FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C.
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- --- ACT OF 1934
For the Quarterly Period Ended December 31, 1998
-----------------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- --- ACT OF 1934
For the Transition Period From To
------------------- ----------------------
Commission file number 1-14122
---------
D.R. HORTON, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 75-2386963
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1901 Ascension Blvd., Suite 100, Arlington, Texas 76006
- ------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(817) 856-8200
----------------------------------------------------
(Registrant's telephone number, including area code)
----------------------------------------------------
(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 reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common stock, $.01 par value -- 64,145,843 shares as of February 10, 1999
----------
This Report contains 18 pages.
--
<PAGE>
INDEX
D.R. HORTON, INC.
PART I. FINANCIAL INFORMATION. Page
----
ITEM 1. Financial Statements.
Consolidated Balance Sheets--December 31, 1998
and September 30, 1998. 3
Consolidated Statements of Income--Three Months Ended
December 31, 1998 and 1997. 4
Consolidated Statement of Stockholders' Equity--Three
Months Ended December 31, 1998. 5
Consolidated Statements of Cash Flows--Three Months
Ended December 31, 1998 and 1997. 6
Notes to Consolidated Financial Statements. 7-9
ITEM 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition. 10-14
PART II. OTHER INFORMATION.
ITEM 2. Changes in Securities. 15
ITEM 6. Exhibits and Reports on Form 8-K. 15-17
SIGNATURES. 18
<PAGE>
D.R. HORTON, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, September 30,
1998 1998
------------ --------------
(In thousands)
(Unaudited)
ASSETS
Homebuilding:
Cash $93,820 $76,754
Inventories:
Finished homes and construction in progress 758,019 717,709
Residential lots - developed and under development 703,528 630,252
Land held for development 5,734 10,072
---------- -----------
1,467,281 1,358,033
Property and equipment (net) 29,841 25,456
Earnest money deposits and other assets 74,808 74,827
Excess of cost over net assets acquired (net) 62,044 56,782
---------- -----------
1,727,794 1,591,852
---------- -----------
Financial Services:
Mortgage loans held for sale 64,576 72,325
Other assets 3,393 3,658
---------- -----------
67,969 75,983
---------- -----------
$1,795,763 $1,667,835
========== ===========
LIABILITIES
Homebuilding:
Accounts payable and other liabilities $256,816 $259,005
Notes payable:
Unsecured:
Revolving credit facility due 2002 535,000 455,000
8 3/8% senior notes due 2004, net 147,853 147,754
10% senior notes due 2006, net 147,187 147,156
6 7/8% convertible subordinated notes
due 2002, net - 58,794
Other secured 17,866 17,303
---------- -----------
847,906 826,007
---------- -----------
1,104,722 1,085,012
Financial Services:
Other liabilities 991 1,444
Notes payable to financial institutions 45,435 28,497
---------- -----------
46,426 29,941
---------- -----------
1,151,148 1,114,953
---------- -----------
Minority interest 3,534 3,446
---------- -----------
STOCKHOLDERS' EQUITY
Preferred stock, $.10 par value, 30,000,000
shares authorized, no shares issued - -
Common stock, $.01 par value, 200,000,000
shares authorized, 61,484,982 at December 31,
1998 and 55,836,733 at September 30, 1998,
issued and outstanding. 615 558
Additional capital 361,708 301,503
Retained earnings 278,758 247,375
---------- -----------
641,081 549,436
---------- -----------
$1,795,763 $1,667,835
========== ===========
See accompanying notes to consolidatedfinancial statements.
-3-
<PAGE>
D. R. HORTON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Three Months
Ended December 31,
--------------------------------
1998 1997
---------- ----------
(In thousands, except
net income per share)
(Unaudited)
Homebuilding:
Revenues
Home sales................................ $611,701 $417,836
Land/lot sales............................ 41,127 820
---------- ----------
652,828 418,656
---------- ----------
Cost of sales
Home sales................................ 497,375 341,945
Land/lot sales............................ 36,777 592
---------- ----------
534,152 342,537
---------- ----------
Gross profit
Home sales................................ 114,326 75,891
Land/lot sales............................ 4,350 228
---------- ----------
118,676 76,119
Selling, general and administrative expense... 65,571 45,727
Interest expense.............................. 2,793 2,475
Other (income)................................ (990) (1,043)
---------- ----------
51,302 28,960
---------- ----------
Financial Services:
Revenues...................................... 7,802 4,541
Selling, general and administrative expense... 4,974 3,297
Interest expense.............................. 743 317
Other (income)................................ (879) (531)
---------- ----------
2,964 1,458
---------- ----------
INCOME BEFORE INCOME TAXES................ 54,266 30,418
Provision for income taxes.................... 21,571 12,094
---------- ----------
NET INCOME................................ $32,695 $18,324
========== ==========
Net income per share:
Basic..................................... $0.54 $0.35
Diluted................................... $0.52 $0.31
========== ==========
Weighted average number of shares of
stock outstanding:
Basic..................................... 60,011 52,779
Diluted................................... 62,378 62,131
========== ==========
See accompanying notes to consolidated financial statements.
-4-
<PAGE>
D. R. HORTON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Total
Common Additional Retained Stockholders'
Stock Capital Earnings Equity
-------------------------------------------
(In thousands)
(Unaudited)
Balances at October 1, 1998 $558 $301,503 $247,375 $549,436
Net income - - 32,695 32,695
Issuance under D.R. Horton, Inc.
employee benefit plans (466 shares) - 6 - 6
Exercise of stock options (78,440
shares) 1 928 - 929
Conversion of convertible
subordinated notes (5,569,343
shares) 56 59,271 - 59,327
Cash dividends - - (1,312) (1,312)
-------------------------------------------
Balances at December 31, 1998 $615 $361,708 $278,758 $641,081
===========================================
See accompanying notes to consolidated financial statements.
-5-
<PAGE>
D. R. HORTON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months
Ended December 31,
----------------------
1998 1997
-------- --------
(In thousands)
(Unaudited)
OPERATING ACTIVITIES
Net income $32,695 $18,324
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 3,836 2,360
Expense associated with issuance of stock
under employee benefit plans - 115
Changes in operating assets and liabilities:
Increase in inventories (109,248) (65,399)
Increase in earnest money deposits and
other assets (895) (3,633)
Decrease (increase) in mortgage loans held
for sale 7,749 (163)
Decrease in accounts payable, accrued
expenses and customer deposits (626) (14,582)
---------- ----------
NET CASH USED IN OPERATING ACTIVITIES (66,489) (62,978)
---------- ----------
INVESTING ACTIVITIES
Net purchase of property and equipment (7,053) (1,157)
Net cash paid for acquisitions (6,300) (1,851)
---------- ----------
NET CASH USED IN INVESTING ACTIVITIES (13,353) (3,008)
---------- ----------
FINANCING ACTIVITIES
Net increase in notes payable 97,285 61,478
Proceeds from issuance of stock associated
with certain employee benefit plans 6 -
Proceeds from exercise of stock options 929 444
Payment of cash dividends (1,312) (1,090)
---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 96,908 60,832
---------- ----------
INCREASE (DECREASE) IN CASH 17,066 (5,154)
Cash at beginning of period 76,754 78,228
---------- ----------
Cash at end of period $93,820 $73,074
========== ==========
Supplemental cash flow information:
Interest paid $5,302 $4,369
========== ==========
Income taxes paid $6,031 $13,952
========== ==========
See accompanying notes to consolidated financial statements.
-6-
<PAGE>
D.R. HORTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
December 31, 1998
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited, consolidated financial statements include the
accounts of D.R. Horton, Inc. (the "Company") and its subsidiaries. Intercompany
accounts and transactions have been eliminated in consolidation. The statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and the instructions to Form 10-Q and
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
only of normal recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the three-month period ended December
31, 1998, are not necessarily indicative of the results that may be expected for
the year ending September 30, 1999.
Business - The Company is a national builder that is engaged primarily in the
construction and sale of single-family housing in the United States. The Company
designs, builds and sells single-family houses on lots developed by the Company
and on finished lots which it purchases, ready for home construction.
Periodically, the Company sells land or lots it has developed. The Company also
provides title agency and mortgage brokerage services to its homebuyers.
NOTE B - NET INCOME PER SHARE
Basic net income per share for the three month periods ended December 31, 1998
and 1997, is based on the weighted average number of shares of common stock
outstanding. Diluted net income per share is based on the weighted average
number of shares of common stock and dilutive common stock equivalents
outstanding.
NOTE C - PROVISIONS FOR INCOME TAXES
Deferred tax liabilities and assets, arising from temporary differences between
the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes, consist primarily of differences
in depreciation, warranty costs and inventory cost capitalization methods and
were, as of December 31, 1998, not significant.
The provisions for income tax expense for the three month periods ended December
31, 1998 and 1997, are based on the effective tax rates estimated to be in
effect for the respective years. The deferred income tax provisions were not
significant in either period.
The difference between income tax expense and tax computed by applying the
statutory Federal income tax rate to income before income taxes is due primarily
to the effect of applicable state income taxes.
NOTE D - INTEREST
Three months ended
December 31,
--------------------------
1998 1997
---- ----
Interest costs are (in thousands):
Capitalized interest, beginning of period $35,153 $28,952
Interest incurred-homebuilding 15,283 15,049
Interest expensed:
Directly-homebuilding (2,793) (2,475)
Amortized to cost of sales (14,884) (8,237)
---------- ----------
Capitalized interest, end of period $32,759 $33,289
========== ==========
-7-
<PAGE>
D.R. HORTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)
December 31, 1998
NOTE E - EVENTS SUBSEQUENT TO QUARTER END
On January 28, 1999, the Company acquired the operating assets (primarily
inventories) of Cambridge Homes of Chicago. In the transaction, the Company
issued 2,555,911 shares of common stock, valued at $55 million, and assumed
debt, consisting primarily of notes payable associated with the acquired assets,
of approximately $103 million, which was paid with borrowings under our
revolving credit facility. The Cambridge acquisition will be treated as a
purchase for accounting purposes. At December 31, 1998, Cambridge had a backlog
of homes under contract of approximately $88 million (475 homes).
On February 4, 1999, the Company issued $385 million, 8% senior notes, due
February 1, 2009, and realized net proceeds of $377 million, which was used to
repay borrowings under the revolving credit facility. The notes contain
covenants similar to those of the 8 3/8% and 10% senior notes, the most
significant of which limit the Company's ability to incur additional debt, pay
dividends on or repurchase common stock, invest in subsidiaries which are not
guarantors of the notes, and enter into certain transactions with affiliates.
NOTE F - SUMMARIZED FINANCIAL INFORMATION
The 8%, 8 3/8%, 10% senior notes payable are fully and unconditionally
guaranteed, on a joint and several basis, by all direct and indirect
subsidiaries other than certain inconsequential subsidiaries. Each of the
guarantors is a wholly-owned subsidiary. Summarized financial information of the
Company and its subsidiaries, including the non-guarantor subsidiaries, is
presented below. Additional financial information relating to the non-guarantor
financial services subsidiaries is included in the accompanying primary
financial statements. Separate financial statements and other disclosures
concerning the guarantor subsidiaries are not presented because management has
determined that they are not material to investors.
As of and for the period ended: (In thousands)
<TABLE>
<CAPTION>
December 31, 1998 Nonguarantor Subsidiaries
D.R. ------------------------- Inter-
(Unaudited) Horton, Guarantor Financial company
Inc. Subsidiaries Services Other Eliminations Total
---------- ------------ --------- --------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Total assets............ $1,276,543 $1,446,602 $67,969 $39,898 ($1,035,249) $1,795,763
Total liabilities....... 931,953 1,091,345 46,426 40,219 (955,261) 1,154,682
Revenues................ 118,894 527,650 7,802 6,284 0 660,630
Gross profit............ 13,197 104,229 0 1,250 0 118,676
Net income.............. 5,174 25,875 1,785 (139) 0 32,695
<CAPTION>
December 31, 1997 Nonguarantor Subsidiaries
D.R. ------------------------- Inter-
(Unaudited) Horton, Guarantor Financial company
Inc. Subsidiaries Services Other Eliminations Total
---------- ------------ --------- --------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Total assets............ $ 663,954 $ 985,624 $36,202 $31,799 ($405,110) $1,312,469
Total liabilities....... 435,648 768,532 24,455 20,897 (382,667) 866,865
Revenues................ 68,336 347,047 4,541 3,273 0 423,197
Gross profit............ 10,490 64,977 0 652 0 76,119
Net income.............. 1,382 16,390 879 (327) 0 18,324
<CAPTION>
September 30, 1998 Nonguarantor Subsidiaries
D.R. ------------------------- Inter-
Horton, Guarantor Financial company
Inc. Subsidiaries Services Other Eliminations Total
---------- ------------ --------- --------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Total assets............ $1,169,347 $1,548,554 $89,097 $30,672 ($1,169,835) $1,667,835
Total liabilities....... 906,014 1,272,398 81,820 19,301 (1,161,134) 1,118,399
Revenues................ 362,847 1,777,833 21,892 14,369 0 2,176,941
Gross profit............ 44,553 342,300 0 2,586 0 389,439
Net income.............. 2,140 88,128 4,418 (1,306) 0 93,380
</TABLE>
-8-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - CONSOLIDATED
D. R. Horton, Inc. and subsidiaries (the "Company") provide homebuilding
activities in 24 states and 41 markets through its 53 homebuilding divisions.
Through its financial services activities, the Company also provides mortgage
banking and title agency services in many of these same markets.
Three Months Ended December 31, 1998 Compared to Three Months Ended December 31,
1997
Consolidated revenues for the three months ended December 31, 1998, increased
56.1%, to $660.6 million, from $423.2 million for the comparable period of 1997,
primarily due to increases in both home and land/lot sales revenues.
Income before income taxes for the three months ended December 31, 1998,
increased 78.4%, to $54.3 million, from $30.4 million for the comparable period
of 1997. As a percentage of revenues, income before income taxes for the three
months ended December 31, 1998, increased 1.0%, to 8.2%, from 7.2% for the
comparable period of 1997 primarily due to the overall reduction in selling,
general and administrative expenses as a percentage of revenues.
The consolidated provision for income taxes increased 78.4%, to $21.6 million
for the three months ended December 31, 1998, from $12.1 million for the same
period of 1997, due to the corresponding increase in income before income taxes.
The effective income tax rate was 39.8% for both periods.
RESULTS OF OPERATIONS - HOMEBUILDING
The following tables set forth certain operating and financial data for the
Company's homebuilding activities:
Percentages of Homebuilding Revenues
Three Months Ended December 31,
1998 1997
----------- -----------
Cost and expenses:
Cost of sales 81.8 % 81.8 %
Selling, general and administrative expense 10.0 10.9
Interest expense 0.5 0.6
----------- -----------
Total costs and expenses 92.3 93.3
Other (income) (0.2) (0.2)
----------- -----------
Income before income taxes 7.9 % 6.9 %
=========== ===========
Three Months Ended December 31,
1998 1997
---------- -----------
Homes Homes
Homes Closed Closed Revenues Closed Revenues
------ -------- ------ --------
($'s in millions)
Mid-Atlantic............... 632 $113.4 250 $ 48.0
Midwest.................... 246 46.2 106 20.3
Southeast.................. 595 93.8 513 74.6
Southwest.................. 1,645 218.8 1,498 191.1
West....................... 728 139.5 454 84.2
------ -------- ------ -------
3,846 $611.7 2,821 $418.2
====== ======== ====== =======
-9-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Three Months Ended December 31,
1998 1997
---------- -----------
Homes Homes
New Sales Contracts (net of cancellations) Sold $ Sold $
------ -------- ------ --------
($'s in millions)
Mid-Atlantic............... 571 $111.6 296 $ 52.6
Midwest.................... 228 45.5 131 24.7
Southeast.................. 545 84.9 558 80.8
Southwest.................. 1,645 229.6 1,274 164.5
West....................... 548 109.1 621 122.5
------ -------- ------ -------
3,537 $580.7 2,880 $445.1
====== ======== ====== =======
December 31,
1998 1997
---------- -----------
Sales Backlog Homes $ Homes $
----- ------- ----- -------
($'s in millions)
Mid-Atlantic............... 871 $ 179.1 380 $ 73.5
Midwest.................... 401 79.8 205 40.0
Southeast.................. 683 107.4 742 107.3
Southwest.................. 3,043 434.7 1,803 234.2
West....................... 1,034 220.9 890 181.1
----- --------- ------ -------
6,032 $1,021.9 4,020 $ 636.1
===== ======== ====== =======
- ----------
The Company's market regions consist of the following markets:
Mid-Atlantic Baltimore, Charleston, Charlotte, Greensboro, Greenville,
Hilton Head, Myrtle Beach, New Jersey, Newport News,
Raleigh/Durham, Richmond, Suburban Washington D.C. and
Wilmington
Midwest Chicago, Cincinnati, Kansas City, Louisville,
Minneapolis/St. Paul and St. Louis
Southeast Atlanta, Birmingham, Jacksonville, Nashville, Orlando,
Pensacola and South Florida
Southwest Albuquerque, Austin, Dallas/Fort Worth, Houston, Killeen,
Phoenix, San Antonio and Tucson
West Denver, Las Vegas, Los Angeles, Portland, Sacramento, Salt
Lake City and San Diego
Three Months Ended December 31, 1998 Compared to Three Months Ended December 31,
1997
Revenues from homebuilding activities increased 55.9%, to $652.8 million (3,846
homes closed) for the three months ended December 31, 1998, from $418.7 million
(2,821 homes closed) for the comparable period of 1997. Increased land/lot sales
accounted for 17.2% of the revenue increase. The number of homes closed
increased in all of the Company's market regions, with percentage increases
ranging from 152.8% in the Mid-Atlantic region to 9.8% in the Southwest region.
The increases in both revenues and homes closed were due to strong housing
demand, the Company's entrance into new markets, and the increases attributable
to the acquisition of C. Richard Dobson Builders, Inc. (February, 1998); Mareli
Development & Construction Co. (May, 1998); and RMP Development, Inc. (June,
1998). In markets where the Company operated during both fiscal years, revenues
increased by 36.8%, to $572.2 million (3,588 homes closed).
The average selling price of homes closed during the three months ended December
31, 1998 was $159,000, up from $148,100 for the same period in 1997. The
increase in average selling price was due an increase in the price mix of homes
closed and increased selling prices.
-10-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
New net sales contracts increased 22.8%, to 3,537 homes for the three months
ended December 31, 1998, from 2,880 for the same period of 1997. Percentage
increases in new net sales contracts ranging from 92.9% to 29.1% were achieved
in three of the Company's five market regions, while the Southeast and West
declined 2.3% and 11.8%, respectively. The overall increase in new net sales
contracts was due in part to sales achieved by the 1998 acquisitions, while new
net sales contracts increased 12.2%, to 3,230 homes in markets where the Company
operated in both periods. The average amount of new net sales contracts in the
three months ended December 31, 1998 was $164,200, up 6.2% over the $154,600
average in the three months ended December 31, 1997. This increase was due to an
increase in the price mix of homes sold and increased selling prices.
The Company was operating in 595 subdivisions at December 31, 1998, compared to
390 at December 31, 1997. At December 31, 1998, the Company's backlog of sales
contracts was $1,021.9 million (6,032 homes), up 60.6% from the comparable
amount at December 31, 1997. In markets where the Company operated during both
quarters, the sales contract backlog was $977.9 million (5,756 homes), up 53.7%
from December 31, 1997. The average sales price of homes in sales backlog was
$169,400 at December 31, 1998, up 7.1% from the $158,200 average at December 31,
1997. The average sales price of homes in backlog typically is higher than the
sales price of closed homes because it takes longer to construct more expensive
homes.
Cost of sales increased by 55.9%, to $534.2 million for the three months ended
December 31, 1998, from $342.5 million for the comparable quarter in 1997. The
increase in cost of sales was primarily attributable to the increase in
revenues. Cost of home sales as a percentage of home sales revenues was down
0.5% to 81.3% for the three months ended December 31, 1998 from 81.8% for the
comparable period of 1997. Cost of land/lot sales increased to 89.4% of land/lot
sales revenues for the three months ended December 31, 1998 from 72.2% for the
comparable period of 1997. Total homebuilding cost of sales was 81.8% of total
homebuilding revenues in both periods.
Selling, general and administrative (SG&A) expenses from homebuilding activities
increased by 43.4%, to $65.6 million in the three months ended December 31, 1998
from $45.7 million in the comparable period of 1997. As a percentage of
revenues, SG&A expenses decreased to 10.0% for the three months ended December
31, 1998 from 10.9% for the comparable period of 1997. The decrease in SG&A
expenses as a percentage of revenue is primarily due to the Company's cost
containment efforts and the increased revenues that absorb the fixed elements of
overhead. Included in SG&A expenses for the three months ended December 31, 1998
is a $4.4 million charge for severance benefits associated with former
Continental executives.
Interest expense associated with homebuilding activities increased to $2.8
million in the three months ended December 31, 1998, from $2.5 million in the
comparable period of 1997. As a percentage of homebuilding revenues,
homebuilding interest expense decreased to 0.5% in the three months ended
December 31, 1998 from 0.6% in the comparable period of 1997 due to average
inventory increasing at a greater rate than average interest-bearing debt. The
Company follows a policy of capitalizing interest only on inventory under
construction or development. During both periods, the Company expensed the
portion of incurred interest and other financing costs which could not be
charged to inventory. Capitalized interest and other financing costs are
included in cost of sales at the time of home closings.
-11-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - FINANCIAL SERVICES
The following table summarizes financial and other information for the Company's
financial services operations:
Three months ended
December 31,
1998 1997
------- -------
Number of loans originated........................ 1,757 1,173
------- -------
Loan acquisition fees............................. $1,742 $1,326
Sale of servicing and marketing gains............. 3,939 2,021
Other revenues.................................... 805 355
------- -------
Total mortgage banking revenues................... 6,486 3,702
Title policy premiums, net........................ 1,316 839
------- -------
Total financial services revenues................. 7,802 4,541
General and administrative expenses............... 4,974 3,297
Interest expense.................................. 743 317
Interest/other (income)........................... (879) (531)
------- -------
Income before income taxes........................ $2,964 $1,458
======= =======
Three Months Ended December 31, 1998 Compared to Three Months Ended December 31,
1997
Revenues from financial services operations increased 71.8%, to $7.8 million in
the three months ended December 31, 1998, from $4.5 million in the comparable
period of 1997. The increase in financial services revenues was due to the rapid
expansion of the Company's mortgage loan and title services provided to the
Company's homebuilding customers. These activities are being expanded to
additional markets served by the homebuilding operations. SG&A expenses
associated with financial services increased 50.9%, to $5.0 million in the three
months ended December 31, 1998, from $3.3 million in the comparable period of
1997. As a percentage of financial services revenues, SG&A expenses decreased by
8.8%, to 63.8% in the three months ended December 31, 1998, from 72.6% in the
comparable period in 1997, due primarily to 1997 startup expenses for new
markets with limited revenues in the 1997 period.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1998, the Company had available cash and cash equivalents of
$93.8 million. Inventories (including finished homes, construction in progress,
and developed residential lots and other land) at December 31, 1998, had
increased by $109.2 million since September 30, 1998, due to a general increase
in business activity and the expansion of operations in the Company's market
areas. The inventory increase was financed largely by borrowing an additional
$80 million under the revolving credit facility and retained earnings. The
increased borrowing was partially offset by the conversion of $58.8 million of 6
7/8% convertible subordinated notes to common stock. As a result, the Company's
ratio of notes payable to total capital at December 31, 1998, was 58.2%, a
decrease of 2.7% over the September 30, 1998 level of 60.9%. The stockholders'
equity to total assets ratio increased to 35.7% at December 31, 1998, from 32.9%
at September 30, 1998.
During the quarter, the Company's Board of Directors declared a cash dividend of
$.0225 per common share, which was paid on October 23, 1998, to stockholders of
record on October 16, 1998.
-12-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company has an $825 million, unsecured revolving credit facility, consisting
of a $775 million four-year revolving loan and a $50 million four-year letter of
credit facility that matures in 2003. At December 31, 1998, the Company had
outstanding debt of $893.3 million, of which $535.0 million represented advances
under the revolving credit facility. Under the debt covenants associated with
the revolving credit facility, at December 31, 1998, the Company had additional
borrowing capacity of $266.6 million. The Company has entered into multi-year
interest rate swap agreements, aggregating $300 million, that fix the interest
rate on a portion of the variable rate revolving credit facility.
The mortgage company operations have a $75 million, one-year bank warehouse
facility that is secured by mortgage loans held for sale. The warehouse facility
is not guaranteed by the parent company. As of December 31, 1998, $45.4 million
had been drawn under this facility with additional financing needs provided by
the Company. In the future, it is anticipated that all mortgage company
activities will be financed under the warehouse facility.
On January 28, 1999, the Company acquired the operating assets of Cambridge
Properties, a partnership doing business as Cambridge Homes. In the transaction,
the Company issued 2,555,911 shares of our common stock under our shelf
registration statement, and assumed debt of approximately $103 million, which
was repaid with borrowings under our revolving credit facility.
The Company's rapid growth and acquisition strategy require significant amounts
of cash. It is anticipated that future home construction, lot and land purchases
and acquisitions will be funded through internally generated funds and new and
existing credit facilities. Additionally, an effective shelf registration
contains about 7.4 million shares of common stock issuable to effect, in whole
or in part, possible future acquisitions. On February 4, 1999, under an existing
shelf registration statement, the Company issued $385 million aggregate
principal amount of 8% Senior Notes, due 2009. The proceeds of the notes were
used to repay outstanding debt under our revolving credit facility and for
general corporate purposes. In the future, the company intends to maintain
effective shelf registration statements that would facilitate access to the
capital markets.
In November, 1998, the Company's Board of Directors approved stock and debt
repurchase programs for up to $100 million each. These programs were intended to
allow the Company to take advantage of favorable market conditions, should they
occur.
Except for ordinary expenditures for the construction of homes, the acquisition
of land and lots for development and sale of homes, at September 30, 1998, the
Company had no material commitments for capital expenditures.
YEAR 2000
The "Year 2000" issue (Y2K) refers to potential complications that may be caused
by computer hardware and software that were not designed for the change in the
century. If not corrected, such computer hardware and software may cause
management information systems to fail or miscalculate data.
The Company has assessed (and continues to assess) its vulnerability to Y2K.
Modifications and replacements of computer hardware and software to prepare for
Y2K are ongoing. The Company has assessed and tested its principal homebuilding
hardware and management information system and believes them to be Y2K
compliant. Evaluation, modification and testing of non-principal homebuilder
hardware and management information systems are in process and such systems are
expected to be converted to the principal management information system or Y2K
modifications are expected to be completed by June, 1999, at a cost of less than
one million dollars.
Management information systems for the Company's financial services activities
also are being evaluated and will require modifications or upgraded software
packages that are expected to be completed by June, 1999, at minimal cost.
-13-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
As part of a program on continuous technology updates, for the past several
years, the Company has upgraded personal computers in its locations and this
process will continue. As this occurs during 1999, personal computers at each
company location will be tested for Y2K compliance. These personal computer
upgrades are considered to be ongoing and are not considered to be specifically
Y2K related. The Company expects to incur costs to replace or repair such
equipment, but has not presently determined the amount of these costs.
The Company is presently evaluating other potential Y2K issues, including
non-management information systems. A Y2K coordinator is directing the Company's
overall effort to address these issues. As part of these reviews, the Company's
relationships with payroll service providers, vendors, contractors, financial
institutions and other third parties will be reviewed to determine the impact,
if any, Y2K will have on these relationships.
The Company expects to incur Y2K specific costs in the future, but does not
anticipate that these costs will be material. It is possible that the Company
could encounter disruptions to its business that could have a material adverse
effect on its results of operations if all systems are not Y2K compliant. Also,
the Company could be materially impacted by widespread economic or financial
market disruptions or by Y2K computer system failures at government agencies on
which the Company is dependent for utilities, zoning, building permits and
related matters. There can be no assurance that Y2K will not adversely affect
the Company and its operations.
A formal Y2K contingency plan has not been prepared at this time due to
alternatives available to the Company. For example, non-principal homebuilding
management information systems could be converted to the principal homebuilding
system before Y2K becomes an issue.
SAFE HARBOR STATEMENT
Certain statements contained herein, as well as statements made by the Company
in periodic press releases and oral statements made by the Company's officials
to analysts and stockholders in the course of presentations about the Company
may be construed as "Forward-Looking Statements" as defined in the Private
Securities Litigation Reform Act of 1995. Such statements may involve unstated
risks, uncertainties and other factors that may cause actual results to differ
materially from those initially anticipated. Such risks, uncertainties and other
factors include, but are not limited to, the Company's substantial leverage,
changes in general economic and market conditions, changes in interest rates and
the availability of mortgage financing, changes in costs and availability of
material, supplies and labor, general competitive conditions, the availability
of capital and the ability to successfully effect acquisitions.
-14-
<PAGE>
PART II. OTHER INFORMATION
ITEM 2. Changes in Securities.
Certain new indebtedness and limitations on payment of dividends or
other distributions by the Company on its Common Stock were created in
connection with its February 4, 1999 offering and issuance of $385 million
principal amount of 8% Senior Notes, due 2009 (the "Notes"). As part of that
issuance, the Company executed a Sixth Supplemental Indenture, dated as of
February 4, 1999, among the Company, the Guarantors named therein and American
Stock Transfer & Trust Company, as Trustee, authorizing the Notes. The
Supplemental Indenture, and the Indenture to which it relates (dated June 9,
1997, among the Company, the Guarantors named therein and American Stock
Transfer & Trust Company, as Trustee), impose limitations on the ability of the
Company and its subsidiaries guaranteeing the Notes to, among other things,
incur indebtedness, make "Restricted Payments" (as defined, which includes
payments of dividends or other distributions on the Common Stock of the
Company), effect certain "Asset Dispositions" (as defined), enter into certain
transactions with affiliates, merge or consolidate with any person, or transfer
all or substantially all of their properties and assets. These limitations are
similar to limitations already existing by reason of the Company's 8-3/8% Senior
Notes, due 2004, 10% Senior Notes, due 2006, and the related Indentures and
Supplemental Indentures. Other information concerning the offering and issuance
of the Notes has previously been reported in, and is described in, Amendment No.
1 to the Company's Registration Statement on Form S-3 (Registration Number
333-57193) dated June 30, 1998, the Company's Prospectus Supplement, dated
February 1, 1999 and filed with the Securities Exchange Commission (the
"Commission") on February 2, 1999 pursuant to Rule 424(b), and the Company's
current report on Form 8-K, dated February 2, 1999 and filed with the Commission
on February 2, 1999, each of which is incorporated herein by reference.
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
3.1* Amended and Restated Bylaws.
4.1 Indenture, dated as of June 9, 1997, among
the Company, the guarantors named therein
and American Stock Transfer & Trust Company,
as Trustee, relating to Senior Debt
Securities, is incorporated herein by
reference from Exhibit 4.1(a) to the
Company's Registration Statement on Form S-3
(Registration No. 333-27521), filed with the
Commission on May 21, 1997.
4.2 First Supplemental Indenture, dated as of
June 9, 1997, among the Company, the
guarantors named therein and American Stock
Transfer & Trust Company, as Trustee, is
incorporated by reference from Exhibit 4.1
to the Company's Form 8- K/A, dated April 1,
1997, filed with the Commission on June 6,
1997.
4.3 Second Supplemental Indenture, dated as of
September 30, 1997, among the Company, the
guarantors named therein and American Stock
Transfer & Trust Company, as Trustee, is
incorporated by reference from Exhibit 4.4
to the Company's Annual Report on Form 10-K
for the fiscal year ended September 30,
1997, filed with the Commission on December
8, 1997.
4.4 Third Supplemental Indenture, dated as of
April 17, 1998, among the Company, the
guarantors named therein and American Stock
Transfer & Trust Company, as Trustee, is
incorporated by reference from Exhibit 4.3
to the Company's Quarterly
-15-
<PAGE>
Report on Form 10-Q for the quarter ended
March 31, 1998, filed with Commission on May
14, 1998.
4.5 Fourth Supplemental Indenture, dated as of
April 20, 1998, among the Company, the
guarantors named therein and American Stock
Transfer & Trust Company, as Trustee, is
incorporated by reference from Exhibit 4.4
to the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 1998,
filed with Commission on May 14, 1998.
4.6 Fifth Supplemental Indenture, dated as of
August 31, 1998, among the Company, the
guarantors named therein and American Stock
Transfer & Trust Company, as Trustee, is
incorporated herein by reference from
Exhibit 4.7 to the Company's Annual Report
on Form 10-K for the fiscal year ended
September 30, 1998, filed with the
Commission on December 10, 1998.
4.7 Sixth Supplemental Indenture, dated as of
February 4, 1999, among the Company, the
guarantors named therein and American Stock
Transfer & Trust Company, as Trustee,
relating to the 8% Senior Notes due 2009,
including the form of the Company's 8%
Senior Notes due 2009, is incorporated
herein by reference from Exhibit 4.1 to the
Company's Form 8-K, filed with the
Commission on February 2, 1999.
4.8 Indenture dated as of April 15, 1996 between
Continental Homes Holding Corp.
("Continental") and First Union National
Bank, as Trustee, is incorporated herein by
reference from Exhibit 4.1 to Continental's
Annual Report on Form 10-K for the year
ended May 31, 1996. The Commission file
number for Continental is 1- 10700.
4.9 First Supplemental Indenture, dated as of
April 20, 1998, among the Company, the
guarantors named therein and First Union
National Bank, as Trustee, is incorporated
by reference from Exhibit 4.5 to the
Company's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1998, filed with
the Commission on May 14, 1998.
4.10 Second Supplemental Indenture, dated as of
August 31, 1998, among the Company, the
guarantors named therein and First Union
National Bank, as Trustee, is incorporated
herein by reference from Exhibit 4.10 to the
Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 1998, filed
with the Commission on December 10, 1998.
4.11 Master Loan and Inter-Creditor Agreement
dated as of April 21, 1998, among D.R.
Horton, Inc., as a Borrower; Nationsbank,
N.A., Bank of America National Trust and
Savings Association, Fleet National Bank,
Bank United, Comerica Bank, Credit Lyonnais
New York Branch, Societe Generale, Southwest
Agency, The First National Bank of Chicago,
PNC Bank, National Association, Amsouth
Bank, Bank One, Arizona, NA, First American
Bank Texas, SSB, Harris Trust and Savings
Bank, Sanwa Bank California, Norwest Bank
Arizona, National Association and Summit
Bank, as Banks; and Nationsbank, N.A., as
Administrative Agent, is incorporated by
reference from Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998, filed with the
Commission on August 6, 1998. Sixth
Supplemental Indenture, dated as of February
4, 1999, among the Company, the guarantors
named therein and American Stock Transfer
-16-
<PAGE>
and Trust Company, as Trustee, relating to
the Company's 8% Senior Notes, due 2009, is
incorporated herein by reference from
Exhibit 4.1 to the Company's Form 8-K dated
February 2, 1999, and filed with the
Commission on that date.
--------
*Filed herewith.
(b) The following report was filed on Form 8-K by the
Company during the quarter ended December 31, 1998.
1. On November 3, 1998, the Company filed a
Current Report on Form 8-K, dated November
1, 1998 (Item 5), in which it reported that
all but $6,000 principal amount of the
6-7/8% Convertible Subordinated Notes due
2002 had been converted into Common Stock of
the Company and that the remaining $6,000
principal amount of these notes had been
redeemed.
-17-
<PAGE>
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.
D.R. HORTON, INC.
Date: February 12, 1999 By /s/ David J. Keller
-----------------------------------------------
David J. Keller, on behalf of D.R. Horton, Inc.
and as Executive Vice President, Treasurer
and Chief Financial Officer
(Principal Financial and Accounting Officer)
-18-
EXHIBIT 3.1
D.R. HORTON, INC.
AMENDED AND RESTATED BYLAWS
<PAGE>
D.R. HORTON, INC.
AMENDED AND RESTATED BYLAWS
Table of Contents Page
ARTICLE I - MEETING OF STOCKHOLDERS
Section 1. Time and Place of Meetings................................1
Section 2. Annual Meeting............................................1
Section 3. Special Meetings..........................................2
Section 4. Notice of Meetings........................................2
Section 5. Quorum....................................................2
Section 6. Voting....................................................2
ARTICLE II - DIRECTORS
Section 1. Powers....................................................3
Section 2. Number and Term of Office.................................3
Section 3. Election, Term of Office and Nomination...................3
Section 4. Vacancies and New Directorships...........................4
Section 5. Regular Meetings..........................................4
Section 6. Special Meetings..........................................4
Section 7. Quorum....................................................4
Section 8. Written Action............................................4
Section 9. Participation in Meetings by Conference Telephone.........5
Section 10. Committees................................................5
Section 11. Compensation..............................................5
Section 12. Rules.....................................................5
ARTICLE III - NOTICES
Section 1. Generally.................................................5
Section 2. Waivers...................................................6
ARTICLE IV - OFFICERS
Section 1. Generally.................................................6
Section 2. Compensation..............................................6
Section 3. Term......................................................6
Section 4. Authority and Duties......................................6
Section 5. Chairman..................................................7
Section 6. Vice Chairmen.............................................7
(i)
<PAGE>
Table of Contents Page
Section 7. President.................................................7
Section 8. Chief Executive Officer...................................7
Section 9. Executive Vice Presidents.................................7
Section 10. Execution of Documents and Action with Respect to
Securities of Other Corporations..........................7
Section 11. Other Vice Presidents.....................................8
Section 12. Secretary and Assistant Secretaries.......................8
Section 13. Treasurer and Assistant Treasurers........................8
Section 14. Chief Financial Officer...................................9
Section 15. General Counsel...........................................9
ARTICLE V - STOCK
Section 1. Certificates..............................................9
Section 2. Transfer..................................................9
Section 3. Lost, Stolen or Destroyed Certificates....................9
Section 4. Record Date..............................................10
ARTICLE VI - GENERAL PROVISIONS
Section 1. Fiscal Year..............................................11
Section 2. Corporate Seal...........................................11
Section 3. Reliance upon Books, Reports and Records.................11
Section 4. Time Periods.............................................11
Section 5. Dividends................................................11
ARTICLE VII - AMENDMENTS
Section 1. Amendments...............................................11
(ii)
<PAGE>
D.R. HORTON, INC.
AMENDED AND RESTATED BYLAWS
ARTICLE I
MEETINGS OF STOCKHOLDERS
Section 1. Time and Place of Meetings. All meetings of the stockholders
for the election of directors or for any other purpose shall be held at such
time and place, within or without the State of Delaware, as may be designated by
the Board of Directors, or by the Chairman of the Board, a Vice Chairman, the
President or the Secretary in the absence of a designation by the Board of
Directors, and stated in the notice of the meeting or in a duly executed waiver
of notice thereof.
Section 2. Annual Meeting. (A) An annual meeting of the stockholders,
commencing with the year 1992, shall be held at such date, place and time as
shall be designated from time to time by resolution of the Board of Directors,
at which meeting the stockholders shall elect by a plurality vote the directors
to succeed those whose terms expire and shall transact such other business as
may properly be brought before the meeting.
(B) At any annual meeting of stockholders, only such new business shall
be conducted, and only such proposals shall be acted upon, as shall have been
properly brought before the meeting (i) by, or at the direction of, the Board of
Directors or (ii) by any stockholder entitled to vote at such meeting. Only such
new business and only such proposals as have been raised in accordance with the
procedures set forth in this Section 2(B) shall be eligible for action or
consideration at an annual meeting.
In order for a proposal to be properly brought before an annual
meeting by a stockholder, the stockholder must have given timely notice thereof
in writing to the Secretary of the Corporation as set forth in this Section
2(B). To be timely, a stockholder's notice must be delivered to, or mailed and
received at, the principal executive office of the corporation not less than
thirty (30) calendar days prior to the date of the originally scheduled meeting,
regardless of any postponements, deferrals or adjournments of that meeting to a
later date; provided, however, that, if less than forty (40) calendar days'
notice or prior public disclosure of the date of the scheduled meeting is given
or made by the Corporation, notice by the stockholder to be timely must be so
received not later than the close of business on the tenth calendar day
following the earlier of the day on which such notice of the date of the
scheduled meeting was mailed or the day on which such public disclosure was
made. Such stockholder's notice shall set forth as to each matter the
stockholder proposes to bring before the meeting (a) a description of the
proposal desired to be brought before the meeting and the reasons for conducting
such business at the meeting, (b) the name and address, as they appear on the
corporation's books, of the stockholder proposing such business, (c) the class
and number of shares of the Corporation beneficially owned by such stockholder
on the date of such stockholder's notice and (d) any financial or other interest
of such stockholder in the proposal.
<PAGE>
Section 3. Special Meetings. Special meetings of the stockholders, for
any purpose or purposes, unless otherwise prescribed by law or by the Restated
Certificate of Incorporation, as amended or further restated from time to time,
may be called at any time by the Board of Directors or by a committee of the
Board of Directors which has been duly designated by the Board of Directors and
whose powers and authority, as provided in a resolution of the Board of
Directors or in these bylaws, include the power to call such meetings, but such
special meetings may not be called by any other person or persons.
Section 4. Notice of Meetings. Written notice of every meeting of the
stockholders, stating the place, date and hour of the meeting and, in the case
of a special meeting, the purpose or purposes for which the meeting is called,
shall be given not less than ten nor more than sixty days before the date of the
meeting to each stockholder entitled to vote at such meeting, except as
otherwise provided herein or by law. When a meeting is adjourned to another
place, date or time, written notice need not be given of the adjourned meeting
if the place, date and time thereof are announced at the meeting at which the
adjournment is taken; provided, however, that if the adjournment is for more
than thirty days, or if after the adjournment a new record date is fixed for the
adjourned meeting, written notice of the place, date and time of the adjourned
meeting shall be given in conformity herewith. At any adjourned meeting, any
business may be transacted which might have been transacted at the original
meeting.
Section 5. Quorum. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by law or by the Restated
Certificate of Incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented.
Section 6. Voting. Except as otherwise provided by law or by the
Restated Certificate of Incorporation, each stockholder shall be entitled at
every meeting of the stockholders to one vote for each share of stock having
voting power standing in the name of such stockholder on the books of the
Corporation on the record date for the meeting and such votes may be cast either
in person or by written proxy. Every proxy must be duly executed and filed with
the Secretary of the Corporation. A stockholder may revoke any proxy which is
not irrevocable by attending the meeting and voting in person or by filing an
instrument in writing revoking the proxy or another duly executed proxy bearing
a later date with the Secretary of the Corporation. Every vote taken by written
ballot shall be counted by one or more inspectors of election appointed by the
Board of Directors. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock which has voting power present in person or
represented by proxy shall decide any question properly brought before such
meeting, unless the question is one upon which by express provision of law, the
(2)
<PAGE>
Restated Certificate of Incorporation or these bylaws, a different vote is
required, in which case such express provision shall govern and control the
decision of such question.
ARTICLE II
DIRECTORS
Section 1. Powers. The business and affairs of the Corporation shall be
managed by or under the direction of its Board of Directors, which may exercise
all such powers of the Corporation and do all such lawful acts and things as are
not by law or by the Restated Certificate of Incorporation directed or required
to be exercised or done by the stockholders.
Section 2. Number and Term of Office. The Board of Directors shall
consist of one or more members. Subject to the provisions of the Restated
Certificate of Incorporation as amended or restated from time to time, the
number of directors shall be fixed by resolution of the Board of Directors or by
the stockholders at the annual meeting or a special meeting. Any decrease in the
authorized number of directors shall not be effective until the expiration of
the term of the directors then in office, unless, at the time of such decrease,
there shall be vacancies on the Board which are being eliminated by such
decrease.
Section 3. Election, Term of Office and Nomination. (A) Except as
provided in Section 4 of this Article, the directors shall be elected at each
annual meeting of stockholders, but if any such annual meeting is not held or
the directors are not elected thereat, then the directors may be elected at any
special meeting of stockholders held for that purpose. Each director shall hold
office until a successor has been elected and qualified.
(B) Only persons who are nominated in accordance with the following
procedures shall be eligible for election by the stockholders as directors.
Nominations of persons for election as directors of the Corporation may be made
at a meeting of stockholders at which directors are being elected (i) by, or at
the direction of, the Board of Directors or by, or at the direction of, any
committee or person authorized or appointed for that purpose by the Board of
Directors or (ii) by any stockholder of the Corporation entitled to vote for the
election of directors at the meeting who complies with the notice procedures set
forth in this Section 3(B). Any nomination other than those governed by clause
(i) of the preceding sentence shall be made pursuant to timely notice in writing
to the Secretary of the Corporation. To be timely, a shareholder's notice shall
be delivered to, or mailed and received at, the principal executive office of
the Corporation not less than thirty (30) calendar days prior to the date of the
originally scheduled meeting, regardless of any postponements, deferrals or
adjournments of that meeting to a later date; provided, however, that, if less
than forty (40) calendar days' notice or prior public disclosure of the date of
the scheduled meeting is given or made by the Corporation, notice by the
stockholder, to be timely, must be so received not later than the close of
business on the tenth calendar day following the earlier of the day on which
such notice of the date of the scheduled meeting was mailed or the day on which
such public disclosure was made. Such stockholder's notice to the Secretary
(3)
<PAGE>
shall set forth (a) as to each person whom the stockholder proposes to nominate
for election as a director (i) the name, age, business address and residence
address of such person, (ii) the principal occupation or employment of such
person, (iii) the class and number of any shares of the Corporation which are
beneficially owned by such person and (iv) any other information relating to
such person that is required to be disclosed in solicitations for proxies for
election of directors pursuant to any then existing rule or regulation
promulgated under the Securities Exchange Act of 1934, as amended (whether or
not then applicable to the Corporation); and (b) as to the stockholder giving
the notice (i) the name and record address of such stockholder and (ii) the
class and number of shares of the Corporation which are beneficially owned by
such stockholder. The Corporation may require any proposed nominee to furnish
such other information as may reasonably be required by the Corporation to
determine the eligibility of such proposed nominee as a director. No person
shall be eligible for election as a director unless nominated as set forth
herein.
Section 4. Vacancies and New Directorships. Vacancies and newly created
directorships resulting from any increase in the authorized number of directors
which occur between annual meetings of the stockholders may be filled by a
majority of the directors then in office, though less than a quorum, or by a
sole remaining director, and the directors so elected shall hold office until
the next annual meeting of the stockholders and until their successors are
elected and qualified, except as required by law.
Section 5. Regular Meetings. Regular meetings of the Board of Directors
may be held without notice immediately after the annual meeting of the
stockholders and at such other time and place as shall from time to time be
determined by the Board of Directors.
Section 6. Special Meetings. Special meetings of the Board of Directors
may be called by the Chairman of the Board, a Vice Chairman or the President on
one day's written notice to each director by whom such notice is not waived,
given either personally or by mail or telegram, and shall be called by the
President or the Secretary in like manner and on like notice on the written
request of any two directors.
Section 7. Quorum. At all meetings of the Board of Directors, a
majority of the total number of directors then in office shall constitute a
quorum for the transaction of business, and the act of a majority of the
directors present at any meeting at which there is a quorum shall be the act of
the Board of Directors. If a quorum shall not be present at any meeting of the
Board of Directors, the directors present thereat may adjourn the meeting from
time to time to another place, time or date, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 8. Written Action. Any action required or permitted to be taken
at any meeting of the Board of Directors or of any committee thereof may be
taken without a meeting if all members of the Board or committee, as the case
may be, consent thereto in writing, and the writing or writings are filed with
the minutes or proceedings of the Board or Committee.
(4)
<PAGE>
Section 9. Participation in Meetings by Conference Telephone. Members
of the Board of Directors, or any committee designated by the Board of
Directors, may participate in a meeting of the Board of Directors, or any such
committee, by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and such participation in a meeting shall constitute presence in person at the
meeting.
Section 10. Committees. The Board of Directors may, by resolution
passed by a majority of the whole Board, designate one or more committees, each
committee to consist of one or more of the directors of the Corporation and each
to have such lawfully delegable powers and duties as the Board may confer. Each
such committee shall serve at the pleasure of the Board of Directors. The Board
may designate one or more directors as alternate members of any committee, who
may replace any absent or disqualified member at any meeting of the committee.
Except as otherwise provided by law, any such committee, to the extent provided
in the resolution of the Board of Directors, shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and affairs of the Corporation, and may authorize the seal of the Corporation to
be affixed to all papers which may require it. Any committee or committees so
designated by the Board shall have such name or names as may be determined from
time to time by resolution adopted by the Board of Directors. Unless otherwise
prescribed by the Board of Directors, a majority of the members of the committee
shall constitute a quorum for the transaction of business, and the act of a
majority of the members present at a meeting at which there is a quorum shall be
the act of such committee. Each committee shall prescribe its own rules for
calling and holding meetings and its method of procedure, subject to any rules
prescribed by the Board of Directors, and shall keep a written record of all
actions taken by it.
Section 11. Compensation. The Board of Directors may establish such
compensation for, and reimbursement of the expenses of, directors for attendance
at meetings of the Board of Directors or committees, or for other services by
directors to the Corporation, as the Board of Directors may determine.
Section 12. Rules. The Board of Directors may adopt such special
rules and regulations for the conduct of their meetings and the management of
the affairs of the Corporation as they may deem proper, not inconsistent with
law or these bylaws.
ARTICLE III
NOTICES
Section 1. Generally. Whenever by law or under the provisions of the
Restated Certificate of Incorporation or these bylaws, notice is required to be
given to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
(5)
<PAGE>
Corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by telegram, telephone or facsimile
transmission.
Section 2. Waivers. Whenever any notice is required to be given by law
or under the provisions of the Restated Certificate of Incorporation or these
bylaws, a waiver thereof in writing, signed by the person or persons entitled to
such notice, whether before or after the time of the event for which notice is
to be given, shall be deemed equivalent to such notice. Attendance of a person
at a meeting shall constitute a waiver of notice of such meeting, except when
the person attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened.
ARTICLE IV
OFFICERS
Section 1. Generally. The officers of the Corporation shall be elected
by the Board of Directors and shall consist of a President, a Secretary, and a
Treasurer. The Board of Directors may also choose any or all of the following: a
Chairman of the Board, one or more Vice Chairmen, Executive Vice Presidents,
Senior Vice Presidents, Vice Presidents and Assistant Vice Presidents, a Chief
Financial Officer, a General Counsel, a Controller, one or more Assistant
Secretaries and Assistant Treasurers and such other officers as the Board of
Directors shall deem necessary or desirable in the conduct of the affairs of the
Company, with such designations, titles, duties and responsibilities as are set
forth in these bylaws, or as the Board of Directors shall determine.
Section 2. Compensation. The compensation of all officers and agents of
the Corporation who are designated executive officers by the Board of Directors
shall be fixed by the Board of Directors. The Board of Directors may delegate
the power to fix the compensation of some or all of the other officers and
agents of the Corporation to a committee of the Board, or may delegate that
power to any officer of the Corporation in respect of some or all of the other
officers under his or her supervision.
Section 3. Term. The officers of the Corporation shall hold office
until their successors are elected and qualified. Any officer may be removed at
any time by the affirmative vote of a majority of the directors. Any vacancy
occurring in any office of the Corporation may be filled by the Board of
Directors.
Section 4. Authority and Duties. Each of the officers of the
Corporation shall have such authority and shall perform such duties as are
stated in these bylaws and as may be stated from time to time by the Board of
Directors, or a duly authorized committee of the Board, in a resolution which is
(6)
<PAGE>
not inconsistent with these bylaws and, to the extent not so stated, as
generally pertain to their respective offices, subject to the control of the
Board of Directors.
Section 5. Chairman. The Chairman of the Board of Directors, if one be
chosen, shall be a member of the Board of Directors. The Chairman of the Board
of Directors shall preside at all meetings of the stockholders and of the Board
of Directors, and he shall have such other authority and shall perform such
other duties as may be established in accordance with Section 4 of this Article.
The Chairman may delegate to any qualified person authority to chair any meeting
of the stockholders, either on a temporary or a permanent basis.
Section 6. Vice Chairmen. The Vice Chairmen, if one or more be chosen,
shall be members the Board of Directors. In case no Chairman of the Board is
chosen, or of the inability or failure of the Chairman to perform the duties of
that office, the Vice Chairmen in order of their seniority shall perform the
duties of Chairman. In addition, the Vice Chairmen shall have such authority and
shall perform such duties as may be established in accordance with Section 4 of
this Article.
Section 7. President. The President shall be a member of the Board of
Directors. In case no Chairman of the Board or Vice Chairman is chosen, or of
the inability or failure of the Chairman or any Vice Chairman to perform the
duties of Chairman, the President shall perform the duties of the Chairman. In
addition, the President shall have such authority and shall perform such duties
as may be established in accordance with Section 4 of this Article.
Section 8. Chief Executive Officer. The officer who is designated the
Chief Executive Officer shall be responsible for the active management and
direction of the business and the affairs of the Corporation. In addition, the
Chief Executive Officer shall have such authority and shall perform such duties
as may be established in accordance with Section 4 of this Article.
Section 9. Executive Vice Presidents. The Executive Vice Presidents, if
one or more be chosen, shall have such authority and shall perform such duties
as may be established in accordance with Section 4 of this Article.
Section 10. Execution of Documents and Action with Respect to
Securities of Other Corporations. The Chairman, the Chief Executive Officer, any
Vice Chairman, the President and any Executive Vice President shall have and
each is hereby given, full power and authority, except as otherwise required by
law or directed by the Board of Directors, (a) to execute, on behalf of the
Corporation, all duly authorized contracts, agreements, deeds, conveyances or
other obligations of the Corporation, applications, consents, proxies and other
powers of attorney, and other documents and instruments, and (b) to vote and
otherwise act on behalf of the Corporation, in person or by proxy, at any
meeting of stockholders (or with respect to any action of such stockholders) of
any other corporation in which the Corporation may hold securities and otherwise
to exercise any and all rights and powers which the Corporation may possess by
(7)
<PAGE>
reason of its ownership of securities of such other corporation. In addition,
each of such officers may delegate to other officers, employees and agents of
the Corporation the power and authority to take any respective action which he
or she is authorized to take under this Section 10, with such limitations as he
or she may specify; such authority so delegated shall not be re-delegated by the
person to whom such execution authority has been delegated.
Section 11. Other Vice Presidents. Each Vice President other than an
Executive Vice President, however titled, shall perform such duties and services
and shall have such authority and responsibilities as are set forth in these
bylaws or as shall be assigned or required from time to time by the Board of
Directors, the Chairman, the Chief Executive Officer, a Vice Chairman, or the
President, or by the Executive Vice President or the Senior Vice President to
whom such Vice President reports.
Section 12. Secretary and Assistant Secretaries. (A) The Secretary
shall attend all meetings of the stockholders and all meetings of the Board of
Directors and record all proceedings of the meetings of the stockholders and of
the Board of Directors and shall perform like duties for the standing committees
when requested by the Board of Directors, the Chairman, the Chief Executive
Officer, a Vice Chairman, the President or an Executive Vice President. The
Secretary shall give, or cause to be given, notice of all meetings of the
stockholders and meetings of the Board of Directors. The Secretary shall have
charge of the seal of the Corporation and authority to affix the seal to any
instrument. The Secretary or any Assistant Secretary may attest to the corporate
seal by handwritten or facsimile signature. The Secretary shall keep and account
for all books, documents, papers and records of the Corporation except those for
which some other officer or agent has been designated or is otherwise properly
accountable. The Secretary shall have authority to sign stock certificates. In
addition, the Secretary shall have such authority and shall perform such duties
as may be established in accordance with Section 4 of this Article.
(B) Assistant Secretaries, in the order of their seniority, shall
assist the Secretary and, if the Secretary is unavailable or fails to act,
perform the duties and exercise the authority of the Secretary.
Section 13. Treasurer and Assistant Treasurers. (A) The Treasurer shall
have the custody of the funds and securities belonging to the Corporation and
shall deposit all moneys and other valuable effects in the name and to the
credit of the Corporation in such depositories as may be designated by the
Treasurer with the prior approval of the Board of Directors, the Chairman, the
Chief Executive Officer or the President. The Treasurer shall disburse the funds
and pledge the credit of the Corporation as may be directed by the Board of
Directors and shall render to the Board of Directors, the Chairman, the Chief
Executive Officer or the President, as and when required by them, or any of
them, an account of all transactions by the Treasurer.
(B) Assistant Treasurers, in the order of their seniority, shall assist
the Treasurer and, if the Treasurer is unable or fails to act, perform the
duties and exercise the powers of the Treasurer.
(8)
<PAGE>
Section 14. Chief Financial Officer. The Chief Financial Officer shall
be the chief accounting officer of the Corporation. The Chief Financial Officer
shall keep full and accurate accounts of receipts and disbursements in books
belonging to the Corporation in accordance with accepted accounting methods and
procedures. The Chief Financial Officer shall initiate periodic audits of the
accounting records, methods and systems of the Corporation. The Chief Financial
Officer shall render to the Board of Directors, the Chairman, the Chief
Executive Officer or the President, as and when required by them, or any of
them, a statement of the financial condition of the Corporation. In case no
Chief Financial Officer is chosen, or of the inability of failure of the Chief
Financial Officer to perform the duties of that office, the Treasurer shall
perform the duties of the Chief Financial Officer.
Section 15. General Counsel. The General Counsel shall be the chief
legal officer of the Corporation. The General Counsel shall provide legal
counsel and advice to the Board of Directors and to the officers with respect to
compliance with applicable laws and regulations. The General Counsel shall also
provide or obtain legal representation of the Corporation in proceedings by or
against the Corporation. The General Counsel shall render to the Board of
Directors, the Chairman, the Chief Executive Officer, the President or an
Executive Vice President, as and when required by them, or any of them, a report
on the status of claims against, and pending litigation of, the Corporation.
ARTICLE V
STOCK
Section 1. Certificates. Certificates representing shares of stock of
the Corporation shall be in such form as shall be determined by the Board of
Directors, subject to applicable legal requirements. Such certificates shall be
numbered and their issuance recorded in the books of the Corporation, and such
certificate shall exhibit the holder's name and the number of shares and shall
be signed by, or in the name of the Corporation by the Chairman of the Board or
the President and the Secretary or an Assistant Secretary or the Treasurer or an
Assistant Treasurer of the Corporation and shall bear the corporate seal. Any or
all of the signatures and the seal of the Corporation, if any, upon such
certificates may be facsimiles, engraved or printed.
Section 2. Transfer. Upon surrender to the Corporation or the transfer
agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation to issue, or to cause its
transfer agent to issue, a new certificate to the person entitled thereto,
cancel the old certificate and record the transaction upon its books.
Section 3. Lost, Stolen or Destroyed Certificates. The Secretary may
direct a new certificate or certificates to be issued in place of any
certificate or certificates theretofore issued by the Corporation alleged to
have been lost, stolen or destroyed upon the making of an affidavit of that
fact, satisfactory to the Secretary, by the person claiming the certificate of
(9)
<PAGE>
stock to be lost, stolen or destroyed. As a condition precedent to the issuance
of a new certificate or certificates the Secretary may require the owner of such
lost, stolen or destroyed certificate or certificates to give the Corporation a
bond in such sum and with such surety or sureties as the Secretary may direct as
indemnity against any claims that may be made against the Corporation with
respect to the certificate alleged to have been lost, stolen or destroyed or the
issuance of the new certificate.
Section 4. Record Date. (A) In order that the Corporation may determine
the stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof, the Board of Directors may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted by the Board of Directors, and which record date shall
not be more than sixty nor less than ten days before the date of such meeting.
If no record is fixed by the Board of Directors, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day next preceding the day on which notice is
given, or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held. A determination of stockholders
of record entitled to notice of or to vote at a meeting of stockholders shall
apply to any adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
(B) In order that the Corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting, the Board
of Directors may fix a record date, which record date shall not precede the date
upon which resolution fixing the record date is adopted by the Board of
Directors and which date shall not be more than ten days which the resolution
fixing the record date is adopted by the Board of Directors. If no record date
has been fixed by the Board of Directors, the record date for determining
stockholders to consent to corporate action in writing without a meeting, when
no prior action by the Board of Directors is required, shall be the first date
on which a signed written consent setting forth the action taken or proposed to
be taken is delivered to the Corporation by delivery to its registered office in
Delaware, its principal place of business, or an officer or agent of the
Corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to a Corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
If no record date has been fixed by the Board of Directors and prior action by
the Board of Directors is required by law, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting shall be at the close of business on the day on which the Board of
Directors adopts the resolution taking such prior action.
(C) In order that the Corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix a record date, which record date
shall not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall be not more than sixty days prior to such
(10)
<PAGE>
action. If no record date is fixed, the record date for determining stockholders
for any such purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto.
ARTICLE VI
GENERAL PROVISIONS
Section 1. Fiscal Year. The fiscal year of the Corporation shall be
fixed from time to time by the Board of Directors.
Section 2. Corporate Seal. The Board of Directors may adopt a corporate
seal and use the same by causing it or a facsimile thereof to be impressed
or affixed or reproduced or otherwise.
Section 3. Reliance upon Books, Reports and Records. Each director,
each member of a committee designated by the Board of Directors, and each
officer of the Corporation shall, in the performance of his or her duties, be
fully protected in relying in good faith upon the records of the Corporation and
upon such information, opinions, reports or statements presented to the
Corporation by any of the Corporation's officers or employees, or committees of
the Board of Directors, or by any other person as to matters the director,
committee member or officer believes are within such other person's professional
or expert competence and who has been selected with reasonable care by or on
behalf of the Corporation.
Section 4. Time Periods. In applying any provision of these bylaws
which requires that an act be done or not be done a specified number of days
prior to an event or that an act be done during a period of a specified number
of days prior to an event, calendar days shall be used, the day of the doing of
the act shall be excluded and the day of the event shall be included.
Section 5. Dividends. The Board of Directors may from time to time
declare and the Corporation may pay dividends upon its outstanding shares of
capital stock, in the manner and upon the terms and conditions provided by law
and the Restated Certificate of Incorporation.
ARTICLE VII
AMENDMENTS
Section 1. Amendments. These bylaws may be altered, amended or
repealed, or new bylaws may be adopted, by the stockholders or by the Board of
Directors; provided, however, that the stockholders may not alter, amend or
repeal the provisions of Section 2 of Article I or Sections 2 or 3 of Article II
of these Bylaws or this Section 1 of this Article VII except upon the
affirmative vote of the holders of not less than sixty-six and two-thirds
percent (66 2/3%) of the total voting power of all outstanding shares of voting
stock of the Corporation.
(11)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheets and Consolidated Statements of Income found on
pages 3 and 4 of the Company's Form 10-Q for the year-to-date, and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 93,820
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 1,467,281
<CURRENT-ASSETS> 1,625,677
<PP&E> 29,841
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,795,763
<CURRENT-LIABILITIES> 257,807
<BONDS> 0
0
0
<COMMON> 615
<OTHER-SE> 640,466
<TOTAL-LIABILITY-AND-EQUITY> 1,795,763
<SALES> 652,828
<TOTAL-REVENUES> 660,630
<CGS> 534,152
<TOTAL-COSTS> 534,152
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,536
<INCOME-PRETAX> 54,266
<INCOME-TAX> 21,571
<INCOME-CONTINUING> 32,695
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 32,695
<EPS-PRIMARY> 0.54
<EPS-DILUTED> 0.52
</TABLE>
