Securities and Exchange Commission
Washington D.C. 20549
FORM 10-Q
[ X ] Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 For the Period Ended March 31, 1998.
[ ] Transition Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 For the Transition Period From -_______________ to
________________.
Commission file number 0-22562
<TABLE>
<CAPTION>
CROSSMANN COMMUNITIES, INC.
-----------------------------
<S> <C>
INDIANA. . . . . . . . . . . . . . . . . 35-1880120
- ---------------------------------------- ---------------------------
(State of incorporation). . . . . . . . (I.R.S. Identification No.)
9202 NORTH MERIDIAN STREET
INDIANAPOLIS, IN . . . . . . . . . . . . 46260
- ---------------------------------------- ---------------------------
(Address of principal executive offices) (Zip Code)
(317) 843-9514
- ----------------------------------------
(Telephone number)
</TABLE>
Indicate by check mark whether the registrant (1) has filed all
documents and 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 periods 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
---
There were 11,138,229 Common shares outstanding as of May 1, 1998.
<PAGE>
CROSSMANN COMMUNITIES, INC.
FORM 10-Q
INDEX
Part I. Financial Information.
Item 1. Financial Statements.
Consolidated balance sheets as of March 31, 1998 (unaudited) and December 31,
1997.
Consolidated unaudited statements of income for the three months ended March
31, 1998 and 1997.
Consolidated unaudited statements of cash flows for the three
months ended March 31, 1998 and 1997.
Notes to consolidated unaudited financial statements for the
three months ended March 31, 1998 and 1997.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Part II. Other Information
Item 1. Legal Proceedings.
Item 2. Changes in Securities.
Item 3. Defaults upon Senior Securities.
Item 4. Submission of Matters to a Vote of Security Holders.
Item 5. Other Information.
Item 6. Exhibits and Reports on Form 8-K.
Signatures.
<PAGE>
PART I. FINANCIAL INFORMATION.
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
CROSSMANN COMMUNITIES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<S> <C> <C>
March 31, 1998 December 31, 1997
---------------- ------------------
(unaudited)
----------------
ASSETS
Cash and cash equivalents. . . . . . . . $ 3,083,475 $ 5,526,138
Retainages . . . . . . . . . . . . . . . 1,426,842 886,766
Real estate inventories. . . . . . . . . 163,833,681 153,523,571
Furniture and equipment, net . . . . . . 3,355,723 3,310,345
Investments in joint ventures. . . . . . 12,406,861 12,354,474
Goodwill, net. . . . . . . . . . . . . . 3,752,812 3,817,650
Other assets . . . . . . . . . . . . . . 6,241,761 5,856,819
---------------- ------------------
Total assets . . . . . . . . . . . . . . . $ 194,101,155 $ 185,275,763
================ ==================
Liabilities and shareholders' equity
Accounts payable . . . . . . . . . . . . $ 10,036,452 $ 15,924,136
Accrued expenses and other liabilities . 6,902,473 7,426,217
Notes payable. . . . . . . . . . . . . . 63,632,431 51,122,431
---------------- ------------------
Total liabilities. . . . . . . . . . . . . 80,571,356 74,472,784
Commitments and contingencies
Shareholders' equity:
Common shares. . . . . . . . . . . . . . 55,726,356 55,548,737
Retained earnings. . . . . . . . . . . . 57,803,443 55,254,242
---------------- ------------------
Total shareholders' equity . . . . . . . . 113,529,799 110,802,979
---------------- ------------------
Total liabilities and shareholders' equity $ 194,101,155 $ 185,275,763
================ ==================
<FN>
See accompanying notes.
</TABLE>
<TABLE>
<CAPTION>
CROSSMANN COMMUNITIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED MARCH 31,
----------------------------
<S> <C> <C>
1998 1997
------------ ------------
Sales of residential real estate . . $56,323,242 $46,821,263
Cost of residential real estate sold 44,527,551 37,074,010
------------ ------------
Gross profit . . . . . . . . . . . . 11,795,691 9,747,253
Selling, general and
administrative. . . . . . . . . . . 7,858,452 6,353,310
------------ ------------
Income from operations . . . . . . . 3,937,239 3,393,943
Other income, net. . . . . . . . . . 518,712 313,525
Interest expense . . . . . . . . . . (216,117) (285,620)
------------ ------------
302,595 27,905
------------ ------------
Income before income taxes . . . . . 4,239,834 3,421,848
Income taxes . . . . . . . . . . . . 1,690,633 1,368,731
------------ ------------
Net income . . . . . . . . . . . . . $ 2,549,201 $ 2,053,117
============ ============
Weighted average number of
common shares outstanding:
Basic. . . . . . . . . . . . . . . 11,118,066 9,188,652
============ ============
Diluted. . . . . . . . . . . . . . 11,348,131 9,294,335
============ ============
Net income per common share:
Basic. . . . . . . . . . . . . . . $ .23 $ .22
============ ============
Diluted . . . . . . . . . . . . . . $ .22 $ .22
============ ============
<FN>
See accompanying notes.
</TABLE>
<TABLE>
<CAPTION>
CROSSMANN COMMUNITIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<S> <C> <C>
Three Months hree Months
Ended March 31, Ended March 31,
----------------- -----------------
1998 1997
----------------- -----------------
Operating activities:
Net Income . . . . . . . . . . . . . . . . . . . $ 2,549,201 $ 2,053,117
Adjustments to reconcile net income to net cash
flows from operating activities:
Depreciation . . . . . . . . . . . . . . . . 129,796 164,512
Amortization . . . . . . . . . . . . . . . . 57,506 40,723
Cash provided (used) by changes in:
Retainages . . . . . . . . . . . . . . . . (540,076) (516,959)
Real estate inventories. . . . . . . . . . (10,310,110) (11,475,710)
Other assets . . . . . . . . . . . . . . . (377,611) (508,560)
Accounts payable . . . . . . . . . . . . . (5,887,594) 1,964,417
Accrued expenses and other liabilities . . (523,752) 289,909
----------------- -----------------
Net cash flows from operating activities . . . . (14,902,640) (7,988,549)
Investing activities:
Purchases of furniture and equipment . . . . . . (175,174) (184,460)
Investments in joint ventures. . . . . . . . . . (52,387) (441,838)
----------------- -----------------
Net cash used by investing activities. . . . . . (227,561) (626,298)
Financing activities:
Proceeds from bank borrowing . . . . . . . . . . 41,855,000 24,965,000
Principal payments on bank borrowing . . . . . . (29,300,000) (16,318,000)
Payments on notes and long-term debt . . . . . . (45,081) (32,153)
Proceeds from sale of common shares. . . . . . . 177,619 -0-
----------------- -----------------
Net cash provided by financing activities. . . . 12,687,538 8,614,847
----------------- -----------------
Net decrease in cash and cash equivalents. . . . (2,442,663) -0-
Cash and cash equivalents at beginning of period 5,526,138 100,000
----------------- -----------------
Cash and cash equivalents at end of period . . . $ 3,083,475 $ 100,000
================= =================
<FN>
See accompanying notes.
</TABLE>
CROSSMANN COMMUNITIES, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
Basis of Presentation
Crossmann Communities, Inc. (the "Company") is engaged primarily in the
development, construction, marketing and sale of new single-family homes for
first time and first move-up buyers. The Company also acquires and develops
land for construction of such homes and originates mortgage loans for the
buyers. The Company operates in Indianapolis, Ft. Wayne and Lafayette, Indiana;
Cincinnati, Columbus and Dayton, Ohio; Louisville and Lexington, Kentucky; and
Memphis, Tennessee.
The accompanying unaudited consolidated financial statements have been prepared
in accordance with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, the unaudited consolidated financial statements do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of the
Company, all adjustments (consisting of normal recurring accruals) considered
necessary to present fairly the consolidated financial statements have been
included.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS.
The Company's business and the homebuilding industry in general are subject to
changes in economic conditions, including, but not limited to, employment
levels, interest rates, the availability of credit, and consumer confidence.
The Company's success over the past several years has been influenced by a
variety of factors including favorable economic conditions in its principal
markets, the availability of capital for expansion, and low interest rates. To
the extent these conditions do not continue, the Company's operating results may
be adversely affected.
The Company's business is subject to weather-related seasonal factors that can
affect quarter-to-quarter results of operations. The number of sales contracts
signed tends to be higher during the first four months of the year, creating a
backlog that declines during the second half of the year. A home is included in
"backlog" upon execution of a sales contract by the customer, and sales and cost
of sales are recognized when the title is transferred and the home is delivered
to the buyer at "closing." Adverse weather conditions during the first and
second quarters of the year usually restrict site development work, and
construction limitations generally result in fewer closings during this period.
Results of operation during the first half of the year also may reflect
increased costs associated with adverse weather.
Effective December 1997, SFAS 128 relating to the computation and presentation
of earnings per share, became effective. SFAS 128 replaces the presentation of
primary EPS with a presentation of basic EPS, requires dual presentation of
basic and diluted EPS for all entities with complex capital structures and
requires a reconciliation of the numerator and denominator of the basic EPS
computation to the numerator and denominator of the diluted EPS computation.
.
THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THE THREE MONTHS ENDED MARCH 31,
1997.
Results of Operation
Sales for the three months ended March 31, 1998 increased approximately $9.5
million, or 20.3%, over the same period in 1997. This increase reflects more
homes closed (479 homes in 1998 as compared to 420 in 1997) and higher selling
prices ($117,585 per home for the period in 1998 as compared to $111,479 in
1997.) Management attributes the increase in unit closings principally to the
contribution of closings in Louisville, Lexington and Memphis, new markets which
had very few closings in the first quarter of last year. Management attributes
the increase in average selling price to improving prices overall but also to
closings in Ohio where homes are generally sold with a basement and in Lexington
where average selling prices are substantially higher than in Crossmann's
Indiana markets.
Gross profit increased approximately $2 million for the three months ended March
31, 1998, over the same period the year before. Gross profit as a percentage of
sales increased from 20.8% in 1997 to 20.9% in 1998. This improvement is due
principally to a lower level of capitalized interest, resulting from Crossman's
equity offering last year.
Selling, general and administrative expenses increased $1.5 million during the
three months ended March 31, 1998 compared to the same period in 1997, due in
part to sale commissions on the higher sales and increased overhead related to
the Company's new markets. Selling, general and administrative expenses
increased as a percentage of sales from 13.57% to 13.95%.
Other income increased $274,690 for the three months ended March 31, 1998
compared to the same period the year before. Although interest expense was
higher during the first quarter of 1997 due to higher inventory levels, earnings
from land development joint ventures were also higher and more than offset the
increase. Trinity Homes LLC, ("Trinity") a homebuilding joint venture in
Indianapolis posted a slight gain of $255. Trinity generates nearly all of its
income in the second half of the year.
Income before income taxes for the three months ended March 31, 1998 increased
$817,986, from more than $3.4 million in 1997 to more than $4.2 million in
1998, an increase of approximately 24%. Income before income taxes as a
percentage of sales increased to 7.5% of sales in 1998 compared to 7.3% in 1997.
This increase is due principally to increased sales volume with stable selling,
general and administrative expenses.
Net income was $496,084 higher for the first quarter of 1998 than for the first
quarter of 1997, an increase of 24.2%. As a percentage of sales, net income
increased to 4.5% from 4.4% during the same period in 1997.
Backlog
The Company generally builds only upon the execution of a sales contract by a
customer and after approval of financing, although it also builds a limited
number of homes on speculation. The standard sales contract used by the Company
provides for an earnest money deposit of $1,000. The contract usually includes
a termination provision under which the earnest money is refunded in the event
that mortgage financing is not available on terms specified in the contract, and
may include other contingencies. Cancellations by buyers with approved
financing occur infrequently.
Sales backlog at March 31, 1998 was 1,759 with an aggregate sales value of
approximately $190.8 million, compared to 1,614 homes with an aggregate sales
value of approximately $173 million at March 31, 1997, an increase of
approximately 8.9%. This increase reflects a higher year-end backlog (1,080 at
December 31, 1997 compared to 1,006 at December 31, 1996) and stronger sales in
the first quarter of 1998 (1,158 contracts written in the first quarter of 1998
compared to 1,028 in 1997, an increase of 13%). Orders in new markets of
Louisville, Lexington and Memphis and improving orders in Ft. Wayne offset
declines in Indianapolis, Lafayette and Ohio. Management attributes declines to
inclement weather in March. January and February sales were strong.
Changes in Financial Position
Income from operations and new borrowings on the line of credit were used
primarily to finance real estate inventories, which increased approximately
$10.3 million or 6.7% from their December 31, 1997 level. The expansion in
inventory during the first quarter is a normal seasonal trend. Winter weather
slows closings but does not prevent work on houses under construction from
continuing; therefore, investment in inventory grows.
Retainages increased $540,076 in the first quarter, or 61%. This increase is
also seasonal. Mortgage companies retain escrows for the completion of exterior
landscape items. As weather permits, yards will be completed and retainages
will be released to the Company during the second and third quarters of the
year.
Notes payable increased approximately $12.5 million during the first quarter of
1998 as the line of credit was used to finance inventories.
Capital Resources and Liquidity
On December 22, 1995 the Company issued senior notes pari passu with its senior
bank facility, in the amount of $25 million, to be repaid over nine years at a
fixed interest rate of 7.625%. At March 31, 1998, $19.4 million was the
outstanding note balance.
To finance inventory expansion during the first quarter, the Company at March
31, 1998, had drawn funds on its senior bank line of credit in the amount of
$43,452,000. On March 31, 1998, Crossmann amended its credit agreement with
Bank One, Indiana, NA, to reduce its interest rate, to streamline its covenants,
and to extend the maturity of the line to March 31, 2000.
Both the note agreements and the bank line of credit require compliance with
certain financial and operating covenants and place certain limitations on the
Company's investments in land and unconsolidated joint ventures. They also
limit payments of cash dividends by the Company.
The Company's financing needs depend on land acquisition, inventory turnover and
sales volume. Historically, the Company has financed operations with the
retention of earnings and borrowings from financial institutions. Management
believes future financing needs will be funded by internally generated capital,
funds available under the existing credit arrangement, and additional financing
to be negotiated.
FUTURE TRENDS
On April 27, 1998, Crossmann announced its entry into Charlotte, North
Carolina. Crossmann acquired an option to purchase 74 lots in Charlotte and is
actively negotiating to purchase land at other sites. Marketing should commence
mid-summer 1998.
PART II. OTHER INFORMATION
The following items for which provision is made in the applicable regulations of
the Securities and Exchange Commission are not required under the related
explanations or are inapplicable and therefore have been omitted:
Item 1. Legal Proceedings.
Item 2. Changes in Securities.
Item 3. Defaults Upon Senior Securities.
Item 4. Submissions of Matters to a Vote of Security Holders.
Item 5. Other Information.
Item 6. Exhibits and Reports on Form 8-K.
<TABLE>
<CAPTION>
a) Exhibits
<S> <C>
Exhibit Description of Exhibit
Number
3.1 . . Amended and restated Articles of Incorporation of Crossmann Communities, Inc.
(Incorporated by reference to Exhibit 3.1 to Form S-1 Registration Statement No.
33-68396.)
3.2 . . Bylaws of Crossmann Communities, Inc. (Incorporated by reference to Exhibit 3.2
to Form S-1 Registration Statement No. 33-68396.)
4.1 . . Specimen Share Certificate for Common Shares. (Incorporated by reference to
Exhibit 2.9 to Form S-1 Registration Statement No. 33-68396.)
10.2. . 1993 Outside Director Stock Option Plan. (Incorporated by reference to Exhibit 10.2
to Form S-1 Registration Statement No. 33-68396.)
10.3. . 1993 Employee Stock Option Plan. (As amended as of May 22, 1996.)
10.37 . Note Agreement dated as of December 19, 1995, $25,000,000 7.625% Senior Notes
due December 9, 2004, by Crossmann Communities, Inc., et al. (Incorporated by
reference to Exhibit 10.37 to From 10-K dated March 18, 1996.)
10.38 . 7.625% Senior Note due December 19, 2004, issued to Combined Insurance
Company by Crossmann Communities, Inc., et al. (Incorporated by reference to
Exhibit 10.38 to Form 10-K dated March 18, 1996.)
10.39 . 7.625% Senior Note due December 19, 2004, issued to Minnesota Mutual Life
Insurance company by Crossmann Communities, Inc., et al. (Incorporated by
reference to Exhibit 10.39 to Form 10-K dated March 18, 1996.)
10.40 . Amended and Restated Credit Agreement, dated December 22, 1995, by and
between Crossmann Communities, Inc., et al. and Bank One, Indianapolis N.A.
(Incorporated by reference to Exhibit 10.40 to Form 10-K dated March 18, 1996.)
10.41 . First Amendment to Amended and Restated Credit Agreement, dated March 27,
1997, by and between Crossmann Communities, Inc. et al. and Bank One, Indiana
N.A. (Incorporated by reference to Exhibit 10.41 to Form 10-Q dated May 13,
1997.)
10.42 . Promissory Note, dated March 27, 1997, by and between Crossmann Communities,
Inc. et al. and Bank One, Indiana, N.A. (Incorporated by reference to Exhibit 10.42
to Form 10-Q dated May 13, 1997.)
10.51 . Second Amendment to Amended and Restated Credit Agreement, dated March 31,
1998, by and between Crossmann Communities, Inc. et. al. and Bank One,
Indianapolis, NA.
10.5. . Promissory Note, dated March 31, 1998, by and between Crossmann Communities,
Inc. et al. and Bank One, Indiana, N.A.
19.1. . Lease by and between Pinnacle Properties LLC ("Landlord") and Crossmann
Communities, Inc. ("Tenant"), 9202 North Meridian Street, Suite 300, Indianapolis,
Indiana 46260, executed April 18, 1994. (Incorporated by reference to Exhibit 19.1
to Form 10-Q dated August 12, 1994.)
21.2. . Amended subsidiaries of the registrant, dated March 28, 1996. (Incorporated by
reference to Exhibit 21.2 to Form 10-Q dated August 13, 1996.)
27.1. . Financial Data Schedule for the quarter ended March 31, 1998.
27.2. . Financial Data Schedule for the years ended December 31, 1995 and 1996, and for
the quarters ended March 31, 1996 and June 30, 1996.
27.3. . Financial Data Schedule for the quarters ended September 30, 1996, March 31, 1997,
June 30, 1997 and September 30, 1997.
</TABLE>
(b) Reports on Form 8-K.
No Reports on Form 8-K were filed during the quarter for which this report
is filed.
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) of the Securities and
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CROSSMANN COMMUNITIES, INC.
/s/ Jennifer A. Holihen
- ---------------------------
Jennifer A. Holihen
Director, Chief Financial Officer;
Treasurer; Secretary;
(Principal Financial and Accounting Officer)
Dated: May 1, 1998
Exhibit 10.51
- --------------
SECOND AMENDMENT TO
AMENDED AND RESTATED CREDIT AGREEMENT
CROSSMANN COMMUNITIES, INC., an Indiana Corporation (the "Company") and
BANK ONE, INDIANA, NA, (formerly known as Bank One, Indianapolis, NA) a national
banking association (the "Bank") being parties to that certain Amended and
Restated Credit Agreement dated December 21, 1995, as amended by that certain
First Amendment to Amended and Restated Credit Agreement dated as of March 31,
1997 (collectively, the "Agreement"), hereby enter into this Second Amendment to
Amended and Restated Credit Agreement (this "Amendment") in order to further
amend the Agreement as follows:
SECTION 1. DEFINITIONS. All defined terms used in this Amendment unless
---------- -----------
otherwise defined herein shall have their respective meanings set forth in the
Agreement. Further, the following definitions appearing in Section 1 of the
Agreement are hereby amended and restated in their respective entireties as
follows:
"Borrowing Base" means for the Company and the Current Subsidiaries,
---------------
determined on a consolidated basis an amount equal to the sum of: (i) one
hundred percent (100%) of cash and cash equivalents; (ii) eighty percent (80%)
of the lesser of the net book value or current market value of inventory of
speculative homes and model homes completed or under construction, and winter
foundations, on land which the Company or a Current Subsidiary owns and with
respect to which neither the Company nor a Current Subsidiary has a contract
with a third party to build a house; (iii) ninety percent (90%) of the lesser of
the net book value or current market value of inventory of residential housing
completed or under construction on land which the Company or a Current
Subsidiary owns and has a contract with a third party to build a house; (iv)
sixty-five percent (65%) of the lesser of the net book value or current market
value of Land Held for Future Development; (v) sixty-five percent (65%) of the
lesser of the net book value or current market value of Land Under Development
and Developed Lots; (vi) ninety-five percent (95%) of receivables held in
escrow; and (vii) the lesser of Ten Million Dollars ($10,000,000.00) or fifty
percent (50%) of the net book value of the Company's unencumbered multi-family
unit inventory completed or under construction; provided that, notwithstanding
the foregoing, in no event shall the sum of the amounts attributable to items
(iv) and (v) above exceed the sum of the amounts attributable to items (i) ,
(ii), (iii), (vi) and (vii).
"LIBOR-based Rate" means that per annum rate of interest which is
-----------------
equal to the sum of the London Interbank Offered Rate plus the Applicable
Spread.
"Revolving Loan Maturity Date" means March 31, 2000, and thereafter
------------------------------
any subsequent date to which the Commitment may be extended by the Bank pursuant
to the terms of Section 2(d).
SECTION 2. NEW DEFINITIONS. The following definitions are added to
---------- ----------------
Section 1 of the Agreement as follows:
-
"Applicable Spread" means that number of percentage points to be
------------------
taken into account in determining the per annum rate at which interest will
accrue on the Revolving Loan based on the London Interbank Offered Rate
determined by reference of the ratio of the Company's Total Debt to its Total
Capitalization in accordance with the following table:
Ratio of Total Debt to Total Capitalization Applicable Spread
------------------------------------------------- -----------------
Greater than or equal to .51:1.0 1.60%
.33-.50:1.0 1.45%
00-.32:1.0 1.30%
The Applicable Spread shall be determined on the basis of the
financial statements of the Company for each fiscal quarter furnished to the
Bank pursuant to the requirements of Section 5(b) with prospective effect for
the following fiscal quarter. Interest will accrue and be payable in any fiscal
quarter on the basis of Applicable Spread in effect during the preceding fiscal
quarter until an adjustment is made under the terms of this provision. The
Applicable Spread shall be adjusted on the first interest payment date which
follows receipt by the Bank of the financial statements upon which such
adjustment is based. In the event that the Company fails to deliver the
financial statements and compliance certificates required under Section 5(b) for
any month which ends a fiscal quarter, then the Applicable Spread shall be the
largest spread shown on the above table from the date such financial statements
were required to be delivered until the first interest payment date which
follows delivery to the Bank of such financial statements. It is noted that the
above table provides an Applicable Spread for a ratio of Total Debt to Total
Capitalization greater than that which is permitted under the terms of Section
5(g)(iii). For the avoidance of doubt, it is agreed that it is the intent of
the parties that the Bank shall be free to exercise all remedies otherwise
provided for in this Agreement in the event of a violation of the Company of the
covenants stated in Section 5(g)(iii), notwithstanding the accrual of interest
upon the Loan at a rate determined in accordance with this definition.
"Joint Venture Land" shall mean, as of the date of any determination thereof,
--------------------
land owned or in the process of development by a joint venture entity formed to
engage principally in land development activity and in which the Company or any
Current Subsidiary is a joint venture partner.
"Second Amendment" means that certain agreement entitled Second
-----------------
Amendment to Amended and Restated Credit Agreement entered into by and between
the Company and the Bank dated as of March 31, 1998.
SECTION 3. REVOLVING LOAN. Section 2(e) of the Agreement is hereby
---------- ---------------
amended and restated in its entirety and a new Section 2(j) is added to the
-
Agreement as follows:
(e) Letters of Credit. At any time that the Company is entitled
-----------------
to an Advance under the Revolving Loan, the Bank shall, upon the application of
the Company, or the Company and any Subsidiary if the context so requires, issue
for the account of the Company or the respective Subsidiary as applicable, a
standby letter of credit (each a "Letter of Credit") in an amount not in excess
of the maximum Advance that the Company would then be entitled to obtain under
the Revolving Loan, provided that (A) the total amount of Letters of Credit
which are outstanding at any time shall not exceed $5,000,000.00, (B) the
issuance of any Letter of Credit with a maturity date beyond the Revolving Loan
Maturity Date shall be entirely at the discretion of the Bank, (c) the form of
the requested Letter of Credit shall be satisfactory to the Bank in the
reasonable exercise of the Bank's discretion, and (D) the Company, or the
Company and Crossmann Partnership as the context so requires, shall have
executed an application and reimbursement agreement for the Letter of Credit (a
"Reimbursement Agreement") on the Bank's standard form (currently in the form of
Exhibit "G"). While any Letter of Credit is outstanding, the maximum amount of
- ------------
advances which may be outstanding under the Revolving Loan shall be reduced by
the maximum amount available to be drawn under the Letter of Credit. The
Company shall pay the Bank a commission for each Letter of Credit issued equal
to one and one-half percent (1-1/2%) of the maximum amount available to be drawn
under the Letter of Credit. Such commissions shall be calculated on the basis
of a 360-day year and the actual number of days in the period during which the
Letter of Credit will be outstanding. The Company shall pay the Bank's standard
transaction fees with respect to any transactions occurring on account of any
Letter of Credit. Commissions shall be payable quarterly in advance when the
related Letters of Credit are issued and thereafter on the first Banking Day of
each subsequent three-month period from the date of issuance so long as such
Letter of Credit is outstanding, and transaction fees shall be payable upon
completion of the transactions as to which they are charged. All such
commissions and fees may be debited by the Bank to any deposit account of the
Company carried with the Bank without further authority, and in any event, shall
be paid by the Company within ten (10) days following billing.
(j) Unused Fee. In addition to interest on the Revolving Loan,
----------
the Company shall pay to the Bank an unused fee for each partial or full
calendar quarter during which the Commitment is outstanding equal to twenty
one-hundredths percent (.20%) per annum of the average daily excess of the
Commitment over the principal balance of the Revolving Loan. Unused fees for
each calendar quarter shall be due and payable within ten (10) days following
the Bank's submission of a statement of the amount due. Such fees may be
debited by the Bank when due to any demand deposit account of the Company
carried with the Bank without further authority.
SECTION 4. FINANCIAL COVENANTS. Sections 5(g)(ii) and 5(g)(iv) of the
---------- --------------------
Agreement are hereby amended and restated in their respective entireties and a
new Section 5(g)(viii) is added to the Agreement as follows:
(ii) Consolidated Tangible Net Worth. The Company shall maintain at all
-------------------------------
times its Consolidated Tangible Net Worth at a level not less than an amount
equal to the sum of Ninety Million and 00/100 Dollars ($90,000,000.00) plus
Fifty Percent (50%) of Consolidated Net Earnings determined on a cumulative
basis for each fiscal quarter ending on and after December 31, 1997; provided,
that for the purposes of the foregoing calculation, in the event that
Consolidated Net Earnings is a deficit figure for any such fiscal quarter,
Consolidated Net Earnings for such fiscal quarter shall be deemed to be zero
and, accordingly, shall not reduce the amount of Consolidated Tangible Net Worth
required to be maintained pursuant to this Section.
(iv) Ratio of Consolidated Land to Consolidated Tangible Net
--------------------------------------------------------
Worth. The Company shall maintain at all times the ratio of its Consolidated
Land to Consolidated Tangible Net Worth at a level not greater than 1.25 to 1.00
(viii) Equity in Joint Ventures. The sum of the Company's equity
------------------------
investment in land development joint ventures formed to engage principally in
land development, plus all loans from the Company to such joint ventures, shall
not at any time exceed twenty-five percent (25%) of the Company's Consolidated
Tangible Net Worth.
SECTION 5. INVESTMENTS. Section 6(d) of the Agreement is hereby amended
---------- -----------
by the addition of a new clause (ix) thereto as follows:
(ix) Investments in non-consolidated joint venture partnerships
formed to engage principally in single-family land development.
SECTION 6. REPRESENTATIONS AND WARRANTIES. In consideration for the terms
--------- ------------------------------
and provisions hereof, the Company represents and warrants that each of its
representations and warranties appearing in Section 3 of the Agreement are
complete and correct as of the date hereof except that:
(a) Section 3(a) shall be deemed to also include as Current
Subsidiaries Cutter Homes, Ltd., a corporation organized, existing and in good
standing under the laws of the Commonwealth of Kentucky, Crossmann Communities
of Tennessee, LLC, a limited liability company organized, existing and in good
standing under the laws of the State of Tennessee, Crossmann Properties, LLC, a
limited liability company, organized, existing and in good standing under the
laws of the State of Indiana, Crossmann Investments, Inc., a corporation
organized, existing and in good standing under the laws of the State of Indiana,
and Crossmann Management, Inc., a corporation organized, existing and in good
standing under the laws of the State of Indiana.
(b) The representation appearing in Section 3(d) shall be deemed
to also refer to the most recent financial statements delivered by the Company
to the Bank; and
(c) The representation appearing in Section 3(l) shall be deemed
to refer to Subsidiaries of the Company created after the date of the Agreement
with the prior consent of the Bank.
SECTION 7. CONDITIONS PRECEDENT. As conditions precedent to the
---------- ---------------------
effectiveness of this Amendment, the Bank shall have received the following, in
-----
form and substance acceptable to the Bank:
(a) This Amendment duly executed by the Company;
(b) The Revolving Note in the form of Exhibit "A" attached hereto
-----------
(the "Revolving Note") which hereafter shall be deemed to be the Revolving Note
for all purposes of the Agreement;
(c) A certified copy of the Resolutions of the Board of Directors
of the Company authorizing the execution and delivery of this Amendment, the
Revolving Note, and any other document required hereunder.
(d) A certificate signed by the Secretary of the Board of
Directors of the Company certifying the name of the Officer or Officers
authorized to sign this Amendment, the Revolving Note, and any other document
required to be executed and delivered pursuant to this Amendment, together with
a sample of the true signature of each such officer.
(e) The Reaffirmation of Guaranty (each a "Reaffirmation of
Guaranty") of each of the Current Subsidiaries in the forms of Exhibits "B, "C,"
--- ----
"D," "E," "F," "G," "H," "I," ",J" "K," "L" "M," "N," and "O" attached hereto.
- ---- ---- ---- ---- ---- ---- ---- ---- --- ---- ---- ---
(f) A Certificate of Existence for the Company issued by the
Indiana Secretary of State as of a recent date.
(g) An opinion of counsel for the Company as to the due execution
and delivery and enforceability of this Amendment, the Revolving Note, and all
other documents to be executed by the Company pursuant hereto.
(h) The reasonable fees of Bank's counsel incurred in connection
with the drafting, negotiation and closing of this Amendment.
(i) Such other documents as the Bank may reasonably require.
SECTION 8. REAFFIRMATION OF AGREEMENT. Except as specifically modified
---------- --------------------------
herein, the Agreement is hereby reaffirmed and shall remain in full force and
effect as originally written and as may have been previously amended.
IN WITNESS WHEREOF, the Company and the Bank have entered into this Second
Amendment to Amended and Restated Credit Agreement by their respective duly
authorized officers as of this 31st day of March, 1998.
CROSSMANN COMMUNITIES, INC., an Indiana corporation
By: /s/Jennifer A. Holiehn
------------------------
Jennifer A. Holihen, Secretary
BANK ONE, INDIANA, NA, formerly known as Bank One, Indianapolis, NA, a
national banking association
By: /s/ Daniel H. Hatfield
-------------------------
Daniel H. Hatfield, Vice President
EXHIBIT 10.52
- --------------
PROMISSORY NOTE
(REVOLVING LOAN)
Indianapolis, Indiana
$60,000,000.00
Dated: March 31, 1998
Final Maturity: March 31, 2000
On or before March 31, 2000 ("Final Maturity"), CROSSMANN COMMUNITIES,
INC., an Indiana corporation (the "Maker") promises to pay to the order of BANK
ONE, INDIANA, NA (the "Bank") at the principal office of the Bank at
Indianapolis, Indiana, the principal sum of Sixty Million and 00/100 Dollars
($60,000,000.00) or so much of the principal amount of the Loan represented by
this Note as may be disbursed by the Bank under the terms of the Credit
Agreement described below, and to pay interest on the unpaid principal balance
outstanding from time to time as provided in this Note.
This Note evidences indebtedness (the "Loan") incurred or to be incurred by
the Maker under a revolving line of credit extended to the Maker by the Bank
under an Amended and Restated Credit Agreement dated December 21, 1995 (as
amended, the "Credit Agreement"). All references in this Note to the Credit
Agreement shall be construed as references to that Agreement as it may be
amended from time to time. The Loan is referred to in the Credit Agreement as
the "Revolving Loan." Subject to the terms and conditions of the Credit
Agreement, the proceeds of the Loan may be advanced and repaid and re-advanced
until Final Maturity. The principal amount of the Loan outstanding from time to
time shall be determined by reference to the books and records of the Bank on
which all Advances under the Loan and all payments by the Maker on account of
the Loan shall be recorded. Such books and records shall be deemed prima facie
----- -----
to be correct as to such matters.
The terms "Advance" and "Banking Day" are used in this Note as defined in
the Credit Agreement.
Interest on the unpaid principal balance of the Loan outstanding from time
to time prior to and after maturity will accrue at the rate or rates provided in
the Credit Agreement. Prior to maturity, accrued interest shall be due and
payable on the last Banking Day of each month commencing on the last Banking Day
of the month in which this Note is executed. After maturity, interest shall be
due and payable as accrued and without demand. Interest will be calculated on
the basis that an entire year's interest is earned in 360 days.
The entire outstanding principal balance of this Note shall be due and
payable, together with accrued interest, at Final Maturity. Reference is made
to the Credit Agreement for provisions requiring prepayment of principal under
certain circumstances. Principal may be prepaid, but only as provided in the
Credit Agreement.
If any installment of interest due under the terms of this Note is not paid
when due, then the Bank or any subsequent holder of this Note may, subject to
the terms of the Credit Agreement, at its option and without notice, declare the
entire principal amount of the Note and all accrued interest immediately due and
payable. Reference is made to the Credit Agreement which provides for
acceleration of the maturity of this Note upon the happening of other "Events of
Default" as defined therein.
If any installment of interest due under the terms of this Note prior
to maturity is not paid in full when due, then the Bank at its option and
without prior notice to the Maker, may assess a late payment fee in an amount
equal to the greater of $50.00 or five percent (5%) (not exceeding a maximum fee
of $250.00) of the amount past due. Each late payment fee assessed shall be due
and payable on the earlier of the next regularly scheduled interest payment date
or the maturity of this Note. Waiver by the Bank of any late payment fee
assessed, or the failure of the Bank in any instance to assess a late payment
fee shall not be construed as a waiver by the Bank of its right to assess late
payment fees thereafter.
All payments on account of this Note shall be applied first to expenses of
collection, next to any late payment fees which are due and payable, next to
interest which is due and payable, and only after satisfaction of all such
expenses, fees and interest, to principal.
The Maker and any endorsers severally waive demand, presentment for payment
and notice of nonpayment of this Note, and each of them consents to any renewals
or extensions of the time of payment of this Note without notice.
This Note is given in renewal, replacement and modification of that certain
Promissory Note (Revolving Loan) from the Maker to the Bank dated December 21,
1995, in the original principal amount of $40,000,000.00 and with a final
maturity date of March 31, 1998, as replaced by that certain Promissory Note
(Revolving Loan) from the Maker to the Bank dated March 31, 1997, in the
original principal amount of $60,000,000.00 and with a final maturity date of
March 31, 1999.
All amounts payable under the terms of this Note shall be payable with
expenses of collection, including attorneys' fees, and without relief from
valuation and appraisement laws.
This Note is made under and will be governed in all cases by the
substantive laws of the State of Indiana, notwithstanding the fact that Indiana
conflicts of law rules might otherwise require the substantive rules of law of
another jurisdiction to apply.
CROSSMANN COMMUNITIES, INC.
By: /s/ Jennifer A. Holihen
--------------------------
Jennifer A. Holihen, Secretary
EXHIBIT "A"
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Crossmann Communities, Inc.
Exhibit 27.1
Article 5 Financial Data Schedule for 1998 10-Q
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 3083475
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 163833681
<CURRENT-ASSETS> 0
<PP&E> 5819323
<DEPRECIATION> 2463600
<TOTAL-ASSETS> 194101155
<CURRENT-LIABILITIES> 0
<BONDS> 63632431
0
0
<COMMON> 55726356
<OTHER-SE> 57803443
<TOTAL-LIABILITY-AND-EQUITY> 194101155
<SALES> 56323242
<TOTAL-REVENUES> 56323242
<CGS> 44527551
<TOTAL-COSTS> 44527551
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 216117
<INCOME-PRETAX> 4239834
<INCOME-TAX> 1690633
<INCOME-CONTINUING> 2549201
<DISCONTINUED> 0
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<EPS-PRIMARY> .23
<EPS-DILUTED> .22
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Crossmann Communities, Inc.
Exhibit 27.2
Article 5 Financial Data Schedule
</LEGEND>
<RESTATED>
<S> <C> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996 DEC-31-1996 DEC-31-1996
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<INTEREST-EXPENSE> 678095 1039251 208003 320271
<INCOME-PRETAX> 18630190 24668735 2477142 6660415
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<INCOME-CONTINUING> 11111412 15065628 1369853 3993565
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<EPS-PRIMARY> 1.22 1.65 .15 .44
<EPS-DILUTED> 1.21 1.63 .15 .43
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Crossmann Communities, Inc.
Exhibit 27.3
Article 5 Financial Data Schedule
</LEGEND>
<RESTATED>
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 9-MOS 3-MOS 6-MOS 9-MOS
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</TABLE>
