<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1996
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 33-89076
WEITZER HOMEBUILDERS INCORPORATED
- - --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 65-0502494
-----------------------------------------------------------
(State or other jurisdiction of (IRS Employer I.D. No.)
incorporation or organization)
5901 N.W. 151st Street, Suite 120, Miami Lakes, FL 33014-2428
- - --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(305) 819-4663
- - ----------------------------------------------------------
(Registrant's telephone number,
including area code)
Indicate by check mark whether the registrant (1) filed all reports required
to be filed by Section 13 or 15(d) of the 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
- -
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Outstanding at
Class July 31, 1996
----- -------------
Class A Common Stock, $.01 Par Value 2,360,254
Class B Common Stock, $.01 Par Value 1,500,000
<PAGE>
WEITZER HOMEBUILDERS INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, September 30,
1996 1995
-------------- --------------
<S> <C> <C>
ASSETS (Unaudited)
- - ------
Cash $ 2,670,717 $ 1,622,882
Restricted escrow funds 1,512,410 1,815,859
Advances for future projects 1,884,510 280,290
Construction-in-progress 33,598,162 30,167,295
Model furnishings, net of accumulated depreciation
of $199,589 and $159,284, respectively 619,832 565,703
Deferred loan costs net of accumulated amortization
of $608,603 and $454,790, respectively 737,500 769,387
Deferred income taxes 57,100 63,000
Goodwill, net of accumulated amortization
of $33,397 and $11,928, respectively 395,977 417,445
Other assets 1,445,400 1,220,499
-------------- --------------
$ 42,921,608 $ 36,922,360
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
- - ------------------------------------
Customer deposits $ 1,512,410 $ 965,659
Accounts payable and accrued liabilities 2,463,229 3,891,949
Acquisition, development and construction loans payable 23,717,119 18,294,562
10% bonds payable 3,317,600 3,155,450
5% debentures 1,185,000 -
Notes and loans payable 460,215 559,869
-------------- --------------
32,655,573 26,867,489
-------------- --------------
Commitments and contingencies
Shareholders' equity:
Preferred stock, $.01 par, 5,000,000 shares authorized,
none issued - -
Class A common stock, $.01 par, 40,000,000 shares authorized,
2,360,254 and 2,032,663 shares issued and outstanding, respectively 23,603 20,327
Class B common stock, $.01 par, 1,500,000 shares authorized,
1,500,000 shares issued and outstanding 15,000 15,000
Additional paid-in capital 10,330,953 10,133,042
Accumulated deficit (103,521) (113,498)
-------------- --------------
10,266,035 10,054,871
-------------- --------------
$ 42,921,608 $ 36,922,360
============== ==============
</TABLE>
See notes to consolidated financial statements
2
<PAGE>
WEITZER HOMEBUILDERS INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
------------------------------ -----------------------------
1996 1995 1996 1995
------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Revenues:
Sales of homes $ 12,418,278 $ 6,943,587 $ 26,898,822 $ 6,943,587
Equity in earnings of affiliated partnerships - 66,678 - 686,711
Interest income 61,270 8,012 113,757 88,988
Other income 100,207 57,135 195,767 57,135
------------- ------------- ------------- ------------
12,579,755 7,075,412 27,208,346 7,776,421
------------- ------------- ------------- ------------
Operating costs and expenses:
Costs of homes sold 10,920,709 5,850,563 23,694,270 5,850,563
Selling expenses 635,090 441,336 1,634,145 452,544
General and administrative expenses 566,586 326,437 1,504,807 364,405
Depreciation and amortization 108,156 67,073 295,392 67,073
Discontinued land acquisitions - 260,647 - 260,647
Amortization of goodwill 7,157 4,771 21,469 4,771
Interest expense 22,836 26,655 42,386 51,655
------------- ------------- ------------- ------------
12,260,534 6,977,482 27,192,469 7,051,658
------------- ------------- ------------- ------------
Income before income taxes 319,221 97,930 15,877 724,763
Provision for income taxes 117,900 26,632 5,900 261,694
------------- ------------- ------------- ------------
Net income $ 201,321 $ 71,298 $ 9,977 $ 463,069
============= ============= ============= ============
Net income per common share $ 0.05 $ 0.02 $ 0.00 $ 0.21
============= ============= ============= ============
Dividends per Class A common share $ 0.05 $ - $ 0.14 $ -
============= ============= ============= ============
Weighted average number of common
shares outstanding 3,835,624 2,944,157 3,633,282 2,182,252
============= ============= ============= ============
</TABLE>
See notes to consolidated financial statements
3
<PAGE>
WEITZER HOMEBUILDERS INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
June 30,
-----------------------------------
1996 1995
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 9,977 $ 463,069
-------------- --------------
Adjustments to reconcile net income to net cash
used in operating activities:
Equity in earnings of affiliated partnerships - (686,711)
Deferred income taxes 5,900 -
Other non-cash charges 745,312 71,844
Changes in assets and liabilities:
Restricted escrow funds 303,449 (909,958)
Construction in progress (3,430,867) (16,404,285)
Other assets (290,143) (331,944)
Customer deposits 546,751 (76,909)
Other liabilities (1,428,720) 3,553,082
-------------- --------------
(3,548,318) (14,784,881)
-------------- --------------
Net cash used in operating activities (3,538,341) (14,321,812)
-------------- --------------
Cash flows from investing activities:
Purchase of model furnishings (165,581) (338,676)
Purchase of affiliated partnerships - (4,056,367)
Advances for future projects (1,604,220) 1,342,172
Distributions from affiliated partnerships - 42,612
-------------- --------------
Net cash used in investing activities (1,769,801) (3,010,259)
-------------- --------------
Cash flows from financing activities:
Acquisition, development and construction loan borrowings 26,669,658 13,486,690
5% convertible debenture 1,881,646 -
Payments on acquisition, development and construction loans (21,247,101) -
Payment of loan from shareholder - (184,900)
Loan from shareholder - 70,000
Payments on notes payable (99,654) (247,781)
Loan, deferred registration and
terminated merger costs (353,113) (251,123)
Proceeds from issuance of common stock - 8,643,780
Dividend to shareholders (495,459) -
Amortization of warrant cost - (135,345)
-------------- --------------
Net cash provided by financing activities 6,355,977 21,381,321
-------------- --------------
Net increase in cash 1,047,835 4,049,250
Cash, beginning of period 1,622,882 53,217
-------------- --------------
Cash, end of period $ 2,670,717 $ 4,102,467
============== ==============
Cash paid during the period for interest, net of
amounts capitalized $ 30,086 $ 51,655
============== ==============
</TABLE>
See notes to consolidated financial statements
4
<PAGE>
WEITZER HOMEBUILDERS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION AND BUSINESS
Weitzer Homebuilders Incorporated (the "Company") was incorporated under
the laws of the State of Florida in June 1994, and engages, through its wholly-
owned subsidiaries, in the design, construction and sale of moderately-priced
single-family residences and townhouses in Dade and Broward counties in
Southeast Florida.
On September 30, 1994, the Company acquired all the outstanding shares of
certain of its wholly-owned subsidiaries in exchange (the "Weitzer Entities
Exchange") for issuing Class B Common Stock to the Company's Chairman of the
Board. This transaction was treated as a combination of companies under common
control, the accounting of which is similar to that of a pooling of interests.
These subsidiaries served as general partners of partnerships (the "Weitzer
Homebuilding Partnerships") which were engaged in the above mentioned
homebuilding activities.
On May 3, 1995, the Company acquired the remaining interests in the Weitzer
Homebuilding Partnerships from affiliates of an unrelated entity (the "Financial
Partner") which previously provided funding for real estate acquisition,
development and construction. The purchase of these interests was accounted for
by the Company under the purchase method of accounting for business
combinations. Accordingly, the results of operations of the Weitzer Homebuilding
Partnerships have been included in the Company's consolidated financial
statements since the date of this acquisition.
The consolidated financial statements included herein have been prepared by
the Company pursuant to the rules and regulation of the Securities and Exchange
Commission for interim financial information. As such financial statements do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements, they should be read in
conjunction with the financial statements and related footnotes included in the
Company's Form 10-K for the year ended September 30, 1995, filed with the
Securities and Exchange Commission.
The consolidated balance sheet of the Company as of September 30, 1995 is
audited. The other consolidated financial statements are unaudited, but in the
opinion of management, contain all adjustments (consisting of normal recurring
adjustments) necessary to present fairly the consolidated balance sheet of the
Company as of June 30, 1996, the related consolidated statements of operations
of the Company for the three and nine months ended June 30, 1996, and the
consolidated statements of cash flows of the Company for the nine months ended
June 30, 1996. Operating results for the three and nine months ended June 30,
1996 are not necessarily indicative of the results for the full fiscal year.
5
<PAGE>
WEITZER HOMEBUILDERS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - INVESTMENTS IN AFFILIATED PARTNERSHIPS
Various subsidiaries of the Company served as general partners of the
Weitzer Homebuilding Partnerships through which most of the Company's prior
homebuilding operations were conducted. Prior to May 3, 1995, the other general
partner was an affiliate of the Financial Partner. The Financial Partner's
interests in the Weitzer Homebuilding Partnerships were acquired on May 3, 1995
by the Company with a portion of the net proceeds of the Company's initial
public offering, and the operations of the Weitzer Homebuilding Partnerships
have been consolidated with the financial statements of the Company from that
date.
The following table presents summarized combined financial information for
the Weitzer Homebuilding Partnerships for the three and nine months ended June
30, 1995. The Company used the equity method to account for its investments in
the Weitzer Homebuilding Partnerships through May 3, 1995, the date the
Financial Partner's interests in these partnerships were acquired.
Income Statement Data
<TABLE>
<CAPTION>
April 1, 1995 October 1, 1994
Through May 3, Through May 3,
1995 1995
---------------- -----------------
<S> <C> <C>
Revenues $ 3,395,996 $ 24,279,626
Costs of homes sold 2,852,187 20,473,203
Selling and other expenses 402,564 2,026,971
--------------- ----------------
Net income $ 141,245 $ 1,779,452
=============== ================
</TABLE>
In accordance with the partnership agreements, the income for each of the
Weitzer Homebuilding Partnerships was allocated to the general partners first to
provide a 10% preferred return on invested capital (which was principally
contributed by the Financial Partner) with the balance of the income shared
equally; all losses were shared equally.
6
<PAGE>
WEITZER HOMEBUILDERS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - INCOME TAXES
The Company's income tax provision for the three and nine months ended
June 30, 1996 and 1995 is summarized as follows:
<TABLE>
<CAPTION>
Three months ended Nine months ended
June 30, June 30,
----------------------- -------------------
Current: 1996 1995 1996 1995
---------- --------- ------- ---------
<S> <C> <C> <C> <C>
Federal $ - $ 26,632 $ - $ 261,694
State - - - -
Deferred:
Federal 117,900 - 5,900 -
State - - - -
---------- --------- ------- ---------
Total income tax provision $ 117,900 $ 26,632 $ 5,900 $ 261,694
========== ========= ======= =========
</TABLE>
Reconciliation of the differences between income taxes computed at federal
statutory rates and the Company's recorded provision for income taxes are as
follows:
<TABLE>
<CAPTION>
1996 1995 1996 1995
---------- --------- ------- ---------
<S> <C> <C> <C> <C>
Expected tax benefit at Federal
statutory rate 34.0% 34.0% 34.0% 34.0%
Increase in State income tax,
net 3.0 3.6 3.0 3.6
---------- --------- ------- ---------
37.0% 37.6% 37.0% 37.6%
========== ========= ======= =========
</TABLE>
The tax effects of the temporary differences comprising the Company's
deferred tax asset are net operating loss carryforwards. As of September 30,
1995, the Company had net operating losses of approximately $180,000 available
to offset future taxable income, if any. These carryforwards will expire in the
year 2009.
7
<PAGE>
WEITZER HOMEBUILDERS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - 5% DEBENTURES
The Company issued a total of $1,970,000, 5%, two year redeemable
convertible debenture ("Debentures") resulting in net proceeds of $1,743,000.
The Debentures were convertible, commencing 45 days after issuance, into shares
of Class A Common Stock of the Company at the lesser of 10% below the average
closing bid price of the Class A Common Stock for the five days immediately
preceding the date of issuance or 21% below the average closing bid price of the
Class A Common Stock for the five business days immediately preceding the date
of conversion and are redeemable under certain circumstances. Subsequent to the
issuance of the Debentures the Company has converted a total of $785,000 of the
Debentures into 327,591 shares of the Company's Class A Common Stock. The
Company has notified the outstanding Debenture holders that any and all
conversions into shares of the Company's Class A Common Stock have been
suspended indefinitely. In the event any such Debenture holders object to such
suspension, then the Company believes that the remedy available to such
Debenture holders, if they prevail in any litigation, would be to declare an
event of default under the terms of the Debentures. In such and event the
Company would then be obligated to repay the principal amount of the Debentures
plus accrued interest. No litigation has been commenced regarding such
suspensions as of this date and the Company believes if any litigation is
instituted the Company, although no assurance can be given, would prevail on the
merits of any such action.
8
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This discussion should be read in conjunction with the Notes to the
Consolidated Financial Statements contained herein and Management's Discussion
and Analysis of Financial Condition and Results of Operations appearing in the
Company's Form 10-K for the fiscal year ended September 30, 1995. Management of
the Company believes that quarterly comparisons may not give a true indication
of overall trends and changes in the Company's operations. The Company's sales
and net income are subject to significant variability based on, among other
things, the phase of development of its projects, the cyclical nature of the
homebuilding industry, changes in governmental regulations, changes in
prevailing interest rates, changes in the costs of materials and labor and other
economic factors. Except for the historical information contained herein, the
matters discussed in this Quarterly Report on Form 10-Q are forward-looking
statements which involve risks and uncertainties, including, but not limited to,
economic, competitive, governmental, and technological factors affecting the
Company's operations, markets, products, services, and prices, and other factors
discussed in the Company's other filings with the Securities and Exchange
Commission.
The Company was organized in June 1994 for the purpose of holding the
capital stock of, and providing funding to, subsidiaries which are or will be
involved in the acquisition and development of land and the design,
construction, marketing, financing and sale of single-family homes and
townhomes. Prior to May 3, 1995, substantially all of the Company's homebuilding
projects were conducted through the Weitzer Homebuilding Partnerships, in which
a subsidiary of the Company held a 50% general partnership interest, and the
Company accounted for its investment in the Weitzer Homebuilding Partnerships
under the equity method of accounting, whereby its initial investment was
recorded at cost, adjusted by its share of the Weitzer Homebuilding
Partnerships' operating results and reduced by distributions received. On May
3, 1995, the Company used a portion of the net proceeds of its initial public
offering to acquire the Financial Partner's interest in the Weitzer Homebuilding
Partnerships and now consolidates the operations of these former partnerships
with the financial statements of the Company. Accordingly, the following
discussion of the results of operations of the Company includes, in addition to
a discussion of the results of operations of the Company for the three and nine
months ended June 30, 1996 and 1995, a discussion of the results of operations
of the Weitzer Homebuilding Partnerships for the three and nine months ended
June 30, 1995 compared to the Company's results of operations for the three and
nine months ended June 30, 1996.
9
<PAGE>
Results of Operations
General
- - -------
The following table sets forth for the periods presented certain items of
the Company's consolidated financial statements (for the 1996 periods) and the
Weitzer Homebuilding Partnerships' combined financial statements (for the 1995
periods) expressed as a percentage of total revenues:
<TABLE>
<CAPTION>
Percentage of Total Revenues
------------------------------------------------
Three Months Ended Nine Months Ended
June 30, June 30,
------------------------- ---------------------
1996 1995 1996 1995
------------ ---------- ---------- ---------
<S> <C> <C> <C> <C>
Revenues 100.0% 100.0% 100.0% 100.0%
Cost of homes sold 86.8 84.1 87.1 84.3
Selling, general and
administrative expenses 9.5 9.2 11.5 8.1
Net income 1.6 6.6 0.1 7.4
</TABLE>
Backlog and Available Lots for Sale or Under Option or Contract. The following
table sets forth the Company's backlog, the available lots for sale and the
available lots for construction for the periods presented. The backlog consists
of homes under sales contracts and includes homes under construction, as well as
homes which have been sold but not started. At June 30,1996 approximately 54% of
the homes in backlog were under construction. The backlog increased 62% from 157
homes at September 30, 1995 to 254 homes at June 30, 1996. The available lots
for sale refer to the number of lots the Company has acquired which it plans to
construct homes on and excludes homes under sales contracts included in backlog.
The available lots under option or contract refer to the number of lots as to
which the Company has an option or a contract to acquire, but whose acquisition
has not closed. The available lots under option or contract reflect the lots for
projects which are currently being developed or are currently planned for future
development. There can be no assurances that settlements of homes subject to
sales contracts will occur or that all of the available lots for sale will be
built on, or that the available lots under option or contract will be acquired
or built on. Contracts for homes under sales contracts and for homes under
construction may be canceled by buyers and may subject the buyers to certain
penalties under the contract.
10
<PAGE>
Backlog of Homes, Available Lots for Sale and Available Lots Under Option or
- - ----------------------------------------------------------------------------
Contract
- - --------
<TABLE>
<CAPTION>
June 30, September 30, June 30,
1996 1995 1995
--------------- ----------------- ------------
<S> <C> <C> <C>
Number of homes in backlog
254 157 142
Aggregate sales value of
homes in backlog $ 28,998,000 $ 19,201,000 $ 15,477,043
Available lots for sale 685 1,006 919
Available lots under
option or contract 963 1,125 1,209
</TABLE>
Comparison of the Three Months Ended June 30, 1996 and 1995
- - -----------------------------------------------------------
The Company as compared to Weitzer Homebuilding Partnerships
The Company's revenues from home sales were approximately $12.4 million for
the three months ended June 30, 1996, as compared to approximately $10.4 million
for the Weitzer Homebuilding Partnerships for the three months ended June 30,
1995. The increase is attributed to an overall increase in the volume of home
sales during the three months ended June 30, 1996, compared to the same period
in 1995. For the three months ended June 30, 1996, there was a 20.4% increase in
the number of homes delivered (83 to 100) compared to the three months ended
June 30, 1995. The average selling price of the homes delivered was constant at
$124,000 for the three months ended June 30, 1996 and 1995. The higher volume of
home sales for the three months ended June 30, 1996 reflect increased closings
at Weitzer at Harmony Lakes and at the Serena Lakes Patio Homes and Serena Lakes
Townhomes projects which have passed through their early development stage, and
were not generating sales during the three months ended June 30, 1995. The
Company has also overcome unforeseen delays in qualifying certain potential home
buyers which had the effect of closing a number of homes in the current quarter
which had been delayed from earlier quarters.
Costs of homes sold increased from approximately $8.7 million for the
Weitzer Homebuilding Partnerships during the three months ended June 30, 1995 to
approximately $10.9 million for the Company during the three months ended June
30, 1996, as a result of the increase in the volume of homes sold. Cost of homes
sold as a percentage of home sales increased from 84.3% during the three months
ended June 30, 1995 for the Weitzer Homebuilding Partnerships to 87.9% for the
three months ended June 30, 1996 for the Company. Specifically, the Chapel Trail
subdivision, whose divisional historical costs have been higher than the overall
consolidated
11
<PAGE>
historical costs, made up more than 22% of the total sales for the current
quarter. This had the effect of reducing the overall consolidated gross margin
for the period. In addition the margin for the Weitzer at Harmony Lakes project
is also lower than the Company's historical consolidated margin.
Selling, general and administrative ("SG&A") expenses increased from
approximately $948,000 during the three months ended June 30, 1995 for the
Weitzer Homebuilding Partnerships to approximately $1.2 million during the three
months ended June 30, 1996 for the Company. SG&A expenses as a percentage of
total revenues increased from 9.2% during the three months ended June 30, 1995
for the Weitzer Homebuilding Partnerships to 9.5% for the three months ended
June 30, 1996 for the Company. The increase was primarily attributable to
startup selling expenses of approximately $154,500 for certain new projects for
which there were no home sales.
Net income of the Weitzer Homebuilding Partnerships was $684,000 during the
three months ended June 30, 1995, compared to a net income of approximately
$201,000 during the three months ended June 30, 1996 for the Company.
The Company
The Company's total revenues increased from approximately $7.1 million for
the three months ended June 30, 1995 to approximately $12.6 million during the
three months ended June 30, 1996. This increase is attributed to the acquisition
of the interest of the affiliates of the Financial Partner in the Weitzer
Homebuilding Partnerships on May 3, 1995, which permitted the Company to
consolidate the operations of the Weitzer Homebuilding Partnerships with the
financial statements of the Company. Prior to May 3, 1995, the Company accounted
for its investment in the Weitzer Homebuilding Partnerships under the equity
method of accounting. Consequently, sales of homes for the three months ended
June 30, 1996 include three months of sales of homes of the Company as compared
to two in the comparative period of the prior fiscal year.
The Company's total expenses increased from approximately $7.0 million for
the three months ended June 30, 1995 to approximately $12.3 million for the
three months ended June 30, 1996. The increase is attributed to the change in
accounting for the investment in the Weitzer Homebuilding Partnerships resulting
from the acquisition of the interests of the affiliates of the Financial Partner
in the Weitzer Homebuilding Partnerships.
The Company's net income for the three months ended June 30, 1995 was
approximately $71,000 compared to a net income of $201,000 for the three months
ended June 30, 1996. Net income per share increased from $.02 for the three
months ended June 30, 1995 to a net loss per share of $.05 for the three months
ended June 30, 1996, as a result of the increase in net income.
12
<PAGE>
Comparison of the Nine Months Ended June 30, 1996 and 1995
- - ----------------------------------------------------------
The Company as compared to Weitzer Homebuilding Partnerships
The Company's revenues from home sales were approximately $26.9 million for
the nine months ended June 30, 1996, as compared to approximately $31.2 million
for the Weitzer Homebuilding Partnerships for the nine months ended June 30,
1995. The decrease is attributed to an overall decrease in the volume of home
sales during the nine months ended June 30, 1996, compared to the same period in
1995. For the nine months ended June 30, 1996, there was a 10.6% decrease in the
number of homes delivered (236 to 211) and the average selling price of the
homes delivered decreased 3.5% (from $132,042 to $127,483) compared to the nine
months ended June 30, 1995. The lower volume of home sales for the nine months
ended June 30, 1996 reflects the completion of a number of homebuilding projects
which were generating sales during the nine months ended June 30, 1995 and the
fact that the Company was in the early development stage of certain new projects
such as Weitzer at Harmony Lakes, The Hammocks at Riverglen, and the future
phases of Serena Lakes Patio Homes and Serena Lakes Townhomes during the
beginning of the current fiscal year. This, coupled with stricter building codes
in the markets where the Company is building and a longer permitting process has
kept salable inventory below prior period levels.
Costs of homes sold decreased from approximately $26.3 million for the
Weitzer Homebuilding Partnerships during the nine months ended June 30, 1995 to
approximately $23.7 million for the Company during the nine months ended June
30, 1996, primarily as a result of the decrease in the volume of homes sold.
Cost of homes sold as a percentage of home sales increased from 84.5% during the
nine months ended June 30, 1995 for the Weitzer Homebuilding Partnerships to
88.1% for the nine months ended June 30, 1996 for the Company. Specifically, the
Chapel Trail subdivision, whose divisional historical costs have been higher
than the overall consolidated historical costs, made up more than 28% of the
total sales for the current period. This had the effect of reducing the overall
consolidated gross margin for the period. In addition the margin for the Weitzer
at Harmony Lakes project is also lower than the Company's historical
consolidated margin.
Selling, general and administrative ("SG&A") expenses increased from
approximately $2.5 million during the nine months ended June 30, 1995 for the
Weitzer Homebuilding Partnerships to approximately $3.1 million during the nine
months ended June 30, 1996 for the Company. SG&A expenses as a percentage of
total revenues increased from 8.1% during the nine months ended June 30, 1995
for the Weitzer Homebuilding Partnerships to 11.5% for the nine months ended
June 30, 1996 for the Company. The increase was primarily attributable to the
decrease in the volume of home sales, combined with startup selling expenses of
approximately $496,500 for
13
<PAGE>
certain new projects for which there were minimal or no home sales. In
addition, the Company had nonrecurring fees totaling $96,000 for the period.
Net income of the Weitzer Homebuilding Partnerships was approximately $2.3
million during the nine months ended June 30, 1995, compared to a net income of
approximately $10,000 during the nine months ended June 30, 1996 for the
Company, primarily as a result of the decrease in home sales.
The Company
The Company's total revenues increased from approximately $7.8 million for
the nine months ended June 30, 1995 to approximately $27.2 million during the
nine months ended June 30, 1996. This increase is attributed to the acquisition
of the interest of the affiliates of the Financial Partner in the Weitzer
Homebuilding Partnerships on May 3, 1995, which permitted the Company to
consolidate the operations of the Weitzer Homebuilding Partnerships with the
financial statements of the Company. Prior to May 3, 1995, the Company accounted
for its investment in the Weitzer Homebuilding Partnerships under the equity
method of accounting. Consequently, sales of homes for the nine months ended
June 30, 1996 include nine months of sales of homes of the Company as compared
to two in the comparative period in the prior fiscal year.
The Company's total expenses increased from approximately $7.0 million for
the nine months ended June 30, 1995 to approximately $27.2 million for the nine
months ended June 30, 1996. The increase is attributed to the change in
accounting for the investment in the Weitzer Homebuilding Partnerships resulting
from the acquisition of the interests of the affiliates of the Financial Partner
in the Weitzer Homebuilding Partnerships.
The Company's net income for the nine months ended June 30, 1995 was
approximately $463,000 compared to a net income of $10,000 for the nine months
ended June 30, 1996. Net income per share decreased from $.21 for the nine
months ended June 30, 1995 to a net income per share of $.00 for the nine months
ended June 30, 1996, as a result of the decrease in net income.
Liquidity and Capital Resources
General. In May 1996, the Company's Board of Directors declared a dividend
of $.08125 per share of Class A Common Stock payable on May 15, 1996 to
shareholders of record on May 8, 1996.
14
<PAGE>
On June 30, 1996, the Company had borrowings from banks and third parties
aggregating approximately $29.1 million. The Company anticipates that it will
fund the maturities of its debt and required expenditures relating to its
developments primarily with cash flow from operations and construction financing
from the Weitzer at Harmony Lakes project, Hammocks at River Glen project,
Tesoro at Forest Lakes project, Weitzer Serena Lakes Homes project and Weitzer
Serena Lakes Townhomes project.
At June 30, 1996, the Company has approximately $10.4 million of available
credit under the Residential Funding Corporation (RFC) Credit Facility which it
may use to finance the acquisition, development and construction of other
homebuilding projects which are approved by RFC.
At June 30, 1996, the Company has an aggregate of approximately $6.3
million of available credit under two lines of credit with Barnett Bank of South
Florida, N.A., which the Company may use to finance the construction and
development of homes at both the Weitzer Serena Lakes Patio Homes and Serena
Lakes Townhomes projects.
The Company issued a total of $1,970,000, 5%, two year redeemable
convertible debenture ("Debentures") resulting in net proceeds of $1,743,000.
The Debentures were convertible, commencing 45 days after issuance, into shares
of Class A Common Stock of the Company at the lesser of 10% below the average
closing bid price of the Class A Common Stock for the five days immediately
preceding the date of issuance or 21% below the average closing bid price of the
Class A Common Stock for the five business days immediately preceding the date
of conversion and are redeemable under certain circumstances. Subsequent to the
issuance of the Debentures the Company has converted a total of $785,000 of the
Debentures into 327,591 shares of the Company's Class A Common Stock. The
Company has notified the outstanding Debenture holders that any and all
conversions into shares of the Company's Class A Common Stock have been
suspended indefinitely. In the event any such Debenture holders object to such
suspension, then the Company believes that the remedy available to such
Debenture holders, if they prevail in any litigation, would be to declare an
event of default under the terms of the Debentures. In such and event the
Company would then be obligated to repay the principal amount of the Debentures
plus accrued interest. No litigation has been commenced regarding such
suspensions as of this date and the Company believes if any litigation is
instituted the Company, although no assurance can be given, would prevail on the
merits of any such action.
15
<PAGE>
Cash Flows. During the nine months ended June 30, 1996, the Company had
$3.5 million of net cash used in operating activities, primarily as a result of
the construction activity for the Weitzer at Harmony Lakes project, Tesoro at
Forest Lakes project and the Hammocks at Riverglen community project. During
that period, the Company had net cash provided by financing activities of $6.3
million, arising principally from the net financing activity for the Weitzer at
Harmony Lakes project, Tesoro at Forest Lakes project, the Hammocks at Riverglen
community project and the Malibu Bay at Chapel Trail project.
The Company had determined that it is currently in the best interest of the
Company and its shareholders to retain all earnings and to forego the August 15,
1996 regularly scheduled cash dividend payment on its outstanding shares of
Class A Common Stock. The Company's determination to forgo such payment was not
the result of the inability of the Company to satisfy such cash payment, but
rather the determination that such cash would be better used to facilitate the
Company's growth, with the potential result of enhancing shareholder valuation.
Cash dividends on the Class A Common Stock are cumulative, and accordingly, the
amount of such dividends would accrue for the benefit of the Company's
shareholders. The Company will continue to evaluate future cash dividend
payments depending upon then current business conditions, opportunities for
growth and on the then current financial condition of the Company. Accordingly,
no assurance can be given as to when the Company plans on resuming the payment
of such cash dividends.
16
<PAGE>
PART II. OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(b) The Company has not filed a report on Form 8-K during the quarter for which
this report is being filed.
SIGNATURES
----------
Pursuant to the requirements 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.
Date: August 16, 1996 /s/ Harry Weitzer
-----------------
Harry Weitzer, Chairman of the Board
(Principal Executive Officer)
Date: August 16, 1996 /s/ Timothy S. Hart
-------------------
Timothy S. Hart
Corporate Controller
(Principal Accounting Officer)
17
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM WEITZER
HOMEBUILDERS INCORPORATED FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> JUN-30-1996
<CASH> 2,670,717
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 42,921,608
<CURRENT-LIABILITIES> 0
<BONDS> 4,502,600
0
0
<COMMON> 38,603
<OTHER-SE> 10,227,432
<TOTAL-LIABILITY-AND-EQUITY> 42,921,608
<SALES> 26,898,822
<TOTAL-REVENUES> 27,208,346
<CGS> 23,694,270
<TOTAL-COSTS> 27,192,469
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 42,386
<INCOME-PRETAX> 15,877
<INCOME-TAX> 5,900
<INCOME-CONTINUING> 9,977
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,977
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
