AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 23, 1997
REGISTRATION STATEMENT NO. 333-40739
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 1
TO
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
ENGLE HOMES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
FLORIDA 59-2214791
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
<TABLE>
<S> <C>
DAVID SHAPIRO
ENGLE HOMES, INC.
123 N.W. 13TH STREET 123 N.W. 13TH STREET
BOCA RATON, FLORIDA 33432 BOCA RATON, FLORIDA 33432
(561) 391-4012 (561) 391-4012
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) INCLUDING AREA CODE, OF AGENTS FOR SERVICE)
</TABLE>
---------------
WITH COPIES TO:
BRIAN J. WALSH, ESQ. JOHN SCHUSTER, ESQ.
GREENBERG TRAURIG HOFFMAN CAHILL GORDON & REINDEL
LIPOFF ROSEN & QUENTEL, P.A. 80 PINE STREET
1221 BRICKELL AVENUE NEW YORK, NEW YORK 10005
MIAMI, FLORIDA 33131 (212) 701-3000
(305) 579-0500 TELECOPY (212) 269-5420
TELECOPY (305) 579-0717
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
---------------
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box. [ ]
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this form, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [x]
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED DECEMBER 22, 1997
P R O S P E C T U S
2,700,000 Shares
Engle Homes, Inc.
Common Stock
----------------
All of the shares of Common Stock offered hereby (the "Equity Offering")
are being sold by Engle Homes, Inc. ("Engle" or the "Company"). The Common
Stock is quoted on The Nasdaq National Market under the symbol "ENGL." On
December 18, 1997, the last reported sale price of the Common Stock as reported
on The Nasdaq National Market was $17.00 per share. See "Price Range of Common
Stock."
Concurrently with the Equity Offering, the Company is offering $75,000,000
aggregate principal amount of % Senior Notes due 2008 (the "1998 Notes") by
means of a separate prospectus (the "Notes Offering" and together with the
Equity Offering, the "Offerings"). The consummation of the Equity Offering and
the consummation of the Notes Offering are not conditioned upon each other. See
"Description of Certain Indebtedness."
----------------
SEE "RISK FACTORS" BEGINNING ON PAGE 9 OF THIS PROSPECTUS FOR A DISCUSSION
OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS
OF THE COMMON STOCK OFFERED HEREBY.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
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UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
Per Share $ $ $
Total(3) $ $ $
- --------------------------------------------------------------------------------
(1) For information regarding indemnification of the Underwriters, see
"Underwriting."
(2) Before deducting expenses estimated at $600,000, which are payable by the
Company.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
405,000 additional shares of Common Stock on the same terms as set forth
above solely to cover over-allotments, if any. See "Underwriting." If such
option is exercised in full, the total Price to Public, Underwriting
Discounts and Commissions and Proceeds to Company will be $ ,
$ and $ , respectively.
----------------
The shares of Common Stock are being offered by the several Underwriters
named herein, subject to prior sale, when, as and if delivered to and accepted
by them and subject to certain conditions. It is expected that the shares of
Common Stock offered hereby will be available for delivery on or about
, 1998, at the office of Smith Barney Inc., 333 West 34th Street, New York,
New York 10001.
----------------
Salomon Smith Barney
Jefferies & Company, Inc.
Southeast Research Partners, Inc.
, 1998
<PAGE>
[Appearing on page 2 and the inside back cover of the Prospectus will be 4
color pictures of homes offered by the Company in several of the Company's
markets and a map showing such markets.]
CERTAIN PERSONS PARTICIPATING IN THE OFFERINGS MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES OFFERED
HEREBY, INCLUDING OVER-ALLOTMENT, STABILIZING TRANSACTIONS, SYNDICATE SHORT
COVERING TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "UNDERWRITING."
IN CONNECTION WITH THE EQUITY OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON
NASDAQ IN ACCORDANCE WITH RULE 103 UNDER REGULATION M. SEE "UNDERWRITING."
SAFE HARBOR STATEMENT
The Company wishes to take advantage of the safe harbor provisions
included in the Private Securities Litigation Reform Act of 1995. Accordingly,
in addition to historical information, this Prospectus contains certain
forward-looking statements, including, but not limited to, statements regarding
the Company's future financial performance and financial condition. These
statements involve a number of risks and uncertainties. Any forward-looking
statements made by the Company herein are not guarantees of future performance,
and actual results may differ materially from those in such forward-looking
statements as a result of various factors, including but not limited to, those
referred under "Risk Factors" herein.
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS APPEARING ELSEWHERE IN THIS PROSPECTUS OR
INCORPORATED BY REFERENCE HEREIN. UNLESS THE CONTEXT INDICATES OTHERWISE, THE
TERMS "COMPANY" AND "ENGLE" AS USED IN THIS PROSPECTUS REFER TO ENGLE HOMES,
INC., ITS PREDECESSORS AND ITS SUBSIDIARIES. UNLESS OTHERWISE INDICATED, THE
INFORMATION IN THIS PROSPECTUS ASSUMES THAT THE UNDERWRITERS' OVER-ALLOTMENT
OPTION HAS NOT BEEN EXERCISED. FISCAL YEAR REFERENCES ARE TO THE RESPECTIVE
FISCAL YEAR ENDED OCTOBER 31.
THE COMPANY
Engle Homes, Inc. designs, constructs, markets and sells detached
single-family residences, townhomes, patio homes and condominiums to entry
level and move-up buyers, retirees and second-home, seasonal buyers. Engle
operates in nine geographic markets: Broward County, Palm Beach County and
Martin County in South Florida; Orlando in Central Florida; Tampa, Sarasota,
Naples and Fort Myers on the west coast of Florida; Denver, Colorado; Dallas,
Texas; Virginia and Maryland; Raleigh, North Carolina; Phoenix, Arizona; and
Atlanta, Georgia. The Company offers a variety of home styles at prices ranging
from approximately $80,000 to over $400,000 with an average sales price in
fiscal 1997 of approximately $203,000. In addition, the Company operates a
mortgage company which provides mortgages primarily to its home buyers in all
of its geographic markets and a title company which provides services to its
home buyers and third parties in Florida and Denver, Colorado.
Engle is a leading Florida homebuilder. The Company believes that it is
the number two and number four builder of single-family homes in South Florida
and Central Florida, respectively, based on revenues from unit closings for the
twelve months ended June 30, 1997. Florida is the number one homebuilding state
in the United States in terms of total housing starts. In addition, Florida is
currently the fourth largest state based upon total population and has
consistently ranked among the top four states in population growth over the
past seven decades.
Since 1993, Engle has expanded into eight of the top 20 homebuilding
markets in the nation through both start-up operations and the acquisition of a
homebuilder in Denver, Colorado. In fiscal 1997, approximately 32% of the
Company's revenues from home sales were generated outside of the Florida
markets as compared to none in fiscal 1993. Most recently, in fiscal 1997 Engle
entered both the Phoenix, Arizona and Atlanta, Georgia markets through start-up
operations.
Over the past five years, the Company's total revenues have grown from
$137.4 million in fiscal 1993 to $425.3 million in fiscal 1997, with annual net
income growing from $6.3 million to $13.5 million over the same period,
representing compound annual growth rates of 33% and 21%, respectively. The
Company's fiscal 1997 total revenues of $425.3 million and net income of $13.5
million were the highest in the Company's history. The number of homes
delivered increased from 797 in fiscal 1993 to 1,992 in fiscal 1997. At the end
of fiscal 1997, Engle was marketing homes in 68 communities.
BUSINESS STRATEGY
Engle believes that its success has been due to its market-oriented
approach which it applies to each of the following: (i) identifying new
markets; (ii) acquiring land; and (iii) diversifying its product offerings and
price ranges to appeal to most segments of the home buying public. Engle
believes that this strategy enables it to respond more rapidly to changing
market conditions.
EXPAND IN EXISTING AND NEW MARKETS. The Company has successfully expanded
its operations through both start-up operations in new and existing markets and
the acquisition of a homebuilder in Denver, Colorado. Within its existing
markets, the Company believes that it is able to gain greater
3
<PAGE>
market share by increasing the number of residential projects, thereby
leveraging its existing management structure and enhancing profitability
through economies of scale. As part of its strategy to further diversify
geographically, the Company continually seeks and evaluates market expansion
opportunities, including potential acquisitions of homebuilding companies. The
Company seeks to expand into geographic markets with significant single-family
home permit activity, substantial job growth, a diversified economy and an
availability of strong management with local market expertise. Since its
initial public offering in January 1992, the Company has expanded into eight
new geographic markets.
OFFER A BROAD SELECTION OF PRODUCTS. The Company designs its homes 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. Engle's
product offerings include semi-custom estate homes, detached single-family
residences, townhomes, semi-detached patio-homes/ duplexes and condominiums.
Management believes that the Company's long-standing policy of product
diversification enables it to respond more rapidly to changing market
conditions.
SELECTIVELY ACQUIRE LAND. The Company maintains a land acquisition policy
designed to enhance profitability and return on capital while minimizing the
risks associated with investments in land. Engle seeks to identify and acquire
superior locations in each market and offer a number of communities with
diverse products and sales prices. The Company prefers to acquire improved
residential lots ready for construction by entering into option contracts,
whenever possible, or through outright purchases. The Company also acquires
tracts of land that require site improvements prior to the start of home
construction. Occasionally, Engle purchases larger parcels of undeveloped land
suited for master-planned communities, primarily in South Florida. When
acquiring larger parcels, the Company typically contracts to sell portions of
improved or unimproved land to other builders as a source of additional revenue
thereby reducing the Company's investment. In addition, when economically
advantageous to the Company, Engle enters into partnership or joint venture
agreements with other major homebuilders to purchase and develop well located
parcels of land. The Company generally purchases land only after required
zoning entitlements have been obtained.
MAINTAIN STRINGENT COST CONTROLS. The Company believes that maintaining
stringent cost controls is a key factor in achieving profitability. The Company
seeks to reduce its costs and risks by (i) obtaining required zoning
entitlements prior to purchasing land, (ii) using subcontractors to perform
home construction and site improvement work on a fixed price basis, (iii)
minimizing inventory of unsold homes, (iv) improving construction cycle time
for new homes, (v) using its position as a leading homebuilder to obtain
national volume discounts on construction materials and favorable pricing from
subcontractors and (vi) maintaining a sophisticated management information
system that allows it to monitor homebuilding production, scheduling and
budgeting on a daily basis.
COMMITMENT TO CUSTOMER SATISFACTION. The Company is dedicated to providing
customer satisfaction through quality construction and customer service.
Divisional managers are responsible for the quality of construction and the
level of customer satisfaction in their respective divisions.
EXPERIENCED MANAGEMENT WITH DECENTRALIZED OPERATING STRUCTURE. To serve
the needs of each of its markets, the Company relies upon the expertise of its
division managers, each of whom has significant experience in the homebuilding
industry. In order to align corporate and divisional profit goals, division
managers receive bonuses based on the return on assets of their respective
divisions. The division managers benefit from Engle's corporate expertise in
sales and marketing, land acquisition and financial services and its
centralized accounting department. The Company believes that this interaction
between the divisional managers and corporate management provides enhanced
operating results.
4
<PAGE>
RECENT DEVELOPMENTS
On October 17, 1997, the Company announced the early redemption of $15.0
million principal amount of its 7% Convertible Subordinated Notes due 2003 (the
"1993 Notes"). On November 18, 1997, the Company redeemed $14.6 million
aggregate principal amount of the 1993 Notes at a price of 104.2% of the
principal amount thereof, plus accrued interest. As a result of such
redemption, 1,042,432 shares of Common Stock will be eliminated from
consideration in calculating diluted earnings per share after fiscal 1997. An
extraordinary charge of approximately $600,000 (net of income tax benefit) will
be recorded in the first quarter of fiscal 1998 for the early retirement of the
1993 Notes. Prior to the redemption, $406,000 aggregate principal amount of the
1993 Notes called for redemption were converted by the holders into 28,996
shares of Common Stock and an additional $75,000 aggregate principal amount of
the 1993 Notes were converted into 5,357 shares. After November 18, 1997 and
prior to the date of this Prospectus, an additional $80,000 principal amount of
the 1993 Notes were converted into 5,713 shares of Common Stock. The Company
intends to use a portion of the net proceeds of the Equity Offering to fund the
redemption of all of the remaining outstanding principal amount of the 1993
Notes which are not converted into Common Stock on or prior to the date of
redemption. See "Use of Proceeds" and "Capitalization."
The Company is currently in discussions with a group of banks to obtain an
unsecured revolving credit facility to be used for working capital and general
corporate purposes. If obtained, the new facility would be used to replace all
of the Company's existing lines of credit, other than its financial services
debt.
The Company has reached a non-binding agreement in principle to acquire
substantially all of the assets of a Jacksonville, Florida based homebuilder.
The Company believes that this acquisition would complement its existing
presence in Florida and further strengthen its position as a leading Florida
homebuilder. Pursuant to the proposed acquisition, the Company would pay an
aggregate cash purchase price of approximately $7.0 million, depending on the
final valuation of the assets being acquired. The assets include approximately
100 lots, 230 lots under option and 35 homes in backlog. In addition, ancillary
to the consummation of the proposed acquisition, the Company would enter into
an option agreement whereby, at the Company's option, the Company would acquire
substantially all of the assets of a related management company on or prior to
March 31, 1999 for an aggregate cash purchase price of approximately $4.6
million. Consummation of the proposed acquisition is subject to a number of
conditions, including (i) the negotiation and execution of definitive purchase
and management agreements, (ii) the Company's satisfactory completion of its
due diligence investigation, and (iii) approval by the Company's Board of
Directors. Although the Company is in the process of negotiating definitive
documentation and conducting its due diligence investigation, there can be no
assurance that the proposed acquisition will be consummated.
The principal executive offices of the Company are located at 123 N.W.
13th Street, Suite 300, Boca Raton, Florida 33432, and its telephone number is
(561) 391-4012.
5
<PAGE>
THE EQUITY OFFERING
<TABLE>
<S> <C>
Common Stock offered ............... 2,700,000 shares
Common Stock to be outstanding
after the Equity Offering ......... 9,671,759 shares(1)
Nasdaq National Market symbol ...... ENGL
Use of proceeds ..................... The net proceeds of the Equity Offering will be
used to redeem the remaining outstanding principal
amount of the 1993 Notes which are not converted
by the holders into Common Stock on or prior to
the date of redemption, to repay outstanding
amounts under certain of the Company's lines of
credit and any remainder for general corporate
purposes. See "Use of Proceeds."
Dividend Policy ..................... 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. See
"Dividend Policy."
</TABLE>
- ----------------
(1) Excludes (i) 1,060,358 shares of Common Stock issuable upon conversion of
1993 Notes which the Company plans to call for redemption following the
consummation of the Equity Offering, and (ii) 606,500 shares of Common
Stock subject to outstanding options as of October 31, 1997, of which
options to purchase 502,000 shares were exercisable on that date. The 1993
Notes are currently callable at 104.2% of the principal amount thereof and
have a conversion price of $14.00 per share (an effective conversion
price, excluding accrued interest, of $14.59). The closing sale price of
the Common Stock as reported on The Nasdaq National Market on December 18,
1997, was $17.00. As a result, the Company anticipates that substantially
all of the 1993 Notes will be converted by the holders into Common Stock
prior to being redeemed.
CONCURRENT OFFERING
Concurrently with the Equity Offering, the Company is offering $75,000,000
aggregate principal amount of the 1998 Notes by means of a separate prospectus.
The consummation of the Equity Offering and the consummation of the Notes
Offering are not conditioned upon each other. See "Description of Certain
Indebtedness." The net proceeds of the Notes Offering will be used to repay
outstanding amounts under certain of the Company's lines of credit. See "Use of
Proceeds."
RISK FACTORS
Investment in the Common Stock involves certain risks discussed under
"Risk Factors" that should be considered by prospective investors.
6
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL AND OPERATING DATA
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------------------
1993 1994 1995
------------- ------------- -------------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Home sales .................................... $ 133,970 $ 215,716 $ 216,059
Cost of home sales ........................... 112,352 183,752 184,888
--------- --------- ---------
Homebuilding gross profit ..................... 21,618 31,964 31,171
--------- --------- ---------
Land sales .................................... 611 2,931 20,964
Cost of land sales ........................... 498 2,577 17,332
--------- --------- ---------
Land gross profit ........................... 113 354 3,632
--------- --------- ---------
Financial services income, net ............... 558 898 1,158
Other income, net .............................. 2,247 1,358 1,573
--------- --------- ---------
Total gross profit ........................... 24,536 34,574 37,534
--------- --------- ---------
Selling, marketing, general and
administrative expenses ..................... 12,741 19,993 24,466
Depreciation and amortization .................. 1,677 2,402 3,532
--------- --------- ---------
Income before income taxes .................. 10,118 12,179 9,536
Provision for income taxes ..................... 3,820 4,604 3,624
--------- --------- ---------
Net income(2) ................................. $ 6,298 $ 7,575 $ 5,912
========= ========= =========
Net income per share--fully diluted(2) ......... $ 0.81 $ 0.96 $ 0.74
Weighted average number of shares outstanding--
fully diluted ................................. 8,131 8,817 9,132
OTHER FINANCIAL DATA:
EBITDA(4) .................................... $ 15,924 $ 22,293 $ 19,972
Interest incurred .............................. 4,068 7,183 13,750
Ratio of EBITDA to interest incurred ......... 3.91x 3.10x 1.45x
Ratio of homebuilding debt to EBITDA ......... 4.01x 4.46x 7.38x
Ratio of earnings to fixed charges(5) ......... 3.14x 2.56x 1.18x
SUMMARY OPERATING DATA:
Units:
Deliveries .................................... 797 1,225 1,137
Backlog at end of period ..................... 687 560 804
Aggregate sales value of backlog ............... $ 119,491 $ 108,200 $ 161,900
Average sales price of homes in backlog ...... 174 193 201
<CAPTION>
PRO FORMA
AS ADJUSTED
1996 1997 1997(1)
------------- ------------- --------------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Home sales .................................... $ 303,972 $ 404,407 $404,407
Cost of home sales ........................... 260,651 345,295 343,056
--------- --------- --------
Homebuilding gross profit ..................... 43,321 59,112 61,351
--------- --------- --------
Land sales .................................... 17,571 7,685 7,685
Cost of land sales ........................... 15,589 7,095 7,095
--------- --------- --------
Land gross profit ........................... 1,982 590 590
--------- --------- --------
Financial services income, net ............... 1,796 2,678 3,858
Other income, net .............................. 1,485 1,513 1,513
--------- --------- --------
Total gross profit ........................... 48,584 63,893 67,312
--------- --------- --------
Selling, marketing, general and
administrative expenses ..................... 31,906 39,620 39,620
Depreciation and amortization .................. 2,977 2,374 2,466
--------- --------- --------
Income before income taxes .................. 13,701 21,899 25,226
Provision for income taxes ..................... 5,206 8,431 9,712
--------- --------- --------
Net income(2) ................................. $ 8,495 $ 13,468 $15,514
========= ========= ========
Net income per share--fully diluted(2) ......... $ 1.03 $ 1.58 $ 1.42(3)
Weighted average number of shares outstanding--
fully diluted ................................. 9,251 9,246 10,904
OTHER FINANCIAL DATA:
EBITDA(4) .................................... $ 28,221 $ 40,339 $41,519
Interest incurred .............................. 15,272 15,623 13,029
Ratio of EBITDA to interest incurred ......... 1.85x 2.58x 3.19x
Ratio of homebuilding debt to EBITDA ......... 5.39x 3.77x 2.77x
Ratio of earnings to fixed charges(5) ......... 1.63x 2.40x 2.93x
SUMMARY OPERATING DATA:
Units:
Deliveries .................................... 1,567 1,992 1,992
Backlog at end of period ..................... 1,016 869 869
Aggregate sales value of backlog ............... $ 210,300 $ 173,989 $173,989
Average sales price of homes in backlog ...... 207 200 200
</TABLE>
<TABLE>
<CAPTION>
AS OF OCTOBER 31, 1997
--------------------------
PRO FORMA
ACTUAL AS ADJUSTED(6)
---------- ---------------
<S> <C> <C>
BALANCE SHEET DATA
Cash ............................................. $ 16,546 $ 20,247
Homebuilding inventories ........................ 230,108 230,108
Total assets .................................... 288,412 293,937(7)
Homebuilding bank credit facilities ............ 82,064 --
% Senior Notes due 2008 ........................ -- 75,000
11-3/4% Senior Notes due 2000 .................... 40,000 40,000
7% Convertible Subordinated Notes due 2003 ...... 30,000 --
Total homebuilding debt ........................ 152,064 115,000
Total debt(8) ................................. 166,593 115,000
Shareholders' equity ........................... 93,180 150,533
</TABLE>
7
<PAGE>
- ---------------
(1) Pro forma for (i) the redemption on November 18, 1997, of $14,594,000
aggregate principal amount of the 1993 Notes at a price of 104.2% of the
principal amount thereof, plus accrued interest, and the conversion of
$561,000 aggregate principal amount of the 1993 Notes into 40,066 shares
of Common Stock, (ii) the issuance and sale of the Common Stock in the
Equity Offering at an assumed price of $17.00, (iii) the sale of the 1998
Notes in the Notes Offering with an assumed interest rate of 9.5%, and
(iv) the application of the estimated net proceeds from the Offerings as
described under "Use of Proceeds" assuming that all of the 1993 Notes are
converted by the holders into Common Stock on or prior to the date of
redemption, as if each of these transactions had occurred on November 1,
1996. See "Capitalization." The 1993 Notes are currently callable at
104.2% of the principal amount thereof and have a conversion price of
$14.00 per share (an effective conversion price, excluding accrued
interest, of $14.59). The closing sale price of the Common Stock as
reported on the Nasdaq National Market on December 18, 1997, was $17.00.
As a result, the Company anticipates that substantially all of the 1993
Notes will be converted by the holders into Common Stock prior to being
redeemed.
(2) 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 which has been
excluded from the calculation of net income. Additionally, pro forma as
adjusted net income and income per share exclude the extraordinary charge
of $596,000, net of income taxes, or $.05 per share on a fully diluted
basis, resulting from the elimination of deferred loan costs and the
premium paid in connection with the redemption of $14,594,000 aggregate
principal amount of the 1993 Notes on November 18, 1997.
(3) Assuming all of the remaining outstanding 1993 Notes are redeemed, pro
forma as adjusted fully diluted net income per share for fiscal 1997 would
have been $1.52 (excluding the extraordinary charge of $1,203,000, net of
income taxes, or $.12 per share, resulting from the elimination of
deferred loan costs and the premium paid in connection with the redemption
of $14,594,000 aggregate principal amount of the 1993 Notes on November
18, 1997 and the redemption of the remaining outstanding $14,845,000
aggregate principal amount of the 1993 Notes).
(4) EBITDA is defined as operating income before amortization of capitalized
interest expense included in the cost of goods sold, depreciation and
other amortization. EBITDA is a widely accepted financial indicator of a
company's ability to service debt. However, EBITDA should not be construed
as an alternative to operating income or to cash flows from operating
activities (as determined in accordance with generally accepted accounting
principles) and should not be construed as an indication of the Company's
operating performance or as a measure of liquidity.
(5) Computed by dividing earnings by fixed charges. "Earnings" consist of
income from operations before income taxes, plus amortization of
previously capitalized interest included in costs of sales and fixed
charges, exclusive of capitalized interest. "Fixed charges" consist of
interest costs incurred, including capitalized interest costs plus
amortization of loan costs and that portion of operating lease rental
expense deemed to be representative of interest.
(6) Pro forma for (i) the redemption on November 18, 1997, of $14,594,000
aggregate principal amount of the 1993 Notes at a price of 104.2% of the
principal amount thereof, plus accrued interest, and the conversion of
$561,000 aggregate principal amount of the 1993 Notes into 40,066 shares
of Common Stock, (ii) the issuance and sale of the Common Stock in the
Equity Offering at an assumed price of $17.00, (iii) the sale of the 1998
Notes in the Notes Offering with an assumed interest rate of 9.5%, and
(iv) the application of the estimated net proceeds from the Offerings as
described under "Use of Proceeds" assuming that all of the 1993 Notes are
converted by the holders into Common Stock on or prior to the date of
redemption. See "Capitalization." The 1993 Notes are currently callable at
104.2% of the principal amount thereof and have a conversion price of
$14.00 per share (an effective conversion price, excluding accrued
interest, of $14.59). The closing sale price of the Common Stock as
reported on the Nasdaq National Market on December 18, 1997, was $17.00.
As a result, the Company anticipates that substantially all of the 1993
Notes will be converted by the holders into Common Stock prior to being
redeemed.
(7) Reflects the estimated professional fees and expenses associated with the
Notes Offering and the write-off of the unamortized deferred financing
costs related to the 1993 Notes. A breakdown of the estimated costs and
write-off follows (in thousands):
<TABLE>
<S> <C>
Financing fees and debt issuance costs ................................. $1,875
Legal and professional fees and other costs .............................. 400
Write-off of unamortized deferred financing costs (net of income taxes) (451)
------
$1,824
======
</TABLE>
(8) Total debt includes financial services debt.
8
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS, PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER
THE FACTORS SET FORTH BELOW BEFORE PURCHASING ANY SHARES OF COMMON STOCK
OFFERED HEREBY.
GENERAL REAL ESTATE, ECONOMIC, INTEREST RATES AND OTHER CONDITIONS
The homebuilding industry is cyclical and affected by changes in general
and local economic and other conditions including employment levels,
demographic considerations, availability of financing, interest rate levels,
consumer confidence and housing demand. In addition, homebuilders are subject
to various risks, many of them outside the control of the homebuilder including
competitive overbuilding, availability and cost of building lots, materials and
labor, adverse weather conditions which can cause delays in construction
schedules, cost overruns, changes in government regulations, and increases in
real estate taxes and other local government fees. The Company cannot predict
whether interest rates will be at levels attractive to prospective home buyers.
If interest rates increase, and in particular mortgage interest rates, the
Company's business could be adversely affected. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and
"Business--Competition and Market Factors."
LEVERAGE; POTENTIAL ADVERSE EFFECT OF INDEBTEDNESS ON FUTURE OPERATIONS
As of October 31, 1997, after giving effect to (i) the redemption on
November 18, 1997, of $14,594,000 aggregate principal amount of the 1993 Notes
and the conversion of $561,000 aggregate principal amount of the 1993 Notes,
(ii) the Offerings and (iii) the application of the estimated net proceeds from
the Offerings as described under "Use of Proceeds" assuming that all of the
1993 Notes are converted into Common Stock on or prior to the date of
redemption, the outstanding indebtedness of the Company would have been
$115,000,000 and the Company would have had stockholders' equity of
approximately $150,533,000. In addition, subject to restrictions in the
indenture (the "1994 Indenture") governing the Company's 113/4% Senior Notes
due 2000 (the "1994 Notes") and the indenture (the "1998 Indenture") governing
the 1998 Notes, the Company may incur additional indebtedness in the future,
some of which may be secured. The Company's ability to make required debt
service payments in the future will be dependent on the Company's operating
results, which are subject to financial, economic and other factors affecting
the Company that are beyond its control. No assurance can be given that the
Company will be able to make required debt service payments. See "Use of
Proceeds" and "Capitalization."
The degree to which the Company is leveraged could have an adverse impact
on the Company, including (i) increased vulnerability to adverse general
economic and market conditions, (ii) impaired ability to expand and to respond
to increased competition, (iii) impaired ability to obtain additional financing
for future working capital, capital expenditures, general corporate or other
purposes and (iv) requiring that a significant portion of cash provided by
operating activities be used for the payment of debt obligations, thereby
reducing funds available for operations and future business opportunities. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and "Description of Certain
Indebtedness."
GEOGRAPHIC CONCENTRATION; RISKS OF EXPANSION
The Company's operations are situated in South Florida; Central Florida;
the west coast of Florida; Denver, Colorado; Dallas, Texas; Virginia and
Maryland; Raleigh, North Carolina; Phoenix, Arizona; and Atlanta, Georgia.
Adverse general economic conditions in these markets could have a material
adverse impact on the operations of the Company. For fiscal 1997, approximately
68% of the Company's housing revenue and a significant portion of the Company's
operating income were derived from operations in its Florida markets. The
Company's performance could be significantly affected by changes in these
markets. The Company expanded into two new geographic markets, Phoenix,
Arizona,
9
<PAGE>
and Atlanta, Georgia, in fiscal 1997. New markets may prove to be less stable
and may involve delays, problems and expenses not typically found by the
Company in the existing markets with which it is familiar. See "Business."
LAND DEVELOPMENT ACTIVITIES
The Company develops land for some of its subdivisions, which occasionally
may consist of large tracts of land suited for master-planned communities.
Acquiring land and committing the financial and managerial resources to develop
such land involve significant risks. Before a subdivision generates any
revenue, material expenditures are required for items such as acquiring land
and constructing subdivision infrastructure (such as roads and utilities).
SIGNIFICANT VOTING CONTROL BY PRINCIPAL SHAREHOLDERS
Following the closing of the Equity Offering and assuming that none of the
outstanding 1993 Notes have been converted, Alec Engelstein, the Company's
Chairman, President and Chief Executive Officer, and Harry Engelstein, the
Company's Executive Vice President and Chief Construction Officer, will
together beneficially own a total of approximately 36.9% of the outstanding
Common Stock (35.4% if the Underwriters' over-allotment option is exercised in
full) and together will continue to have significant voting power with respect
to the election of the Board of Directors of the Company, and in general, the
determination of the outcome of various matters submitted to the shareholders
of the Company for approval.
DEPENDENCE ON KEY EXECUTIVES
The Company is managed by a relatively small number of executive officers.
The loss of the services of one or more of these executive officers,
particularly Alec Engelstein, the Company's Chairman, President and Chief
Executive Officer, could have an adverse effect on the Company's business and
operations. See "Management."
COMPETITION
The homebuilding industry is highly competitive and fragmented. The
Company competes in each of its markets with numerous national, regional and
local builders, including some builders with greater financial resources.
Builders of new homes compete not only for home buyers, but also for desirable
properties, raw materials and skilled subcontractors. The Company also competes
for residential sales with individual sales of existing homes and available
rental housing. See "Business--Competition and Market Factors."
GOVERNMENTAL REGULATION
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, declare
moratoriums on the issuance of building permits and impose other restrictions
in areas where sewage treatment facilities and other public facilities do not
reach minimum standards. 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. Prior to consummating the purchase of land, the Company engages
independent environmental
10
<PAGE>
engineers to evaluate such land for the presence of hazardous or toxic
materials, wastes or substances. Such governmental regulation may result in
delays, cause the Company to incur substantial compliance and other costs and
prohibit or severely restrict development in certain regions or areas, which
could have an adverse effect on the Company's business and results of
operations. See "Business-- Government Regulation and Environmental Matters."
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.
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of Common Stock in the public market
following the Equity Offering could adversely affect the market price for the
Common Stock. The shares of Common Stock offered hereby will be freely tradable
by persons who are not affiliates of the Company without restriction or further
registration under the Securities Act of 1933, as amended (the "Securities
Act"). Substantially all of the other outstanding shares of Common Stock, other
than shares held by officers, directors and other affiliates of the Company,
are freely tradable. After the Equity Offering and assuming that none of the
outstanding 1993 Notes have been converted, approximately 9,671,759 shares of
Common Stock will be outstanding, and directors and officers of the Company
will beneficially own approximately 3,880,066 outstanding shares in the
aggregate. Pursuant to Rule 144 under the Securities Act ("Rule 144"), shares
of Common Stock held by affiliates of the Company are subject to limitations on
the volume that may be sold other than sales pursuant to a registration
statement under the Securities Act or another applicable exemption from
registration thereunder. The Company has also granted certain registration
rights to Alec Engelstein and Harry Engelstein pursuant to a registration
rights agreement entered into in October 1991. The Company, its directors and
executive officers, and certain shareholders have agreed not to offer, sell,
transfer or otherwise dispose of any shares of Common Stock or any securities
convertible into or exchangeable or exercisable for shares of Common Stock
without the prior written consent of Smith Barney Inc. for a period of 120 days
after the date of this Prospectus, except for grants of awards under the
Company's existing employee benefit plans or issuances of Common Stock upon the
exercise of outstanding stock options or conversions of the 1993 Notes. See
"Shares Eligible for Future Sale."
11
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of Common
Stock in the Equity Offering are estimated to be approximately $42.8 million
($49.3 million if the Underwriters' overallotment option is exercised in full),
assuming an offering price of $17.00 per share and after deducting the
estimated underwriting discounts and offering expenses payable by the Company.
The Company intends to use up to approximately $15.5 million of the net
proceeds of the Equity Offering to fund the redemption of all of the remaining
outstanding principal amount of the 1993 Notes which are not converted into
Common Stock on or prior to the date of redemption at a price of 104.2% of the
principal amount thereof and to use the remaining net proceeds to repay
outstanding amounts under certain of the Company's homebuilding lines of credit
(the "Homebuilding Lines of Credit"). To the extent that the 1993 Notes are
converted into Common Stock on or prior to the date of redemption, the Company
intends to use any remaining net proceeds, first, to repay additional
outstanding amounts under the Homebuilding Lines of Credit; second, to repay
outstanding amounts under the Company's financial services line of credit (the
"Financial Services Line of Credit"); and, any remainder, for general corporate
purposes.
Assuming the Notes Offering, which is expected to occur concurrently with
the Equity Offering, is consummated, the net proceeds to the Company from the
Notes Offering are estimated to be approximately $72.7 million after deducting
the estimated underwriting discounts and offering expenses payable by the
Company. The Company intends to use the entire net proceeds of the Notes
Offering to repay outstanding amounts under the Homebuilding Lines of Credit.
The Homebuilding Lines of Credit bear interest at rates ranging from LIBOR
plus 3.00% to prime plus .50%, bore a weighted average interest rate of 9.28%
per annum during fiscal 1997 and had approximately $104.5 million outstanding
at November 30, 1997, of which approximately $19.0 million matures in 1998,
approximately $42.2 million matures in 1999, approximately $41.9 million
matures in 2000 and approximately $1.4 million matures thereafter. The
Financial Services Line of Credit bears interest at a rate of prime minus .25%,
bore a weighted average interest rate of 8.125% per annum during fiscal 1997
and had approximately $12.0 million outstanding at November 30, 1997 which
matures in April 1998. As of November 30, 1997, after giving effect to the
Offerings and the application of the net proceeds therefrom as described above
assuming that all of the 1993 Notes are converted into Common Stock on or prior
to the date of redemption, no amounts would have been outstanding under the
Homebuilding Lines of Credit and approximately $1.0 million would have been
outstanding under the Financial Services Line of Credit and approximately
$121.0 million and $17.0 million, respectively, would have been available to
the Company for additional borrowings thereunder. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources" and Note 5 to the Company's Consolidated Financial
Statements.
12
<PAGE>
PRICE RANGE OF COMMON STOCK
The Common Stock is quoted 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.
<TABLE>
<CAPTION>
HIGH LOW
--------- -------
<S> <C> <C>
YEAR ENDED OCTOBER 31, 1996
Quarter ended January 31 .................................... $ 11.00 $ 8.25
Quarter ended April 30 .................................... 10.25 7.63
Quarter ended July 31 ....................................... 9.25 5.50
Quarter ended October 31 .................................... 8.50 6.88
YEAR ENDED OCTOBER 31, 1997
Quarter ended January 31 .................................... $ 9.00 $ 8.50
Quarter ended April 30 .................................... 10.75 8.25
Quarter ended July 31 ....................................... 11.88 9.13
Quarter ended October 31 .................................... 15.50 11.75
YEAR ENDING OCTOBER 31, 1998
Quarter ending January 31 (through December 18, 1997) ...... $ 17.38 $14.25
</TABLE>
As of November 7, 1997 there were approximately 75 shareholders of record.
The closing sale price of the Common Stock as reported on The Nasdaq National
Market on December 18, 1997, was $17.00.
DIVIDEND POLICY
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 1994 Indenture 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 generally
does not exceed the sum of (i) 50% of the Company's cumulative Consolidated Net
Income (as defined in the 1994 Indenture) since January 31, 1994 plus (ii) cash
proceeds to the Company from certain issuances of capital stock of the Company.
The 1998 Indenture will contain provisions limiting the payment of dividends
which are substantially similar to the provisions in the 1994 Indenture except
that cumulative Consolidated Net Income will be calculated from the beginning
of the fiscal quarter in which the 1998 Notes are issued.
13
<PAGE>
CAPITALIZATION
The following table sets forth (i) the actual capitalization of the
Company at October 31, 1997, (ii) the pro forma capitalization of the Company
at October 31, 1997, after giving effect to the redemption on November 18, 1997
of $14,594,000 aggregate principal amount of the 1993 Notes at a price of
104.2% of the principal amount thereof, plus accrued interest, and the
conversion of $561,000 aggregate principal amount of the 1993 Notes into 40,066
shares of Common Stock, as if such events had occurred on October 31, 1997, and
(iii) the pro forma capitalization of the Company as adjusted to reflect the
issuance and sale of the Common Stock in the Equity Offering, the sale of the
1998 Notes in the Notes Offering and the application of the estimated net
proceeds from the Offerings as described under "Use of Proceeds" assuming that
all of the 1993 Notes are converted into Common Stock on or prior to the date
of redemption. This table should be read in conjunction with the Company's
Consolidated Financial Statements and notes thereto and "Management's
Discussion and Analysis of Results of Operations and Financial Condition," each
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF OCTOBER 31, 1997
-------------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
---------- ----------- ----------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Cash ...................................................... $ 16,546 $ 16,546 $ 20,247
======== ========= ==========
Debt
Homebuilding debt
Bank credit facilities(1) ................................. $ 82,064 $ 97,271 $ --
% Senior Notes due 2008 ................................. -- -- 75,000
11-3/4% Senior Notes due 2000 ............................. 40,000 40,000 40,000
7% Convertible Subordinated Notes due 2003 ............... 30,000 14,845 --
-------- --------- ----------
Total homebuilding debt ................................. 152,064 152,116 115,000
-------- --------- ----------
Financial services debt .................................... 14,529 14,529 --
-------- --------- ----------
Total debt ............................................. 166,593 166,645 115,000(2)
-------- --------- ----------
Shareholders' equity
Common stock ($.01 par value, 25,000,000 shares authorized;
6,931,693 actual shares issued and outstanding; 6,971,759
shares issued and outstanding pro forma; 10,732,117 shares
issued and outstanding pro forma as adjusted)(3) ......... 69 70 107
Additional paid-in capital ................................. 47,852 48,405 105,763
Retained earnings(4) ....................................... 45,259 44,663 44,663
-------- --------- ----------
Total shareholders' equity .............................. 93,180 93,138 150,533(2)
-------- --------- ----------
Total capitalization ....................................... $259,773 $259,783 $ 265,533
======== ========= ==========
</TABLE>
- ----------------
(1) The Company is currently in discussions with a group of banks to obtain an
unsecured revolving credit facility to be used for working capital and
general corporate purposes. If obtained, the new facility would be used to
replace all of the Company's existing lines of credit, other than
financial services debt.
(2) If all of the remaining $14,845,000 aggregate principal amount of the 1993
Notes were redeemed with the proceeds of the Equity Offering pursuant to
the Company's call for redemption, pro forma as adjusted total debt and
total shareholders' equity as of October 31, 1997 would have been
$126,768,000 and $135,304,000, respectively. After November 18, 1997 and
prior to the date of this Prospectus, an additional $80,000 principal
amount of the 1993 Notes were converted into 5,713 shares of Common Stock.
The 1993 Notes are currently callable at 104.2% of the principal amount
thereof and have a conversion price of $14.00 per share (an effective
conversion price of $14.59). The closing price of the Common Stock on the
Nasdaq National Market on December 18, 1997 was $17.00.
(3) Excludes 606,500 shares of Common Stock subject to outstanding options as
of October 31, 1997, of which options to purchase 502,000 shares were
exercisable on that date.
(4) Pro forma amount includes an adjustment to reflect the extraordinary charge
of approximately $600,000, net of income taxes, resulting from the
elimination of deferred loan costs and the premium paid in connection with
the redemption of $14,594,000 aggregate principal amount of the 1993 Notes
on November 18, 1997.
14
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The following selected consolidated financial and operating data of the
Company were derived from the Company's consolidated financial statements as of
and for the years ended October 31, 1993 through 1997 which have been audited
by BDO Seidman, LLP, independent certified public accountants. The information
presented below should be read in conjunction with the Company's Consolidated
Financial Statements and notes thereto and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere
in this Prospectus or incorporated by reference herein.
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
---------------------------------------------------------------------
1993 1994 1995 1996 1997
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues .......................................... $ 137,386 $ 224,459 $ 244,528 $ 332,088 $ 425,295
Costs and expenses:
Cost of sales--homes .............................. 112,352 183,752 184,888 260,651 345,295
Cost of sales--land .............................. 498 2,577 17,332 15,589 7,095
Selling, marketing, general & administrative ...... 12,741 19,993 24,466 31,906 39,620
Depreciation & amortization ........................ 1,677 2,402 3,532 2,977 2,374
Financial services ................................. 0 3,556 4,774 7,264 9,012
--------- --------- --------- --------- ---------
Total costs and expenses ........................... 127,268 212,280 234,992 318,387 403,396
--------- --------- --------- --------- ---------
Income before income taxes ........................ 10,118 12,179 9,536 13,701 21,899
--------- --------- --------- --------- ---------
Net income(1) ....................................... $ 6,298 $ 7,575 $ 5,912 $ 8,495 $ 13,468
========= ========= ========= ========= =========
Net income per share
Primary .......................................... $ 0.95 $ 1.13 $ 0.85 $ 1.20 $ 1.94
Fully diluted .................................... 0.81 0.96 0.74 1.03 1.58
Weighted average number of shares outstanding
Primary .......................................... 6,650 6,674 6,989 7,108 6,951
Fully diluted .................................... 8,131 8,817 9,132 9,251 9,246
Cash dividends .................................... $ 1,064 $ 1,066 $ 1,109 $ 1,109 $ 1,109
OTHER FINANCIAL DATA:
EBITDA(2) .......................................... $ 15,924 $ 22,293 $ 19,972 $ 28,221 $ 40,339
Interest incurred ................................. 4,068 7,183 13,750 15,272 15,623
Ratio of EBITDA to interest incurred ............... 3.91x 3.10x 1.45x 1.85x 2.58x
Ratio of earnings to fixed charges(3) ............ 3.14x 2.56x 1.18x 1.63x 2.40x
SUMMARY OPERATING DATA:
Units:
Deliveries ....................................... 797 1,225 1,137 1,567 1,992
Backlog at end of period ........................ 687 560 804 1,016 869
Aggregate sales value of backlog .................. $ 119,491 $ 108,200 $ 161,900 $ 210,300 $ 173,989
Average sales price of homes in backlog ............ 174 193 201 207 200
</TABLE>
<TABLE>
<CAPTION>
AS OF OCTOBER 31,
-------------------------------------------------------------
1993 1994 1995 1996 1997
---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Cash ........................... $ 27,326 $ 13,121 $ 13,400 $ 21,700 $16,546
Homebuilding inventories ...... 88,902 138,428 198,664 220,564 230,108
Total assets .................. 143,991 188,913 251,918 284,789 288,412
Total homebuilding debt ...... 63,794 99,428 147,454 152,117 152,064
Total debt(4) .................. 66,575 102,341 153,927 165,123 166,593
Shareholders' equity ......... 58,102 66,303 74,106 81,492 93,180
</TABLE>
15
<PAGE>
- ----------------
(1) 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 which has been
excluded from the calculation of net income.
(2) EBITDA is defined as operating income before amortization of capitalized
interest expense included in the cost of goods sold, depreciation and
other amortization. EBITDA is a widely accepted financial indicator of a
company's ability to service debt. However, EBITDA should not be construed
as an alternative to operating income or to cash flows from operating
activities (as determined in accordance with generally accepted accounting
principles) and should not be construed as an indication of the Company's
operating performance or as a measure of liquidity.
(3) Computed by dividing earnings by fixed charges. "Earnings" consist of
income from operations before income taxes, plus amortization of
previously capitalized interest included in costs of sales and fixed
charges, exclusive of capitalized interest costs. "Fixed Charges" consist
of interest costs incurred, including capitalized interest costs plus
amortization of loan costs and that portion of operating lease rental
expense deemed to be representative of interest.
(4) Total debt includes financial services debt.
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
IS BASED UPON AND SHOULD BE READ IN CONJUNCTION WITH THE COMPANY'S CONSOLIDATED
FINANCIAL STATEMENTS AND THE RELATED NOTES THERETO INCLUDED ELSEWHERE IN THIS
PROSPECTUS OR INCORPORATED BY REFERENCE HEREIN.
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>
<CAPTION>
PRCENTAGE OF TOTAL REVENUES
YEAR ENDED OCTOBER 31,
------------------------------------
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Sales of homes ................................................ 88.4% 91.5% 95.1%
Sales of land ................................................ 8.6 5.3 1.8
Rent and other ................................................ 0.6 0.5 0.4
Financial services income .................................... 2.4 2.7 2.7
----- ----- -----
Total ...................................................... 100.0% 100.0% 100.0%
===== ===== =====
Cost of sales--homes .......................................... 75.6 78.5 81.2
Cost of sales--land .......................................... 7.0 4.7 1.7
Selling, marketing, general and administrative expenses ...... 10.0 9.6 9.3
Income before income taxes .................................... 3.9 4.1 5.1
Net income ................................................... 2.4 2.6 3.2
</TABLE>
The following tables set forth information relating to homes closed, new
sales contracts and sales backlog by operating division for fiscal years 1995,
1996 and 1997.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------
1995 1996 1997
-------------------- -------------------- -------------------
HOMES CLOSED CLOSED PERCENT CLOSED PERCENT CLOSED PERCENT
- -------------------------- -------- --------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
South Florida ............ 513 45.1% 624 39.8% 847 42.4%
Central Florida ......... 244 21.5 343 21.9 386 19.4
West Coast Florida ...... 56 4.9 66 4.2 84 4.2
Dallas, TX ............... 57 5.0 107 6.8 173 8.7
Denver, CO ............... 243 21.4 269 17.2 334 16.8
Virginia/Maryland ...... 18 1.6 102 6.5 103 5.2
Raleigh, NC ............ 6 0.5 56 3.6 64 3.2
Phoenix, AZ ............ -- -- -- -- 1 0.1
----- ---- ----- ---- ----- ----
Total .................. 1,137 100% 1,567 100% 1,992 100%
===== ==== ===== ==== ===== ====
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------
1995 1996 1997
-------------------- -------------------- -------------------
NEW SALES CONTRACTS SOLD DOLLARS SOLD DOLLARS SOLD DOLLARS
- -------------------------- ------- ---------- ------- ---------- ------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
South Florida ............ 698 $139,000 643 $141,200 628 $135,100
Central Florida ......... 268 48,700 378 70,500 365 69,200
West Coast Florida ...... 60 11,700 81 12,200 153 25,400
Dallas, TX ............... 62 12,500 179 30,200 148 23,800
Denver, CO ............... 217 40,500 318 59,600 346 67,800
Virginia/Maryland ...... 41 10,400 111 24,700 110 27,600
Raleigh, NC ............ 35 7,000 69 14,000 37 7,700
Phoenix, AZ ............ - - - - 58 11,500
----- -------- ----- -------- ----- --------
Total .................. 1,381 $269,800 1,779 $352,400 1,845 $368,100
===== ======== ===== ======== ===== ========
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------
1995 1996 1997
-------------------- -------------------- -------------------
SALES BACKLOG HOMES DOLLARS HOMES DOLLARS HOMES DOLLARS
- -------------------------- ------- ---------- ------- ---------- ------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
South Florida ............ 540 $110,800 559 $126,500 340 $ 72,600
Central Florida ......... 130 23,500 165 31,000 144 28,400
West Coast Florida ...... 25 4,900 39 5,800 108 18,000
Dallas, TX ............... 18 3,600 90 14,500 63 9,900
Denver, CO ............... 37 7,300 86 15,700 100 19,400
Virginia/Maryland ...... 25 6,100 34 8,000 41 10,900
Raleigh, NC ............ 29 5,700 43 8,800 16 3,400
Phoenix, AZ ............ 0 0 0 0 57 11,400
--- -------- ----- -------- --- --------
Total .................. 804 $161,900 1,016 $210,300 869 $174,000
=== ======== ===== ======== === ========
</TABLE>
BACKLOG. Sales of the Company's homes are generally made pursuant to a
standard contract which requires a down payment. 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 four to six months.
As of October 31, 1997, the Company's backlog was $174.0 million (869
contracts) as compared to $210.3 million (1,016 contracts) as of October 31,
1996. Excluding South Florida, the Company's backlog increased to $101.4
million (529 contracts) as of October 31, 1997 from $83.8 million (457
contracts) as of October 31, 1996, an increase of 21% (or 16% based on
contracts). The Company believes that as a result of its focus on improving
cycle times, it expects to deliver a higher percentage of backlog in subsequent
quarters.
The Company believes that the decline in South Florida backlog can be
attributed to two primary factors: (i) timing differences between recently
completed subdivisions and the opening of new subdivisions, and (ii) the
success of its pre-sale contract activity at Pembroke Falls prior to October
31, 1996. As is common practice for large projects, the Company began pre-sale
activity at Pembroke Falls prior to October 31, 1996 so that it could begin
home construction on that project immediately upon completion of site
development.
RESULTS OF OPERATIONS
YEAR ENDED OCTOBER 31, 1997 COMPARED TO YEAR ENDED OCTOBER 31, 1996.
The Company's revenues from home sales during fiscal 1997 increased $100.4
million (or 33.0%) compared to fiscal 1996. The number of homes delivered by
the Company increased 27.1% (to 1,992 from 1,567) and the average selling price
of homes delivered increased 4.6% (to $203,000 from $194,000). The increase of
revenues and homes delivered is primarily attributable to a higher percentage
of backlog being delivered during fiscal 1997. 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 $9.9
million (or 56.3%) during fiscal 1997 as compared to fiscal 1996 primarily as a
result of a decrease in commercial and multi-family land sales at Pembroke
Falls.
18
<PAGE>
Cost of home sales increased approximately $84.6 million (or 32.5%)
compared to fiscal 1996, primarily due to the related increase in home sales
revenues. Cost of home sales as a percentage of home sales decreased to 85.3%
from 85.7% as a result of the product mix of homes delivered.
Cost of land sales decreased approximately $8.5 million (or 54.5%) during
fiscal 1997 as compared to fiscal 1996, primarily as a result of the decrease
in land sales. Costs of land sales as a percentage of land sales increased to
92.3% from 88.7%, which was primarily attributable to lower margin single
family lots available for sale. Margins from land sales at Pembroke Falls in
fiscal 1997 were comparable to fiscal 1996.
The Company's selling, marketing, general and administrative ("S,G&A")
expenses increased approximately $7.7 million (or 24.2%) during fiscal 1997 as
compared to fiscal 1996, primarily as a result of variable 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 9.6% in fiscal
1996 to 9.3% in fiscal 1997, primarily due to certain economies of scale.
Fiscal 1997 income before income taxes increased $8.2 million (or 59.8%)
as compared to fiscal 1996, primarily due to the increase in home sales
revenues.
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 $75.7 million (or 40.9%)
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 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 S,G&A expenses increased approximately $7.4 million (or
30.4%) 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 10.0% in fiscal 1995 to 9.6% in fiscal 1996, primarily due to
economies of scale.
19
<PAGE>
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.
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 113/4% 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.
The Company has two primary credit agreements (the "Agreements") with
various lending institutions which at November 13, 1997, provided for a
combined $130.0 million collateralized revolving line of credit. Borrowings
under these Agreements bear interest at rates ranging from LIBOR plus 2.50% to
prime plus .25% 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. The Company is currently in discussions
with a group of banks to obtain an unsecured revolving credit facility to be
used for working capital and general corporate purposes. If obtained, the new
facility would be used to replace all of the Company's existing lines of
credit, other than financial services debt.
At October 31, 1997, the Company had outstanding homebuilding borrowings
of approximately $152.1 million, and aggregate available funds of approximately
$18.9 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 during fiscal
1998, with the exception of major land acquisitions, if any. For a further
description of the Company's borrowings, see Note 5 of the Company's
Consolidated Financial Statements.
On October 17, 1997, the Company announced the early redemption of $15.0
million principal amount of the 1993 Notes. On November 18, 1997, the Company
redeemed approximately $14.6 million principal amount of such 1993 Notes and
$406,000 principal amount thereof were converted into 28,996 shares of Common
Stock. In order to fund this redemption, the Company established a $15.0
million short-term unsecured credit facility. In addition, $75,000 principal
amount of the 1993 Notes not previously called for redemption were converted
into 5,357 shares on November 18, 1997. After November 18, 1997 and prior to
the date of this Prospectus, an additional $80,000 principal amount of the 1993
Notes were converted into 5,713 shares of Common Stock. Following the
consummation of the Equity Offering, the Company intends to call for redemption
the remaining outstanding principal amount of the 1993 Notes to be funded with
a portion of the proceeds of the Equity Offering.
In addition, Preferred Home Mortgage Company ("PHMC") has a warehouse line
of credit of $18.0 million which is guaranteed by the Company. At October 31,
1997 the outstanding balance was $14.5 million to service origination of
mortgage loans. The Company expects to increase the warehouse line of credit to
$25.0 million to accommodate the potential growth of its mortgage banking
operations in fiscal year 1998.
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
20
<PAGE>
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. Scheduled and estimated maturities of the Company's
borrowings aggregate approximately $4.4 million during fiscal 1998 and
approximately $42.0 million in fiscal 1999. 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 or selling of equity or debt.
See Note 5 to the Company's Consolidated Financial Statements.
CASH FLOWS. The Company experienced negative cash flows of $2.7 million
during fiscal 1997. This is primarily the result of increasing land inventory
to meet expected sales demand and site development costs associated with
Pembroke Falls. Cash flows required by operating activities decreased $1.1
million in fiscal 1997 as compared to fiscal 1996 primarily due to the
increased pace of home deliveries. Cash flows from investing activities
decreased by $7.5 million in 1997 primarily due to a reduction in the sales of
commercial property. Cash flows from financing activities decreased by $5.4
million primarily due to a decrease in borrowings.
Management does not anticipate that PHMC's expansion of its operations
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 1997 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 home buyer to secure adequate financing. Such results of higher interest
rates may result in adversely affecting the Company's revenues, gross margins
and net income.
NEW FASB PRONOUNCEMENTS
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings
per Share" ("SFAS No. 128"), issued in February 1997, replaces the current
methodology for calculating and presenting earnings per share. Under SFAS No.
128, primary earnings per share will be replaced with a presentation of basic
earnings per share and fully diluted earnings per share will be replaced with
diluted earnings per share. Basic earnings per share excludes dilution and is
computed by dividing income available to common shares outstanding for the
period by the weighted average of common
21
<PAGE>
shares outstanding. Diluted earnings per share is computed similarly to fully
diluted earnings per share in accordance with the Accounting Principles Board
("APB") Opinion No. 15. The Statement will be effective for financial
statements issued by the Company after December 15, 1997. The impact of SFAS
No. 128 is not expected to be material.
SFAS No. 130, "Reporting Comprehensive Income" ("SFAS No. 130"),
establishes standards for reporting and display of comprehensive income, its
components and accumulated balances. Comprehensive income is defined to include
all changes in equity except those resulting from investments by owners and
distributions to owners. Among other disclosures, SFAS No. 130 requires that
all items that are required to be recognized under current accounting standards
as components of comprehensive income be reported in a financial statement that
is displayed with the same prominence as other financial statements.
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information" ("SFAS No. 131"), which supersedes SFAS No. 14, "Financial
Reporting for Segments of a Business Enterprise," establishes standards for the
way that public enterprises report information about operating segments in
annual financial statements and requires reporting of selected information
about operating segments in interim financial statements issued to the public.
It also establishes standards for disclosures regarding products and services,
geographic areas and major customers. SFAS No. 131 defines operating segments
as components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision maker in
deciding how to allocate the resources and in assessing performance.
Both SFAS No. 130 and No. 131, issued in June 1997, are effective for
financial statements for periods beginning December 15, 1997 and require
comparative information for earlier years to be restated. Due to the recent
issuance of these standards, management has been unable to fully evaluate the
impact, if any, they may have on future financial statement disclosures.
22
<PAGE>
BUSINESS
GENERAL
Engle Homes, Inc. designs, constructs, markets and sells detached
single-family residences, townhomes, patio homes and condominiums to entry
level and move-up buyers, retirees and second-home, seasonal buyers. Engle
operates in nine geographic markets: Broward County, Palm Beach County and
Martin County in South Florida; Orlando in Central Florida; Tampa, Sarasota,
Naples and Fort Myers on the west coast of Florida; Denver, Colorado; Dallas,
Texas; Virginia and Maryland; Raleigh, North Carolina; Phoenix, Arizona; and
Atlanta, Georgia. The Company offers a variety of home styles at prices ranging
from approximately $80,000 to over $400,000 with an average sales price in
fiscal 1997 of approximately $203,000. In addition, the Company operates a
mortgage company which provides mortgages primarily to its home buyers in all
of its geographic markets and a title company which provides services to its
home buyers and third parties in Florida and Denver, Colorado.
Engle is a leading Florida homebuilder. The Company believes that it is
the number two and number four builder of single-family homes in South Florida
and Central Florida, respectively, based on revenues from unit closings for the
twelve months ended June 30, 1997. Florida is the number one homebuilding state
in the United States in terms of total housing starts. In addition, Florida is
currently the fourth largest state based upon total population and has
consistently ranked among the top four states in population growth over the
past seven decades.
Since 1993, Engle has expanded into eight of the top 20 homebuilding
markets in the nation through both start-up operations and the acquisition of a
homebuilder in Denver, Colorado. In fiscal 1997, approximately 32% of the
Company's revenues from home sales were generated outside of the Florida
markets as compared to none in fiscal 1993. Most recently, in fiscal 1997 Engle
entered both the Phoenix, Arizona and Atlanta, Georgia markets through start-up
operations.
Over the past five years, the Company's total revenues have grown from
$137.4 million in fiscal 1993 to $425.3 million in fiscal 1997, with annual net
income growing from $6.3 million to $13.5 million over the same period,
representing compound annual growth rates of 33% and 21%, respectively. The
Company's fiscal 1997 total revenues of $425.3 million and net income of $13.5
million were the highest in the Company's history. The number of homes
delivered increased from 797 in fiscal 1993 to 1,992 in fiscal 1997. At the end
of fiscal 1997, Engle was marketing homes in 68 communities.
BUSINESS STRATEGY
Engle believes that its success has been due to its market-oriented
approach which it applies to each of the following: (i) identifying new
markets; (ii) acquiring land; and (iii) diversifying its product offerings and
price ranges to appeal to most segments of the home buying public. Engle
believes that this strategy enables it to respond more rapidly to changing
market conditions.
EXPAND IN EXISTING AND NEW MARKETS. The Company has successfully expanded
its operations through both start-up operations in new and existing markets and
the acquisition of a homebuilder in Denver, Colorado. Within its existing
markets, the Company believes that it is able to gain greater market share by
increasing the number of residential projects, thereby leveraging its existing
management structure and enhancing profitability through economies of scale. As
part of its strategy to further diversify geographically, the Company
continually seeks and evaluates market expansion opportunities, including
potential acquisitions of homebuilding companies. The Company seeks to expand
into geographic markets with significant single-family home permit activity,
substantial job growth, a diversified economy and an availability of strong
management with local market expertise. Since its initial public offering in
January 1992, the Company has expanded into eight new geographic markets.
OFFER A BROAD SELECTION OF PRODUCTS. The Company designs its homes to
appeal to a wide variety of home buyers, including entry level and move-up
buyers, retirees and second-home, seasonal buyers.
23
<PAGE>
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. Engle's product offerings include semi-custom estate homes,
detached single-family residences, townhomes, semi-detached patio-homes/
duplexes and condominiums. Management believes that the Company's long-standing
policy of product diversification enables it to respond more rapidly to
changing market conditions.
SELECTIVELY ACQUIRE LAND. The Company maintains a land acquisition policy
designed to enhance profitability and return on capital while minimizing the
risks associated with investments in land. Engle seeks to identify and acquire
superior locations in each market and offer a number of communities with
diverse products and sales prices. The Company prefers to acquire improved
residential lots ready for construction by entering into option contracts,
whenever possible, or through outright purchases. The Company also acquires
tracts of land that require site improvements prior to the start of home
construction. Occasionally, Engle purchases larger parcels of undeveloped land
suited for master-planned communities, primarily in South Florida. When
acquiring larger parcels, the Company typically contracts to sell portions of
improved or unimproved land to other builders as a source of additional revenue
thereby reducing the Company's investment. In addition, when economically
advantageous to the Company, Engle enters into partnership or joint venture
agreements with other major homebuilders to purchase and develop well located
parcels of land. The Company generally purchases land only after required
zoning entitlements have been obtained.
MAINTAIN STRINGENT COST CONTROLS. The Company believes that maintaining
stringent cost controls is a key factor in achieving profitability. The Company
seeks to reduce its costs and risks by (i) obtaining required zoning
entitlements prior to purchasing land, (ii) using subcontractors to perform
home construction and site improvement work on a fixed price basis, (iii)
minimizing inventory of unsold homes, (iv) improving construction cycle time
for new homes, (v) using its position as a leading homebuilder to obtain
national volume discounts on construction materials and favorable pricing from
subcontractors and (vi) maintaining a sophisticated management information
system that allows it to monitor homebuilding production, scheduling and
budgeting on a daily basis.
COMMITMENT TO CUSTOMER SATISFACTION. The Company is dedicated to providing
customer satisfaction through quality construction and customer service.
Divisional managers are responsible for the quality of construction and the
level of customer satisfaction in their respective divisions.
EXPERIENCED MANAGEMENT WITH DECENTRALIZED OPERATING STRUCTURE. To serve
the needs of each of its markets, the Company relies upon the expertise of its
division managers, each of whom has significant experience in the homebuilding
industry. In order to align corporate and divisional profit goals, division
managers receive bonuses based on the return on assets of their respective
divisions. The division managers benefit from Engle's corporate expertise in
sales and marketing, land acquisition, financial services and its centralized
accounting department. The Company believes that this interaction between the
divisional managers and corporate management provides enhanced operating
results.
LAND ACQUISITION AND DEVELOPMENT
The Company prefers to acquire improved residential lots ready for
construction by entering into option contracts, whenever possible, or through
outright purchases. The Company also acquires tracts of land that require site
improvements prior to the start of home construction. Occasionally, the Company
purchases larger tracts of land with the intention of reselling portions of the
tracts to other builders as a source of additional revenue. Specifically, 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.
24
<PAGE>
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 approximately 1,500
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 2,000 single-family housing units and has sold most of the
approximately 222 acres of land zoned for commercial and multi-family use.
Through October 31, 1997, approximately $45.4 million in land sales contracts
had been written, of which $34.5 million closed through fiscal 1997. Of the
remaining $10.9 million in contracts, $8.3 million are binding contracts, and
$2.6 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
South Florida division 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.
25
<PAGE>
At October 31, 1997, the Company was marketing 14 subdivisions in South
Florida; 12 in Central Florida; 10 on the west coast of Florida; 9 in Denver,
Colorado; 8 in Dallas, Texas; 8 in Virginia and Maryland; 3 in Raleigh, North
Carolina; and 4 in Phoenix, Arizona. As of October 31, 1997, the Company had
not yet begun to market any subdivisions in Atlanta, Georgia. The Company's
residential real estate inventory at October 31, 1997 was as follows:
<TABLE>
<CAPTION>
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) ............ 2,544 (4) 182 56 9 158 2,062 77
Central Florida(5) ......... 1,017 61 41 11 83 637 184
West coast Florida(6) ...... 1,706 (7) 39 15 7 69 1,179 397
Denver, CO .................. 999 54 50 1 46 405 443
Dallas, TX .................. 816 25 24 4 38 197 528
Virginia and Maryland ...... 291 26 12 7 15 129 102
Raleigh, NC ............... 270 12 9 1 4 244 --
Phoenix, AZ ............... 225 18 4 -- 39 67 97
----- --- --- -- --- ----- -----
Total ..................... 7,868 417 211 40 452 4,920 1,828
===== === === == === ===== =====
</TABLE>
- ----------------
(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) South Florida refers to Broward County, Palm Beach County and Martin
County.
(4) Includes 1,713 remaining lots in Pembroke Falls.
(5) Central Florida refers to Orlando.
(6) Florida's west coast refers to Tampa, Sarasota, Naples and Fort Myers.
(7) Includes 906 lots in Lake Bernadette in Tampa.
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 primarily through commissioned employees, who
typically work from sales offices located at the model homes in each Engle
subdivision, as well as through 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 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
26
<PAGE>
brochures and model homes in its comprehensive marketing program. In addition,
Engle maintains a web site on the Internet. 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
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 a home buyer with 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. For fiscal 1997, the financial services subsidiaries
increased their profitability to $2.7 million, an increase of 49% compared to
fiscal 1996.
MORTGAGE BANKING. In April 1992, the Company established PHMC. PHMC is a
full service mortgage banker which arranges financing through the origination
of mortgage loans to the Company's home buyers 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 to FNMA and to other investors and to service such
loans.
During fiscal 1997, PHMC originated and sold approximately $138.0 million
in mortgage loans (including servicing rights), representing a significant
portion of the Company's home buyers that requested mortgage financing.
Substantially all of PHMC's revenues are derived from mortgages on homes built
by Engle. At October 31, 1997, PHMC was originating mortgages in substantially
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 home buyers in Florida and Denver, Colorado, as well
as third parties. At October 31, 1997, ULT was operating 15 offices in Florida
and four offices in Denver, Colorado.
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
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<PAGE>
heating and cooling systems. Local governments also, at times, declare
moratoriums on the issuance of building permits and impose 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 presence 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 generally 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 with numerous
national, regional and local builders, including some builders with greater
financial resources. Builders of new homes compete not only for home buyers,
but also for desirable properties, raw materials and skilled subcontractors.
The Company also competes for residential sales with individual sales of
existing homes and available rental housing.
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, 1997, the Company employed approximately 544 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.
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<PAGE>
PROPERTIES
The Company's corporate office is located at 123 N.W. 13th Street, Suite
300, Boca Raton, Florida 33432, where the Company leases 9,356 square feet of
office space for a term expiring in August 2006. 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
3 of Notes to Consolidated Financial Statements for discussion of sale of
commercial properties.
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.
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<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information as of December 17,
1997, regarding each of the Company's executive officers, directors and other
key employees:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY
- ------------------------------- ----- ---------------------------------------------
<S> <C> <C>
Alec Engelstein ............... 67 Chairman of the Board, President and
Chief Executive Officer
Harry Engelstein ............ 62 Executive Vice President, Chief Construction
Officer and Director
John A. Kraynick ............ 42 Senior Vice President and Director
Lawrence R. Shawe ............ 42 Vice President--Sales and Marketing
David Shapiro ............... 42 Vice President--Finance, Chief
Financial Officer and Director
Paul M. Leikert ............... 41 Vice President--Chief Accounting Officer
Henry H. Fishkind, Ph.D ...... 48 Director
Ronald J. Korn ............... 57 Director
Alan L. Shulman ............... 65 Director
</TABLE>
ALEC ENGELSTEIN, a co-founder and Chairman of the Board of the Company,
has served as its President and Chief Executive Officer since its organization
in August 1982. Alec Engelstein has over 35 years of experience in the
homebuilding industry and has been actively engaged as a homebuilder in
southeast Florida since 1969.
HARRY ENGELSTEIN, a co-founder and director of the Company and Alec
Engelstein's brother, has served as Executive Vice President and Chief
Construction Officer since the Company's inception in August 1982. Harry
Engelstein has over 30 years of experience in home construction.
JOHN A. KRAYNICK has served as a Vice President of the Company since
August 1986 and was appointed Senior Vice President in July 1991. Mr. Kraynick
is responsible for administrative matters and coordinating the Company's
compliance with Federal, state and local regulatory requirements. Mr. Kraynick
has over 19 years of experience in the homebuilding industry.
LAWRENCE R. SHAWE has served as the Company's Vice President--Sales and
Marketing since April 1986. Mr. Shawe joined the Company in April 1984 and
since such time has been responsible for the Company's sales and marketing
efforts. Mr. Shawe has over 17 years of experience in the homebuilding
industry.
DAVID SHAPIRO joined the Company in June 1991, has served as the Company's
Chief Financial Officer since July 1991, was appointed Vice President--Finance
in October 1991 and was appointed as a director on December 17, 1997. From
January 1986 until June 1991, he served as vice president of a privately held
retail clothing company located in West Palm Beach, Florida. David Shapiro is
Alec Engelstein's son-in-law.
PAUL M. LEIKERT joined the Company in 1992 and has served as the Vice
President--Chief Accounting Officer since March 1994. Mr. Leikert is a
certified public accountant and has over 13 years of experience in the
homebuilding industry.
HENRY H. FISHKIND, PH.D., has served as a director of the Company since
October 1991 and is a member of the Compensation and Audit Committees of the
Board of Directors. Dr. Fishkind has
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served as President of Fishkind & Associates, Inc., an economic and financing
consulting firm based in Orlando, Florida, since 1988. From January 1984 until
December 1987, Dr. Fishkind served as president of M.G. Lewis Econometrics,
Inc., the research subsidiary of an investment banking firm based in Winter
Park, Florida. Dr. Fishkind also serves as editor of Econocast, a quarterly
economic forecast, since 1984, and as a director of Summit Properties.
RONALD J. KORN, chairman of the Compensation and Audit Committees of the
Board of Directors, has served as a director of the Company since October 1991.
Since July 1991, Mr. Korn has served as President of Ronald Korn Consulting, a
business consulting firm, and as Chairman of the Board of Carole Korn
Interiors, Inc., an interior design firm. From August 1985 until June 1991, Mr.
Korn served as the managing partner of the Miami office of KPMG Peat Marwick, a
nationally recognized firm of independent public accountants. Mr. Korn also
serves as a director of Vacation Break USA, Inc., which develops, markets,
operates and finances vacation ownership interests in premium resort properties
and as a director of Magicworks Entertainment, Inc., which produces, manages,
promotes and merchandises live entertainment.
ALAN L. SHULMAN was appointed as a director of the Company on December 17,
1997. Mr. Shulman is currently a private investor. Mr. Shulman served on the
board of directors of Island National Bank in Palm Beach, Florida from its
inception in 1989 until April 1, 1997 and currently serves on the board of
directors of CV Reit, Inc., a New York Stock Exchange listed company.
There are no arrangements or understandings with respect to the selection
of officers or directors.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 25,000,000 shares
of Common Stock, par value $.01 per share, and 1,000,000 shares of Preferred
Stock, par value $.01 per share. After the consummation of the Equity Offering,
9,671,759 shares of Common Stock will be outstanding (not including 1,060,358
shares of Common Stock issuable upon conversion of the 1993 Notes). No shares
of Preferred Stock have been issued.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share held
of record on all matters submitted to a vote of the shareholders. Subject to
preferential rights with respect to any outstanding Preferred Stock, holders of
Common Stock are entitled to receive ratably such dividends as may be declared
by the Board of Directors out of funds legally available therefor. See
"Dividend Policy." In the event of a liquidation, dissolution or winding up of
the Company, holders of Common Stock are entitled to share ratably in all
assets remaining after payment of liabilities and satisfaction of preferential
rights with respect to any outstanding shares of Preferred Stock and have no
rights to convert their Common Stock into any other securities. The outstanding
shares of Common Stock are, and the Common Stock to be outstanding upon
completion of the Equity Offering will be, fully paid and nonassessable.
The transfer agent and registrar for the Common Stock is American Stock
Transfer & Trust Company, New York, New York.
PREFERRED STOCK
The Board of Directors is authorized to issue the Preferred Stock in one
or more series and to fix the rights, preferences, privileges and restrictions,
including the dividend rights, conversion rights, voting rights, rights and
terms of redemption, redemption price or prices, liquidation preferences and
the number of shares constituting any series or the designations of such
series, without any further vote or action by the shareholders. The issuance of
Preferred Stock may have the effect of delaying, deferring or preventing a
change in control of the Company without further action of the shareholders.
The issuance of Preferred Stock with voting and conversion rights may adversely
affect the voting power of the holders of Common Stock, including the loss of
voting control to others. The Company has no present plans to issue any shares
of Preferred Stock.
CERTAIN FLORIDA LEGISLATION
The State of Florida has enacted legislation that may deter or frustrate
takeovers of Florida corporations. The Florida Control Share Act generally
provides that shares acquired in excess of certain specified thresholds will
not possess any voting rights unless such voting rights are approved by a
majority of a corporation's disinterested shareholders. The Florida Affiliated
Transactions Act generally requires supermajority approval by disinterested
shareholders or majority approval by disinterested directors of certain
specified transactions between a public corporation and holders of more than
10% of the outstanding voting shares of the corporation (or their affiliates).
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<PAGE>
DESCRIPTION OF CERTAIN INDEBTEDNESS
THE 1993 NOTES
GENERAL. In February 1993, the Company issued $30,000,000 principal amount
of 7% Convertible Subordinated Notes due 2003 (the "1993 Notes"). The 1993
Notes mature on March 1, 2003, and bear interest at 7% per annum, payable
semi-annually on March 1 and September 1 of each year.
The following is a summary of certain material terms of the 1993 Notes and
is qualified in its entirety by reference to the indenture governing the 1993
Notes (the "1993 Indenture"). The 1993 Notes are unsecured general obligations
of the Company subordinated in right of payment to all existing and future
Senior Indebtedness (as defined in the 1993 Indenture").
CONVERSION. The 1993 Notes are convertible into Common Stock at any time
prior to maturity, unless previously redeemed, at a conversion price of $14.00
per share, subject to adjustment upon certain circumstances.
REDEMPTION. The 1993 Notes are redeemable at the option of the Company on
or after April 1, 1996, in whole or in part, at specified redemption prices
(expressed as a percentage of principal amount), together with accrued and
unpaid interest. On November 18, 1997, the Company redeemed $14,594,000
aggregate principal amount of the 1993 Notes at a price of 104.2% of the
principal amount thereof, plus accrued interest and $406,000 aggregate
principal amount of the 1993 Notes were converted into Common Stock. In
addition, $75,000 principal amount of the 1993 Notes not previously called for
redemption were converted into 5,357 shares on November 18, 1997. After
November 18, 1997 and prior to the date of this Prospectus, an additional
$80,000 principal amount of the 1993 Notes were converted into 5,713 shares of
Common Stock. Following the consummation of the Equity Offering, the Company
intends to call for redemption the remaining outstanding principal amount of
the 1993 Notes. The Company intends to use a portion of the net proceeds of the
Equity Offering to fund the redemption of the remaining outstanding principal
amount of the 1993 Notes which are not converted into Common Stock on or prior
to the date of redemption. See "Use of Proceeds."
OFFERS TO PURCHASE. In the event of a Change of Control or a Consolidated
Net Worth Deficiency (each as defined in the 1993 Indenture), the Company will
be required, subject to certain conditions, to offer to purchase all
outstanding 1993 Notes at a price equal to 100% of the principal amount thereof
together with accrued and unpaid interest.
COVENANTS. The 1993 Indenture contains covenants that, among other things,
limit the Company's ability to merge, consolidate or transfer substantially all
its assets.
GUARANTEES. Payments under the 1993 Notes are guaranteed by the
subsidiaries of the Company.
THE 1994 NOTES
GENERAL. In March 1994, the Company issued $40,000,000 principal amount of
11-3/4% Senior Notes due 2000 (the "Original 1994 Notes"). In August 1994, the
Company exchanged the Original 1994 Notes for $40,000,000 principal amount of
11-3/4% Senior Notes due 2000 (the "1994 Notes"), which are substantially
identical to the Original 1994 Notes except that the 1994 Notes are registered
under the Securities Act. The 1994 Notes mature on December 15, 2000, and bear
interest at 11-3/4% per annum, payable semi-annually on June 15 and December 15
of each year.
The following is a summary of certain material terms of the 1994 Notes and
is qualified in its entirety by reference to the indenture governing the 1994
Notes (the "1994 Indenture"). The 1994 Notes are senior unsecured obligations
of the Company, ranking PARI PASSU in right of payment to all existing and
future Senior Indebtedness (as defined in the 1994 Indenture) of the Company
and senior in right of payment to all subordinated indebtedness of the Company.
33
<PAGE>
REDEMPTION. The 1994 Notes are redeemable at the option of the Company, in
whole or in part, at any time on or after June 15, 1998, initially at 105.875%
of their principal amount plus accrued interest, declining ratably to 100% of
their principal amount plus accrued interest on and after June 15, 2000.
OFFERS TO PURCHASE. In the event of a Change of Control (as defined in the
1994 Indenture), the Company will be required, subject to certain conditions,
to offer to purchase all outstanding 1994 Notes at a price equal to 101% of the
principal amount thereof together with accrued and unpaid interest. In
addition, in the event of a Consolidated Net Worth Deficiency (as defined in
the 1994 Indenture), the Company will be required, subject to certain
conditions, to offer to purchase $4.0 million aggregate principal amount of the
1994 Notes at a price equal to 100% of the principal amount thereof together
with accrued and unpaid interest.
COVENANTS. The 1994 Indenture contains covenants that, among other things,
limit the Company's and its subsidiaries' ability to incur additional
indebtedness; make certain restricted payments; enter into transactions with
affiliates; sell their assets and capital stock; grant liens on their assets;
and merge, consolidate or transfer substantially all of their assets.
GUARANTEES. Payments under the 1994 Notes are guaranteed by the all of
the Company's existing subsidiaries and all future restricted subsidiaries.
THE 1998 NOTES
GENERAL. Concurrently with the Equity Offering, the Company is offering
$75,000,000 aggregate principal amount of the 1998 Notes. The consummation of
the Equity Offering and the issuance of the 1998 Notes are not conditioned upon
each other. The following is a summary of certain material terms which the 1998
Notes, if issued, are expected to have. The 1998 Notes will be senior unsecured
obligations of the Company, ranking PARI PASSU in right of payment to all
existing and future and Senior Indebtedness (as such term will be defined in
the 1998 Indenture) and senior in right of payment to all subordinated
indebtedness of the Company.
REDEMPTION. The 1998 Notes are expected to be redeemable at the option of
the Company, in whole or in part, at any time on or after the fifth anniversary
of the date of issuance of the 1998 Notes, initially at a premium of their
principal amount plus accrued interest, declining ratably to 100% of their
principal amount plus accrued interest on and after the seventh anniversary of
the date of issuance of the 1998 Notes.
OFFERS TO PURCHASE. In the event of a Change of Control (as defined in the
1998 Indenture), the Company will be required, subject to certain conditions,
to offer to purchase all outstanding 1998 Notes at a price equal to 101% of the
principal amount thereof together with accrued and unpaid interest. In
addition, in the event the Company's Net Worth (as defined in the 1998
Indenture) falls below a specified level for two consecutive fiscal quarters,
the Company will be required, subject to certain conditions, to offer to
purchase 1998 Notes in an aggregate principal amount equal to 10% of the
initial outstanding principal amount at a price equal to 100% of the principal
amount thereof together with accrued and unpaid interest.
COVENANTS. The 1998 Indenture is expected to contain covenants that, among
other things, limit the Company's and its subsidiaries' ability to incur
additional indebtedness; make certain restricted payments; enter into
transactions with affiliates; sell their assets and capital stock; grant liens
on their assets; and merge, consolidate or transfer substantially all of their
assests.
GUARANTEES. Payments under the 1998 Notes will be guaranteed by all of the
Company's existing subsidiaries and all future restricted subsidiaries.
CREDIT FACILITIES
For a description of the Company's bank credit facilities, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
34
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of Common Stock in the public market
following the Equity Offering could adversely affect the market price for the
Common Stock. The shares of Common Stock offered hereby will be freely tradable
by persons who are not affiliates of the Company without restriction or further
registration under the Securities Act. Substantially all of the other
outstanding shares of Common Stock, other than shares held by officers,
directors and other affiliates of the Company, are freely tradable. After the
Equity Offering and assuming that none of the outstanding 1993 Notes have been
converted, approximately 9,671,759 shares of Common Stock will be outstanding,
and directors and officers of the Company will beneficially own approximately
3,880,066 shares in the aggregate. Pursuant to Rule 144, shares of Common Stock
held by affiliates of the Company are subject to limitations on the volume that
may be sold other than sales pursuant to a registration statement under the
Securities Act or another applicable exemption from registration thereunder.
The Company has also granted certain registration rights to Alec Engelstein and
Harry Engelstein pursuant to a registration rights agreement entered into in
October 1991. Alec Engelstein and Harry Engelstein have waived their rights to
include Common Stock in the registration statement of which this Prospectus is
a part. All of the shares of Common Stock owned by Alec Engelstein and Harry
Engelstein constitute restricted securities which are eligible for sale
pursuant to Rule 144, as described below. The Company, its directors and
executive officers, and certain shareholders have agreed not to offer, sell,
contract to sell, transfer or otherwise dispose of any shares of Common Stock
or any securities convertible into or exchangeable or exercisable for shares of
Common Stock without the prior written consent of Smith Barney Inc. for a
period of 120 days after the date of this Prospectus, subject to certain
limited exceptions, including, but not limited to grants of awards under the
Company's existing employee benefit plans or issuances of Common Stock upon the
exercise of outstanding stock options or conversions of the 1993 Notes. See
"Underwriting."
In general, under Rule 144, a person (or persons whose shares are
aggregated) who has beneficially owned restricted securities within the meaning
of Rule 144 ("Restricted Shares") for at least one year, including the holding
period of any securities which converted into the Restricted Shares and
including the holding period of any prior owner except an affiliate, would be
entitled to sell within any three-month period a number of shares that does not
exceed the greater of one percent of the then outstanding shares of Common
Stock or the average weekly trading volume of the Common Stock on The Nasdaq
National Market during the four calendar weeks preceding such sale. Sales under
Rule 144 are also subject to certain manner of sale provisions, notice
requirements and the availability of current public information about the
Company. In addition, any shares held by an affiliate of the Company (whether
or not such shares are restricted) may be sold under Rule 144 subject to
similar limitations, except that the holding period requirement does not apply
to shares that are not restricted. Any person who has not been an affiliate of
the Company at any time during the 90 days preceding a sale, and who has
beneficially owned shares for at least two years (including any period of
ownership of preceding non-affiliated holders), would be entitled to sell such
shares under Rule 144(k) without regard to the volume limitations, manner of
sale provisions, public information requirements or notice requirements.
The Company has effective registration statements under the Securities Act
covering (i) the 850,000 shares of Common Stock reserved for issuance under the
Company's stock option plan, as amended and (ii) the 25,000 shares of Common
Stock reserved for issuance under the Company's 1997 Performance Bonus Plan.
Accordingly, shares registered under such registration statements will be
available for sale in the open market after issuance.
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<PAGE>
UNDERWRITING
Upon the terms and subject to the conditions stated in the Underwriting
Agreement dated the date hereof, each of the underwriters (the "Underwriters")
named below has severally agreed to purchase, and the Company has agreed to
sell to such Underwriter, the number of shares of Common Stock set forth
opposite the name of such Underwriter.
NUMBER
NAME OF UNDERWRITER OF SHARES
- ----------------------------------------- ----------
Smith Barney Inc. .....................
Jefferies & Company, Inc. ...............
Southeast Research Partners, Inc. ......
---------
Total ................................. 2,700,000
=========
The Underwriting Agreement provides that the obligations of the
Underwriters to pay for and accept delivery of the shares are subject to
approval of certain legal matters by counsel and to certain other conditions.
The Underwriters are obligated to take and pay for all shares of Common Stock
offered hereby (other than those covered by the over-allotment option described
below) if any such shares are taken.
The Underwriters propose to offer part of the shares directly to the
public at the public offering price set forth on the cover page of this
Prospectus and part of the shares to certain dealers at a price which
represents a concession not in excess of $ per share under the public
offering price. The Underwriters may allow, and such dealers may reallow, a
concession not in excess of $ per share to certain other dealers. After
the initial offering of the shares to the public, the public offering price and
such concessions may be changed by the Underwriters.
The Company has granted to the Underwriters an option, exercisable for
thirty days from the date of this Prospectus, to purchase up to an aggregate of
405,000 additional shares of Common Stock at the price to public set forth on
the cover page of this Prospectus minus the underwriting discounts and
commissions. The Underwriters may exercise such option solely for the purpose
of covering over-allotments, if any, in connection with the offering of the
shares offered hereby. To the extent such option is exercised, each Underwriter
will be obligated, subject to certain conditions, to purchase approximately the
same percentage of such additional shares as the number of shares set forth
opposite each Underwriter's name in the preceding table bears to the total
number of shares listed in such table.
Each of the Company, the Company's executive officers and directors and
certain shareholders has agreed that, for a period of 120 days from the date of
this Prospectus, it will not, in each case without the prior written consent of
Smith Barney Inc., offer, sell, contract to sell, transfer or otherwise dispose
of, any shares of Common Stock of the Company or any securities convertible
into, or exercisable or exchangeable for, Common Stock of the Company, except
for grants of awards under the Company's existing employee benefit plans or
issuances of Common Stock upon the exercise of outstanding stock options or
conversions of the 1993 Notes.
The Company and the Underwriters have agreed to indemnify each other
against certain liabilities, including liabilities under the Securities Act.
The Underwriters may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation
M under the Exchange Act. Over-allotment involves syndicate sales in excess of
the offering size, which creates a syndicate short position. Stabilizing
transactions permit bids for and purchases of the Common Stock so long as the
stabilizing bids do not exceed a specified maximum. Syndicate covering
transactions involve purchases of the Common Stock in the open market in order
to cover syndicate short positions. Penalty bids permit the Underwriters to
reclaim a selling concession from a syndicate member when the Common Stock
originally sold by such syndicate member is purchased in a stabilizing
transaction or syndicate covering
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<PAGE>
transaction to cover syndicate short positions. Such stabilizing transactions,
syndicate covering transactions and penalty bids may cause the price of the
Common Stock to be higher than it would otherwise be in the absence of such
transactions. These transactions may be effected on The Nasdaq National Market
or otherwise and, if commenced, may be discontinued at any time.
The Underwriters and dealers may engage in passive market making
transactions in the Common Stock in accordance with Rule 103 of Regulation M
under the Exchange Act. In general, a passive market maker may not bid for, or
purchase, the Common Stock at a price that exceeds the highest independent bid.
In addition, the net daily purchases made by any passive market maker generally
may not exceed 30% of its average daily trading volume in the Common Stock
during a specified two month prior period, or 200 shares, whichever is greater.
A passive market maker must identify passive market making bids as such on the
Nasdaq electronic inter-dealer reporting system. Passive market making may
stabilize or maintain the market price of the Common Stock above independent
market levels. Underwriters and dealers are not required to engage in passive
market making and may end passive market making activities at any time.
LEGAL MATTERS
Certain legal matters relating to the validity the shares of Common Stock
offered hereby will be passed upon for the Company by Greenberg Traurig Hoffman
Lipoff Rosen & Quentel, P.A., Miami, Florida. Certain legal matters relating to
the Equity Offering will be passed upon for the Underwriters by Cahill Gordon &
Reindel (a partnership including a professional corporation), New York, New
York.
EXPERTS
The Consolidated Financial Statements of the Company and the related
schedule included and incorporated by reference in this Prospectus and in the
Registration Statement have been audited by BDO Seidman, LLP, independent
certified public accountants, to the extent and for the periods set forth in
their reports appearing elsewhere and incorporated by reference herein and in
the Registration Statement, and are included in reliance upon such reports
given upon the authority of said firm as experts in auditing and accounting.
AVAILABLE INFORMATION
The Company has filed a registration statement on Form S-2 (together with
all amendments and exhibits thereto, the "Registration Statement") under the
Securities Act. This Prospectus does not contain all of the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information, reference is made to the Registration Statement and the exhibits
filed as part thereof. Statements contained herein are qualified in their
entirety by reference to the Registration Statement and such exhibits.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information can be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's regional offices located at Citicorp Center, 500 West Madison,
14th Floor, Chicago, Illinois 60661 and Seven World Trade Center, 13th Floor,
New York, New York 10048. Copies of such material can be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. The Commission also maintains a
World Wide Web site on the Internet at http://www.sec.gov that contains reports
and other information regarding registrants that file electronically with the
Commission. The Common Stock is listed on the Nasdaq National Market, and such
reports, proxy statements and other information can also be inspected at the
offices of The Nasdaq National Market, Reports Section, 1735 K Street, N.W.,
Washington, D.C. 20006.
37
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K, as amended, for the fiscal year
ended October 31, 1997, is hereby incorporated herein by reference.
Any statement contained in a document incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as modified or superseded, to constitute
a part of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon the request of any such person, a copy of
all of the documents which are incorporated herein by reference, other than
exhibits to such documents (unless such exhibits are specifically incorporated
by reference into such documents). Requests should be directed to Engle Homes,
Inc., 123 N.W. 13th Street, Suite 300, Boca Raton, Florida 33432, Attention:
David Shapiro, Vice President-- Finance, telephone number (561) 391-4012.
38
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
-----
Report of Independent Certified Public Accountants ......... F-2
Consolidated Balance Sheets
as of October 31, 1997 and 1996 ........................... F-3
Consolidated Statements of Income
For the Years Ended October 31, 1997, 1996 and 1995 ...... F-4
Consolidated Statements of Shareholders' Equity
For the Years Ended October 31, 1997, 1996 and 1995 ...... F-5
Consolidated Statements of Cash Flows
For the Years Ended October 31, 1997, 1996 and 1995 ...... F-6
Notes to Consolidated Financial Statements .................. F-7
F-1
<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, 1997 and 1996 and the related
consolidated statements of income, shareholders' equity and cash flows for each
of the three years in the period ended October 31, 1997. 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Engle
Homes, Inc. and subsidiaries at October 31, 1997 and 1996, and the results of
their operations and their cash flows for each of the three years in the period
ended October 31, 1997 in conformity with generally accepted accounting
principles.
BDO SEIDMAN, LLP
Miami, Florida
November 10, 1997
F-2
<PAGE>
ENGLE HOMES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
OCTOBER 31,
----------------------
1997 1996
---------- ---------
<S> <C> <C>
ASSETS
CASH
Unrestricted ......................................................... $ 15,565 $ 18,262
Restricted ............................................................ 981 3,438
INVENTORIES ............................................................ 230,108 220,564
PROPERTY AND EQUIPMENT, net .......................................... 2,623 3,599
OTHER ASSETS ......................................................... 15,803 19,406
GOODWILL, net of accumulated amortization
of $1,149 and $813, respectively .................................... 5,627 5,964
DEFERRED TAX ASSET ................................................... 3,176 550
MORTGAGE LOANS HELD FOR SALE .......................................... 14,529 13,006
-------- --------
TOTAL ASSETS ...................................................... $288,412 $284,789
======== ========
LIABILITIES
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES .............................. $ 21,167 $ 26,170
CUSTOMER DEPOSITS ...................................................... 7,472 12,004
BORROWINGS ............................................................ 82,064 82,117
SENIOR NOTES PAYABLE, including $5,390 to related parties ............ 40,000 40,000
CONVERTIBLE SUBORDINATED NOTES ....................................... 30,000 30,000
FINANCIAL SERVICE BORROWINGS .......................................... 14,529 13,006
-------- --------
TOTAL LIABILITIES ................................................ 195,232 203,297
-------- --------
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 6,931,693 and 6,929,200 respectively ......... 69 69
ADDITIONAL PAID-IN CAPITAL ............................................. 47,852 48,523
RETAINED EARNINGS ...................................................... 45,259 32,900
-------- --------
TOTAL SHAREHOLDERS' EQUITY ....................................... 93,180 81,492
-------- --------
$288,412 $284,789
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
ENGLE HOMES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31,
-----------------------------------
1997 1996 1995
---------- ---------- ---------
<S> <C> <C> <C>
REVENUES
Sales of homes ....................................... $404,407 $303,972 $216,059
Sales of land ....................................... 7,685 17,571 20,964
Rent and other ....................................... 1,513 1,485 1,573
Financial services ................................. 11,690 9,060 5,932
-------- -------- --------
425,295 332,088 244,528
-------- -------- --------
COSTS AND EXPENSES
Cost of sales-homes ................................. 345,295 260,651 184,888
Cost of sales-land ................................. 7,095 15,589 17,332
Selling, marketing, general and administrative ...... 39,620 31,906 24,466
Depreciation and amortization ........................ 2,374 2,977 3,532
Financial services ................................. 9,012 7,264 4,774
-------- -------- --------
403,396 318,387 234,992
-------- -------- --------
INCOME BEFORE INCOME TAXES ........................... 21,899 13,701 9,536
Provision for income taxes ........................... 8,431 5,206 3,624
-------- -------- --------
NET INCOME .......................................... $ 13,468 $ 8,495 $ 5,912
======== ======== ========
Net income per share
Primary ............................................. $ 1.94 $ 1.20 $ 0.85
======== ======== ========
Fully diluted ....................................... $ 1.58 $ 1.03 $ 0.74
======== ======== ========
Shares used in earnings per share calculations
Primary ............................................. 6,951 7,108 6,989
Fully diluted ....................................... 9,246 9,251 9,132
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
ENGLE HOMES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK
---------------------- ADDITIONAL RETAINED
SHARES AMOUNT PAID-IN CAPITAL EARNINGS TOTAL
----------- -------- ----------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
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
Net income ........................ 13,468 13,468
Dividends to shareholders ......... (1,109) (1,109)
Distribution in connection with
land purchase ..................... (694) (694)
Common Stock issued in connection with
employee stock bonus plan ......... 2,493 23 23
--------- ---- ------- -------- --------
Amounts at October 31, 1997 ......... 6,931,693 $ 69 $47,852 $45,259 $93,180
========= ==== ======= ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
ENGLE HOMES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31,
-----------------------------------------
1997 1996 1995
------------ ----------- ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ......................................................... $ 13,468 $ 8,495 $ 5,912
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization .................................... 2,374 2,977 3,532
Impairment loss ................................................... 2,156 1,948
Deferred tax (benefit) provision ................................. (2,626) (1,508) 154
Employee stock compensation ....................................... 24
Change in assets and liabilities:
Decrease in restricted cash ....................................... 2,457 819 221
Increase in inventories .......................................... (11,700) (23,848) (56,957)
Decrease (increase) in other assets .............................. 3,231 (5,396) (822)
Increase in mortgages held for sale .............................. (1,523) (6,533) (3,910)
(Decrease) increase in accounts payable and accrued expenses ...... (5,003) 12,462 2,181
(Decrease) increase in deposits .................................... (4,532) 2,785 929
Increase in financial service borrowings ........................... 1,523 6,533 3,910
--------- -------- ---------
Net cash required by operating activities ..................... (151) (1,266) (44,850)
--------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property and equipment .............................. (1,282) (707) (1,567)
Proceeds from sale of property .................................... 592 7,538
--------- -------- ---------
Net cash (required) provided by investing activities ............ (690) 6,831 (1,567)
--------- -------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in borrowings ............................................. 47,510 94,872 105,955
Repayment of borrowings ............................................. (47,563) (90,209) (57,929)
Distribution to shareholders ....................................... (1,803) (1,109) (1,109)
--------- -------- ---------
Net cash (required) provided by financing activities ............ (1,856) 3,554 46,917
--------- -------- ---------
NET (DECREASE) INCREASE IN CASH .................................... (2,697) 9,119 500
CASH AT BEGINNING OF PERIOD .......................................... 18,262 9,143 8,643
--------- -------- ---------
CASH AT END OF PERIOD ................................................ $ 15,565 $ 18,262 $ 9,143
========= ======== =========
Supplemental disclosure of cash flow information
Interest paid ...................................................... $ 15,623 $ 15,293 $ 14,915
========= ======== =========
Income taxes paid ................................................... $ 10,324 $ 4,902 $ 3,407
========= ======== =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
ENGLE HOMES, INC. AND SUBSIDIARIES
NOTES TO 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; Virginia and Maryland; Raleigh, North Carolina; Phoenix, Arizona and
Atlanta, Georgia. 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 Standard
Statement No. 121 entitled "Accounting for the Impairment of 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 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 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 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 letters of credit.
INVENTORIES:
Inventories are stated at the lower of cost or fair value. Inventories
under development or held for development are stated at an accumulated cost
unless such cost would not be recovered from the cash flows generated by future
disposition. In this instance, such inventories are measured at fair value.
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.
F-7
<PAGE>
ENGLE HOMES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
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 annually amounted to $336,550 in fiscal
1997, 1996, and 1995 respectively.
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.
SELLING AND MARKETING:
Certain selling and marketing costs associated with residential projects
are deferred and amortized as closings related to those sales occur and revenue
is recognized. The deferred selling and marketing amount was $1,300,000 at
October 31, 1997. The Company amortized selling and marketing costs of
$27,800,000, $22,100,000 and $15,600,000 in 1997, 1996 and 1995, respectively.
INCOME TAXES:
The Company accounts for income taxes under the asset and liability method
in accordance with Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes."
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 5 and 6. 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 $1,114,000, $1,071,000 and $854,905 for the years
ended October 31, 1997, 1996 and 1995 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.
F-8
<PAGE>
ENGLE HOMES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
STOCK BASED COMPENSATION:
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.
NEW ACCOUNTING PRONOUNCEMENTS:
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per
Share," issued in February 1997, replaces the current methodology for
calculating and presenting earnings per share. Under SFAS No. 128, primary
earnings per share will be replaced with a presentation of basic earnings per
share and fully diluted earnings per share will be replaced with diluted
earnings per share. Basic earnings per share excludes dilution and is computed
by dividing income available to common shares outstanding for the period by the
weighted average number of shares of common stock outstanding. Diluted earnings
per share is computed similarly to fully diluted earnings per share in
accordance with APB Opinion No. 15. The Statement will be effective for
financial statements issued by the Company after December 15, 1997. The impact
of SFAS No. 128 is not expected to be material.
SFAS No. 130, "Reporting Comprehensive Income," establishes standards for
reporting and display of comprehensive income, its components and accumulated
balances. Comprehensive income is defined to include all changes in equity
except those resulting from investments by owners and distributions to owners.
Among other disclosures, SFAS No. 130 requires that all items that are required
to be recognized under current accounting standards as components of
comprehensive income be reported in a financial statement that is displayed
with the same prominence as other financial statements.
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," which supersedes SFAS No. 14, Financial Reporting for Segments of
a Business Enterprise, establishes standards for the way that public
enterprises report information about operating segments in annual financial
statements and requires reporting of selected information about operating
segments in interim financial statements issued to the public. It also
establishes standards for disclosures regarding products and services,
geographic areas and major customers. SFAS No. 131 defines operating segments
as components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision maker in
deciding how to allocate the resources and in assessing performance.
Both SFAS No. 130 and No. 131, issued in June 1997, are effective for
financial statements for periods beginning after December 15, 1997 and require
comparative information for earlier years to be restated. Due to the recent
issuance of these standards, management has been unable to fully evaluate the
impact, if any, they may have on future financial statement disclosures.
F-9
<PAGE>
ENGLE HOMES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
FINANCIAL STATEMENT RECLASSIFICATIONS:
Certain amounts reflected in the consolidated financial statements for the
years ended October 31, 1996 and 1995 have been reclassified to conform to the
presentation for the year ended October 31, 1997.
NOTE 2--INVENTORIES
Inventories consist of (dollars in thousands):
<TABLE>
<CAPTION>
OCTOBER 31,
----------------------
1997 1996
---------- ---------
<S> <C> <C>
Land and improvements for residential homes under
development .................................... $180,899 $161,590
Residential homes under construction ............ 46,049 55,715
Land zoned for commercial development ............ 1,780 1,780
Investment in unconsolidated joint ventures ...... 1,380 1,479
-------- --------
$230,108 $220,564
======== ========
</TABLE>
The investment in the unconsolidated joint venture consists of land
purchased in connection with a joint venture with US Home. Each company
maintains a fifty percent (50%) interest in the venture. The land is being
developed by the joint venture and then transferred to each joint venture
partner at the venture's cost. The Company and US Home separately market and
build the homes.
Included in inventory is the following (dollars in thousands):
<TABLE>
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31,
-----------------------------------------
1997 1996 1995
------------ ------------ -----------
<S> <C> <C> <C>
Interest capitalized, beginning of period ...... $ 16,821 $ 13,092 $ 6,246
Interest incurred and capitalized ............... 15,623 15,272 13,750
Interest amortized to cost of sales ............ (16,066) (11,543) (6,904)
--------- --------- --------
Interest capitalized, end of period ............ $ 16,378 $ 16,821 $ 13,092
========= ========= ========
</TABLE>
Included in the cost of sales-homes during the years ended October 31,
1997 and 1996, are impairment losses of $2.2 million and $1.9 million,
respectively, to reduce certain projects under development to fair value.
NOTE 3--PROPERTY AND EQUIPMENT (dollars in thousands)
<TABLE>
<CAPTION>
OCTOBER 31,
-------------------------
1997 1996
----------- -----------
<S> <C> <C>
Commercial properties ............... $ 1,041 $ 1,825
Other property and equipment ......... 3,835 4,756
-------- --------
4,876 6,581
Less: accumulated depreciation ...... (2,253) (2,982)
-------- --------
$ 2,623 $ 3,599
======== ========
</TABLE>
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.
F-10
<PAGE>
ENGLE HOMES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 4--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% (8.25% at October 31, 1997),
expiring April 1998, to finance mortgage originations. As of October 31, 1997,
the balance outstanding under the line of credit was approximately $14.5
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:
PREFERRED HOME MORTGAGE COMPANY
INCOME STATEMENT INFORMATION
(dollars in thousands)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED OCTOBER
31,
-----------------------------
1997 1996 1995
-------- -------- -------
<S> <C> <C> <C>
REVENUES
Loan origination fees ............ $3,556 $3,041 $1,551
Interest ........................... 577 494 134
------ ------ ------
TOTAL REVENUES ..................... 4,133 3,535 1,685
------ ------ ------
COSTS AND EXPENSES ..................
General and administrative ......... 1,724 1,716 982
Interest ........................... 570 514 174
Application processing costs ...... 566 512 208
------ ------ ------
TOTAL EXPENSES ..................... 2,860 2,742 1,364
------ ------ ------
INCOME BEFORE TAXES ............... $1,273 $ 793 $ 321
====== ====== ======
</TABLE>
F-11
<PAGE>
ENGLE HOMES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 4--FINANCIAL SERVICES--(CONTINUED)
PREFERRED HOME MORTGAGE COMPANY
BALANCE SHEET INFORMATION
(dollars in thousands)
<TABLE>
<CAPTION>
OCTOBER 31,
--------------------
1997 1996
--------- --------
<S> <C> <C>
ASSETS
CASH ............................................. $ 102 $ 106
MORTGAGE LOANS HELD FOR SALE ..................... 14,529 13,006
MORTGAGE LOANS RECEIVABLE ........................ 171 360
OTHER .......................................... 559 655
ADVANCES TO PARENT (a) ........................... 1,877 331
------- -------
TOTAL ASSETS ................................. $17,238 $14,458
======= =======
LIABILITIES AND EQUITY
ACCOUNTS PAYABLE ................................. $ 66 $ 82
NOTES PAYABLE .................................... 14,529 13,006
------- -------
TOTAL LIABILITIES .............................. 14,595 13,088
SHAREHOLDERS' EQUITY ........................... 2,643 1,370
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ...... $17,238 $14,458
======= =======
</TABLE>
- ----------------
(a) Certain intercompany transactions and balances are eliminated in
consolidation and have no effect on consolidated earnings or equity.
NOTE 5--BORROWINGS (dollars in thousands)
Borrowings consist of:
<TABLE>
<CAPTION>
OCTOBER 31,
----------------------
1997 1996
---------- ---------
<S> <C> <C>
Acquisition and development loans from banks, payable through
1999, with interest at floating rates (8.75% at October 31, 1997),
collateralized by inventories .................................... $ 13,357 $ 24,907
Purchase money mortgages, collateralized by inventories ......... 1,624
Revolving construction loans from banks, payable through 2000
with interest at floating rates (8.15% to 9.00% at October 31,
1997), collateralized by inventories ........................... 68,622 55,541
Other ............................................................ 85 45
-------- --------
Borrowings ...................................................... $ 82,064 82,117
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
-------- --------
$152,064 $152,117
======== ========
</TABLE>
On February 22, 1993, the Company sold $30,000,000 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 or in part, at the option of the Company on or after April 1, 1996.
F-12
<PAGE>
ENGLE HOMES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 5--BORROWINGS--(CONTINUED)
In October 1997, the Company announced the early redemption of $15 million
of the Notes. The redemption is anticipated to be completed in November 1997 at
a redemption price of $1,042.50 per $1,000 (face value) of Notes.
The Company's loan agreements include 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. The financial statements of the subsidiary guarantors
are omitted as management has determined that they would not be material to
investors.
Maturities of borrowings are as follows:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
- ----------------------------------
<S> <C>
1998 ........................... 4,424
1999 ........................... 42,004
2000 ........................... 74,173
2001 ........................... --
Thereafter ..................... 31,463
--------
$152,064
========
</TABLE>
The Company has approximately $18,921,000 available for future borrowings
under various acquisition and development related borrowing arrangements at
October 31, 1997.
As of October 31, 1997, the outstanding principal amount of 7% Convertible
Subordinated Notes and 113/4% 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, 1997, was approximately $75,610,000. All
other borrowings, due to their relative short-term maturity, approximate fair
market value as of October 31, 1997.
NOTE 6--STOCK-BASED COMPENSATION
At October 31, 1997, the Company has a fixed stock option plan which is
described below. The Company applies APB Opinion 25, Accounting for Stock
Issued to Employees, and related interpretations in accounting for the plan.
Under APB Opinion 25, if the exercise price of the Company's employee stock
options equals the market price of the underlying stock on the date of grant,
no compensation is recognized.
Under the plan, options were authorized to be granted to purchase 850,000
common shares at not less than the fair market value at the date of grant.
Options expire ten years from the date of grant.
FASB Statement 123, Accounting for Stock-Based Compensation, requires the
Company to provide proforma information regarding net income and net income per
share as if compensation cost for the Company's stock option plan had been
determined in accordance with the fair-value based method prescribed in FASB
Statement 123. There were no options granted during the year ended October 31,
1997 and options to purchase 5,000 shares were granted during the year ended
October 31, 1996. The Company's pro forma net income and income per share under
the accounting provisions of FASB Statement 123 did not materially differ from
the reported amounts.
F-13
<PAGE>
ENGLE HOMES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 6--STOCK-BASED COMPENSATION--(CONTINUED)
A summary of the status of the Company's fixed stock option plan as of
October 31, 1997 and 1996, and changes during the years then ended on those
dates are presented below:
<TABLE>
<CAPTION>
AS OF OCTOBER 31, 1997 AS OF OCTOBER 31, 1996
------------------------------ --------------------------------
WEIGHTED AVERAGE WEIGHTED AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE
--------- ------------------ ------------ -----------------
<S> <C> <C> <C> <C>
Outstanding at beginning of year ...... 606,500 $10.76 624,000 $ 10.80
Granted .............................. -- -- 5,000 $ 9.00
Exercised .............................. -- -- -- --
Forfeited .............................. -- -- (22,500) $ 11.50
Outstanding at end of year ............ 606,500 $10.76 606,500 $ 10.76
------- ------ ------- -------
Options exercisable at year-end ...... 502,000 $11.10 387,200 $ 11.20
Weighted average fair value of options
granted during the year ............... -- -- 5,000 $ 9.00
</TABLE>
The following table summarizes information about fixed stock options
outstanding at October 31, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- -------------------------------------------------------------------------- -------------------------------
NUMBER WEIGHTED AVERAGE WEIGHTED NUMBER WEIGHTED
RANGE OF OUTSTANDING REMAINING AVERAGE EXERCISABLE AVERAGE
EXERCISE PRICES AT 10/31/97 CONTRACTUAL LIFE EXERCISE PRICE AT 10/31/97 EXERCISE PRICE
- ------------------ ------------- ------------------ ---------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
$9.00 - $11.50 606,500 5 years $10.76 502,000 $11.10
</TABLE>
During fiscal 1997 the Company established the 1997 Performance Bonus Plan
(the "Bonus Plan"). The Bonus Plan provides for the issuance of up to 25,000
shares at "Fair Market Value" to certain management employees. The Company
issued 2,493 shares valued at approximately $24,000 during fiscal 1997.
NOTE 7--INCOME TAXES
The income tax provision in the consolidated statements of income consists
of the following components (dollars in thousands) :
<TABLE>
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31,
-----------------------------------
1997 1996 1995
----------- ----------- -------
<S> <C> <C> <C>
Current:
Federal ...... $ 9,467 $ 5,734 $2,952
State ......... 1,589 981 518
-------- -------- ------
$ 11,056 $ 6,715 $3,470
-------- -------- ------
Deferred:
Federal ...... (2,250) (1,288) 132
State ......... (375) (221) 22
-------- -------- ------
(2,625) (1,509) 154
-------- -------- ------
Total ...... $ 8,431 $ 5,206 $3,624
======== ======== ======
</TABLE>
The provision for income taxes was different from the amount computed by
applying the statutory rate due to the effect of state income taxes.
F-14
<PAGE>
ENGLE HOMES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 7--INCOME TAXES--(CONTINUED)
Temporary differences which gave rise to deferred income tax assets and
liabilities at October 31, 1997 and 1996 were as follows (dollars in
thousands):
<TABLE>
<CAPTION>
OCTOBER 31,
--------------------------
1997 1996
------------ -----------
<S> <C> <C>
Deferred tax liabilities:
Differences in reporting selling and marketing costs for tax
purposes. ................................................... $ 818 $ 1,185
Other ...................................................... 97 68
-------- -------
Gross deferred tax liabilities .............................. $ 915 $ 1,253
Deferred tax assets:
Inventory ................................................... 2,822 913
Property and equipment .................................... 384 534
Income recognized for tax purposes and deferred for financial
reporting purposes ....................................... 885 356
-------- -------
Gross deferred tax assets .................................... 4,091 1,803
-------- -------
Net deferred tax asset ....................................... $ (3,176) $ (550)
======== =======
</TABLE>
NOTE 8--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 to perform certain development activities, deposits on land and lot
purchase contract deposits. Outstanding letters of credit and performance bonds
under these arrangements totaled approximately $29.2 million at October 31,
1997.
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."
The Company and its subsidiaries occupy certain facilities under lease
arrangements. Rent expense, net of sublease income, amounted to $293,541,
$302,582, and $202,888 in fiscal 1997, 1996, and 1995, respectively. Future
minimum rental commitments for operating leases with non-cancelable terms in
excess of one year are $800,000 per year through 2006. Sublease income is
derived primarily from tenants occupying space under month-to-month and annual
leases.
The Internal Revenue Service is in the process of reviewing the Company's
tax returns for the years 1994 through 1996. While the Company cannot be
certain of the results of these audits, it believes that adjustments, if any,
will not be material.
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
F-15
<PAGE>
ENGLE HOMES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 8--COMMITMENTS AND CONTINGENCIES--(CONTINUED)
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 operations.
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 home buyer to secure adequate financing and may adversely affect the
carrying value of inventory. Such results of higher interest rates may result
in adversely affecting the Company's revenues, gross margins and net income.
NOTE 9--DEFERRED COMPENSATION PLAN
The Company has 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, 1997, 1996, and 1995
amounted to $93,000, $61,000 and $66,000, respectively.
NOTE 10--SUMMARIZED FINANCIAL INFORMATION
The securities that may be issued under a debt offering contemplated by
the Company will be guaranteed by all of the Company's subsidiaries on a full,
unconditional, joint and several basis. The financial statements of the
subsidiary guarantors are omitted as management has determined that separate
financial statements and other disclosures concerning the subsidiaries are not
material to investors.
Summarized financial information of guarantor subsidiaries are as follows
(dollars in thousands):
<TABLE>
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31,
-----------------------------------
1997 1996 1995
---------- ---------- ---------
<S> <C> <C> <C>
Inventory ....................................... $194,847 $204,200 $178,407
Total assets .................................... 247,966 239,402 215,204
Borrowings .................................... 51,346 50,098 50,563
Total liabilities .............................. 146,817 155,045 154,241
Revenues from the sales of homes and land ...... 339,198 282,773 198,598
Total revenues ................................. 378,996 293,103 205,209
Cost of sales homes and land .................. 293,884 241,518 167,955
Net income .................................... 10,230 11,341 8,861
</TABLE>
F-16
<PAGE>
ENGLE HOMES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 11--QUARTERLY RESULTS FOR 1997 AND 1996 (UNAUDITED)
Quarterly results for the years ended October 31, 1997 and 1996 follow:
(dollars in thousands, except per share data):
<TABLE>
<CAPTION>
1997 1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER
------------------------------------------------------------ ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Revenues ................................................... $100,108 $105,120 $107,125 $112,942
Income before income taxes ................................. 4,618 4,999 5,856 6,426
Net Income ................................................. 2,840 3,074 3,602 3,952
Net income per share
Primary ................................................... 0.41 0.44 0.52 0.56
Fully diluted ............................................. 0.34 0.36 0.43 0.46
Shares used in earnings per share
calculation:
Primary ................................................... 6,989 6,962 6,963 7,047
Fully diluted ............................................. 9,132 9,105 9,106 9,246
1996
----
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
</TABLE>
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.
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. During fiscal 1997, the Company paid the seller approximately
$694,000 in connection with the guarantee. The guarantee expired during fiscal
1997.
F-17
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED HEREIN, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR BY ANY OF THE UNDERWRITERS. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH IT
RELATES OR AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THOSE TO
WHICH IT RELATES IN ANY STATE TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE
SUCH OFFER IN SUCH STATE. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT
IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS
DATE.
--------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----------
<S> <C>
Prospectus Summary ........................ 3
Risk Factors .............................. 9
Use of Proceeds ........................... 12
Price Range of Common Stock ............... 13
Dividend Policy ........................... 13
Capitalization ........................... 14
Selected Consolidated Financial and
Operating Data ........................ 15
Management's Discussion and
Analysis of Financial Condition
and Results of Operations ............ 17
Business ................................. 23
Management .............................. 30
Description of Capital Stock ............ 32
Description of Certain Indebtedness ...... 33
Shares Eligible for Future Sale ......... 35
Underwriting .............................. 36
Legal Matters ........................... 37
Experts ................................. 37
Available Information ..................... 37
Incorporation of Certain Documents
by Reference ........................... 38
Index to Consolidated Financial
Statements ........................... F-1
</TABLE>
2,700,000 SHARES
ENGLE HOMES, INC.
COMMON STOCK
[LOGO]
-----------------
P R O S P E C T U S
, 1998
-----------------
SALOMON SMITH BARNEY
JEFFERIES & COMPANY, INC.
SOUTHEAST RESEARCH
PARTNERS, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The Registrant estimates that expenses payable by the Registrant in
connection with the offering described in this registration statement (other
than underwriting discounts and commissions) will be as follows:
Securities and Exchange Commission registration fee ............ $ 13,526
NASD filing fee ................................................ 4,964
Nasdaq National Market additional listing fee .................. 17,500
Printing and engraving expenses ................................. 60,000
Accounting fees and expenses .................................... 30,000
Legal fees and expenses ....................................... 60,000
Fees and expenses (including legal fees) for qualifications under
state securities laws .......................................... 5,000
Registrar and Transfer Agent's fees and expenses ............... 2,500
Miscellaneous ................................................... 406,510
--------
Total ......................................................... $600,000
========
All amounts except the Securities and Exchange Commission registration
fee, the NASD filing fee and the Nasdaq National Market additonal listing fee
are estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant has authority under the Florida Business Corporation Act to
indemnify its directors and officers to the extent provided in such statute.
The Registrant's Amended and Restated Articles of Incorporation provide that
the Registrant may indemnify its executive officers and directors to the
fullest extent permitted by law either now or hereafter. The Registrant has
also entered into an agreement with each of its directors and certain of its
officers wherein it has agreed to indemnify each of them to the fullest extent
permitted by law. In general, Florida law permits a Florida corporation to
indemnify its directors, officers, employees and agents, and persons serving at
the corporation's request in such capacities for another enterprise against
liabilities arising from conduct that such persons reasonably believed to be
in, or not opposed to, the best interests of the corporation and, with respect
to any criminal action or proceeding, had no reasonable cause to believe their
conduct was unlawful.
The provisions of the Florida Business Corporation Act that authorize
indemnification do not eliminate the duty of care of a director and, in
appropriate circumstances, equitable remedies such as injunctive or other forms
of nonmonetary relief will remain available under Florida law. In addition,
each director will continue to be subject to liability for (a) violations of
the criminal law, unless the director had reasonable cause to believe his
conduct was lawful or had no reasonable cause to believe his conduct was
unlawful, (b) deriving an improper personal benefit from a transaction, (c)
voting for or assenting to an unlawful distribution, and (d) willful misconduct
or a conscious disregard for the best interests of the Registrant in a
proceeding by or in the right of the Registrant to procure a judgment in its
favor or in a proceeding by or in the right of a shareholder. The statute does
not affect a director's responsibilities under any other law, such as the
Federal securities laws or state or Federal environmental laws.
At present, there is no pending litigation or proceeding involving a
director or officer of the Registrant as to which indemnification is being
sought from the Registrant, nor is the Registrant aware of any threatened
litigation that may result in claims for indemnification from the Registrant by
any officer or director.
II-1
<PAGE>
Pursuant to the Underwriting Agreement filed as Exhibit 1.1 to this
Registration Statement, the Underwriters agreed to indemnify the directors,
officers and controlling persons of the Registrant against certain civil
liabilities that may be incurred in connection with this offering, including
certain liabilities under the Act.
Pursuant to the Registration Rights Agreement incorporated by reference as
Exhibit 10.3 to this Registration Statement, certain principal shareholders of
the Registrant have agreed to indemnify the directors, officers and controlling
persons of the Registrant against certain civil liabilities that may be
incurred in connection with certain future registrations of the Registrant's
Common Stock, including certain liabilities under the Act.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- --------- ------------------------------------------------------------------------------------------------
<S> <C>
1.1 Form of Underwriting Agreement.
4.1 Specimen Stock Certificate for Registrant's Common Stock, hereby incorporated by reference
to Exhibit 4.1 of the Registrant's Registration Statement of Form S-1 (File No. 33-43305).
4.2 Registrant's Amended and Restated Articles of Incorporation, hereby incorporated by
reference to Exhibit 3.1 to the Registrant's Registration Statement on Form S-1 (File No.
33-58678).
4.3 Registrant's Bylaws, hereby incorporated by reference to Exhibit 3.2 to the Registrant's
Registration Statement on Form S-1 (File No. 33-43305).
5.1 Opinion of Greenberg Traurig Hoffman Lipoff Rosen & Quentel, P.A. as to the validity of the
Common Stock being registered.
10.1 Registrant's Second Amended and Restated 1991 Stock Option Plan (Compensatory Plan),
hereby incorporated by reference to Exhibit A of the Registrant's Proxy Statement for its 1996
Annual Meeting.
10.2 Indemnification Agreement between the Registrant and each of its directors and certain
executive officers, hereby incorporated by reference to Exhibit 10.2 of the Registrant's
Registration Statement of Form S-1 (File No. 33-58678).
10.3 Registration Rights Agreement, dated October 1991, among the Registrant, Alec Engelstein,
Sheila Engelstein and Harry Engelstein, incorporated by reference to Exhibit 4.2 to the
Registrant's Registration Statement on Form S-1 (File No. 33-43305).
10.4 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, hereby incorporated
by reference to Exhibit 4.3 of the Registrant's Registration Statement on Form S-1 (File
No. 33-58678).
10.5 Indenture, dated as of March 15, 1994, relating to the Registrant's 11.75% Senior Notes due
2000, hereby incorporated by reference to Exhibit 4.9 of the Registrant's Current Report on
Form 8-K, dated March 17, 1994.
10.6 Form of Indenture, relating to the 1998 Notes, hereby incorporated by reference to Exhibit 4.1
of the Registrant's Registration Statement on Form S-2 (File No. 333-40741).
10.7 Registrant's 1997 Performance Bonus Plan (Compensatory Plan), hereby incorporated by
reference to Exhibit 10.1 of the Registrant's Registration Statement on Form S-8 (File No. 333-
39223).
11.1 Statement Regarding Computation of Per Share Earnings.*
12.1 Statement Regarding Computation of Ratio of Earnings to Fixed Charges.*
23.1 Consent of BDO Seidman, LLP.
23.2 Consent of Greenberg Traurig Hoffman Lipoff Rosen & Quentel, P.A. (included in
Exhibit 5.1).
24.1 Powers of Attorney (included on signature page).*
</TABLE>
- ----------------
* Previously filed.
II-2
<PAGE>
ITEM 17. UNDERTAKINGS
(a) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(b) The undersigned registrant hereby undertakes that:
(i) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of a
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of the registration
statement as of the time it was declared effective.
(ii) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(c) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets the
requirements for filing on Form S-2 and has duly caused this Amendment No. 1 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boca Raton, State of Florida, on
December 22, 1997.
ENGLE HOMES, INC.
By: /s/ ALEC ENGELSTEIN
-------------------------------------------
Alec Engelstein, President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ ---------------------------------- ------------------
<S> <C> <C>
/s/ ALEC ENGELSTEIN Chairman of the Board, President December 22, 1997
- ------------------------------ and Chief Executive Officer
Alec Engelstein (Principal Executive Officer)
/s/ DAVID SHAPIRO Vice President--Finance, Chief December 22, 1997
- ------------------------------ Financial Officer and Director
David Shapiro (Principal Financial Officer)
* Vice President--Chief Accounting December 22, 1997
- ------------------------------ Officer
Paul Leikert (Principal Accounting Officer)
* Executive Vice President, Chief December 22, 1997
- ------------------------------ Construction Officer and Director
Harry Engelstein
* Senior Vice President and December 22, 1997
- ------------------------------ Director
John A. Kraynick
* Director December 22, 1997
- ------------------------------
Henry H. Fishkind
* Director December 22, 1997
- ------------------------------
Ronald J. Korn
/s/ ALAN L. SHULMAN Director December 22, 1997
- ------------------------------
Alan L. Shulman
* By: /s/ DAVID SHAPIRO
-----------------------
David Shapiro,
as Attorney-in-Fact
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NO. DESCRIPTION NUMBER
- --------- ---------------------------------------------------------------------------- -----------
<S> <C> <C>
1.1 Form of Underwriting Agreement.
5.1 Opinion of Greenberg Traurig Hoffman Lipoff Rosen & Quentel, P.A. as to the
validity of the Common Stock being registered.
23.1 Consent of BDO Seidman, LLP.
</TABLE>
EXHIBIT 1.1
2,700,000 Shares
ENGLE HOMES, INC.
Common Stock
UNDERWRITING AGREEMENT
January , 1998
SMITH BARNEY INC.
JEFFERIES & COMPANY, INC.
SOUTHEAST RESEARCH PARTNERS, INC.
c/o SMITH BARNEY INC.
388 Greenwich Street
New York, New York 10013
Dear Sirs:
Engle Homes, Inc., a Florida corporation (the "Company"), proposes,
upon the terms and conditions set forth herein, to issue and sell an aggregate
of 2,700,000 shares (the "Firm Shares") of its common stock, $0.01 par value per
share (the "Common Stock"), to Smith Barney Inc., Jefferies & Company, Inc. and
Southeast Research Partners, Inc. (the "Underwriters"), in such amounts as are
set forth in Schedule I hereto. The Company also proposes to sell to the
Underwriters, upon the terms and conditions set forth herein, up to an
additional 405,000 shares (the "Additional Shares") of Common Stock. The Firm
Shares and the Additional Shares are hereinafter collectively referred to as the
"Shares". Concurrently with the offering of Common Stock contemplated hereby
(the "Equity Offering"), the Company is offering $75,000,000 aggregate principal
amount of Senior Notes due 2008 (the "Notes Offering") by means of a separate
prospectus. The consummation of the Equity Offering and the consummation of the
Notes Offering are not conditioned on each other.
The Company wishes to confirm as follows its agreement with the several
Underwriters, in connection with the several purchases of the Shares by the
Underwriters.
1. REGISTRATION STATEMENT AND PROSPECTUS. The Company has prepared and
filed with the Securities and Exchange
<PAGE>
-2-
Commission (the "Commission") in accordance with the provisions of the
Securities Act of 1933, as amended, and the rules and regulations of the
Commission thereunder (collectively, the "Act"), a registration statement on
Form S-2 (File No. 333-40739) under the Act (the "registration statement"),
including a prospectus subject to completion relating to the Shares. The term
"Registration Statement" as used in this Agreement means the registration
statement (including all financial schedules and exhibits), as amended at the
time it becomes effective, or, if the registration statement became effective
prior to the execution of this Agreement, as supplemented or amended prior to
the execution of this Agreement. If it is contemplated, at the time this
Agreement is executed, that a post-effective amendment to the registration
statement will be filed and must be declared effective before the offering of
the Shares may commence, the term "Registration Statement" as used in this
Agreement means the registration statement as amended by said post-effective
amendment. The term "Prospectus" as used in this Agreement means the prospectus
in the form included in the Registration Statement, or, if the prospectus
included in the Registration Statement omits information in reliance on Rule
430A under the Act and such information is included in a prospectus filed with
the Commission pursuant to Rule 424(b) under the Act, the term "Prospectus" as
used in this Agreement means the prospectus in the form included in the
Registration Statement as supplemented by the addition of the Rule 430A
information contained in the prospectus filed with the Commission pursuant to
Rule 424(b). The term "Prepricing Prospectus" as used in this Agreement means
the prospectus subject to completion in the form included in the registration
statement at the time of the initial filing of the registration statement with
the Commission, and as such prospectus shall have been amended from time to time
prior to the date of the Prospectus. If the Company elects to rely on Rule 434
under the Act, all references to the Prospectus shall be deemed to include,
without limitation, the form of prospectus and the terms sheet contemplated by
Rule 434, taken together, provided to the Underwriters by the Company in
reliance on Rule 434 under the Act (the "Rule 434 Prospectus"). If the Company
has filed or files another registration statement with the Commission to
register a portion of the Shares pursuant to Rule 462(b) under the Act (the
"Rule 462 Registration Statement"), then any reference to "Registration
Statement" herein shall be deemed to include the Registration Statement on Form
S-2 (File No. 333-40739) and the Rule 462 Registration Statement, as each such
registration statement may be amended pursuant to the Act. Any reference in this
Agreement to the registration statement, the Registration Statement, any
Prepricing Prospectus or the Prospectus shall be
<PAGE>
-3-
deemed to refer to and include the documents incorporated by reference therein
pursuant to Item 12 of Form S-2 under the Act. As used herein, the term
"Incorporated Documents" means the documents which are incorporated by reference
into the registration statement, the Registration Statement, any Prepricing
Prospectus, the Prospectus, or any amendment or supplement thereto.
2. AGREEMENTS TO SELL AND PURCHASE. The Company hereby agrees, subject
to all the terms and conditions set forth herein, to issue and sell to each
Underwriter and, upon the basis of the representations, warranties and
agreements of the Company herein contained and subject to all the terms and
conditions set forth herein, each Underwriter agrees, severally and not jointly,
to purchase from the Company, at a purchase price of $[ ] per Share (the
"purchase price per share"), the number of Firm Shares set forth opposite the
name of such Underwriter in Schedule I hereto (or such number of Firm Shares
increased as set forth in Section 10 hereof).
The Company also agrees, subject to all the terms and conditions set
forth herein, to sell to the Underwriters, and, upon the basis of the
representations, warranties and agreements of the Company herein contained and
subject to all the terms and conditions set forth herein, the Underwriters shall
have the right to purchase from the Company, at the purchase price per share,
pursuant to an option (the "over-allotment option") which may be exercised at
any time and from time to time prior to 9:00 P.M., New York City time, on the
30th day after the date of the Prospectus (or, if such 30th day shall be a
Saturday or Sunday or a holiday, on the next business day thereafter when the
New York Stock Exchange is open for trading), up to an aggregate of 405,000
Additional Shares. Additional Shares may be purchased only for the purpose of
covering over-allotments made in connection with the offering of the Firm
Shares. Upon any exercise of the over-allotment option, each Underwriter,
severally and not jointly, agrees to purchase from the Company the number of
Additional Shares (subject to such adjustments as you may determine in order to
avoid fractional shares) which bears the same proportion to the number of
Additional Shares to be purchased by the Underwriters as the number of Firm
Shares set forth opposite the name of such Underwriter in Schedule I hereto (or
such number of Firm Shares increased as set forth in Section 10 hereof) bears to
the aggregate number of Firm Shares.
3. TERMS OF PUBLIC OFFERING. The Company has been advised by you that
the Underwriters propose to make a public
<PAGE>
-4-
offering of their respective portions of the Shares as soon after the
Registration Statement and this Agreement have become effective as in your
judgment is advisable and initially to offer the Shares upon the terms set forth
in the Prospectus.
4. DELIVERY OF THE SHARES AND PAYMENT THEREFOR. Delivery to the
Underwriters of and payment for the Firm Shares shall be made at the office of
Smith Barney Inc., 388 Greenwich Street, New York, N.Y. 10013, at 10:00 A.M.,
New York City time, on January , 1998 (the "Closing Date"). The place of closing
for the Firm Shares and the Closing Date may be varied by agreement between you
and the Company.
Delivery to the Underwriters of and payment for any Additional Shares
to be purchased by the Underwriters shall be made at the aforementioned office
of Smith Barney Inc. at such time on such date (the "Option Closing Date"),
which may be the same as the Closing Date but shall in no event be earlier than
the Closing Date nor earlier than three nor later than ten business days after
the giving of the notice hereinafter referred to, as shall be specified in a
written notice from you on behalf of the Underwriters to the Company of the
Underwriters' determination to purchase a number, specified in such notice, of
Additional Shares. The place of closing for any Additional Shares and the Option
Closing Date for such Shares may be varied by agreement between you and the
Company.
Certificates for the Firm Shares and for any Additional Shares to be
purchased hereunder shall be registered in such names and in such denominations
as you shall request by written notice prior to 9:30 A.M., New York City time,
on or before the second business day preceding the Closing Date or any Option
Closing Date, as the case may be. Such certificates shall be made available to
you in New York City for inspection and packaging not later than 9:30 A.M., New
York City time, on the business day next preceding the Closing Date or the
Option Closing Date, as the case may be. The certificates evidencing the Firm
Shares and any Additional Shares to be purchased hereunder shall be delivered to
you on the Closing Date or the Option Closing Date, as the case may be, against
payment of the purchase price therefor in immediately available funds by wire
transfer to the Company's account specified in writing to you by the Company.
5. AGREEMENTS OF THE COMPANY. The Company agrees with the several
Underwriters as follows:
<PAGE>
-5-
(a) If, at the time this Agreement is executed and delivered,
it is necessary for the Registration Statement or a post-effective
amendment thereto to be declared effective before the offering of the
Shares may commence, the Company will endeavor to cause the
Registration Statement or such post-effective amendment to become
effective as soon as possible and will advise you promptly and, if
requested by you, will confirm such advice in writing, when the
Registration Statement or such post-effective amendment has become
effective.
(b) The Company will advise you promptly and, if requested by
you, will confirm such advice in writing: (i) of any request by the
Commission for amendment of or a supplement to the Registration
Statement, any Prepricing Prospectus or the Prospectus or for
additional information; (ii) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement
or of the suspension of qualification of the Shares for offering or
sale in any jurisdiction or the initiation of any proceeding for such
purpose; and (iii) within the period of time referred to in paragraph
(f) below, of any change in the Company's condition (financial or
other), business, prospects, properties, net worth or results of
operations, or of the happening of any event, which makes any statement
of a material fact made in the Registration Statement or the Prospectus
(as then amended or supplemented) untrue or which requires the making
of any additions to or changes in the Registration Statement or the
Prospectus (as then amended or supplemented) in order to state a
material fact required by the Act or the regulations thereunder to be
stated therein or necessary in order to make the statements therein not
misleading, or of the necessity to amend or supplement the Prospectus
(as then amended or supplemented) to comply with the Act or any other
law. If at any time the Commission shall issue any stop order
suspending the effectiveness of the Registration Statement, the Company
will make every reasonable effort to obtain the withdrawal of such
order at the earliest possible time.
(c) The Company will furnish to you, without charge, (i) four
signed copies of the registration statement as originally filed with
the Commission and of each amendment thereto, including financial
state-
<PAGE>
-6-
ments and all exhibits to the registration statement, (ii) such number
of conformed copies of the registration statement as originally filed
and of each amendment thereto, but without exhibits, as you may
request, (iii) such number of copies of the Incorporated Documents,
without exhibits, as you may request, and (iv) four copies of the
exhibits to the Incorporated Documents.
(d) The Company will not (i) file any amendment to the
Registration Statement or make any amendment or supplement to the
Prospectus of which you shall not previously have been advised or to
which you shall reasonably object after being so advised or (ii) so
long as, in the opinion of counsel for the Underwriters, a Prospectus
is required to be delivered in connection with sales by any Underwriter
or dealer, file any information, documents or reports pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act")
without delivering a copy of such information, documents or reports to
the Underwriters prior to or concurrently with such filing.
(e) Prior to the execution and delivery of this Agreement, the
Company has delivered to you, without charge, in such quantities as you
have requested, copies of each form of the Prepricing Prospectus. The
Company consents to the use, in accordance with the provisions of the
Act and with the securities or Blue Sky laws of the jurisdictions in
which the Shares are offered by the several Underwriters and by
dealers, prior to the date of the Prospectus, of each Prepricing
Prospectus so furnished by the Company.
(f) As soon after the execution and delivery of this Agreement
as possible and thereafter from time to time for such period as in the
opinion of counsel for the Underwriters a prospectus is required by the
Act to be delivered in connection with sales by any Underwriter or
dealer, the Company will expeditiously deliver to each Underwriter and
each dealer, without charge, as many copies of the Prospectus (and of
any amendment or supplement thereto) as you may request. The Company
consents to the use of the Prospectus (and of any amendment or
supplement thereto) in accordance with the provisions of the Act and
with the securities or Blue Sky laws of the jurisdictions in which the
Shares are offered by the several Underwriters and by
<PAGE>
-7-
all dealers to whom Shares may be sold, both in connection with the
offering and sale of the Shares and for such period of time thereafter
as the Prospectus is required by the Act to be delivered in connection
with sales by any Underwriter or dealer. If during such period of time
any event shall occur that in the judgment of the Company or in the
reasonable opinion of counsel for the Underwriters is required to be
set forth in the Prospectus (as then amended or supplemented) or should
be set forth therein in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading,
or if it is necessary to supplement or amend the Prospectus to comply
with the Act or any other law, the Company will forthwith prepare and,
subject to the provisions of paragraph (d) above, file with the
Commission an appropriate supplement or amendment thereto, and will
expeditiously furnish to the Underwriters and dealers a reasonable
number of copies thereof. In the event that the Company and you agree
that the Prospectus should be amended or supplemented, the Company, if
requested by you, will promptly issue a press release announcing or
disclosing the matters to be covered by the proposed amendment or
supplement.
(g) The Company will cooperate with you and with counsel for
the Underwriters in connection with the registration or qualification
of the Shares for offering and sale by the several Underwriters and by
dealers under the securities or Blue Sky laws of such jurisdictions as
you may designate and will file such consents to service of process or
other documents necessary or appropriate in order to effect such
registration or qualification; provided that in no event shall the
Company be obligated to qualify to do business in any jurisdiction
where it is not now so qualified or to take any action which would
subject it to service of process in suits, other than those arising out
of the offering or sale of the Shares, or to taxation in any
jurisdiction where it is not now so subject.
(h) The Company will make generally available to its security
holders a consolidated earnings statement, which need not be audited,
covering a twelve-month period commencing after the effective date of
the Registration Statement and ending not later than 15 months
thereafter, as soon as practica-
<PAGE>
-8-
ble after the end of such period, which consolidated earnings statement
shall satisfy the provisions of Section ll(a) of the Act.
(i) During the period of three years hereafter, the Company
will furnish to you (i) as soon as available, a copy of each report of
the Company mailed to stockholders or filed with the Commission, and
(ii) from time to time such other information concerning the Company as
you may reasonably request.
(j) If this Agreement shall terminate or shall be terminated
after execution pursuant to any provisions hereof (otherwise than
pursuant to the second paragraph of Section 10 hereof or by notice
given by you terminating this Agreement pursuant to Section 10 or
Section 11 hereof) or if this Agreement shall be terminated by the
Underwriters because of any failure or refusal on the part of the
Company to comply with the terms or fulfill any of the conditions of
this Agreement, the Company agrees to reimburse the Underwriters for
all out-of-pocket expenses (including fees and expenses of counsel for
the Underwriters) incurred by you in connection herewith.
(k) The Company will apply the net proceeds from the sale of
the Shares substantially in accordance with the description set forth
in the Prospectus.
(l) If Rule 430A of the Act is employed, the Company will
timely file the Prospectus pursuant to Rule 424(b) under the Act and
will advise you of the time and manner of such filing.
(m) Except as provided in this Agreement, the Company will not
sell, contract to sell or otherwise dispose of any Common Stock or any
securities convertible into or exercisable or exchangeable for Common
Stock, or grant any options or warrants to purchase Common Stock,
except for (i) grants of awards under the Company's existing employee
benefit plans, (ii) issuances of Common Stock upon the exercise of
outstanding stock options or (iii) issuances of Common Stock upon the
conversion of the Company's 7% Convertible Subordinated Notes due 2000,
for a period of 120 days after the date of the Prospectus, without the
prior written consent of Smith Barney Inc.
<PAGE>
-9-
(n) The Company has furnished or will furnish to you "lock-up"
letters, in the form attached as Exhibit A hereto, signed by each of
its officers and directors identified under the heading "Management" in
the Prospectus.
(o) Except as stated in this Agreement and in the Prepricing
Prospectus and Prospectus, the Company has not taken, nor will it take,
directly or indirectly, any action designed to or that might reasonably
be expected to cause or result in stabilization or manipulation of the
price of the Common Stock to facilitate the sale or resale of the
Shares.
(p) The Company will use its best efforts to have the Shares
listed, subject to notice of issuance, on the Nasdaq National Market on
or before the Closing Date.
6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to each Underwriter that:
(a) Each Prepricing Prospectus included as part of the
registration statement as originally filed or as part of any amendment
or supplement thereto, or filed pursuant to Rule 424 under the Act,
complied when so filed in all material respects with the provisions of
the Act. The Commission has not issued any order preventing or
suspending the use of any Prepricing Prospectus.
(b) The Company has reasonable grounds to believe that it
meets the requirements for the use of Form S-2 under the Act. The
Registration Statement in the form in which it became or becomes
effective and also in such form as it may be when any post-effective
amendment thereto shall become effective and the Prospectus and any
supplement or amendment thereto when filed with the Commission under
Rule 424(b) under the Act, complied or will comply in all material
respects with the provisions of the Act and did not or will not at any
such times contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading, except that this
representation and warranty does not apply to statements in or
omissions from the Registration Statement or the Prospectus made in
reliance upon and in conformity
<PAGE>
-10-
with information relating to any Underwriter furnished to the Company
in writing by or on behalf of any Underwriter through you expressly for
use therein.
(c) The Incorporated Documents, when they were filed (or, if
any amendment with respect to any such document was filed, when such
amendment was filed), complied in all material respects with the
requirements of the Exchange Act and the rules and regulations
thereunder, and did not contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein not misleading.
(d) All the outstanding shares of Common Stock of the Company
have been duly authorized and validly issued, are fully paid and
nonassessable and are free of any preemptive or similar rights; the
Shares have been duly authorized and, when issued and delivered to the
Underwriters against payment therefor in accordance with the terms
hereof, will be validly issued, fully paid and nonassessable and free
of any preemptive or similar rights; and the capital stock of the
Company conforms to the description thereof in the Registration
Statement and the Prospectus.
(e) The Company is a corporation duly organized and validly
existing in good standing under the laws of the State of Florida with
full corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Registration
Statement and the Prospectus, and is duly registered and qualified to
conduct its business and is in good standing in each jurisdiction or
place where the nature of its properties or the conduct of its business
requires such registration or qualification, except where the failure
so to register or qualify does not have a material adverse effect on
the condition (financial or other), business, properties, net worth or
results of operations of the Company and the Subsidiaries (as
hereinafter defined) taken as a whole (a "Material Adverse Effect").
(f) All of the Company's subsidiaries (collectively, the
"Subsidiaries") are listed in an exhibit to the Company's Annual Report
on Form 10-K which is incorporated by reference into the Registration
Statement. Each Subsidiary is a corporation duly organ-
<PAGE>
-11-
ized, validly existing and in good standing in the jurisdiction of its
incorporation, with full corporate power and authority to own, lease
and operate its properties and to conduct its business as described in
the Registration Statement and the Prospectus, and is duly registered
and qualified to conduct its business and is in good standing in each
jurisdiction or place where the nature of its properties or the conduct
of its business requires such registration or qualification, except
where the failure so to register or qualify does not have a Material
Adverse Effect; all the outstanding shares of capital stock of each of
the Subsidiaries have been duly authorized and validly issued, are
fully paid and nonassessable, and are owned by the Company directly, or
indirectly through one of the other Subsidiaries, free and clear of any
lien, adverse claim, security interest, equity, or other encumbrance.
(g) There are no legal or governmental proceedings pending or,
to the knowledge of the Company, threatened, against the Company or any
of the Subsidiaries, or to which the Company or any of the
Subsidiaries, or to which any of their respective properties, is
subject, that are required to be described in the Registration
Statement or the Prospectus but are not described as required, and
there are no agreements, contracts, indentures, leases or other
instruments that are required to be described in the Registration
Statement or the Prospectus or to be filed as an exhibit to the
Registration Statement or any Incorporated Document that are not
described or filed as required by the Act or the Exchange Act.
(h) Neither the Company nor any of the Subsidiaries is in
violation of its certificate or articles of incorporation or by-laws,
or other organizational documents, or of any law, ordinance,
administrative or governmental rule or regulation applicable to the
Company or any of the Subsidiaries or of any decree of any court or
governmental agency or body having jurisdiction over the Company or any
of the Subsidiaries, or in default in any material respect in the
performance of any obligation, agreement or condition contained in any
bond, debenture, note, or other evidence of indebtedness, or in any
material agreement, indenture, lease or other instrument to which the
Company or any of the Subsidiaries is a party or by which any
<PAGE>
-12-
of them or any of their respective properties may be bound, other than
any such violations or defaults that have not had and will not have,
individually or in the aggregate, a Material Adverse Effect.
(i) Neither the issuance and sale of the Shares, the
execution, delivery or performance of this Agreement by the Company nor
the consummation by the Company of the transactions contemplated hereby
(i) requires any consent, approval, authorization or other order of or
registration or filing with, any court, regulatory body, administrative
agency or other governmental body, agency or official (except such as
may be required for the registration of the Shares under the Act and
compliance with the securities or Blue Sky laws of various
jurisdictions, all of which have been or will be effected in accordance
with this Agreement), or conflicts or will conflict with or constitutes
or will constitute a breach of, or a default under, the certificate or
articles of incorporation or bylaws, or other organizational documents,
of the Company or any of the Subsidiaries or (ii) conflicts or will
conflict with or constitutes or will constitute a breach of, or a
default under, any agreement, indenture, lease or other instrument to
which the Company or any of the Subsidiaries is a party or by which any
of them or any of their respective properties may be bound, or violates
or will violate any statute, law, regulation or filing or judgment,
injunction, order or decree applicable to the Company or any of the
Subsidiaries or any of their respective properties, other than any such
conflicts, breaches, defaults or violations that have not had and will
not have a Material Adverse Effect, or will result in the creation or
imposition of any lien, charge or encumbrance upon any property or
assets of the Company or any of the Subsidiaries pursuant to the terms
of any agreement or instrument to which any of them is a party or by
which any of them may be bound or to which any of the property or
assets of any of them is subject.
(j) The accountants, BDO Seidman, LLP, who have certified the
financial statements included or incorporated by reference in the
Registration Statement and the Prospectus (or any amendment or
supplement thereto) are independent public accountants as required by
the Act.
<PAGE>
-13-
(k) The financial statements, together with related schedules
and notes, included or incorporated by reference in the Registration
Statement and the Prospectus (and any amendment or supplement thereto),
present fairly the consolidated financial position, results of
operations, shareholders' equity and cash flows of the Company and the
Subsidiaries on the basis stated in the Registration Statement at the
respective dates or for the respective periods to which they apply;
such statements and related schedules and notes have been prepared in
accordance with generally accepted accounting principles consistently
applied throughout the periods involved, except as disclosed therein;
and the other financial and statistical information and data included
or incorporated by reference in the Registration Statement and the
Prospectus (and any amendment or supplement thereto) are accurately
presented and prepared on a basis consistent with such financial
statements and the books and records of the Company and the
Subsidiaries.
(l) The execution and delivery of, and the performance by the
Company of its obligations under, this Agreement, have been duly and
validly authorized by the Company, and this Agreement has been duly
executed and delivered by the Company and constitutes the valid and
legally binding agreement of the Company, enforceable against the
Company in accordance with its terms, except to the extent
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to creditors'
rights generally or by general equitable principles, and except as
rights to indemnity and contribution hereunder may be limited by
federal or state securities laws or other applicable laws or public
policy.
(m) Except as disclosed in the Registration Statement and the
Prospectus (or any amendment or supplement thereto), subsequent to the
respective dates as of which such information is given in the
Registration Statement and the Prospectus (or any amendment or
supplement thereto), neither the Company nor any of the Subsidiaries
has incurred any liability or obligation, direct or contingent, or
entered into any transaction, not in the ordinary course of business,
that is material to the Company and the Subsidiaries taken as a whole,
and there has not been any material change in the capital stock, or
material increase, on a con-
<PAGE>
-14-
solidated basis, in the short-term debt or long-term debt of the
Company and the Subsidiaries taken as a whole, or any material adverse
change, or any development involving or which may reasonably be
expected to involve, a prospective material adverse change, in the
condition (financial or other), business, net worth or results of
operations of the Company and the Subsidiaries taken as a whole (a
"Material Adverse Change").
(n) Each of the Company and the Subsidiaries has good and
marketable title to all property (real and personal) described in the
Prospectus as being owned by it, free and clear of all liens, claims,
security interests or other encumbrances except such as are described
in the Registration Statement and the Prospectus or in a document filed
as an exhibit to the Registration Statement, and except for other
encumbrances including purchase money liens entered into in the
ordinary course of business which are not required to be described in
the Registration Statement, and all the property described in the
Prospectus as being held under lease by the Company or any Subsidiary
is held by it under valid, subsisting and enforceable leases.
(o) The Company has not distributed and, prior to the later to
occur of (i) the Closing Date and (ii) completion of the distribution
of the Shares, will not distribute any offering material in connection
with the offering and sale of the Shares other than the Registration
Statement, the Prepricing Prospectus, the Prospectus or other
materials, if any, permitted by the Act.
(p) The Company and each of the Subsidiaries has such permits,
licenses, franchises and authorizations of governmental or regulatory
authorities ("permits") as are necessary to own its respective
properties and to conduct its business in the manner described in the
Prospectus, subject to such qualifications as may be set forth in the
Prospectus, except such permits as may be necessary for the development
and construction on specific properties or where the failure to have
any such permits has not had and will not have a Material Adverse
Effect; the Company and each of the Subsidiaries has fulfilled and
performed all its material obligations with respect to such permits and
no event has occurred which allows, or after notice or lapse of time
would allow, revocation or termination thereof or
<PAGE>
-15-
results in any other material impairment of the rights of the holder of
any such permit, subject in each case to such qualification as may be
set forth in the Prospectus and except to the extent that any such
revocation or termination would not have a Material Adverse Effect;
and, except as described in the Prospectus, none of such permits
contains any restriction that is materially burdensome to the Company
or any of the Subsidiaries except such restrictions that will not have
a Material Adverse Effect.
(q) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management's general or
specific authorization; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for
assets; (iii) access to assets is permitted only in accordance with
management's general or specific authorization; and (iv) the recorded
accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to
any differences.
(r) To the Company's knowledge, neither the Company nor any of
its Subsidiaries nor any employee or agent of the Company or any
Subsidiary has made any payment of funds of the Company or any
Subsidiary or received or retained any funds in violation of any law,
rule or regulation, which payment, receipt or retention of funds is of
a character required to be disclosed in the Prospectus.
(s) The Company and each of the Subsidiaries have filed all
tax returns required to be filed under applicable law, which returns
are complete and correct in all material respects, and neither the
Company nor any Subsidiary is in default in the payment of any taxes
which were payable pursuant to said returns or any assessments with
respect thereto.
(t) Except as described in the Registration Statement, no
holder of any security of the Company has any right to require
registration of shares of Common Stock or any other security of the
Company because of the filing of the registration statement or
<PAGE>
-16-
consummation of the transactions contemplated by this Agreement.
(u) The Company and the Subsidiaries own or possess all
patents, trademarks, trademark registration, service marks, service
mark registrations, trade names, copyrights, licenses, inventions,
trade secrets and rights described in the Prospectus as being owned or
possessed by them or any of them or necessary for the conduct of their
respective businesses, and the Company is not aware of any claim to the
contrary or any challenge by any other person to the rights of the
Company and the Subsidiaries with respect to the foregoing.
(v) The Company is not now, and after sale of the Shares and
application of the net proceeds from such sale as described in the
Prospectus under the caption "Use of Proceeds" will not be, an
"investment company" within the meaning of the Investment Company Act
of 1940, as amended.
(w) The Company has complied with all provisions of Florida
Statutes, 157.075, relating to issuers doing business with Cuba.
7. INDEMNIFICATION AND CONTRIBUTION. (a) The Company agrees to
indemnify and hold harmless each of you and each other Underwriter and each
person, if any, who controls any Underwriter within the meaning of Section 15 of
the Act or Section 20(a) of the Exchange Act from and against any and all
losses, claims, damages, liabilities and expenses (including reasonable costs of
investigation) arising out of or based upon any untrue statement or alleged
untrue statement of a material fact contained in any Prepricing Prospectus or in
the Registration Statement or the Prospectus or in any amendment or supplement
thereto, or arising out of or based upon any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, except insofar as such losses, claims,
damages, liabilities or expenses arise out of or are based upon any untrue
statement or omission or alleged untrue statement or omission which has been
made therein or omitted therefrom in reliance upon and in conformity with the
information relating to such Underwriter furnished in writing to the Company by
or on behalf of any Underwriter through you expressly for use in connection
therewith; provided, however, that the indemnification contained in this
paragraph (a) with respect to any Prepricing
<PAGE>
-17-
Prospectus shall not inure to the benefit of any Underwriter (or to the benefit
of any person controlling such Underwriter) on account of any such loss, claim,
damage, liability or expense arising from the sale of the Shares by such
Underwriter to any person if a copy of the Prospectus shall not have been
delivered or sent to such person within the time required by the Act and the
regulations thereunder, and the untrue statement or alleged untrue statement or
omission or alleged omission of a material fact contained in such Prepricing
Prospectus was corrected in the Prospectus, provided that the Company has
delivered the Prospectus to the several Underwriters in requisite quantity on a
timely basis to permit such delivery or sending. The foregoing indemnity
agreement shall be in addition to any liability which the Company may otherwise
have.
(b) If any action, suit or proceeding shall be brought against any
Underwriter or any person controlling any Underwriter in respect of which
indemnity may be sought against the Company, such Underwriter or such
controlling person shall promptly notify the Company and the Company shall
assume the defense thereof, including the employment of counsel and payment of
all fees and expenses. Such Underwriter or any such controlling person shall
have the right to employ separate counsel in any such action, suit or proceeding
and to participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of such Underwriter or such controlling person
unless (i) the Company has agreed in writing to pay such fees and expenses, (ii)
the Company has failed to assume the defense and employ counsel, or (iii) the
named parties to any such action, suit or proceeding (including any impleaded
parties) include both such Underwriter or such controlling person and the
Company and such Underwriter or such controlling person shall have been advised
by its counsel that representation of such indemnified party and the Company by
the same counsel would be inappropriate under applicable standards of
professional conduct (whether or not such representation by the same counsel has
been proposed) due to actual or potential differing interests between them (in
which case the Company shall not have the right to assume the defense of such
action, suit or proceeding on behalf of such Underwriter or such controlling
person). It is understood, however, that the Company shall, in connection with
any one such action, suit or proceeding or separate but substantially similar or
related actions, suits or proceedings in the same jurisdiction arising out of
the same general allegations or circumstances, be liable for the reasonable fees
and expenses of only one separate firm of attorneys (in addition to any local
counsel) at any time for all such Underwriters and controlling persons not
having actual
<PAGE>
-18-
or potential differing interests with you or among themselves, which firm shall
be designated in writing by Smith Barney Inc., and that all such fees and
expenses shall be reimbursed as they are incurred. The Company shall not be
liable for any settlement of any such action, suit or proceeding effected
without its written consent, but if settled with such written consent, or if
there be a final judgment for the plaintiff in any such action, suit or
proceeding, the Company agrees to indemnify and hold harmless any Underwriter,
to the extent provided in the preceding paragraph, and any such controlling
person from and against any loss, claim, damage, liability or expense by reason
of such settlement or judgment.
(c) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors, its officers who sign the
Registration Statement, and any person who controls the Company within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, to the
same extent as the foregoing indemnity from the Company to each Underwriter, but
only with respect to information relating to such Underwriter furnished in
writing by or on behalf of such Underwriter through you expressly for use in the
Registration Statement, the Prospectus or any Prepricing Prospectus, or any
amendment or supplement thereto. If any action, suit or proceeding shall be
brought against the Company, any of its directors, any such officer, or any such
controlling person, based on the Registration Statement, the Prospectus or any
Prepricing Prospectus, or any amendment or supplement thereto, and in respect of
which indemnity may be sought against any Underwriter pursuant to this paragraph
(c), such Underwriter shall have the rights and duties given to the Company by
paragraph (b) above (except that if the Company shall have assumed the defense
thereof such Underwriter shall not be required to do so, but may employ separate
counsel therein and participate in the defense thereof, but the fees and
expenses of such counsel shall be at such Underwriter's expense), and the
Company, its directors, any such officer, and any such controlling person shall
have the rights and duties given to the Underwriters by paragraph (b) above. The
foregoing indemnity agreement shall be in addition to any liability which the
Underwriters may otherwise have.
(d) If the indemnification provided for in this Section 7 is
unavailable to an indemnified party under paragraphs (a) or (c) hereof in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then an indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemni-
<PAGE>
-19-
fied party as a result of such losses, claims, damages, liabilities or expenses
(i) in such proportion as is appropriate to reflect the relative benefits
received by the Company on the one hand and the Underwriters on the other hand
from the offering of the Shares, or (ii) if the allocation provided by clause
(i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company on the one hand and the
Underwriters on the other in connection with the statements or omissions that
resulted in such losses, claims, damages, liabilities or expenses, as well as
any other relevant equitable considerations. The relative benefits received by
the Company on the one hand and the Underwriters on the other shall be deemed to
be in the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company bear to the total underwriting
discounts and commissions received by the Underwriters, in each case as set
forth in the table on the cover page of the Prospectus. The relative fault of
the Company on the one hand and the Underwriters on the other hand shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company on the one hand
or by the Underwriters on the other hand and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
(e) The Company and the Underwriters agree that it would not be just
and equitable if contribution pursuant to this Section 7 were determined by a
pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation that does not take account of
the equitable considerations referred to in paragraph (d) above. The amount paid
or payable by an indemnified party as a result of the losses, claims, damages,
liabilities and expenses referred to in paragraph (d) above shall be deemed to
include, subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
any claim or defending any such action, suit or proceeding. Notwithstanding the
provisions of this Section 7, no Underwriter shall be required to contribute any
amount in excess of the amount by which the total price of the Shares
underwritten by it and distributed to the public exceeds the amount of any
damages which such Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within
<PAGE>
-20-
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations to contribute pursuant to this Section 7 are several
in proportion to the respective numbers of Firm Shares set forth opposite their
names in Schedule I hereto (or such numbers of Firm Shares increased as set
forth in Section 10 hereof) and not joint.
(f) No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
action, suit or proceeding in respect of which any indemnified party is or could
have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such action, suit or proceeding.
(g) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 7 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 7 and the
representations and warranties of the Company set forth in this Agreement shall
remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Underwriter or any person controlling
any Underwriter, the Company, its directors or officers, or any person
controlling the Company, (ii) acceptance of any Shares and payment therefor
hereunder, and (iii) any termination of this Agreement. A successor to any
Underwriter or any person controlling any Underwriter, or to the Company, its
directors or officers, or any person controlling the Company, shall be entitled
to the benefits of the indemnity, contribution and reimbursement agreements
contained in this Section 7.
8. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The several obligations of
the Underwriters to purchase the Firm Shares hereunder are subject to the
following conditions:
(a) If, at the time this Agreement is executed and delivered,
it is necessary for the registration statement or a post-effective
amendment thereto to be declared effective before the offering of the
Shares may commence, the registration statement or such post-effective
amendment shall have become effective not later than 5:30 P.M., New
York City time, on the
<PAGE>
-21-
date hereof, or at such later date and time as shall be consented to in
writing by you, and all filings, if any, required by Rules 424 and 430A
under the Act shall have been timely made; no stop order suspending the
effectiveness of the Registration Statement shall have been issued and
no proceeding for that purpose shall have been instituted or, to the
knowledge of the Company or any Underwriter, threatened by the
Commission, and any request of the Commission for additional
information (to be included in the Registration Statement or the
Prospectus or otherwise) shall have been complied with to your
satisfaction.
(b) Subsequent to the effective date of this Agreement, there
shall not have occurred (i) any change or any development involving a
prospective change, in or affecting the condition (financial or other),
business, properties, net worth, or results of operations of the
Company and the Subsidiaries, taken as a whole, not contemplated by the
Prospectus, which in your opinion would materially adversely affect the
market for the Shares, or (ii) any event or development relating to or
involving the Company or any officer or director of the Company which
makes any statement made in the Prospectus untrue or which, in the
opinion of the Company and its counsel or the Underwriters and their
counsel, requires the making of any addition to or change in the
Prospectus in order to state a material fact required by the Act or any
other law to be stated therein or necessary in order to make the
statements therein not misleading, if amending or supplementing the
Prospectus to reflect such event or development would, in your opinion
materially adversely affect the market for the Shares.
(c) You shall have received on the Closing Date, an opinion of
Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A., Miami,
Florida, counsel for the Company, dated the Closing Date and addressed
to the Underwriters, to the effect that:
(i) The Company is a corporation duly incorporated
and validly existing in good standing under the laws of the
State of Florida with full corporate power and authority to
own, lease and operate its properties and to conduct its
business as described in the Registration Statement
<PAGE>
-22-
and the Prospectus; (and any amendment or supplement thereto);
(ii) Each of the Subsidiaries is a corporation
validly existing in good standing under the laws of the
jurisdiction of its organization, with full corporate power
and authority to own, lease, and operate its properties and to
conduct its business as described in the Registration
Statement and the Prospectus (and any amendment or supplement
thereto); and all the outstanding shares of capital stock of
each of the Subsidiaries have been duly authorized and validly
issued, are fully paid and nonassessable, and are owned of
record by the Company directly, or indirectly through one of
the other Subsidiaries, to such counsel's knowledge free and
clear of any perfected security interest, or, to the knowledge
of such counsel after reasonable inquiry, any other security
interest, lien, adverse claim or other encumbrance;
(iii) The authorized and, to such counsel's
knowledge, outstanding, capital stock of the Company was as
set forth under the caption "Capitalization -Actual" in the
Prospectus as of the applicable date indicated therein and the
authorized capital stock of the Company conforms in all
material respects as to legal matters to the description
thereof contained in the Prospectus under the caption
"Description of Capital Stock";
(iv) All the shares of capital stock of the Company
outstanding prior to the issuance of the Shares have been duly
authorized and validly issued, and are fully paid and
nonassessable;
(v) The Shares have been duly authorized and, when
issued and delivered to the Underwriters against payment
therefor in accordance with the terms hereof, will be validly
issued, fully paid and nonassessable and free of any statutory
preemptive rights, or, to the knowledge of such counsel after
reasonable inquiry, similar rights that entitle or will
entitle any person to acquire any Shares upon the issuance
thereof by the Company;
<PAGE>
-23-
(vi) The form of certificates for the Shares conforms
to the requirements of the Florida Business Corporation Act;
(vii) Based solely upon telephonic advice from the
Commission, the Registration Statement and all post-effective
amendments, if any, have become effective under the Act and,
to the knowledge of such counsel after reasonable inquiry, no
stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose
are pending before or contemplated by the Commission; and any
required filing of the Prospectus pursuant to Rule 424(b) has
been made in accordance with Rule 424(b);
(viii) The Company has corporate power and authority
to enter into this Agreement and to issue, sell and deliver
the Shares to the Underwriters as provided herein, and this
Agreement has been duly authorized, executed and delivered by
the Company and is a valid, legal and binding agreement of the
Company, enforceable against the Company in accordance with
its terms, except as enforcement of rights to indemnity and
contribution hereunder may be limited by Federal or state
securities or other applicable laws or principles of public
policy and subject to the qualification that the
enforceability of the Company's obligations hereunder may be
limited by bankruptcy, fraudulent conveyance, insolvency,
reorganization, moratorium, and other laws relating to or
affecting creditors' rights generally and by general equitable
principles;
(ix) Neither the Company nor any of the Subsidiaries
is (A) in violation of its respective certificate or articles
of incorporation or bylaws, or other organizational documents,
or (B) to the knowledge of such counsel after reasonable
inquiry, is in default in the performance of any material
obligation, agreement or condition contained in any bond,
debenture, note or other evidence of indebtedness, except as
may be disclosed in the Prospectus, other than any such
violations or defaults that have not had and will
<PAGE>
-24-
not have, individually or in the aggregate, a Material Adverse
Effect;
(x) Neither the offer, sale or delivery of the
Shares, the execution, delivery or performance of this
Agreement, compliance by the Company with the provisions
hereof nor consummation by the Company of the transactions
contemplated hereby (A) conflicts or will conflict with or
constitutes or will constitute a breach of, or a default
under, the certificate or articles of incorporation or bylaws,
or other organizational documents, of the Company or any of
the Subsidiaries or any agreement, indenture, lease or other
instrument to which the Company or any of the Subsidiaries is
a party or by which any of them or any of their respective
properties is bound that is an exhibit to the Registration
Statement or to any Incorporated Document, or other material
agreements known to such counsel after reasonable inquiry, or
(B) will result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the
Company or any of the Subsidiaries, nor (C) will any such
action result in any violation of any existing law,
regulation, ruling (assuming compliance with all applicable
state securities and Blue Sky laws and all applicable rules
and regulations of the National Association of Securities
Dealers, Inc. (the "NASD")), judgment, injunction, order or
decree known to such counsel after reasonable inquiry,
applicable to the Company, the Subsidiaries or any of their
respective properties, except, in each case, as has not had
and will not have a Material Adverse Effect;
(xi) No consent, approval, authorization or other
order of, or registration or filing with, any court,
regulatory body, administrative agency or other governmental
body, agency, or official is required on the part of the
Company (except (A) as have been obtained under the Act and
the Exchange Act, and (B) as may be required under state
securities or Blue Sky laws and the rules and regulations of
the NASD, as to which such counsel need not express any
opinion) for the valid issuance and sale of the Shares to the
Underwriters as contemplated by this Agreement;
<PAGE>
-25-
(xii) The Registration Statement and the Prospectus
and any supplements or amendments thereto (except for the
financial statements and the notes thereto and the schedules
and other financial and statistical data included therein, as
to which such counsel need not express any opinion) comply as
to form in all material respects with the requirements of the
Act; and each of the Incorporated Documents (except for the
financial statements and the notes thereto and the schedules
and other financial and statistical data included therein, as
to which such counsel need not express any opinion), when
filed with the Commission under the Exchange Act, complied as
to form in all material respects with the Exchange Act and the
rules and regulations of the Commission thereunder;
(xiii) To the knowledge of such counsel after
reasonable inquiry, (A) other than as described or
contemplated in the Prospectus (or any supplement thereto),
there are no legal or governmental proceedings pending or
threatened against the Company or any of the Subsidiaries, or
to which the Company or any of the Subsidiaries, or any of
their property, is subject, which are required to be described
in the Registration Statement or Prospectus (or any amendment
or supplement thereto) and (B) there are no agreements,
contracts, indentures, leases or other instruments, that are
required to be described in the Registration Statement or the
Prospectus (or any amendment or supplement thereto) or to be
filed as an exhibit to the Registration Statement or any
Incorporated Document that are not described or filed as
required, as the case may be;
(xiv) To the knowledge of such counsel after
reasonable inquiry, neither the Company nor any of the
Subsidiaries is in violation of any law, ordinance,
administrative or governmental rule or regulation applicable
to the Company or any of the Subsidiaries or of any decree of
any court or governmental agency or body having jurisdiction
over the Company or any of the Subsidiaries, other than any
such violations that have not had and are not reasonably
expected to have a Material Adverse Effect;
<PAGE>
-26-
(xv) The statements in the Registration Statement and
Prospectus, insofar as they are descriptions of contracts,
agreements or other legal documents, or refer to statements of
law or legal conclusions, are accurate and present fairly the
information required to be shown; and
(xvi) Although counsel has not undertaken, except as
otherwise indicated in their opinion, to determine
independently, and does not assume any responsibility for, the
accuracy or completeness of the statements in the Registration
Statement, such counsel has participated in the preparation of
the Registration Statement and the Prospectus, including
review and discussion of the contents thereof (including
review and discussion of the contents of all Incorporated
Documents), and nothing has come to the attention of such
counsel that has caused them to believe that the Registration
Statement (including the Incorporated Documents) at the time
the Registration Statement became effective, contained an
untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to
make the statements therein not misleading or that the
Prospectus or any amendment or supplement to the Prospectus,
as of its respective date, and as of the Closing Date or the
Option Closing Date, as the case may be, contained any untrue
statement of a material fact or omitted to state a material
fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not
misleading (it being understood that such counsel need express
no opinion with respect to the financial statements and the
notes thereto and the schedules and other financial and
statistical data included in the Registration Statement or the
Prospectus or any Incorporated Document).
In rendering their opinion as aforesaid, counsel may rely upon
an opinion or opinions, each dated the Closing Date, of other counsel
retained by them or the Company as to laws of any jurisdiction other
than the United States or the State of Florida or the State of New
York, provided that (1) each such local counsel is acceptable to the
Underwriters, (2) such reliance is expressly authorized by each opin-
<PAGE>
-27-
ion so relied upon and a copy of each such opinion is delivered to the
Underwriters and is, in form and substance satisfactory to them and
their counsel, and (3) counsel shall state in their opinion that they
believe that they and the Underwriters are justified in relying
thereon. In rendering such opinion, such counsel may rely, to the
extent they deem such reliance proper, as to matters of fact upon
certificates of officers of the Company and of government officials,
provided that a copy of any such certificate is delivered to the
Underwriters.
(d) You shall have received on the Closing Date, an
opinion of Kerry Safier, Esq., corporate counsel for the
Company, dated the Closing Date and addressed to the
Underwriters, to the effect that:
(i) The Company and each of the Subsidiaries
has full corporate power and authority, and all
necessary governmental authorizations, approvals,
orders, licenses, certificates, franchises and
permits of and from all governmental regulatory
officials and bodies (except where the failure so to
have any such authorizations, approvals, orders,
licenses, certificates, franchises or permits,
individually or in the aggregate, would not have a
Material Adverse Effect to own their respective
properties and to conduct their respective businesses
as now being conducted, as described in the
Prospectus and the Company and each of the
Subsidiaries is duly registered and qualified to
conduct its business and is in good standing in each
jurisdiction or place where the nature of its
properties or the conduct of its business requires
such registration or qualification, except where the
failure so to register or qualify does not have a
Material Adverse Effect;
(ii) Except as disclosed in the Prospectus,
the Company owns of record, directly or indirectly,
all the outstanding shares of capital stock of each
of the Subsidiaries free and clear of any lien,
adverse claim, security interest, equity, or other
encumbrance;
(iii) The Company and the Subsidiaries own
all patents, trademarks, trademark registrations,
service marks, service mark registrations, trade
names, copyrights, licenses, inventions, trade
<PAGE>
-28-
secrets and rights described in the Prospectus as
being owned by them or any of them or necessary for
the conduct of their respective businesses, and such
counsel is not aware of any claim to the contrary or
any challenge by any other person to the rights of
the Company and the Subsidiaries with respect to the
foregoing;
(iv) Neither the Company nor any of the
Subsidiaries is in violation of any law, ordinance,
administrative or governmental rule or regulation
applicable to the Company or any of the Subsidiaries
or of any decree of any court or governmental agency
or body having jurisdiction over the Company or any
of the Subsidiaries;
(v) Except as described in the Prospectus,
there are no outstanding options, warrants or other
rights calling for the issuance of, and such counsel
does not know of any commitment, plan or arrangement
to issue, any shares of capital stock of the Company
or any security convertible into or exchangeable or
exercisable for capital stock of the Company; and
(vi) Except as described in the Prospectus,
there is no holder of any security of the Company or
any other person who has the right, contractual or
otherwise, to cause the Company to sell or otherwise
issue to them, or to permit them to underwrite the
sale of, the Shares or the right to have any Common
Stock or other securities of the Company included in
the registration statement or the right, as a result
of the filing of the registration statement, to
require registration under the Act of any shares of
Common Stock or other securities of the Company.
(e) You shall have received on the Closing Date an
opinion of Cahill Gordon & Reindel (a partnership including a
professional corporation), New York, New York, counsel for the
Underwriters, dated the Closing Date and addressed to the
Underwriters, with respect to the matters referred to in
clauses (v) (assuming due authorization and provided that such
counsel need not express any opinion with respect to the
existence of any preemptive or similar rights), (vii), (viii),
<PAGE>
-29-
(xii) and (xvi) of the foregoing paragraph (c) and such other
related matters as you may request.
(f) You shall have received letters addressed to the
Underwriters, and dated the date hereof and the Closing Date
from BDO Seidman, LLP, independent certified public
accountants, substantially in the forms heretofore approved by
you.
(g) (i) No stop order suspending the effectiveness of
the Registration Statement shall have been issued and no
proceedings for that purpose shall have been taken or, to the
knowledge of the Company, shall be contemplated by the
Commission at or prior to the Closing Date; (ii) there shall
not have been any change in the capital stock of the Company
nor any material increase in the short-term or long-term debt
of the Company (other than in the ordinary course of business)
from that set forth in or contemplated by the Registration
Statement or the Prospectus (or any amendment or Supplement
thereto); (iii) there shall not have been, since the
respective dates as of which information is given in the
Registration Statement and the Prospectus (or any amendment or
supplement thereto), except as may otherwise be stated in the
Registration Statement and Prospectus (or any amendment or
supplement thereto), any Material Adverse Change; (iv) the
Company and the Subsidiaries shall not have any liabilities or
obligations, direct or contingent (whether or not in the
ordinary course of business), that are material to the Company
and the Subsidiaries, taken as a whole, other than those
reflected in the Registration Statement or the Prospectus (or
any amendment or supplement thereto); and (v) all the
representations and warranties of the Company contained in
this Agreement shall be true and correct in all material
respects on and as of the date hereof and on and as of the
Closing Date as if made on and as of the Closing Date, and you
shall have received a certificate, dated the Closing Date and
signed by the chief executive officer and the chief financial
officer of the Company (or such other officers as are
acceptable to you), to the effect set forth in this Section
8(g) and in Section 8(h) hereof.
(h) The Company shall not have failed at or prior to
the Closing Date to have performed or complied in all material
respects with any of its agree-
<PAGE>
-30-
ments herein contained and required to be performed or
complied with by it hereunder at or prior to the Closing Date.
(i) Prior to the Closing Date the Shares shall have
been listed, subject to notice of issuance, on the Nasdaq
National Market.
(j) The Company shall have furnished or caused to be
furnished to you such further certificates and documents as
you shall have reasonably requested.
All such opinions, certificates, letters and other documents
will be in compliance with the provisions hereof only if they are
satisfactory in form and substance to you and your counsel.
Any certificate or document signed by any officer of the
Company and delivered to the Underwriters, or to counsel for the
Underwriters, each in connection with any purchase and sale of Shares
hereunder, shall be deemed a representation and warranty by the Company
to each Underwriter as to the statements made therein.
The several obligations of the Underwriters to purchase
Additional Shares hereunder are subject to the satisfaction on and as
of any Option Closing Date of the conditions set forth in this Section
8, except that, if any Option Closing Date is other than the Closing
Date, the certificates, opinions and letters referred to in paragraphs
(c) through (g) shall be dated the Option Closing Date in question and
the opinions called for by paragraphs (c), (d) and (e) shall be revised
to reflect the sale of Additional Shares.
9. EXPENSES. The Company agrees to pay the following costs and expenses
and all other costs and expenses incident to the performance by it of its
obligations hereunder: (i) the preparation, printing or reproduction, and filing
with the Commission of the registration statement (including financial
statements and exhibits thereto), each Prepricing Prospectus, the Prospectus,
and each amendment or supplement to any of them; (ii) the printing (or
reproduction) and delivery (including postage, air freight charges and charges
for counting and packaging) of such copies of the registration statement, each
Prepricing Prospectus, the Prospectus, the Incorporated Documents, and all
amendments or supplements to any of them, as may be reasonably requested for use
in connection with
<PAGE>
-31-
the offering and sale of the Shares; (iii) the preparation, printing,
authentication, issuance and delivery of certificates for the Shares, including
any stamp taxes in connection with the original issuance and sale of the Shares;
(iv) the printing (or reproduction) and delivery of this Agreement, the Blue Sky
Memorandum and all other agreements or documents printed (or reproduced) and
delivered in connection with the offering of the Shares; (v) the registration of
the Shares under the Exchange Act and the listing of the Shares on the Nasdaq
National Market; (vi) the registration or qualification of the Shares for offer
and sale under the securities or Blue Sky laws of the several states as provided
in Section 5(g) hereof (including the reasonable fees, expenses and
disbursements of counsel for the Underwriters relating to the preparation,
printing or reproduction, and delivery of the Blue Sky Memorandum and such
registration and qualification); (vii) the filing fees in connection with any
filings required to be made with the National Association of Securities Dealers,
Inc.; (viii) the transportation and other expenses incurred by or on behalf of
Company representatives in connection with presentations to prospective
purchasers of the Shares; and (ix) the fees and expenses of the Company's
accountants and the fees and expenses of counsel (including local and special
counsel) for the Company.
10. EFFECTIVE DATE OF AGREEMENT. This Agreement shall become effective:
(i) upon the execution and delivery hereof by the parties hereto; or (ii) if, at
the time this Agreement is executed and delivered, it is necessary for the
registration statement or a post-effective amendment thereto to be declared
effective before the offering of the Shares may commence, when notification of
the effectiveness of the registration statement or such post-effective amendment
has been released by the Commission. Until such time as this Agreement shall
have become effective, it may be terminated by the Company, by notifying you, or
by the Underwriters, by notifying the Company.
If any one or more of the Underwriters shall fail or refuse to purchase
Shares which it or they are obligated to purchase hereunder on the Closing Date,
and the aggregate number of Shares which such defaulting Underwriter or
Underwriters are obligated but fail or refuse to purchase is not more than
one-tenth of the aggregate number of Shares which the Underwriters are obligated
to purchase on the Closing Date, each non-defaulting Underwriter shall be
obligated, severally, in the proportion which the number of Firm Shares set
forth opposite its name in Schedule I hereto bears to the aggregate num-
<PAGE>
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ber of Firm Shares set forth opposite the names of all non-defaulting
Underwriters or in such other proportion as you may specify in accordance with
Section 20 of the Master Agreement Among Underwriters of Smith Barney Inc., to
purchase the Shares which such defaulting Underwriter or Underwriters are
obligated, but fail or refuse, to purchase. If any one or more of the
Underwriters shall fail or refuse to purchase Shares which it or they are
obligated to purchase on the Closing Date and the aggregate number of Shares
with respect to which such default occurs is more than one-tenth of the
aggregate number of Shares which the Underwriters are obligated to purchase on
the Closing Date and arrangements satisfactory to you and the Company for the
purchase of such Shares by one or more non-defaulting Underwriters or other
party or parties approved by you and the Company are not made within 36 hours
after such default, this Agreement will terminate without liability on the part
of any non-defaulting Underwriter or the Company. In any such case which does
not result in termination of this Agreement, either you or the Company shall
have the right to postpone the Closing Date, but in no event for longer than
seven days, in order that the required changes, if any, in the Registration
Statement and the Prospectus or any other documents or arrangements may be
effected. Any action taken under this paragraph shall not relieve any defaulting
Underwriter from liability in respect of any such default of any such
Underwriter under this Agreement. The term "Underwriter" as used in this
Agreement includes, for all purposes of this Agreement, any party not listed in
Schedule I hereto who, with your approval and the approval of the Company,
purchases Shares which a defaulting Underwriter is obligated, but fails or
refuses, to purchase.
Any notice under this Section 10 may be given by telegram, telecopy or
telephone but shall be subsequently confirmed by letter.
11. TERMINATION OF AGREEMENT. This Agreement shall be subject to
termination in your absolute discretion, without liability on the part of any
Underwriter to the Company, by notice to the Company, if prior to the Closing
Date or any Option Closing Date (if different from the Closing Date and then
only as to the Additional Shares), as the case may be, (i) trading in securities
generally on the New York Stock Exchange, the American Stock Exchange or the
Nasdaq National Market shall have been suspended or materially limited, (ii) a
general moratorium on commercial banking activities in New York or Florida shall
have been declared by either federal or state authorities, or (iii) there shall
have occurred any outbreak or esca-
<PAGE>
-33-
lation of hostilities or other international or domestic calamity, crisis or
change in political, financial or economic conditions, the effect of which on
the financial markets of the United States is such as to make it, in your
judgment, impracticable or inadvisable to commence or continue the offering of
the Shares at the offering price to the public set forth on the cover page of
the Prospectus or to enforce contracts for the resale of the Shares by the
Underwriters. Notice of such termination may be given to the Company by
telegram, telecopy or telephone and shall be subsequently confirmed by letter.
12. INFORMATION FURNISHED BY THE UNDERWRITERS. The statements set forth
in the last paragraph on the cover page, the stabilization legend and the
passive market making legend on the inside cover page, and the statements in the
third, seventh and eighth paragraphs under the caption "Underwriting" in any
Prepricing Prospectus and in the Prospectus, constitute the only information
furnished by or on behalf of the Underwriters through you as such information is
referred to in Sections 6(b) and 7 hereof.
13. MISCELLANEOUS. Except as otherwise provided in Sections 5, 10 and
11 hereof, notice given pursuant to any provision of this Agreement shall be in
writing and shall be delivered (i) if to the Company, at the office of the
Company at 123 N.W. 13th Street, Boca Raton, Florida 33432, Attention: David
Shapiro, Vice President - Finance, with a copy to Greenberg, Traurig, Hoffman,
Lipoff, Rosen & Quentel, P.A., 1221 Brickell Avenue, Miami, Florida 33131,
Attention: Brian J. Walsh, Esq.; or (ii) if to the Underwriters, care of Smith
Barney Inc., 388 Greenwich Street, New York, New York 10013, Attention: Manager,
Investment Banking Division.
This Agreement has been and is made solely for the benefit of the
several Underwriters, the Company, its directors and officers, and the other
controlling persons referred to in Section 7 hereof and their respective
successors and assigns, to the extent provided herein, and no other person shall
acquire or have any right under or by virtue of this Agreement. Neither the term
"successor" nor the term "successors and assigns" as used in this Agreement
shall include a purchaser from any Underwriter of any of the Shares in his
status as such purchaser.
14. APPLICABLE LAW; COUNTERPARTS. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed within the State of New York.
<PAGE>
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This Agreement may be signed in various counterparts which together
constitute one and the same instrument. If signed in counterparts, this
Agreement shall not become effective unless at least one counterpart hereof
shall have been executed and delivered on behalf of each party hereto.
<PAGE>
-35-
Please confirm that the foregoing correctly sets forth the agreement
between the Company and the several Underwriters.
Very truly yours,
ENGLE HOMES, INC.
By
------------------------
Name:
Title:
Confirmed as of the date first
above mentioned.
SMITH BARNEY INC.
JEFFERIES & COMPANY, INC.
SOUTHEAST RESEARCH PARTNERS, INC.
By SMITH BARNEY INC.
By
------------------------------
Name:
Title:
<PAGE>
SCHEDULE I
ENGLE HOMES, INC.
NUMBER OF
UNDERWRITER FIRM SHARES
- ----------- -----------
Smith Barney Inc.
Jeffries & Company, Inc.
Southeast Research Partners, Inc.
___________
Total..... ___________
EXHIBIT 5.1
December 23, 1997
Engle Homes, Inc.
123 N.W. 13th Street
Boca Raton, Florida 33432
Re: ENGLE HOMES, INC.
REGISTRATION STATEMENT ON FORM S-2 (FILE NO. 333-40739)
Ladies and Gentlemen:
We have acted as counsel to Engle Homes, Inc., a Florida corporation
(the "Company"), in connection with the proposed public offering by the Company
of up to 3,105,000 shares (including 405,000 shares subject to an over-allotment
option) (the "Shares") of the Company's Common Stock, par value $.01 per share
(the "Common Stock").
This opinion is being furnished in accordance with the requirements of
Item 601(b)(5) of Regulation S-K under the Securities Act of 1933, as amended
(the "Act").
In connection with this opinion, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of (i) the Registration
Statement on Form S-2 (File No. 333-40739) as filed with the Securities and
Exchange Commission (the "Commission") on November 21, 1997 and Amendment No. 1
thereto as filed with the Commission on December 23, 1997 (such Registration
Statement, as so amended, being hereinafter referred to as the "Registration
Statement"); (ii) the form of the Underwriting Agreement (the "Underwriting
Agreement") proposed to be entered into between the Company, as issuer, and
Smith Barney Inc., Jefferies & Company, Inc. and Southeast Research Partners,
Inc., as underwriters (the "Underwriters"), filed as an exhibit to the
Registration Statement, (iii) a specimen certificate representing the Common
Stock; (iv) the Company's Amended and Restated Articles of Incorporation, as
presently in effect; (v) the By-Laws of the Company, as presently in effect;
(vi) certain resolutions of the Company's Board of Directors authorizing the
issuance and sale of the Shares and related matters; and (vii) such other
documents and instruments as we have deemed necessary for the expression of
opinions herein contained.
In making the foregoing examinations, we have assumed the legal
capacity of all natural persons, the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as certified or photostatic
copies and the authenticity of the originals of such latter documents. As to
various questions of fact material to this opinion, we have relied, to the
extent we deemed appropriate, upon representations or certificates of officers
or directors of the Company and upon documents,
<PAGE>
records and instruments furnished to us by the Company, without independently
verifying the accuracy of such documents, records and instruments.
Members of our firm are admitted to the bar in the State of Florida and
we do not express any opinion as to the laws of any other jurisdiction.
Based upon and subject to the foregoing, we are of the opinion that
when (i) the Registration Statement becomes effective; (ii) the price at which
the Shares are to be sold to the Underwriters pursuant to the Underwriting
Agreement and other matters relating to the issuance and sale of the Shares have
been approved by the Company's Board of Directors; (iii) the Underwriting
Agreement has been duly executed and delivered; and (iv) certificates
representing the Shares in the form of the specimen certificates examined by us
have been manually signed by an authorized officer of the transfer agent and
registrar for the Common Stock and registered by such transfer agent and
registrar, and delivered to and paid for by the Underwriters as contemplated by
the Underwriting Agreement, the Shares will be validly issued, fully paid and
nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. We also consent to the reference to our firm under the
caption "Legal Matters" in the prospectus comprising a part of the Registration
Statement. In giving such consent, we do not thereby admit that we are included
within the category of persons whose consent is required under Section 7 of the
Act or the rules and regulations promulgated thereunder.
Very truly yours,
/s/ Greenberg Traurig Hoffman
Lipoff Rosen & Quentel, P.A.
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 use in the Prospectus constituting a part of this
Registration Statement of our report dated November 10, 1997, relating to the
consolidated financial statements of Engle Homes, Inc., which is contained in
that Prospectus, and to the incorporation by reference of our report dated
November 10, 1997 relating to the schedule appearing in the Company's annual
report on Form 10-K/A for the year ended October 31, 1997.
We also consent to the reference to us under the captions "Selected
Consolidated Financial and Operating Data" and "Experts" in the Prospectus.
BDO SEIDMAN, LLP
Miami, Florida
December 22, 1997
