-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, G0WXzWgs6RIXphImAzP21wHRNBORI2gl7jiaBYlf0jDCosoIaHGM7S7hCQA30XSK dkcKtZQ1FC6j4BjesyyDsw== 0000950129-95-000094.txt : 19950224 0000950129-95-000094.hdr.sgml : 19950224 ACCESSION NUMBER: 0000950129-95-000094 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19950223 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: U S HOME CORP /DE/ CENTRAL INDEX KEY: 0000101640 STANDARD INDUSTRIAL CLASSIFICATION: OPERATIVE BUILDERS [1531] IRS NUMBER: 210718930 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-05899 FILM NUMBER: 95514670 BUSINESS ADDRESS: STREET 1: 1800 WEST LOOP SOUTH CITY: HOUSTON STATE: TX ZIP: 77027 BUSINESS PHONE: 7138772311 MAIL ADDRESS: STREET 1: PO BOX 2863 CITY: HOUSTON STATE: TX ZIP: 77252 FORMER COMPANY: FORMER CONFORMED NAME: UNITED STATES HOME & DEVELOPMENT CORP DATE OF NAME CHANGE: 19710713 10-K 1 FORM 10-K -- U.S. HOME CORPORATION 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (MARK ONE) /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO . COMMISSION FILE NUMBER 1-5899 U.S. HOME CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 21-0718930 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
1800 WEST LOOP SOUTH, HOUSTON, TEXAS 77027 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 877-2311 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH TITLE OF EACH CLASS EXCHANGE OF WHICH REGISTERED - ---------------------------------------------------------------- ---------------------------- Common Stock, $.01 par value per share New York Stock Exchange Convertible Redeemable Preferred Stock, $.10 par value per share New York Stock Exchange Class B Warrants to acquire Common Stock New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE 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 / / Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. / / Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. YES /X/ NO / / As of February 10, 1995, the number of shares outstanding of Registrant's voting stock was 11,428,632 and the aggregate market value of the Registrant's voting stock held by non-affiliates was $200,873,556. DOCUMENTS INCORPORATED BY REFERENCE
PART OF 10-K WHERE INCORPORATED ------------------ Proxy Statement dated March 20, 1995 for the Annual Meeting of Stockholders to be held on April 26, 1995............................... III
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 PART I ITEM 1. BUSINESS GENERAL U.S. Home Corporation ("U.S. Home" or the "Company"), organized in 1954 and incorporated in the State of Delaware in 1959, is one of the largest single-family home builders in the United States based on homes delivered. The Company currently builds and sells homes in more than 190 new home communities in 31 metropolitan areas in 12 states. Since its formation, the Company has delivered more than 252,000 homes. The Company conducts substantially all of its home building business through U.S. Home, the parent company. The Company offers a wide variety of moderately-priced homes that are designed to appeal to the affordable, move-up and retirement and active-adult/second home buyers. In each of its markets, the Company's primary strategy is to build quality homes, utilizing its Zero Defect Program, which the Company believes offers prospective home buyers a high level of new home value. The Company believes that many home purchasers compare homes on the basis of location, perceived quality and dollars of purchase price per square foot of living area. As a result, the Company attempts to purchase land and lots in popular growth corridors, maintain high quality standards and design homes to maximize living space. In addition to building and selling single-family homes, the Company provides mortgage banking services to its customers. The Company originates, processes and sells mortgages to third-party investors. The Company does not retain or service the mortgages that it originates but, rather, sells the mortgages and related servicing rights to investors. OPERATIONS The Company is engaged in two related industry segments: home building and financial services. The revenues, operating profits or losses and identifiable assets attributable to the Company's industry segments are separately disclosed in the Consolidated Financial Statements. HOME BUILDING OPERATIONS The Company's primary industry segment is the on-site development of single-family residential communities. Currently, the Company builds in 31 metropolitan areas in 12 states. During 1994, the Company's product mix consisted of deliveries of approximately 34% affordable homes, 47% move-up homes and 19% retirement and active-adult/second homes. U.S. Home continues to pay increasing attention to the active adult who is in the market for a second home or is nearing retirement. The Company has set a goal to increase its retirement and active-adult/second home deliveries to approximately 30% of the Company's volume. However, there can be no assurance that such efforts will be successful. The Company presently has retirement and active-adult/second home communities in Texas, Maryland, New Jersey, Nevada and Florida, with expansion plans for California and Arizona where two retirement communities are expected to open in the latter part of 1995. During 1994, the Company entered new markets in the Midwest by acquiring or optioning property in Cleveland and Columbus, Ohio and Indianapolis, Indiana. By the third quarter of 1995, the Company expects to open 10 new communities in these Midwest markets. 2 3 MARKETS U.S. Home's building operations are currently conducted in the following market areas:
MARKETS METROPOLITAN AREAS ------- ------------------ Florida.......................... Bonita Springs, Clearwater/Palm Harbor/Tarpon Springs, Fort Myers, Key Largo, Naples, Orlando, Sarasota/ Bradenton, Spring Hill/New Port Richey and Tampa Mountain -- Colorado....................... Colorado Springs, Denver and Fort Collins/Greeley/ Loveland Arizona........................ Phoenix and Tucson Nevada......................... Las Vegas Northeast/Midwest -- Maryland/Virginia.............. Annapolis/Baltimore and Washington, D.C. area Minnesota...................... Minneapolis/St. Paul New Jersey..................... Dover/Jackson/Monroe/Princeton and Washington/ Lumberton Indiana........................ Indianapolis Ohio........................... Cleveland and Columbus California....................... Bakersfield, Palmdale/Lancaster and Sacramento Texas............................ Austin, Dallas/Fort Worth, Houston, McAllen/Harlingen/ Brownsville and San Antonio
The Company seeks to maintain geographic diversity and thus reduce the potential risk of economic volatility in any given market. The Company's homebuilding and marketing activities are conducted under the name of U.S. Home in each of its markets except in Minneapolis/St. Paul where the Company markets its homes under the name of Orrin Thompson Homes and in Florida where homes are marketed under the name of Rutenberg Homes as well as U.S. Home. Set forth below are revenues for the Company from the sale of single-family homes by market for each of the last three fiscal years:
YEARS ENDED DECEMBER 31, ---------------------------------- MARKETS 1994 1993 1992 ------- -------- -------- -------- (DOLLARS IN THOUSANDS) Florida............................................ $293,278 $243,130 $202,859 Mountain -- Colorado......................................... 138,409 103,769 89,240 Arizona.......................................... 128,343 85,784 65,210 Nevada........................................... 43,540 28,946 19,475 Northeast/Midwest -- Maryland/Virginia................................ 67,689 49,913 53,042 Minnesota........................................ 67,496 64,645 45,375 New Jersey....................................... 39,198 31,810 18,887 California......................................... 107,625 104,416 108,426 Texas.............................................. 79,173 77,061 67,179 -------- -------- -------- $964,751 $789,474 $669,693 ======== ======== ========
3 4 Set forth below are tables providing information (expressed in number of housing units) with respect to new orders taken, deliveries to purchasers and backlog of single-family homes by market for each of the last three fiscal years: NEW ORDERS TAKEN
YEARS ENDED DECEMBER 31, ------------------------- MARKETS 1994 1993 1992 ------- ----- ----- ----- Florida..................................................... 2,127 1,979 1,654 Mountain -- Colorado.................................................. 812 841 676 Arizona................................................... 845 931 650 Nevada.................................................... 308 249 136 Northeast/Midwest -- Maryland/Virginia......................................... 333 334 369 Minnesota................................................. 339 493 323 New Jersey................................................ 283 210 179 Ohio...................................................... 10 -- -- California.................................................. 592 722 643 Texas....................................................... 585 659 644 ----- ----- ----- 6,234 6,418 5,274 ===== ===== =====
DELIVERIES
YEARS ENDED DECEMBER 31, ------------------------- MARKETS 1994 1993 1992 ------- ----- ----- ----- Florida..................................................... 1,948 1,705 1,491 Mountain -- Colorado.................................................. 898 674 617 Arizona................................................... 970 729 600 Nevada.................................................... 299 206 137 Northeast/Midwest -- Maryland/Virginia......................................... 382 301 324 Minnesota................................................. 396 457 327 New Jersey................................................ 203 175 173 California.................................................. 643 692 722 Texas....................................................... 648 647 624 ----- ----- ----- 6,387 5,586 5,015 ===== ===== =====
4 5 BACKLOG (1)
YEARS ENDED DECEMBER 31, ------------------------- MARKETS 1994 1993 1992 ------- ----- ----- ----- Florida..................................................... 1,146 967 693 Mountain -- Colorado.................................................. 390 476 309 Arizona................................................... 263 388 186 Nevada.................................................... 90 81 38 Northeast/Midwest -- Maryland/Virginia......................................... 82 131 98 Minnesota................................................. 87 144 108 New Jersey................................................ 169 89 54 Ohio...................................................... 10 -- -- California.................................................. 86 137 107 Texas....................................................... 228 291 279 ----- ----- ----- 2,551 2,704 1,872 ===== ===== =====
- ------------ (1) Homes under contract for sale but not delivered at end of year. The Company anticipates that substantially all of its backlog units, net of cancellations, as of December 31, 1994 will be completed and delivered during 1995. While operations in certain market areas are affected by seasonal factors which limit on-site building and sales activities, the Company's ability to build and deliver its backlog is not considered to be seriously affected by such factors. SALES AND MARKETING The Company employs sales consultants for the sale of single-family homes, although sales by independent real estate brokers are also encouraged. Specific sales training programs are provided which inform sales consultants about sales techniques and methods as well as information about their local market, realtors and products. The sales programs focus on the Company's Zero Defect Program as a marketing tool because the sales force is the first contact with the customer. The Zero Defect Program is a quality assurance program with major emphasis on construction (see Construction below). The Company advertises primarily in magazines and local newspapers. Additionally, homes are marketed by means of model homes, pictorial brochures and on-site displays. The Company's general marketing strategy seeks to generate one-third of housing sales through advertisements, one-third through customer referrals and one-third through realtor contacts. The Company markets homes in "model home parks" featuring one or more model homes, attractively furnished and decorated and staffed by the Company's sales consultants who provide information regarding floor plans, the various elevations available, decorating options, as well as assisting with mortgage financing information. The model may include a variety of options and upgrades which the customer may request at an additional cost. Such upgrades may include items such as pools, fireplaces and decks. The Company constantly studies both aesthetic design and architectural trends, as well as quality construction and engineering trends, in order to provide customers with high quality, design and value. The Company has received numerous awards in various markets for outstanding housing design. Selling prices are set in each area based on local market conditions and competitive factors. The Company's gross margins vary from area to area based on competitive factors in each market. 5 6 The Company's product lines include both single-family detached and attached homes. During 1994, 1993 and 1992, approximately 85% of the homes delivered were single-family detached. The number of units and average sales prices of single-family homes delivered in 1994, 1993 and 1992 were as follows:
SINGLE-FAMILY SINGLE-FAMILY DETACHED ATTACHED ------------------------ ------------------------ NUMBER AVERAGE NUMBER AVERAGE OF UNITS SALES PRICE OF UNITS SALES PRICE -------- ----------- -------- ----------- 1994....................................... 5,411 $155,200 976 $127,900 1993....................................... 4,773 145,000 813 119,500 1992....................................... 4,211 137,400 729 125,000
The increases in the average sales prices of single-family detached homes in 1994 and 1993 were primarily due to price increases. The increase in the average sales prices of single-family attached homes in 1994 was primarily due to an increase in deliveries in higher priced markets while the decrease in the average sales prices of single-family attached homes in 1993 was primarily due to an increase in the deliveries in lower priced markets. In 1994, the national average sales prices of new single-family homes (both detached and attached) as reported on a preliminary basis by the U.S. Census Bureau was $154,100 compared with an average sales price of $151,000 for the Company. Variations in the general product and customer mix may exist from year to year based on shifts in local market demand or product availability. The table below sets forth the mix of the Company's deliveries for the affordable, move-up and retirement and active-adult/second home products during the last three years:
1994 1993 1992 ---- ---- ---- Affordable..................................................... 34% 31% 28% Move-up........................................................ 47% 54% 56% Retirement and active-adult/second home........................ 19% 15% 16%
Many purchasers finance a large portion of the purchase price of a home through conventional or government insured/guaranteed mortgages from lending institutions. The Company generally assists purchasers in obtaining mortgages. Approximately 85% of the homes delivered in 1994 and 86% delivered in 1993 and in 1992, were purchased using mortgage financing. The Company takes steps to qualify certain of its homes under Veterans Administration ("VA") and Federal Housing Administration ("FHA") mortgage financing programs, which provide mortgage financing sources. During 1994, 1993 and 1992, approximately 19%, 25% and 25% of the Company's homes delivered were financed under VA and FHA mortgage programs. CONSTRUCTION The Company's investment in direct employee labor costs, equipment and facilities is kept to a minimum because all construction of single-family homes is performed by independent subcontractors. At all stages of construction, however, on-site Company managers supervise and coordinate the activities of these subcontractors and subject their work to quality and cost control standards. The Company's Director of National Purchasing and Quality Control provides centralized management of quality standards, both with respect to the construction of homes and the purchase of certain major components used in the construction of homes. Company employees are rated and compensation incentives are affected by a measure of quality standards. The Company's commitment to quality and its use in the Company's sales efforts are best illustrated by its Zero Defect Program. Under the Zero Defect Program, the home buyer meets with the construction supervisor prior to the commencement of, and during, construction in order to ensure that the home buyer (i) is aware of all quality features of the house, including those which are not readily apparent in the finished house, (ii) agrees that the design features, including appliances, match those ordered and (iii) is satisfied with the finished product. The Company considers a completed house to have "zero defects" if, upon final inspection by the home buyer, only a few minor cosmetic items remain to be corrected. 6 7 Construction subcontractors are selected on the basis of competitive bids and written agreements govern their relationship with the Company. All bids are based on detailed specifications and complete blueprints to ensure commitment to the Company's expectation for high quality workmanship. The Company purchases the majority of its construction material on a decentralized basis with a "just in time" delivery schedule to each individual job site. Materials are regularly purchased on a competitive bid basis to ensure both competitive pricing and high quality. In addition to local purchasing, the Company has entered into a number of national purchasing agreements in order to maximize purchasing power. Agreements with each vendor are negotiated on an annual basis by the Company's Director of National Purchasing and Quality Control. In order to minimize the risk associated with completed but unsold inventory, the Company generally does not commence construction of a single-family detached home prior to receipt of an executed purchase contract, a deposit from the customer and preliminary mortgage approval based on the purchaser's mortgage application. For single-family attached homes, construction does not generally commence until 50% of the units in a building have been sold. REGULATION The Company and its subcontractors must comply with various federal, state and local zoning, building, pollution, environmental, advertising and consumer credit statutes, rules and regulations, as well as other activities, including regulations relating to specific building materials to be used, building design and minimum elevations of properties. All of these regulations have increased the time and cost required to market the Company's products by extending the time between the initial acquisition of land and the commencement of construction. The Company's operations, like those of other home builders, have been periodically subject to moratoriums on development activities caused by insufficient water, sewage and energy-related facilities. Moratoriums in local areas have not had a material adverse effect on its overall activities because of the geographic diversification of the Company's operations. COMPETITION The single-family residential housing industry is highly competitive. U.S. Home competes in each of its markets, with respect to the location, design and price of its products, with numerous firms engaged in the on-site development of single-family residential housing, ranging from regional and national firms to small local companies. The Company is one of the largest on-site builders of single-family homes in the United States, ranking among the ten largest single-family on-site home builders in the United States for each of the last 20 years. However, because there are so many firms engaged in the single-family home building industry, the Company accounts for less than 1% of all new on-site single-family housing sales in the United States. RAW MATERIALS AND SUBCONTRACTORS The Company uses numerous suppliers of raw materials and services in its business and such materials and services have been and continue to be available. Where appropriate, the Company has adopted national programs for products to maximize price discounts through volume purchases. The Company also utilizes numerous independent subcontractors representing all building trades in connection with the construction of its homes. COMMUNITY DEVELOPMENT A significant portion of the Company's land and lot needs are currently satisfied through rolling lot options, which enable the Company to initially pay a small fraction of total lot cost and then purchase the lots on a scheduled or on an "as needed" basis. For example, during 1994, 56% of the Company's unit deliveries were from lots owned by the Company and 44% were from lots acquired by the exercise of rolling lot options. The Company's policy is that land cannot be purchased or sold without prior approval of the Company's Asset Management Committee. Asset Management Committee approval requires submission of data relating 7 8 to sales forecasts, a timing schedule (e.g., estimated dates on start of land development, housing construction, model opening and sales) and a projection of income and internal rate of return. All development expenditures are reviewed by the respective President of Operations prior to the commencement of development. In addition, the Company's amended and restated by-laws require approval by the Company's Board of Directors of any acquisition of unimproved real property or acreage by the Company in any single transaction or series of related transactions involving an expenditure in excess of $5 million and any other capital expenditures and other commitments by the Company in excess of $5 million per transaction (excluding transactions involving housing). The Presidents of Operations and the Division Presidents are responsible for maintaining continuity of housing sales through awareness of trends in housing demand in each market area. Feasibility studies and market research studies are generally required before approval of the purchase of land. These studies examine the demographics of an area including population trends, income trends, employment trends, housing stock and housing demand. Products are matched to customer profile, determined in part by the market studies and the experience of the local manager in each market. Housing communities are generally built in or near major metropolitan areas and are normally located in growing markets for such areas. At December 31, 1994, the Company's land and finished lot inventories totaled $304.0 million, excluding option deposits. See Note 1 of Notes to Consolidated Financial Statements. Substantially all are zoned for their intended use and serviced by utilities. As of December 31, 1994, the Company had deposits totaling $53.6 million for options to purchase undeveloped land and finished lots for home building operations for a total purchase price on exercise of approximately $327.7 million. The following table sets forth as of December 31, 1994, by market, the cost of certain of the Company's land inventories and the estimated number of lots controlled through direct ownership and under option which are being used or that will be used in the Company's home building operations (dollars in thousands):
ESTIMATED NUMBER OF HOUSING UNITS THAT COULD BE CONSTRUCTED ON LAND CONTROLLED BOOK AS OF DECEMBER 31, 1994 (1) COST ---------------------------- OF LAND UNDER MARKETS OWNED OWNED OPTION TOTAL ---------------------------------------------- --------- ------ ------ ------ Florida....................................... $ 86,413 8,002 4,529 12,531 Mountain -- Colorado.................................... 43,146 3,183 3,946 7,129 Arizona..................................... 11,891 753 2,873 3,626 Nevada...................................... 16,159 494 743 1,237 Northeast/Midwest -- Maryland/Virginia........................... 22,430 568 533 1,101 Minnesota................................... 12,714 604 783 1,387 New Jersey.................................. 26,131 1,726 338 2,064 Indiana..................................... 262 10 134 144 Ohio........................................ 836 22 782 804 California.................................... 23,062 713 2,450 3,163 Texas......................................... 28,537 2,513 394 2,907 --------- ------ ------ ------ $ 271,581 18,588 17,505 36,093 ======== ====== ====== ======
- ------------ (1) Based upon current management estimates, which are subject to change. This table does not include commercial property and other properties which the Company has no current plans to use, with an aggregate cost of $32.4 million (including $13.3 million relating to land under contract for sale and for exchange). In view of the various stages of development of the land owned by the Company as of December 31, 1994 (i.e., finished, under development and development not started), any per lot cost derived by dividing the book cost by the estimated number of units would not be meaningful. 8 9 In 1994, revenues from the sale of developed and undeveloped land by the Company amounted to $16.2 million, as compared to revenues of $8.5 million in 1993 and $6.6 million in 1992. In addition, the Company, in 1993 and 1992, completed several exchanges of land assets with third parties in which the Company received land suitable for development of single-family detached homes, which could be more readily developed and sold, in return for land zoned primarily for commercial use and single-family attached homes which the Company had no near-term plans to utilize. REORGANIZATION The Company and certain of its affiliates commenced proceedings (the "Cases") under Chapter 11 of title 11 of the United States Code on April 15, 1991 (the "Filing Date"), in order to restructure their indebtedness and other liabilities. On May 25, 1993, the United States Bankruptcy Court for the Southern District of New York (the "Bankruptcy Court") entered an order confirming the first amended consolidated plan of reorganization of the Company and certain of its affiliates (as modified, the "Plan"). Such order became final on June 5, 1993, and the Plan became effective on June 21, 1993 (the "Effective Date"). On the Effective Date, the Company also completed a public offering of $200 million principal amount of 9.75% senior notes due 2003, the net proceeds from which were utilized to pay a portion of the claims of certain unsecured creditors of the Company under the Plan and to repay outstanding amounts under the Company's debtor-in-possession financing facility. The Plan effected a recapitalization of the Company and did not result in a reduction in the scope or other major restructuring of the Company's operations. During the pendency of the Cases, the Company continued its home building operations in the ordinary course in its housing markets and improved its market share in a majority of such markets. The Company was able to retain its senior management and believes that it maintained customer, subcontractor and supplier goodwill and the confidence of its employees. As part of the Plan, creditors received 4,873,650 shares of common stock, $.01 par value per share, and 2,816,762 shares of convertible redeemable preferred stock, $.10 par value per share, and the pre-Effective Date stockholders received 3,510,818 shares of common stock and Class B warrants to acquire common stock (exercisable at $20 per share), which, if fully exercised, would result in an additional 1,904,757 shares of common stock (a total of 5,415,575 shares). As of December 31, 1994, 2,297,867 shares of convertible redeemable preferred stock had been converted into an equal number of shares of common stock and 3,321 Class B warrants had been exercised. See Notes 5 and 6 of Notes to Consolidated Financial Statements. FINANCIAL SERVICES OPERATIONS The Company's second industry segment consists primarily of its mortgage banking activities. U.S. Home Mortgage Corporation ("Mortgage"), a wholly-owned subsidiary of the Company, commenced operations in 1971 and serves an important role in the Company's sale of its homes by arranging financing for customers. Mortgage is a Federal National Mortgage Association/Government National Mortgage Association/ Federal Home Loan Mortgage Corporation approved seller-servicer, headquartered in Clearwater, Florida with branch offices in the metropolitan areas of Phoenix and Tucson, Arizona; Sacramento, California; Denver, Colorado; Washington, D.C.; Clearwater, Fort Myers and Orlando, Florida; Minneapolis, Minnesota; Las Vegas, Nevada; and Dallas, Texas. The Company offers a wide variety of conventional, FHA and VA financing programs through Mortgage, thereby providing prospective buyers the benefits of both conventional and government assisted loan programs. As a mortgage banker, Mortgage originates and funds mortgage loans and sells the loans and the related servicing rights directly to investors. Loans and servicing rights are generally sold by Mortgage and funded by the investors within 30 days after home delivery. To limit its risk of interest rate fluctuations, Mortgage regularly enters into fixed price mandatory forward delivery contracts to sell mortgage-backed securities to securities dealers or fixed price forward delivery commitments to sell specific whole loans to investors on a mandatory or best efforts basis. Mortgage has a secured revolving line of credit to fund the mortgage loans on an interim basis until purchased by investors. 9 10 The following table summarizes certain mortgage banking operating information (dollars in thousands):
YEARS ENDED DECEMBER 31, ------------------------------ 1994 1993 1992 -------- -------- -------- Residential mortgage loans Number of loans originated........................... 2,987 3,050 2,502 Average amount of loan originated.................... $ 122 $ 114 $ 114 Total amount of loans originated: Funded by Mortgage................................ $308,000 $317,000 $250,000 Brokered by Mortgage.............................. 58,000 30,000 35,000 -------- -------- -------- Total................................................ $366,000 $347,000 $285,000 ======== ======== ======== Company's homes delivered financed by Mortgage as a percentage of Company's homes delivered which were financed............................................. 50% 51% 47% Company's homes delivered financed by Mortgage as a percentage of Mortgage's total originations.......... 92% 83% 82%
While the Company continues to focus its attention primarily upon the expansion of Mortgage's operations within the Company's own customer base, Mortgage also offers its services to realtors, unaffiliated builders and refinance customers. Among the factors affecting Mortgage's operations are general economic conditions, federal, state and local regulatory constraints, consumer confidence and interest rate volatility. These factors, together with the number of homes delivered by the Company, affect the volume of loan originations which in turn impact the resulting volume of mortgage loans and mortgage servicing rights available for sale. ADDITIONAL INFORMATION FINANCING OF HOUSING OPERATIONS The Company finances its housing operations through internally generated funds, unsecured public debt and a $95 million secured working capital credit facility and certain other secured acquisition and development financing facilities. See Notes 2 and 3 of Notes to Consolidated Financial Statements. FINANCING OF FINANCIAL SERVICES OPERATIONS The Company finances its financial services operations primarily through internally generated funds (i.e., origination and sale of residential mortgage loans and related servicing rights) and short-term debt. The short-term debt consists of a $25 million secured revolving line of credit. See Note 2 of Notes to Consolidated Financial Statements. This debt is not guaranteed by the Company nor does the Company have any obligation to provide funding to its financial services operations. EMPLOYEES At December 31, 1994, the Company had 1,353 employees, of whom 1,220 were employed in home building operations and 133 were employed in financial services operations. None of the Company's employees are represented by a union. The Company considers its relations with its employees to be good. The Company's single-family housing and community development operations are conducted primarily through independent subcontractors, thereby limiting the number of direct employees required. ITEM 2. PROPERTIES The Company leases its executive offices, located at 1800 West Loop South, Houston, Texas 77027, pursuant to a lease scheduled to expire on February 28, 1999. The Company does not believe that its executive 10 11 offices or its other facilities, consisting of sales and administrative offices located in or near each of the Company's areas of operations and generally held under leases with terms not exceeding five years, are material to its operations. ITEM 3. LEGAL PROCEEDINGS The Company is involved in litigation arising from the normal course of business, none of which, in the opinion of the Company, will have a material adverse effect on the financial position or results of operations of the Company. ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS None. EXECUTIVE OFFICERS OF THE COMPANY The Company's executive officers during 1994 and their respective ages and positions are set forth below:
NAME AGE POSITION AND OFFICE ---- --- ------------------- Robert J. Strudler....... 52 Chairman and Chief Executive Officer Isaac Heimbinder......... 51 President and Chief Operating Officer Gary L. Frueh............ 54 Vice President -- Tax and Audit Craig M. Johnson......... 41 Vice President -- Community Development Thomas A. Napoli......... 53 Vice President -- Finance and Chief Financial Officer Chester P. Sadowski...... 48 Vice President -- Controller and Chief Accounting Officer Richard G. Slaughter..... 50 Vice President -- Planning and Secretary Kelly F. Somoza.......... 41 Vice President
No family relationship exists among any of the executive officers of the Company. Each of the foregoing officers has been elected to serve in the office indicated until the first meeting of the Board of Directors following the next annual meeting of stockholders of U.S. Home and until his or her successor is elected and qualified. Mr. Strudler has served as Chairman and Chief Executive Officer of the Company since May 12, 1986. Mr. Heimbinder has served as President and Chief Operating Officer of the Company since May 12, 1986. Mr. Frueh has been Vice President -- Tax and Audit since February 5, 1992; prior thereto, he had been Vice President, Tax, since December 18, 1986. Mr. Johnson was elected Vice President -- Community Development on June 11, 1992; prior thereto, he had been Executive Vice President, Community Development since October 14, 1988. Mr. Napoli has served as Vice President -- Finance and Chief Financial Officer since April 21, 1989. Mr. Sadowski has served as Vice President -- Controller and Chief Accounting Officer since December 17, 1987. Mr. Slaughter was elected Vice President -- Planning on December 18, 1986; prior thereto, he had been Secretary since June 26, 1986. Ms. Somoza was elected Vice President on June 11, 1992; prior thereto, she had been Director, Investor Relations since December 31, 1981. Ms. Somoza is responsible for the Company's public and investor relations, and is the administrator of the Company's profit sharing and employees' savings programs. 11 12 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS As of February 10, 1995, there were 7,115 holders of record of the Company's common stock, $.01 par value per share. The principal market on which the common stock is traded is the New York Stock Exchange. The following tables set forth the high and low sale prices of the Company's common stock, $.10 par value per share, outstanding prior to the effectiveness of the Plan and the common stock (issued pursuant to the Plan) for the periods indicated as reported on the New York Stock Exchange Composite Tape. The Company believes that the stock price information through June 21, 1993 is of limited use and relevance in the view of the significant changes in ownership of the Company's capital stock and the Company's capital structure which occurred under the Plan. NEW COMMON STOCK
1994 HIGH LOW ---- ------ ------ First Quarter.................................................... $29.38 $20.75 Second Quarter................................................... 22.25 14.00 Third Quarter.................................................... 18.50 14.63 Fourth Quarter................................................... 16.38 14.38 1993 ---- Second Quarter subsequent to June 21, 1993....................... $22.13 $19.00 Third Quarter.................................................... 26.38 19.38 Fourth Quarter................................................... 29.00 24.88 OLD COMMON STOCK 1993 ---- First Quarter.................................................... 1.50 .69 Second Quarter through June 21, 1993............................. 2.38 1.00
Immediately prior to the Effective Date, the Company had 45,312,526 shares of common stock, $.10 par value per share, outstanding. Pursuant to the Plan, all pre-Effective Date capital stock was canceled and common stock, $.01 par value per share, and other securities were issued. No dividends were paid by the Company during 1994 or 1993. The Company's working capital facility (the most restrictive of the Company's borrowing agreements) prohibits the Company from paying dividends on its capital stock. The senior note indenture and the Company's second restated certificate of incorporation also contain restrictions on the payment of dividends. 12 13 ITEM 6. SELECTED FINANCIAL DATA U.S. HOME CORPORATION AND SUBSIDIARIES CONSOLIDATED SUMMARY OF SELECTED FINANCIAL DATA FOR THE FIVE YEARS ENDED DECEMBER 31, 1994 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
YEARS ENDED DECEMBER 31, ---------------------------------------------------------- 1994 1993 1992 1991 1990 -------- -------- -------- -------- --------- OPERATING REVENUES.................... $995,311 $812,077 $689,900 $495,117 $ 633,178 OPERATING INCOME (LOSS)............... 52,526 44,640 29,349 (4,832) (87,870) REORGANIZATION ITEMS.................. -- 6,915 50,703 3,978 -- INCOME TAXES.......................... 19,697 (33,966) -- -- -- -------- -------- -------- -------- --------- INCOME (LOSS) BEFORE DISCONTINUED OPERATIONS AND EXTRAORDINARY ITEM... 32,829 71,691 (21,354) (8,810) (87,870) LOSS FROM DISCONTINUED OPERATIONS..... -- -- -- -- (15,654) EXTRAORDINARY ITEM.................... -- -- -- -- 1,880 -------- -------- -------- -------- --------- NET INCOME (LOSS)..................... $ 32,829 $ 71,691 $(21,354) $ (8,810) $(101,644) ======== ======== ======== ======== ========= INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE (1): PRIMARY -- Income (loss) before discontinued operations and extraordinary item............................. $ 2.89 $ 6.16(2) $ (1.89) $ (.78) $ (7.79) Loss from discontinued operations... $ -- $ -- $ -- $ -- $ (1.39) Extraordinary item.................. $ -- $ -- $ -- $ -- $ .17 Net income (loss)................... $ 2.89 $ 6.16(2) $ (1.89) $ (.78) $ (9.01) FULLY DILUTED -- Income (loss) before discontinued operations and extraordinary item............................. $ 2.50 $ 5.93(2) $ (1.89) $ (.78) $ (7.79) Loss from discontinued operations... $ -- $ -- $ -- $ -- $ (1.39) Extraordinary item.................. $ -- $ -- $ -- $ -- $ .17 Net income (loss)................... $ 2.50 $ 5.93(2) $ (1.89) $ (.78) $ (9.01) DIVIDENDS PER COMMON SHARE............................... $ -- $ -- $ -- $ -- $ -- TOTAL ASSETS.......................... $747,951 $678,846 $543,471 $609,804 $ 620,609 ======== ======== ======== ======== ========= TOTAL SHORT-TERM DEBT (3)............. $ 18,656 $ 20,566 $193,572 $206,226 $ 231,998 ======== ======== ======== ======== ========= TOTAL LONG-TERM DEBT (3).............. $304,272 $313,039 $156,413 $199,825 $ 208,488 ======== ======== ======== ======== =========
- --------------- (1) Income (loss) per common and common equivalent share has been computed using the weighted average number of common and common equivalent shares outstanding, assuming the new capital structure had been effective as of the beginning of all periods presented. This differs from historical primary and fully diluted income (loss) per common and common equivalent share previously reported (based on the Company's former capital structure) for the years ended December 31, 1992, 1991, and 1990 of $(.47), $(.20), and $(2.27), respectively. The Company believes that earnings per common share information for 1992, 1991, and 1990 is of limited use and relevance in view of the significant changes in ownership of the Company's capital stock and the Company's capital structure which occurred in 1993 under the Plan. (Notes continued on following page) 13 14 (2) Primary and fully diluted income per share in 1993 were $2.29 per share and $2.21 per share, respectively, excluding $3.87 primary income per share and $3.72 fully diluted income per share, respectively, due to the decrease in the deferred tax asset valuation allowance. See Note 4 of Notes to Consolidated Financial Statements. (3) Includes unsecured debt of $266,635,000 at December 31, 1992 which was exchanged for a combination of cash and equity securities, and secured debt of $5,213,000 at December 31, 1992 which was either reinstated or the property securing the debt was deeded to the lenders in full satisfaction of the debt. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The historical financial statements for the years ended December 31, 1993 and 1992 include certain expenses and write-offs related to the Cases and the Plan and do not include certain interest charges on the Company's unsecured debt which was stayed during the pendency of the Cases. HOUSING The following table sets forth certain financial information for the Company's housing segment for the periods indicated (dollars in thousands, except average sales price):
YEARS ENDED DECEMBER 31, ---------------------------------- 1994 1993 1992 -------- -------- -------- Revenues -- Single-family homes.............................. $964,751 $789,474 $669,693 Land and other................................... 17,627 9,476 9,522 -------- -------- -------- Total.................................... $982,378 $798,950 $679,215 ======== ======== ======== Single-family homes -- Gross margin amount.............................. $156,982 $127,901 $108,851 Gross margin percentage.......................... 16.3% 16.2% 16.3% Units delivered.................................. 6,387 5,586 4,940 Average sales price.............................. $151,000 $141,300 $135,600 New orders taken................................. 6,234 6,418 5,189 Backlog at end of year........................... 2,551 2,704 1,845 Selling, general and administrative expenses as a percentage of housing revenues................... 11.0% 11.0% 12.0% Interest expense -- Paid or accrued.................................. $ 30,820 $ 22,105 $ 14,462 Capitalized...................................... $ 30,820 $ 21,920 $ 13,210 Percentage capitalized........................... 100% 99.2% 91.3% Capitalized interest included in cost of sales..... $ 28,871 $ 22,342 $ 23,338
REVENUES AND GROSS MARGIN Revenues from sales of single-family homes for 1994 increased 22% from 1993. The increase resulted from a 14% increase in the number of housing units delivered and a 7% increase in the average sales price. Revenues from sales of single-family homes for 1993 increased 18% from 1992, resulting primarily from a 13% increase in the number of housing units delivered and a 4% increase in the average sales price. The increase in units delivered in 1994 was primarily attributable to an improved backlog level at December 31, 1993 when compared to the backlog level at December 31, 1992. The increase in units delivered in 1993 was primarily attributed to a continuation of generally improved industry conditions, as well as increases in the Company's market share in many of its housing markets. The increases in the average sales prices in 1994 and 1993 were primarily due to price increases. 14 15 The gross margin percentage was essentially unchanged over the three year period as the Company was able to increase sales prices in the three year period to offset cost increases. New orders taken in 1994 decreased 3% from 1993. The decline in new orders in 1994 occurred in the second half of the year and was attributable to the increases in mortgage interest rates caused by Federal Reserve actions in the last three quarters of 1994. New orders taken in 1993 increased 24% from 1992 attributable primarily to a continuation of generally improved industry conditions. If mortgage interest rates in 1995 continue at the present level or increase, new orders in 1995 from the Company's current communities may be less than new orders in 1994. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES As a percentage of housing revenues, selling, general and administrative expenses were 11% in both 1994 and 1993 as compared to 12% in 1992. Actual selling, general and administrative expense for 1994 increased $19.5 million compared to 1993. This increase was attributable to increases in volume-related expenses ($6.5 million) resulting from the increase in deliveries in 1994 when compared to 1993 and increases in other selling, general and administrative expenses resulting from increased activities and earnings. Similarly, selling, general and administrative expenses increased by $6.7 million in 1993 compared to 1992, due to increases in volume-related expenses ($4.4 million) resulting from increases in deliveries in 1993 when compared to 1992 and increases in other selling, general and administrative expenses resulting from increased activities and earnings. INTEREST EXPENSE Interest paid and accrued for 1994 increased approximately 39% compared to 1993 and increased approximately 53% in 1993 compared to 1992. The increase in 1994 over 1993 was primarily due to interest on a majority of the Company's debt in the first six months of 1993 being stayed during the pendency of the Cases, while the increase in 1993 over 1992 was primarily due to the sale of the 9.75% senior notes in June 1993 and the 4.875% convertible subordinated debentures in November 1993. The increase in the percentage of interest capitalized for 1993 over 1992 was primarily due to an increase in the amount of assets qualifying for interest capitalization. REORGANIZATION ITEMS, NET Reorganization items in 1993 and 1992 represent expenses (primarily professional and other fees) incurred by the Company resulting from the Cases and are specific to the reorganization process. Pursuant to the Plan, the Company issued 140,000 shares of common stock on June 21, 1993 to corporate officers and certain other key employees for services rendered in connection with the reorganization of the Company. The Company has reflected the issuance as an increase in stockholders' equity and an offsetting charge to earnings of $2.9 million based upon the market price of the common stock on June 21, 1993. In connection with implementing the Plan, the Company recorded a $42.4 million provision in the fourth quarter of 1992 to reflect the impact of the Plan on land utilization and its estimated net realizable value which amount has been included in "Reorganization Items" in the Consolidated Statements of Operations. 15 16 FINANCIAL SERVICES REVENUES Revenues for the financial services segment for the periods indicated were as follows (dollars in thousands):
YEARS ENDED DECEMBER 31, -------------------------------- 1994 1993 1992 -------- -------- -------- U.S. Home Mortgage Corporation and Subsidiaries....... $ 9,885 $10,303 $ 7,828 Other financial services subsidiaries................. 3,048 2,824 2,857 ------- ------- ------- $12,933 $13,127 $10,685 ======= ======= =======
Mortgage provides financing primarily to purchasers of homes sold by the Company's housing operations through origination of residential mortgage loans and engages in the sale of such mortgages and related servicing rights to unaffiliated investors. Mortgage's operations are affected, among other things, by general economic conditions, consumer confidence and interest rate volatility. These factors, together with the number of homes delivered by the Company, affect the volume of loan originations which in turn impact the resulting volume of mortgages and servicing rights for sale. The decrease in Mortgage's revenues for 1994 from 1993 was primarily due to decreased marketing income as a result of increased pricing competition and volatility in the secondary mortgage markets. The increase in Mortgage's revenues for 1993 from 1992 was primarily due to an increase in the number of residential mortgage loan originations. This increase was primarily due to an increase in the number of Company homes deliveries financed by Mortgage. GENERAL AND ADMINISTRATIVE EXPENSE General and administrative expenses in 1994 increased $1.9 million from 1993 which had increased $.5 million from 1992. The increase in 1994 was due in part to nonrecurring transactions which reduced general and administrative expenses in 1993 by approximately $1.0 million. The balance of the increase in 1994 was primarily due to Mortgage opening additional branch and satellite offices in the last half of 1993 and early 1994. The increase in 1993, which was offset in part by the nonrecurring transactions referred to above, was due to the opening of additional Mortgage offices in the last half of 1993 and an increase in Mortgage's staffing as a result of increased volume of activities. INTEREST EXPENSE Interest expense in 1994 decreased approximately 58% from 1993 which was approximately the same as 1992. The decrease in 1994 was due to a decrease in the average short-term borrowings. FINANCIAL CONDITION AND LIQUIDITY HOUSING The Company's most significant needs for capital resources are land and finished lot purchases, land development and housing construction. The Company's ability to generate cash adequate to meet these needs is principally achieved from the sale of homes and the margins thereon, the utilization of Company-owned lots and periodic borrowings under its financing facilities. The Company expects, on a long-term basis, that operations will generate cash to meet substantially all of its housing cash flow needs and that a financing facility, such as the $95 million secured revolving working capital facility (the "Working Capital Facility") with General Electric Capital Corporation ("GECC"), would be utilized to meet peak operating needs. The Company does not anticipate that the borrowing base requirements of the Working Capital Facility will restrict the Company's ability to borrow under such Facility. See Note 2 of Notes to Consolidated Financial Statements. The Company employs various operational guidelines to reduce initial cash requirements with respect to investments in land, thereby increasing its financial flexibility and reducing its risk by limiting the amount invested in land owned directly by the Company. The Company intends to continue, where possible, 16 17 to use Company-owned lots in inventory to generate additional cash flow and to continue to emphasize land acquisitions using rolling lot options, which enable the Company to initially pay a small fraction of total lot cost and then purchase the lots for a fixed price on a scheduled or "as needed" basis. The Company believes that these steps result in reduced carrying costs and limited exposure to market changes and direct land investments. The increase in the land inventories in 1994 from 1993 was primarily the result of increased activities, including expansion of the retirement and active-adult/second home communities which will continue into 1995. The net cash provided or used by the operating, investing and financing activities of the housing operations for the years ended December 31, 1994, 1993 and 1992 is summarized below (dollars in thousands):
YEARS ENDED DECEMBER 31, ---------------------------------- 1994 1993 1992 -------- -------- -------- Net cash provided (used by): Operating activities............................. $(17,887) $(61,613) $ 46,951 Investing activities............................. (1,676) 1,520 973 Financing activities............................. (3,445) 70,262 (48,759) -------- -------- -------- Net increase (decrease) in cash.................... $(23,008) $ 10,169 $ (835) ======== ======== ========
Housing operations are, at any time, affected by a number of factors, including the number of housing units under construction and housing units delivered. Housing operating activities used less cash in 1994 than in 1993 primarily due to an increase in the number of housing units delivered offset in part by an increase in construction and land asset activities. Housing operating activities used cash during 1993 compared to providing cash in 1992 primarily due to an increase in the number of housing units under construction, land and finished lot option deposit payments and reorganization expense payments, offset in part by an increase in the number of housing units delivered. Cash flow from housing financing activities for 1994 was used for the repayment of notes and mortgages payable, offset by net borrowings under the Working Capital Facility. Cash flow from housing financing activities for 1993 was provided by the net proceeds from the sale of the Company's 9.75% senior notes and 4.875% convertible subordinated debentures, offset by the payment of reorganization debt and liabilities and the repayment of the postpetition credit facility with GECC. Cash flow from housing financing activities for 1992 was used for the repayment of reorganization secured debt and certain outstanding amounts under the postpetition credit facility with GECC. The Company anticipates that cash flow from operations and amounts available under the Working Capital Facility will be sufficient to meet its working capital obligations. FINANCIAL SERVICES Mortgage's activities represent a substantial portion of the financial services segment's activities. As loan originations by Mortgage are primarily from homes sold by the Company's home building operations, Mortgage's financial condition and liquidity are to a significant extent dependent upon the financial condition of the Company. The Company finances its financial services operations primarily from internally generated funds, such as the origination and sale of residential mortgage loans and related servicing rights, and short-term debt. As more fully discussed in Note 2 of Notes to Consolidated Financial Statements, the short-term debt consists of a $25 million secured revolving line of credit entered into by Mortgage in April 1992, as amended (the "Mortgage Credit Facility"). At December 31, 1994, $10.0 million was outstanding under the Mortgage Credit Facility. The Company has no obligation to provide funding to its financial services operations, nor does it guarantee any of its financial services subsidiaries' debt. The Company believes that internally generated funds and the Mortgage Credit Facility will be sufficient to provide for Mortgage's working capital needs. 17 18 The Mortgage Credit Facility bears interest at the greater of a premium over the London Interbank Offered Rate or a premium over a composite rate for dealer-placed 30-day commercial paper and matures on August 31, 1995. Certain residential mortgage loans have been pledged as collateral to secure Mortgage's obligations under the Mortgage Credit Facility. While the Mortgage Credit Facility contains numerous covenants, including a debt to tangible net worth ratio and a minimum tangible net worth requirement, these covenants are not anticipated to significantly limit Mortgage's operations. OTHER Impact of Inflation Inflation not only affects interest rates on funds borrowed by the Company, but also affects the affordability of permanent mortgage financing available to prospective customers. Increased construction costs associated with rising interest rates, as well as increased material costs, compress gross margins in the short-term, but may be recovered in the long-term through increases in sales prices, although such increases may reduce sales volume. In recent years, inflation has not had a significant adverse effect on the Company. 18 19 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA U.S. HOME CORPORATION AND SUBSIDIARIES INDEX TO FINANCIAL STATEMENTS
PAGE ---- Financial Statements: Report of Independent Public Accountants............................................ 20 Consolidated Balance Sheets -- December 31, 1994 and 1993........................... 21 Consolidated Statements of Operations -- For the Years Ended December 31, 1994, 1993 and 1992.................................................................... 22 Consolidated Statements of Cash Flows -- For the Years Ended December 31, 1994, 1993 and 1992.................................................................... 23 Consolidated Statements of Stockholders' Equity -- For the Years Ended December 31, 1994, 1993 and 1992.............................................................. 24 Notes to Consolidated Financial Statements.......................................... 25
19 20 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors of U.S. Home Corporation: We have audited the accompanying consolidated balance sheets of U.S. Home Corporation (a Delaware corporation) and subsidiaries as of December 31, 1994 and 1993, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1994. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of U.S. Home Corporation and subsidiaries as of December 31, 1994 and 1993, and the results of their operations and cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. /s/ ARTHUR ANDERSEN LLP -------------------------------------- ARTHUR ANDERSEN LLP Houston, Texas February 8, 1995 20 21 U.S. HOME CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1994 AND 1993 (DOLLARS IN THOUSANDS)
1994 1993 -------- -------- ASSETS HOUSING: Cash (including restricted funds of $614 and $698)............................. $ 1,148 $ 15,192 Receivables, net............................................................... 22,219 14,027 Single-family housing inventories.............................................. 576,779 491,620 Option deposits on real estate................................................. 53,621 34,618 Deferred tax asset............................................................. 13,727 33,527 Other assets................................................................... 41,869 33,019 -------- -------- 709,363 622,003 -------- -------- FINANCIAL SERVICES: Cash (including restricted funds of $4,051 and $4,403)......................... 5,567 5,738 Residential mortgage loans..................................................... 24,672 38,412 Other assets................................................................... 8,349 12,693 -------- -------- 38,588 56,843 -------- -------- $747,951 $678,846 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY HOUSING: Current Liabilities -- Short-term debt.............................................................. $ 8,642 $ -- Current maturities of long-term debt......................................... 10,572 8,093 Accounts payable............................................................. 85,581 47,997 Accrued expenses and other current liabilities............................... 40,497 30,701 -------- -------- 145,292 86,791 Long-Term Debt................................................................. 292,666 303,844 -------- -------- 437,958 390,635 -------- -------- FINANCIAL SERVICES: Current Liabilities -- Short-term debt.............................................................. 10,014 20,566 Accrued expenses and other current liabilities............................... 7,481 9,504 -------- -------- 17,495 30,070 Long-Term Debt................................................................. 1,034 1,102 -------- -------- 18,529 31,172 -------- -------- Total Liabilities....................................................... 456,487 421,807 -------- -------- STOCKHOLDERS' EQUITY: Convertible Preferred Stock, $25 per share redemption value, 518,772 and 1,954,730 shares outstanding at December 31, 1994 and 1993................... 12,969 48,868 Common Stock, 10,909,860 and 9,389,116 shares outstanding at December 31, 1994 and 1993..................................................................... 109 94 Capital in Excess of Par Value................................................. 340,673 303,193 Retained Earnings (Deficit).................................................... (62,287) (95,116) -------- -------- Total Stockholders' Equity.............................................. 291,464 257,039 -------- -------- $747,951 $678,846 ======== ========
The accompanying notes are an integral part of these balance sheets. 21 22 U.S. HOME CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1994 1993 1992 -------- -------- -------- HOUSING: Operating Revenues....................................... $982,378 $798,950 $679,215 -------- -------- -------- Operating Costs and Expenses -- Cost of products sold................................. 823,597 668,706 567,970 Selling, general and administrative................... 107,736 88,229 81,575 Interest, net......................................... -- 185 1,252 -------- -------- -------- 931,333 757,120 650,797 -------- -------- -------- Housing Operating Income................................. 51,045 41,830 28,418 -------- -------- -------- FINANCIAL SERVICES: Operating Revenues....................................... 12,933 13,127 10,685 -------- -------- -------- Operating Costs and Expenses -- General and administrative............................ 10,915 9,049 8,523 Interest.............................................. 537 1,268 1,231 -------- -------- -------- 11,452 10,317 9,754 -------- -------- -------- Financial Services Operating Income...................... 1,481 2,810 931 -------- -------- -------- INCOME BEFORE REORGANIZATION ITEMS AND INCOME TAXES........ 52,526 44,640 29,349 -------- -------- -------- REORGANIZATION ITEMS: Impact of Plan on Land Utilization, net.................. -- -- 42,368 Other.................................................... -- 6,915 8,335 -------- -------- -------- -- 6,915 50,703 -------- -------- -------- INCOME (LOSS) BEFORE INCOME TAXES.......................... 52,526 37,725 (21,354) -------- -------- -------- PROVISION FOR INCOME TAXES -- Federal and State Income Taxes........................... 19,697 11,034 -- Decrease in Deferred Tax Asset Valuation Allowance....... -- (45,000) -- -------- -------- -------- 19,697 (33,966) -- -------- -------- -------- NET INCOME (LOSS).......................................... $ 32,829 $ 71,691 $(21,354) ======== ======== ======== INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE: Primary.................................................. $ 2.89 $ 6.16 $ (1.89) ======== ======== ======== Fully Diluted............................................ $ 2.50 $ 5.93 $ (1.89) ======== ======== ========
The accompanying notes are an integral part of these statements. 22 23 U.S. HOME CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992 (DOLLARS IN THOUSANDS)
1994 1993 1992 --------- --------- -------- Cash Flows From Operating Activities: Net income (loss)...................................... $ 32,829 $ 71,691 $(21,354) Adjustments to reconcile net income (loss) to net cash provided by operating activities -- Decrease in deferred tax asset.................... 22,125 9,148 -- Decrease in deferred tax asset valuation allowance...................................... -- (45,000) -- Noncash reorganization items...................... -- 2,940 42,368 Other, net (principally depreciation and amortization).................................. 4,578 9,060 11,519 Changes in assets and liabilities -- Decrease (increase) in receivables, inventories and other assets............................... (107,200) (98,926) (944) Increase (decrease) in accounts payable and accrued liabilities............................ 48,662 (20,456) 12,105 --------- --------- -------- Net cash provided (used) by operating activities....... 994 (71,543) 43,694 --------- --------- -------- Cash Flows From Investing Activities: Decrease in restricted cash............................ 436 4,098 2,347 Purchase of property, plant and equipment, net of disposals........................................... (2,034) (2,273) (349) Proceeds from investments in mortgages................. 868 1,015 4,810 Other.................................................. 22 (353) 281 --------- --------- -------- Net cash provided (used) by investing activities....... (708) 2,487 7,089 --------- --------- -------- Cash Flows From Financing Activities: Repayment of short-term debt, net of proceeds.......... (2,410) (12,095) (11,755) Net proceeds from sale of senior notes and convertible subordinated debentures............................. -- 271,800 -- Long-term debt assumed................................. 1,037 -- -- Repayment of long-term debt............................ (12,692) (17,022) (31,340) Payment of liabilities subject to compromise........... -- (166,020) -- --------- --------- -------- Net cash provided (used) by financing activities....... (14,065) 76,663 (43,095) --------- --------- -------- Net Increase (Decrease) In Cash.......................... (13,779) 7,607 7,688 Cash At Beginning Of Year................................ 15,829 8,222 534 --------- --------- -------- Cash At End Of Year...................................... $ 2,050 $ 15,829 $ 8,222 ========= ========= ======== Supplemental Disclosure: Interest paid, before amount capitalized -- Housing............................................. $ 30,559 $ 30,384 $ 19,070 Financial Services.................................. 572 1,302 1,260 --------- --------- -------- $ 31,131 $ 31,686 $ 20,330 ========= ========= ========
The accompanying notes are an integral part of these statements. 23 24 U.S. HOME CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992 (DOLLARS IN THOUSANDS)
COMMON STOCK CONVERTIBLE CAPITAL IN RETAINED --------------------- PREFERRED EXCESS OF EARNINGS $.10 PAR $.01 PAR STOCK PAR VALUE (DEFICIT) -------- -------- ----------- ---------- --------- BALANCE AT DECEMBER 31, 1991.......... $ 4,531 $ -- $ -- $ 216,322 $(145,453) Net loss for the year................. -- -- -- -- (21,354) -------- -------- ----------- ---------- --------- BALANCE AT DECEMBER 31, 1992.......... 4,531 -- -- 216,322 (166,807) Common and convertible redeemable preferred stock issued in connection with the Plan (8,524,468 shares and 2,816,762 shares, respectively)..... (4,531) 85 70,419 65,277 -- Conversion of convertible redeemable preferred stock to common stock (862,032 shares).................... -- 9 (21,551) 21,542 -- Other................................. -- -- -- 52 -- Net income for the year............... -- -- -- -- 71,691 -------- -------- ----------- ---------- --------- BALANCE AT DECEMBER 31, 1993.......... -- 94 48,868 303,193 (95,116) Conversion of convertible redeemable preferred stock to common stock (1,435,835 shares).................. -- 14 (35,896) 35,882 -- Issuance of common stock under incentive bonus program (29,046 shares)............................. -- -- -- 740 -- Contribution of common stock issued to profit sharing plan (55,000 shares)............................. -- 1 -- 847 -- Other................................. -- -- (3) 11 -- Net income for the year............... -- -- -- -- 32,829 -------- -------- ----------- ---------- --------- BALANCE AT DECEMBER 31, 1994.......... $ -- $109 $ 12,969 $ 340,673 $ (62,287) ======= ====== ======== ======== =========
The accompanying notes are an integral part of these statements. 24 25 U.S. HOME CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) SIGNIFICANT ACCOUNTING POLICIES GENERAL Nature of Operations The Company is one of the largest single-family home builders in the United States based on homes delivered. The Company currently builds and sells homes in more than 190 new home communities in 31 metropolitan areas in 12 states. The Company offers a wide variety of moderately-priced homes that are designed to appeal to the affordable, move-up and retirement and active-adult/second home buyers. In addition to building and selling single-family homes, the Company provides mortgage banking services to its customers. The Company originates, processes and sells mortgages to third-party investors. The Company does not retain or service the mortgages that it originates but, rather, sells the mortgages and related servicing rights to investors. Principles of Consolidation and Basis of Presentation The accompanying consolidated financial statements include the accounts of the Company and all wholly-owned subsidiaries after elimination of all significant intercompany balances and transactions. The financial statements for 1993 and 1992 have been conformed to the format used in 1994. The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of any contingent assets and liabilities at the date of the consolidated financial statements and revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company is engaged in two related industry segments, the on-site development of single-family residential communities and financial services. Identifiable assets and the results of operations of the Company's segments are reported in the consolidated balance sheets and consolidated statements of operations. Capital expenditures, depreciation and amortization expense for the years ended December 31, 1994, 1993 and 1992 were insignificant. Income (Loss) Per Share Primary income (loss) per common and common equivalent share has been computed using the weighted average number of common and common equivalent shares outstanding, assuming the new capital structure (see Note 6) had been effective as of the beginning of all periods presented. This differs from historical loss per common and common equivalent share for 1992 of $.47, previously reported (based on the Company's former capital structure and 45,312,508 shares of common stock, $.10 par value per share, outstanding at December 31, 1992). In management's opinion, per share information prior to the Company's emergence from Chapter 11 is of limited use or relevance given the significant changes in ownership and the Company's capital structure which occurred as a result of the Company's reorganization pursuant to the Plan (see Note 5). The weighted average number of common and common equivalent shares outstanding for primary income per share include the dilutive effect of the convertible redeemable preferred stock and Class B warrants and the assumed exercise of stock options for periods subsequent to June 21, 1993 (based on the average stock price for the periods). No effect was given to the shares that would be issuable on exercise of the warrants and stock options in 1994, since they would be antidilutive or immaterial. Fully diluted income per share includes the assumed conversion of the convertible subordinated debentures in 1994 and 1993 and the dilutive effect of the Class B warrants and stock options (based on the higher year-end stock price) in 1993. 25 26 U.S. HOME CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following weighted average number of common and common equivalent shares were used to compute income (loss) per share:
1994 1993 1992 ---------- ---------- ---------- Primary........................................ 11,366,810 11,631,071 11,284,885 Fully diluted.................................. 13,620,331 12,110,237 11,284,885
Cash Equivalents The Company considers all short-term investments with an initial maturity of less than 90 days to be cash equivalents. Financial Instruments The Company believes that fair value approximates recorded values for such financial instruments as cash and cash equivalents, trade receivables and payables, short-term debt and option deposits because of the typically liquid, short-term nature, market rate terms and lack of specific concentration of these instruments. The Company's senior notes and convertible subordinated debentures are fixed rate instruments with yields which are currently below the prevailing rates. These instruments trade at a discount; however, the actual amount of the discount or the fair value of the instruments can not be determined as neither of these instruments are actively traded on the open market. The Company does not presently intend to repurchase any of these instruments prior to maturity. In addition, the Working Capital Facility (see Note 2) prohibits the Company from repurchasing any of these instruments. The fair value of the Company's residential mortgage loans approximate their carrying value as such loans are packaged and sold to investors generally within 30 days after home delivery. Additionally, a significant portion of the Company's interest rate risk associated with and generated by these loans is mitigated by the use of forward delivery contracts and commitments. See Hedging Contracts below. HOUSING Sales and Profit Recognition Profit is recognized from the sale of real estate at time of closing, i.e., when sufficient down payment has been made; any financing has been arranged; title, possession and other attributes of ownership have been transferred to the buyer; and the Company is not obligated to perform additional significant activities after the sale. Inventories and Valuation The components of single-family housing inventories are as follows (dollars in thousands):
1994 1993 --------- --------- Housing completed and under construction....................... $ 224,870 $ 193,827 Models......................................................... 47,914 34,366 Finished lots.................................................. 118,508 83,140 Land under development......................................... 60,809 58,824 Raw land held for development or sale.......................... 124,678 121,463 --------- --------- $ 576,779 $ 491,620 ========= =========
The cost of acquiring and developing land and constructing certain applicable amenities are allocated to the related parcels. The Company records land inventories held for sale or investment at the lower of cost or 26 27 U.S. HOME CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) net realizable value. Net realizable value differs from market value in that, among other things, market value assumes a cash sale under current market conditions, considers a potential purchaser's requirement for future profit and discounts the timing of estimated future cash receipts, whereas net realizable value is the price obtainable in the future based on the current intended use of the land, net of disposal and holding costs, without provision for future profits or discounting future cash flow to present value. Housing inventories are recorded using the specific identification method at the lower of cost or net realizable value. Excluding the $42,368,000 provision recorded in the fourth quarter of 1992 (see Note 5), provisions to reduce land and housing inventories to the lower of cost or net realizable value for 1994, 1993 and 1992 were not significant. Total land and housing reserves were $35,417,000, $48,362,000 and $59,777,000 at December 31, 1994, 1993 and 1992, respectively. During 1993 and 1992, the Company completed several exchanges of land assets with third parties totaling approximately $5,697,000 and $22,300,000, respectively, in which the Company received land suitable for single-family detached homes, which can be more readily developed and sold, in return for land zoned primarily for commercial use and single-family attached homes for which the Company had no near-term plans to utilize. The exchanges are treated as non-cash transactions for purposes of the consolidated statements of cash flow. Capitalization Period Interest is capitalized on land, finished building lots and single-family residential housing construction costs during the development and construction period. Interest is capitalized to eligible assets using an allocation method based on the Company's actual interest costs. A summary of interest for 1994, 1993 and 1992 follows:
YEARS ENDED DECEMBER 31, ---------------------------------- 1994 1993 1992 -------- -------- -------- (DOLLARS IN THOUSANDS) Capitalized at beginning of year -- U.S. Home........................................ $ 55,580 $ 57,474 $ 92,898 Joint ventures consolidated...................... -- 1,234 -- -------- -------- -------- 55,580 58,708 92,898 -------- -------- -------- Paid and accrued................................... 30,820 22,105 14,462 Expensed........................................... -- (185) (1,252) -------- -------- -------- Capitalized........................................ 30,820 21,920 13,210 Included in cost of sales.......................... (28,871) (22,342) (23,338) Included in reorganization items, asset write-downs and other........................................ (1,447) (2,706) (25,296) -------- -------- -------- Capitalized at end of year......................... $ 56,082 $ 55,580 $ 57,474 ======== ======== ========
Under Chapter 11 ("Chapter 11") of title 11 of the United States Code, interest on the Company's unsecured debt was stayed, while the Company was in reorganization (April 1991 to June 1993). Had the accrual of interest not been stayed, paid and accrued interest for 1993 and 1992 would have been increased by approximately $12,000,000 and $26,400,000, respectively, and interest expense for 1993 and 1992 would have been increased by approximately $1,300,000 and $5,900,000, respectively. 27 28 U.S. HOME CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) FINANCIAL SERVICES Revenue Recognition The sale of loans and loan servicing rights is recognized when the closed loans are sold and delivered to an investor. During the years ended December 31, 1994, 1993 and 1992, revenues included net gains (losses) from the sale of loans of $(831,000), $(262,000) and $(655,000), respectively, and net gains from the sale of servicing of $4,212,000, $3,829,000 and $3,189,000 respectively. Residential Mortgage Loans Residential mortgage loans held for sale ($16,235,000 at December 31, 1994) are included in the accompanying consolidated balance sheets at the lower of cost or market on an aggregate basis. The Company estimates the fair value of residential mortgage loans held at December 31, 1994 approximated recorded value based on quoted market prices (at December 31, 1994) for similar loans sold either on a whole loan basis or pooled and sold as collateral for mortgage-backed securities. Hedging Contracts The Company manages its interest rate market risk on the inventory loans held for sale and its estimated future commitments to originate and close mortgage loans at fixed prices ("Loan Quotes") through hedging techniques by regularly entering into either fixed price mandatory forward delivery contracts ("Forward Contracts") to sell mortgage-backed securities to security dealers or fixed price forward delivery commitments ("Forward Commitments") to sell specific whole loans to investors on a mandatory or best efforts basis ("Forward Contracts" and "Forward Commitments" collectively "Hedging Contracts"). The Company records the inventory of residential mortgage loans at the lower of cost or market on an aggregate basis after considering any market value changes in the inventory loans, Loan Quotes and Hedging Contracts. See Note 9. (2) SHORT-TERM DEBT Short-term debt consists of the following:
DECEMBER 31, ------------------- 1994 1993 ------- ------- (DOLLARS IN THOUSANDS) Housing -- Revolving working capital facility............................. $ 7,553 $ -- Other short-term debt.......................................... 1,089 -- ------- ------- 8,642 -- Financial Services............................................... 10,014 20,566 ------- ------- Total short-term debt............................................ $18,656 $20,566 ======= =======
The revolving working capital agreement, as amended (the "Working Capital Facility") consists of a $95,000,000 secured financing agreement with General Electric Capital Corporation ("GECC") of which $25,000,000 may be used for letter of credit obligations. The Working Capital Facility bears interest at a premium over the GECC composite commercial paper rate and matures on June 20, 1997. In accordance with the Working Capital Facility, the Company has provided GECC liens on its cash, personal property and certain finished lots and single-family housing units, including models, with a cost of approximately $154,200,000 at December 31, 1994. This collateral has provided the Company with an estimated available borrowing base capacity of $95,000,000 at December 31, 1994, of which $13,687,000 was outstanding, including $6,134,000 of letter of credit obligations. The Working Capital Facility contains 28 29 U.S. HOME CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) numerous real estate and financial covenants, including an inventory-to-backlog ratio and restrictions on the incurring of additional debt, creation of liens and the purchase of land. Financial services short-term debt consists of an agreement with a financial institution which, as amended, provides the Company's mortgage banking subsidiary, U.S. Home Mortgage Corporation ("Mortgage"), with a $25,000,000 secured revolving line of credit (the "Mortgage Credit Facility"). The Mortgage Credit Facility, which is not guaranteed by the Company, matures on August 31, 1995 and bears interest at the greater of a premium over the London Interbank Offered Rate or a premium over a composite rate for dealer-placed 30-day commercial paper. Certain residential mortgage loans have been pledged as collateral to secure Mortgage's obligations under the Mortgage Credit Facility. The Company expects the Mortgage Credit Facility to be extended or, replaced by a credit facility similar to the terms and conditions of its present credit facility. The maximum and average amounts of short-term borrowings from banks and other financial institutions (excluding short-term debt subject to compromise in 1993 and 1992) outstanding at any time and the weighted average interest rates, without giving effect to commitment fees, during 1994, 1993 and 1992 were (dollars in thousands):
1994 1993 1992 ------- ------- ------- Housing -- Maximum amount...................................... $34,600 $60,900 $59,400 Average amount...................................... $10,700 $34,900 $47,500 Average rate........................................ 9.2% 8.3% 9.0% Financial Services -- Maximum amount...................................... $21,600 $32,600 $22,800 Average amount...................................... $ 5,600 $16,200 $11,100 Average rate........................................ 6.3% 6.6% 7.5%
Computations of the weighted average interest rates were made based upon the weighted average of outstanding loan balances during the respective years. (3) LONG-TERM DEBT Long-term debt consists of the following:
DECEMBER 31, --------------------- 1994 1993 -------- -------- (DOLLARS IN THOUSANDS) Housing -- Notes and mortgage notes payable............................. $ 23,238 $ 31,937 9.75% Senior notes due 2003.................................. 200,000 200,000 4.875% Convertible subordinated debentures due 2005.......... 80,000 80,000 -------- -------- 303,238 311,937 Less -- Current maturities................................... (10,572) (8,093) -------- -------- 292,666 303,844 Financial Services............................................. 1,034 1,102 -------- -------- Total long-term debt........................................... $293,700 $304,946 ======== ========
29 30 U.S. HOME CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Housing notes and mortgage notes payable are primarily for the acquisition and development of land, with interest rates ranging from 6.0% to 10.25%. Assets pledged as collateral under these agreements totaled approximately $71,000,000 at December 31, 1994. In June 1993, the Company completed the sale of its 9.75% senior notes due June 15, 2003. Interest is payable semi-annually. On or after June 15, 1998, the senior notes may be redeemed at the option of the Company, in whole or in part, at prices ranging from 103.656% (during the 12 month period ending June 14, 1999) to 100% (on and after June 15, 2001) of the principal amount thereof, together with accrued and unpaid interest. The indenture relating to the senior notes contains numerous covenants, including a minimum tangible net worth requirement and a limitation on the incurring of additional debt. In November 1993, the Company completed the sale of its 4.875% convertible subordinated debentures due November 1, 2005. Interest is payable semi-annually. The debentures are convertible at any time at the option of the holder into common stock at a conversion price of $35.50 per share, subject to adjustment under certain conditions. On or after November 1, 1996, the debentures may be redeemed at the option of the Company, in whole or in part, at prices ranging from 103.25% (during the 12 month period ending October 31, 1997) to 100% (on or after November 1, 2004) of the principal amount thereof, together with accrued and unpaid interest. Upon a change of control of the Company, holders of the senior notes and the debentures will have the right to require the Company to redeem the senior notes and debentures at a price of 101% of the principal amount of the senior notes and 100% of the principal amount of the debentures, together with accrued and unpaid interest. There can be no assurance that sufficient funds will be available to make the required repurchases if a change of control occurs. In addition, the Working Capital Facility prohibits the Company from repurchasing the senior notes and debentures prior to the termination of the Working Capital Facility. At December 31, 1994, housing long-term debt matures as follows: $10,572,000 in 1995, $7,262,000 in 1996, $4,379,000 in 1997, $36,000 in 1998, $39,000 in 1999, $950,000 in 2000, $200,000,000 in 2003 and $80,000,000 in 2005. (4) INCOME TAXES The Company and its subsidiaries file consolidated federal income tax returns. The components of the provision for income taxes consisted of the following:
YEARS ENDED DECEMBER 31, ----------------------------- 1994 1993 1992 ------- -------- ---- (DOLLARS IN THOUSANDS) Current -- Federal............................................... $ 730 $ 555 $ 33 State................................................. 70 345 2 ------- -------- ---- 800 900 35 ------- -------- ---- Deferred -- Federal............................................... 16,866 9,078 (33) State................................................. 2,031 1,056 (2) ------- -------- ---- 18,897 10,134 (35) ------- -------- ---- Decrease in valuation allowance......................... -- (45,000) -- ------- -------- ---- Total provision............................... $19,697 $(33,966) $ -- ======= ======== ====
30 31 U.S. HOME CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Deferred income taxes are determined based upon the difference between the financial statements and the tax basis of assets and liabilities and available net operating loss carryforward ("NOL"). When the Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," in 1992, a valuation allowance was provided for the total amount of deferred tax assets attributable to the NOL because the Company was precluded from recognizing the tax benefit of the NOL during the pendency of the Cases. Subsequent to emerging from Chapter 11, the Company concluded that it would, based on the Company's historical and current pretax earnings (adjusted for reorganization items) and business plans, more likely than not be able to realize substantially all of the benefit associated with deferred tax assets. Accordingly, during the six months ended December 31, 1993, the Company reduced its valuation allowance by $45,000,000 (based on 39.0% effective tax rate), resulting in a reduction of the Company's provision for income taxes and recognition of a deferred tax asset in the same amount, which amount has been reduced to approximately $13,700,000 at December 31, 1994 as a result of pretax income generated during 1994 and the last six months of 1993. The decrease in the deferred tax asset valuation allowance increased primary and fully diluted income per share in 1993 by $3.87 per share and $3.72 per share, respectively. At December 31, 1994, the Company has a net deferred tax asset of $38,400,000, which is comprised of deferred tax assets of $54,800,000 (including $16,300,000 relating to land and housing reserves which were expensed for financial reporting purposes but deferred for federal income tax reporting purposes and $24,200,000 relating to the Company's NOL) and deferred tax liabilities of $16,400,000 (including $13,100,000 relating to interest expense capitalized for financial reporting purposes but expensed for federal income tax reporting purposes). At December 31, 1993, deferred tax assets and deferred tax liabilities were $54,800,000 and $15,700,000, respectively, and were primarily attributable to the same items as noted above. At December 31, 1994 and 1993, valuation allowances totaling $22,200,000 and $4,400,000, respectively, had been provided against the existing net deferred tax asset. The increase in the valuation allowance in 1994 relates to the increase in the NOL resulting from deductions taken in the 1993 tax returns. The NOL will reduce taxable income when it is realized unless the valuation allowance is reduced at an earlier date due to a change in circumstances. At December 31, 1994, the Company has available an NOL of approximately $98,400,000 which expires in the years 2000 through 2008. In addition, the Company has a credit for alternative minimum tax ("AMT") paid ($2,000,000 at December 31, 1994) which can be carried forward and be used to reduce regular taxes payable in excess of AMT in future years. Pretax income of approximately $35,200,000 will have to be generated during the NOL carryforward period for the Company to fully utilize the remaining deferred tax asset at December 31, 1994. As a result of the Company's recognition of the deferred tax asset attributable to its NOL, effective July 1, 1993 (and for all future periods), the Company began providing income taxes based on its effective tax rate. Excluding the decrease in deferred tax asset valuation allowance in 1993, the following table reconciles the statutory federal income tax rate to the effective income tax rate for:
YEARS ENDED DECEMBER 31, ------------------------ 1994 1993 1992 ---- ---- ----- Tax provision (benefit) at statutory rate..................... 35.0% 35.0% (34.0)% Increases (decreases) in taxes resulting from -- State and local income taxes, net of federal income tax provision................................................ 4.0 4.0 (4.0) Utilization of net operating loss carryforward in first half of 1993.................................................. -- (9.8) -- Benefit of net operating loss carryforward not currently recognized............................................... -- -- 37.8 Other, net.................................................. (1.5) -- .2 ---- ---- ----- Effective rate................................................ 37.5% 29.2% --% ==== ==== =====
31 32 U.S. HOME CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (5) REORGANIZATION AND EMERGENCE FROM CHAPTER 11 On June 21, 1993 (the "Effective Date"), the Company and 46 of its affiliates emerged from Chapter 11 pursuant to their First Amended Consolidated Plan of Reorganization (as modified, the "Plan"). Seven other affiliates (consisting of the Company's discontinued manufactured housing and building supply operations, the "Liquidating Debtors") commenced liquidation pursuant to their First Amended Joint Plan of Reorganization (the "Liquidating Plan"). None of the financial services subsidiaries were a party to the Company's reorganization. Under the Plan, creditors received 4,873,650 shares of common stock and 2,816,762 shares of convertible redeemable preferred stock and pre-Effective Date stockholders received 3,510,818 shares of common stock and warrants (exercisable at $20 per share), which, if fully exercised, would result in the issuance of an additional 1,904,757 shares of the Company's common stock. In connection with the Plan, the Company issued 140,000 shares of common stock to corporate officers and certain other key employees for services rendered in connection with the reorganization of the Company. The Company has reflected the issuance as an increase in stockholders' equity and an offsetting charge to earnings (which charge has been included in the accompanying consolidated statement of operations for 1993 as "reorganization items, net") of $2,940,000 based upon the prevailing market price of the Company's common stock at the Effective Date. In connection with preparing to implement the Plan, the Company recorded provisions totaling $69,668,000 in 1992 to reflect the impact of the Plan on land utilization ($42,368,000) and certain nonrecourse debt restructuring ($27,300,000) and recorded a gain from nonrecourse debt forgiven in connection with the Plan ($27,300,000). The resulting net amount ($42,368,000) was included in "reorganization items, net" in the accompanying consolidated statement of operations for 1992. The primary component of the charge was a change in the intended use and reduced holding period for certain land assets necessitated by increased debt amortization and service requirements of certain indebtedness originally planned to be issued under the Plan. The Liquidating Plan provided, among other things, that the proceeds from the liquidation of the assets of each Liquidating Debtor, if any, after payment of that Liquidating Debtor's administrative and priority claims, would be distributed to that Liquidating Debtor's secured and unsecured creditors. (6) STOCKHOLDERS' EQUITY As of December 31, 1994, the Company's capital structure consisted of the following: Common Stock -- Authorized 50,000,000 shares, par value $.01 per share, outstanding 10,909,860 shares. Shares reserved for issuance -- Convertible subordinated debentures............................. 2,253,521 Class B warrants................................................ 1,901,436 Stock plans..................................................... 1,100,000 Convertible redeemable preferred stock.......................... 602,133 --------- 5,857,090 =========
Preferred Stock -- Authorized 10,000,000 shares, par value $.10 per share, including 602,133 convertible redeemable preferred shares and 9,397,867 undesignated as to series shares. (a) Convertible redeemable preferred stock -- $25 per share liquidation preference and redemption value, outstanding 518,772 shares. The shares may be redeemed at the option of the Company at any time at an amount equal to the liquidation preference/redemption value ($25 per share) plus any declared and 32 33 U.S. HOME CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) unpaid dividends. Each share of convertible redeemable preferred stock is convertible, subject to adjustments, into one share of common stock at the option of the holder and at any time prior to its redemption by the Company. During 1994 and 1993, 1,435,835 shares and 862,032 shares, respectively, of convertible redeemable preferred stock were converted into an equal number of shares of common stock. If the closing price of the common stock is equal to or greater than $30 per share for 20 consecutive trading days, the convertible redeemable preferred stock will automatically convert into common stock. Any shares converted are restored to the status of authorized and unissued preferred stock without designation as to series. The holders of the convertible redeemable preferred stock are entitled to one vote for each share of convertible redeemable preferred stock held by them. The holders of the convertible redeemable preferred stock vote together as a single class with the holders of the common stock on all matters requiring stockholder action. (b) Undesignated as to series -- None outstanding. Shares may be issued in one or more classes or series with preference, limitations and relative rights as determined by the Board of Directors at the time of issuance. Any shares issued will rank, as to dividends and liquidation preference, junior to the convertible redeemable preferred stock. Class B Warrants -- In connection with the Plan, pre-Effective Date stockholders received Class B warrants to acquire an aggregate of 1,904,757 shares of common stock for $20 per share, of which 3,321 warrants had been exercised at December 31, 1994. The warrants expire in June 1998. The Working Capital Facility, the senior note indenture and the Company's second restated certificate of incorporation contain restrictions on the (i) payment of dividends on the Company's common and convertible redeemable preferred stock and (ii) purchase, redemption, retirement or other acquisition of the Company's common and preferred stock, other than upon conversion of the convertible redeemable preferred stock into common stock and upon exercise into the Company's common stock of Class B warrants and options to acquire common stock issued pursuant to stock options and stock payment plans. (7) STOCK PLANS Stock Option Plans -- In June 1993, the Company adopted a qualified and non-qualified stock option plan for key employees (the "Employee Plan") to purchase a maximum of 500,000 shares of the Company's common stock. In August 1993, the Company adopted an additional stock option plan whereby options may be granted to non- employee directors (the "Director Plan") to purchase a maximum of 100,000 shares of the Company's common stock. Options under the Director Plan are granted annually in a fixed amount. Options granted under the Employee Plan will be granted at not less than the closing price of the common stock on date of grant. Options granted under the Director Plan will be granted at not less than the average closing price of the common stock for the ten consecutive trading days prior to the date of grant; provided that the grant price will not be less than 95% of the average closing price of the common stock for the 20 consecutive trading days prior to the date of grant. The options are exercisable as specified in the stock option agreements relating to the options and may not be exercised later than ten years from the date of grant. In 1994, options for 104,000 shares were granted at exercise prices ranging from $15.13 to $22.71 per share to certain key employees and non-employee directors, options for an aggregate of 9,000 shares were cancelled and no options were exercised. In 1993, options for 318,500 shares were granted at exercise prices ranging from $23.29 to $26.50 per share to certain key employees and non-employee directors, options for an aggregate of 10,000 shares were cancelled and no options were exercised. 33 34 U.S. HOME CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) At December 31, 1994, options for 403,500 shares were outstanding at exercise prices ranging from $15.13 to $26.50 per share of which options for 143,834 shares were exercisable. As of December 31, 1994, 195,500 shares were available for granting of options, including 38,500 shares to non-employee directors. Stock Payment Plan -- In December 1993, the Company adopted an employee stock payment plan (the "Payment Plan") for key employees whereby up to 25% of an employee's annual incentive pay (compensation other than base salary) may be payable in shares of the Company's common stock as determined by the Company's Board of Directors, of which up to 50% of the shares payable will vest to the employee not later than two years after the end of the incentive compensation year and will expire in the event the employee is not employed by the Company on the vesting date. The Payment Plan has a five-year term and commences on January 1, 1994. As of December 31, 1994, 250,000 shares of the Company's common stock were reserved for issuance under the Payment Plan. Shares to be issued under the Payment Plan will be valued at the average closing price of the common stock for a ten consecutive trading day period as defined in the plan. Restricted Stock Plan -- In October 1994, the Company adopted, subject to stockholder approval, a restricted stock plan (the "Restricted Plan") for officers and other key employees. Under the Restricted Plan, which will be effective upon stockholder approval, a maximum of 250,000 shares of the Company's common stock may be granted as restricted stock. Participants in the Restricted Plan may not dispose of any of the stock granted for five years from date of grant. Restrictions lapse at the rate of 20% of the stock per year, commencing with the end of the fifth year. The lapsing of the restrictions between the end of the fifth year and the ninth year may be accelerated based upon improvements in the Company's return on assets (as defined in the Restricted Plan) over the base year. Upon issuance of the restricted stock, unearned compensation equivalent to the average closing price of the common stock for a ten consecutive trading day period as defined in the Restricted Plan will be charged to stockholders' equity and subsequently amortized to expense over a nine year period. (8) PROFIT SHARING The Company has a qualified profit sharing plan for the benefit of its employees which may be terminated at any time at the option of the Company. The annual contributions may be made in such amount as the Board of Directors of the Company determines, limited to 15% of the total compensation (as defined) of all participating employees. The aggregate amounts accrued for contribution to the profit sharing plan for distribution to employees were $891,000 in 1994, $546,000 in 1993 and $493,000 in 1992. (9) COMMITMENTS AND CONTINGENCIES As of December 31, 1994, the Company had refundable and non-refundable deposits outstanding totaling $53,621,000 for options and contracts to purchase undeveloped land and finished lots having a total purchase price of approximately $327,699,000. These options expire at various dates through 2001. The Company is involved in litigation arising from the normal course of business, none of which, in the opinion of the Company, will have a material adverse effect on the financial position or results of operations of the Company. At December 31, 1994, Mortgage in connection with managing the interest rate market risk on its inventory loans held for sale of $16,235,000 and Loan Quotes of $22,816,000, had outstanding $15,338,000 34 35 U.S. HOME CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (face amount of $15,500,000 and estimated fair value of $15,373,000) of Forward Contracts and $23,310,000 of Forward Commitments which expire over the next four months when the inventory loans are expected to be sold and Loan Quotes are expected to close. At December 31, 1994, the estimated fair value of the inventory loans and Loan Quotes hedged by Forward Contracts and not covered by the Forward Commitments was $15,832,000. Mortgage reduces its risk of nonperformance under the Hedging Contracts by entering into those contracts with reputable security dealers and investors and evaluating their financial condition. However, there is a risk if certain of the Loan Quotes do not close or are renegotiated in a declining interest rate market and close at lower prices. Mortgage reduces this risk by collecting commitment fees on certain of the Loan Quotes along with entering into Forward Commitments to deliver loans to investors on a best efforts basis and adjusting, from time to time, the estimate of loan closings covered by Forward Contracts. (10) UNAUDITED SUMMARIZED CONSOLIDATED QUARTERLY INFORMATION Summarized quarterly financial information for the years ended December 31, 1994 and 1993 is as follows (dollars in thousands, except per share data).
THREE MONTHS ENDED --------------------------------------------------------- MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, 1994 1994 1994 1994 --------- -------- ------------- ------------ Housing -- Operating revenues........................ $ 222,000 $238,143 $ 252,553 $269,682 Gross profit.............................. $ 36,196 $ 38,142 $ 40,956 $ 43,487 Operating income.......................... $ 11,149 $ 11,712 $ 13,742 $ 14,442 Financial Services -- Operating revenues........................ $ 3,300 $ 2,943 $ 3,287 $ 3,403 Operating income.......................... $ 427 $ 44 $ 466 $ 544 Net Income.................................. $ 7,061 $ 7,172 $ 9,230 $ 9,366 Income Per Common and Common Equivalent Share -- Primary................................... $ .60 $ .63 $ .81 $ .82 Fully diluted............................. $ .52 $ .55 $ .70 $ .72
THREE MONTHS ENDED --------------------------------------------------------- MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, 1993 1993 1993 1993 --------- -------- ------------- ------------ Housing -- Operating revenues........................ $ 164,464 $192,328 $ 223,983 $218,175 Gross profit.............................. $ 28,071 $ 31,269 $ 36,497 $ 34,407 Operating income.......................... $ 7,779 $ 8,924 $ 12,709 $ 12,418 Financial Services -- Operating revenues........................ $ 2,590 $ 3,356 $ 3,490 $ 3,691 Operating income.......................... $ 402 $ 631 $ 1,125 $ 652 Reorganization Items........................ $ 2,890 $ 4,025 $ -- $ -- Net Income.................................. $ 5,029 $ 5,251 $ 53,438 $ 7,973 Income Per Common and Common Equivalent Share -- Primary................................... $ .45 $ .46 $ 4.61 $ .67 Fully diluted............................. $ .45 $ .46 $ 4.55 $ .61
35 36 U.S. HOME CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (11) RECEIVABLES The Company had housing and financial services receivables of approximately $6,627,000 in 1994 and $2,799,000 in 1993 that were due after one year. The balance due after one year in 1994 included notes and mortgage notes receivable of $5,071,000 with interest rates ranging from 7.0% to 10.5%. A majority of the balance matures within five years. (12) ACCRUED EXPENSES At December 31, 1994 and 1993, accrued expenses and other current liabilities consisted of the following:
1994 1993 ------- ------- (DOLLARS IN THOUSANDS) Housing -- Customer deposits.............................................. $19,112 $14,750 Salaries and other compensation................................ 10,522 6,701 Interest....................................................... 1,972 1,711 Taxes, other than income taxes................................. 3,816 3,647 Other.......................................................... 5,075 3,892 ------- ------- $40,497 $30,701 ======= ======= Financial Services -- Accounts payable............................................... $ 2,741 $ 4,706 Other.......................................................... 4,740 4,798 ------- ------- $ 7,481 $ 9,504 ======= =======
36 37 ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information relating to the directors of the Company is incorporated by reference from the Nominees for Directors Section, pages 2 through 5, of the Company's Proxy Statement, dated March 20, 1995, for the Annual Meeting of Stockholders to be held on April 26, 1995, filed pursuant to Section 14 of the Securities Exchange Act of 1934 ("1994 Proxy Statement"). ITEM 11. EXECUTIVE COMPENSATION The information is incorporated by reference from the Executive Compensation Section, pages 7 and 8 of the 1994 Proxy Statement (see Part I-Item 4, Executive Officers of the Company). ITEM 12. COMMON STOCK The information relating to the security ownership of certain beneficial owners and management is incorporated by reference from the Security Ownership of Management and Certain Beneficial Owners Section, pages 17 and 18 of the 1994 Proxy Statement. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS None. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) 1. and 2. The following financial statements and financial statement schedules are filed as part of this Report: See Index to Financial Statements -- Item 8. (a) 3. Exhibits 2.1 -- First Amended Consolidated Plan to Reorganization of U.S. Home Corporation and certain of its affiliates dated April 1, 1993. Incorporated by reference from exhibit 2.1 to U.S. Home Corporation's Current Report on Form 8-K filed June 9, 1993. 2.2 -- Modification to "USH Debtors' First Amended Consolidated Plan of Reorganization." Incorporated by reference from exhibit 2.2 to U.S. Home Corporation's Current Report on Form 8-K filed June 9, 1993. 2.3 -- First Amended Joint Plan of Reorganization of certain affiliates of U.S. Home Corporation dated April 1, 1993. Incorporated by reference from exhibit 2.3 to U.S. Home Corporation's Current Report on Form 8-K filed June 9, 1993. 2.4 -- Findings of Fact, Conclusions of Law and Order Confirming the First Amended Consolidated Plan of Reorganization of U.S. Home Corporation and certain of its affiliates. Incorporated by reference from exhibit 28.1 to U.S. Home Corporation's Current Report on Form 8-K filed June 9, 1993.
37 38 2.5 -- Findings of Fact, Conclusions of Law and Order Confirming the First Amended Joint Plan of Reorganization of certain affiliates of U.S. Home Corporation. Incorporated by reference from exhibit 28.2 to U.S. Home Corporation's Current Report on Form 8-K filed June 9, 1993. 3.1 -- Second Restated Certificate of Incorporation of U.S. Home Corporation effective on June 21, 1993. Incorporated by reference from exhibit 3.1 to Registration Statement on Form S-3 of U.S. Home Corporation (Registration No. 33-68966). 3.1(i) -- Certificate of Amendment of Second Restated Certificate of Incorporation as filed with the State of Delaware on May 13, 1994. Incorporated by reference from exhibit 3.1 to U.S. Home Corporation's Quarterly Report on Form 10-Q for the period ended June 30, 1994. 3.2 -- Amended and Restated By-Laws of U.S. Home Corporation, dated as of June 21, 1993. Incorporated by reference from exhibit 3.2 to Registration Statement on Form S-3 of U.S. Home Corporation (Registration No. 33-68966). 10.1 -- Amended and Restated Loan Agreement, dated as of June 21, 1993, between U.S. Home Corporation and General Electric Capital Corporation. Incorporated by reference from exhibit 10.1 to Registration Statement on Form S-3 of U.S. Home Corporation (Registration No. 33-68966). 10.1(i) -- First Amendment to Amended and Restated Loan Agreement, dated as of September 7, 1993, between U.S. Home Corporation and General Electric Capital Corporation. Incorporated by reference from exhibit 10.1(i) to Registration Statement on Form S-3 of U.S. Home Corporation (Registration No. 33-68966). 10.1(ii) -- Second Amendment to Amended and Restated Loan Agreement, dated as of September 15, 1993, between U.S. Home Corporation and General Electric Capital Corporation. Incorporated by reference from exhibit 10.1(ii) to Registration Statement on Form S-3 of U.S. Home Corporation (Registration No. 33-68966). 10.1(iii) -- Third Amendment to Amended and Restated Loan Agreement, dated as of October 22, 1993, between U.S. Home Corporation and General Electric Capital Corporation. Incorporated by reference from exhibit 10.2(iii) to Amendment No. 3 to Registration Statement on Form S-3 of U.S. Home Corporation (Registration No. 33-68966). 10.1(iv) -- Fourth Amendment to Amended and Restated Loan Agreement, dated as of December 31, 1993, between U.S. Home Corporation and General Electric Capital Corporation. Incorporated by reference from exhibit 10.1(iv) to U.S. Home Corporation's Annual Report on Form 10-K for the year ended December 31, 1993. 10.1(v) -- Fifth Amendment to Amended and Restated Loan Agreement, dated as of June 30, 1994, between U.S. Home Corporation and General Electric Capital Corporation. Incorporated by reference from exhibit 10.1 to U.S. Home Corporation's Quarterly Report on Form 10-Q for the period ended June 30, 1994. 10.1(vi) -- Sixth Amendment to Amended and Restated Loan Agreement, dated effective as of September 16, 1994, between U.S. Home Corporation and General Electric Capital Corporation. 10.2 -- Trust Indenture, dated as of June 21, 1993, by and between U.S. Home Corporation and IBJ Schroder Bank & Trust Company, as trustee, relating to U.S. Home Corporation's 9.75% Senior Notes due 2003. Incorporated by reference from exhibit 10.2 to Registration Statement on Form S-3 of U.S. Home Corporation (Registration No. 33-68966).
38 39 10.3 -- Trust Indenture, dated as of November 3, 1993, by and between U.S. Home Corporation and Marine Midland Bank, N.A., as trustee, relating to U.S. Home Corporation's 4.875% Convertible Subordinated Debentures. Incorporated by reference from exhibit 4.1 to U.S. Home Corporation's Current Report on Form 8-K filed November 3, 1993. 10.4 -- Warrant Agreement, dated as of June 21, 1993, between U.S. Home Corporation and The First National Bank of Boston relating to U.S. Home Corporation's Class B Warrants. Incorporated by reference from exhibit 10.3 to Registration Statement on Form S-3 of U.S. Home Corporation (Registration No. 33-68966). 10.5 -- U.S. Home Corporation's 1993 Stock Option Plan. Incorporated by reference from exhibit 4.1 to Registration Statement on Form S-8 of U.S. Home Corporation (Registration No. 33-64712). 10.6 -- U.S. Home Corporation's Non-Employee Directors' Stock Option Plan. Incorporated by reference from exhibit 10.5 to Registration Statement on Form S-3 of U.S. Home Corporation (Registration No. 33-68966). 10.7 -- U.S. Home Corporation's Employee Stock Payment Plan. Incorporated by reference from exhibit B to U.S. Home Corporation's 1993 Proxy Statement dated March 3, 1994. 10.8 -- U.S. Home Corporation's Restricted Stock Plan. 10.9 -- U.S. Home Corporation's 1994 Corporate Officers Incentive Compensation Plan. 10.10 -- U.S. Home Corporation's Key Employees' Separation Pay Plan. Incorporated by reference from exhibit 10.5 to Amendment No. 1 to Registration Statement on Form S-1 of U.S. Home Corporation (Registration No. 33-60638). 10.11 -- U.S. Home Corporation's Retirement Plan for Non-Employee Directors. Incorporated by reference from exhibit 10 to U.S. Home Corporation's Quarterly Report on Form 10-Q for the period ended September 30, 1994. 10.12 -- Employment and Consulting Agreement, dated May 12, 1986, between U.S. Home Corporation and Robert J. Strudler. Incorporated by reference from exhibit 10.1 to U.S. Home Corporation's Current Report on Form 8-K dated July 8, 1986. 10.12(i) -- First Amendment to Employment and Consulting Agreement, effective as of February 8, 1990, between U.S. Home Corporation and Robert J. Strudler. Incorporated by reference from exhibit 10.27(i) to U.S. Home Corporation's Annual Report on Form 10-K for the year ended December 31, 1989. 10.12(ii) -- Second Amendment to Employment and Consulting Agreement effective as of December 6, 1990, between U.S. Home Corporation and Robert J. Strudler. Incorporated by reference from exhibit 10.14(ii) to U.S. Home Corporation's Annual Report on Form 10-K for the year ended December 31, 1990. 10.12(iii) -- Third Amendment to Employment and Consulting Agreement, effective as of June 21, 1993, between U.S. Home Corporation and Robert J. Strudler. Incorporated by reference from exhibit 10.8(iii) to Registration Statement on Form S-3 of U.S. Home Corporation (Registration No. 33-68966). 10.13 -- Employment and Consulting Agreement, dated May 12, 1986, between U.S. Home Corporation and Isaac Heimbinder. Incorporated by reference from exhibit 10.2 to U.S. Home Corporation's Current Report on Form 8-K dated July 8, 1986. 10.13(i) -- First Amendment to Employment and Consulting Agreement, effective as of February 8, 1990, between U.S. Home Corporation and Isaac Heimbinder. Incorporated by reference from exhibit 10.28(i) to U.S. Home Corporation's Annual Report on Form 10-K for the year ended December 31, 1989.
39 40 10.13(ii) -- Second Amendment to Employment and Consulting Agreement, effective as of December 6, 1990, between U.S. Home Corporation and Isaac Heimbinder. Incorporated by reference from exhibit 10.15(ii) to U.S. Home Corporation's Annual Report on Form 10-K for the year ended December 31, 1990. 10.13(iii) -- Third Amendment to Employment and Consulting Agreement, effective as of June 21, 1993, between U.S. Home Corporation and Isaac Heimbinder. Incorporated by reference from exhibit 10.9(iii) to Registration Statement on Form S-3 of U.S. Home Corporation (Registration No. 33-68966). 10.14 -- Registration Rights Agreement, dated as of June 21, 1993, between U.S. Home Corporation and Loomis, Sayles & Company Incorporated, on behalf of certain holders of the common stock of U.S. Home Corporation. Incorporated by reference from exhibit 10.10 to Registration Statement on Form S-3 of U.S. Home Corporation (Registration No. 33-68966). 10.15 -- Trust Agreement, dated December 18, 1986, between U.S. Home Corporation, as Grantor, and Kenneth J. Hanau, Jr., as Trustee, with respect to retirement benefits for Isaac Heimbinder. Incorporated by reference from exhibit 10.25 to U.S. Home Corporation's Annual Report on Form 10-K for the year ended December 31, 1986. 10.16 -- Trust Agreement, dated December 18, 1986, between U.S. Home Corporation, as Grantor, and Kenneth J. Hanau, Jr., as Trustee, with respect to retirement benefits for Robert J. Strudler. Incorporated by reference from exhibit 10.26 to U.S. Home Corporation's Annual Report on Form 10-K for the year ended December 31, 1986. 10.17 -- Letter, dated as of March 20, 1990, between U.S. Home Corporation and William E. Reichard, as Successor Trustee, with respect to Trust Agreements dated December 18, 1986 between U.S. Home Corporation, as Grantor, Kenneth J. Hanau, Jr., as Trustee, with respect to retirement benefits for Robert J. Strudler and Isaac Heimbinder. Incorporated by reference from exhibit 10.19 to U.S. Home Corporation's Annual Report on Form 10-K for the year ended December 31, 1992. 10.18 -- Warehousing Credit and Security Agreement (single-family mortgage loans), dated as of April 15, 1992, between U.S. Home Mortgage Corporation and Residential Funding Corporation. Incorporated by reference from exhibit 10.3 to U.S. Home Corporation's Quarterly Report on Form 10-Q for the period ended March 31, 1992. 10.18(i) -- First Amendment to Warehousing Credit and Security Agreement (single-family mortgage loans), dated as of June 1, 1992, between U.S. Home Mortgage Corporation and Residential Funding Corporation. Incorporated by reference from exhibit 10.1 to U.S. Home Corporation's Quarterly Report on Form 10-Q for the period ended June 30, 1992. 10.18(ii) -- Second Amendment to Warehousing Credit and Security Agreement (single-family mortgage loans), dated as of June 11, 1992, between U.S. Home Mortgage Corporation and Residential Funding Corporation. Incorporated by reference from exhibit 10.2 to U.S. Home Corporation's Quarterly Report on Form 10-Q for the period ended June 30, 1992. 10.18(iii) -- Third Amendment to Warehousing Credit and Security Agreement (single-family mortgage loans), dated as of October 21, 1992, between U.S. Home Mortgage Corporation and Residential Funding Corporation. Incorporated by reference from exhibit 10.3 to U.S. Home Corporation's Quarterly Report on Form 10-Q for the period ended September 30, 1992.
40 41 10.18(iv) -- Fourth Amendment to Warehousing Credit and Security Agreement (single-family mortgage loans), dated as of May 28, 1993, between U.S. Home Mortgage Corporation and Residential Funding Corporation. Incorporated by reference to exhibit 10.13(iv) to Amendment No. 2 to Registration Statement on Form S-1 of U.S. Home Corporation (Registration No. 33-60638). 10.18(v) -- Fifth Amendment to Warehousing Credit and Security Agreement (single-family mortgage loans), dated as of June 15, 1993, between U.S. Home Mortgage Corporation and Residential Funding Corporation. Incorporated by reference from exhibit 10.1 to U.S. Home Corporation's Quarterly Report on Form 10-Q for the period ended June 30, 1993. 10.18(vi) -- Sixth Amendment to Warehousing Credit and Security Agreement (single-family mortgage loans), dated as of September 15, 1993, between U.S. Home Mortgage Corporation and Residential Funding Corporation. Incorporated by reference from exhibit 10.15(vi) to Registration Statement on Form S-3 of U.S. Home Corporation (Registration No. 33-68966). 10.18(vii) -- Seventh Amendment to Warehousing Credit and Security Agreement (single-family mortgage loans), dated as of July 1, 1994, between U.S. Home Mortgage Corporation and Residential Funding Corporation. Incorporated by reference from exhibit 10.2 to U.S. Home Corporation's Quarterly Report on Form 10-Q for the period ended June 30, 1994. 10.18(viii) -- Eighth Amendment to Warehousing Credit and Security Agreement (single-family mortgage loans), dated as of October 1, 1994, between U.S. Home Mortgage Corporation and Residential Funding Corporation. 10.18(ix) -- Ninth Amendment to Warehousing Credit and Security Agreement (single-family mortgage loans), dated as of January 1, 1995, between U.S. Home Mortgage Corporation and Residential Funding Corporation. 10.19 -- U.S. Home Corporation's Amortizing Incentive Plan. Incorporated by reference from exhibit 4.2 to Registration Statement on Form S-8 of U.S. Home Corporation (Registration No. 33-64712). 10.20 -- Form of Indemnification Agreement for directors and executive officers. Incorporated by reference from exhibit 10.15 to Amendment No. 2 to Registration Statement on Form S-1 of U.S. Home Corporation (Registration No. 33-60638). 11 -- Computation of earnings per share. 22 -- Subsidiaries of U.S. Home Corporation. 23 -- Consent of Independent Public Accountants. 27 -- Financial Data Schedule.
(b) Report on Form 8-K No Current Report on Form 8-K was filed by the Company during October, November or December 1994. 41 42 SIGNATURES PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) 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. Date: February 17, 1995 U.S. HOME CORPORATION By: /s/ ISAAC HEIMBINDER -------------------------------------- Isaac Heimbinder President and Chief Operating Officer By: /s/ CHESTER P. SADOWSKI -------------------------------------- Chester P. Sadowski Vice President, Controller and Chief Accounting Officer (principal accounting officer) By: /s/ THOMAS A. NAPOLI -------------------------------------- Thomas A. Napoli Vice President, Finance and Chief Financial Officer (principal financial officer) PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE - --------------------------------------------- ---------------------------- ------------------ /s/ ROBERT J. STRUDLER Director, Chairman and Chief February 17, 1995 - --------------------------------------------- Executive Officer Robert J. Strudler (principal executive officer) /s/ ISAAC HEIMBINDER Director, President and February 17, 1995 - --------------------------------------------- Chief Operating Officer Isaac Heimbinder /s/ GLEN ADAMS Director February 17, 1995 - --------------------------------------------- Glen Adams /s/ STEVEN L. GERARD Director February 17, 1995 - --------------------------------------------- Steven L. Gerard /s/ KENNETH J. HANAU, JR. Director February 17, 1995 - --------------------------------------------- Kenneth J. Hanau, Jr. /s/ MALCOLM T. HOPKINS Director February 17, 1995 - --------------------------------------------- Malcom T. Hopkins /s/ JACK L. McDONALD Director February 17, 1995 - --------------------------------------------- Jack L. McDonald /s/ CHARLES A. McKEE Director February 17, 1995 - --------------------------------------------- Charles A. McKee /s/ GEORGE A. POOLE, JR. Director February 17, 1995 - --------------------------------------------- George A. Poole, Jr. /s/ HERVE RIPAULT Director February 17, 1995 - --------------------------------------------- Herve Ripault /s/ JAMES W. SIGHT Director February 17, 1995 - --------------------------------------------- James W. Sight
42 43 INDEX TO EXHIBITS
Exhibit Number - ------ 10.1(vi) Sixth Amendment to Amended and Restated Loan Agreement dated effective as of September 16, 1994, between U.S. Home Corporation and General Electric Capital Corporation 10.8 U.S. Home Corporation's Restricted Stock Plan 10.9 U.S. Home Corporation's 1994 Corporate Officers Incentive Compensation Plan 10.18(viii) Eighth Amendment to Warehousing Credit and Security Agreement (single-family mortgage loans), as of October 1, 1994, between U.S. Home Mortgage Corporation and Residential Funding Corporation 10.18(ix) Ninth Amendment to Warehousing Credit and Security Agreement (single-family mortgage loans), as of January 1, 1995, between U.S. Home Mortgage Corporation and Residential Funding Corporation 11 Computation of earnings per share 22 Subsidiaries of U.S. Home Corporation 23 Consent of Independent Public Accountants 27 Financial Data Schedule
EX-10.1.VI 2 SIXTH AMENDMENT TO LOAN AGREEMENT 1 EXHIBIT 10.1(VI) SIXTH AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT SIXTH AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT ("Sixth Amendment"), dated effective as of September 16, 1994, between U.S. HOME CORPORATION, a Delaware corporation ("Borrower"), and GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation ("Lender"). R E C I T A L S: A. Borrower and Lender have previously entered into that certain Amended and Restated Loan Agreement, dated as of June 21, 1993, that certain First Amendment to Amended and Restated Loan Agreement, dated as of September 7, 1993, that certain Second Amendment to Amended and Restated Loan Agreement, dated as of September 15, 1993, that certain Third Amendment to Amended and Restated Loan Agreement, dated as of October 22, 1993, that certain Fourth Amendment to Amended and Restated Loan Agreement, dated effective as of December 31, 1994, and that certain Fifth Amendment to Amended and Restated Loan Agreement dated as of June 30, 1994 (as previously and hereafter amended from time to time, the "Loan Agreement"). B. The parties hereto desire to further amend the Loan Agreement. - ------------------------------------------------------------------------------ GENEL COMPANY, INC.'S ARIZONA MORTGAGE BANKER'S NUMBER IS BK 8284 2 C. GENEL Company, Inc., an Oregon corporation, which is licensed as a mortgage banker in Arizona (Arizona Mortgage Banker Number BK 8284), has been engaged by Lender to, and did negotiate the terms of this Sixth Amendment as such terms relate to Arizona matters. NOW THEREFORE, in consideration of the premises and the mutual covenants hereinafter contained, the parties hereto agree as follows: 1. DEFINITIONS In addition to the terms defined herein, capitalized terms used in this Sixth Amendment shall have the respective meanings ascribed thereto in the Loan Agreement. 2. SIXTH AMENDMENT TO LOAN AGREEMENT The Loan Agreement is, effective as of the date hereof, amended as follows: 2.1 Section 1 of the Loan Agreement is amended by adding or amending and restating, as the case may be, the definitions set forth below: "'Land Account to Net Worth Ratio' shall mean, as at the date of determination thereof, the ratio of (i) the Land Account Balance (as defined in the Fifth Amendment) as of such date to (ii) Adjusted Consolidated Tangible Net Worth as of such date. "'Sixth Amendment' shall mean that certain Sixth Amendment to Amended and Restated Loan Agreement, dated effective as of September 16, 1994, between Borrower and Lender." "'Total Land Account Balance' shall mean, on any date, the net aggregate sum of book cost (net of reserves) 2 3 of (i) Land Held for Investment or in the Process of Development owned by Borrower or Guarantors on such date; (ii) Development Costs incurred by Borrower or Guarantors on such date; (iii) the USH Book Cost of all Finished Building Lots owned by Borrower or any Guarantor on such date; (iv) Option Deposits made by Borrower or Guarantors (including refundable Option Deposits) on such date; and (v) Advance Costs incurred by Borrower or Guarantors on such date." 2.2 Section 2.9(a) of the Loan Agreement is hereby amended and restated in its entirety to read as follows: "(a) Borrower shall pay interest to Lender monthly in arrears, on the first day of each month (each, an 'Interest Payment Date'), in an amount equal to the quotient of (i) an amount equal to (A) the sum of the daily unpaid principal amounts of the Loan outstanding on each day during the previous month multiplied by (B) a rate equal to the GECC Composite Commercial Paper Rate for the previous month plus 4.0% (the 'Stated Rate'), divided by (ii) 360." 2.3 Section 2.10(a) of the Loan Agreement is hereby amended and restated in its entirety to read as follows: "(a) Upon the effectiveness of the Sixth Amendment, Borrower is obligated to pay Lender a fee (the "Availability Fee") of $475,000 per annum, with such per annum amount to be pro rated for any partial year during which this Agreement is in effect. Upon the occurrence and during the continuation of an Event of Default, the Availability Fee will increase to $950,000 per annum and, if such Event of Default is cured by Borrower, the Availability Fee shall revert to the rate of $475,000 per annum. Upon the effectiveness of the Sixth Amendment, the entire amount of the Availability Fee for the remaining term of this Agreement (which, for purposes of this sentence, shall be calculated at the rate of $475,000 per annum notwithstanding the existence of an Event of Default on the date this Agreement is terminated) shall be deemed to be fully earned by Lender and the termination of this Agreement for any reason prior to June 21, 1997, shall not terminate the obligation of Borrower to pay the entire remaining amount of the Availability Fee for the anticipated term of this Agreement which, upon termination of this Agreement for any reason prior to June 21, 1997, shall become immediately due and payable in full. Borrower shall pay the Availability Fee to Lender in quarterly installments on the first 3 4 Business Day of each calendar quarter in immediately available funds; provided that to the extent the conditions of Section 2.2 hereof are met, the Availability Fee shall, at the option of Borrower, constitute a Revolving Credit Advance." 2.4 Subsection (c) of Section 7.10 of the Loan Agreement is hereby amended and restated in its entirety to read as follows: "(c) Maximum Land Account Balance. Borrower shall not, at any time, permit (i) its Land Account to Net Worth Ratio to be greater than 1.15 to 1.0 or (ii) its Total Land Account Balance to exceed $425,000,000." 2.5 Section 10.2 of the Loan Agreement is hereby amended and restated in its entirety as follows: "10.2 Fees and Expenses. (a) Borrower shall, upon execution of this Agreement, and thereafter pay all reasonable out-of-pocket expenses of Lender in connection with the preparation and, subject to subsection (b)(i) below, administration of the Loan Documents (including the reasonable fees and expenses of all of its counsel and advisors retained in connection with the Loan Documents and the transactions contemplated thereby and advice in connection therewith). If, at any time or times, regardless of the existence of an Event of Default (except with respect to paragraphs (iv) and (v), which shall be subject to an Event of Default having occurred and be continuing), Lender (or in the case of paragraphs (iv) and (v) below, any Assignee Lender) shall employ counsel or other advisors for advice or other representation or shall incur reasonable legal or other costs and expenses in connection with: (i) subject to the terms of subsection (b)(ii) below, any sale of participations, assignment, transfer or other disposition of Lender's interest in the Loan or any of the Loan Documents or any portion thereof; (ii) any amendment, interpretation of, modification or waiver, or consent with respect to, any of the Loan Documents or, subject to the terms of subsection (b)(i) and (iii) below, advice in connection with the administration of the Loans made pursuant hereto or its rights hereunder or thereunder; 4 5 (iii) any litigation, contest, dispute, suit, proceeding or action (whether instituted by Lender or any Assignee Lender, Borrower, any Subsidiary of Borrower or any other Person) in any way relating to the Collateral, any of the Loan Documents or any other agreements to be executed or delivered in connection herewith; (iv) any attempt to enforce any rights of Lender or any Assignee Lender against Borrower, any Subsidiary of Borrower or any other Person, that may be obligated to Lender by virtue of any of the Loan Documents; (v) any attempt to verify, protect, value, collect, sell, liquidate or otherwise dispose of the Collateral; then, and in any such event, the attorneys' and other parties' fees arising from such services, including those of any appellate proceedings, and all expenses, costs, charges and other fees incurred by such counsel and others in any way or respect arising in connection with or relating to any of the events or actions described in this Section shall be payable, on demand, by Borrower to Lender (or as provided above to an Assignee Lender) and shall be additional Obligations secured under this Agreement and the other Loan Documents. Without limiting the generality of the foregoing, such reasonable expenses, costs, charges and fees may include: appraisers, liquidators, review of applicable Court filings, paralegal fees, costs and expenses; accountants' and investment bankers' fees, costs and expenses; court costs and expenses; photocopying and duplicating expenses; court reporter fees, costs and expenses; long distance telephone charges; air express charges; telegram charges; secretarial overtime charges; and expenses for travel, lodging and food paid or incurred in connection with the performance of such legal services. (b) Notwithstanding the terms of subsection (a) hereof, (i) Borrower shall not be obligated to pay any of the expenses incurred by Lender (including the fees and expenses of its counsel and advisors) in connection with the qualification of properties as Eligible Collateral, for admittance of Eligible Collateral to the Borrowing Base or determinations or calculations of Borrowing Base Availability, (ii) Borrower shall only be obligated to pay 50% of the attorneys' and other parties' fees arising from the activities described in 10.2(a)(i) hereof and (iii) Lender shall be obligated for any expenses incurred by it in 5 6 connection with the issuance of mortgagee title policies or commitments issued in its favor (together with any related title company charges) and any fees of local real estate counsel incurred in connection therewith; provided, however, that Borrower shall remain obligated to pay all usual and customary fees and premiums for the issuance of owner's title policies (together with any related title company charges), all recording fees and all fees, costs and expenses for environmental matters, including environmental peer reports." 2.6 Schedule 1.1 to the Loan Agreement is hereby replaced in its entirety by the revised Schedule 1.1 attached to this Sixth Amendment as Exhibit A. 3. REPRESENTATIONS AND WARRANTIES The Borrower hereby represents and warrants to Lender that: (a) All the representations and warranties of the Loan Parties contained in the Loan Agreement or in any of the Loan Documents are true and correct on, and as if made on, the date of this Sixth Amendment, except to the extent that any such representation or warranty expressly relates to an earlier date and for changes therein permitted or contemplated by the Loan Agreement. (b) After giving effect to this Sixth Amendment, no event has occurred and is continuing, or would result from the execution of this Sixth Amendment, which constitutes or would constitute a Default or an Event of Default. (c) The execution, delivery and performance of this Sixth Amendment have been duly authorized by all necessary corporate action, and this Sixth Amendment is the legal and binding obligation of Borrower, enforceable in accordance with its terms. (d) Borrower's execution, delivery and performance of this Sixth Amendment does not contravene, violate or conflict with any provision of any laws, statutes, rules, regulations or any order or any decree of any court to which Borrower or any of its Subsidiaries are 6 7 subject or any contract, agreement, or understanding to which Borrower or any of its Subsidiaries is a party. 4. REFERENCE TO AND EFFECT ON THE LOAN DOCUMENTS 4.1 Upon the effectiveness of this Sixth Amendment, from and after the date hereof, each reference in the Loan Agreement to "this Agreement," "hereunder," "hereof," or words of like import referring to the Loan Agreement, and each reference in the other Loan Documents to "the Loan Agreement," "thereunder," "thereof" or words of like import referring to the Loan Agreement, shall mean and be a reference to the Loan Agreement, as amended hereby. 4.2 Except as specifically amended above, the Loan Agreement, and all other Loan Documents are and shall continue to be in full force and effect and are hereby ratified and confirmed in all respects. Without limiting the generality of the foregoing, the Collateral Documents and all of the Collateral described therein do and shall continue to secure the payment of all Obligations of Borrower and its Subsidiaries under the Loan Agreement, as amended hereby, and other Loan Documents. 4.3 Except as provided herein, the execution, delivery and effectiveness of this Sixth Amendment shall not operate as a waiver of any right, power or remedy of Lender under the Loan Agreement or any of the Loan Documents, nor constitute a waiver of any provision of any of the Loan Documents. 7 8 5. MISCELLANEOUS 5.1 This Sixth Amendment may be executed in any number of separate counterparts, each of which shall, collectively and separately, constitute one agreement. 5.2 In all respects, including all matters of construction, validity and performance, this Sixth Amendment shall be governed by, and construed and enforced in accordance with, the laws of the State of New York applicable to contracts made and performed in such state, without regard to the principles thereof regarding conflict of laws, and any applicable laws of the United States of America. 5.3 THIS SIXTH AMENDMENT, THE LOAN AGREEMENT AND THE LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. 8 9 IN WITNESS WHEREOF, this Sixth Amendment has been duly executed and is effective as of the date first above written. U.S. HOME CORPORATION By: /s/ THOMAS A. NAPOLI Thomas A. Napoli Vice President-Finance and Chief Financial Officer GENERAL ELECTRIC CAPITAL CORPORATION By: /s/ MARK T. LACOURSE Mark T. LaCourse Attorney-in-Fact 9 10 EXHIBIT A SCHEDULE 1.1 "Borrowing Base" shall mean all Eligible Collateral that Lender has not rejected in its sole discretion as constituting a portion of the Borrowing Base and with respect to which (a) Lender has a first priority Lien perfected as contemplated by the terms of this Agreement, subject only to Ordinary Course Liens; (b) Lender has received a binding mortgagee's policy of title insurance on ALTA Form B (1970 and 1984) or the appropriate state-specific form requested by Lender and otherwise in form and content satisfactory to Lender, to be obtained at Lender's expense, insuring that the Lien of the Collateral Documents constitutes a valid Lien encumbering the Real Estate, free and clear of all defects and encumbrances except for Ordinary Course Liens and such other Liens as Lender shall approve and naming Lender as insured, issued by a nationally recognized title insurance company acceptable to Lender, with no exceptions or exclusions other than as may be approved by Lender (together with legible copies of all permitted title exceptions), and in an amount not less than the value attributed to such Eligible Collateral by Lender, with the total amount of the title policies to be issued in Lender's favor to be (i) with respect to parcels of Real Estate located in the states of Arizona, California, Colorado, Maryland, Minnesota, Nevada, New Jersey and Virginia, in a maximum aggregate amount equal to the maximum principal amount of $95,000,000; and (ii) with respect to parcels of Real Estate located in the states of Texas, Florida or any other states not named in section (i) of this definition, in an amount equal to the "book value" attributed to each parcel by Lender. Notwithstanding the provisions of parenthetical (ii) of the immediately preceding sentence, with respect to parcels of Real Estate located in the state of Texas only, Lender hereby agrees that it will accept an interim construction binder of title insurance in lieu of the above described mortgagee's title insurance policy (but which otherwise meet all of the requirements of the preceding sentence), provided that (x) an Event of Default has not occurred; and (y) immediately upon Lender's request (whether or not an Event of Default has occurred), Borrower shall obtain, at Lender's expense, mortgagee's policies of title insurance on all parcels of Real Estate located in the state of Texas, which policies shall meet all of the requirements of the preceding sentence. Each title policy shall include such affirmative insurance as Lender may require and shall be in form and substance satisfactory to Lender's legal counsel. The title insurance policy shall be reinsured with such title companies, in such 11 amounts and in such manner and form as shall be acceptable to Lender. In the event that a Lien (other than an Ordinary Course Lien) is filed against any Eligible Collateral subsequent to its admission to the Borrowing Base (whether or not such Lien is subordinate to the Lien perfected by Lender as contemplated by this Agreement), in addition to all other rights and remedies that Lender may have under this Agreement or the other Loan Documents, Lender shall be entitled, in its sole discretion, to remove the Eligible Collateral affected by such Lien from the Borrowing Base, effective immediately. S-2 EX-10.8 3 RESTRICTED STOCK PLAN 1 EXHIBIT 10.8 U.S. HOME CORPORATION CORPORATE OFFICERS AND PRESIDENTS OF OPERATIONS RESTRICTED STOCK PLAN 1. PURPOSE. The purpose of the U.S. Home Corporation Corporate Officers and Presidents of Operations Restricted Stock Plan (the "Plan") is to create incentives for the corporate officers and presidents of operations of U.S. Home Corporation (the "Company") to provide services to the Company over a long period of time and to enhance the level of performance of the Company by awarding such employees shares of Stock (as defined herein) subject to certain vesting requirements. 2. ADMINISTRATION. (a) A committee (the "Committee"), which shall initially be the Compensation and Stock Option Committee of the board of directors of the Company (the "Board"), and which will be comprised of at least three members of the Board, all of whom are "disinterested persons" (as defined below), will (i) administer the Plan, (ii) establish, subject to the provisions of the Plan, such rules and regulations as it may deem appropriate for the proper administration of the Plan and (iii) make such determinations under, and such interpretations of, and take such steps in connection with, the Plan or the Stock issued thereunder as it may deem necessary or advisable. The members of the Committee may be appointed from time to time by the Board and serve at the pleasure of the Board. The Committee will hereinafter be referred to as the "Administrator." (b) For the purposes of this Section 2, a "disinterested person" is a person who, on a given date, is disinterested within the meaning of Rule 6b-13 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). 3. STOCK. The stock which is the subject of the Plan will be the shares of common stock of the Company, $.01 par value per share (the "Stock"), whether authorized and unissued or treasury stock. The total number of shares of Stock which may be issued under the Plan will not exceed, in the aggregate, 250,000. 4. AWARD OF STOCK. (a) All of the corporate officers and presidents of operations of the Company listed on Schedule A attached hereto (each an "Employee" and collectively, "Employees"), shall be eligible to receive Stock in accordance with the terms hereof. (b) In consideration of future services to be provided by each Employee to the Company, each Employee shall be awarded, on a one-time basis, the number of shares of Stock, subject to the restrictions contained herein, determined by dividing $200,000 by the average closing price of the Stock on the New York Stock Exchange (the "NYSE") for the 10 consecutive trading days immediately following the date on which the Company releases its financial results for the fiscal year ending December 3, 1994; provided that no fractional shares of Stock shall be issued under the Plan. (c) The closing price of the Stock, as of any particular day, will be as reported in The Wall Street Journal; provided, however, that if the Stock is not listed on the NYSE on any applicable day, the closing price for such day will be not less than the fair market value of the Stock on such day, as determined by the Administrator based on such empirical evidence as it deems to be appropriate under the circumstances. A-1 2 (d) The Administrator shall have the right pursuant to the terms hereof to award Stock to any individual who becomes a corporate officer or president of operations of the Company after the effective date of the Plan and prior to the initial Vesting Date (as defined herein). The Administrator shall make such award substantially in accordance with the terms of the Plan, including the vesting requirements contained in Section 5 hereof, but shall be permitted to award a smaller number of shares of Stock based on the date on which the individual commences employment as a corporate officer or president of operations of the Company. 5. VESTING. (a) On each Vesting Date, unless all shares of Stock awarded to each Employee shall have previously vested with each Employee and subject to the forfeiture provisions contained herein, a percentage of the shares of Stock awarded hereunder to each Employee shall vest with each Employee such that the cumulative percentage of total shares of Stock vested with each Employee shall be the greater of the applicable percentages set forth below: (i) (A) 20% as of the Vesting Date in the year 2000; (B) 40% as of the Vesting Date in the year 2001; (C) 60% as of the Vesting Date in the year 2002; (D) 80% as of the Vesting Date in the year 2003; (E) 100% as of the Vesting Date in the year 2004; (ii) If, on a Vesting Date, the Return on Assets Improvement (as defined herein) is: (A) greater than 1.05 and less than or equal to 1.10, then 40%; (B) greater than 1.10 and less than or equal to 1.15, then 60%; (C) greater than 1.15 and less than or equal to 1.20, then 80%; (D) greater than 1.20, then 100%; provided, however, that no Employee shall be required to forfeit any shares of Stock previously vested hereunder. For the purposes hereof: "Return on Assets Improvement" means (x) the sum of the Return on Assets for the two fiscal years of the Company immediately prior to the applicable Vesting Date divided by two, and the result divided by (y) the Return on Assets for the fiscal year ended December 31, 1994, rounded to the nearest hundredth. "Return on Assets" means (x) the amount contained in the Company's "income (loss) before income tax" line-item for the applicable fiscal year of the Company as reported in the consolidated statements of operations set forth in the audited financial statements for the Company for such fiscal year, divided by (y) the Average Total Assets for such year. "Average Total Assets" means an amount equal to (x) (1) total housing assets at the beginning of the applicable fiscal year of the Company (as reported in the consolidated balance sheet set forth in the audited financial statements for the Company for the prior fiscal year), plus (2) total housing assets at the end of such fiscal year (as reported in the consolidated balance sheet set forth in the audited financial statements for the Company for such fiscal year), divided by (y) two. (b) In the event an Employee is not employed by the Company on or prior to December 31 of any year which is immediately prior to any Vesting Date, due to voluntary termination of employment by the Employee or termination for Cause (as defined herein), all of the shares of Stock remaining to be vested with such Employee hereunder and all rights arising from such shares of Stock shall be forfeited by such Employee and returned to the Company. A-2 3 (c) For purposes of the Plan, a voluntary termination by an Employee will not be deemed to occur in the event such Employee is Constructively Terminated (as defined herein). (d) In the event an Employee is terminated without Cause prior to January 1, 2000, 20% of the shares of Stock awarded hereunder shall immediately vest with such Employee and the remaining shares of Stock to be vested hereunder and all rights arising from such shares of Stock shall be forfeited by such Employee and returned to the Company. (e) In the event there is a Change of Control (as defined herein) and within 24 months thereof an Employee is terminated without Cause or Constructively Terminated, all shares of Stock remaining to be vested with such Employee hereunder shall immediately vest with such Employee and the Company shall immediately cause the issuance to such Employee of appropriate stock certificates representing such shares of Stock in such Employee's name in accordance with Section 6 hereof. (f) In the event an Employee dies, is Permanently Disabled (as defined herein), or retires (after not less than 20 years of employment by the Company), the Administrator shall have the authority, in its sole discretion, to vest such Employee (or such Employee's estate, if applicable) in as many shares of Stock as the Administrator shall deem appropriate, based upon such Employee's prior job performance. (g) For purposes of the Plan: (i) "Base Salary" shall mean an amount equal to an Employee's maximum annual base salary in effect at any time after the effective date of the Plan, excluding any incentive compensation or bonus payable or paid to an Employee. (ii) "Cause" means (1) an Employee's continuing willful failure to perform his duties with respect to the Company (other than as a result of total or partial incapacity due to physical or mental illness), (2) gross negligence or malfeasance by an Employee in the performance of his duties with respect to the Company, (3) an act or acts on an Employee's part constituting a felony under the laws of the United States or any state thereof which results or was intended to result directly or indirectly in gain or personal enrichment by such Employee at the expense of the Company or (4) any other circumstances set forth in an employment agreement between the Company and such Employee which would constitute grounds for the Company to terminate the employment of such Employee for cause (as defined in the applicable employment agreement). (iii) "Change of Control" means any of the following: (i) the sale, lease, conveyance or other disposition of all or substantially all of the Company's assets as an entirety or substantially as an entirety to any person (including any individual or entity) or group of persons (within the meaning of Section 13(d)(3) of the Exchange Act in one or a series of transactions; provided that a transaction where the holders of all classes of common equity of the Company immediately prior to such transaction own, directly or indirectly, 50% or more of the aggregate voting power of all classes of common equity of such person or group immediately after such transaction will not be a Change of Control, (ii) the liquidation or dissolution of the Company; provided that a liquidation or dissolution of the Company which is part of a transaction or series of related transactions that does not constitute a Change of Control under the "provided" clause of clause (i) above will not constitute a Change of Control hereunder or (iii) any transaction or a series of related transactions (as a result of a tender offer, merger, consolidation or otherwise) that results in, or that is in connection with, any person, including, a "group" (within the meaning of Section 13(d)(3) of the Exchange Act) acquiring "beneficial ownership" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 50% or more of the aggregate voting power of all classes of A-3 4 common equity of the Company or of any person that possesses "beneficial ownership" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 50% or more of the aggregate voting power of all classes of common equity of the Company. (v) "Constructively Terminated" means (1) a reduction in an amount equal to or greater than 15 percent of an Employee's Base Salary, (2) a material reduction in an Employee's job function, duties or responsibilities or (3) a required relocation of an Employee of more than 50 miles from such Employee's current job location; provided, however, that the employment with the Company or its divisions or subsidiaries of a President of Operations will not be deemed to be Constructively Terminated in the event he or she is required to be a Division Chairman or Division President with the Company or its divisions or subsidiaries and has job functions, duties or responsibilities of a Division Chairman or Division President and/or is required to relocate in connection with such change in position; provided, further, that the employment of an Employee will not be deemed Constructively Terminated unless such Employee actually terminates his or her employment with the Company within 60 days after the occurrence of an event specified in clause (1), (2) or (3) above. (vi) "Permanently Disabled" means physical or mental incapacity of such nature that an Employee is unable to engage in or perform the principal duties of his customary employment or occupation on a continuing or sustained basis. All determinations as to the date and extent of disability of any Employee shall be made by the Administrator upon the basis of such evidence as it deems necessary or desirable. (vii) "Vesting Date" means the date each year, commencing in 2000, on which the Company releases its financial results for the previous fiscal year. 6. STOCK CERTIFICATES. (a) Each Employee shall receive a stock certificate reflecting the number of shares of Stock awarded hereunder. Such certificate shall be registered in the name of such Employee and shall bear the following legend: "The securities (the "Shares") represented by this stock certificate are restricted by the terms of the U.S. Home Corporation Corporate Officers and Presidents of Operations Restricted Stock Plan ("Restricted Stock Plan"), effective as of January 1, 1995, which contains provisions affecting the rights and obligations of the holder of the Shares and restrictions on the transfer of the Shares. Any transfer of the Shares represented by this stock certificate in violation of the Restricted Stock Plan is null and void." (b) The Administrator may, in its sole discretion, require that the stock certificates evidencing the shares of Stock be held in custody by the Company until the restrictions thereon shall have lapsed, and that, as a condition of receiving the shares of Stock, the Employee shall have delivered a stock power, endorsed in blank, relating to the shares of Stock. If and to the extent any shares of Stock vest with an Employee in accordance with terms hereof, stock certificates for the appropriate number of unrestricted shares of Stock shall be delivered promptly to the Employee. Shares of Common Stock will not be released to an Employee unless and until the amount of federal, state or local taxes required to be withheld has been paid or satisfied. Tax withholding liabilities may be satisfied by the Employee relinquishing shares of Common Stock vested pursuant to the Plan, valued at the market price of the Common Stock on the date such shares of Common Stock are released to the Employee. A-4 5 7. TERM AND EFFECTIVE DATE. The Plan will become effective upon (i) approval by the Board and (ii) approval by the affirmative vote of a majority of the shares of voting capital stock of the Company present or represented and entitled to vote at the 1995 annual meeting of the Company's stockholders. Subject to Section 15 hereof, the Plan shall terminate upon issuance and vesting of the Stock issuable pursuant to the Plan. 8. TRANSFERABILITY. Employees shall not be permitted to sell, transfer, pledge, assign or otherwise encumber shares of Stock awarded hereunder prior to the vesting of such shares of Stock. Upon vesting of such shares of Stock, an Employee will only transfer such shares of Stock in compliance with applicable federal and state securities laws. Employees who are affiliates of the Company may generally dispose of their shares in accordance with Rule 44 promulgated under the Securities Act of 1933, as amended. 9. RIGHTS AS A STOCKHOLDER. Except as provided in Section 8 hereof or this Section 9, Employees shall have, with respect to any shares of Stock remaining to be vested hereunder, all of the rights of stockholders of the Company, including the right to vote such shares of Stock and to receive any cash dividends. Stock dividends, if any, issued with respect to such shares of Stock shall be subject to the same restrictions and other terms and conditions hereunder that apply to such shares of Stock. 10. INVESTMENT PURPOSE. At the time of issuance of any shares of Stock, the Administrator may, if it will deem it necessary or desirable for any reason, require an Employee to represent in writing to the Company that (a) it is such Employee's then intention to acquire the Stock for investment purposes and not with a view to the distribution thereof and/or (b) upon acquisition of the Stock, the Employee will not beneficially own in excess of 4.9 percent of the value of the equity securities (as defined in Rule 3a-11-1 under the Exchange Act) of the Company; provided that for purposes of this Section 10(b), all outstanding options and convertible securities to acquire Stock shall be deemed to be exercised or converted; provided, further, that this Section 10(b) shall be inoperative after June 21, 1995. 11. RIGHT TO TERMINATE EMPLOYMENT. Nothing contained herein will restrict the right of the Company to terminate the employment of any Employee at any time. 12. FINALITY OF DETERMINATIONS. Each determination, interpretation, or other action made or taken pursuant to the provisions of the Plan by the Administrator will be final and be binding and conclusive for all purposes. 13. SUBSIDIARY AND PARENT CORPORATIONS. Unless the context requires otherwise, references under the Plan to the Company will be deemed to include any subsidiary corporations and parent corporations of the Company, as those terms are defined in Section 424 of the Internal Revenue Code of 1986, as amended. 14. GOVERNING LAW. The Plan will be governed by the laws of the State of Delaware. A-5 6 15. AMENDMENT AND TERMINATION. The Administrator may at any time terminate, amend or modify the Plan in any respect it deems suitable; provided, however, that, solely with respect to persons subject to Section 16 of the Exchange Act, no such action of the Administrator, without the approval of the stockholders of the Company, may (I) materially increase the benefits accruing to employees eligible to receive Stock under the Plan, (ii) materially increase the total amount of Stock which may be awarded under the Plan or (iii) materially modify the requirements for participation in the Plan; provided, further, that no amendment, modification or termination of the Plan may in any manner affect any Stock (whether vested or not) theretofore awarded under the Plan without the consent of the Employee to whom Stock has been awarded. 16. OVERRIDE. (a) With respect to persons subject to Section 16 of the Exchange Act, transactions under the Plan are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the Exchange Act. To the extent any provision of the Plan or action by the Administrator fails to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Administrator. (b) All transactions pursuant to terms of the Plan, including, without limitation, awards and vesting of Stock, shall only be effective at such time as counsel to the Company shall have determined that such transaction will not violate federal or state securities or other laws. The Administrator may, in its sole discretion, defer the effectiveness of such transaction to pursue whatever actions may be required to ensure compliance with such federal or state securities or other laws. A-6 7 SCHEDULE A
CORPORATE OFFICERS PRESIDENTS OF OPERATIONS - ------------------ ------------------------ Robert J. Strudler Sam B. Crimaldi Isaac Heimbinder James R. Petty Gary L. Frueh Christopher B. Rediger Craig M. Johnson Michael T. Richardson Thomas A. Napoli Philip J. Walsh III Chester P. Sadowski Richard G. Slaughter Kelly F. Somoza
A-7 EX-10.9 4 INCENTIVE COMPENSATION PLAN 1 (12/13/93) EXHIBIT 10.9 U.S. HOME CORPORATION CORPORATE OFFICERS'(1) INCENTIVE COMPENSATION PROGRAM For the Incentive Period January 1, 1994 to December 31, 1994 Set forth below is an outline of the Corporate Officers' Incentive Compensation Program for the incentive period January 1, 1994 to December 31, 1994 ("Incentive 1994"). Corporate Officers who are employed by the Corporation as of January 1, 1994 will be eligible to participate in the Corporate Officers' Incentive Compensation Program for the period commencing January 1, 1994 and ending December 31, 1994. Effective January 1, 1994, base salaries are established as set forth in Exhibit A hereto. Under this Program, an incentive compensation pool equal to the lessor of $600,000 or 2% of the pre-tax profits of the Corporation earned in fiscal 1994, shall be established to be distributed to the Corporate Officers at the sole discretion and upon approval of a majority of the non-management members of the Compensation Committee and of the Board of Directors of the Corporation based on its evaluation of the following factors: 1. The Board of Directors shall review the profit and loss of the Company for the fiscal year ended December 31, 1994 as compared to the projected profit and loss for the period January 1, 1994 through December 31, 1994 as set forth in the 1994 Business Plan as presented to the Board of Directors. 2. The Board of Directors shall review the cash flow of the Company as compared to the projected cash flow for the period January 1, 1994 through December 31, 1994 as set forth in the 1994 Business Plan as presented to the Board of Directors. 3. The Board of Directors shall review the overall performance of the Company in comparison to competitive industry performance taking into consideration, an analysis of rates of growth, return on equity and return on sales. 4. The Board of Directors shall review incentive bonus payments by competitors in relation to proposed payments to said officers to insure that they are designed to retain and motivate executives. 5. All other actions by said Officers to maximize the value of shareholders' equity. Upon the recommendation of the Chairman and President of the Company, the Board of Directors shall determine, in its sole discretion, the amount each respective Officer shall receive from the said incentive compensation pool, provided that the maximum incentive compensation payable to any Officer shall not exceed 75% of the base compensation of such Officer. ____________ (1) Excludes Chairman and President who are subject to Employment and Consulting Agreements which govern payment of bonus (see Exhibit A). 2 Coporate Officers' Incentive Program Page 2 To be entitled to receive a bonus, a Corporate Officer must remain in the employ of the Company for the entire fiscal year. Notwithstanding the foregoing, the Corporation shall have the right to terminate employment of any Corporate Officer covered under this Program at will, without notice, and without cause, at any time. The total bonus earned pursuant to the incentive program set forth herein shall be paid upon approval of the Board of Directors of the Company as follows: A. 75% of the aggregate incentive bonus earned by the Corporate Officer shall be paid in cash within 30 days following receipt of 1994 audited financial statements. B. 25% of the aggregate incentive bonus earned by the Corporate Officer shall be paid in shares of U.S. Home Corporation's common stock, with each share valued at the average market price of said shares on the New York Stock Exchange, as of the close of trading for the ten (10) trading days commencing the day following release by the Company of its results for the fiscal year ended December 31, 1994. Said shares shall be held in escrow by the Company to be delivered to the respective Corporate Officers as follows: 1. 1/2 of such shares shall be delivered to the Corporate Officer within thirty (30) days of the determination of the respective stock price. 2. 1/2 of such shares shall be delivered to the Corporate Officer on or prior to January 31, 1997. However, in order to receive such shares, the Corporate Officer must remain in the employ of the Corporation as of December 31, 1996. Notwithstanding the foregoing, in the event that said Corporate Officer's employment with the Corporation is terminated by the Corporation other than for "Cause", all remaining shares not previously delivered to the Corporate Officer shall be delivered to said Corporate Officer within thirty (30) days following termination. For purposes of this Program, the term "Cause" shall mean (i) the Officer's continuing, willful failure to perform his duties required of his position (other than as a result of total or partial incapacity due to physical or mental illness), (ii) gross negligence or malfeasance by the Officer in the performance of his duties hereunder, (iii) an act or acts on the Officer's part constituting a felony under the laws of the United States or any state thereof which results or was intended to result directly or indirectly in gain or personal enrichment by the Officer at the expense of the Company, or (iv) breach of the provisions of Exhibit B hereto pertaining to confidentiality and competitive activities, but shall not mean (A) the refusal to relocate to another city more than 50 miles from the Officer's present place of business, nor (B) a refusal to perform the duties required of his position as a result of either a material change in the scope of his job responsibilities or a reduction in base compensation. The transfer of said shares by such Corporate Officer shall be required to conform to all applicable laws and regulations pertaining thereto. 3 Coporate Officers' Incentive Program Page 3 EXHIBIT A
Name and Title 1993 Proposed 1994 % of Employee Base Salary Base Salary Inc. - -------------------------- ----------- ------------- ---- Gary L. Frueh 120,000 126,000 5.00% Vice President - Tax Craig Johnson 135,000 145,000 7.41% Vice President - Community Development Kelly Somoza 95,000 100,000 5.26% Vice President Thomas A. Napoli 135,000 145,000 7.41% Vice President - Finance and Chief Financial Officer Chester P. Sadowski 145,000 152,000 4.83% Vice President - Controller and Chief Accounting Officer Richard G. Slaughter 145,000 152,000 4.83% Vice President - Planning and Secretary
4 Coporate Officers' Incentive Program Page 4 EXHIBIT B A. Confidentiality. The Officer acknowledges that he has acquired and will acquire confidential information respecting the business of the Company. Accordingly, the Officer agrees that, without the written consent of the Company as authorized by its Board of Directors, he will not, at any time, willfully disclose any such confidential information to any unauthorized third party with an intent that such disclosure will result in financial benefit to the Officer or to any person other than the Company. For this purpose, information shall be considered confidential only if such information is uniquely proprietary to the Company and has not been made publicly available prior to its disclosure by the Officer. B. Competitive Activity. Until the end of his employment, the Officer shall devote full business time to business of the Corporation and shall not, without the consent of the Board of Directors of the Company, directly or indirectly, knowingly engage or be interested in (as owner, partner, shareholder, employee, director, officer, agent, consultant or otherwise), with or without compensation, any business which is in competition with any line of business being actively conducted by the Company or any of its affiliates or subsidiaries during his employment period. Nothing herein, however, shall prohibit the Officer from acquiring or holding not more than one percent of any class of publicly traded securities of any such business. EX-10.18.VII 5 EIGHTH AMENDMENT TO WAREHOUSE AGREEMENT 1 EXHIBIT 10.18(VIII) EIGHTH AMENDMENT TO WAREHOUSING CREDIT AND SECURITY AGREEMENT THIS EIGHTH AMENDMENT TO WAREHOUSING CREDIT AND SECURITY AGREEMENT (this "Amendment") is entered into as of this 1st day of October, 1994, by and between U.S. HOME MORTGAGE CORPORATION, a Florida corporation (the "Company") and RESIDENTIAL FUNDING CORPORATION, a Delaware corporation (the "Lender"). WHEREAS, the Company and the Lender have entered into a single family revolving warehouse facility with a present commitment amount of Forty Million Dollars ($40,000,000) (the "Commitment"), to finance the origination and acquisition of Mortgage Loans as evidenced by a Fourth Amended and Restated Promissory Note in the principal sum of Forty Million Dollars ($40,000,000), dated as of June 15, 1993 (the "Note"), and by a Warehousing Credit and Security Agreement dated as of April 15, 1992, as the same may have been amended or supplemented (the "Agreement"); and WHEREAS, the Company has requested the Lender to reduce the Commitment amount, to provide for tiered pricing on the Commitment, and to amend certain other terms of the Agreement, and the Lender has agreed to such reduction and amendment subject to the terms and conditions of this Amendment. NOW, THEREFORE, for and in consideration of the foregoing and of the mutual covenants, agreements and conditions hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. All capitalized terms used herein and not otherwise defined shall have their respective meanings set forth in the Agreement. 2. Section 1.1 of the Agreement shall be amended by adding the following definition: "C.P. Rate" means, as of any date of determination, the rate of interest per annum which is equal to the composite rate for dealer-placed thirty-day commercial paper published by Knight-Ridder, Inc. on its MoneyCenter system at 10 a.m. on the first Business Day of such week. The CP Rate shall be rounded, if necessary, to the next highest one eighth of one percent. If such composite commercial paper rate is not so published for any period, then during such period the CP Rate shall mean the rate for thirty-day commercial paper sold through dealers published for the first Business Day of such week in The Wall Street Journal in its regular column entitled "Money Rates." -1- 2 3. From the date hereof until December 31, 1994, Section 1.1 of the Agreement shall be amended to delete the definition of "Floating Rate" in its entirety, replacing it with the following definition: "Floating Rate" means the Tier 1 Floating Rate or the Tier 2 Floating Rate, as applicable. 4. Effective as of November 1, 1994, Section 2.1(a) of the Agreement is hereby deleted in its entirety and the following section is substituted in lieu thereof: 2.1(a) Subject to the terms and conditions of this Agreement and provided no Default or Event of Default has occurred and is continuing, the Lender agrees, from time to time during the period from November 1, 1994, to and including August 31, 1995 (unless such period is earlier terminated pursuant hereto) to make Advances to the Company, provided the total aggregate principal amount outstanding at any one time of all such Advances shall not exceed Twenty-Five Million Dollars ($25,000,000). The obligation of the Lender to make Advances hereunder up to such limit, is hereinafter referred to as the "Commitment." Within the Commitment, the Company may borrow, repay and reborrow. All Advances under this Agreement shall constitute a single indebtedness, and all of the Collateral shall be security for the Note and for the performance of all the Obligations. 5. Effective as of November 1, 1994, Section 2.1(b)(1) of the Agreement is hereby deleted in its entirety and the following section is substituted in lieu thereof: (1) The aggregate amount of Wet Settlement Advances outstanding at any one time shall not exceed Seven Million Dollars ($7,000,000). 6. From the date hereof through December 31, 1994, Section 2.4(a) of the Agreement shall be deleted in its entirety and the following shall be substituted in lieu thereof: 2.4(a) From the date hereof, to and including December 31, 1994, the unpaid amount of each Ordinary Warehousing Advance shall bear interest, from the date of such Ordinary Warehousing Advance until paid in full, at rates of interest which are equal to: (i) From the date hereof, to and including December 31, 1994, the unpaid amount of each Ordinary Warehousing Advance shall bear interest, from the date of such -2- 3 Ordinary Warehousing Advance until paid in full, at rates of interest which are equal to: (A) On the outstanding principal amount of Ordinary Warehousing Advances in an amount not to exceed twenty percent (20%) of the Commitment, a floating rate of interest which is equal to the greater of (a) LIBOR plus one and one-quarter percent (1.25%) per annum or (b) the C.P. Rate plus one percent (1.00%) per annum (the "Tier 1 Floating Rate"). (B) On the outstanding principal amount of Ordinary Warehousing Advances to the extent such outstanding principal amount exceeds twenty percent (20%) of the Commitment, a floating rate of interest which is equal to LIBOR plus one and one- half percent (1.50%) per annum (the "Tier 2 Floating Rate"). (ii) From November 1, 1994, to and including December 31, 1994, the unpaid amount of each Ordinary Warehousing Advance shall bear interest, from the date of such Ordinary Warehousing Advance until paid in full, at a floating rate of interest which is equal to the greater of (a) LIBOR plus one and one-quarter percent (1.25%) per annum or (b) the C.P. Rate plus one percent (1.00%) per annum. (iii) Each Floating Rate will be adjusted as of the effective date of each change in LIBOR. The Lender's determination of each Floating Rate as of any date of determination shall be conclusive and binding, absent manifest error. 7. Effective as of November 1, 1994, the words "Thirty Million Dollars ($30,000,000)" in Sections 2.9(a) and 2.9(b) of the Agreement shall be replaced with the words "Fifteen Million Dollars ($15,000,000)" wherever they appear in such sections. 8. On December 31, 1994, the provisions of the Agreement amended by paragraphs 3 and 6 of this Amendment shall automatically revert to the provisions in effect prior to the effective date of this Amendment. 9. As a condition precedent to the effectiveness of this Amendment, the Company shall deliver to the Lender an executed original of this Amendment. 10. The Company represents, warrants and agrees that (a) there exists no Default or Event of Default under the Loan Documents, (b) the Loan Documents continue to be the legal, valid -3- 4 and binding agreements and obligations of the Company enforceable in accordance with their terms, as modified herein, (c) the Lender is not in default under any of the Loan Documents and the Company has no offset or defense to its performance or obligations under any of the Loan Documents, (d) the representations contained in the Loan Documents remain true and accurate in all respects, and (e) there has been no material adverse change in the financial condition of the Company from the date of the Agreement to the date of this Amendment. 11. Except as hereby expressly modified, the Agreement shall otherwise be unchanged and shall remain in full force and effect, and the Company ratifies and reaffirms all of its obligations thereunder. 12. This Amendment may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. IN WITNESS WHEREOF, the Company and the Lender have caused this Amendment to be duly executed on their behalf by their duly authorized officers as of the day and year above written. U.S. HOME MORTGAGE CORPORATION, a Florida corporation By: /s/ Thomas A. Napali Its: Vice President RESIDENTIAL FUNDING CORPORATION, a Delaware corporation By: /s/ DONNA A WEST Its: Vice President -4- 5 STATE OF Texas ) ) ss COUNTY OF Harris ) On November 15, 1994, before me, a Notary Public, personally appeared Thomas A. Napoli, the Vice President of U.S. HOME MORTGAGE CORPORATION, a Florida corporation, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose name is subscribed to the within instrument and acknowledged to me that he/she executed the same in his/her authorized capacity, and that by his/her signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument. WITNESS my hand and official seal. /s/ Brenda Grable Notary Public (SEAL) My Commission Expires: 7-1-97 STATE OF Florida ) ) ss COUNTY OF Broward ) On November 16, 1994, before me, a Notary Public, personally appeared Donna A, West, the Vice President of RESIDENTIAL FUNDING CORPORATION, a Delaware corporation, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose name is subscribed to the within instrument and acknowledged to me that he/she executed the same in his/her authorized capacity, and that by his/her signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument. WITNESS my hand and official seal. Marsha S. Grabin Notary Public (SEAL) My Commission Expires: 9-15-98 -5- EX-10.18.IX 6 NINTH AMENDMENT TO WAREHOUSE AGREEMENT 1 EXHIBIT 10.18(IX) NINTH AMENDMENT TO WAREHOUSING CREDIT AND SECURITY AGREEMENT THIS NINTH AMENDMENT TO WAREHOUSING CREDIT AND SECURITY AGREEMENT (this "Amendment") is entered into as of this 1st day of January, 1995, by and between U.S. HOME MORTGAGE CORPORATION, a Florida corporation (the "Company") and RESIDENTIAL FUNDING CORPORATION, a Delaware corporation (the "Lender"). WHEREAS, the Company and the Lender have entered into a single family revolving warehouse facility with a present commitment amount of Twenty-Five Million Dollars ($25,000,000) (the "Commitment"), to finance the origination and acquisition of Mortgage Loans as evidenced by a Fourth Amended and Restated Promissory Note in the principal sum of Forty Million Dollars ($40,000,000), dated as of June 15, 1993 (the "Note"), and by a Warehousing Credit and Security Agreement dated as of April 15, 1992, as the same may have been amended or supplemented (the "Agreement"); and WHEREAS, the Company has requested the Lender to extend the period for which the interest rate under the Agreement has been made, and the Lender has agreed to such extension subject to the terms and conditions of this Amendment. NOW, THEREFORE, for and in consideration of the foregoing and of the mutual covenants, agreements and conditions hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. All capitalized terms used herein and not otherwise defined shall have their respective meanings set forth in the Agreement. 2. Section 1.1 of the Agreement shall be amended to delete the definition of "Floating Rate" in its entirety and the following shall be substituted in lieu thereof: "Floating Rate" means the rate of interest applicable to the Advance pursuant to Section 2.4(a). 3. Section 2.4(a) of the Agreement shall be deleted in its entirety and the following shall be substituted in lieu thereof: 2.4(a) The unpaid amount of each Advance shall bear interest, from the date of such Advance until paid in full, at a Floating Rate of interest equal to the greater of (i) LIBOR plus one and one-quarter percent (1.25%) per annum, or (ii) the C.P. Rate plus one percent (1.00%) per annum. The Floating Rate will be adjusted as of any -1- 2 effective change in LIBOR or the C.P. Rate, as applicable. The Lender's determination of the Floating Rate as of any date of determination shall be conclusive and binding, absent manifest error. 4. As a condition precedent to the effectiveness of this Amendment, the Company shall deliver to the Lender (a) an executed original of this Amendment; and (b) a Two Hundred Fifty Dollar ($250) document production fee. 5. The Company represents, warrants and agrees that (a) there exists no Default or Event of Default under the Loan Documents, (b) the Loan Documents continue to be the legal, valid and binding agreements and obligations of the Company enforceable in accordance with their terms, as modified herein, (c) the Lender is not in default under any of the Loan Documents and the Company has no offset or defense to its performance or obligations under any of the Loan Documents, (d) the representations contained in the Loan Documents remain true and accurate in all respects, and (e) there has been no material adverse change in the financial condition of the Company from the date of the Agreement to the date of this Amendment. 6. Except as hereby expressly modified, the Agreement shall otherwise be unchanged and shall remain in full force and effect, and the Company ratifies and reaffirms all of its obligations thereunder. 7. This Amendment may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. IN WITNESS WHEREOF, the Company and the Lender have caused this Amendment to be duly executed on their behalf by their duly authorized officers as of the day and year above written. U.S. HOME MORTGAGE CORPORATION, a Florida corporation By: /s/ Thomas A. Napoli Its: Vice President RESIDENTIAL FUNDING CORPORATION, a Delaware corporation By: /s/ Donna A. West Its: Vice President -2- 3 STATE OF Texas ) ) ss COUNTY OF Harris ) On December 28, 1994, before me, a Notary Public, personally appeared Thomas A. Napoli, the Vice president of U.S. HOME MORTGAGE CORPORATION, a Florida corporation, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose name is subscribed to the within instrument and acknowledged to me that he/she executed the same in his/her authorized capacity, and that by his/her signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument. WITNESS my hand and official seal. /s/ Brenda Grable Notary Public (SEAL) My Commission Expires: 7/1/97 STATE OF Florida ) ) ss COUNTY OF Broward ) On December 30, 1994, before me, a Notary Public, personally appeared Donna A. West, the Vice President of RESIDENTIAL FUNDING CORPORATION, a Delaware corporation, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose name is subscribed to the within instrument and acknowledged to me that he/she executed the same in his/her authorized capacity, and that by his/her signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument. WITNESS my hand and official seal. /s/ Marsha S. Grabin Notary Public (SEAL) My Commission Expires: 9/15/98 -3- EX-11 7 COMPUTATION OF EARNINGS PER SHARE 1 EXHIBIT 11 U.S. HOME CORPORATION AND SUBSIDIARIES INCOME (LOSS) PER COMMON SHARE FOR THE CONSOLIDATED STATEMENTS INCOME (LOSS) HAS BEEN COMPUTED ON THE WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON SHARE EQUIVALENTS OUTSTANDING AS FOLLOWS: (Dollars in Thousands, Except Per Share Data)
Years Ended December 31, --------------------------------------------------- 1994 1993 1992 ----------- ----------- ----------- Income (loss) per common and common equivalent shares - Net income (loss) $ 32,829 $ 71,691 $ (21,354) =========== =========== =========== Weighted average common shares outstanding 11,366,810 11,259,262 11,284,885 Effect of assumed exercise of dilutive stock options and warrants - 371,809 - ----------- ----------- ----------- Total common and common equivalent shares 11,366,810 11,631,071 11,284,885 =========== =========== =========== Income (loss) per common and common equivalent shares $ 2.89 $ 6.16 $ (1.89) =========== =========== =========== Income (loss) per common share, assuming full dilution - Net income (loss) $ 32,829 $ 71,691 $ (21,354) Add interest applicable to 4.875% convertible subordinated debentures, net of income taxes 1,220 174 - ----------- ----------- ----------- Income (loss) per common share, assuming full dilution $ 34,049 $ 71,865 $ (21,354) =========== =========== =========== Total common and common equivalent shares 11,366,810 11,631,071 11,284,885 Assumed additional common shares from exercise of dilutive stock options and warrants resulting from use of market price of common stock at end of period - 102,550 - Assumed conversion of 4.875% convertible subordinated debentures at $35.50 per share at date of issuance (see Note 3 of Notes to Consolidated Financial Statements) 2,253,521 376,616 - ----------- ----------- ----------- Common shares, assuming full dilution 13,620,331 12,110,237 11,284,885 =========== =========== =========== Income (loss) per common share assuming full dilution $ 2.50 $ 5.93 $ (1.89) =========== =========== ===========
Note a - See Note 1 of Notes to Consolidated Financial Statements EX-22 8 SUBSIDIARIES OF U.S. HOME CORPORATION 1 EXHIBIT 22 Subsidiaries of the Company The following table sets forth the names of U.S. Home's subsidiaries and the state in which incorporated. All subsidiaries are directly or indirectly wholly-owned by U.S. Home. Certain insignificant subsidiaries are omitted.
Jurisdiction of Incorporation --------------- Fidelity Guaranty and Acceptance Corporation Delaware U.S. Home Acceptance Corporation Delaware U.S. Home Insurors, Inc. Florida U.S.H. Indemnity Company, Ltd. Bermuda San Felipe Indemnity Company, Ltd. Bermuda U.S. Home Mortgage Corporation Florida USH II Corporation Delaware
EX-23 9 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS 1 EXHIBIT 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report dated February 8, 1995 included in this Form 10-K, into the Company's previously filed Registration Statements No. 33-64712 and 33-52993. /s/ Arthur Andersen LLP ARTHUR ANDERSEN LLP Houston, Texas February 22, 1995 EX-27 10 FINANCIAL DATA SCHEDULE
5 This Schedule Contains Summary Financial Information Extracted From The Consolidated Condensed Financial Statements As Of December 31, 1994 And For The Year Then Ended And Is Qualified In Its Entirety By Reference To Such Financial Statements. YEAR DEC-31-1994 DEC-31-1994 6,715 0 46,891 0 576,638 0 0 0 747,951 162,787 293,700 109 0 12,969 278,386 747,951 0 995,311 823,597 942,248 0 0 537 52,526 19,697 32,829 0 0 0 32,829 2.89 2.50
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