FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ---- EXCHANGE ACT OF 1934
For the quarterly period ended January 31, 2000
----------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
---------- -----------
For Quarter Ended Commission file number 0-19633
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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.)
123 N.W. 13th Street
Boca Raton, Florida 33432
- ------------------------------- --------------------------------
(Address of principal executive offices) (Zip code)
(Registrant's telephone number, including area code) (561) 391-4012
----------------------
NONE
- --------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such report(s), and (2) has been subject to filing requirements
for the past 90 days.
YES x NO
------ ------
Number of shares of common stock outstanding as of January 31, 2000: 11,038,996
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
ENGLE HOMES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(dollars in thousands)
<CAPTION>
January 31, October 31,
2000 1999
----------- -----------
(Unaudited)
<S> <C> <C>
ASSETS
CASH
Unrestricted $ 33,848 $ 60,944
Restricted 2,298 2,092
INVENTORIES 418,900 386,804
PROPERTY AND EQUIPMENT, net 6,037 6,221
OTHER ASSETS 27,088 26,354
GOODWILL 5,068 5,155
MORTGAGE LOANS HELD FOR SALE 16,668 27,323
--------- ----------
TOTAL ASSETS $ 509,907 $ 514,893
========= ==========
LIABILITIES
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES $ 31,850 $ 31,771
CUSTOMER DEPOSITS 17,535 16,279
BORROWINGS 4,850 5,457
SENIOR NOTES PAYABLE 248,233 248,178
FINANCIAL SERVICES BORROWINGS 16,329 26,776
--------- ---------
TOTAL LIABILITIES $ 318,797 $ 328,461
--------- ---------
SHAREHOLDERS' EQUITY
PREFERRED STOCK, $.01 par, share authorized
1,000,000, none issued
COMMON STOCK, $.01 par, shares authorized
25,000,000; issued and outstanding 11,038,996
and 11,047,977, respectively 110 110
ADDITIONAL PAID-IN CAPITAL 101,912 102,060
RETAINED EARNINGS 89,088 84,262
--------- ---------
TOTAL SHAREHOLDERS' EQUITY 191,110 186,432
--------- ---------
$ 509,907 $ 514,893
========= =========
<FN>
See accompanying notes to condensed consolidated financial statements.
</FN>
</TABLE>
2
<TABLE>
ENGLE HOMES, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)
(dollars in thousands, except per share data)
<CAPTION>
THREE MONTHS ENDED
JANUARY 31,
---------------------
2000 1999
--------- ---------
<S> <C> <C>
REVENUES
Sales of homes $ 154,680 $ 143,034
Sales of land 6,784 1,399
Rent and other 1,170 1,052
Financial services 4,540 5,234
--------- ---------
167,174 150,719
--------- ---------
COSTS AND EXPENSES
Cost of sales - homes 129,855 121,255
Cost of sales - land 6,138 1,323
Selling, marketing, general
and administrative 17,148 15,483
Depreciation and amortization 1,576 1,165
Financial services 3,797 3,830
--------- ---------
158,514 143,056
--------- ---------
INCOME BEFORE INCOME TAX 8,660 7,663
Provision for income taxes 3,170 2,958
--------- ---------
NET INCOME $ 5,490 $ 4,705
========= =========
Net income per share
Basic $ 0.50 $ 0.42
Diluted $ 0.50 $ 0.42
Shares used in earnings per
share calculations
Basic 11,047 11,182
Diluted 11,081 11,313
<FN>
See accompanying notes to condensed consolidated financial statements.
</FN>
</TABLE>
3
<TABLE>
ENGLE HOMES, INC. AND SUBSIDIARIES
Condensed Consolidated Statement of Shareholders' Equity
For the Three Months Ended January 31, 2000
(Unaudited)
(in thousands)
<CAPTION>
COMMON STOCK ADDITIONAL
-------------- PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
------ ------ ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
Amounts at
October 31, 1999 11,048 $ 110 $ 102,060 $ 84,262 $186,432
Net Income for the
Three Months Ended
January 31, 2000 5,490 5,490
Dividends to
Shareholders (664) (664)
Common stock issued
in connection with
employee stock bonus
plan 38 365 365
Common stock acquired
in connection with
stock repurchase plan (47) (513) (513)
------ ----- ---------- --------- ---------
Amounts at
January 31, 2000 11,039 $ 110 $ 101,912 $ 89,088 $191,110
====== ===== ========== ========= =========
<FN>
See accompanying notes to condensed consolidated financial statements.
</FN>
</TABLE>
4
<TABLE>
ENGLE HOMES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(dollars in thousands)
<CAPTION>
THREE MONTHS ENDED
JANUARY 31,
----------------------
2000 1999
---------- ----------
<S> <C> <C>
NET CASH REQUIRED BY OPERATING ACTIVITIES $ (24,300) $ (474)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Net acquisitions of property
and equipment (1,012) (2,420)
---------- ----------
Net cash required by investing activities (1,012) (2,420)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in borrowings 8,989
Repayment of borrowings (607) (8,434)
Distribution to shareholders (664) (447)
Stock options exercised 96
Repurchase of common stock (513)
---------- ----------
Net cash (required) provided by
financing activities (1,784) 204
---------- ----------
NET DECREASE IN CASH (27,096) (2,690)
CASH AT BEGINNING OF PERIOD 60,944 20,041
---------- ----------
CASH AT END OF PERIOD $ 33,848 $ 17,351
========== ==========
<FN>
See accompanying notes to condensed consolidated financial statements.
</FN>
</TABLE>
5
ENGLE HOMES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
NOTE 1 BASIS OF PRESENTATION AND BUSINESS
These statements do not contain all information required by generally
accepted accounting principles that are included in a full set of financial
statements. In the opinion of management, the accompanying unaudited condensed
consolidated financial statements reflect all adjustments necessary to present
fairly the financial position of Engle Homes, Inc. and subsidiaries ("the
Company") at January 31, 2000 and results of its operations and its cash flows
for the period then ended and for the period ended January 31, 1999. These
unaudited condensed consolidated financial statements should be read in
conjunction with the audited financial statements and notes contained in the
Company's Form 10-K for the year ended October 31, 1999. Results of operations
for this period are not necessarily indicative of results to be expected for the
full year.
Engle Homes, Inc. and subsidiaries are engaged principally in construction
and sale of residential homes and land development in Florida; Dallas, Texas;
Denver, Colorado; Raleigh, North Carolina; Atlanta, Georgia; Phoenix, Arizona
and Virginia. Ancillary products and services to its residential homebuilding
include land sales to other builders, origination and sale of mortgage loans,
and title transfer 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.
<TABLE>
NOTE 2 INVENTORIES (dollars in thousands)
<CAPTION>
January 31, October 31,
2000 1999
--------- -----------
<S> <C> <C>
Land and improvements for residential homes
under development $ 289,602 $ 275,373
Residential homes under construction 129,298 111,431
--------- ---------
$ 418,900 $ 386,804
========= =========
</TABLE>
<TABLE>
NOTE 3 CAPITALIZATION OF INTEREST (dollars in thousands)
Included in inventory is the following:
<CAPTION>
For the Three Months
Ended January 31,
--------------------
2000 1999
--------- ---------
<S> <C> <C>
Interest capitalized,
beginning of period $ 19,205 $ 16,326
Interest incurred and
capitalized 5,947 4,695
Amortized to cost of sales - homes (3,606) (4,147)
Amortized to cost of sales - land (264) (70)
--------- ---------
Interest capitalized, end of period $ 21,282 $ 16,804
6 ========= =========
</TABLE>
NOTE 4 SHAREHOLDERS' EQUITY
On November 15, 1999, the Company declared a cash dividend of $.06 per
share to shareholders of record on November 24, 1999, which was paid on
December 14, 1999.
During the first quarter of fiscal year 2000, the Company repurchased
47,500 shares of common stock at an average price of $10.82 per share.
NOTE 5 - EARNINGS PER SHARE
<TABLE>
Basic and diluted earnings per share are calculated as follows:
<CAPTION>
For the Three Months
Ended January 31,
2000 1999
-------- --------
<S> <C> <C>
Basic:
Net Income $ 5,490 $ 4,705
Weighted average number of common shares
outstanding 11,047 11,182
-------- --------
Basic earnings per share 0.50 0.42
======== ========
Diluted:
Net Income $ 5,490 $ 4,705
======== ========
Weighted average number of common shares
outstanding 11,047 11,182
Options to acquire common stock 34 131
-------- --------
Diluted weighted average common shares
outstanding 11,081 11,313
-------- --------
Diluted earnings per share 0.50 0.42
======== ========
</TABLE>
7
Part 1 - Item II
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
<TABLE>
The following table sets forth for the periods indicated certain items of
the Company's financial statements expressed as a percentage of the Company's
total revenues:
<CAPTION>
For the Three
Months Ended
January 31,
-----------------
2000 1999
------ -------
<S> <C> <C>
Total Revenues 100.0% 100.0%
Costs of home construction and
land sales 81.3 81.3
Selling, marketing, general and
administrative expense 10.3 10.3
Income before taxes 5.2 5.1
</TABLE>
<TABLE>
Backlog
Sales of the Company's homes are generally made pursuant to a standard
contract which requires a down payment of up to 10% of the sales price. The
contract includes a financing contingency which permits the customer to cancel
in the event mortgage financing at prevailing interest rates (including
financing arranged by the Company) is unobtainable within a specified period,
typically four to six weeks. The Company includes an undelivered home sale in
its backlog upon execution of the sales contracts 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.
The following table sets forth the Company's backlog for the periods indicated:
<CAPTION>
January 31,
(dollars in thousands)
2000 1999
---------------- ----------------
Units Dollars Units Dollars
----- --------- ----- ---------
<S> <C> <C> <C> <C>
South Florida 474 110,100 371 $ 80,000
Central Florida 407 87,200 428 86,100
West Coast Florida 236 46,700 161 26,000
Dallas, Texas 157 30,300 123 21,000
Denver, Colorado 190 47,800 244 51,300
Virginia 119 34,900 119 28,600
Raleigh, North Carolina 11 2,700 36 7,700
Atlanta, Georgia 59 11,700 25 4,400
Phoenix, Arizona 218 50,200 251 52,300
----- --------- ------ ---------
TOTAL 1,871 $ 421,600 1,758 $ 357,400
===== ========= ====== =========
</TABLE>
8
The Company is currently marketing in 89 subdivisions at January 31, 2000,
compared to 89 subdivisions at January 31, 1999. At January 31, 2000, the
Company was marketing 15 subdivisions in South Florida; 21 in Central Florida;
11 in West Coast Florida; 8 in Denver, CO; 13 in Dallas, TX; 4 in Virginia;
11 in Phoenix, Arizona and 6 in Atlanta, Georgia.
Result of Operations:
Three Months Ended January 31, 2000 compared to January 31, 1999.
The Company's revenues from home sales for the quarter ended January 31,
2000 increased $11.6 million (or 8.1%) compared to the same period in fiscal
1999. The number of homes delivered increased 1.0% (to 735 from 729) and the
average selling price of homes delivered increased 7.1% (to $210,000 from
$196,000). The increase of revenues is primarily attributable to the increase
of the average selling price of homes delivered during the quarter compared
with the prior year period. 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 during the three months ended
January 31, 2000, increased approximately $5.4 million as compared to the same
period in fiscal 1999, primarily as a result of an apartment land sale in South
Florida of $3.4 million and sale of homebuilding lots in our Tampa, Florida
division in the amount of $2.9 million.
Cost of home sales increased $8.6 million (or 7.1%) compared to the
quarter ended January 31, 1999, primarily due to the related increase in home
sale revenues. Cost of home sales as a percentage of home sales decreased to
84.0% from 85.8% as a result of the product mix of homes delivered.
Primarily as a result of an increase in revenues, net income increased by
$785,000 in the three months ended January 31, 2000 from the comparable period
in fiscal 1999.
Liquidity and Capital Resources
The Company's financing needs are provided by cash flows from operations,
unsecured bank borrowings and from time to time the public debt and equity
markets.
Cash flow from operations, before inventory additions, has improved as a
result of increased revenue. The Company anticipates that cash flow from
operations before inventory additions will continue to increase in fiscal year
2000 as a result of increased revenues from new home deliveries.
On January 31, 2000, the Company's $100 million unsecured revolving credit
facility, which expires in May 2002, had outstanding borrowings of $100,000.
In addition, $10.6 million of letters of credit are outstanding at January 31,
2000. The Company believes that funds generated from operations and expected
borrowing availability under the Credit Facility will be sufficient to fund the
Company's working capital requirements during fiscal 2000, with the exception
of major land acquisitions, if any.
In addition, Preferred Home Mortgage Company (PHMC) has a warehouse line
of credit in the amount of $40.0 million which is guaranteed by the Company.
At January 31,2000 the outstanding balance was $16.3 million to service
9
origination of mortgage loans. The Company believes that this line is
sufficient for its mortgage banking operation for the remainder of fiscal 2000.
Management does not anticipate that PHMC'S expansion of its operation will
significantly impact 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 2000, the
Company has not retained servicing rights relating to loans sold.
LAND ACQUISITION. The Company is continually exploring opportunities to
purchase parcels of land for its homebuilding operations and is, at any given
time, in various stages of proposing, making offers for, and negotiating the
acquisition of various parcels, whether outright or through options. The
Company has continued to increase its land development and construction
activities in response to current and anticipated demand and expects to pursue
additional land acquisition and development opportunities in the future.
Risk Relating to the "Year 2000 Issue"
The Company has done an assessment of the homebuilding and corporate
operations that utilize the significant information technology ("IT") system
and non-IT systems ("Systems") (embedded technology such as microprocessors
in office equipment). The Company believes that the IT system is Year 2000
compliant in all material aspects and has not experienced any business
disruptions related to the Year 2000 problem.
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Certain information included in this
Report and other such Company filings (collectively, "SEC filings") under the
Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as
amended (as well as information communicated orally or in writing between the
dates of such SEC filings) contains or may contain information that is forward
looking, related to subject matter such as national and local economic
conditions, the effect of governmental regulation on the Company, the
competitive environment in which the Company operates, changes in interest
rates, home prices, availability and cost of land for future growth,
availability of working capital and the availability and cost of labor and
materials. Such forward looking information involves important risks and
uncertainties that could significantly affect expected results. These risks
and uncertainties are addressed in this and other SEC filings.
10
SIGNATURES
Pursuant to the requirements of the
Securities Exchange Act of 1934, the
registrant has duly caused this report
to be signed on its behalf by the
undersigned thereunto duly authorized.
ENGLE HOMES, INC.
-----------------
(Registrant)
Date: FEBRUARY 16, 2000 \s\ ALEC ENGELSTEIN
- ------------------------ ------------------------
Alec Engelstein
Chief Executive Officer
Date: FEBRUARY 16, 2000 \s\ DAVID SHAPIRO
- ------------------------ ------------------------
David Shapiro
Chief Financial Officer
11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-2000
<PERIOD-END> JAN-31-2000
<CASH> 36146
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 418900
<CURRENT-ASSETS> 0
<PP&E> 6037
<DEPRECIATION> 0
<TOTAL-ASSETS> 509907
<CURRENT-LIABILITIES> 0
<BONDS> 248233
0
0
<COMMON> 110
<OTHER-SE> 191000
<TOTAL-LIABILITY-AND-EQUITY> 509907
<SALES> 161464
<TOTAL-REVENUES> 167174
<CGS> 135993
<TOTAL-COSTS> 135993
<OTHER-EXPENSES> 22521
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 8660
<INCOME-TAX> 3170
<INCOME-CONTINUING> 5490
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5490
<EPS-BASIC> 0.50
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</TABLE>
