-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, J87cLRnLvaDd4LZJQguUE1W4AuZbLvHVDRM3Tep4wqgv9GWGnPnbaJ9k0/itiMq9 aBrekhCMyVHoIVYwJX6Z0A== 0000950144-00-004111.txt : 20000331 0000950144-00-004111.hdr.sgml : 20000331 ACCESSION NUMBER: 0000950144-00-004111 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ORIOLE HOMES CORP CENTRAL INDEX KEY: 0000074928 STANDARD INDUSTRIAL CLASSIFICATION: OPERATIVE BUILDERS [1531] IRS NUMBER: 591228702 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 001-06963 FILM NUMBER: 585144 BUSINESS ADDRESS: STREET 1: 1690 S CONGRESS AVE STE 200 CITY: DELRAY BEACH STATE: FL ZIP: 33445 BUSINESS PHONE: 4072742000 FORMER COMPANY: FORMER CONFORMED NAME: ORIOLE LAND & DEVELOPMENT CORP DATE OF NAME CHANGE: 19720615 10-K405 1 ORIOLE HOMES CORP 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------------------------ FORM 10-K Annual Report pursuant to Section 13 of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 1999 File No. 1-6963 ORIOLE HOMES CORP. ------------------ 1690 South Congress Avenue, Suite 200, Delray Beach, Florida 33445 (561) 274-2000 FLORIDA 59-1228702 - ------------------------ ---------------------- (State of Incorporation) (I.R.S. Employer I.D.) Securities registered pursuant of Section 12(b) of the act: NAME OF EACH EXCHANGE ON TITLE OF EACH CLASS WHICH REGISTERED ------------------------------------ ----------------------- Class A Common Stock, $.10 par Value American Stock Exchange Class B Common Stock, $.10 par Value American Stock Exchange ------------------ The Registrant (1) HAS filed all reports required to be filed by Section 13 of the Securities Exchange Act of 1934 during the preceding twelve months; and (2) HAS been subject to the filing requirements for at least the past 90 days. 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 [ X ]. As of March 15, 2000, the Company had outstanding 1,863,649 shares of its Class A Common Stock and 2,761,875 shares of its Class B Common Stock. The aggregate market value of voting stock held by non-affiliates of the Registrant is $10,761,063 as of March 15, 2000. Part III of this Report is incorporated by reference to the Registrant's Proxy Statement which will be filed for the 2000 Annual Meeting, to be held on May 10, 2000. 2 ORIOLE HOMES CORP. FORM 10-K TABLE OF CONTENTS
Page Part I Item 1. Business ............................................................................................. 1 Item 2. Properties ........................................................................................... 14 Item 3. Legal Proceedings .................................................................................... 14 Item 4. Submission of Matters to a Vote of Security-Holders .................................................. 14 Part II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters ................................ 15 Item 6. Selected Financial Data .............................................................................. 16 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations ................ 17 Item 8. Financial Statements and Supplementary Data .......................................................... 23 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ................. 43 Part III Item 10. Directors and Executive Officers of the Registrant ................................................... 43 Item 11. Executive Compensation ............................................................................... 43 Item 12. Security Ownership of Certain Beneficial Owners and Management ....................................... 43 Item 13. Certain Relationships and Related Transactions ....................................................... 43 Part IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K ...................................... 44 Signatures ...................................................................................................... 46 Exhibit Index .......................................................................................................... 47
3 PART I ITEM 1 BUSINESS GENERAL Oriole Homes Corp. (together with its consolidated subsidiaries, the "Company" or "Oriole") builds and sells single-family homes, patio homes, townhomes, villas, duplexes and low and mid-rise condominiums, principally in southeast Florida. Oriole was incorporated in the State of Florida in 1968 as the successor to six corporations that had engaged in the construction and sale of single-family homes in Florida since 1963. The Company's executive office is located at 1690 South Congress Avenue, Suite 200, Delray Beach, Florida 33445, and its telephone number is (561) 274-2000. The Company is a leader in the "active adult" (age 55 and over) market in south Florida. In 1999, approximately 86% of the Company's revenues were derived from sales of homes in communities designed exclusively for active adults. According to various market studies conducted on behalf of the Company, during each of the last five years Oriole was the largest builder of condominiums for active adults in Palm Beach County, measured by dollar volume and number of units sold. Oriole designs its product mix in response to the preferences of active adults, a demographic group which, according to U.S. Census reports, enjoys a high percentage of discretionary income in this marketplace and is the fastest growing segment of the population in the United States. In 1999, homes in the Company's active adult communities sold at prices that ranged from $100,000 to $195,000. Approximately 54% of these sales were for cash. During the year ended December 31, 1999, the average sales price for housing units sold by the Company was $154,600. 1 4 HOME BUILDING DATA (IN 000's) The following table sets forth information concerning sales, new contracts and backlog for each of the past five years for the Company's homes:
YEARS ENDED DECEMBER 31, (DOLLARS IN THOUSANDS) --------------------------------------------------------------------------- 1999 1998 1997 1996 1995 ---- ---- ---- ---- ---- Total Sales Sales value $77,454 $82,737 $106,788 $100,661 $73,409 Number of homes 501 522 676 597 433 Total New Contracts Sales value $73,082 $75,876 $102,392 $110,122 $79,410 Number of homes 463 491 653 670 483 Total Backlog Sales value $29,181 $33,553 $ 40,414 $44,810 $35,349 Number of homes 174 212 243 266 193
The Company anticipates delivering substantially all backlog, both in number of homes and dollar amount, within a twelve month period. It generally takes eight months after receipt of a contract to deliver a home. OPERATING STRATEGIES The Company has attempted to maximize its financial return by (i) acquiring tracts of developed and undeveloped land and marketing this land in phases, (ii) developing planned communities, which permit the Company to take advantage of certain economies of scale, (iii) generally beginning construction only after a home is contracted for, and (iv) acting as general contractor and hiring subcontractors on a fixed-price or other negotiated cost-effective basis. In 1999, Oriole implemented certain strategic initiatives to help enhance profit margins, including the installation of a new information technology system. This system provided the infrastructure to support the evaluation, modification and automation of certain business processes in order to reduce home delivery time, enhance the quality of home construction and standardize options. 2 5 Market-driven attributes which have contributed to Oriole's success include, (i) construction of quality homes within communities that offer a significant range of amenities, and therefore satisfy customers who have provided a continual source of referrals, (ii) the offering of a wide selection of competitively priced housing, which includes a substantial product mix, (iii) extensive knowledge of the Florida market, and (iv) a land acquisition and development strategy that both permits development and construction in phases and ensures availability of strategically located land for future marketing. The Company will continue to adhere to most of its current operating strategies but will also adopt new strategies as it deems appropriate to meet evolving and increasingly competitive market conditions. In this regard, the Company continues to extend its geographic market into the central Florida area to take advantage of accelerated demand in those areas. It has also reduced reliance on the purchase of larger tracts of land outright with the use of "rolling" options and strategic alliances. The typical "rolling" option allows the Company an exclusive right to the future purchase of a predetermined quantity of land in a development at a price fixed at the original contract date, thereby allowing the Company to reduce its market risk by adjusting its level of investment. A typical strategic alliance allows for shared resources and risk between homebuilders and/or vendors in the purchase, development and marketing of large parcels of land. These alliances may take various forms; i.e. direct investment, joint ventures, etc. FLORIDA MARKET. The Company's residential developments are all located in the State of Florida and primarily in southeast and central Florida (Broward, Palm Beach, Osceola and Marion Counties). QUALITY CONSTRUCTION AND DIVERSE AMENITIES. The Company creates a total lifestyle experience for the active adult. The communities usually include extensive product mix and recreational facilities, which range from intimate social clubhouses and swimming pools to multi-million dollar clubhouse environments which include tennis courts, indoor and outdoor swimming pools, theaters for the performing arts, health clubs/spas and other amenities. 3 6 PRODUCT DIVERSIFICATION AND MERCHANDISING. The Company spends considerable effort in developing design, marketing and merchandising concepts for each of its communities. The design concepts determine the size, style and price range of homes, the layout of common areas and individual lots and the overall community presentation. The product line offered depends upon many factors, including the housing generally available in the area and the needs of a particular target market. After establishing design concepts and a marketing plan, the Company undertakes development activities which can include site planning and engineering and the construction of roads, sewer, water and drainage facilities and recreational facilities. Oriole seeks to appeal to a wide variety of buyers in different geographic locations with different individual risk profiles and lifestyle preferences and, accordingly, the Company offers a diversity of home styles and price ranges including single family, patio, townhomes, villas, duplexes and low and mid-rise condominiums. Sales prices range from $100,000 to $450,000, with an average price of $154,600 for homes delivered during 1999. See "COMMUNITIES CURRENTLY UNDER DEVELOPMENT OR CONSTRUCTION", at page 6. The Company offers a variety of options for each of its homes. Options permit buyers some flexibility to customize their homes on a design fee basis. Options also provide the Company with higher margins while allowing the Company to maintain the efficiencies of a production builder. The Company believes the availability of options increases the appeal of its homes and makes them desirable to a wide variety of buyers. LAND ACQUISITION AND DEVELOPMENT. The Company selects locations for its developments on the basis of accessibility to infrastructure such as major highways and thoroughfares, shopping areas, medical facilities and community cultural and recreation centers. The land is then separated into development phases and concepts, with actual construction typically beginning within one (1) year from the land acquisition date. The Company generally develops tracts of land that require site improvements prior to construction. This work sometimes requires that the Company maintain Performance Bonds with the appropriate regulatory authorities. 4 7 Oriole's general policy is not to begin construction of single-family homes prior to the execution of a sales contract, which minimizes the costs and risk of completed but unsold inventory. The Company will, however, begin multi-family construction (duplex, townhouse, villa and multi-story complexes) when (a) sales contracts are executed for a predetermined percentage of the total units available and (b) profit can be enhanced by matching production schedule to deliveries. LAND SALES. In the normal course of its business, the Company has and may sell land which either can be sold at an advantageous price due to market conditions or because it no longer meets the Company's marketing needs. Sales of this land may also be made because it is located in areas where the Company considers its inventory to be excessive or because the land has been zoned for commercial use. 5 8 COMMUNITIES CURRENTLY UNDER DEVELOPMENT OR CONSTRUCTION The following table summarizes information as of December 31, 1999 with respect to the Company's principal projects under development or construction during 1999.
UNITS SOLD NAME AND YEAR AND UNITS SOLD LOCATION OF DEVELOPMENT TOTAL UNITS DELIVERED AND DELIVERED DEVELOPMENT STARTED TYPE PLANNED THRU 1999 IN 1999 - ------------------------------------------------------------------------- ----------------- Country Glen 1993 Single 300 154 18 Cooper City Family Sandpiper Landing 1995 Single 145 145 29 Coconut Creek Family Coral Lakes 1992 Active 1,372(3) 789 137 Delray Beach Adult Palm Isles 1991 Active 992 992 18 Boynton Beach Adult Palm Isles West 1995 Active 235 189 46 Boynton Beach Adult Majestic Isles 1994 Active 450 382 86 Boynton Beach Adult Addison Green 1998 Active 130 4 4 Boynton Beach Adult
NAME AND LOCATION OF UNITS UNDER UNITS UNDER REMAINING DEVELOPMENT CONSTRUCTION(1) CONTRACT UNITS(2) - ----------------------------------------------------------------- ------------------- AT DECEMBER 31, 1999 ---------------------------------------------------------- Country Glen 9 10 136 Cooper City Sandpiper Landing -- -- -- Coconut Creek Coral Lakes 86 67 516 Delray Beach Palm Isles -- -- -- Boynton Beach Palm Isles West 14 15 31 Boynton Beach Majestic Isles 20 9 59 Boynton Beach Addison Green 12 11 115 Boynton Beach
6 9 COMMUNITIES CURRENTLY UNDER DEVELOPMENT OR CONSTRUCTION - Continued
UNITS SOLD NAME AND YEAR AND UNITS SOLD LOCATION OF DEVELOPMENT TOTAL UNITS DELIVERED AND DELIVERED DEVELOPMENT STARTED TYPE PLANNED THRU 1999 IN 1999 ---------------------------------------------------------------------------------- ---------------- Summer Chase 1989 Active 221 210 42 Lake Worth Adult Whispering Sound 1991 Active 230 230 24 Palm City/Stuart Adult Sandpiper Isles 1995 Mixed 70 (3) 70 11 Bonita Springs Sandpiper Greens 1995 Mixed 30 (3) 30 16 Bonita Springs Stonecrest 1995 Active 715 (4) 274 70 Ocala Adult Terrace Homes 1999 Mixed 99 -- -- Celebration
NAME AND LOCATION OF UNITS UNDER UNITS UNDER REMAINING DEVELOPMENT CONSTRUCTION(1) CONTRACT UNITS(2) ---------------------------------------------------------------------- ------------------- AT DECEMBER 31, 1999 ---------------------------------------------------------- Summer Chase 11 2 9 Lake Worth Whispering Sound -- -- -- Palm City/Stuart Sandpiper Isles -- -- -- Bonita Springs Sandpiper Greens -- -- -- Bonita Springs Stonecrest 59 60 381 Ocala Terrace Homes -- -- 99 Celebration
(1) Includes model units. (2) Includes model units and potential units to be constructed. (3) Reduction in original number of units purchased. (4) Includes purchase of additional land. 7 10 COUNTRY GLEN is a community of single-family homes located in Cooper City. The community consists of 300 units with recreational facilities under development and construction. Prices range from $298,000 to $400,000. SANDPIPER LANDING is in a 240 acre master planned private-gated community consisting of 145 three and four bedroom, two-car garage residences, located in Coconut Creek. Prices range from $129,000 to $160,000. This community was sold out in 1999. CORAL LAKES is an active adult community in Boynton Beach with a multi-million dollar on-site clubhouse with substantial amenities. The community of 1,372 units features condominiums in four-story buildings, coach homes and sections of single-family residences including the newly introduced enclave of Tuscany. Prices range from under $98,000 to $174,000. PALM ISLES is an active adult community of 992 residences in Boynton Beach. Prices in this community range from $129,000 to $140,000, and home styles include villas, duplexes, lakefront two-story condominiums and single-family residences. The community has a multi-million dollar on-site clubhouse and spa with eight tennis courts and satellite swimming pools. This community was sold out in 1999. PALM ISLES WEST, an active adult community in Boynton Beach, features 235 duplexes and single-family residences priced from $120,000 to $186,000. Residents of this community share Palm Isles' amenities, plus enjoy the convenience of a satellite swimming pool and sun deck within Palm Isles West. MAJESTIC ISLES is an active adult community of 450 duplexes and single-family residences located in Boynton Beach. Prices range from $128,000 to $183,000. The community features an intimate, luxury clubhouse with swimming pool and tennis courts. ADDISON GREEN is a gated community with a private recreation area in a section of the Aberdeen Golf and Country Club located in Boynton Beach. Aberdeen with its Tennis and Fitness Center overlooks an 18-hole golf course. Oriole's 130 single-family residences, with two-car garages, are priced from $160,000 to $184,000. SUMMER CHASE is a community for active adults located in Lake Worth. The community features 221 single-family residences with two-car garages. The price range is $145,000 to $169,000. A social clubhouse is available to all residents along with tennis courts and pool. 8 11 WHISPERING SOUND is an active adult community of 230 duplex residences located in Martin County in Palm City/Stuart. The residences range in price from $114,000 to $124,000. The community includes natural preserved areas offering backyard privacy for nearly every residence. The social clubhouse is available to all residents along with tennis courts and pool. This community was sold out in 1999. SANDPIPER ISLES, located in Bonita Springs, is a 70 home neighborhood of luxury 3 bedroom, 2 bath coach homes surrounded by lakes and preserves, priced from $167,000 and luxury 3 bedroom, 3 1/2 bath mid-rise condominiums, priced from $232,000. Included is a private social clubhouse, lakeside pool and gated entry. This community was sold out in 1999. SANDPIPER GREENS is a neighborhood of sixty 3 bedroom, 2 bath garden mid-rise residences adjoining a country club with a championship 18-hole golf course, priced from $148,000 to the mid $200's, located in Bonita Springs. Residents have the option of becoming members of the country club. This community was sold out in 1999. STONECREST is an active adult community consisting of 715 single-family homes priced from $90,000 to $160,000, offering championship golf and a social recreational clubhouse with pool, located in Marion County. TERRACE HOMES at Celebration, located in Disney's planned community, will feature multi-family condominium residences. Construction is planned for Summer, 2000. CONSTRUCTION Oriole is the general contractor for the construction of its developments. Company employees monitor the construction of each project, participate in design and building decisions, coordinate the activities of subcontractors and suppliers, maintain quality and cost controls and monitor compliance with zoning and building codes. Subcontractors typically are retained for a specified phase of development pursuant to a contract that obligates construction at a fixed price. Agreements with subcontractors are generally subject to competitive bidding, with the Company continuously negotiating prices and other significant terms with its subcontractors. The Company does not have any commitment beyond one (1) year with any subcontractor. At December 31, 1999, the Company employed approximately 38 people in the construction operation. Most materials are obtained by subcontractors and are readily available from numerous sources at commercially reasonable prices. 9 12 The Company has not experienced any material delays in construction due to shortages of materials or labor, but has experienced cost increases due to shortages of certain types of experienced labor. There has been a significant increase in construction activity in Florida which has resulted in material shortages for some competitors and could, but has not yet, affected the Company's supply of labor and materials. MARKETING AND SALES The Company sells its homes primarily through commissioned employees who typically work in model sales centers or from offices located in model homes in the communities. The Company may also sell through independent brokers. Oriole's sales and marketing organization consists of approximately 42 employees, many of whom are licensed real estate agents in Florida. The Company advertises in newspapers and magazines, by direct mail, on billboards and by electronic media. In fiscal 1999, the Company's aggregate advertising cost was about $1.6 million. Oriole maintains model homes in most of its communities and management believes that these units play a particularly important role in the Company's marketing and merchandising efforts. COMPETITION AND MARKET INFLUENCES The business of developing and selling residential properties and planned communities is highly competitive and fragmented. The Company competes with numerous large and small builders on the basis of a number of interrelated factors, including location, reputation, amenities, design, quality and price. Some competing builders have nationwide operations and substantially greater financial resources. The Company's products must also compete with resales of existing homes and available rental housing. As discussed, management believes that the Company's primary competitive strengths have been location, reputation, price, design, value engineering, amenities and over 24,000 satisfied customers who provide Oriole with a continuous source of referrals. In general, the housing industry is cyclical and is affected by consumer confidence levels, prevailing economic conditions and interest rates. A variety of factors affect the demand for new homes, including the availability and cost of labor and materials, changes in costs associated with home ownership, changes in consumer preferences, demographic trends and the availability of mortgage financing. 10 13 The Company has enjoyed doing business in a geographic area with relatively positive market demand factors for a number of years including higher than U.S. average population growth, employment growth and household and per capita income. In addition, market demographics is strongly weighted in favor of the Company's primary customer base, namely older segments of the population with an average head of household age of 54 + years. There is no guarantee, however, that these positive trends will continue. REGULATION AND ENVIRONMENTAL MATTERS In developing a community, the Company must obtain the approval of numerous government authorities that regulate such matters as permitted land uses, density levels, the installation of utilities such as water, drainage and waste disposal, and the dedication of acreage for open space, parks, schools and other community purposes. Several authorities in Florida have imposed impact fees as a means of defraying the costs of providing certain governmental services to developing areas. The amount of these fees has increased significantly during recent years. Building codes generally require the use of specific construction materials which increases the energy efficiency of homes. In addition, each county in which the Company is building has imposed restrictive zoning and density requirements in order to limit the number of persons who live and work within certain boundaries. Counties and cities within Florida have also, at times, declared moratoriums on the issuance of building permits and imposed other restrictions in the areas where sewage treatment facilities and other public facilities do not reach minimum standards. Certain permits and approvals will be required to complete the communities under development and currently being planned by Oriole. To date, restrictive zoning laws, impact fees, and imposition of moratoriums have not had a material adverse effect on the Company's development activities. However, there is no assurance that such restrictions will not adversely affect the Company in the future. The Company is also subject to a variety of federal, state and local statutes, ordinances, rules and regulations concerning protection of the environment. Environmental laws vary greatly depending on the community's location, the site's environmental conditions and the present and former uses of the site. These environmental laws may result in delays, causing the Company to incur substantial compliance and other costs, and prohibit or severely restrict development. Prior to consummating the purchase of land, the Company engages independent environmental engineers to evaluate the land for the presence of hazardous or toxic materials, wastes, or substances. Oriole has not been 11 14 adversely affected to date by the presence or potential presence of such materials, but there is no assurance that environmental issues will not adversely affect the Company in the future. The Florida Local Government Comprehensive Planning and Land Development Regulation Act (the "Act") provides that public facilities, including, but not limited to: sewer, solid waste, drainage, potable water, parks, roads and recreation facilities, shall be available concurrently with the impact of land development projects that would use such facilities. This requirement is known as the "concurrency" requirement and counties and cities are required to implement concurrency by adopting local comprehensive plans and land development regulations. These plans and regulations establish the guidelines for concurrency review and the exemptions from the concurrency requirement. All of the Company's projects have been found to satisfy concurrency requirements. The Company must also comply with regulations by federal and state authorities relating to the sale and advertising of residential real estate, including the preparation of registration statements or other disclosure type documents to be filed with designated regulatory agencies. CUSTOMER FINANCING AND SERVICES The Company arranges title insurance for, and provides closing services to, buyers of the Company's homes and other outside customers. Oriole also works with mortgage lenders to provide buyers with conventional financing programs. By making available a variety of attractive programs, the Company is able to more efficiently expedite the entire sales transaction by assuring that necessary mortgage commitments and other necessary conditions of sales are obtained. The State of Florida requires that certain customer deposits be held in segregated bank accounts. As of December 31, 1999, the Company has posted bonds of $1.0 million and had entered into an escrow agreement with a bank and the State of Florida which allows the Company to use customer deposits under certain circumstances. RENTAL ARRANGEMENTS The Company currently owns 39 rental units in Miramar, Florida known as Lakeshore at University Park. The Company leases these apartments through an independent management company, typically for one year. In addition, in connection with certain housing developments, the Company leases recreation facilities. 12 15 JOINT VENTURES Oriole is a participant in a joint venture to construct and sell homes with another builder of residential housing in southeastern Florida. The project is for 1,000 units and is known as Regency Lakes. Oriole invested $5.1 million in 1994 and has received $2.5 million from the sale of lots in addition to guaranteed returns ranging from 10% to 15%. There were no advances to the joint venture in 1999. In January, 2000, the Company received $1.2 million from the sale of the joint venture's remaining lots. The balance of the Company's investment of $1.4 million is unrecoverable and has been written off as of December 31, 1999. EMPLOYEES The Company employs approximately 123 persons, 6 of whom are senior executives and 26 of whom are management personnel. The Company has had no major work stoppages as a result of labor disputes and believes that relations with its employees and its subcontractors are good. There are no collective bargaining agreements with employees. 13 16 ITEM 2 PROPERTIES The Company leases 19,700 square feet of space in a two-story office building in Delray Beach as its principal business office. The lease expires December 31, 2002 and can be renewed, at the Company's option, for an additional five year period. ITEM 3 LEGAL PROCEEDINGS The Company is a party to various lawsuits, all of which are of a routine nature and are incidental to the Company's present business activities. These proceedings are not material, nor would the adverse resolution thereof materially affect the business or properties of the Company. ITEM 4 SUBMISSION OF MATTERS TO A VOTE BY SECURITY HOLDERS No matters were submitted to security holders during the 4th quarter. The Annual Meeting of Shareholders of the Registrant has been scheduled for May 10, 2000. The Company will file its definitive proxy materials pursuant to Regulation 14A on or prior to April 28, 2000. 14 17 PART II ITEM 5 MARKET FOR REGISTRANT'S COMMON EQUITY The Company has two classes of common stock, Class A Common Stock and Class B Common Stock, which, at December 31, 1999, were held by approximately 233 and 194 shareholders of record, respectively. Both the Class A Common Stock and the Class B Common Stock are traded on the American Stock Exchange under the symbols OHC.A and OHC.B. The following sets forth the range of high and low sale prices:
CLASS A CLASS B --------------- ------------------ QUARTER 1999 HIGH LOW HIGH LOW ------------ ---- --- ---- --- First 2.69 2.00 2.50 1.81 Second 2.00 1.50 2.00 1.50 Third 2.75 1.88 2.81 1.06 Fourth 2.38 1.50 1.50 .88
CLASS A CLASS B --------------- ------------------ QUARTER 1998 HIGH LOW HIGH LOW ------------ ---- --- ---- --- First 5.25 4.38 5.00 4.00 Second 5.25 4.63 5.19 4.63 Third 5.00 3.94 4.88 3.63 Fourth 3.75 2.25 3.75 2.13
On March 15, 2000, the last reported sales prices of the Class A Common Stock and Class B Common Stock were $2.65 and $2.13 per share, respectively. On the same date, there were 230 shareholders of record of Class A Common Stock and 193 shareholders of record of Class B Common Stock. 15 18 The Company currently intends to retain its future earnings to finance the development of its business. In addition, the Company is currently restricted from the payment of cash dividends on its Common Stock under the terms of the Senior Notes. Accordingly, the Company does not anticipate paying any cash dividends on its Common Stock in the foreseeable future. The payment of any future dividends will be at the discretion of the Company's Board of Directors and will depend upon, among other things, future earnings, the success of the Company's development activities, capital requirements, restrictions in financing arrangements, the general financial condition of the Company and general business conditions. ITEM 6 SELECTED FINANCIAL DATA The following table sets forth selected financial data for the Company and its consolidated subsidiaries and should be read in conjunction with the financial statements included elsewhere in this Form 10-K. The data set forth below as of and for the years ended December 31, 1999, 1998, 1997, 1996 and 1995 have been derived from the Company's audited consolidated financial statements.
IN THOUSANDS (EXCEPT PER SHARE DATA) 1999 1998 1997 1996 1995 - --------------------------------------------------------------------------------------------------------- Revenues .................................. 87,936 91,065 116,190 111,619 82,236 Net Income (loss) ......................... (5,042) 82 (20,850) 85 (11,762) Shareholders' Equity ...................... 41,937 46,979 46,897 67,747 67,661 Average Shareholders' Return on Equity .... (12.02%) .17% (44.46%) .13% (17.38%) Total Assets .............................. 102,041 135,226 145,060 175,546 179,478 Net Income (loss) per Share (Class A and B) (1.09) .02 (4.51) .02 (2.54) Dividends- Class A ........................ -- -- -- -- -- Dividends- Class B ........................ -- -- -- -- -- Average Shares Outstanding ................ 4,626 4,626 4,626 4,626 4,626
16 19 ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW REVENUES. The following table sets forth for the periods indicated certain components of the revenues expressed as a percentage of total revenues.
- -------------------------------------------------------------------------------------------------------------------- PERCENTAGE OF TOTAL REVENUES YEARS ENDED DECEMBER 31, - -------------------------------------------------------------------------------------------------------------------- 1999 1998 1997 ----------------------------------------------------- Sale of homes 88.1% 90.9% 91.9% Sales of land -- -- .1 Other operating revenues 2.3 4.2 2.9 Interest, rentals and other income 2.7 3.5 2.8 Gain on sales of property and equipment and land held for investment, net 6.9 1.4 2.3 Selling, general and administrative expenses 16.0 16.6 15.4 Net income (loss) (5.7) .1 (17.9) - --------------------------------------------------------------------------------------------------------------------
BACKLOG. The following table sets forth the Company's backlog at December 31, 1999, 1998 and 1997. Backlog generally represents units under a standard contract for which a full deposit has been received and any statutory rescission right has expired. The Company generally fills backlog within twelve months and estimates that the period between receipt of a sales contract and delivery of the completed home to be eight months. Trends in the Company's backlog are subject to change from period to period corresponding to changes in certain economic conditions including consumer confidence levels and the availability and cost of financing.
- -------------------------------------------------------------------------------------------------------------------- NUMBER AGGREGATE OF VALUE DECEMBER 31 UNITS (DOLLARS IN THOUSANDS) - -------------------------------------------------------------------------------------------------------------------- 1999 174 29.2 1998 212 33.6 1997 243 40.4 - --------------------------------------------------------------------------------------------------------------------
17 20 RESULTS OF OPERATIONS YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998 Revenues from home sales decreased $5.3 million (6.4%) during the fiscal year 1999 as compared to 1998 primarily as a result of a reduction in the number of homes delivered. Oriole delivered 501 homes in 1999 compared to 522 in 1998, with a slight decrease in the average selling price of deliveries from $158,500 to $154,600. The number of new contracts signed and the aggregate dollar value of those contracts decreased to 463 and $73.1 million in 1999 from 491 and $75.9 million, respectively, in 1998. The average selling price of homes under new contracts in 1999 was approximately the same as in 1998. Non-homebuilding revenues increased $3.0 million in 1999 as compared to the same period in 1998 due to the sale of certain property and equipment and land held for investment. Interest, rentals and other income decreased $0.8 million in 1999 compared to the same period in 1998 primarily as the result of a decrease in rental income due to one of the property sales noted above. Cost of home sales decreased by $1.1 million (1.5%) to $70.3 million in 1999 as compared to 1998. As a percentage of home sales, cost of sales actually increased in 1999 to 90.8% from 86.3% in 1998 due to the impact of higher previously capitalized interest. Selling, general and administrative expenses decreased $1.0 million (6.8%). This improvement was the result of reductions in advertising, promotion and sales commission expense associated with a workforce reduction program. The Company incurred a net loss in 1999 of $5.0 million, or $1.09 per share, as compared to net income of $0.1 million, or $0.02 per share in 1998. Included in this net loss are non-cash pre-tax charges of $4.9 million representing an inventory valuation adjustment affecting the value of land inventory for approximately 250 unsold housing units located in four developments and a write-down of $1.4 million of an investment in a joint venture. EBITDA, inclusive of the 1999 non-cash valuation adjustments, increased $0.5 million to $9.8 million in 1999 from $9.3 million in 1998 primarily due to the increase in non-homebuilding revenues. EBITDA was also affected by the factors influencing net income discussed above. 18 21 RESULT OF OPERATIONS YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997 Revenues from home sales decreased $24.1 million (22.5%) during the fiscal year 1998 as compared to 1997 primarily as a result of a reduction in the number of homes delivered. Oriole delivered 522 homes in 1998 compared to 676 in 1997, with a slight increase in the average selling price of deliveries from $158,000 to $158,500. The number of new contracts signed and the aggregate dollar value of those new contracts decreased to 491 and $75.9 million in 1998 from 653 and $102.4 million, respectively, in 1997. The average selling price of homes under new contracts in 1998 was approximately the same as in 1997. The reduction in the level of activity was the result of a lag in deliveries due to an operational strategies to introduce new redesigned product and to balance sales deliveries with construction cycle time. Other operating revenues and interest, rentals and other income increased to $7.0 million in 1998 as compared to $6.7 million in 1997 due to sales of recreation facility leases and a lower vacancy rate in the Company's rental property. Cost of home sales decreased by 24.8% to $71.4 million from $95.0 million in 1997 as a result of a decrease in the number of homes delivered. As a percentage of home sales, cost of sales decreased to 86.3% in 1998 from 88.0% in 1997 due to the positive impact of the prior year 1997 inventory valuation adjustment and the execution of a strategy to better match construction delivery schedules with sales pace. Selling, general and administrative expenses, exclusive of the $0.2 million amortization associated with the purchase of $11.0 million of the Company's Senior Notes, decreased by $3.0 million, or 15.6% to $15.1 million in 1998 compared to 1997. This improvement was the result of the implementation of strategic initiatives designed to enhance operating efficiencies, which included a workforce reduction program, a centralized purchasing initiative, the redesign of the sales incentive compensation program and functional outsourcing. During the year ended December 31, 1997, the Company had a net loss of $20.8 million ($4.51 per share) primarily because of the write-down in value of certain land inventory and write-down of the cost of a rental apartment project to estimated fair market value less cost to sell. These write-downs resulted in non-cash, pre-tax charges of $17.1 million and $4.5 million, respectively. The net loss for 1997 calculated without giving effect to these write-offs and before related 1997 income tax benefits was $1.4 million ($0.31 per share) compared to a net income of $0.1 million ($0.02 per share) in 1998. 19 22 FINANCIAL POSITION. The following table sets forth selected balance sheet items of the Company at December 31, 1999 and 1998. - -------------------------------------------------------------------------------- YEARS ENDED DECEMBER 31, (DOLLARS IN THOUSANDS) - -------------------------------------------------------------------------------- 1999 1998 --------------------------------- Cash $ 18.7 $ 10.6 Inventories 73.0 97.1 Senior Notes, at face value 43.1 56.3 Other Liabilities 17.0 31.9 - ------------------------------------------------------------------------------- LIQUIDITY AND CAPITAL RESOURCES The Company's cash requirements vary from period to period depending upon changes in inventory, land acquisition and development requirements, construction in progress and, to a lesser extent, the Company's current net income. The Company obtains funds for its cash requirements from operations, the sale of investment property and borrowings. In connection with land acquisitions and development, the Company may borrow money secured by land and improvements. In addition, the Company has a revolving line of credit in the amount of $10.0 million (the "Revolving Line of Credit") available for general cash requirements. As of December 31, 1999, the Company had approximately $18.7 million in cash and cash equivalents and substantially the entire amount of the Revolving Line of Credit was available. The Company believes that these resources are sufficient to provide for its cash requirements during 2000. In 1999 the Company purchased land for development purposes totaling approximately $3.6 million, using approximately $2.6 million in cash and approximately $1.0 million in financing secured by a promissory note on certain real property. In addition, the Company used available cash to repurchase $13.2 million of the Company's 12 1/2% Senior Notes due January 15, 2003 (the "Senior Notes") and retire an existing $12.2 million mortgage on a rental property. As of December 31, 1999 Senior Notes having a face value of $43.1 million were outstanding. Under the terms of the Senior Notes indenture (the "Indenture"), the Company may redeem the Senior Notes at 105% of their principal amount on or after January 15, 1998 and thereafter at prices declining to 100% of their principal amount on January 15, 2001. 20 23 The Indenture requires the Company to meet sinking fund payments on the original $70.0 million issue of $17.5 million on January 15, 2001 and 2002. In addition, the Indenture restricts the amount and type of additional indebtedness that the Company may incur and restricts the purchase by the Company of its common stock and the payment of cash dividends until the Company has achieved cumulative net income in excess of $72.2 million. As of December 31, 1999, the Company was not permitted to purchase common stock or pay cash dividends. Borrowings under the Revolving Line of Credit are secured by a mortgage on certain real property of the Company. Under the terms of the Revolving Line of Credit, the Company is subject to customary covenants and restrictions, including those relating to maintenance of consolidated tangible net worth and the issuance of certain types of additional debt. Oriole believes that it will be able to further extend the Revolving Line of Credit beyond its scheduled expiration date or obtain a replacement credit facility if necessary, but there can be no assurance that it will be able to extend its existing facility or obtain a replacement credit facility. Oriole has a mortgage on certain property with an outstanding principal balance of $3.3 million. The interest rate on the loan is adjusted monthly to a Libor market rate index plus .275% or the bank's prime rate, at the Company's option. In addition at December 31, 1999, Oriole had a promissory note of $1.0 million bearing interest at 8.00% per annum, collateralized by land. The principal and accrued interest were due and paid in January, 2000. As of December 31, 1999, the Company had no firm commitments for capital expenditures. FORWARD LOOKING STATEMENTS Certain statements made in this document, including certain statements made in Management's Discussion and Analysis, contain "forward looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, regarding the expectations of management with respect to revenues, profitability, marketplace conditions, adequacy of funds from operations and regulatory conditions applicable to the Company, among other things. Management cautions that these statements are qualified by their terms and/or important factors, many of which are outside the control of the Company, that could cause actual results and events to differ materially from the statements made herein, including, but not limited to the following: changes in consumer preferences, increases in interest rates, a reduction in labor availability, increases in the cost of labor and materials, changes in the 21 24 regulatory environment particularly as relates to zoning and land use, competitive pricing pressures, the general state of the economy, both nationally and in the Company's market, unseasonable weather trends, and the effect on the Company, its subcontractors and suppliers, disruptions caused by deficiencies in the ability of computer hardware and software to process information with dates or date ranges spanning the year 2000 and beyond. INFLATION The Company, as well as the home building industry in general, may be adversely affected during periods of high inflation, primarily because of higher land and construction costs. In addition, higher mortgage interest rates may affect the affordability and availability of permanent mortgage financing to prospective purchasers. Inflation also increases the cost of labor and materials. The Company attempts to pass through to its customers any increases in its costs through increased selling prices. During the last three years, the Company has experienced a reduction in gross margins on the sale of homes due in part to the inability to pass on increased construction costs. There is no assurance that inflation will not have an adverse impact on the future results of operations of the Company. INTEREST RATES Overall housing demand is adversely affected by increases in interest costs. If mortgage interest rates increase significantly, this may negatively impact the ability of a homebuyer to secure adequate financing. Although about 54% of the Company's current sales are for cash, there is no guarantee that future sales will be made on such terms in comparable amounts. As such, higher interest rates may adversely affect the Company's revenues, gross margins and/or net income. 22 25 ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO FINANCIAL STATEMENTS AND SCHEDULES PAGE ---- Consolidated Balance Sheets as of December 31, 1999 and 1998 ........................................ 24 Consolidated Statements of Operations for the Years Ended December 31, 1999, 1998 and 1997 .................................. 26 Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 1999, 1998 and 1997 .................................. 27 Consolidated Statements of Cash Flows for the Years Ended December 31, 1999, 1998 and 1997 .................................. 28 Notes to Consolidated Financial Statements ........................ 29 Management's Responsibility for Financial Statements .............. 41 Report of Independent Accountants ................................. 42 23 26 ORIOLE HOMES CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, ASSETS
1999 1998 ------------ ------------ Cash and cash equivalents ...................................... $ 18,708,081 $ 10,557,772 ------------ ------------ Receivables Mortgage notes ............................................ 262,240 953,284 ------------ ------------ Inventories Land ...................................................... 49,170,778 59,059,535 Homes completed or under construction ..................... 27,562,235 42,763,798 Model homes ............................................... 3,856,810 4,360,514 ------------ ------------ 80,589,823 106,183,847 Less estimated costs of completion included in inventories .......................................... 7,574,038 9,080,857 ------------ ------------ 73,015,785 97,102,990 ------------ ------------ Property and equipment, at cost Land ...................................................... 152,448 517,554 Buildings ................................................. 2,671,438 3,505,343 Furniture, fixtures and equipment ......................... 2,595,802 3,445,563 ------------ ------------ 5,419,688 7,468,460 Less accumulated depreciation .................................. 2,978,526 4,070,613 ------------ ------------ 2,441,162 3,397,847 ------------ ------------ Property and equipment held for sale, at cost .................. -- 11,956,165 ------------ ------------ Investments in and advances to joint ventures .................. 1,242,240 3,288,596 ------------ ------------ Land held for investment, at cost .............................. 1,857,300 2,127,009 ------------ ------------ Other Prepaid expenses .......................................... 1,075,934 1,719,517 Unamortized debt issuance costs ........................... 661,429 1,111,696 Other assets .............................................. 2,776,732 3,011,589 ------------ ------------ 4,514,095 5,842,802 ------------ ------------ Total assets ................................. $102,040,903 $135,226,465 ============ ============
The accompanying notes are an integral part of these statements. 24 27 ORIOLE HOMES CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS - CONTINUED DECEMBER 31, LIABILITIES AND SHAREHOLDERS' EQUITY
1999 1998 ------------ ------------ Liabilities Line of credit ............................................ $ 10,000 $ 10,000 Mortgage notes payable .................................... 4,306,372 15,970,385 Accounts payable and accrued liabilities .................. 8,555,721 11,664,858 Customer deposits ......................................... 4,583,143 5,095,182 Senior notes .............................................. 42,648,760 55,507,312 ------------ ------------ Total liabilities ............................ 60,103,996 88,247,737 ------------ ------------ Shareholders' equity Class A common stock, $.10 par value Authorized - 10,000,000 shares issued and outstanding - 1,863,649 in 1999 and 1,864,149 in 1998 ....................... 186,365 186,415 Class B common stock, $.10 par value Authorized - 10,000,000 shares issued and outstanding - 2,761,875 in 1999 and 2,761,375 in 1998 ....................... 276,188 276,138 Additional paid-in capital ................................ 19,267,327 19,267,327 Retained earnings ......................................... 22,207,027 27,248,848 ------------ ------------ Total shareholders' equity ................... 41,936,907 46,978,728 ------------ ------------ Total liabilities and shareholders' equity ...................................... $102,040,903 $135,226,465 ============ ============
The accompanying notes are an integral part of these statements. 25 28 ORIOLE HOMES CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31,
1999 1998 1997 ---------------- --------------- ---------------- Revenues Sales of homes $ 77,454,410 $ 82,736,768 $ 106,787,968 Sales of land -- 8,500 56,500 Other operating revenues 2,003,522 3,873,699 3,426,228 Gain on sale of property and equipment, net 3,745,618 -- -- Gain on sales of land held for investment and other assets, net 2,305,603 1,225,190 2,633,761 Interest, rentals and other income 2,426,739 3,221,183 3,286,038 ---------------- --------------- ---------------- 87,935,892 91,065,340 116,190,495 ---------------- --------------- ---------------- Costs and expenses Cost of homes 70,308,875 71,420,904 94,981,000 Inventory valuation adjustment 4,860,636 -- 17,050,000 Fixed asset valuation adjustment -- -- 4,525,000 Cost of land sold -- 2,097 14,638 Loss on joint venture investment 1,430,083 -- -- Costs relating to other operating revenues 1,892,866 3,289,012 3,983,745 Selling, general and administrative expenses 14,074,117 15,095,165 17,878,373 Interest costs incurred 6,888,691 8,764,448 9,910,964 Interest capitalized (deduct) (6,477,555) (7,588,039) (9,150,552) ----------------- --------------- ---------------- 92,977,713 90,983,587 139,193,168 ---------------- --------------- ---------------- Income (loss) before benefit from income taxes (5,041,821) 81,753 (23,002,673) Income tax benefit Current -- -- (765,437) Deferred -- -- (1,387,473) ---------------- --------------- ----------------- -- -- (2,152,910) ---------------- --------------- ----------------- Net income (loss) $ (5,041,821) $ 81,753 $ (20,849,763) ================= =============== ================= Net income (loss) per Class A and Class B common share available for common stockholders - Basic and Diluted $ (1.09) $ .02 $ (4.51) ================ =============== ================ Weighted average number of common stock outstanding - Basic 4,625,524 4,625,524 4,625,524 ================ =============== ================ - Diluted 4,625,524 4,625,549 4,625,524 ================ =============== ================
The accompanying notes are an integral part of these statements. 26 29 ORIOLE HOMES CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
COMMON STOCK ---------------------------------------------------------- CLASS A CLASS B ADDITIONAL ---------------------------- --------------------------- PAID-IN RETAINED SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS ------------ ------------ ------------ ------------ ------------ ------------ Balance at January 1, 1997 1,874,949 $ 187,495 2,750,575 $ 275,058 $ 19,267,327 $ 48,016,858 Net loss for 1997 -- -- -- -- -- (20,849,763) Stock conversion (10,800) (1,080) 10,800 1,080 -- -- ------------ ------------ ------------ ------------ ------------ ------------ Balance at December 31, 1997 1,864,149 186,415 2,761,375 276,138 19,267,327 27,167,095 Net income for 1998 -- -- -- -- -- 81,753 ------------ ------------ ------------ ------------ ------------ ------------ Balance at December 31, 1998 1,864,149 186,415 2,761,375 276,138 19,267,327 27,248,848 Net loss for 1999 -- -- -- -- -- (5,041,821) Stock conversion (500) (50) 500 50 -- -- ------------ ------------ ------------ ------------ ------------ ------------ Balance at December 31, 1999 1,863,649 $ 186,365 2,761,875 $ 276,188 $ 19,267,327 $ 22,207,027 ============ ============ ============ ============ ============ ============
The accompanying notes are an integral part of this statement. 27 30 ORIOLE HOMES CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31,
1999 1998 1997 ------------ ------------- ------------ Cash flows from operating activities Net income (loss) $ (5,041,821) $ 81,753 $(20,849,763) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities Depreciation 892,446 1,320,976 1,377,780 Amortization 759,715 785,769 503,648 Deferred income taxes -- -- (1,387,473) Gain on sales of property and equipment and land held for investment, net (6,051,221) (1,225,190) (2,633,761) Inventory valuation adjustment 4,860,636 -- 17,050,000 Fixed asset valuation adjustment -- -- 4,525,000 Loss on joint venture investment 1,430,083 -- -- (Increase) decrease in operating assets Receivables 691,044 (685,961) 9,882 Income taxes receivable -- 765,437 1,633,477 Inventories 17,601,052 (3,651,987) 15,654,771 Other assets 878,440 1,121,158 (708,715) Increase (decrease) in operating liabilities Accounts payable and accrued liabilities (3,109,137) (1,476,633) (4,189,180) Customer deposits (512,039) (1,293,963) (1,194,426) ------------ ------------ ------------ Total adjustments 17,441,019 (4,340,394) 30,641,003 ------------ ------------ ------------ Net cash provided by (used in) operating activities 12,399,198 (4,258,641) 9,791,240 ------------ ------------ ------------ Cash flows from investing activities Return from joint ventures 616,273 1,206,404 2,036,000 Capital expenditures (694,787) (1,084,857) (398,051) Sales of property and equipment and land held for investment 20,661,638 2,354,403 9,102,514 ------------ ------------ ------------ Net cash provided by investing activities 20,583,124 2,475,950 10,740,463 ------------ ------------ ------------ Cash flows from financing activities Proceeds from mortgage notes 1,575,101 3,750,000 -- Payment of mortgage notes (13,239,114) (218,060) (203,056) Borrowings under line of credit agreement -- -- 15,100,000 Repayments under line of credit agreement -- -- (17,790,000) Repurchase of senior notes (13,168,000) (11,022,000) (150,000) Issuance costs -- -- (67,500) ------------ ------------ ------------ Net cash (used in) financing activities (24,832,013) (7,490,060) (3,110,556) ------------ ------------ ------------ Net increase (decrease) in cash and cash equivalents 8,150,309 (9,272,751) 17,421,147 Cash and cash equivalents at beginning of year 10,557,772 19,830,523 2,409,376 ------------ ------------ ------------ Cash and cash equivalents at end of year $ 18,708,081 $ 10,557,772 $ 19,830,523 ============ ============ ============ Supplemental disclosures of cash flow information Cash paid during the year for: Interest (net of amount capitalized) $ 820,159 $ 1,620,812 $ 590,868 Income taxes $ -- $ 2,627 $ --
The accompanying notes are an integral part of these statements. 28 31 ORIOLE HOMES CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION BASIS OF PRESENTATION AND BUSINESS The consolidated financial statements include the accounts of Oriole Homes Corp. and all wholly-owned subsidiaries (the "Company"). Significant intercompany accounts and transactions, if any, have been eliminated in consolidation. The Company, a Florida corporation, is engaged principally in the design, construction, marketing and sale of single-family homes, patio homes, townhomes, villas, duplexes and low and mid-rise condominiums in Palm Beach, Broward, Martin, Lee, Marion and Osceola counties in Florida. REVENUE RECOGNITION The Company records sales of real estate in accordance with generally accepted accounting principles governing profit recognition for real estate transactions. INVENTORIES Inventories are carried at land cost, plus accumulated development and construction costs (including capitalized interest and real estate taxes). Homes which are completed and being held for sale aggregate approximately $10,200,000 in 1999 and $23,000,000 in 1998. The accumulated costs of land and homes is not in excess of estimated fair value less cost to sell. Estimated fair value less cost to sell is based upon sales and backlog in the normal course of business less estimated cost to complete and dispose of the property. The Company's management, on a continuous basis, reviews individual projects in inventory for potential adjustments in net realizable value. The Company capitalizes certain interest costs incurred on land under development and homes under construction. Such capitalized interest is included in cost of home sales when the units are delivered. PROPERTY AND EQUIPMENT Property and equipment is stated at cost. The Company provides for depreciation of property and equipment by the straight-line method over the following estimated useful lives of the various classes of depreciable assets: Buildings 25 to 31.5 years Furniture, fixtures and equipment 5 to 7 years SENIOR NOTE ISSUANCE COSTS AND UNAMORTIZED DISCOUNT Costs incurred in connection with the Senior Notes have been deferred and are being amortized by using the interest method over the term of the debt. 29 32 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION - Continued CASH EQUIVALENTS Cash equivalents consist of highly liquid investments with maturities of one month or less when purchased. NET INCOME (LOSS) PER SHARE Net income (loss) per common share is computed by dividing net income (loss) by the weighted average shares outstanding during each year. The computation of diluted net income (loss) per share includes all dilutive common stock equivalents in the weighted average shares outstanding during each year. ADVERTISING The Company expenses advertising costs as incurred. Advertising expense for the years ended December 31, 1999, 1998 and 1997 was $1,584,483, $2,079,033 and $1,868,236, respectively. ESTIMATES In preparing financial statements in conformity with generally accepted accounting principles, management makes estimates and assumptions that affect the reported amounts and disclosures of assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. INCOME TAXES The Company accounts for income taxes under Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). This statement requires an asset and liability approach to account for income taxes. The Company provides deferred income taxes for temporary differences that will result in taxable or deductible amounts in future years based on the reporting of certain costs in different periods for financial statement and income tax purposes. A valuation allowance is established for deferred tax assets when it is more likely than not that a tax benefit will not be realized. NOTE B - MORTGAGE NOTES First and second mortgage notes receivable bear interest at rates ranging from 7.75% to 10.0%. The Company's receivables are primarily mortgages, which are collateralized by real estate. The amounts are due in year 2000. 30 33 NOTE C - INVENTORIES Information related to the interest component capitalized in the Company's inventories is as follows:
YEARS ENDED DECEMBER 31, -------------------------------------------- 1999 1998 1997 ----- ----- ---- Interest capitalized in inventories, beginning of period $ 14,221,491 $ 12,626,682 $ 21,241,460 Interest capitalized 6,477,555 7,588,039 9,150,552 Interest expensed to cost of sales - operations (6,480,654) (5,993,230) (6,420,951) Interest expensed - valuation adjustment (3,624,686) -- (11,344,379) ------------- ------------- ------------- Interest capitalized in inventories, end of period $ 10,593,706 $ 14,221,491 $ 12,626,682 ============= ============= =============
NOTE D - INVENTORY AND FIXED ASSET VALUATION ADJUSTMENTS The Company follows Statement of Financial Accounting Standards ("SFAS") No. 121, which requires that long-lived assets held and used by an entity be reviewed for impairment whenever events or changes indicate that the net book value of the asset may not be recoverable. An impairment loss is recognized if the sum of the undiscounted expected future cash flows from the use of the asset is less than the net book value of the asset. The Company periodically reviews the carrying value of its assets and, if such reviews indicate a lack of recovery of the net book value, adjusts the assets accordingly. In this regard, the Company recorded in the second and fourth quarters of 1999, non-cash valuation adjustments totaling $2,480,695 and $2,379,941 respectively (or $.54 and $.42 per common share, respectively). These adjustments reduced certain inventory to estimated fair value less cost to sell. The inventory adjustments pertained to land inventory for approximately 344 unsold housing units located in four developments. The Company recorded in the first and second quarters of 1997, non-cash inventory and fixed asset valuation adjustments totaling $17,050,000 and $4,525,000, respectively. These adjustments reduced certain inventory to estimated fair value less cost to sell. The inventory adjustment pertained to land inventory for approximately 2,200 unsold housing units located in five developments. The fixed asset adjustment pertained to rental property which management had decided to sell, and, as such, the Company had reduced the rental property's carrying amount to its fair value less cost to sell. NOTE E - LIFE INSURANCE The Company has purchased life insurance on the lives of two of its officers and their spouses who own significant shares of common stock of the Company. An irrevocably designated trustee of the officers is the beneficiary. Upon the death of the officers or termination of the policies, the Company shall receive an amount equal to the aggregated premiums paid less any policy loans and unpaid interest or cash withdrawals received by the Company. The accumulated premiums paid by the 31 34 NOTE E - LIFE INSURANCE - Continued Company on the above policies through the years ended December 31, 1999 and 1998 were $1,007,713 and $893,786, respectively, and are classified as other assets. In connection with the policies, the Company has an option with the officers to acquire all or any part of the Class A or Class B common stock of the Company owned by such individuals at the market price of such securities at the time of their death. NOTE F - INVESTMENT IN JOINT VENTURE The Company had one investment in a joint venture in 1999 and 1998, respectively. The joint venture constructs and sells homes. During the years ended December 31, 1999 and 1998, there were no advances from the Company to the joint venture. In January, 2000, the Company received $1,242,240 from the sale of its remaining lots. The balance of the Company's investment of $1,430,183 is unrecoverable and has been written off as of December 31, 1999. NOTE G - LINES OF CREDIT The Company may borrow up to $10,000,000 at an interest rate of prime plus 1.5% under a revolving loan agreement (line of credit) with a bank, secured by a mortgage on certain real property. At December 31, 1999, $9,990,000 was available under this line of credit. The line of credit can be used to finance ongoing development and construction of residential real estate and short-term capital needs and only requires monthly interest payments. The loan agreement, among other things, restricts the Company from incurring additional debt and requires a consolidated tangible net worth (as amended) of not less than $41,000,000. The loan agreement expires June 30, 2000. The average interest rate and balance outstanding for the revolving line of credit payable to the bank, based on a weighted average, is as follows:
1999 1998 ---------------- --------------- Daily average outstanding borrowings $ 10,000 $ 10,000 Average interest rate during the period 9.6% 9.6% Interest rate at the end of the period 10% 9.25% Maximum outstanding during the year $ 10,000 $ 10,000
The Company also may draw up to $200,000 under the Letter of Credit (see Note H). Amounts advanced under the Letter of Credit bear interest at the bank's prime rate plus 2.0%. Principal and interest are due and payable on demand. At December 31, 1999, the Company has not drawn on the Letter of Credit. 32 35 NOTE H - MORTGAGE NOTES PAYABLE Mortgage notes payable at December 31, 1999 and 1998, are as follows:
1999 1998 ---- ---- Mortgage note, interest at 7.15%, requires monthly payments of $91,696 including interest; paid in full June 30, 1999. $ -- $12,220,385 Acquisition loan/mortgage note, interest at the specified Libor Market Rate Index plus 0.275% or the prime rate of the bank as selected each month by the Company. At December 31, 1999, interest was 8.50%; secured by certain land and improvements; accrued interest paid monthly and partial payments of principal to be made upon the closing of homes. Principal must be paid in full at maturity on December 22, 2000, unless extended for one year under certain circumstances. 3,306,372 3,750,000 Promissory note, dated July 21, 1999, interest at 8.0%. Principal and accrued interest due January 21, 2000. Promissory note of $1,000,000 was paid in full on January 21, 2000. 1,000,000 -- ------------- ----------- $ 4,306,372 $15,970,385 ============= ===========
On December 22, 1998, the Company entered into a Construction Loan Agreement with a bank providing for a loan totaling $6,750,000 (the "Loan") and a letter of credit facility in the amount of $200,000 in connection with the Company's acquisition of certain real property (the "Land") and the construction of single family residential homes thereon (the "Homes"). The Loan is comprised of a $3,750,000 acquisition loan (the "Acquisition Loan") relating to the purchase of the Land and a revolving credit facility in an amount of up to $3,000,000 outstanding at any time to be used to finance construction of the Homes (the "Revolving Loan"). Outstanding amounts borrowed under the Loan bear interest at the specified LIBOR Market Rate Index plus 0.275% or the prime rate of the bank as selected each month by the Company. The Loan is secured by a mortgage on the Land and the Homes to be constructed thereon. Interest accrued on the Loan must be paid monthly and partial payments of principal shall be made from time to time upon the closing of the sale of Homes. The principal must be paid in full at maturity on December 22, 2000, unless extended for one year under certain circumstances. 33 36 NOTE I - INCOME TAXES Deferred tax assets and liabilities reflect the future income tax effects of temporary differences between the consolidated financial statement amounts and liabilities and their respective tax bases. As of December 31, 1999 and 1998, the significant components of the Company's deferred tax assets and liabilities were: 1999 1998 ------------ ------------ AMT credit carryover $ 113,877 $ 113,877 Federal net operating loss carryforward 7,261,430 3,749,382 State net operating loss carryforward 1,962,063 1,393,938 Inventory valuation adjustment 3,019,334 6,557,409 Reserve for warranties 572,170 593,450 Percentage of completion 89,663 80,768 Inventory capitalization 134,073 115,172 ------------ ------------ Total deferred tax asset, before valuation allowance 13,152,610 12,603,996 Less valuation allowance 11,045,277 8,962,909 ------------ ------------ Total deferred tax assets, net of valuation allowance 2,107,333 3,641,087 ------------ ------------ Deferred expenses (2,068,124) (3,571,379) Accelerated depreciation (39,209) (69,708) ------------ ------------ Total deferred tax liabilities (2,107,333) (3,641,087) ------------ ------------ Net deferred tax (liability) asset $ -- $ -- ============ ============ The net change in the valuation allowance for the years ended December 31, 1999 and 1998 were increases of $2,082,368 and $55,657, respectively. The principal reasons for the difference between the total tax expense and the amount computed by applying the statutory federal income tax rate to income (loss) before income taxes is the valuation allowance and the effects of state income taxes. At December 31, 1999, the Company has federal and state net operating loss carryforwards (NOLs) of $21,357,147 and $35,673,881, respectively. Of this amount, $6,128,138 of the federal NOLs expire in 2012 and $15,229,009 will begin to expire in 2018. The Company's state NOLs expire principally in the years 2012 through 2014. The complete realization of the value of the NOLs is dependent on various factors, including future profitability. NOTE J - CUSTOMER DEPOSITS Certain customer deposits, pursuant to statutory regulations of the State of Florida or by agreement between the customer and the Company, are held in segregated bank accounts. At December 31, 1999 and 1998, cash in the amounts of approximately $416,000 and $1,650,000, respectively, was so restricted. 34 37 NOTE J - CUSTOMER DEPOSITS - Continued The Company entered into an escrow agreement with a certain bank and the Division of Florida Land Sales and Condominiums which allows the Company to use customer deposits which were previously maintained in an escrow account. Deposits of up to $357,000 in 1999 and $557,000 in 1998, which could be released to the Company, are guaranteed by performance bonds aggregating $1,000,000 for 1999 and 1998. NOTE K - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES Accounts payable and accrued liabilities include the following: 1999 1998 ----------- ----------- Accounts payable $ 3,903,935 $ 6,080,030 Accrued interest 2,506,592 3,225,063 Accrued warranties on homes 1,480,016 1,536,565 Other accrued liabilities 665,178 823,200 ----------- ----------- $ 8,555,721 $11,664,858 =========== =========== NOTE L - SENIOR NOTES Senior notes consist of the following: 1999 1998 ------------ ------------ 12 1/2% senior notes due January 15, 2003 at par with an effective interest rate of 13.02% $ 70,000,000 $ 70,000,000 Repurchase of senior notes to be used as part of sinking fund (26,876,000) (13,708,000) Unamortized discount (475,240) (784,688) ------------ ------------ $ 42,648,760 $ 55,507,312 ============ ============ On January 13, 1993, the Company issued 12 1/2% senior notes ("Senior Notes"), due January 15, 2003. The Senior Notes have a face value of $70,000,000 and were issued at a discount of $1,930,600. The Senior Notes are senior unsecured obligations of the Company subject to redemption at the Company's option on or after January 15, 1998 at 105% of the principal amount and thereafter at prices declining annually to 100% of the principal amount on or after January 15, 2001. Under the terms of the indenture ("Indenture"), the Company must make Senior Notes sinking fund payments of $17,500,000 by January 15, 2001 and January 15, 2002. The Indenture also contains provisions restricting the amount and type of indebtedness the Company may incur, the purchase by the Company of its stock and the payment of cash dividends. At December 31, 1999, the payment of cash dividends is prohibited and will be restricted until the Company posts cumulative net income in excess of $72,200,000. During the first quarter of year 2000, the Company repurchased $1,234,000 of Senior Notes to be used to partially satisfy its sinking fund obligation. 35 38 NOTE M - EARNINGS (LOSS) PER SHARE Included in diluted earnings per share are common stock equivalents relating to options of 71,300, 61,000 and 81,300 for 1999, 1998 and 1997, respectively. Options to purchase 58,600 shares of common stock at prices ranging from $4.50 to $8.62 per share, which were outstanding during 1998, were not included in the computation of diluted per share data because the exercise prices were greater than the average market price of the common shares during such period. NOTE N - STOCK OPTIONS The Company has two stock option plans accounted for under APB Opinion 25 and related interpretations. The plans allow the Company to grant options to employees for the purchase of up to 400,000 shares of Class B common stock and non-employee Directors for the purchase of up to 20,000 shares of Class B common stock. The options have terms of five years for employees and ten years for non-employee Directors when issued. The stock options for employee's vest at the end of the second year, and stock options for non-employee Directors vest 50% after each of the first and second year of service on the Board. The exercise price of each option equals the market price of the Company's Class B Common stock on the date of grant. Accordingly, no compensation cost has been recognized for the plans. Had compensation cost for the plans been determined based on the fair value of the options at the grant dates consistent with the method of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), the Company's net income (loss) and earnings (loss) per share would have been reduced to the proforma amounts indicated below.
1999 1998 1997 ---------------- --------------- --------------- Net income (loss) As reported $ (5,041,821) $ 81,753 $ (20,849,763) Pro forma $ (5,047,666) $ 70,936 $ (20,935,861) Primary earnings (loss) per share As reported $ (1.09) $ .02 $ (4.51) Pro forma $ (1.09) $ .02 $ (4.51)
The fair value of each option grant is estimated on the date of grant using the binomial options-pricing model with the following weighted-average assumptions used for grants in 1999, 1998 and 1997, respectively: expected volatility of 37.59, 36.52 and 36.68 percent; risk-free interest rate of 5.91, 6.91 and 6.92 percent; and expected life of 6.3, 5.8 and 5.5 years. 36 39 NOTE N - STOCK OPTIONS - Continued A summary of the status of the Company's stock option plans as of December 31, 1999, 1998, and 1997, and changes during the years ending on those dates is presented below:
1999 1998 1997 -------------------------- ---------------------------- -------------------------- WEIGHTED WEIGHTED WEIGHTED AVERAGE AVERAGE AVERAGE SHARES EXERCISE SHARES EXERCISE SHARES EXERCISE (000) PRICE (000) PRICE (000) PRICE --------------- -------------- --------------- -------------- -------------- ----------- Outstanding at beginning of year 61.0 $ 7.06 92.3 $ 7.34 88.7 $ 7.34 Granted 19.0 2.06 2.4 4.50 3.6 7.38 Exercised -- -- -- -- -- -- Forfeited 8.7 7.37 33.7 5.37 -- -- ----------- ----------- ----------- ----------- ----------- ----------- Outstanding at end of year 71.3 $ 5.99 61.0 $ 7.17 92.3 $ 7.34 Options Exercisable at year end 52.3 $ 7.28 57.4 $ 7.28 46.4 $ 7.08 Weighted- average fair value of options granted during the year -- $ 1.20 -- $ 2.49 -- $ 4.41
The following information applies to options outstanding at December 31, 1999:
Number outstanding 71,300 Range of exercise prices $1.5 to $8.62 Weighted-average exercise price $5.99 Weighted-average remaining contractual life 2.48
NOTE O - COMMON STOCK Class A and Class B common stock have identical dividend rights with the exception that the Class B common stock is entitled to a $.025 per share additional dividend. Class A common stock is entitled to one vote per share while Class B common stock is entitled to one-tenth vote per share. Holders of Class B common stock are entitled to elect 25% of the Board of Directors as long as the number of outstanding shares of Class B common stock is at least 10% of the number of outstanding shares of both classes of common stock. At the option of the holder of record, each share of Class A common stock may be converted at any time into one share of Class B common stock. 37 40 NOTE P - LEASING ARRANGEMENTS RENTAL PROPERTIES In connection with certain developments, the Company leases recreation facilities. The Company also leases rental units on a one-year basis. These leases are accounted for as operating leases. The following schedule provides an analysis of the Company's property under operating leases (included in property and equipment) by major classes as of December 31, 1999 and 1998:
1999 1998 ----------------- ----------------- Land $ 152,448 $ 2,324,844 Buildings 2,671,438 19,063,378 Furniture, fixtures and equipment -- 1,431,649 ----------------- ----------------- 2,823,886 22,819,871 Less accumulated depreciation 1,478,276 8,691,757 ----------------- ----------------- $ 1,345,610 $ 14,128,114 ================= =================
On June 30, 1999, the Company sold a 480 rental apartment complex for $19.0 million, which resulted in a gain on sale of property and equipment in the amount of $3.75 million. The following is a schedule of approximate future minimum rental income (assuming non-renewal of one-year leases of the Company's units) expected under these leases as of December 31, 1999: 2000 $ 200,208 2001 165,953 2002 165,293 2003 165,293 2004 165,293 Thereafter 10,386,866 ---------- $11,248,906 ========== OFFICE AND WAREHOUSE The Company leases its headquarters office and a warehouse under lease agreements extending through 2002, with options to renew for up to five years, accounted for as operating leases. The approximate future minimum rental payments as of December 31, 1999 are as follows: 2000 $ 205,862 2001 216,155 2002 226,962 --------- $ 648,979 ========= Total rent expense, including common area maintenance expenses, for each of the years ended December 31, 1999, 1998 and 1997 amounted to approximately $384,000, $366,000 and $308,000, respectively. 38 41 NOTE Q - DEFERRED COMPENSATION PLAN The Company has a defined contribution plan (the "Plan") established pursuant to Section 401(k) of the Internal Revenue Code. Participant employees may elect to contribute up to 15% of pretax annual compensation as defined in the Plan, subject to certain limitations. The Company will match 25% of the participant's contributions, not to exceed 6% of the participant's annual compensation. The Company's contributions to the Plan amounted to $47,925 in 1999, $44,688 in 1998 and $75,450 in 1997. NOTE R - FINANCIAL INSTRUMENTS The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value: CASH AND CASH EQUIVALENTS The carrying amount approximates fair value because of the short maturity of those instruments. MORTGAGE NOTES RECEIVABLES The carrying amount approximates fair value due to interest rates currently offered for loans with similar terms to borrowers of similar credit quality not being significantly different. LINE OF CREDIT The carrying amount of the line of credit approximates fair value due to the length of the maturity and interest rate being tied to market indices. MORTGAGE NOTE PAYABLE The carrying amount of the mortgage note payable approximates fair value due to the interest rate not being significantly different from the current market rates available to the Company. SENIOR NOTES The Senior Notes are not listed on any exchange. Prices offered to the Company by individual holders and dealers in the Senior Notes are used to estimate fair value of the Company's Senior Notes. The estimated fair value of the Senior Notes at December 31, 1999 and 1998 is $41,399,040 and $49,536,960, respectively. NOTE S - SEGMENT INFORMATION The Company has the following two reportable segments: home building and rental operations. The home building segment develops and sells residential properties and planned communities. The rental operations segment consists of 529 units in two separate properties. On June 30, 1999 the Company sold a 480 rental apartment complex. The accounting policies used to develop segment information correspond to those described in the summary of significant accounting policies and other information. Segment net income or loss is based on income or loss from operations before income taxes, the cumulative effect of changes in accounting principles, and the allocation of selling, general or administrative costs. 39 42 NOTE S - SEGMENT INFORMATION - Continued The following information about the two segments is for the years ended December 31, 1999, 1998 and 1997, in thousands (000).
HOME RENTAL BUILDING OPERATIONS OTHER TOTAL -------- ---------- ----- ----- DECEMBER 31, 1999: Revenues $81,613 $2,003 $4,320 $87,936 Interest expense 6,892 -- -- 6,892 Depreciation and amortization 1,251 450 1 1,702 Segment net income (loss) (9,195) 111 4,042 (5,042) Segment assets 99,876 1,734 431 102,041 Expenditures for segment assets 695 -- -- 695 DECEMBER 31, 1998 Revenues $ 86,610 $ 3,874 $ 581 $ 91,065 Interest expense 7,170 -- -- 7,170 Depreciation and amortization 1,313 792 2 2,107 Segment net income (loss) (740) 585 237 82 Segment assets 119,669 14,779 778 135,226 Expenditures for segment assets 689 396 -- 1,085 DECEMBER 31, 1997: Revenues $ 112,074 $ 3,426 $ 690 $ 116,190 Interest expense 7,181 -- -- 7,181 Depreciation and amortization 1,136 743 2 1,881 Segment net income (loss) (18,182) (5,083) 262 (23,003) Segment assets 129,088 15,076 896 145,060 Expenditures for segment assets 329 68 1 398
During 1997, the Company recorded valuation adjustments to its homebuilding and rental operations segments of $17,050,000 and $4,525,000 respectively. During 1999, the Company recorded valuation adjustments to its homebuilding segment in the amount of $6,290,719. NOTE T - COMMITMENTS AND CONTINGENCIES The Company is involved, from time to time, in litigation arising in the ordinary course of business, none of which is expected to have a material adverse effect on the Company's consolidated financial position or results of operations. The Company is also subject to the normal and customary obligations associated with entering into contracts for the purchase, development and sale of real estate in the routine conduct of its business. 40 43 MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS Management is responsible for the preparation of the Company's consolidated financial statements and related information appearing in this annual report. Management believes that the consolidated financial statements reasonably present the Company's financial position and results of operations in conformity with generally accepted accounting principles. Management also has included in the Company's financial statement amounts that are based on estimates and judgments which it believes are reasonable under the circumstances. The independent accountants audit the Company's financial statements in accordance with generally accepted auditing standards and provide an objective, independent review of the fairness of reported operating results and financial position. The Board of Directors of the Company has an Audit Committee composed of two non-management independent Directors. The committee meets periodically with financial management and the independent accountants to review accounting, control, auditing and financial reporting matters. 41 44 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Board of Directors Oriole Homes Corp. We have audited the accompanying consolidated balance sheets of Oriole Homes Corp. and Subsidiaries as of December 31, 1999 and 1998, and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 1999. 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 consolidated financial position of Oriole Homes Corp. and Subsidiaries at December 31, 1999 and 1998, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1999, in conformity with generally accepted accounting principles. Grant Thornton LLP Miami, Florida February 18, 2000 42 45 ITEM 9 DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE This item is not applicable. PART III ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by Item 10 is incorporated herein by reference to Registrant's definitive proxy statement to be filed pursuant to Regulation 14A, in conjunction with the Company's Annual Meeting of Shareholders. ITEM 11 EXECUTIVE COMPENSATION The information required by the Item 11 is incorporated herein by reference to Registrant's definitive proxy statement to be filed pursuant to Regulation 14A, in conjunction with the Company's Annual Meeting of Shareholders scheduled to be held on May 10, 2000. ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this Item 12 is incorporated herein by reference to Registrant's definitive proxy statement to be filed pursuant to Regulation 14A, in conjunction with the Company's Annual Meeting of Shareholders scheduled to be held on May 10, 2000. ITEM 13 CERTAIN RELATIONSHIP AND RELATED TRANSACTIONS The information required by this Item 13 is incorporated herein by reference to Registrant's definitive proxy statement to be filed pursuant to Regulation 14A, in conjunction with the Company's Annual Meeting of Shareholders scheduled to be held on May 10, 2000. 43 46 PART IV ITEM 14 EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K (a) Financial Statements See Item 8 (b) Reports on Form 8-K There were no reports on Form 8-K for the three months ended December 31, 1999 (c) Exhibits EXHIBIT NUMBER ------- 3.1 Articles of Incorporation, as amended, of Registrant. 3.2 Composite By-Laws of Registrant. 4.1 Form of 12-1/2% Senior Note. 4.2 Form of Indenture between the Registrant and Sun Bank National Association, Trustee. 10.1 Lease Agreement, dated May 7, 1991 between the Registrant and Arbors Associates, Ltd. 10.2 First Amendment to Lease Agreement dated as of April 30, 1998, between Registrant and Arbors Associates, Ltd. 10.3 Revolving Loan Agreement dated July 13, 1993, between Ohio Savings Bank, F.S.B. and the Registrant. 10.4 First Amendment to Revolving Loan Agreement. 10.5 Second Amendment to Revolving Loan Agreement. 10.6 Mortgage and Security Agreement dated as of July 13, 1993. 10.7 Mortgage, Assignment and Financing Statement Spreader Agreement dated May 31, 1995. 10.8 Future Advance, Mortgage, Assignment and Financing Statement Extension, Modification and Spreader Agreement dated August 23, 1995. 10.9 Future Advance, Mortgage, Assignment and Financing Statement Extension, Modification and Spreader Agreement dated January 12, 1996. 10.10 Mortgage and Loan Modification and Extension Agreement dated July 1, 1997. 10.11 Mortgage and Loan Modification and Extension Agreement dated October 15, 1998. 10.12 Second Amendment to Revolving Loan Agreement dated July 1, 1997. 44 47 10.13 Construction Loan Agreement dated December 22, 1998 between First Union National Bank and the Registrant. 10.14 Mortgage and Security Agreement dated December 22, 1998 between First Union National Bank and the Registrant. 10.15 Stock Option Agreement with Richard D. Levy dated February 22, 1995. 10.16 Stock Option Agreement with Richard D. Levy dated May 14, 1996. 10.17 Stock Option Agreement with Harry A. Levy dated February 22, 1995. 10.18 Stock Option Agreement with Harry A. Levy dated May 14, 1996. 10.19 Stock Option Agreement with Mark A. Levy dated February 22, 1995. 10.20 Stock Option Agreement with Mark A. Levy dated May 14, 1996. 10.21 Stock Option Agreement with George Richards dated May 22, 1997. 10.22 Stock Option Agreement with George Richards dated May 20, 1998. 10.23 Stock Option Agreement with Paul Lehrer dated May 4, 1994. 10.24 Stock Option Agreement with Paul Lehrer dated May 15, 1995. 10.25 Stock Option Agreement with Paul Lehrer dated May 16, 1996. 10.26 Stock Option Agreement with Paul Lehrer dated May 22, 1997. 10.27 Stock Option Agreement with Paul Lehrer dated May 20, 1998. 10.28 Stock Option Agreement with Joseph Pivinski dated December 14, 1998. 10.29 Joint Venture Agreement between the Company and Regency Homes, Inc. dated December 31, 1993. 10.30 Registrant's 401(k) Defined Contribution Benefit Plan. 10.31 Registrant's 1994 Stock Option Plan for Employees (filed as Exhibit A to the proxy statement dated April 5, 1994 for the Company's Annual Meeting of Shareholders held on May 9, 1994). 10.32 Registrant's 1994 Stock Option Plan for Non-Employee Directors (filed as Exhibit B to the proxy statement dated April 5, 1994 for the Company's Annual Meeting of Shareholders held on May 9, 1994). 10.33 Stock Option Agreement with Paul Lehrer dated May 12, 1999. 10.34 Stock Option Agreement with George Richards dated May 12, 1999. 10.35 Stock Option Agreement with Michael Rich dated October 4, 1999. 22.1 List of Registrant's Subsidiaries. 23.1 Consent of Grant Thornton LLP. 27.0 Summary Financial Information. 45 48 SIGNATURES Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual Report to be Signed on its behalf by the undersigned, thereunto duly authorized. ORIOLE HOMES CORP. DATE MARCH 23, 2000 /s/ R.D. LEVY ------------------------ --------------------------------------- R.D. Levy, Chairman of the Board, Chief Executive Officer, Director DATE MARCH 23, 2000 /s/ J. PIVINSKI ------------------------ -------------------------------------- J. Pivinski, Vice President - Finance, Treasurer, Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934 this Annual Report has also been signed by the following persons on behalf of the Registrant in the capacities indicated. MEMBERS OF THE BOARD OF DIRECTORS DATE MARCH 23, 2000 /s/ R.D. LEVY ------------------------ ----------------------------------------- R.D. Levy, Chairman of the Board, Chief Executive Officer, Director DATE MARCH 23, 2000 /s/ HARRY A. LEVY ------------------------ ----------------------------------------- Harry A. Levy, Director DATE MARCH 23, 2000 /s/ MARK LEVY ------------------------ ----------------------------------------- Mark Levy, Chief Operating Officer, Director DATE MARCH 23, 2000 /s/ PAUL R. LEHRER ------------------------ ----------------------------------------- Paul R. Lehrer, Director DATE MARCH 23, 2000 /s/ GEORGE R. RICHARDS ------------------------ ----------------------------------------- George R. Richards, Director 46 49 EXHIBIT INDEX EXHIBIT NUMBER 3.1 Articles of Incorporation, as amended, of Registrant. (6) 3.2 Composite By-Laws of Registrant. (7) 4.1 Form of 12-1/2% Senior Note. (1) 4.2 Form of Indenture between the Registrant and Sun Bank National Association, Trustee. (2) 10.1 Lease Agreement, dated May 7, 1991 between the Registrant and Arbors Associates, Ltd. (3) 10.2 First Amendment to Lease Agreement dated as of April 30, 1998, between Registrant and Arbors Associates, Ltd. (8) 10.3 Revolving Loan Agreement dated July 13, 1993, between Ohio Savings Bank, F.S.B. and the Registrant. (9) 10.4 First Amendment to Revolving Loan Agreement. (10) 10.5 Second Amendment to Revolving Loan Agreement. (11) 10.6 Mortgage and Security Agreement dated as of July 13, 1993. (12) 10.7 Mortgage, Assignment and Financing Statement Spreader Agreement dated May 31, 1995. (13) 10.8 Future Advance, Mortgage, Assignment and Financing Statement Extension, Modification and Spreader Agreement dated August 23, 1995. (14) 10.9 Future Advance, Mortgage, Assignment and Financing Statement Extension, Modification and Spreader Agreement dated January 12, 1996. (15) 10.10 Mortgage and Loan Modification and Extension Agreement dated July 1, 1997. (16) 10.11 Mortgage and Loan Modification and Extension Agreement dated October 15, 1998. (17) 10.12 Second Amendment to Revolving Loan Agreement dated July 1, 1997. (18) 10.13 Construction Loan Agreement dated December 22, 1998 between First Union National Bank and the Registrant. (19) 10.14 Mortgage and Security Agreement dated December 22, 1998 between First Union National Bank and the Registrant. (20) 10.15 Stock Option Agreement with Richard D. Levy dated February 22, 1995. (21) 10.16 Stock Option Agreement with Richard D. Levy dated May 14, 1996. (22) 10.17 Stock Option Agreement with Harry A. Levy dated February 22, 1995. (23) 10.18 Stock Option Agreement with Harry A. Levy dated May 14, 1996. (24) 47 50 10.19 Stock Option Agreement with Mark A. Levy dated February 22, 1995. (25) 10.20 Stock Option Agreement with Mark A. Levy dated May 14, 1996. (26) 10.21 Stock Option Agreement with George Richards dated May 22, 1997. (27) 10.22 Stock Option Agreement with George Richards dated May 20, 1998. (28) 10.23 Stock Option Agreement with Paul Lehrer dated May 4, 1994. (29) 10.24 Stock Option Agreement with Paul Lehrer dated May 15, 1995. (30) 10.25 Stock Option Agreement with Paul Lehrer dated May 16, 1996. (31) 10.26 Stock Option Agreement with Paul Lehrer dated May 22, 1997. (32) 10.27 Stock Option Agreement with Paul Lehrer dated May 20, 1998. (33) 10.28 Stock Option Agreement with Joseph Pivinski dated December 14, 1998. (34) 10.29 Joint Venture Agreement between the Company and Regency Homes, Inc. dated December 31, 1993. (4) 10.30 Registrant's 401(k) Defined Contribution Benefit Plan. (5) 10.31 Registrant's 1994 Stock Option Plan for Employees (filed as Exhibit A to the proxy statement dated April 5, 1994 for the Company's Annual Meeting of Shareholders held on May 9, 1994). (35) 10.32 Registrant's 1994 Stock Option Plan for Non-Employee Directors (filed as Exhibit B to the proxy statement dated April 5, 1994 for the Company's Annual Meeting of Shareholders held on May 9, 1994). (36) 10.33 Stock Option Agreement with Paul Lehrer dated May 12, 1999. 10.34 Stock Option Agreement with George Richards dated May 12, 1999. 10.35 Stock Option Agreement with Michael Rich dated October 4, 1999. 22.1 List of Registrant's Subsidiaries. (37) 23.1 Consent of Grant Thornton LLP. 27.0 Summary Financial Information. ----------------- (1) Filed as Exhibit 4.1 to the Company's registration statement on Form S-2 (no. 33-51680). (2) Filed as Exhibit 4.2 to the Company's registration statement on Form S-2 (no. 33-51680). (3) Filed as Exhibit 10.1 to the Company's registration statement on Form S-2 (no. 33-51680). (4) Filed as Exhibit 10.7 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993. (5) Filed as Exhibit 10.6 to the Company's registration statement on Form S-2 (no. 33-46123). 48 51 (6) Filed as Exhibit 3.1 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. (7) Filed as Exhibit 3.2 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. (8) Filed as Exhibit 10.2 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. (9) Filed as Exhibit 10.3 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. (10) Filed as Exhibit 10.4 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. (11) Filed as Exhibit 10.5 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. (12) Filed as Exhibit 10.6 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. (13) Filed as Exhibit 10.7 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. (14) Filed as Exhibit 10.8 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. (15) Filed as Exhibit 10.9 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. (16) Filed as Exhibit 10.10 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. (17) Filed as Exhibit 10.11 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. (18) Filed as Exhibit 10.12 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. (19) Filed as Exhibit 10.13 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. (20) Filed as Exhibit 10.14 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. (21) Filed as Exhibit 10.15 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. (22) Filed as Exhibit 10.16 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. (23) Filed as Exhibit 10.17 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. (24) Filed as Exhibit 10.18 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. (25) Filed as Exhibit 10.19 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. (26) Filed as Exhibit 10.20 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. (27) Filed as Exhibit 10.21 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. (28) Filed as Exhibit 10.22 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. 49 52 (29) Filed as Exhibit 10.23 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. (30) Filed as Exhibit 10.24 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. (31) Filed as Exhibit 10.25 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. (32) Filed as Exhibit 10.26 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. (33) Filed as Exhibit 10.27 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. (34) Filed as Exhibit 10.28 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. (35) Filed as Exhibit 10.31 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. (36) Filed as Exhibit 10.32 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. (37) Filed as Exhibit 22.1 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. 50 EX-10.33 2 STOCK OPTION AGREEMENT W/PAUL LEHRER 1 Exhibit 10.33 STOCK OPTION AGREEMENT FOR NONEMPLOYEE DIRECTORS AGREEMENT dated this 12th day of May, 1999, between Oriole Homes Corp., a Florida corporation (hereinafter called the "Company"), and Paul R. Lehrer (hereinafter called the "Eligible Director"). W I T N E S S E T H: WHEREAS, the Company's shareholders approved (on May 9, 1994) the adoption of the 1994 Stock Option Plan for Nonemployee Directors (the "Plan") pursuant to which each Eligible Director is entitled to receive a grant to purchase 1,200 Shares per year, up to a maximum of 6,000 Shares: WHEREAS, the Company's Board of Directors approved (on May 12, 1999) the adjustment of the maximum Shares pursuant to Article 7 of the 1994 Stock Option Plan for Nonemployee Directors (the "Plan") each Eligible Director is now entitled to a maximun of 12,000 Shares: WHEREAS, the Executive Committee of the Board of Directors of the Company (the "Committee") has this day granted to each Eligible Director an option to purchase 1,200 shares of Class B Common Stock, par value $.10 per share, (the "Shares") of the Company, and at the option price, all as hereinafter stated, such option to be exercisable not more than ten (10) years after the date hereof; and WHEREAS, the Eligible Director is willing to accept said option and to be bound by the terms and conditions thereof; and WHEREAS, the execution and delivery of this Agreement has been duly authorized by the Board of Directors of the Company; NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants herein contained and other good and valuable considerations, the receipt whereof is hereby acknowledged, the parties hereto, including to be legally bound hereby, agree as follows: GRANT OF OPTION: ADJUSTMENT OF SHARES COVERED BY OPTION 1.1 The Company hereby grants to the Eligible Director an option to purchase from the Company, upon the terms and conditions hereinafter set forth, 1,200 shares of Class B Common Stock, par value $.10 per share (the "Shares"), for a cash consideration of $1.9375 per share. 1.2 The number of Shares above stated, and the purchase price thereof, may be subject to adjustment from time to time as provided herein. VESTING 2.1 This option shall vest and become nonforfeitable on the day of the Annual Meeting following the date hereof if the Eligible Director continues to serve as a Director. 2 PAYMENTS FOR SHARES 3.1 The option price of the shares to be purchased pursuant to each exercise of the within option shall be paid to the Company by the Eligible Director in full in cash or by bank certified, cashier's or personal check at the time of exercise of the option. EXERCISE OF OPTION 4.1 The within option may be exercised according to the following schedule: 4.1.1 Fifty (50%) percent of the options granted become exercisable on the date of the first Annual Meeting after the date hereof. 4.1.2 The remaining fifty (50%) percent of the options granted become exercisable on the date of the second Annual Meeting after the date hereof. TERM OF OPTION 5.1 The options granted shall expire ten years from the date hereof, but are subject to earlier termination as follows: 5.1.1 In the event of the termination of the optionee's service as a Director, other than by reason of retirement, total and permanent disability, or death, the options granted herein that have not been exercised shall automatically expire on the effective date of termination. 5.1.2 In the event of termination of the optionee by reason of retirement or total and permanent disability, all vested options shall become exercisable to the full extent of the number of Shares remaining then outstanding, regardless of whether such options were previously exercisable and each such option shall expire four years after the date of such termination or on the stated grant expiration date whichever is earlier. 5.1.3 In the event of the death of the optionee while he is still a Director, vested options as per Section 2.1 hereof shall become exercisable, to the full extent of Shares remaining covered by such options, regardless of whether such options were previously exercisable and each such option shall expire four years after the date of death of such optionee or on the stated grant expiration, whichever is earlier. RESTRICTIONS ON EXERCISE OF OPTION AND SALE OF STOCK BY ELIGIBLE DIRECTOR 6.1 The within option shall not be exercisable if: (a) The exercise thereof will involve a violation of any applicable federal or state securities law; or (b) The exercise thereof will require registration under the Securities Act of 1933, as amended, of the shares of stock or other securities of the Company to be purchased by the Eligible Director pursuant to such exercise. 6.2 The Company hereby agrees to make such reasonable efforts to comply with any applicable state securities law as the Committee of the Company shall determine are reasonably necessary but such efforts shall not subject the Company to unreasonable expense or hardship. 6.3 At the time of any exercise of the within option, the Eligible Director shall represent to and agree with the Company in writing that he is acquiring the shares in respect of which the option is being exercised for the purpose of investment and not with a view of distribution. 2 3 6.4 The Eligible Director agrees that he will not sell or otherwise dispose of any shares of stock or other securities of the Company purchased by him pursuant to the exercise of all or any portion of the within option at any time unless there is an effective Registration Statement in respect of such shares or other securities under the provisions of the Securities Act of 1933, as amended, or counsel for the Company is reasonably satisfied that an exemption from such registration provisions is available to the Company and the Eligible Director. MISCELLANEOUS 7.1 This Agreement shall be binding upon and inure to the benefit of the Company and its successors and the Eligible Director and his executors, administrators or personal representatives provided that the within option shall be non-transferable by the Eligible Director otherwise than by will or by the laws of descent and distribution, and during the lifetime of the Eligible Director the option shall be exercisable only by him. 7.2 In the event there are any changes in the capitalization of the Company through merger, consolidation, recapitalization, stock dividend or other change in the corporate or capital structure of the Company, appropriate adjustments, as may seem equitable to the Committee shall be made in the number of shares and the exercise price per share of the options to prevent dilution of the rights granted hereunder. 7.3 This Agreement shall be deemed to be made under and shall be construed in accordance with the laws of the State of Florida. 7.4 This Agreement shall become effective as of the date hereof and, unless sooner terminated, shall remain in effect for a period of ten (10) years from the date hereof. This Agreement may be terminated at any time by mutual consent of the parties hereto, but no modification or amendment of this Agreement shall become effective until such modification or amendment shall have been approved by the Committee. IN WITNESS WHEREOF, the Company has caused this Stock Option Agreement to be executed by its President or Vice President and the Eligible Director has executed this Agreement, the day and year first above written. ORIOLE HOMES CORP. /s/ Richard D. Levy ------------------------------------ Richard D. Levy Chief Executive Officer /s/ Paul R. Lehrer ------------------------------------ Paul R. Lehrer, Director 3 EX-10.34 3 STOCK OPTION AGREEMENT W/GEORGE RICHARDS 1 Exhibit 10.34 STOCK OPTION AGREEMENT FOR NONEMPLOYEE DIRECTORS AGREEMENT dated this 12th day of May, 1999, between Oriole Homes Corp., a Florida corporation (hereinafter called the "Company"), and George R. Richards (hereinafter called the "Eligible Director"). W I T N E S S E T H: WHEREAS, the Company's shareholders approved (on May 9, 1994) the adoption of the 1994 Stock Option Plan for Nonemployee Directors (the "Plan") pursuant to which each Eligible Director is entitled to receive a grant to purchase 1,200 Shares per year, up to a maximum of 6,000 Shares: WHEREAS, the Company's Board of Directors approved (on May 12, 1999) the adjustment of the maximum Shares pursuant to Article 7 of the 1994 Stock Option Plan for Nonemployee Directors (the "Plan") each Eligible Director is now entitled to a maximun of 12,000 Shares: WHEREAS, the Executive Committee of the Board of Directors of the Company (the "Committee") has this day granted to each Eligible Director an option to purchase 1,200 shares of Class B Common Stock, par value $.10 per share, (the "Shares") of the Company, and at the option price, all as hereinafter stated, such option to be exercisable not more than ten (10) years after the date hereof; and WHEREAS, the Eligible Director is willing to accept said option and to be bound by the terms and conditions thereof; and WHEREAS, the execution and delivery of this Agreement has been duly authorized by the Board of Directors of the Company; NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants herein contained and other good and valuable considerations, the receipt whereof is hereby acknowledged, the parties hereto, including to be legally bound hereby, agree as follows: GRANT OF OPTION: ADJUSTMENT OF SHARES COVERED BY OPTION 1.1 The Company hereby grants to the Eligible Director an option to purchase from the Company, upon the terms and conditions hereinafter set forth, 1,200 shares of Class B Common Stock, par value $.10 per share (the "Shares"), for a cash consideration of $1.9375 per share. 1.2 The number of Shares above stated, and the purchase price thereof, may be subject to adjustment from time to time as provided herein. VESTING 2.1 This option shall vest and become nonforfeitable on the day of the Annual Meeting following the date hereof if the Eligible Director continues to serve as a Director. 2 PAYMENTS FOR SHARES 3.1 The option price of the shares to be purchased pursuant to each exercise of the within option shall be paid to the Company by the Eligible Director in full in cash or by bank certified, cashier's or personal check at the time of exercise of the option. EXERCISE OF OPTION 4.1 The within option may be exercised according to the following schedule: 4.1.1 Fifty (50%) percent of the options granted become exercisable on the date of the first Annual Meeting after the date hereof. 4.1.2 The remaining fifty (50%) percent of the options granted become exercisable on the date of the second Annual Meeting after the date hereof. TERM OF OPTION 5.1 The options granted shall expire ten years from the date hereof, but are subject to earlier termination as follows: 5.1.1 In the event of the termination of the optionee's service as a Director, other than by reason of retirement, total and permanent disability, or death, the options granted herein that have not been exercised shall automatically expire on the effective date of termination. 5.1.2 In the event of termination of the optionee by reason of retirement or total and permanent disability, all vested options shall become exercisable to the full extent of the number of Shares remaining then outstanding, regardless of whether such options were previously exercisable and each such option shall expire four years after the date of such termination or on the stated grant expiration date whichever is earlier. 5.1.3 In the event of the death of the optionee while he is still a Director, vested options as per Section 2.1 hereof shall become exercisable, to the full extent of Shares remaining covered by such options, regardless of whether such options were previously exercisable and each such option shall expire four years after the date of death of such optionee or on the stated grant expiration, whichever is earlier. RESTRICTIONS ON EXERCISE OF OPTION AND SALE OF STOCK BY ELIGIBLE DIRECTOR 6.1 The within option shall not be exercisable if: (a) The exercise thereof will involve a violation of any applicable federal or state securities law; or (b) The exercise thereof will require registration under the Securities Act of 1933, as amended, of the shares of stock or other securities of the Company to be purchased by the Eligible Director pursuant to such exercise. 6.2 The Company hereby agrees to make such reasonable efforts to comply with any applicable state securities law as the Committee of the Company shall determine are reasonably necessary but such efforts shall not subject the Company to unreasonable expense or hardship. 6.3 At the time of any exercise of the within option, the Eligible Director shall represent to and agree with the Company in writing that he is acquiring the shares in respect of which the option is being exercised for the purpose of investment and not with a view of distribution. 2 3 6.4 The Eligible Director agrees that he will not sell or otherwise dispose of any shares of stock or other securities of the Company purchased by him pursuant to the exercise of all or any portion of the within option at any time unless there is an effective Registration Statement in respect of such shares or other securities under the provisions of the Securities Act of 1933, as amended, or counsel for the Company is reasonably satisfied that an exemption from such registration provisions is available to the Company and the Eligible Director. MISCELLANEOUS 7.1 This Agreement shall be binding upon and inure to the benefit of the Company and its successors and the Eligible Director and his executors, administrators or personal representatives provided that the within option shall be non-transferable by the Eligible Director otherwise than by will or by the laws of descent and distribution, and during the lifetime of the Eligible Director the option shall be exercisable only by him. 7.2 In the event there are any changes in the capitalization of the Company through merger, consolidation, recapitalization, stock dividend or other change in the corporate or capital structure of the Company, appropriate adjustments, as may seem equitable to the Committee shall be made in the number of shares and the exercise price per share of the options to prevent dilution of the rights granted hereunder. 7.3 This Agreement shall be deemed to be made under and shall be construed in accordance with the laws of the State of Florida. 7.4 This Agreement shall become effective as of the date hereof and, unless sooner terminated, shall remain in effect for a period of ten (10) years from the date hereof. This Agreement may be terminated at any time by mutual consent of the parties hereto, but no modification or amendment of this Agreement shall become effective until such modification or amendment shall have been approved by the Committee. IN WITNESS WHEREOF, the Company has caused this Stock Option Agreement to be executed by its President or Vice President and the Eligible Director has executed this Agreement, the day and year first above written. ORIOLE HOMES CORP. /s/ Richard D. Levy ------------------------------------ Richard D. Levy Chief Executive Officer /s/ George R. Richards ------------------------------------ George R. Richards, Director 3 EX-10.35 4 STOCK OPTION AGREEMENT W/MICHAEL RICH 1 EXHIBIT 10.35 INCENTIVE STOCK OPTION AGREEMENT OF ORIOLE HOMES CORP. AGREEMENT dated this 4th day of October, 1999, between Oriole Homes Corp., a Florida corporation (hereinafter called the "Company"), and Michael A. Rich (hereinafter called the "Employee"). W I T N E S S E T H: WHEREAS, the Company desires to grant Employee a proprietary interest in the Company in order to increase his/her efforts on its behalf; and WHEREAS, the Company has this day granted to the Employee an option to purchase the number of shares of Class B Common Stock, par value $.10 per share, of the Company, and at the option price, all as hereinafter stated, such option to be exercisable not more than five (5) years after the date hereof; and WHEREAS, the Employee is willing to accept said option and to be bound by the terms and conditions thereof; and WHEREAS, the execution and delivery of this Agreement has been duly authorized by the Board of Directors of the Company; NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants herein contained and other good and valuable considerations, the receipt whereof is hereby acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows: GRANT OF OPTION; ADJUSTMENT OF SHARES COVERED BY OPTION 1.1 The Company hereby grants to the Employee an option to purchase from the Company, upon the terms and conditions hereinafter set forth, ***10,000*** shares of Class B Common Stock, par value $.10 per share, of the Company, for a consideration of $1.50 per share. 2 1.2 The number of shares of Common Stock above stated, and the purchase price thereof, shall be subject to adjustment from time to time as provided herein. PAYMENT FOR SHARES 2.1 The option price of the shares to be purchased pursuant to each exercise of the within option shall be paid to the Company by the Employee in full, in cash or check or in whole or in part by: a. transfer to the Company of shares of Class A or Class B Common Stock having a Fair Market Value equal to the option exercise price at the time of such exercise; or b. delivery of instructions to the Company to withhold from the option shares that would otherwise be issued on the exercise that number of option shares having a Fair Market Value equal to the option exercise price at the time of such exercise. If the Fair Market Value of the number of whole shares transferred or the number of whole option shares surrendered is less than the total exercise price of the option, the shortfall must be made up in cash or check. EXERCISE OF OPTION 3.1 The within option may be exercised during the lifetime of the Employee and in whole or in part at any time after October 4, 2001 and thereafter until on or before October 4, 2004. 3.2 At least twenty days prior to the date upon which all or any portion of the within option is to be exercised, the person entitled to exercise the option shall deliver to the Company written notice of his/her election to exercise all or part of the option, which notice shall specify the date and time for the exercise of the option and the number of shares in respect to which the option is to be exercised. The date specified in such notice shall be a business day and the time specified shall be during the regular business hours of the Company. 3.3 The person entitled to exercise the option shall, at the date and time specified in such notice, pay to the Company the consideration set forth in Section 2 hereof at the principal office of the Company, the option price of the shares in respect of which the option is being exercised, and contemporaneously, or as soon thereafter as is practical, the Company shall 2 3 deliver to the person entitled to exercise the option, registered in the name of such person, certificates representing the number of shares of stock or other securities in respect of which the option is being exercised. EMPLOYMENT OF EMPLOYEE 4.1 If the services of Employee are terminated for any reason on or prior to October 4, 2004, the Company has the right to redeem the shares that have been acquired at the exercise price. If such right of redemption is not exercised within THIRTY (30) days from the termination date, the Company's rights of redemption shall have no further force or effect. RESTRICTIONS ON EXERCISE OF OPTION AND SALE OF STOCK BY EMPLOYEE 5.1 Unless the option and shares acquired upon the exercise of the option are registered under the Securities Act of 1933, as amended (the "Securities Act"), the Employee hereby represents and warrants to the Company that any and all shares of Class B Common Stock which shall be acquired pursuant to the exercise of the option shall be acquired for the Employee's own account and not for the account or beneficial interest of any other person or entity, that such shares of Class B Common Stock shall be acquired for the Employee's own investment and that the shares of Class B Common Stock shall not be acquired with a view to or for resale in connection with the distribution of all or any part thereof. Furthermore, the Employee agrees that any shares of Class B Common Stock so acquired will bear an appropriate legend to signify their restriction under the applicable securities laws and that "stop-transfer" instructions will be given to the Company's transfer agent. The Employee agrees to be subject to and bound by any other restrictions imposed by, or which the Company believes to be necessary or advisable to comply with, any Federal or State securities laws, including but not limited to restrictions governing the time and circumstances or disposition of the shares being acquired by exercise of such option. NO RIGHTS AS SHAREHOLDER OR TO CONTINUED EMPLOYMENT 6.1 The Employee shall not have any rights as a shareholder of the Company with respect to any shares of Class B Common Stock prior to the date of issuance to the Employee of the certificate or certificates for such shares and 3 4 the grant of the option does not confer to the Employee any right to be employed by the Company and will not interfere in any way with the right of the Company to terminate the employment of the Employee. NO SECURITIES ACT REGISTRATION OBLIGATION 7.1 The Company shall have no obligation to the Employee to register the Common Stock under the Securities Act. MISCELLANEOUS 8.1 This Agreement shall be binding upon and inure to the benefit of the Company and its successors and the Employee and his executors and/or administrators, provided that the within option shall be nontransferable by the Employee otherwise than by will or by the laws of descent and distribution, and during the lifetime of the Employee the option shall be exercisable only by him. 8.2 In the event there are any changes in the Class B Common Stock of the Company through merger, consolidation, recapitalization, stock dividend or other change in the corporate or capital structure of the Company, appropriate adjustments, as may seem equitable to the Board of Directors of the Company, shall be made in the number of shares and the exercise price per share of the options to prevent dilution of the rights granted hereunder. 8.3 For the purposes of this Agreement, a transfer of the Employee from the Company to a subsidiary, or vice versa, or from one subsidiary to another, shall not be deemed a termination of employment. 8.4 This Agreement shall be deemed to be made under and shall be construed in accordance with the laws of the State of Florida. 8.5 This Agreement shall become effective as of the date hereof and, unless sooner terminated, shall remain in effect for a period of five (5) years from the date hereof. This Agreement may be terminated at any time by mutual consent of the parties hereto, but no modification or amendment of this Agreement shall become effective until such modification or amendment shall have been approved by the Board of Directors of the Company. 4 5 8.6 The terms and conditions of the 1994 Stock Option Plan of Oriole Homes Corp., as approved by Shareholders on April 5, 1994 (the "Plan") are hereby incorporated herein by reference and if there is any conflict between this Agreement and the Plan the provisions of the Plan shall govern. IN WITNESS WHEREOF, the Company has caused this Stock Option Agreement to be executed by its President or Vice President and the Employee has executed this Agreement, the day and year first above written. ORIOLE HOMES CORP. /s/ RICHARD D. LEVY ----------------------------------------------- Richard D. Levy, Chief Executive Officer /s/ MICHAEL A. RICH ----------------------------------------------- Michael A. Rich, Vice President-Sales & Marketing 5 EX-23.1 5 CONSENT OF GRANT THORNTON LLP 1 EXHIBIT 23.1 Consent of Grant Thornton LLP Grant Thornton LLP Certified Public Accountants 777 Brickell Avenue Suite 1200 Miami, FL 33131 We have issued our report dated February 18, 2000, accompanying the consolidated financial statements and schedules incorporated by reference in the Annual Report of Oriole Homes Corp. on Form 10-K for the years ended December 31, 1999 and 1998. We hereby consent to the incorporation by reference of said report in the Registration Statement of Oriole Homes Corp. on Form S-8 (File No. 333-27321). /s/ GRANT THORNTON LLP - --------------------------------- Grant Thornton LLP Miami, Florida February 18, 2000 EX-27 6 FINANCIAL DATA SCHEDULE
5 YEAR DEC-31-1999 JAN-01-1999 DEC-31-1999 18,708,081 0 262,240 0 73,015,785 0 5,419,688 2,978,526 102,040,903 0 46,955,132 0 0 462,553 41,474,354 102,040,903 77,454,410 87,935,892 70,308,875 78,492,460 14,074,117 0 411,136 (5,041,821) 0 (5,041,821) 0 0 0 (5,041,821) (1.09) (1.09)
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