
stock-based compensation arrangements rather than the intrinsic value based
method contained in APB Opinion No. 25. The Statement does not require an
entity to adopt the new fair value based method for the purpose of preparing
its basic financial statements. Entities that retain the APB Opinion No. 25
method of accounting will be required to display in the footnotes pro forma
net income and earnings per share information as if the fair value based
method had been adopted. The Company currently does not intend to adopt the
Fair Value Method provided in Statement No. 123.
SFAS No. 122 and 123 are effective for fiscal years beginning after
December 15, 1995. SFAS No. 125 is effective for transfers and servicing of
financial assets occurring after December 31, 1996. The actual effects of
implementing these new standards has not been determined. However, their
adoption is not expected to have any material or adverse affect on the
Company's financial position or results of operations.
<PAGE>
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
----
Report of Independent Certified Public Accountants 22
Consolidated Balance Sheets
as of October 31, 1996 and 1995 23
Consolidated Statements of Income
For the Years Ended October 31, 1996, 1995 and 1994 24
Consolidated Statements of Shareholders' Equity
For the Years Ended October 31, 1996, 1995 and 1994 25
Consolidated Statements of Cash Flows
For the Years Ended October 31, 1996, 1995 and 1994 26
Notes to Consolidated Financial Statements 27
Consolidated Financial Statement Schedules:
Schedule II - Valuation and Qualifying Accounts 47
Schedules other than those listed above are omitted because of the
conditions under which they are required, or because the information
required therein is set forth in the consolidated financial statements or
the notes thereto. <PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders' and Board of Directors
Engle Homes, Inc.
Boca Raton, Florida
We have audited the accompanying consolidated balance sheets of Engle
Homes,Inc., and subsidiaries as of October 31, 1996 and 1995 and the
related consolidated statements of income, shareholders' equity and cash
flows for each of the three years in the period ended October 31, 1996. We
have also audited the schedule listed in the accompanying index. These
financial statements and the schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and the schedule 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 and
schedule 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Engle
Homes, Inc. and subsidiaries at October 31, 1996 and 1995, and the results
of their operations and their cash flows for each of the three years in the
period ended October 31, 1996 in conformity with generally accepted
accounting principles.
Also, in our opinion, the schedule presents fairly, in all material
respects, the information set forth therein.
As discussed in Note 1 to the Consolidated Financial Statements, the Company
changed its method of accounting for income taxes during the year ended
October 31, 1994.
Miami, Florida BDO SEIDMAN, LLP
November 20, 1996
<PAGE>
<TABLE>
ENGLE HOMES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<CAPTION>
October 31,
-----------
1996 1995
---- ----
<S> <C> <C>
ASSETS
CASH
Unrestricted $ 18,262 $ 9,143
Restricted 3,438 4,257
INVENTORIES 220,564 198,664
PROPERTY AND EQUIPMENT, net 3,599 16,435
OTHER ASSETS 19,406 10,646
GOODWILL, net of accumulated
amortization of $813 and $477, respectively 5,964 6,300
DEFERRED TAX ASSET 550
MORTGAGE LOANS HELD FOR SALE 13,006 6,473
-------- --------
TOTAL ASSETS $284,789 $251,918
======== ========
LIABILITIES
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES $ 26,170 $ 13,708
CUSTOMER DEPOSITS 12,004 9,219
BORROWINGS 82,117 77,454
SENIOR NOTES PAYABLE,
including $5,390 to related parties 40,000 40,000
CONVERTIBLE SUBORDINATED NOTES 30,000 30,000
DEFERRED INCOME TAX 958
FINANCIAL SERVICE BORROWINGS 13,006 6,473
-------- --------
TOTAL LIABILITIES $203,297 $177,812
-------- --------
SHAREHOLDERS' EQUITY
PREFERRED STOCK, $.01 par,
shares authorized 1,000,000; none issued
COMMON STOCK, $.01 par
shares authorized 25,000,000; issued and
outstanding 6,929,200 69 69
ADDITIONAL PAID-IN CAPITAL 48,523 48,523
RETAINED EARNINGS 32,900 25,514
------- -------
TOTAL SHAREHOLDERS' EQUITY 81,492 74,106
------- -------
$284,789 $251,918
======== ========
<FN>
See accompanying notes to consolidated financial statements
</FN>
/TABLE
<PAGE>
<TABLE>
ENGLE HOMES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
<CAPTION>
For the Year Ended October 31,
------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
REVENUES
Sales of homes $303,972 $216,059 $215,716
Sales of land 17,571 20,964 2,931
Rent and other 1,485 1,573 1,358
Financial services 9,060 5,932 4,454
-------- -------- --------
332,088 244,528 224,459
-------- -------- --------
COSTS AND EXPENSES
Cost of sales-homes 263,226 187,281 185,847
Cost of sales-land 15,589 17,332 2,577
Selling, marketing, and
general and administrative 29,331 22,073 17,898
Depreciation and amortization 2,977 3,532 2,402
Financial services 7,264 4,774 3,556
-------- -------- --------
318,387 234,992 212,280
-------- -------- --------
INCOME BEFORE INCOME TAXES 13,701 9,536 12,179
Provision for income taxes 5,206 3,624 4,604
Income before cumulative
effect of change in
accounting for income taxes 7,575
Cumulative effect of change
in accounting for income taxes 1,332
-------- -------- --------
NET INCOME $ 8,495 $ 5,912 $ 8,907
======== ======== ========
Income per share before
cumulative effect of change
in accounting for income taxes
Primary $ 1.13
Fully diluted $ .96
Income per share from cumulative
effect of change in accounting
for income taxes
Primary $ .20
Fully diluted $ .15
Net income per share
Primary $ 1.20 $ 0.85 $ 1.33
Fully diluted $ 1.03 $ 0.74 $ 1.11
Shares used in earnings per
share calculations
Primary 7,108 6,989 6,674
Fully diluted 9,251 9,132 8,817
<FN>
See accompanying notes to consolidated financial statements
</FN>
/TABLE
<PAGE>
<TABLE>
ENGLE HOMES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(in thousands, except share data)
<CAPTION>
Common Stock Additional
------------ Paid-In Retained
Shares Amount Capital Earnings Total
------ ------ ------- -------- -----
<S> <C> <C> <C> <C> <C>
Amounts at October 31, 1993 6,650,000 $ 67 $45,164 $12,870 $58,101
Net income 8,907 8,907
Dividends to shareholders (1,066)(1,066)
Common Stock issued in
connection with acquisition
of business 29,200 361 361
--------- ---- ------- ------- -------
Amounts at October 31,1994 6,679,200 $ 67 $45,525 $20,711 $66,303
Net income 5,912 5,912
Dividends to shareholders (1,109)(1,109)
Common Stock issued in
connection with acquisition
of land 250,000 2 2,998 3,000
--------- ---- ------- ------- -------
Amounts at October 31, 1995 6,929,200 $ 69 $48,523 $25,514 $74,106
Net income 8,495 8,495
Dividends to Shareholders (1,109)(1,109)
========= ==== ======= ======= =======
Amounts at October 31, 1996 6,929,200 $ 69 $48,523 $32,900 $81,492
========= ==== ======= ======= =======
<FN>
See accompanying notes to consolidated financial statements
</FN>
</TABLE>
<PAGE>
<TABLE>
ENGLE HOMES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
<CAPTION>
For the Year Ended October 31,
------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 8,495 $ 5,912 $ 8,907
Adjustments to reconcile net income to net
cash provided by operating activities:
Cumulative effect of change in
accounting for income taxes (1,332)
Depreciation and amortization 2,977 3,532 2,402
Deferred tax (benefit) provision (1,508) 154 (79)
Change in assets and liabilities net of
effects from acquisition of businesses:
Decrease in restricted cash 819 221 4,865
Increase in inventories (21,900) (56,957) (31,294)
Increase in other assets (5,396) (822) (4,065)
Increase in mortgages held for sale (6,533) (3,910) (123)
Increase in accounts payable and
accrued expenses 12,462 2,181 1,427
Increase(decrease) in deposits 2,785 929 (2,784)
Increase in financial service borrowings 6,533 3,910 123
--------- --------- --------
Net cash required by operating activities (1,266) (44,850) (21,953)
--------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property and equipment (707) (1,567) (1,319)
Proceeds from sale of property 7,538
Decrease in short-term investments 1,518
Acquisition of business,net of cash acquired (13,142)
---------- --------- --------
Net cash provided (required) by investing
activities 6,831 (1,567) (12,943)
---------- --------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in borrowings 94,872 105,955 40,676
Repayment of borrowings (90,209) (57,929) (54,054)
Increase in senior notes payable 40,000
Distribution to shareholders (1,109) (1,109) (1,066)
---------- -------- --------
Net cash provided by financing activities 3,554 46,917 25,556
---------- -------- --------
NET INCREASE (DECREASE) IN CASH 9,119 500 (9,340)
CASH AT BEGINNING OF PERIOD 9,143 8,643 17,983
--------- -------- --------
CASH AT END OF PERIOD $ 18,262 $ 9,143 $ 8,643
========= ======== ========
Supplemental disclosure of cash flow
information
Interest paid $ 15,293 $ 14,915 $ 4,012
Income taxes paid $ 4,902 $ 3,407 $ 4,845
<FN>
See accompanying notes to consolidated financial statements
</FN>
</TABLE>
<PAGE>
ENGLE HOMES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Business:
Engle Homes, Inc. and subsidiaries (the Company) is engaged
principally in the construction and sale of residential homes and land
development. The Company's primary market is Florida with divisions in
Dallas, Texas; Denver, Colorado; Maryland; Virginia and Raleigh,
North Carolina. Ancillary products and services to its residential home
building include land sales to other builders, origination and sale of
mortgage loans and title services. The consolidated financial statements
include the accounts of the Company and all subsidiaries. All significant
intercompany balances and transactions have been eliminated in
consolidation.
Preparation of Financial Statements:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Asset Impairments:
During Fiscal 1996, the Company adopted Financial Accounting Standards
Board Statement No. 121 entitled "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed of" which was not
significantly different from the Company's previous asset impairment
accounting policy. The Company periodically reviews the carrying value of
certain of its assets in relation to historical results, current business
conditions and trends to identify potential situations in which the carrying
value of assets may not be recoverable. If such reviews indicate that the
carrying value of such assets may not be recoverable, the Company would
estimate the undiscounted sum of the expected future cash flows of such
assets to determine if such sum is less than the carrying value of such
assets to ascertain if a permanent impairment exists. If a permanent
impairment exists, the Company would determine the fair value by using
quoted market prices, if available, for such assets, or if quoted market
prices are not available, the Company would discount the expected future
cash flows of such assets.
Cash:
Unrestricted cash includes amounts in transit from the title
companies for home closings and highly liquid investments with an initial
maturity of three months or less.
Restricted cash consists of amounts held in escrow as required by
purchase contracts or by law for rental security deposits and compensating
balances for various open letters of credit.
Inventories:
Inventories are stated at the lower of cost or estimated net realizable
value. Estimated net realizable value is based upon sales achieved and
backlog in the normal course of business less estimated cost to complete and
dispose of the property.
Interest, real estate taxes and similar development costs are
capitalized to land and construction costs during the development and
construction period and are amortized to costs of sales as closings occur.
Property and Equipment, Depreciation and Amortization:
Property and equipment are stated at cost. Depreciation and
amortization are provided over the assets' estimated useful lives ranging
from 18 months to 30 years, primarily on the straight-line method. Loan
costs are deferred and amortized over the term of the outstanding
borrowings.
Goodwill:
The Company has classified as goodwill, the excess of cost over the
fair value of the net assets of companies acquired in purchase transactions.
Goodwill is being amortized on a straight-line method over 20 years.
Amortization charged to operations amounted to $336,550, $336,550 and
$139,854 in fiscal 1996, 1995 and 1994 respectively. The Company evaluates
the realizability of goodwill based upon estimated non-discounted cash flows
of subdivisions having a goodwill balance.
Revenue Recognition:
Revenues and profits from sales of commercial and residential real
estate and related activities are recognized when closings have occurred and
the purchaser has made a minimum down payment and other criteria for sale
and profit recognition are satisfied in accordance with generally accepted
accounting principles governing profit recognition for real estate
transactions.
Income Taxes:
Effective November 1, 1993, the Company adopted statement of Financial
Accounting Standards No. 109 "Accounting for Income Taxes", which requires
an asset and liability method of accounting for income taxes. The Company
recorded a benefit of $1,332,000 in the first quarter of fiscal 1994 as a
cumulative effect on prior years of this accounting change.
Earnings Per Share:
Net income per share is based on the weighted average number of shares
of Common Stock outstanding during each year, after giving effect to the
stock splits, convertible debt and stock options described in Notes 6 and 7.
Such computations are further adjusted for fully diluted purposes by
assuming conversion of the $30,000,000 7% Convertible Subordinated Notes and
elimination of related interest amortized net of taxes during the period,
resulting in an increase in net income of $1,071,000, $854,905 and $898,075
for the years ended October 31, 1996, 1995 and 1994, respectively.
Financial Instruments:
The fair value of financial instruments is determined by reference to
various market data and other valuation techniques as appropriate, unless
otherwise disclosed, the fair values of financial instruments approximate
their recorded values.
New Accounting Pronouncements:
In May 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 122, "Accounting for Mortgage
Servicing Rights". SFAS No. 122, among other provisions, requires the
recognition of originating mortgage servicing rights as assets by allocating
total costs incurred in originating a loan between the loan and the
servicing rights based on their relative fair values. Presently, the cost
of originated mortgage servicing rights is included with the cost of the
related loans and written off against income when the loans are sold. Also,
under SFAS No. 122 all capitalized mortgage servicing rights are evaluated
for impairment based on the excess of the carrying amount of the mortgage
servicing rights over their fair value.
In June 1996, the Financial Accounting Standards Board issued SFAS No.
125 "Accounting for Servicing and Transfers of Financial Assets." This
statement supersedes SFAS No. 122 in establishing standards for resolving
issues relating to the accounting for continuing involvement arising from
the transfer of financial assets. Under SFAS No. 125, each time an entity
undertakes an obligation to service financial assets it shall recognize a
financial asset or servicing liability for that servicing contract. A
servicing asset or liability shall be amortized in proportion to and over
the period of estimated net servicing income (if servicing revenues exceed
servicing costs) or net servicing loss (if servicing costs exceed servicing
revenues). A servicing asset or liability shall be assessed for impairment
or increased obligation based on its fair value.
On October 23, 1995 the Financial Accounting Standards Board issued a
SFAS No. 123 , "Accounting for Stock-Based Compensation," which is
effective for financial statements for fiscal years beginning after December
15, 1995. Statement No. 123 provides a fair value method of accounting for
stock-based compensation arrangements rather than the intrinsic value based
method contained in APB Opinion No. 25. The Statement does not require an
entity to adopt the new fair value based method for the purpose of preparing
its basic financial statements. Entities that retain the APB Opinion No. 25
method of accounting will be required to display in the footnotes pro forma
net income and earnings per share information as if the fair value based
method had been adopted. The Company currently does not intend to adopt the
Fair Value Method provided in Statement No. 123.
SFAS No. 122 and 123 are effective for fiscal years beginning after
December 15, 1995. SFAS No. 125 is effective for transfers and servicing of
financial assets occurring after December 31, 1996. The actual effects of
implementing these new standards has not been determined. However, their
adoption is not expected to have any material or adverse affect on the
Company's financial position or results of operations.
Financial Statement Reclassifications:
Certain amounts reflected in the consolidated financial statements for
the years ended October 31, 1995 and 1994 have been reclassified to conform
to the presentation for the year ended October 31, 1996.
NOTE 2 ACQUISITIONS
On May 2, 1994, the Company acquired all of the capital stock of
Universal Land Title, Inc., (ULT) a company that sells, but does not
underwrite, title policies in several Florida markets. The Company paid ULT
approximately $1.9 million in cash, issued 29,200 shares of the Company's
Common Stock (valued at $361,000) to the selling shareholders, and entered
into an agreement to pay two of the selling shareholders a total of $300,000
in cash in equal monthly installments over a two year period. The Company
also assumed, among other things, approximately $7.0 million of financial
services liabilities (consisting primarily of escrow deposits) which were
offset by corresponding financial services assets of approximately $7.7
million.
On June 15, 1994, the Company acquired substantially all of the assets
of Park Homes West, Inc. (Park), a company primarily engaged in the
construction and sales of residential homes in the Denver, Colorado area.
As consideration for the assets acquired, the Company paid Park
approximately $11.3 million in cash, issued to the principal shareholders of
Park $2.0 million promissory note due October 31, 1995, and assumed
approximately $7.0 million of Park's indebtedness to certain banks and other
financial institutions. The Company also assumed, among other things,
approximately $2.5 million of trade payables and other ordinary course
indebtedness of Park.
Both acquisitions were accounted for as purchases, and accordingly, the
financial results of ULT and Park are included in the consolidated financial
results of the Company from the respective dates of acquisition. The cost
of the acquisitions have been allocated based on the estimated fair market
value of assets acquired and the liabilities assumed. These allocations
resulted in goodwill of approximately 2.3 million for ULT and approximately
$4.4 million for Park.
NOTE 3 INVENTORIES
<TABLE>
Inventories consist of (dollars in thousands):
<CAPTION>
October 31,
----------------
1996 1995
---- ----
<S> <C> <C>
Land and improvements for residential
homes under development $161,590 $151,977
Residential homes under construction 55,715 42,887
Land zoned for commercial development 1,780 1,924
Investment in unconsolidated joint ventures 1,479 1,876
-------- --------
$220,564 $198,664
======== ========
<PAGE>
<FN>
The investment in unconsolidated joint ventures consists of land
purchased in connection with separate joint ventures with Centex Homes and
US Home. Each company maintains a fifty percent (50%) interest in each of
the ventures. The land is being developed by the joint venture and then
transferred to each joint venture partner at the venture's cost. The
Company, Centex and US Home separately market and build the homes.
</FN>
</TABLE>
<TABLE>
Included in inventory is the following (dollars in thousands):
<CAPTION>
For the Year Ended October 31,
------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Interest capitalized,
beginning of period $13,092 $ 6,246 $ 6,775
Interest incurred and capitalized 15,272 13,750 7,183
Interest amortized to cost of sales (11,543) (6,904) (7,712)
------- ------- ------
Interest capitalized, end of period $16,821 $13,092 $6,246
======= ======= ======
</TABLE>
<TABLE>
NOTE 4 PROPERTY AND EQUIPMENT (dollars in thousands)
<CAPTION>
October 31,
----------------
1996 1995
---- ----
<S> <C> <C>
Commercial properties $ 1,825 $13,750
Residential rental units 4,051
Other property and equipment 4,756 5,540
-------- --------
6,581 23,341
Less: accumulated depreciation (2,982) (6,906)
-------- --------
$ 3,599 $16,435
======== ========
<FN>
During fiscal 1996, the Company sold three commercial properties, a 38,000
square foot shopping plaza and a 60,000 square foot mixed use office
building, both located in Boca Raton, Florida, and a 95 unit rental
apartment complex in Orlando, Florida.
</FN>
</TABLE>
NOTE 5 FINANCIAL SERVICES
The Company operates two financial services subsidiaries: a full
service mortgage company and a title company.
The mortgage company's activities include the origination, sale and
servicing of residential mortgages. The mortgage company has established an
$18.0 million line of credit at prime minus .25% (8% at October 31, 1996),
expiring April 1997, to finance such mortgage originations. As of October
31, 1996 the balance outstanding under the line of credit was approximately
$13.0 million. Management does not anticipate that such expanded operations
will significantly impact the Company's liquidity because the originated
mortgages are sold within a short period of time after their origination to
qualified investors. The following is a summary of the mortgage company's
results of operations and financial position:
<TABLE>
Preferred Home Mortgage Company
Income Statement Information
(dollars in thousands)
<CAPTION>
For the Year Ended October 31,
--------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
REVENUES
Loan origination fees $2,529 $1,343 $1,016
Loan servicing 28
Interest 494 134 144
Gain on sale of servicing rights 203
------- ------ -----
TOTAL REVENUES 3,023 1,477 1,391
======= ====== =====
COSTS AND EXPENSES
Payroll and related costs 1,244 673 841
Occupancy and office expenses 472 309 248
Interest 514 174 124
------ ------ -----
TOTAL EXPENSES 2,230 1,156 1,213
------ ------ -----
INCOME BEFORE TAXES $ 793 $ 321 $ 178
====== ====== =====
</TABLE>
<TABLE>
Preferred Home Mortgage Company
Balance Sheet Information
(dollars in thousands)
<CAPTION>
October 31,
-----------------
1996 1995
---- ----
<S>
ASSETS <C> <C>
CASH $ 106 $ 197
MORTGAGE LOANS HELD FOR SALE 13,006 6,557
MORTGAGE LOANS RECEIVABLE 360 453
OTHER 655 534
ADVANCES TO PARENT(a) 1,032 99
------- -------
TOTAL ASSETS $15,159 $ 7,840
======= =======
LIABILITIES AND EQUITY
ACCOUNTS PAYABLE $ 82 $ 5
NOTES PAYABLE 13,006 6,557
------- -------
TOTAL LIABILITIES 13,088 6,562
SHAREHOLDER'S EQUITY 2,071 1,278
------- -------
TOTAL LIABILITIES AND
SHAREHOLDER'S EQUITY $15,159 $ 7,840
======= =======
<FN>
(a) Certain intercompany transactions and balances are eliminated in
consolidation and have no effect on consolidated earnings or equity.
</FN>
</TABLE>
<PAGE>
<TABLE>
NOTE 6 BORROWINGS (dollars in thousands)
<CAPTION>
Borrowings consist of:
October 31,
1996 1995
---- ----
<S> <C> <C>
Acquisition and development loans from banks,
payable through 1999, with interest at
floating rates (8.50% at October
31, 1996), collateralized by inventories $ 24,907 $ 36,565
Mortgages, loans , with interest at floating
and fixed rates (9.25% to 10.9% at October
1995), collateralized by commercial property 3,352
Purchase money mortgages, payable through
1997 with interest at a floating rate
(9.75% at October 31, 1996), collateralized
by inventories 1,624 3,350
Revolving construction loans from banks,
payable through 1999 with interest at
floating rates (8.12% to 8.75% at
October 31, 1996), collateralized by
inventories 55,541 34,146
Other 45 41
-------- --------
Borrowings $ 82,117 $ 77,454
Senior Notes due December 15, 2000, with
interest at a fixed rate of 11 3/4% payable
semi-annually $ 40,000 $ 40,000
Convertible Subordinated Notes due
March 1, 2003, with interest at a fixed rate
of 7% payable semi-annually $ 30,000 $ 30,000
-------- --------
$152,117 $147,454
======== ========
<FN>
On February 22, 1993, the Company sold $30,000 of 7% Convertible
Subordinated Notes Due 2003 (the "Notes"). The Notes are convertible into
Common Stock at a conversion price of $14.00 per share and are redeemable in
whole of in part, at the option of the Company on or after April 1, 1996.
In March 1994 the Company sold $40.0 million principal amount of 11
3/4% Senior Notes due 2000. From the net proceeds, $10.0 million were used
to repay a loan from Alec Engelstein, the Company's Chairman of the Board,
President and Chief Executive Officer, which borrowing had been incurred in
connection with the Pembroke Falls land purchase.
The Company's loan agreements contain covenants, including restrictions
on the Company's ability to pay dividends (no more than 50% of net income
after taxes for each fiscal year). Certain of such loans also require that
the principal shareholders continue to beneficially own a majority of the
Company's outstanding Common Stock and provide that the lender may, at its
option, accelerate such loans as a result of, among other things, mergers
with other entities. In addition, the Convertible Subordinated Notes and
the Senior Notes are guaranteed by all of the Company's subsidiaries on a
full, unconditional, joint and several basis, and as a result, the financial
statements of the subsidiary guarantors are omitted.
NOTE 6 BORROWINGS (Continued)
Maturities of borrowings are as follows:
Year Ended October 31,
1997 4,558
1998 6,195
1999 69,766
2000 40,038
2001 -
Thereafter 31,560
--------
$152,117
========
The Company has approximately $50,963,000 available for future
borrowings under various acquisition and development related borrowing
arrangements at October 31, 1996.
As of October 31, 1996, the outstanding principal amount of 7%
Convertible Subordinated Notes and 11.75% Senior Notes were $30,000,000 and
$40,000,000, respectively. The aggregate fair market value of the notes,
based upon their quoted market price as of October 31, 1996, was
approximately $65,655,000. All other borrowings, due to their relative
short-term maturity, approximate fair market value as of October 31, 1996.
</FN>
</TABLE>
NOTE 7 SHAREHOLDERS' EQUITY
<TABLE>
Under the Company's stock option plan, as amended, the Company has
reserved 850,000 shares for issuance, of which options to purchase 606,500
shares have been issued to employees and directors of the Company, generally
becoming exercisable cumulatively over five years from the date of grant and
expiring ten years from the date of grant. A summary of changes in Common
Stock options follows:
<CAPTION>
Stock Option Available
Options Price Outstanding Exercisable for Grant
- ------------------------- ------------ ----------- ----------- ---------
<S> <C> <C> <C> <C>
October 31, 1993 $11.50 466,000 93,200 284,000
Became exercisable 93,200
------------ ----------- ----------- ---------
October 31, 1994 $11.50 466,000 186,400 284,000
Became exercisable 93,200
Cancelled $11.50 (17,000) (10,200) 17,000
Granted $9.50 175,000 (175,000)
------------ ----------- ----------- ---------
October 31, 1995 $9.00-11.50 624,000 269,400 126,000
Authorized for grant 100,000
Cancelled $9.00-11.50 (22,500) (15,400) 22,500
Granted $9.00 5,000 (5,000)
Became exercisable $9.00-11.50 133,200
------------ ----------- ----------- ---------
October 31, 1996 $9.00-11.50 606,500 387,200 243,500
============ =========== =========== =========
</TABLE>
On December 6, 1994, in connection with a land purchase in the
approximate amount of $3.0 million, the Company issued 250,000 restricted
shares of Common Stock with a minimum guaranteed price of $12.00 per share.
The Company's guarantee expires at the rate of one percent (1%) of the
Company's outstanding Common Stock per three month period following the
initial two year restriction period.
NOTE 8 INCOME TAXES
<TABLE>
The income tax provision in the consolidated statements of income
consists of the following components(dollars in thousands):
<CAPTION>
For the Years Ended October 31,
1996 1995 1994
------ ------- ------
<S> <C> <C> <C>
Current:
Federal $5,734 $2,952 $3,999
State 981 518 684
------ ------- ------
$6,715 $3,470 $4,683
------ ------- ------
Deferred:
Federal (1,288) 132 (67)
State (221) 22 (12)
------ ------- ------
(1,509) 154 (79)
------ ------- ------
Total $5,206 $3,624 $4,604
====== ======= ======
<FN>
The provision for income taxes was different from the amount computed
by applying the statutory rate due to the effect of state income taxes.
</FN>
</TABLE>
<PAGE>
<TABLE>
Temporary differences which gave rise to deferred income tax assets and
liabilities at October 31, 1996 and 1995 were as follows (dollars in
thousands):
<CAPTION>
October 31,
-------------
1996 1995
---- ----
<S> <C> <C>
Deferred tax liabilities:
Differences in reporting selling and
marketing costs for tax purposes $1,185 $1,358
Other 68 40
------ ------
Gross deferred tax liabilities $1,253 $1,398
Deferred tax assets:
Inventory 913 94
Property and equipment 534 41
Income recognized for tax purposes
and deferred for financial reporting
purposes 356 305
------ ------
Gross deferred tax assets 1,803 440
------ ------
Net deferred tax(asset) liability $ (550) $ 958
====== ======
</TABLE>
NOTE 9 COMMITMENTS AND CONTINGENCIES
The Company is subject to the normal obligations associated with
entering into contracts for the purchase, development and sale of real
estate in the routine conduct of its business. The Company is committed
under various letters of credit and performance bonds which are required for
certain development activities, deposits on land and lot purchase contract
deposits. Outstanding letters of credit and performance bonds under these
arrangements totaled approximately $22.9 million at October 31, 1996.
During fiscal 1996, the Company entered into an agreement for the sale
and leaseback of the Company's office/retail complex located at the
Company's headquarters in Boca Raton, Florida. The sales price was
$8,000,000 which approximated the carrying amount. The lease is classified
as an operating lease in accordance with Statement of Financial Accounting
Standards No. 13, "Accounting for Leases".
<TABLE>
The Company and its subsidiaries occupy certain facilities under lease
arrangements. Rent expense amounted to $476,522, $202,888, and $133,852 in
fiscal 1996, 1995 and 1994, respectively. Future minimum rental
commitments, net of sublease income, for operating leases with non-
cancelable terms in excess of one year are as follows:
<CAPTION>
<PAGE>
(In thousands)
Minimum
Rental Sublease
Payments Income Net
-------- --------- ------
<S> <C> <C> <C>
1997 $854 $669 $185
1998 $854 $253 $601
1999 $800 $149 $651
2000 $800 $68 $732
2001 $800 $46 $754
Later Years $3,800 $3,800
</TABLE>
The Company is involved, from time to time, in litigation arising in
the ordinary course of business, none of which is expected to have a
material adverse effect on the Company's consolidated financial position or
results of operations.
The Company, as well as the homebuilding industry in general, may be
adversely affected during periods of high inflation, primarily because of
higher land and construction costs. In addition, higher mortgage interest
rates may significantly affect the affordability of permanent mortgage
financing to prospective purchasers. Inflation also increases the Company's
interest costs and costs of labor and materials. The Company attempts to
pass through to its customers any increases in its costs through increased
selling prices and, to date, inflation has not had a material adverse effect
on the Company's results of operations. However, there is no assurance that
inflation will not have a material adverse impact on the Company's future
results of operation.
The Company's operations are interest rate sensitive. Overall housing
demand is adversely affected by increases in interest costs. If mortgage
interest rates increase significantly, this may negatively impact the
ability of a homebuyer to secure adequate financing. Such results of higher
interest rates may result in adversely affecting the Company's revenues,
gross margins and net income.
NOTE 10 DEFERRED COMPENSATION PLAN
Effective August, 1993, the Company adopted a defined contribution plan
established pursuant to Section 401(k) of the Internal Revenue Code.
Employees contribute to the plan a percentage of their salaries, subject to
certain dollar limitations, and the Company matches a portion of the
employees' contributions. The Company's contribution to the plan for the
years ended October 31, 1996, 1995, and 1994 amounted to $61,000, $66,000
and $46,000 respectively.
<PAGE>
<TABLE>
NOTE 11 QUARTERLY RESULTS FOR 1996 AND 1995 (unaudited)
Quarterly results for the years ended October 31, 1996 and 1995 follow
(dollars in thousands, except share data):
<CAPTION>
1996 1st 2nd 3rd 4th
Quarter
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues $60,050 $76,034 $90,393 $105,611
Income before income taxes 1,306 3,304 3,990 5,101
Net Income 810 2,048 2,474 3,163
Net income per share
Primary 0.12 0.29 0.35 0.44
Fully diluted 0.11 0.25 0.30 0.38
Shares used in earnings
per share calculation:
Primary 6,989 7,037 7,120 7,108
Fully diluted 9,132 9,180 9,263 9,251
1995
Revenues $57,533 $50,366 $65,708 $70,921
Income before income taxes 1,743 1,672 2,705 3,416
Net Income 1,081 1,037 1,677 2,117
Net income per share
Primary 0.16 0.15 0.24 0.30
Fully diluted 0.14 0.14 0.21 0.26
Shares used in earnings
per share calculation:
Primary 6,912 7,086 7,017 7,022
Fully diluted 9,054 9,229 9,163 9,165
<FN>
Quarterly and year to date computation of per share amounts are made
independently. Therefore, the sum of per share amounts for the quarters may
not agree with per share amounts for the year.
</FN>
/TABLE
<PAGE>
NOTE 12 NON-CASH INVESTING AND FINANCING ACTIVITIES
During fiscal 1996 the Company sold certain commercial properties in
exchange for cash of $7.5 million and notes receivable of $3.9 million.
During fiscal 1995 the Company purchased land valued at $3.0 million in
exchange for 250,000 restricted shares of Common Stock with a minimum
guaranteed price of $12.00 a share. In connection with this transaction,
the Company recorded a deferred tax liability of $280,000 representing the
differential in the basis of the land for financial reporting and tax
reporting purposes.
The Company purchased all of the capital stock of Universal and all of
the assets of Park during fiscal year 1994. These acquisitions included the
following non-cash transactions (dollars in thousands):
Fair value of net assets acquired $15,883
Cash paid for capital stock (1,905)
Cash paid for net assets (11,317)
---------
Common stock and debt issued
in connection with acquisition $ 2,661
=========
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
Item 10. DIRECTORS AND OFFICERS OF REGISTRANT
The information required by this Item 10 will be contained in the
company's definitive proxy materials to be filed with the Securities and
Exchange Commission and is incorporated in this Annual Report on Form 10-K
by this reference.
Item 11. EXECUTIVE COMPENSATION
The information required by this Item 11 will be contained in the
Company's definitive proxy materials to be filed with the Securities and
Exchange Commission and is incorporated in this Annual Report on Form 10-K
by this reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by this Item 11 will be contained in the
Company's definitive proxy materials to be filed with the Securities and
Exchange Commission and is incorporated in this Annual Report on Form 10-K
by this reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item 11 will be contained in the
Company's definitive proxy materials to be filed with the Securities and
Exchange Commission and is incorporated in this Annual Report on Form 10-K
by this reference.<PAGE>
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) 1. Financial Statements:
Reference is made to the index set forth on page 21 of this
Annual Report on Form 10-K.
2. Financial Statement Schedules:
Reference is made to the index set forth on page 21 of this
Annual Report on Form 10-K.
3. Exhibits:
Exhibit
No. Description
-------
3.1 Registrant's Amended and Restated Articles of
Incorporation(1)
3.2 Registrant's Amended and Restated Bylaws(2)
4.1 Specimen Stock Certificate for Registrant's
Common Stock(2)
4.2 Registration Rights Agreement among the
Registrant, Alec Engelstein, Sheila Engelstein
and Harry Engelstein(2)
4.3 Indenture dated as of February 12, 1993, among
the Registrant, its subsidiaries and The First
National Bank of Boston, relating to the
Convertible Subordinated Notes(1)
4.4 Specimen form of original Convertible
Subordinated Note(1)
4.6 Purchase Agreement, dated as of February 12,
1993, among the Registrant, its subsidiaries and
the purchasers of the Convertible Subordinated
Notes(1)
4.7 Registration Rights Agreement, dated as of
February 12, 1993, among the Registrant and the
purchasers of the Convertible Subordinated
Notes(1)
4.8 Specimen Form of New Convertible Subordinated
Note(1)
4.9 Indenture, dated as of March 15, 1994, relating
to the Company's 11.75% Senior Notes due 2000(3)
4.10 Specimen form of 11.75% Senior Notes due 2000(3)
4.11 Registration Rights Agreement, dated March 17,
1994, between the Company and PaineWebber
Incorporated Relating to the Company's 11.75%
Senior Notes due 2000(3)
4.12 Purchase Agreement, dated March 10, 1994, between
the Company and PaineWebber Incorporated relating
to the sale of the Company's 11.75% Senior Notes
due 2000(3)
10.1 Registrant's 1991 Stock Option Plan (Compensatory
Plan)(7)
10.2 Indemnification Agreement between the Registrant
and each of its directors and certain executive
officers(1)
10.10 Asset Purchase Agreement, dated May 13, 1994,
among Engle Homes, Inc., Park Homes West, Inc.
and David H. Feinberg, and Amendment No. 1
thereto, dated June 14, 1994 (6)
11.1 Statement Regarding Computation of Per Share
Earnings(5)
22.1 Subsidiaries of the Registrant(5)
23.1 Consent of BDO Seidman, LLP(5)
____________________
(1) Incorporated by reference to the exhibit with the
same number filed with the Registrant's
Registration Statement on Form S-1 (File No.
33-58678).
(2) Incorporated by reference to the exhibit with the
same number filed with the Registrant's
Registration Statement on Form S-1 (File No.
33-43305).
(3) Incorporated by reference to the exhibit with the
same number filed with the Registrant's current
Report on Form 8-K, dated March 24, 1994.
(4) Previously filed.
(5) Filed herewith.
(6) Incorporated by reference to exhibit 2.1 with the
same number filed with the Registrant's Current
Report on Form 8-K, dated June 28, 1994.
(7) Incorporated by reference from the Company's
registration statement on Form S-8 filed on
November 30, 1995.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the last
quarter of the period covered by this report.
<PAGE>
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.
ENGLE HOMES, INC.
By /s/ ALEC ENGELSTEIN
----------------------
Alec Engelstein
Chairman of the Board, President
Dated: December 16, 1996 and Chief Executive Officer
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 in the capacities and on the dates indicated:
Signatures Title Date
/s / ALEC ENGELSTEIN Chairman of the Board, December 16, 1996
- -------------------- President and Chief
Executive Officer(Principal
Executive Officer)
/s/ DAVID SHAPIRO Vice President and Chief December 16, 1996
- ----------------- Financial Officer
David Shapiro (Principal Financial Officer)
/s/ PAUL LEIKERT Vice President -Chief December 16, 1996
- ---------------- Accounting Officer
Paul Leikert (Principal Accounting Officer)
/s/ HARRY ENGELSTEIN Executive Vice President, December 16, 1996
- -------------------- Chief Construction Officer
Harry Engelstein and Director
/s/ JOHN A. KRAYNICK Senior Vice President December 16, 1996
- -------------------- and Director
John A. Kraynick
/s/ HENRY H. FISHKIND Director December 16, 1996
- ---------------------
Henry H. Fishkind
/s/ RONALD J. KORN Director December 16, 1996
- ------------------
Ronald J. Korn<PAGE>
Exhibit 22.1
List of Registrant's Subsidiaries
Subsidiary Name State of Incorporation
Biltmore South Corp. Florida
Preferred Builders Realty, Inc. Florida
Engle Homes/Orlando, Inc. Florida
Preferred Home Mortgage Company Florida
St. Tropez At Boca Golf, Inc. Florida
Engle Homes/Palm Beach, Inc. Florida
Engle Homes/Broward, Inc. Florida
Engle Homes/Gulf Coast, Inc. Florida
Engle Homes/Texas, Inc. Florida
Engle Homes/Pembroke, Inc. Florida
Engle Homes/Virginia, Inc. Florida
Engle Homes/Maryland, Inc. Florida
Engle Homes/North Carolina, Inc. Florida
Universal Land Title, Inc. Florida
Park Engle Homes, Inc. Florida
Engle Homes/Lake Bernadette, Inc. Florida
Engle Homes/Naples, Inc. Florida
<PAGE>
<TABLE>
Exhibit 11.1
ENGLE HOMES, INC. AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
(In thousands, except per share data)
<CAPTION>
FULLY DILUTED EARNINGS PER SHARE FOR THE YEAR ENDED
OCTOBER 31, 1996
------------------
<S> <C>
Computation for Statement of Income
Reconciliation of net income to amount
used for fully diluted computation
in statement of income:
Net income per statement per statement
of income $8,495
Add - interest on 7% convertible debentures
reflected in cost of sales, net of income
tax effect 1,071 <F1>
------
Net income, adjusted $9,566
Reconciliation of weighted average number of
shares outstanding to amount used for fully
diluted computation in statement of income:
Weighted average number of shares outstanding 7,108
Add - weighted average shares issuable from
assumed exercise of 7% convertible debentures 2,143
------
Weighted average number of common shares,
as adjusted 9,251
Fully diluted earnings per share 1.03
======
<FN>
<F1> Interest incurred on the 7% convertible debenture is
capitalized to inventory and amortized through cost of sales. The interest
add back represents the current year amortization of capitalized interest,
net of the estimated income tax effect of approximately $657,000.
</FN>
</TABLE> <PAGE>
<TABLE>
SCHEDULE II
ENGLE HOMES, INC AND SUBSIDIARIES
Valuation and Qualifying Accounts
Years ended October 31, 1996, 1995 and 1994
(amounts in thousands)
<CAPTION>
Balance Additions Deductions
at charged to credited to Balance
beginning costs and costs and at end
Description of year expenses expenses of year
- ---------------------------- --------- -------- ----------- -------
<S> <C> <C> <C> <C>
Year ended October 31, 1996
Valuation allowance $1,948 $1,948
Year ended October 31, 1995
Valuation allowance
Year ended October 31, 1994
Valuation allowance
</TABLE>
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of
Engle Homes, Inc.
We hereby consent to the incorporation by reference in the Registration
Statement No. 33-59204 on Form S-3 and Registration No. 33-74358 on Form S-8
of Engle Homes, Inc. (the "Company"), of our report dated November 20, 1996
relating to the consolidated financial statements of the Company, appearing
in the Company's Annual Report on Form 10-K for the fiscal year ended
October 31, 1996.
Miami, Florida
December 16, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<CASH> 21,700
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 220,564
<CURRENT-ASSETS> 0
<PP&E> 19,406
<DEPRECIATION> 0
<TOTAL-ASSETS> 284,789
<CURRENT-LIABILITIES> 0
<BONDS> 165,123
0
0
<COMMON> 69
<OTHER-SE> 81,423
<TOTAL-LIABILITY-AND-EQUITY> 284,789
<SALES> 321,543
<TOTAL-REVENUES> 332,088
<CGS> 278,815
<TOTAL-COSTS> 278,815
<OTHER-EXPENSES> 39,572
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 13,701
<INCOME-TAX> 5,206
<INCOME-CONTINUING> 8,495
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,495
<EPS-PRIMARY> 1.20
<EPS-DILUTED> 1.03
</TABLE>
