<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly 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 0-23270
DOMINION HOMES, INC.
(Exact name of registrant as specified in its charter)
Ohio 31-1393233
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
5501 Frantz Road, Dublin, Ohio 43017-0766
(Address of principal executive offices)
(614) 761-6000
(Registrant's Telephone Number, Including Area Code)
Not Applicable
(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 / /
Number of common shares outstanding as of May 8, 1998: 6,271,053
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DOMINION HOMES, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
(unaudited)
--------- ---------
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 252 $ 252
Notes and accounts receivable, net:
Trade 1,321 1,443
Due from financial institutions for residential closings 1,317 340
Real estate inventories:
Land and land development costs 55,264 62,867
Homes under construction 54,277 46,717
Other 3,394 2,177
--------- ---------
Total real estate inventories 112,935 111,761
Prepaid expenses and other 1,105 455
Deferred income taxes 2,000 2,110
Property and equipment, at cost 4,370 4,325
Less accumulated depreciation (2,904) (2,891)
--------- ---------
Net property and equipment 1,466 1,434
--------- ---------
Total assets $ 120,396 $ 117,795
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable, trade $ 7,198 $ 6,770
Deposits on homes under contract 2,704 1,977
Accrued liabilities 11,136 10,625
Note payable, banks 52,144 52,687
Term debt 4,484 5,076
--------- ---------
Total liabilities 77,666 77,135
--------- ---------
Commitments and contingencies
Shareholders' equity
Common shares, without stated value, 12,000,000 shares
authorized, 6,271,053 and 6,266,953 shares issued
and outstanding, respectively 30,717 30,673
Less deferred compensation (129) (150)
Retained earnings 12,142 10,137
--------- ---------
Total shareholders' equity 42,730 40,660
--------- ---------
Total liabilities and shareholders' equity $ 120,396 $ 117,795
========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
-2-
<PAGE> 3
DOMINION HOMES, INC.
STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1998 1997
---------- ----------
<S> <C> <C>
Revenues $ 54,458 $ 36,997
Cost of real estate sold 43,558 29,380
---------- ----------
Gross profit 10,900 7,617
Selling, general and administrative 6,352 5,135
---------- ----------
Income from operations 4,548 2,482
Interest expense 1,091 1,443
---------- ----------
Income before income taxes 3,457 1,039
Provision for income taxes 1,452 436
---------- ----------
Net income $ 2,005 $ 603
========== ==========
Earnings per share
Basic $ 0.32 $ 0.10
========== ==========
Diluted $ 0.30 $ 0.10
========== ==========
Weighted average shares outstanding
Basic 6,268,199 6,239,153
========== ==========
Diluted 6,579,019 6,319,208
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
-3-
<PAGE> 4
DOMINION HOMES, INC.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
======================================================================================================
Common Shares Deferred Retained
Shares Amount Compensation Earnings Total
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1997 6,266,953 $30,673 $(150) $10,137 $40,660
Net income 2,005 2,005
Shares issued-shares awarded 4,100 44 44
Deferred compensation 21 21
- ------------------------------------------------------------------------------------------------------
Balance, March 31, 1998 6,271,053 $30,717 $(129) $12,142 $42,730
- ------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
-4-
<PAGE> 5
DOMINION HOMES, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1998 1997
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,005 $ 603
Adjustments to reconcile net income to cash
Provided by (used in) operating activities:
Depreciation and amortization 198 235
Disposal of property and equipment (47) 46
Issuance of common shares for compensation 44
Deferred income taxes 110
Changes in assets and liabilities:
Notes and accounts receivable (855) (868)
Real estate inventories (1,174) (9,921)
Prepaid expenses and other (636) (120)
Accounts payable 428 (155)
Deposits on homes under contract 727 245
Accrued liabilities 492 234
-------- --------
Net cash provided by (used in) operating activities 1,292 (9,701)
Cash flows from investing activities:
Proceeds from sale of property and equipment 17
Purchase of property and equipment (173) (61)
-------- --------
Net cash used in investing activities (156) (61)
Cash flows from financing activities:
Payments on note payable banks (51,208) (34,543)
Proceeds from note payable banks 50,665 44,881
Payments on term debt (593) (602)
-------- --------
Net cash (used in) provided by financing activities (1,136) 9,736
-------- --------
Net change in cash and cash equivalents 0 (26)
Cash and cash equivalents, beginning of period 252 252
-------- --------
Cash and cash equivalents, end of period $ 252 $ 226
======== ========
Supplemental disclosures of cash flow information:
Interest paid (net of amounts capitalized) $ 208 $ 504
======== ========
Income taxes paid $ 485 $ 763
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
-5-
<PAGE> 6
DOMINION HOMES, INC.
NOTES TO THE FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10
of Regulation S-X. Accordingly, they do not include all information and
footnotes required by generally accepted accounting principles for complete
financial statements. These financial statements should be read in
conjunction with the December 31, 1997 audited annual financial statements of
Dominion Homes, Inc. contained in its Annual Report to Shareholders or in the
December 31, 1997 Form 10-K.
The financial information included herein reflects all adjustments
(consisting of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair presentation of the results for interim
periods. The results of operations for the three months ended March 31, 1998
are not necessarily indicative of the results to be expected for the full
year.
2. RECLASSIFICATION
Certain prior period information has been reclassified to conform to the
current period presentation. Effective January 1, 1998 the Company made a
decision to reclassify certain indirect construction costs to cost of real
estate sold from selling, general and administrative expense. Accordingly,
the cost of real estate sold for the three months ended March 31, 1997 was
increased by $1.7 million. The reclassification had no impact on reported net
income.
3. CAPITALIZED INTEREST
Interest is capitalized on land during the development period and on
housing construction costs during the construction period. As lots are
transferred to homes under construction, the interest capitalized on the lot
during the land development period is included as a cost of the land and is
expensed through cost of sales when the home is closed. Capitalized interest
related to housing construction costs is included in interest expense in the
period in which the home is closed. Capitalized interest related to land
under development and construction in progress was $2.0 million and $2.1
million at March 31, 1998 and March 31, 1997, respectively. The following
table summarizes the activity with respect to capitalized interest:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1998 1997
----------- -----------
<S> <C> <C>
Interest incurred $ 1,185,000 $ 1,425,000
Interest capitalized (934,000) (935,000)
----------- -----------
Interest expensed directly 251,000 490,000
Previously capitalized interest charged to interest expense 840,000 953,000
----------- -----------
Total interest expense $ 1,091,000 $ 1,443,000
=========== ===========
</TABLE>
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<PAGE> 7
4. NOTE PAYABLE, BANKS
The Company is currently operating under a $90 million bank credit
facility that was executed on September 29, 1997 and is described in the
Company's Annual Report and Form 10-K for the fiscal year ended December 31,
1997. The Company is a party to interest rate swap contracts that fix the
interest rate at 6.13% plus a variable margin on $10 million of borrowings
under the existing bank credit facility and at 5.48% plus a variable margin
on a second $10 million of borrowings. The first interest rate swap contract
matures on October 16, 2000 and the second contract matures on January 14,
2001. The variable margin paid by the Company has been 2.25% since inception
of the existing bank credit facility and is determined quarterly. At March
31, 1998, the Company's overall effective borrowing rate was approximately
7.9%.
As indicated in the Company's Annual Report and Form 10-K, the Company has
been exploring other financing that will provide the Company with the
financial flexibility to expand to additional markets in Ohio and adjacent
states. On April 17, 1998, the Company executed a commitment letter
("Commitment") with Huntington National Bank, the lead bank under its
existing bank credit facility, for a $125 million senior unsecured revolving
credit facility which Huntington intends to syndicate. The Company intends to
use the proceeds of the new bank credit facility to refinance the borrowings
outstanding under its existing bank credit facility and to provide working
capital, financing for capital expenditures and acquisitions and financing
for other general corporate purposes. The Company also may use up to $20
million of the new bank credit facility for the issuance of standby letters
of credit. The Company expects to close the new bank credit facility during
the second quarter of 1998.
The Commitment provides that the new bank credit facility will mature on
May 31, 2003 and will permit cash advances and letters of credit in an
aggregate amount outstanding equal to the lesser of $125 million or the
availability under a borrowing base. The new bank credit facility will be
unsecured and will require the Company to give a negative pledge with respect
to the granting of security interests to other parties. Under the new bank
credit facility, interest will be payable monthly and at the end of each
interest period and principal will be due at maturity. Prior to maturity,
principal may be repaid and re-advanced any number of times. The Company will
have the option to use any combination of the following methods to price the
revolving line of credit: (a) the bank's prime rate of interest; or (b) a
Eurodollar rate of interest plus a variable margin of from 1.75% to 2.50%
based upon the ratio of the Company's EBITDA to interest expense ("Interest
Coverage Ratio").
-7-
<PAGE> 8
5. EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 128 "Earnings Per
Share." SFAS No. 128 establishes standards for computing and presenting
earnings per share ("EPS") and supersedes APB Opinion No. 15 "Earnings Per
Share" ("Opinion 15"). SFAS No. 128 replaces the presentation of primary EPS
with a presentation of basic EPS which excludes dilution and is computed by
dividing income available to common stockholders by the weighted average
number of common shares outstanding during the period. This statement also
requires dual presentation of basic EPS and diluted EPS on the face of the
income statement for all periods presented. Diluted EPS is computed as the
weighted average shares outstanding adjusted for the effect of common share
equivalents. EPS data for the three months ended March 31, 1997 have been
restated to conform with the requirements of SFAS No. 128.
A reconciliation of the weighted average shares used in basic and diluted
EPS is as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31
1998 1997
--------- ---------
<S> <C> <C>
Weighted average shares outstanding
during the period 6,268,199 6,239,153
Assuming exercise of options 310,820 80,055
--------- ---------
Weighted average shares outstanding adjusted
for common share equivalents 6,579,019 6,319,208
========= =========
</TABLE>
6. LEGAL PROCEEDINGS
The Company is involved in various legal proceedings, most of which arise
in the ordinary course of business and some of which are covered by
insurance. In the opinion of the Company's management, none of the claims
relating to such proceedings will have a material adverse effect on the
financial condition or results of operations of the Company.
-8-
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The Company achieved record first quarter revenues, home deliveries, homes
sold, sales contracts in backlog and net income. Revenues during first quarter
1998 increased by 47.2% to $54.5 million from $37.0 million for first quarter
1997. The increase in revenues resulted from closing 104 more homes in first
quarter 1998, as closings increased to 370 from 266 in first quarter 1997.
Revenues also increased as a result of higher average prices for homes
delivered. The average price for homes delivered increased to $146,916 during
first quarter 1998 compared to $138,327 during first quarter 1997. During the
first quarter of 1998 the Company was able to take advantage of its strong
marketing campaign, good economic conditions, high consumer confidence and mild
weather to record 670 sales contracts, the largest number of sales contracts in
its history. This compares to 356 homes sold during the three months ended March
31, 1997 and represents a 88.2% quarter to quarter increase. There were 1,003
contracts in backlog at March 31, 1998, representing an aggregate sales value of
$154.4 million, compared to 778 sales contracts in backlog at March 31, 1997,
representing an aggregate sales value of $118.0 million. As a result of the
Company's increased revenues and ability to maintain expenses, net income
increased to $2.0 million in first quarter 1998 compared to $603,000 in first
quarter 1997, an increase of 232.5%. The Company also attributes the improvement
in financial results to selective price increases, delivering homes with more
customer selected options, effective control of direct construction costs and
favorable economic and weather-related conditions.
The Company continued to search during first quarter 1998 for locations in
which to expand its operations outside of Central Ohio. To fund this future
expansion, the Company began discussions with several sources to increase its
credit resources. On April 17, 1998, the Company entered into a commitment with
the Huntington National Bank to increase the Company's revolving line of credit
to $125 million and extend the maturity date of the revolving line of credit to
May 31, 2003. The loan commitment also provides that up to $25 million of the
revolving line of credit may be used for expansion outside of Central Ohio. See
Note 4 to the Financial Statements for additional details.
Also during first quarter 1998 the Company continued to focus its efforts
toward implementing new computer systems that will increase operating
efficiencies, provide the technology for growth both within and outside of
Central Ohio and address the Year 2000 issues.
-9-
<PAGE> 10
COMPANY OUTLOOK
The Company expects its financial results for 1998 to exceed the financial
results reported for 1997. This expectation is based upon record sales and
closings during the first quarter of 1998, a record backlog of sales contracts
at March 31, 1998 and continued steady sales. Barring unusual weather conditions
or other unforeseen events, the Company believes it is well positioned to
complete construction of a record number of homes during 1998. While shortages
of materials or labor may cause delays, the Company believes that its ongoing
subcontractor retention programs mitigate the risk of such shortages. Also, the
Company continues to benefit from improvements in operational and administrative
efficiencies
Assuming the new revolving line of credit is consummated, economic conditions
remain favorable, and new market opportunities continue to look promising, the
Company anticipates expanding to an area outside of Central Ohio prior to the
end of 1998. The Company however does not expect this expansion to significantly
impact 1998 revenues or net income.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION ACT OF 1995
The statements contained in this report under the caption "Company Outlook"
and other provisions of this report on Form 10-Q which are not historical facts
are "forward looking statements" that involve various important risks,
uncertainties and other factors which could cause the Company's actual results
for 1998 and beyond to differ materially from those expressed in such forward
looking statements. These important factors include, without limitation, the
following risks and uncertainties: real or perceived adverse economic conditions
and/or an increase in mortgage interest rates, mortgage commitments that expire
prior to homes being delivered, the Company's ability to install public
improvements or build and close homes on a timely basis due to adverse weather
conditions, delays in the zoning, permitting or inspection processes, the effect
of changing consumer tastes on the market acceptance for the Company's products,
the impact of competitive products and pricing, the effect of shortages or
increases in the costs of materials, labor and financing, the continued
availability of credit, the outcome of litigation, the impact of changes in
government regulation, the problems associated with the Year 2000 issue, the
problems that could arise from expansion to areas outside of Central Ohio and
the other risks described in the Company's December 31, 1997 Form 10-K.
SEASONALITY AND VARIABILITY IN QUARTERLY RESULTS
The Company has experienced, and expects to continue to experience,
significant seasonality and quarter-to-quarter variability in homebuilding
activity levels. Typically, closings and related revenues will increase in the
second half of the year. The Company believes that this seasonality reflects the
tendency of homebuyers to shop for a new home in the Spring with the goal of
closing in the Fall or Winter. Weather conditions can also accelerate or delay
the scheduling of closings. The Company is concentrating on mitigating these
seasonal variations whenever possible.
-10-
<PAGE> 11
The following table sets forth certain data for each of the last eight
quarters:
<TABLE>
<CAPTION>
THREE SALES BACKLOG
MONTHS REVENUES CONTRACTS CLOSINGS (AT PERIOD END)
ENDED (IN THOUSANDS) (IN UNITS) (IN UNITS) (IN UNITS)
========================================================================================
<S> <C> <C> <C> <C>
June 30, 1996 $41,524 325 278 785
Sept. 30, 1996 $45,916 305 301 789
Dec. 31, 1996 $51,821 253 354 688
Mar. 31, 1997 $36,997 356 266 778
June 30, 1997 $56,672 333 380 731
Sept. 30, 1997 $58,723 380 383 728
Dec. 31, 1997 $55,534 333 358 703
Mar. 31, 1998 $54,458 670 370 1,003
</TABLE>
At March 31, 1998 the aggregate sales value of homes in backlog was $154.8
million compared to $118.0 million at March 31, 1997. The average sales value of
homes in backlog at March 31, 1998 increased to $154,364 compared to $151,717 at
March 31, 1997.
The Company annually incurs a substantial amount of indirect construction
costs which are essentially fixed in nature. For purposes of financial
reporting, the Company capitalizes these costs to real estate inventories on the
basis of the ratio of estimated annual indirect costs to direct construction
costs to be incurred. Thus, variations in construction activity cause
fluctuations in interim and annual gross profits.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain items from
the statements of income expressed as percentages of total revenues:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1998 1997
------ ------
<S> <C> <C>
Revenues ...................................... 100.0% 100.0%
Cost of real estate sold ...................... 80.0 79.4
------ ------
Gross profit ............................... 20.0 20.6
Selling, general and administrative expenses .. 11.6 13.9
------ ------
Income from operations ..................... 8.4 6.7
Interest expense .............................. 2.0 3.9
------ ------
Income before income tax ...................... 6.4 2.8
Income tax provision .......................... 2.7 1.2
------ ------
Net income ................................. 3.7% 1.6%
====== ======
</TABLE>
-11-
<PAGE> 12
FIRST QUARTER 1998 COMPARED TO FIRST QUARTER 1997
REVENUES. Revenues for first quarter 1998 increased to $54.5 million from
$37.0 million for first quarter 1997. The number of closings during first
quarter 1998 increased to 370 homes from 266 homes during first quarter 1997.
The increase in revenues is attributed to the increased number of closings and a
higher average home price which increased to $146,916 during first quarter 1998
from $138,327 during first quarter 1997, an increase of $8,589. The increase in
the average home price is primarily attributed to the Company's customers
purchasing larger homes and homes with more options. Customers were able to
purchase larger homes and homes with more options during 1998 because the
Company began offering a greater selection of larger models and more locations
for larger homes during 1997 and because FHA mortgage limits were increased
during 1997, allowing customers to finance larger homes. The Company was also
able to continue selectively increasing the price on some of its homes.
GROSS PROFIT. Gross profit for first quarter 1998 increased to $10.9 million
from $7.6 million for first quarter 1997. This increase in gross profit is
attributed to an increase in deliveries. As a percentage of revenues, the gross
profit margin declined to 20.0% for first quarter 1998 from 20.6% for first
quarter 1997. The decline in gross profit margin is principally attributable to
lower gross margin associated with larger homes and additional work equity
discounts issued by the Company during first quarter 1998. Additionally, the
gross profit margin reflects the benefits of closing more homes while
maintaining indirect construction expenses.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expense for first quarter 1998 increased to $6.4 million from $5.1 million for
first quarter 1997. This $1.3 million increase in selling general and
administrative expense is a result of the increase in the number of closings and
additional selling and marketing expense. As a percentage of revenues, selling,
general and administrative expense for first quarter 1998 decreased to 11.6%
from 13.9% for first quarter 1997. This decrease primarily reflects the effect
of closing more homes without significantly impacting fixed costs.
INTEREST EXPENSE. Interest expense for first quarter 1998 decreased to $1.1
million from $1.4 million for first quarter 1997, which represents a 24.4%
decrease. The primary reasons for the decrease in interest expense were a lower
average revolving line of credit borrowings combined with a lower average
interest rate. The lower average interest rate was the result of alternative
pricing methods allowed by the September 29, 1997 loan agreement that were
implemented during fourth quarter 1997. The Company also increased capitalized
interest by $94,000 during first quarter 1998 compared to recognizing
capitalized interest expense of $18,000 during first quarter 1997. The weighted
average rate of interest under the Company's revolving line of credit was 8.3%
for the first quarter of 1998 compared to 8.8% for the first quarter 1997. The
average revolving line of credit borrowings outstanding were $53.1 million and
$60.2 million for the first quarter of 1998 and 1997, respectively.
PROVISION FOR INCOME TAXES. Income tax expense for first quarter 1998
increased to $1.5 million from $436,000 for first quarter 1997. The Company's
estimated annual effective tax rate was 42.0% for first quarter 1998 and 1997.
-12-
<PAGE> 13
SOURCES AND USES OF CASH
FIRST QUARTER 1998 COMPARED TO FIRST QUARTER 1997:
Operating activities during the first quarter of 1998 provided cash of $1.3
million compared to using $9.7 million during the first quarter of 1997. Net
income of $2.0 million earned during first quarter 1998, partially offset by
growth in real estate inventories of $1.2 million, accounted for the majority of
the positive cash flow experienced during first quarter 1998. Short term
liabilities associated with increased home sales and construction expenses, less
increases in prepaid expenses, accounted for the remaining cash flow in first
quarter 1998. In comparison, net income of $603,000 earned during first quarter
1997 was offset by $9.9 million the Company invested in real estate inventories,
principally to fund increased home construction activity undertaken during the
period. Net cash used in investing activities during first quarter 1998 was
$156,000, net of $17,000 from the sale of property and equipment, compared to
$61,000 invested during first quarter 1997. Computer aided graphic design
equipment for the Company's architectural department and sales office
improvements located in model homes comprised the majority of the investment in
property and equipment. The Company reduced financing debt by $1.1 million
during first quarter 1998. During first quarter 1997, the Company funded
increased home construction activity and reduced term debt with $10.3 million of
additional borrowing under the revolving line of credit.
REAL ESTATE INVENTORIES
The Company's practice is to develop most of the lots on which it builds its
homes. Generally, the Company attempts to maintain a land inventory that will be
sufficient to meet its anticipated lot needs for the next three to five years.
At March 31, 1998, the Company either owned or was under contract to purchase
lots or land that could be developed into approximately 4,600 lots. The Company
controlled through option agreements an additional 3,500 lots. Included in the
3,500 lots controlled through option agreements were 45 lots owned by Borror
Realty Company ("BRC"). During first quarter 1998 the Company exercised options
to purchase 139 controlled lots, including 13 lots from BRC. Option agreements
expire at varying dates through 2003. The Company's decision to exercise any
particular option or otherwise acquire additional land is based upon an
assessment of a number of factors, including its existing land inventory at the
time and its evaluation of the future demand for its homes. During first quarter
1998, the Company sold one lot to another builder for $36,000.
During first quarter 1998, real estate inventories of land and land
development costs decreased by $7.6 million as a result of the large number of
homes started during first quarter 1998 combined with a seasonal reduction in
land development activity. However, the amount of inventory of homes under
construction increased $7.6 million due to the larger number of homes under
construction, the emphasis the Company placed on accelerating the construction
process and favorable weather conditions. Lumber and building supply inventories
also increased by $1.2 million as a result of the increased sales and
construction activity that occurred in first quarter 1998.
On March 31, 1998, the Company had 69 single family inventory homes in
various stages of construction, which represented an aggregate investment of
$4.8 million. At March 31, 1997, the Company had 135 inventory homes, including
32 condominiums, in various stages of construction, which represented an
aggregate investment of $9.3 million. Inventory homes are not reflected in sales
or backlog.
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<PAGE> 14
SELLER-PROVIDED DEBT
The Company had $4.5 million and $1.4 million of seller-provided term debt
outstanding at March 31, 1998 and 1997, respectively. The Company did not add
any new seller-provided term debt during first quarter 1998. The seller-provided
term debt outstanding at March 31, 1998 had interest rates between 6.5% and 8.5%
and maturities that ranged from one to four years.
LAND PURCHASE COMMITMENTS
At March 31, 1998, the Company had commitments to purchase 135 residential
lots and unimproved land at an aggregate cost of $3.7 million, less $58,000 in
good faith deposits, all of which is expected to be funded prior to December 31,
1998. In addition, at March 31, 1998, the Company had $28.4 million of
cancelable obligations to purchase residential lots and unimproved land in which
$760,000 in good faith deposits had been invested by the Company. Included in
the $28.4 million of cancelable purchase obligations is $950,000 of purchase
options with BRC. The majority of the land subject to cancelable obligations is
for post 1998 development activities. The Company expects to fund its capital
requirements for land acquisition and development and its obligations under
purchase contracts and mortgage notes from internally generated cash and from
the borrowing capacity available under its bank credit facilities.
CREDIT FACILITIES
The Company is currently operating under a $90 million bank credit facility
that was executed on September 29, 1997 and is described in the Company's Annual
Report and Form 10-K for the fiscal year ended December 31, 1997. The Company is
a party to interest rate swap contracts that fix the interest rate at 6.13% plus
a variable margin on $10 million of borrowings under the existing bank credit
facility and at 5.48% plus a variable margin on a second $10 million of
borrowings. The first interest rate swap contract matures on October 16, 2000
and the second contract matures on January 14, 2001. The variable margin paid by
the Company has been 2.25% since inception of the existing bank credit facility
and is determined quarterly. At March 31, 1998, the Company's overall effective
borrowing rate was approximately 7.9%.
As indicated in the Company's 1997 Annual Report and Form 10-K, the Company
has been exploring other financing that will provide the Company with the
financial flexibility to expand to additional markets in Ohio and adjacent
states. On April 17, 1998, the Company executed a commitment letter
("Commitment") with Huntington National Bank, the lead bank under its existing
bank credit facility, for a $125 million senior unsecured revolving credit
facility which Huntington intends to syndicate. The Company intends to use the
proceeds of the new bank credit facility to refinance the borrowings outstanding
under its existing bank credit facility and to provide working capital,
financing for capital expenditures and acquisitions and financing for other
general corporate purposes. The Company also may use up to $20 million of the
new bank credit facility for the issuance of standby letters of credit. The
Company expects to close the new bank credit facility during the second quarter
of 1998. See Note 4 to the Financial Statements for additional details.
-14-
<PAGE> 15
INFLATION AND OTHER COST INCREASES
The Company is not always able to reflect all of its cost increases in the
prices of its homes because competitive pressures and other factors require it
in many cases to maintain or discount those prices. After a sales contract has
been accepted, the Company is generally able to maintain costs with
subcontractors from the date the sales contract is accepted until the date
construction is completed; however, unanticipated additional costs may be
incurred between the date a sales contract is accepted and the date construction
is completed. For example, delays in construction of a home can cause the
mortgage commitment to expire and can require the Company, if mortgage interest
rates have increased, to pay significant amounts to the mortgage lender to
extend the original mortgage interest rate. In addition, during periods of high
construction activities, additional costs may be incurred to obtain
subcontractor availability when certain trades are not readily available, which
additional costs can result in lower gross profits.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
NOT APPLICABLE
-15-
<PAGE> 16
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is involved in various legal proceedings, most of which
arise in the ordinary course of business and some of which are covered
by insurance. In the opinion of the Company's management, none of the
claims relating to such proceedings will have a material adverse effect
on the financial condition or results of operations of the Company.
Item 2. Change in Securities and Use of Proceeds. Not applicable.
Item 3. Defaults Upon Senior Securities. Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders. Not applicable
Item 5. Other Information. Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) See attached index (following the signature page).
(b) Reports on Form 8-K. Not applicable.
-16-
<PAGE> 17
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.
DOMINION HOMES, INC.
(Registrant)
Date: May 8, 1998 By: /s/Douglas G. Borror
--------------------
Douglas G. Borror
Chief Executive Officer,
President
Date: May 8, 1998 By: /s/Jon M. Donnell
-----------------
Jon M. Donnell
Chief Operating Officer,
Chief Financial Officer
(Principal Financial Officer)
Date: May 8, 1998 By: /s/Tad E. Lugibihl
------------------
Tad E. Lugibihl
Controller
(Principal Accounting Officer)
-17-
<PAGE> 18
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description Location
- ----------- ----------- --------
<S> <C> <C>
2.1 Corporate Exchange and Subscription Agreement, dated January 20, Incorporated by reference to Exhibit
1994, between Borror Corporation and Borror Realty Company 2.1 to the Company's Registration
Statement on Form S-1 (File No.
33-74298) as filed with the
Commission on January 21, 1994 and as
amended on March 2, 1994 (The "Form
S-1").
2.2 Form of First Amendment to Corporate Exchange and Subscription Incorporated by reference to Exhibit
Agreement 2.2 to Form S-1.
3.1 Amended and Restated Articles of Incorporation of Dominion Homes, Incorporated by reference to Exhibit
Inc., as amended May 7, 1997 4(a)(3) to the Company's Registration
Statement on Form S-8 (File No.
333-26817) filed with the Commission
on May 9, 1997.
3.2 Amended and Restated Code of Regulations of Borror Corporation Incorporated by reference to Exhibit
3.2 to Form S-1.
4. Specimen of Stock Certificate of Dominion Homes, Inc. Incorporated by reference to Exhibit
4 to the Company's March 31, 1997
Form 10-Q.
10.1 Dominion Homes, Inc. Incentive Stock Plan, as amended December 5, Incorporated by reference to Exhibit
1995 and May 7, 1997 4(c) to the Company's Registration
Statement on Form S-8 (File No.
333-26817) as filed with the
Commission on May 9, 1997.
10.2 Shareholder Agreement, dated January 20, 1994, between Borror Incorporated by reference to Exhibit
Corporation and Borror Realty Company 10.4 to Form S-1.
10.3 Land Option Agreement, dated January 20, 1994, between Borror Incorporated by reference to Exhibit
Corporation and Borror Realty Company 10.5 to Form S-1.
10.4 Model Home Lease Agreement, dated January 20, 1994, between Borror Incorporated by reference to Exhibit
Corporation and Borror Realty Company 10.6 to Form S-1.
</TABLE>
-18-
<PAGE> 19
<TABLE>
<S> <C> <C>
10.5 Architectural Department Lease Agreement, dated January 4, 1994, Incorporated by reference to Exhibit
between Borror Corporation and Borror Realty Company 10.9 to Form S-1.
10.6 Open Ended Mortgage and Security Agreement, dated December 22, Incorporated by reference to Exhibit
1987, between The Borror Corporation and W. Lyman Case & Company 10.11 to Form S-1.
10.7 Decorating Center Lease Agreement, dated January 4, 1994, between Incorporated by reference to Exhibit
Borror Corporation and Borror Realty Company, as amended by 10.12 to the Company's December 31,
addendum No. 1, effective July 1, 1994 1994 Form 10-K.
10.8 Loan Agreement, dated September 29, 1997, among Dominion Homes, Incorporated by reference to Exhibit
Inc., the lenders listed therein, and The Huntington National 10.13 to the Company's Form 10-Q.
Bank, as agent
10.9 Incentive Stock Option Agreement, dated January 4, 1995, between Incorporated by reference to Exhibit
Borror Corporation and Richard R. Buechler (which agreement is 10.18 to the Company's December 31,
substantially the same as Incentive Stock Option Agreements 1995 Form 10-K.
entered into between the Company and other employees to whom
options were granted on January 4, 1995 under the Company's
Incentive Stock Plan)
10.10 Incentive Stock Option Agreement, dated July 1, 1997, between Incorporated by reference to Exhibit
Dominion Homes, Inc. and Richard R. Buechler (which agreement is 10.15 to the Company's September 30,
substantially the same as Incentive Stock Option Agreements 1997 Form 10-Q.
entered into between the Company and other employees to whom
options were granted on July 1, 1997 under the Company's
Incentive Stock Plan)
10.11 Amended and Restated Dominion Homes, Inc. Executive Deferred Incorporated by reference to Exhibit
Compensation Plan, effective November 15, 1997 4(a) to the Company's Registration
Statement on Form S-8 (file No.
333-40051) as filed with the
Commission on November 12, 1997.
10.12 Employment Agreement, dated May 17, 1996, between Dominion Homes, Incorporated by reference to Exhibit
Inc. and Richard R. Buechler 10.12 to the Company's December 31,
1997 Form 10-K.
10.13 Employment Agreement, dated May 17, 1996, between Dominion Homes, Incorporated by reference to Exhibit
Inc. and Robert A. Meyer, Jr. 10.13 to the Company's December 31,
1997 Form 10-K
</TABLE>
-19-
<PAGE> 20
<TABLE>
<S> <C> <C>
10.14 First Amendment to Lease Agreement, dated March 19, 1996, between Incorporated by reference to Exhibit
Borror Realty Company and Borror Corporation 10.21 to the Company's March 31, 1995
Form 10-Q.
10.15 Employment Agreement, dated May 17, 1996, between Borror Incorporated by reference to Exhibit
Corporation and Jon M. Donnell 10.22 to the Company's September 30,
1996 Form 10-Q.
10.16 First Amendment, dated November 6, 1996, to Employment Agreement Incorporated by reference to Exhibit
between Borror Corporation and Jon M. Donnell 10.28 to the Company's December 31,
1996 Form 10-K.
10.17 Restricted Stock Agreement, dated August 1, 1995, between Borror Incorporated by reference to Exhibit
Corporation and Jon M. Donnell 10.19 to the Company's December 31,
1995 Form 10-K.
10.18 Restricted Stock Agreement, dated November 6, 1996, between Borror Incorporated by reference to Exhibit
Corporation and Jon M. Donnell 10.30 to the Company's December 31,
1996 Form 10-K.
10.19 Restricted Stock Agreement, dated August 1, 1997, between Dominion Incorporated by reference to Exhibit
Homes, Inc., and Jon M. Donnell 10.24 to the Company's September 30,
1997 Form 10-Q.
10.20 Real Estate Purchase Contract, dated December 18, 1997, between Incorporated by reference to Exhibit
Borror Realty Company and Dominion Homes, Inc. 10.20 to the Company's December 31,
1997 Form 10-K
10.21 Lease, dated December 29, 1997 as amended by Addendum dated Incorporated by reference to Exhibit
February 2, 1998, between Borror Realty Company and Dominion 10.21 to the Company's December 31,
Homes, Inc. 1997 Form 10-K
10.22* Commitment letter, dated April 17, 1998, from The Huntington Filed Herewith
National Bank and Huntington Capital Corp., relating to a
$125,000,000 Senior Unsecured Credit Facility
27* Financial Data Schedule Filed herewith
</TABLE>
* Filed Herewith
-20-
<PAGE> 1
EXHIBIT 10.22
(614) 480-4228
April 17, 1998
Mr. Douglas G. Borror, Chief Executive Officer
Mr. Jon M. Donnell, Chief Operating Officer
Mr. David S. Borror, Executive Vice President
Mr. Terry E. George, Treasurer
Dominion Homes, Inc.
5501 Frantz Road
Dublin OH 43017-0766
Re: $125,000,000 Senior Unsecured Credit Facility
Gentlemen:
Commitment
You have advised the Huntington National Bank ("Huntington") that Dominion
Homes, Inc. an Ohio corporation (the "Borrower") desires to establish a
$125,000,000 Senior Unsecured Revolving Credit Facility (the "Facility"), the
proceeds of which would be used by the Borrower to: (i) refinance the Borrower's
outstanding loans made under that certain Loan Agreement dated as of September
29, 1997 among the Borrower, the lenders party thereto, Huntington, as issuing
bank, and Huntington as Administrative Agent (the "Existing Loan Agreement");
and (ii) provide working capital, capital expenditure and acquisition financing
for the Borrower and financing for other lawful general corporate purposes
(including those set forth in the attached Annex I). You have asked Huntington
to commit to provide you with financing commitments for the entire amount of the
Facility.
Huntington is pleased to inform you of its commitment to provide the entire
amount of the Facility, as sole Lender, subject to the terms and conditions
described in this letter and Annex I attached hereto, and together with the Fee
Letter referred to below, the "Commitment Letter." Huntington's commitment to
provide the entire amount of the Facility shall be without regard to
Huntington's ability to syndicate the Facility as described below, subject to
all the terms and conditions set forth below.
Conditions Precedent
The commitment of Huntington hereunder is subject to: (i) the preparation,
execution and delivery of mutually-acceptable loan documentation, including a
credit agreement among the Borrower, the Administrative Agent, and Huntington as
lender and issuing bank, incorporating substantially the terms and conditions
outlined in this Commitment Letter; (ii) the absence of a material adverse
change in the business condition, financial or otherwise, operations,
performance, properties or prospects of the Borrower since December 31, 1997;
(iii) the accuracy and completeness of all representations you make to us and
information that you furnish to us and your compliance with the terms of this
Commitment Letter; and (iv) the payment in full of all fees, expenses and other
amounts payable under this Commitment Letter.
<PAGE> 2
Commitment Termination
The commitment of Huntington set forth in this Commitment Letter will
terminate on May 29, 1998, unless the Facility closes on or before such date.
Prior to such date, this Commitment Letter may be terminated (i) by you at any
time at your option upon payment of all fees, expenses and other amounts payable
under this Commitment Letter or (ii) by the Huntington if any event occurs or if
information has become available that, in its judgment, results or is likely to
result in the failure to satisfy any conditions set forth above.
Syndication
Huntington reserves the right, prior to or after the execution of
definitive documentation with respect to the Facility, to syndicate a portion of
its commitment to one or more other financial institutions reasonably acceptable
to you that will become parties to such definitive documentation pursuant to a
syndication to be managed by Huntington Capital Corp. ("Huntington Capital")
(Huntington and any financial institutions becoming parties to such definitive
documentation being collectively referred to herein as the "Lenders"). You
understand that Huntington Capital intends to commence syndication efforts
promptly and that it may elect to appoint one or more syndication agents (which
may include Huntington) to direct the syndication efforts on its behalf.
Huntington Capital will act as the syndication agent with respect to the
Facility and will manage all aspects of the syndication in consultation with
you, including the timing of all offers to potential Lenders, the acceptance of
commitments, and the determination of the amounts offered and the compensation
provided.
You agree to take all action as Huntington Capital may reasonably request
to assist it in forming a syndicate acceptable to it and you. Your assistance in
forming such a syndicate shall include but not be limited to: (i) making senior
management and representatives of the Company available to participate in
information meetings with potential Lenders at such times and places as
Huntington Capital may reasonably request; (ii) using your best efforts to
ensure that the syndication efforts benefit from your lending relationships; and
(iii) providing Huntington Capital with all information reasonably deemed
necessary by it to successfully complete the syndication.
To ensure an orderly and effective syndication of the Facility, you agree
that until the closing of the syndication transaction (as determined by
Huntington Capital), you will not, and will not permit any of your affiliates
to, syndicate or issue, attempt to syndicate or issue, announce or authorize the
announcement of the syndication or issuance of, or engage in discussions
concerning the syndication or issuance of, any debt facility or debt security
(including any renewals thereof), without the prior written consent of
Huntington Capital.
You agree that Huntington will act as the sole administrative agent for the
Facility and that Huntington Capital will act as sole syndication agent and that
no additional agents, co-agents or arrangers will be appointed, or other titles
conferred, without the consent of Huntington Capital and Huntington.
-2-
<PAGE> 3
Fees
In addition to the fees described below, you agree to pay the fees set
forth in that certain letter between you and us of even date herewith (the "Fee
Letter"). The terms of the Fee Letter are an integral part of the commitment
hereunder and constitute part of this Commitment Letter for all purposes hereof.
Costs, Fees and Expenses
In further consideration of the commitment hereunder, and recognizing that
in connection herewith, the Huntington and Huntington Capital are incurring
costs and expenses, including, without limitation, reasonable fees and
disbursements of counsel and syndication agent, search fees, due diligence, and
syndication (including printing, distribution and bank meetings), costs and
expenses, you hereby agree to pay, or reimburse the Huntington and Huntington
Capital on demand for all such reasonable costs and expenses, whether incurred
before or after the date hereof, regardless of whether any of the transactions
contemplated hereby are consummated. The Borrower shall not be responsible for
any fees, costs or expenses of any Lenders or their counsel (other than
Huntington and its counsel).
Indemnification
You agree to indemnify and hold harmless Huntington, Huntington Capital,
each Lender and each of their affiliates and each of their respective officers,
directors, employees, agents, advisors, attorneys and representatives (each, an
"Indemnified Party") from and against any and all claims, damages, losses,
liabilities and expenses (including, without limitation, reasonable fees and
disbursements of counsel), joint or several, that may be incurred by or asserted
or awarded against any Indemnified Party, in each case arising out of or in
connection with or relating to any investigation, litigation or proceeding or
the preparation of any defense with respect thereto, arising out of or in
connection with or relating to this Commitment Letter or the loan documentation
or the transactions contemplated hereby or thereby or any use made or proposed
to be made with the proceeds of the Facility, whether or not such investigation,
litigation or proceeding is brought by the Borrower, any of its shareholders or
creditors, an Indemnified Party or any other person, or an Indemnified Party is
otherwise a party thereto and whether or not the transactions contemplated
hereby are consummated, except to the extent such claim, damage, loss, liability
or expense is found in a final judgment by a court of competent jurisdiction to
have resulted from such Indemnified Party's gross negligence or willful
misconduct.
You agree that no Indemnified Party shall have any liability (whether
direct or indirect, in contract, tort or otherwise) to the Borrower or any of
its shareholders or creditors for or in connection with the transactions
contemplated hereby, except to the extent such liability is found in a final
judgment by a court of competent jurisdiction to have resulted from such
Indemnified Party's gross' negligence or willful misconduct. In no event,
however, shall any Indemnified Party be liable on any theory of liability for
any special, indirect, consequential or punitive damages.
Confidentiality
By accepting delivery of this Commitment Letter, you agree that this
Commitment Letter is for your confidential use only and that neither its
existence nor the terms hereof will be disclosed by you to
-3-
<PAGE> 4
any person other than your officers, directors, employees, accountants,
attorneys and other advisors, and then only on a "need to know" basis in
connection with the transactions contemplated hereby and on a confidential
basis. Notwithstanding the foregoing, following your acceptance of the
provisions hereof and your return of an executed counterpart of this Commitment
Letter to us as provided below, (i) you may make public disclosure of the
existence and amount of Huntington's commitment hereunder and of Huntington's
identity as administrative agent, (ii) you may file a copy of this Commitment
Letter (other than the Fee Letter) in any public record in which it is required
by law to be filed, and (iii) you may make such other public disclosures of the
terms and conditions hereof as you are required by law, in the opinion of your
counsel, to make.
Representations and Warranties
You represent and warrant that (i) all information that has been or will
hereafter be made available to Huntington or any of the Lenders by you or any of
your representatives in connection with the transactions contemplated hereby is
and will be complete and correct in all material respects and (ii) all financial
projections that have been or will be prepared by you and made available to
Huntington and the Lenders have been or will be prepared in good faith based
upon reasonable assumptions. You further agree to supplement the information or
projections from time to time so that the representations and warranties
contained in this paragraph remain correct. In issuing this commitment,
Huntington is relying on the accuracy of the information furnished to it by or
on behalf of the Borrower and without an independent verification thereof.
No Third Party Reliance
The agreements of Huntington hereunder to provide financing under the
Facility are made solely for the benefit of the Borrower and may not be relied
upon or enforced by any other person. Please note that those matters that are
not covered or made clear herein or in Annex I or in the Fee Letter are subject
to the mutual agreement of the parties. The terms and conditions of this
Commitment Letter may be modified only in writing.
Governing Law
This Commitment Letter shall be governed by and construed in accordance
with the laws of the State of Ohio. This Commitment Letter sets forth the entire
agreement of the parties with respect to the matters addressed herein and
supersedes all prior communications, written or oral, with respect hereto,
including without limitation, the proposal letters issued to the Borrower by
Huntington on April 10, 1998. This Commitment Letter may be executed in any
number of counterparts, each of which, when so executed, shall be deemed to be
an original, and all of which taken together shall constitute one and the same
Commitment Letter. Delivery of an executed counterpart of the signature page to
this Commitment Letter by telecopier shall be as effective as delivery of a
manually executed counterpart of this Commitment Letter. The Borrower's
obligations under the above paragraphs with respect to fees, costs and expenses,
and confidentiality, shall survive the expiration and termination of this
Commitment Letter.
-4-
<PAGE> 5
Please indicate your acceptance of the provisions hereof by signing the
enclosed copy of this Commitment Letter and the Fee Letter and returning them
along with a $100,000 nonrefundable fee, to William R. Remias, Assistant Vice
President, The Huntington National Bank (telecopier (614) 480-5791), 41 South
High Street, Columbus, Ohio 43287, on or before 5:00 p.m. (Columbus time), on
April 20, 1998, the time at which the Commitment of Huntington set forth above,
if not so accepted prior thereto, will expire. Upon the closing of the Facility,
the above nonrefundable fee will be credited against the fees set forth in the
Fee Letter. If you elect to deliver this Commitment Letter by telecopier, please
arrange for the executed original to follow by next-day courier.
Very truly yours,
THE HUNTINGTON NATIONAL BANK
By: */s/William R. Remias
---------------------
William R. Remias
Title: Assistant Vice President
THE HUNTINGTON CAPITAL CORP., as Syndication
Agent (and not as Lender)
By: */s/Scott L. Moore
---------------------------------
Scott L. Moore
Title: Vice President
Accepted this 17th day of April, 1998 by Dominion Homes, Inc.
By */s/Terry E. George
--------------------------------
Its Treasurer
-5-
<PAGE> 6
EXHIBIT 10.22
ANNEX I
DOMINION HOMES, INC.
SUMMARY OF TERMS AND CONDITIONS
$125,000,000 SENIOR UNSECURED REVOLVING CREDIT FACILITY
This Summary of Terms and Conditions outlines certain terms of the Facility
referred to in the Commitment Letter dated April 16, 1998, addressed to Dominion
Homes, Inc. from The Huntington National Bank and Huntington Capital Corp.(the
"Commitment Letter"). This Summary of Terms and Conditions is part of and
subject to the Commitment Letter.
BORROWER: Dominion Homes, Inc., an Ohio corporation
ADMINISTRATIVE
AGENT: The Huntington National Bank.
SYNDICATION
AGENT: Huntington Capital Corp.
ISSUING BANK: The Huntington National Bank.
LENDERS: Huntington and other financial institutions acceptable
to the Administrative Agent and the Borrower.
CLOSING DATE: On or before May 29, 1998.
THE REVOLVING
LOAN: The Lenders jointly, and not severally, shall make
advances up to $125,000,000 in a senior unsecured
revolving credit facility (the "Revolving Loan")
subject to the terms and conditions of a certain
Credit Agreement to be entered into among the
Borrower, the Administrative Agent and the Lenders
(the "Credit Agreement"), which may limit advances to
availability under a Borrowing Base. Notwithstanding
the respective individual limits of the Revolving Loan
and the Letters of Credit (as defined below), the
maximum principal sum of the Revolving Loan, plus the
aggregate stated value of all letters of credit
outstanding under the Letter of Credit Facility shall
not exceed the lesser of (i) the Borrowing Base, plus
the Acquisition Advance (to the extent applicable only
during the first 3 years) or (ii) $125,000,000.00.
<PAGE> 7
MATURITY: The Revolving Loan shall be payable five years from
closing (May 31, 2003).
REPAYMENT: Interest shall be payable monthly and at the end of each
interest period. Principal shall be due at maturity.
Prior to maturity, subject to the terms of the Credit
Agreement, the principal of the Revolving Loan may be
readvanced and repaid any number of times.
INTEREST RATES: During the term of the Revolving Loan, the rate of
interest applicable thereto shall, at the Borrower's
option, accrue at one or more of the following rates:
(a) the Prime Commercial Rate plus the applicable margin
set forth below in effect from time to time; or (b) the
current reserve adjusted Eurodollar Rate which deposits
in U.S. Dollars are offered to leading banks in the
London Interbank Market, as reported on Telerate page
3750, and subject to the customary change of
circumstance provisions, for interest periods of one,
two, three or six months, plus the applicable margin set
forth below. The appropriate margin for fixed rates
shall fluctuate based on the Borrower's ratio of EBITDA
to Interest Expense ("Interest Coverage Ratio"). The
Prime Rate margin and the Eurocurrency Rate margin from
time to time will be determined as of the date of the
Administrative Agent's receipt of the Borrower's
financial statements for the previous quarter on the
basis of the Borrower's Interest Coverage Ratio as set
forth below.
Performance Pricing Matrix
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
Interest Coverage Ratio Prime Margin Eurodollar Margin Commitment Fee
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Greater than 3.75 to 1.00 0% 1.75% .25%
- --------------------------------------------------------------------------------------
Greater than or equal to
3.25 to 1.00, but less than
or equal to 3.75 to 1.00 0% 2.00% .25%
- --------------------------------------------------------------------------------------
Greater than or equal to
2.75 to 1.00, but less than
3.25 to 1.00 0% 2.25% .25%
- --------------------------------------------------------------------------------------
Less than 2.75 to 1.00 0% 2.50% .375%
- --------------------------------------------------------------------------------------
</TABLE>
-2-
<PAGE> 8
In addition, interest shall accrue on the amount of any
Acquisition Advances under the Revolving Loan at an
interest rate equal to the Eurodollar Rate, plus the
applicable margin set forth in the Performance Pricing
Matrix, plus .5% per annum. "Acquisition Advance" means,
subject to the terms and conditions below, a sum of
permitted advances under the Revolving Loan which may
exceed the Borrowing Base (with a maximum sum of
$10,000,000) attributable to Permitted Acquisitions
consummated by the Borrower, but Acquisition Advances
shall be available only during the first three years
after closing.
INTEREST RATE
PROTECTION: If any of the Eurodollar rates (without the applicable
margins) offered by the Credit Agreement reaches 8.50%
per anum, the Borrower will be required to enter into
or have entered into interest rate contracts (which
may be entered into between the Borrower and any
financial institution) with an aggregate notional
amount equal to 50% of the Revolving Loan outstanding
on such date for a term extending to the maturity date
of the Revolving Loan on terms reasonably satisfactory
to the requisite Lenders.
USE OF PROCEEDS: The Revolving Loan proceeds will be used (a) to refinance
the revolving credit commitments under the Existing Loan
Agreement; (b) for working capital and normal and
customary business purposes of the Borrower; and (c) for
Permitted Acquisitions.
FEES: (a) Unused Fee: See Performance Pricing Matrix for
percent per annum of the difference between (i)
$125,000,000 and (ii) the sum of (a) the daily
principal balance of the Revolving Loan during any
full or partial calendar quarter, plus (b) the daily
aggregate sum of issued and outstanding Letters of
Credit. Such fees shall be payable quarterly in
arrears and shall be shared on a pro rata basis among
the Lenders.
(b) Underwriting Fee: As set forth in the Fee Letter.
LETTERS OF CREDIT: Huntington will make available to the Borrower or to
Approved Joint Ventures standby letters of credit up to
the aggregate maximum stated value outstanding at any one
time not to exceed $20,000,000.00 (the "Letters of
Credit"), subject to the limitations stated in this
letter.
-3-
<PAGE> 9
(a) Expiry Date: None of the Letters of Credit shall have
an expiry date later than the earlier of (i) 24 months
from issuance or (ii) the maturity date of the Revolving
Loan.
(b) Letter of Credit Fees: The fees for issuance of
Letters of Credit shall be the Eurodollar Margin, as set
forth in the Performance Pricing Matrix as a percent per
annum of the stated amount of each Letter of Credit,
payable one-fourth of such fees upon the issuance of each
Letter of Credit, and the remainder of such fees payable
quarterly in arrears: The issuing bank shall retain a fee
equal to 1/8% per annum, and the remaining amount shall
be shared on a pro rata basis by the Lenders. In
addition, the Borrower shall pay to the issuing bank its
normal and customary issuing, servicing, and amendment
fees.
(c) Use of Letters of Credit: The Letters of Credit shall
be used by the Borrower (i) to support bonding
requirements for real estate site improvements in favor
of various municipal entities, (ii) to secure contractual
performance of the Borrower's land development
activities, (iii) to secure the Borrower's performance in
land acquisition activities, and (iv) in connection with
the type of activities described above for Approved Joint
Ventures.
(d) Approved Joint Ventures: The term "Approved Joint
Ventures" shall be defined in the Credit Agreement and
shall be substantially similar to the definition of such
term contained in the Existing Loan Agreement.
BORROWING BASE: The sum of (a) advances under the Revolving Loan plus
(b) the aggregate outstanding stated amounts of the
Letters of Credit shall not exceed the Borrowing Base.
"Borrowing Base" shall mean:
(a) 100% of the Company's Available Cash, plus
(b) 80% of Eligible Accounts Receivable, plus
(c) 75% of Eligible Lumber Inventory, plus
(d) 90% of Eligible Home --Work-in-Process,
plus
(e) the lesser of $15,000,000 or 50% of Eligible Real
Estate Held for Development, plus
-4-
<PAGE> 10
(f) the lesser of $10,000,000 or 50% of Eligible
Investments in Joint Venture, plus
(g) the lesser of $5,850,000 or 90% of the aggregate
sum of Eligible Model Homes, plus
(h) the lesser of $6,000,000 or 90% of Eligible
Speculative Homes, plus
(i) 62.5% of Eligible Developed Lots, plus
(j) 50% of Eligible Lots Under Development.
In addition, subject to the terms set forth herein, the
Borrower may have borrowing availability in the amount of
the Acquisition Advances up to the amount of the
aggregate acquisition purchase price, minus aggregate
additions to the Borrowing Base as a result of the
consummation of any Acquisition or Acquisitions (not to
exceed the aggregate sum of $10,000,000).
The Administrative Agent reserves the right to deduct
from any borrowing availability under the Borrowing Base,
such amounts as necessary to establish reserves for the
basket of "Excess Permitted Nonrecourse Borrowings" set
forth below.
ELIGIBILITY: The term "Eligible" and the components constituting
the Borrowing Base set forth above shall be
substantially the same as in the Existing Loan
Agreement. With respect to the Borrowing Base, only
real property located in the State of Ohio or
contiguous states and joint ventures having Ohio real
property in Ohio or contiguous states shall be
considered for eligibility.
DEFAULT RATE: The default rate on the Revolving Loan and on the failure
to reimburse any draws under the Letters of Credit shall
be two percentage points per annum in excess of the Prime
Commercial Rate.
-5-
<PAGE> 11
CONDITIONS Usual and customary, including without limitation:
PRECEDENT: (1) The Borrower shall provide the Administrative Agent
with certified corporate resolutions of its board
of directors authorizing it to borrow the full
amount of the loans, closing certificates, a good
standing certificate, articles of incorporation,
bylaws, and other corporate documents requested by
the Administrative Agent.
(2) The Borrower shall execute and deliver to the
Administrative Agent and the Lenders, inter alia,
promissory notes, letter of credit reimbursement
agreements, and the Credit Agreement.
(3) The Borrower will pay all costs and expenses
incidental to the Facility, whether or not the
loans are closed, but the Borrower shall not be
responsible for fees, costs or expenses of any
Lenders or their counsel (other than Huntington and
its counsel). Such costs shall include, but not be
limited to, fees and out-of-pocket expenses of the
Administrative Agent, including without limitation
attorneys fees.
(4) The Borrower shall provide to the Administrative
Agent and the Lenders at closing an opinion of its
counsel, acceptable in form and substance to the
Administrative Agent, including such provisions and
addressing such matters as may be requested by the
Administrative Agent.
(5) Except for existing outstanding letters of credit
issued by Huntington for the account of the
Borrower or certain approved joint ventures, full
payment or satisfaction shall be obtained of the
obligations under the Existing Credit Agreement.
(6) No change shall have occurred since December 31,
1997 which has or is reasonably likely to have a
material adverse effect on (a) the business
condition (financial or otherwise), operations,
performance, properties or prospects of the
Borrower, (b) the ability of the Borrower to
perform its obligations under the Loan documents,
or (c) the ability of the Administrative Agent, the
Lenders and issuing banks to enforce such Loan
documents) ("Material Adverse Change").
-6-
<PAGE> 12
(7) There shall exist no action, suit, investigation,
litigation or proceeding pending or threatened in
any court or before any arbitrator or government
instrumentality that, if adversely determined,
could reasonably be expected to result in a
Material Adverse Change.
CONDITIONS
PRECEDENT TO
REVOLVING LOAN
AND LETTERS OF
CREDIT: No default shall have occurred under any of the loan
documents, the representations and warranties of the
Borrower therein shall be true and correct immediately
prior to, and after giving affect to, funding and no
Material Adverse Change shall have occurred.
REPRESENTATIONS
AND WARRANTIES: Usual and customary for financings of this type and
substantially similar to those in the Existing Loan
Agreement.
COVENANTS IN CREDIT
AGREEMENT: Those negative, affirmative and financial covenants
customarily found in Administrative Agent's Credit
Agreements for financings of this type and substantially
similar to those in the Existing Loan Agreement,
including without limitation the following:
(a) The Borrower shall be required to provide
unqualified annual financial statements audited by
independent certified public accountants acceptable
to the Administrative Agent, within 90 days of the
end of its fiscal year;
(b) The Borrower shall deliver the following
information and reports to the Administrative
Agent and the Lenders on a monthly basis within
45 days after the end of each month: (1)
internally prepared financial statements,
including balance sheets and income statements;
(2) Borrowing Base calculation reports; (3)
Compliance Certificates together with financial
ratio calculations certifying compliance with
the Credit Agreement and calculating all
financial ratios; (4) aged listing of accounts
receivable; (5) Land Development Lot
Availability Report detailing completed lots and
lots under development for each subdivision; (6)
listing of model homes including cost to value;
and (7) listing of speculative homes including
cost to value;
-7-
<PAGE> 13
(c) In addition to the foregoing information, the
Borrower shall provide to the Administrative
Agent and the Lenders copies of all filings,
disclosures, or other information filed with the
Securities Exchange Commission, any state
securities commission or other regulatory agency
and all press releases issued by the Borrower,
contemporaneously with the filing, release or
disclosure, as the case may be;
(d) The Borrower shall be required to provide such
other financial information from time to time as
the Administrative Agent or the Lenders may
request;
(e) The Borrower shall provide a negative pledge by
which it shall agree not to cause, permit, agree
or consent to cause or permit in the future any
of its property, whether now owned or hereafter
acquired to be subject to a lien or encumbrance,
except for those liens in connection with
purchase money indebtedness permitted in
paragraph (g) below, nonrecourse obligations to
sellers of real estate, whether acquired
directly or as a result of a Permitted
Acquisition, and other liens mutually agreed to
between Borrower and the Administrative Agent.
In addition, the Borrower shall enter into a
"double negative pledge" by which it shall agree
not to provide a negative pledge to any party
other than the Administrative Agent;
(f) The Borrower shall not replace or change the
position of its Chief Executive Officer or Chief
Operating Officer unless such replacement or change
is not reasonably likely to cause a Material
Adverse Change;
(g) Except for Excess Permitted Nonrecourse
Borrowings, the Borrower shall agree that its
other borrowings, additional debt or capital
lease obligations (as defined by GAAP) shall not
exceed the aggregate principal sum of
$10,000,000 outstanding at any one time. In
addition, the Borrower may incur up to
$5,000,000 of Indebtedness in respect of
nonrecourse obligations to sellers of real
estate ("Excess Permitted Nonrecourse
Borrowings"), provided that all of such Excess
Permitted Nonrecourse Borrowings shall be fully
reserved under the Borrowing Base;
-8-
<PAGE> 14
(h) The Borrower will not guarantee, indorse or
otherwise become surety for Indebtedness of
others in excess of $100,000 outstanding at any
one time, except for (i) Letters of Credit in
connection with Approved Joint Ventures; or up
to $10,000,000 of letters of credit not issued
under the Facility or in connection with seller
financing for Approved Joint Ventures; (ii)
indorsement of negotiable instruments in the
ordinary course of business; and (iii)
partnership liability in connection with joint
ventures or partnerships.
(i) The Borrower shall agree to maintain property and
liability insurance coverage in such amounts and
with such insurers as the Administrative Agent may
deem acceptable;
(j) The Borrower shall agree that its annual payments
for (i) operating lease rentals will not exceed
$2,000,000 in the aggregate, and (ii) model homes
rentals will not exceed $1,000,000 in the
aggregate;
(k) The Borrower may make loans and advances in a
manner substantially similar to those permitted
under Section 8.11 of the Existing Loan
Agreement;
(l) So long as no Event of Default exists under the
Credit Agreement, the Borrower may redeem or
acquire any of its own capital stock (a) having a
value up to $500,000 in any fiscal year; and (b) an
amount equal to the net proceeds from the
simultaneous sale of an equivalent amount of its
capital stock;
(m) The Borrower shall limit its investments to
bonds or other obligations in the United States,
certificates of deposit issued by commercial
banks with minimum capital of $500 million,
commercial paper rated at least A-1 or P-1, and
having maturity dates of not more than one year,
Permitted Acquisitions, those investments
permitted by the Existing Loan Agreement and up
to $2,000,000.00 in Investments in a mortgage
company or companies;
(n) The Borrower shall agree with respect to all
real property owned or leased by it to maintain
agreed upon standards (substantially similar to
the Existing Loan Agreement) with respect to
environmental matters, condemnation or eminent
-9-
<PAGE> 15
domain, boundary line disputes, encroachments,
access limitations, surveys, licenses,
environmental studies, wetland analyses, zoning
(to the extent required), availability of
utilities and other related real estate or
development requirements;
(o) At all times, the Borrower shall maintain a
Tangible Net Worth of the following amounts for
the following periods: from closing through and
including December 30, 1998, not less than
$35,000,000, and from and after December 31,
1998, the sum of $35,000,000, plus 75% of the
Borrower's net income after taxes in each fiscal
year which the Borrower's net income after taxes
is positive, beginning with the fiscal year
ending December 31, 1998, and ending with the
most recently ended fiscal year at the date of
calculation. "Tangible Net Worth" shall mean
Borrower's shareholders' equity, minus the sum
of all the following: (i) the excess of cost
over the value of net assets of purchased
businesses, rights, and other similar
intangibles, (ii) organization expenses, (iii)
intangible assets (to the extent not reflected
in the foregoing), (iv) goodwill, (v) deferred
charges or deferred financing costs, (vi) loans
or advances to and/or accounts or notes
receivable from affiliates, and (vii)
non-compete agreements;
(p) At all times, the Borrower shall maintain an
Interest Coverage Ratio (EBITDA to Interest
Expense) of not less than 2.25 to 1.00. The
Interest Coverage Ratio shall be determined as of
the end of each quarter for the twelve month period
ending on such date.
(q) At all times, the Borrower shall maintain a ratio
of Total Liabilities to Tangible Net Worth of not
greater than 2.75 to 1.00 through December 31,
1999, and 2.50 to 1.00 from and after January 1,
2000;
(r) At all times, the Borrower shall maintain a ratio
of Uncommitted Land Holdings to Tangible Net Worth
of not greater than 2.00 to 1.00 through December
31, 1999, and 1.75 to 1.00 from and after January
1, 2000;
(s) The Borrower shall be permitted to sell or
otherwise dispose of assets in the ordinary course
of business, but shall agree
-10-
<PAGE> 16
not to sell or otherwise dispose any of its
assets, except as permitted in the Existing Loan
Agreement;
(t) The Borrower shall obtain prior approval from the
requisite Lenders for any purchases of unzoned land
that would cause the Borrower to have such land in
excess of $2,500,000 at cost outstanding at any one
time;
(u) Uncommitted land holdings in central Ohio (60 mile
radius from agreed upon point in Franklin County)
shall not exceed $73,000,000 at the end of fiscal
1997, and thereafter increasing by 50% of the
Borrower's net income, not to exceed the sum of
$90,000,000 outstanding at any time;
(v) Other than in markets in which the Borrower has
ongoing construction and a substantial presence
as of December 31, 1997, total investment in
uncommitted land holdings, speculative homes,
model homes, and in Permitted Acquisitions shall
not exceed the aggregate sum of $25,000,000 (the
"Maximum New Market Investment Amount") without
all Lender approval. Notwithstanding the
foregoing, the Borrower may only invest up to
$15,000,000 of such amount in one or more
"start-up" operations involving uncommitted land
holdings, speculative homes and model homes not
associated with an ongoing business acquired by
the Borrower. In addition, the Borrower shall
not build homes or develop real estate in
markets other than Ohio and any state contiguous
to Ohio without requisite Lender approval;
(w) Subject to the Maximum New Market Investment
Amount, acquisitions of other businesses,
corporations or entities up to the aggregate
amount of $25,000,000 shall be permitted,
subject to meeting the requirements of a
"permitted acquisition" agreed to between the
Borrower and the Administrative Agent under the
Credit Agreement in form substantially similar
to Permitted Acquisitions in the Existing Loan
Agreement, or as set forth below;
(x) Model homes inventory shall not exceed $6,500,000
at any time;
-11-
<PAGE> 17
(y) Dividends (in the absence of default) in any fiscal
year shall not exceed 25% of net income after
taxes; provided, however, no default shall occur
after the payment of any dividend;
(z) The Borrower shall not incur a quarterly loss in
any five consecutive quarters; and
(aa) The Administrative Agent shall be appointed as
Administrative Agent to administer the Facility for
the benefit of the Lenders, and such agency shall
contain terms and conditions satisfactory to the
Administrative Agent and the Lenders.
COUNSEL TO
AGENT: Porter, Wright, Morris & Arthur, 41 South High Street,
Suite 31, Columbus, Ohio 43215, Timothy E. Grady,
telephone: (614) 227-2105.
REQUISITE
LENDERS: Lenders holding greater than 66 2/3% of the commitments
under the Facility.
PERMITTED
ACQUISITIONS: Neither the Borrower nor any Subsidiary shall make any
Acquisition without the prior written consent of the
Administrative Agent and the Requisite Lenders except
in connection with a Permitted Acquisition, the
Purchase Price of which, together with the aggregate
Purchase Price of all other Permitted Acquisitions
made after the date hereof does not exceed the sum of
$25,000,000.00, provided, however such Acquisitions,
plus all Investments in Restricted Subsidiaries, plus
purchases of the real and personal property shall not
exceed the Maximum New Market Investment Amount (all
such definitions shall be substantially similar to the
Existing Loan Agreement). "Purchase Price" shall
mean the sum of cash and cash equivalents paid, notes
or other indebtedness given, liabilities assumed, or
the fair market value of property transferred in
connection with any Acquisition. A "Permitted
Acquisition" shall mean an Acquisition by the
Borrower or any Subsidiary, for which the Borrower or
a Restricted Subsidiary satisfies each of the
following conditions to the good faith satisfaction of
the Administrative Agent and the Requisite Lenders:
-12-
<PAGE> 18
(a) such Acquisition is in the homebuilding or
related industry.
(b) such Acquisition is made at a time when, after
giving effect thereto and the related financing
thereof, (i) no Event of Default exists or would
occur based upon a (A) pro forma prospective
calculation for the next twelve (12) month
period and (B) a pro forma historical
calculation (using Adjusted EBITDA, if
applicable) for the most recent twelve (12)
month period of the financial covenants set
forth in the Credit Agreement performed in
accordance with GAAP giving effect to any higher
levels of Indebtedness associated with the
acquired operations, together with interest
thereon to be accrued for such twelve (12) month
periods, and (ii) after giving effect to such
Acquisition, the Borrower and each Subsidiary
would remain solvent pursuant to the warranties
contained in this Agreement.
(c) the acquired business entity shall have had
positive adjusted EBITDA for the previous twelve
(12) months. "Adjusted EBITDA" shall mean such
entity's EBITDA, plus (i) owner's and
affiliate's compensation and other expenses
related to owners and affiliates (if such owner
and affiliate will not remain with business or
if such related expenses will not continue),
plus (ii) any extraordinary losses incurred
during such period as determined by GAAP, minus
any extraordinary gains for such period.
(d) on the date of the closing of the Permitted
Acquisition and after giving effect thereto and
to any advances under the Revolving Loan made to
finance such Permitted Acquisition, (i) no Event
of Default shall have occurred and be continuing
and (ii) all representations and warranties
under this Agreement shall be true and correct
as though made on and as of such date, except to
the extent that any such representation or
warranty expressly relates to an earlier date;
(e) the acquired business entity, if the acquisition
is of capital stock and such entity constitutes
a Subsidiary, obligates itself on the Loans or
the Credit Agreement pursuant to a guaranty or
supplement or other loan documents satisfactory
to the Administrative Agent and otherwise
complies with the requirements of the Credit
Agreement and (ii) executes and
-13-
<PAGE> 19
delivers such documentation as the Administrative
Agent deems appropriate with respect to
intercompany borrowings from the Borrower.
(f) the acquired assets are free and clear of all liens
or encumbrances except as permitted under the
Credit Agreement;
(g) the Borrower delivers written notice to the
Administrative Agent of its intention to make
such Acquisition no less than 45 days prior to
the proposed closing date for such Acquisition
that sets forth, among other things, information
regarding liabilities and obligations with
respect to the environmental matters, labor
matters, or ERISA matters to be incurred by the
Borrower (including, without limitation, the
acquired business entity in the event of an
acquisition of capital stock) as a result of
such Acquisition, any indemnities afforded under
the terms of such acquisition and the scope and
results of any environmental review, labor
review, or ERISA review undertaken by the
Borrower in connection therewith and the results
of any further due diligence required by the
Administrative Agent;
(h) the Borrower shall provide the Administrative Agent
with copies of financial statements of the proposed
acquired business entity;
(i) the Borrower shall not engage in a Hostile
Acquisition. "Hostile Acquisition" shall mean
to acquire, or obtain the right to acquire,
beneficial ownership of 5% of common stock or 5%
of assets then outstanding of any other business
entity pursuant to a tender offer, exchange
offer, or other offer not expressly authorized
in writing by the Board of Directors of such
business entity; and
(j) all assets and/or subsidiaries acquired shall be
subject to the provisions of this Agreement.
-14-
<PAGE> 20
"Acquisition" means any transaction, or any series of related
transactions, by which the Borrower or any of its Subsidiaries
(i) acquires any going business or all or substantially all of
the assets of any firm, corporation or division thereof which
constitutes a going business, whether through purchase of
assets, merger or otherwise, or (ii) directly or indirectly
acquires (in one transaction or in a series of transactions) at
least a majority (in number of votes) of the securities of a
corporation which have ordinary voting power for the election
of directors or a majority (by percentage or voting power) of
the outstanding interests of a partnership or a joint venture
or a majority (by percentage or voting power) of the
outstanding ownership interest of a limited liability company.
-15-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF MARCH 31, 1998 AND STATEMENTS OF INCOME FOR THE THREE MONTHS ENDING
MARCH 31, 1998, OF DOMINION HOMES, INC. AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1
<CASH> 252
<SECURITIES> 0
<RECEIVABLES> 2,726
<ALLOWANCES> 88
<INVENTORY> 112,935
<CURRENT-ASSETS> 0
<PP&E> 4,370
<DEPRECIATION> 2,904
<TOTAL-ASSETS> 120,396
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 30,717
<OTHER-SE> 12,013
<TOTAL-LIABILITY-AND-EQUITY> 120,396
<SALES> 54,458
<TOTAL-REVENUES> 54,458
<CGS> 43,558
<TOTAL-COSTS> 49,910
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,091
<INCOME-PRETAX> 3,457
<INCOME-TAX> 1,452
<INCOME-CONTINUING> 2,005
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,005
<EPS-PRIMARY> .32
<EPS-DILUTED> .30
</TABLE>
