10-K 1 g75132e10-k.txt ORIOLE HOME CORP. UNITED STATES 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, 2001 Commission File Number 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 [ ]. As of March 18, 2002, the Company had outstanding 1,863,149 shares of its Class A Common Stock and 2,762,375 shares of its Class B Common Stock. The aggregate market value of voting stock held by non-affiliates of the Registrant is $2,860,962 as of March 18, 2002. ORIOLE HOMES CORP. FORM 10-K TABLE OF CONTENTS
Page ---- Part I Item 1. Business ............................................................................................ 1 Item 2. Properties .......................................................................................... 12 Item 3. Legal Proceedings ................................................................................... 12 Item 4. Submission of Matters to a Vote of Security Holders ................................................. 12 Part II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters ........................................................................ 13 Item 6. Selected Financial Data ............................................................................. 14 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations ................................................................ 15 Item 7A.Quantitative and Qualitative Disclosures About Market Risk .......................................... 25 Item 8. Financial Statements and Supplementary Data ......................................................... 26 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ................................................................ 49 Part III Item 10. Directors and Executive Officers of the Registrant ................................................. 49 Item 11. Executive Compensation ............................................................................. 51 Item 12. Security Ownership of Certain Beneficial Owners and Management .................................................................................... 53 Item 13. Certain Relationships and Related Transactions ..................................................... 56 Part IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K ............................................................................... 57 Signatures .................................................................................................. 64 Exhibit Index ............................................................................................... 65
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 and central 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 has been a pioneer in the "active adult" (age 55 and over) market in south Florida. In 2001, approximately 87% of the Company's unit sales and 77% of its revenues from home sales were derived from sales of homes in communities designed exclusively for active adults. 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 2001, homes in the Company's active adult communities were delivered at prices that ranged from $89,000 to $333,000. Approximately 66% of these sales were for cash. During the year ended December 31, 2001, the average sales price for homes delivered by the Company was $194,800. For the fiscal years ended December 31, 2001, 2000 and 1999, the Company generated revenues of $142,764,573, $91,989,406, and $87,935,892, respectively, and for each of such years sustained a net loss of $3,565,878, $2,581,386, and $5,041,821. The Company is now in the process of considering strategic alternatives to current operating strategies in an effort to determine the best means of maximizing shareholder value. The Board of Directors anticipates making a decision in this regard before September 30, 2002. 1 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)
2001 2000 1999 1998 1997 ---- ---- ---- ---- ---- Total Home Sales Sales value $140,030 $91,989 $77,454 $82,737 $106,788 Number of homes 719 562 501 522 676 Total New Contracts Sales value $135,267 $150,770 $73,082 $75,876 $102,392 Number of homes 650 848 463 491 653 Total Backlog Sales value $83,199 $87,962 $29,181 $33,553 $40,414 Number of homes 391 460 174 212 243
The Company anticipates delivering substantially all backlog, both in number of homes and dollar amount, within a twelve month period. It generally takes eight to twelve months after execution 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 permits 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. To leverage this infrastructure, in 2000 Oriole implemented additional strategic initiatives to increase site traffic, customer referrals and new sales. These included new merchandising programs to better focus on the needs of primary target markets, an e-commerce initiative to enhance responsiveness to our customers, and homebuyer surveys through an independent organization to evaluate and improve customer satisfaction. Market-driven initiatives 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, 2 which includes a substantial product mix, (iii) extensive knowledge of the Florida market, (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, and (v) a merchandising program which promotes community lifestyle advantages. The Company is in the process of evaluating current operating strategies and will adopt new strategies as it deems appropriate to meet evolving and increasingly competitive market conditions. Currently, the Company continues to extend its geographic market into the central Florida area to take advantage of accelerated demand in that area. Additionally, the Company pursues strategic alliances. A typical strategic alliance allows for shared resources and risk between homebuilders and/or vendors in the purchase, development and marketing of parcels of land. An alliance may take various forms; i.e., direct investment, joint venture, etc. In August 2000, the Company acquired, through a wholly owned subsidiary, a real estate project known as the "Vizcaya Project", with a $6.5 million direct investment and a $17.2 million acquisition and development loan, $2.0 million of which was guaranteed by the Company. The Company then entered into a Builders Agreement with Centerline Homes at Delray, Inc. ("Centerline - Delray") to manage this project. Certain affiliates of that developer also provided guarantees for the subsidiary's acquisition and construction loan. Pursuant to various agreements between the Company and Centerline-Delray, the Company is to be repaid its cash investment and a preferred return of 25% per annum on its cash investment and Centerline-Delray receives a management fee and may earn a bonus based upon the financial performance of the community. See also Notes B, I and V to Consolidated Financial Statements. In September, 2001, the Company contributed capital of $5,000,000 to a special purpose limited liability company formed to operate a joint venture between the Company and Centerline Homes at the Equestrian Club, Inc. to construct and sell homes in Palm Beach County. On February 27, 2002 an additional $1,000,000 was contributed by the Company. Under the terms of the joint venture, the Company is entitled to a preferential cash distribution equal to the greater of (a) the first $7,841,000 of Available Cash (as defined in the operating agreement) or (b) a return of all of its capital contributions plus an internal rate of return equal to 25% on its contributions to the venture. The Company may, but is not obligated to, make further capital contributions, make any loan to the joint venture or guarantee any of the joint venture's obligations. The Company's interest in the unconsolidated joint venture is accounted for using the equity method of accounting. 3 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 includes tennis courts, indoor and outdoor swimming pools, theaters for the performing arts, health clubs/spas and other amenities. 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 $89,000 to $665,000, with an average price of $194,800 for homes delivered during 2001. See "Communities Currently Under Development or Construction" on page 6. The Company offers a variety of options and upgrades 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. 4 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. 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. 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 schedules to required delivery dates. 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. The Company owns two parcels of land, classified as land held for investment in the Consolidated Financial Statements at December 31, 2001, in Bonita Springs in Lee County, Florida. In 2002, the Company has elected to build-out this land with 48 homes. The Company had previously sold 100 homes in this development. 5 COMMUNITIES CURRENTLY UNDER DEVELOPMENT OR CONSTRUCTION The following table summarizes information as of December 31, 2001 with respect to the Company's principal projects under development or construction during 2001.
Total Total Units Name and Year Units Sold and Units Sold Location of Development Planned Delivered and Delivered Units Under Remaining Units Under Development Started Type (2) thru 2001 in 2001 Contract Units(1) Construction(2) ----------- ----------- ---- ------- ----------- ------------- ----------- ---------- --------------- At December 31, 2001 ---------------------------------------- Country Glen 1993 Single 300 244 73 54 2 39 Cooper City Family Coral Lakes 1992 Active 1,372(3) 1308 290 56 8 37 Delray Beach Adult Palm Isles West 1995 Active 235 234 3 1 0 0 Boynton Beach Adult Majestic Isles 1994 Active 450 450 5 0 0 0 Boynton Beach Adult Addison Green 1998 Active 130 101 68 27 2 10 Boynton Beach Adult Summer Chase 1989 Active 221 221 1 0 0 0 Lake Worth Adult Stonecrest 1995 Active 772(4) 451 75 38 283 15 Ocala Adult Terrace Homes 1999 Mixed 99 19 19 77 3 77 Celebration Spring Park Terraces 2001 Mixed 110 0 0 0 110 0 Celebration Vizcaya 2000 Active 504 330 185 138 36 82 Delray Beach Adult
(1) Includes model units and potential units to be constructed. (2) Includes model units. (3) Reduction in original number of units purchased. (4) Includes purchase of additional land. Note: Remaining Units + Units Under Contract equals remaining units to be delivered and closed. 6 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 $300,000 to $665,000. CORAL LAKES is an active adult community in Boynton Beach with a multi-million dollar on-site clubhouse which includes substantial amenities. The community of 1,372 units features condominiums in four-story buildings, coach homes and single-family residences including the enclave of Tuscany. The last remaining homes in this community were sold in the first quarter of 2002, and all homes are expected to be delivered by September 30, 2002. Prices range from under $99,000 to $290,000. PALM ISLES WEST, an active adult community in Boynton Beach, features 235 duplex and single-family residences priced from $120,000 to $186,000. Residents of this community enjoy the convenience of a swimming pool and sun deck within the community and share other amenities with Palm Isles, a completed Oriole active adult community. The last remaining home in this community was sold and delivered in the first quarter of 2002. MAJESTIC ISLES is an active adult community of 450 duplex 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. All remaining homes in this community were sold and delivered in 2001. 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 $142,000 to $270,000. 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. All remaining homes in this community were sold and delivered in 2001. STONECREST is an active adult community located in Marion County consisting of 772 single-family homes priced from $89,000 to $333,000, offering a championship golf course and a recreational clubhouse which includes indoor and outdoor pools. 7 TERRACE HOMES AT CELEBRATION, located in Disney's planned community in Osceola County near Orlando, features 99 multi-family condominium residences priced between $133,000 and $222,000. SPRING PARK TERRACES AT CELEBRATION, also located in Disney's planned community in Osceola County near Orlando, features 110 multi-family condominium residences. VIZCAYA, located in Delray Beach, is an active adult community being developed as part of a strategic alliance with Centerline Homes at Delray, Inc. The community features 504 single-family homes with a multi-million dollar on-site clubhouse and other amenities. Under the terms of a Builder's Agreement, Centerline may be entitled to receive a bonus depending upon the financial performance of the community. See Notes B, I and V to the Consolidated Financial Statements. CONSTRUCTION Oriole is normally 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 for a specified period of time. Agreements with subcontractors are generally subject to competitive bidding, with the Company continuously negotiating prices and other significant terms. At December 31, 2001, the Company employed approximately 42 full-time people in the construction operation. Most materials are obtained by subcontractors and are readily available from numerous sources at commercially reasonable prices. 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 that has resulted in material shortages for some competitors and could, but has not yet, affected the Company's supply of 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 8 Company may also sell through independent brokers. Oriole's sales and marketing organization consists of approximately 24 full-time 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 radio, television and via the Internet through its website. In fiscal 2001, the Company's aggregate advertising cost was about $2.2 million. Oriole maintains model homes in most of its communities and management believes that these models 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 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 and the industry is consolidating and competing builders are offering substantially similar, standardized styles of homes. 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 25,000 satisfied customers who provide Oriole with a continuous source of referrals. In general, the housing industry has historically been cyclical and 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 and cost of mortgage financing. 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. 9 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. Florida adopted a single building code for the entire state, the Florida Building Code 2001, effective March 1, 2002 for building permit applications submitted as of that date. This replaces the various existing codes in different areas of the state. The primary change for projects the Company develops will be in stronger energy efficiency requirements. 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 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. 10 The Florida Local Government Comprehensive Planning and Land Development Regulation 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 conditions of sale are expedited. The State of Florida requires that certain customer deposits be held in segregated ("escrow") bank accounts or otherwise secured. The Company had previously posted bonds which allowed it to use customer deposits. As of December 31, 2001, the Company discontinued use of these bonds, and has placed required deposits in escrow accounts. See Note K to the Consolidated Financial Statements. Prior to the closing of the sale of a condominium, the Florida Statutes afford a purchaser the right to cancel an executed purchase and sale agreement up to 15 days after the date of execution of the agreement and receipt of all the items that the seller is required to deliver to the purchaser. If the purchaser provides notice to the seller within this statutory time period, the purchaser has the right to receive a full refund of any funds deposited with the seller with respect to the purchase price. Upon the closing of the sale, even if the closing occurs less than 15 days after the execution date, the rescission right expires. 11 EMPLOYEES The Company employs approximately 96 full-time persons, 6 of whom are senior executives and 13 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. 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. The Company maintains temporary sales and construction offices at its various project locations. These facilities are either rented trailers or offices, or homes made available for sale to customers as the projects complete. The corporate, sales and construction offices are of adequate size and suitably utilized to ensure efficient operations. 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 OF SECURITY HOLDERS No matters were submitted to security holders during the 4th quarter. 12 PART II ITEM 5 MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company has two classes of common stock, Class A Common Stock and Class B Common Stock, which have identical dividend rights with the exception that the Class B common stock is entitled to a $.025 per share additional dividend, and are traded on the American Stock Exchange under the symbols OHC.A and OHC.B, respectively. The following sets forth the range of high and low sale prices:
CLASS A CLASS B QUARTER 2001 HIGH LOW HIGH LOW ------------ ---- --- ---- --- First 2.00 1.38 1.55 .94 Second 3.50 1.95 2.90 1.40 Third 2.80 2.05 2.75 1.00 Fourth 2.15 1.40 2.00 1.12 CLASS A CLASS B QUARTER 2000 HIGH LOW HIGH LOW ------------ ---- --- ---- --- First 3.25 1.56 3.00 1.13 Second 2.75 1.88 2.13 1.63 Third 1.88 1.50 1.63 1.13 Fourth 2.00 1.38 1.38 .75
On March 4, 2002, the last reported sales prices of the Class A Common Stock and Class B Common Stock were $1.92 and $1.95 per share, respectively. On the same date, there were 206 shareholders of record of Class A Common Stock and 173 shareholders of record of Class B Common Stock. The Company has experienced net losses in recent years, and does not anticipate paying any cash dividends on its Common Stock in the foreseeable future. The payment of any dividends will ultimately 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. 13 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, 2001, 2000, 1999, 1998, and 1997 have been derived from the Company's audited consolidated financial statements.
-------------------------------------------------------------------------------------------------------------------------- IN $ THOUSANDS (EXCEPT PER SHARE DATA) 2001 2000 1999 1998 1997 -------------------------------------------------------------------------------------------------------------------------- Revenues 142,765 95,655 87,936 91,065 116,190 Net income (loss) (3,566) (2,581) (5,042) 82 (20,850) Shareholders' equity 35,790 39,356 41,937 46,979 46,897 Average Shareholders' Return on Equity (9.96%) (6.56%) (12.02%) .17% (44.46%) Total Assets 79,865 116,218 102,041 135,226 145,060 Long-Term Debt 16,347 54,999 46,955 71,478 78,622 Net income (loss) per share (Class A and B) (.77) (.56) (1.09) .02 (4.51) Dividends- Class A -- -- -- -- -- Dividends- Class B -- -- -- -- -- Average Shares Outstanding 4,626 4,626 4,626 4,626 4,626
14 ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD-LOOKING STATEMENTS Some of the statements in this document are "forward-looking statements" as that term is defined in the Private Securities Litigation Reform Act of 1995. By their nature, forward-looking statements involve risks, uncertainties and other factors that may cause actual results to differ materially from those that the statements anticipate. PARTICULAR FACTORS THAT COULD AFFECT US The following factors in particular could significantly affect our operations and financial results. The residential homebuilding industry is cyclical and is highly sensitive to changes in general economic conditions, such as consumer confidence and income, availability of financing, interest rate levels and demand for housing. The resale market for used homes, including foreclosed homes, also affects new home sales. The residential homebuilding industry has, from time-to-time, experienced fluctuating lumber prices and supply, as well as shortages of other materials and labor, including insulation, drywall, concrete, carpenters, electricians and plumbers. Delays in construction of homes due to these shortages or due to weather conditions could adversely affect our operations. Inflation can increase the cost of building materials and labor and other construction related costs. Conversely, deflation can reduce the value of our land inventory and make it more difficult to include the full cost of previously purchased land in home sale prices. Customers may be unwilling or unable to purchase our homes at times when mortgage-financing costs are considered high. In general, housing demand is adversely affected by increases in interest rates and by decreases in the availability of mortgage financing. Also, our homebuilding activity is dependent upon the cost and availability of mortgage financing for buyers of homes currently owned by potential customers who need to sell before buying from us. Although about 45% of our current sales are for cash, there is no guarantee that future sales will be made on such terms in comparable amounts. If mortgage interest rates increase and the ability or willingness of 15 prospective buyers to finance home purchases is adversely affected, our operating results may suffer. A number of other factors can cause our operating results to vary. We have historically experienced, and expect to continue to experience, variability in operating results on a quarterly basis. Factors that may contribute to this variability include, but are not limited to: o The timing of home deliveries and land sales; o The timing of receipt of regulatory approvals for the construction of homes; o Changes in the regulatory environment particularly with respect to zoning and land use; o The condition of the real estate market and general economic conditions, which can be adversely affected by national and international events, such as the tragic events of September 11, 2001; o The cyclical nature of the homebuilding and financial services industries; o Changes in federal income tax laws; o An increase in the supply of homes available for sale; o Pricing policies of our competitors; o The timing of the opening of new residential communities, and o The cost and availability of materials and labor. Our historical financial performance is not necessarily a meaningful indicator of future results. We expect our financial results to continue to vary from quarter to quarter. We have incurred significant losses in the past several years and can provide no assurances that we will be able to implement strategies that will result in profitability. We have engaged affiliates of Centerline Homes, Inc. to develop and manage two of our real estate investments, the Vizcaya Project and the Equestrian Club. As our other investment properties are closed and delivered, our profitability may increasingly depend on the ability of Centerline Homes to manage these two investments in a financially successful manner. 16 OVERVIEW REVENUES. The following table sets forth for the periods indicated certain components of revenues expressed as a percentage of total revenues. See "Results of Operations" for a discussion of factors affecting the components during the periods indicated.
------------------------------------------------------------------------------------- Years Ended December 31, ------------------------------------------------------------------------------------- 2001 2000 1999 ---- ---- ---- Sale of homes 98.1% 96.2% 88.1% Other operating revenues -- 0.1 2.3 Interest, rentals and other income 1.8 2.8 2.8 Gain on sales of property and equipment and land held for investment, net .1 1.0 6.9 Selling, general and administrative expenses 12.1 15.7 16.0 Net loss (2.5) (2.7) (5.7) -------------------------------------------------------------------------------------
BACKLOG. The following table sets forth the Company's backlog at December 31, 2001, 2000 and 1999. 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 to twelve 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 Millions) ------------------------------------------------------------------------------------- 2001 391 83.2 2000 460 88.0 1999 174 29.2 -------------------------------------------------------------------------------------
17 EVENT AFFECTING COMPARABILITY The results of operations were impacted by the acquisition of the Vizcaya Project. Among other things, the acquisition contributed the delivery of 185 homes producing aggregate revenue of $37.9 million and a preferred return (net income) of $960,000 to results of operations for the year ended December 31, 2001. Vizcaya contributed 70 homes producing aggregate revenue of $13.1 million and similar net income of $401,000 for the year ended December 31, 2000. Under the terms of a Builder's Agreement, Centerline Homes at Delray, Inc. may be entitled to receive a bonus up to the cumulative preferred return, as defined, earned by the Company. Based upon the cumulative Vizcaya results of operations to December 31, 2001, the Company has recorded a potential bonus due to the builder of $760,000. LIQUIDITY AND CAPITAL RESOURCES Liquidity can be regarded as the ability of current assets to meet current liabilities when due. A liquid company has less risk of being unable to meet debt, and generally has more financial flexibility to take on investment opportunities. It is also a measure of how easily assets can be converted into cash. 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, proceeds from the sale of investment property and from borrowings. Currently, borrowings are concentrated with two lenders. In connection with land acquisitions and development, the Company may borrow money secured by land and improvements. In 2001 the Company used available cash to redeem the remaining $34.9 million of the Company's 12 1/2% Senior Notes due January 15, 2003, purchased land for development purposes for $3.0 million, and invested $5.0 million in an unconsolidated joint venture. On June 30, 2001 the Company did not renew its $10.0 million revolving line of credit facility and decided to rely, instead, on its available cash and new credit facilities described below. 18 On July 16, 2001, the Company entered into agreements providing for borrowing an aggregate principal amount of $49,878,136 secured by four separate mortgage notes encumbering different parcels of real property (land and related improvements). Interest is at the specified prime rate of the bank plus 0.50% and is adjusted with the prime rate. At March 18, 2002 the interest rate was 5.25%. Interest is to be paid monthly and partial payments of principal are to be made upon delivery of homes. The principal must be paid in full at various maturities ranging from 18 to 24 months from the date of the agreements. On July 16, 2001, the Company effected an optional redemption of all of its outstanding 12 1/2% Senior Notes due 2003. The total redemption price was $35,915,688 including accrued interest, $33,313,737 of which was provided by the credit facility described above and $2,601,951 from available cash. On August 23, 2001, the Company entered into an agreement providing for borrowing an aggregate principal amount of $1,265,000 for purchase of land (the "Land Loan"). The Land Loan is secured by a mortgage note encumbering the parcel of real property. Interest is at the specified prime rate of the bank plus 0.50%, currently 5.25% per annum. Interest is to be paid monthly and the principal must be paid in full at maturity on August 23, 2002. On September 14, 2001, the Company contributed capital of $5,000,000 to a special purpose limited liability company formed to operate a joint venture between the Company and Centerline Homes at the Equestrian Club, Inc. to construct and sell homes in Palm Beach County. On February 27, 2002 an additional $1,000,000 was contributed by the Company. Under the terms of the joint venture, the Company is entitled to a preferential distribution equal to the greater of (a) the first $7,841,000 of Available Cash (as defined in the operating agreement) or (b) a return of all of its capital contributions plus an internal rate of return equal to 25% on its contributions to the venture. Under the terms of the joint venture, the Company may, but is not obligated to, make further capital contributions, make any loan to the joint venture or guarantee any of the joint venture's obligations. In 2000 the Company used available cash to repurchase $8.3 million of the Company's 12 1/2 % Senior Notes due January 15, 2003. In 1999 the Company purchased land for development purposes totaling approximately $3.6 million, and used available cash to repurchase $13.2 million of the Company's 12 1/2 % Senior Notes due January 15, 2003 and retire an existing $12.2 mortgage on a rental property. At December 31, 2001, the Company had approximately $8.1 million in cash and cash equivalents, of which $5.8 million was restricted customer escrow deposits. 19 As of December 31, 2001, the Company had no firm commitments for capital expenditures. The Company incurred capital expenditures of $105,123, $1,109,945, and $694,787 in 2001, 2000 and 1999 respectively. The majority of the expenditures were for model furnishings. FINANCIAL POSITION. The following table sets forth selected balance sheet items of the Company at December 31, 2001 and 2000.
------------------------------------------------------------------ Years Ended December 31, (Dollars in Millions) ------------------------------------------------------------------ 2001 2000 ------- ------- Cash $ 8.1 $ 21.7 Inventories 59.1 86.5 Senior Notes, at face value 0.0 34.9 Mortgage Notes 24.3 20.4 Other Liabilities 19.8 21.6 ------------------------------------------------------------------
The following table represents the Company's contractual obligations at December 31, 2001.
---------------------------------------------- ------------------------------------------------------------------------------ Payments Due by Period ------------------------------------------------------------------------------ Less than 1 1 - 3 4 - 5 After 5 Contractual Obligations Total year years years years --------------------------------------------- ----------- ----------- ----------- ----------- ---------- Long-Term Debt (Mortgage Notes) $24,257,026 $ 7,909,789 $16,347,237 $ -- $ -- Capital Lease Obligations -- -- -- -- -- Operating Leases 760,619 571,016 144,497 45,106 -- Unconditional Purchase Obligations -- -- -- -- -- Other Long-Term Obligations -- -- -- -- -- ----------- ----------- ----------- ----------- ---------- Total Contractual Cash Obligations $25,017,645 $ 8,480,805 $16,491,734 $ 45,106 $ -- =========== =========== =========== =========== ==========
See Note I for further discussion of long-term debt and Note Q for operating leases. The Company has no other commercial commitments. 20 The Company has no material commitments or material off-balance sheet obligations that would affect future liquidity. Management anticipates that funds from operations, available cash and cash available under existing credit facilities are sufficient for reasonably anticipated current and near-term capital requirements during 2002. As funds from operations result primarily from the delivery of homes, which cycle time is eight to twelve months, a decrease in customers' demand for homes would not have an immediate impact on cash availability. The effect of a decrease in demand, if any, would be felt in the following year. If the Company does not have sufficient capital resources to acquire capital assets and land, develop land improvements, and meet other needs of its business, projects may be delayed and additional financing may be required, resulting in possible adverse effects on the Company's results of operations. No assurance can be given as to the terms, availability or cost of any future financing the Company may need. If the Company is at any time unable to service its debt, financing may not be available or available on terms acceptable to the Company. RESULTS OF OPERATIONS OVERVIEW In terms of revenues, the Company records sales of real estate in accordance with generally accepted accounting principles governing profit recognition for real estate transactions. The Company's principal source of revenue is the sale of residential homes. Sales, including profit recognition, of residential homes and land are recognized upon delivery and closing. Payments received from customers prior to closing are recorded as deposits. The buyer places a deposit (10% or more of the sales price) with Oriole. A sales price is set at the contract signing subject to amendment for subsequent sales of options at the customer's request. Revenue is recognized on the delivery and closing date of the sale, at which time title is transferred and 100% of the cash sales price is collected by Oriole. The Company records inventory at land cost, plus accumulated land development and construction costs, including capitalized interest, real estate taxes, and other carrying costs. These capitalized costs are included in cost of home sales when delivered. Also, certain other project costs are capitalized as the project is developed. The total capitalized costs of our real estate projects are assigned to residential units based on specific identification and/or relative value and/or area methods, where applicable. This allocation is necessary to properly charge inventory to cost of sales upon the delivery of homes. 21 The accumulated costs of land and homes are reviewed by management on a continuous basis to determine that these are 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. YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2000 Revenues from home sales increased $48.0 million (52.2%) during the fiscal year 2001 as compared to 2000 primarily due to an increase in the number of homes delivered as a result of the Vizcaya Project. As compared to the 562 homes delivered in 2000, Oriole delivered 719 homes in 2001, 185 of which for $37.9 million were contributed by this project. Accompanying this increase in number of homes delivered, there was a 19.0% increase in the average selling price of deliveries in 2001 to $194,800 from $163,700. Much of the increase in average selling price is due to the higher number of single-family homes closed in 2001 at 492, with average revenue per single-family home increasing $37,000 to $220,900. Multi-family home prices remained stable at average revenue of $138,000 on 18 fewer deliveries in 2001. The number of contracts executed and the aggregate dollar value of those contracts decreased to 650 and $135.3 million respectively, in 2001, from 848 and $150.8 million, respectively, in 2000. Of this amount in 2001, 200 and $41.6 million, respectively, related to the Vizcaya Project. The average selling price of homes contracted in 2001 increased 17.0 % to $208,100 from $177,800 in 2000. Non-homebuilding revenues decreased to $0.1 million in 2001 as compared to $1.0 million in 2000. Interest, rentals and other income was approximately the same in 2001 as it was in 2000. Cost of home sales increased to $128.4 million (54.9%) in 2001 from $82.9 million in 2000, due principally to the increase in revenues from home sales. Cost of sales increased slightly as a percentage of home sales in 2001 to 91.7% from 90.1% in 2000. The cost of home sales increase in 2001 was largely due to a $760,000 accrual to the builder of the Vizcaya project for a potential bonus based upon the cumulative results of operations to December 31, 2001. Selling, general and administrative expenses increased $2.2 million (14.8%) in 2001 as a result of the Vizcaya Project. These expenses decreased as a percentage of total revenue to 12.1% from 15.7% due to the increase in total revenue. The Company incurred a net loss in 2001 of $3.6 million or $0.77 per share, as compared to a net loss of $2.6 million, or $0.56 per share, in 2000. Included in this net loss, however, is a $0.6 million non-cash extraordinary item for the early extinguishment of debt. 22 The Company has earned a preferred return, as defined, based upon its cash investment in the Vizcaya Project. Because this cash investment has been substantially reduced, and because the builder may receive a bonus from available profits up to an amount equal to the Company's cumulative preferred return, future net income accruing to the Company from this project is expected to be significantly lower. Earnings before interest, taxes, depreciation and amortization, referred to as EBITDA, is recognized within the real estate industry as a meaningful financial measure. Interest expense included in the cost of sales, depreciation, amortization, and the 2001 extraordinary item related to early extinguishment of debt are non-cash items added back to the Company's net loss of $3,566,000 and therefore included in EBITDA of $8,648,000. EBITDA increased $4.2 million to $8.6 million for 2001 from $4.4 million in 2000. The increase resulted from the increase in home sales. The Company has responded to the close-out of several of its projects by reductions in staff and related overhead expenses. The Company reduced staff by 22% in 2001 and will continue to adjust to meet current market conditions. Sales revenues from closed and delivered homes remained strong in the last two quarters of 2001 but new contracts written have decreased. Based upon the reduced backlog of homes to be delivered and the reduced number of customer deposits as compared to last year, home-building revenues for fiscal 2002 will most likely be lower than fiscal 2001. The Company believes that the Stonecrest project can provide a stable source of revenue for the next several years. The Spring Park Terraces project, for which land development began in late 2001, and the proposed Sandpiper Isles and Sandpiper Greens projects in Pelican Landing, will be in development and construction stages in 2002, with sales revenues being recognized through 2003. The build-out of many of our current projects is anticipated by year-end 2002, and the Company is evaluating future land purchases, as well as developing future strategies for positioning itself within the competitive building and development market in Florida. The Company is now in the process of considering strategic alternatives to its current operating strategies in an effort to determine the best means of maximizing shareholder value. 23 YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999 Revenues from home sales increased $14.5 million (18.8%) during the fiscal year 2000 as compared to 1999 primarily due to an increase in the number of homes delivered as a result of the acquisition of the Vizcaya Project. As compared to the 501 homes delivered in 1999, Oriole delivered 562 homes in 2000, 70 of which for $13.1 million were contributed by the Vizcaya Project. There was a 5.9% increase in the average selling price of homes delivered in 2000 to $163,700 from $154,600. The number of contracts executed and the aggregate dollar value of those contracts increased to 848 and $150.8 million respectively, in 2000, from 463 and $73.1 million, respectively, in 1999. Of this amount, 193 and $37.1 million, respectively, related to the Vizcaya Project. The average selling price of homes contracted in 2000 increased 12.7% to $177,800 from $157,800 in 1999. Non-homebuilding revenues decreased to $1.0 million in 2000 as compared to $8.1 million in 1999. This decrease occurred because the prior year included both proceeds from the sale of certain properties held for investment and the associated rental income derived from those properties. These income streams were not duplicated in 2000 due to the sale of the underlying assets in 1999. Interest, rentals and other income was approximately the same in 2000 as it was in 1999. Cost of home sales increased to $82.9 million (18.0%) in 2000 from $70.3 million in 1999. However, cost of sales actually decreased as a percentage of home sales in 2000 to 90.2% from 90.8% in 1999 due to higher average selling prices. Selling, general and administrative expenses increased $1.0 million (7.0%) in 2000 as a result of the Vizcaya Project. These expenses decreased as a percentage of total revenue to 15.7% from 16.0% due to the increase in total revenue. The Company incurred a net loss in 2000 of $2.6 million or $0.56 per share, as compared to a net loss of $5.0 million, or $1.09 per share, in 1999. Significantly, the 1999 net loss was affected by several one-time transactions which included (a) a loss of $4.9 million to write down the value of land inventory for 250 unsold housing units to fair market value less cost to sell; (b) a loss of $1.4 million to write down the value of an investment in a joint venture; and (c) a gain of $6.1 million from the sale of certain properties and equipment. In addition, 1999 also included an additional $2.0 million in rental income derived from the properties and equipment sold. 24 EBITDA, adjusted to exclude the 1999 non-cash valuation adjustments and gains on property and equipment, increased $0.9 million to $4.4 million for 2000 from $3.5 million in 1999, primarily due to the impact of the Vizcaya Project. EBITDA was also affected by the other factors influencing net income discussed above. ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is exposed to market risk, primarily related to interest rates. In 2001 the Company redeemed its fixed rate 12.5% Senior Note debt and entered into a borrowing arrangement with a bank providing for variable interest rates tied to the prime interest rate. This change in composition of debt significantly reduced interest expense but modified interest rate risk in 2001 as rates are now subject to increases in the prime rate. As homes covered by this debt are closed and delivered to customers, associated principal repayments are made, reducing the loan balances and the amount at risk. The Company's variable rate debt at the end of 2001 was $24,257,026. A one hundred basis point increase in prime rate would result in an increase of $242,570 in annual interest expense before principal reductions during 2002. The Company does not enter into derivative agreements to manage interest costs and hedge against risks associated with fluctuating interest rates. Accordingly, it is the Company's belief that risks associated with interest rates are minimal and would not materially affect the results of operations of the Company. 25 ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
Page ---- Consolidated Balance Sheets as of December 31, 2001 and 2000 ........................................... 27 Consolidated Statements of Operations for the Years Ended December 31, 2001, 2000, and 1999 .................................... 29 Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 2001, 2000, and 1999 .................................... 30 Consolidated Statements of Cash Flows for the Years Ended December 31, 2001, 2000, and 1999 .................................... 31 Notes to Consolidated Financial Statements ........................... 32 Report of Independent Accountants .................................... 48
26 ORIOLE HOMES CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, ASSETS
2001 2000 ------------ ------------ Cash and cash equivalents Cash and cash equivalents $ 2,226,739 $ 18,076,508 Restricted cash 5,849,729 3,631,248 ------------ ------------ 8,076,468 21,707,756 Inventories Land 31,765,628 49,406,779 Homes completed or under construction 26,047,903 32,876,886 Model homes 1,300,459 4,216,273 ------------ ------------ 59,113,990 86,499,938 Property and equipment, at cost Land 80,885 81,379 Buildings 457,216 664,065 Furniture, fixtures and equipment 2,223,601 3,044,175 ------------ ------------ 2,761,702 3,789,619 Less accumulated depreciation 1,952,717 2,127,155 ------------ ------------ 808,985 1,662,464 ------------ ------------ Land held for investment, at cost 1,857,300 1,857,300 Investment in unconsolidated joint venture 5,000,000 -- Other Prepaid expenses 1,732,764 1,713,099 Unamortized financing costs 752,970 392,752 Other assets 2,522,057 2,384,853 ------------ ------------ 5,007,791 4,490,704 ------------ ------------ Total assets $ 79,864,534 $116,218,162 ============ ============
The accompanying notes are an integral part of these statements. 27 ORIOLE HOMES CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS - CONTINUED DECEMBER 31, LIABILITIES AND SHAREHOLDERS' EQUITY
2001 2000 ------------ ------------ Liabilities Line of credit $ -- $ 10,000 Mortgage notes payable 24,257,026 20,415,730 Accounts payable and accrued liabilities 10,054,699 11,662,494 Customer deposits 9,763,166 10,190,140 Senior notes -- 34,584,277 ------------ ------------ Total liabilities 44,074,891 76,862,641 ------------ ------------ Shareholders' equity Class A common stock, $.10 par value Authorized - 10,000,000 shares Issued and outstanding - 1,863,149 in 2001 and 1,863,649 in 2000 186,315 186,365 Class B common stock, $.10 par value Authorized - 10,000,000 shares Issued and outstanding - 2,762,375 in 2001 and 2,761,875 in 2000 276,238 276,188 Additional paid-in capital 19,267,327 19,267,327 Retained earnings 16,059,763 19,625,641 ------------ ------------ Total shareholders' equity 35,789,643 39,355,521 ------------ ------------ Total liabilities and shareholders' equity $ 79,864,534 $116,218,162 ============ ============
The accompanying notes are an integral part of these statements. 28 ORIOLE HOMES CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31,
2001 2000 1999 ------------- ------------- ------------- Revenues Sales of homes $ 140,029,478 $ 91,989,406 $ 77,454,410 Sales of land 14,500 15,000 -- Other operating revenues -- 73,115 2,003,522 Gain on sales of property and equipment, net 105,469 930,872 3,745,618 Gain on sales of land held for investment and other assets, net -- -- 2,305,603 Interest, rentals and other income 2,615,126 2,646,882 2,426,739 ------------- ------------- ------------- 142,764,573 95,655,275 87,935,892 ------------- ------------- ------------- Costs and expenses Cost of homes 128,461,317 82,939,937 70,308,875 Inventory valuation adjustment -- -- 4,860,636 Cost of land sold 6,442 11,603 -- Loss on joint venture investment -- -- 1,430,083 Costs relating to other operating revenues 9,587 190,475 1,892,866 Selling, general and administrative expenses 17,281,097 15,054,416 14,074,117 Interest costs incurred 4,362,383 6,003,735 6,888,691 Interest capitalized (deduct) (4,362,383) (5,963,505) (6,477,555) ------------- ------------- ------------- 145,758,443 98,236,661 92,977,713 ------------- ------------- ------------- Net loss before extraordinary item $ (2,993,870) $ (2,581,386) $ (5,041,821) Extraordinary loss on early extinguishment of debt (572,008) -- -- ------------- ------------- ------------- Net loss $ (3,565,878) $ (2,581,386) $ (5,041,821) ============= ============= ============= Basic and Diluted loss per Class A and B common share available for common stockholders Net loss before extraordinary item $ (.65) $ (.56) $ (1.09) Extraordinary item $ (.12) $ -- $ -- ------------- ------------- ------------- Net loss $ (.77) $ (.56) $ (1.09) ============= ============= ============= Weighted average number of common shares outstanding - Basic and Diluted 4,625,524 4,625,524 4,625,524 ============= ============= =============
The accompanying notes are an integral part of these statements. 29 ORIOLE HOMES CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999
COMMON STOCK -------------------------------------------------------------- CLASS A CLASS B ----------------------------- ---------------------------- ADDITIONAL PAID-IN RETAINED SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS ------------ ------------ ------------ ------------ ------------ ------------ Balance at January 1, 1999 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 Net loss for 2000 -- -- -- -- -- (2,581,386) ------------ ------------ ------------ ------------ ------------ ------------ Balance at December 31, 2000 1,863,649 $ 186,365 2,761,875 $ 276,188 $ 19,267,327 $ 19,625,641 Net loss for 2001 -- -- -- -- -- (3,565,878) ------------ ------------ ------------ ------------ ------------ ------------ Stock conversion (500) (50) 500 50 -- -- ------------ ------------ ------------ ------------ ------------ ------------ Balance at December 31, 2001 1,863,149 $ 186,315 2,762,375 $ 276,238 $ 19,267,327 $ 16,059,763 ============ ============ ============ ============ ============ ============
The accompanying notes are an integral part of these statements. 30 ORIOLE HOMES CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31,
2001 2000 1999 ------------ ------------ ------------ Cash flows from operating activities Net loss $ (3,565,878) $ (2,581,386) $ (5,041,821) Adjustments to reconcile net loss to net cash provided by (used in) operating activities Depreciation 437,362 312,585 892,446 Extraordinary item 572,008 -- -- Amortization 1,367,388 481,194 759,715 Gain on sales of property, equipment and land held for investment, net (105,469) (970,289) (6,051,221) Inventory valuation adjustment -- -- 4,860,636 Loss on joint venture investment -- -- 1,430,083 (Increase) decrease in operating assets Receivables -- 262,240 691,044 Inventories 27,775,021 16,218,657 17,601,052 Other assets (715,579) (35,200) 878,440 Increase (decrease) in operating liabilities Accounts payable and accrued liabilities (1,607,795) (1,276,534) (3,109,137) Customer deposits (426,974) 2,914,842 (512,039) ------------ ------------ ------------ Total adjustments 27,295,962 17,907,495 17,441,019 ------------ ------------ ------------ Net cash provided by operating activities 23,730,084 15,326,109 12,399,198 ------------ ------------ ------------ Cash flows from investing activities Acquisition of project, net of cash acquired -- (22,672,617) -- Capital expenditures (105,123) (1,109,945) (694,787) Investment in unconsolidated joint venture (5,000,000) -- -- Return on investment in Regency joint venture -- 1,242,240 616,273 Sales of property and equipment and land held for investment 237,635 2,364,530 20,661,638 ------------ ------------ ------------ Net cash (used in) provided by investing activities (4,867,488) (20,175,792) 20,583,124 ------------ ------------ ------------ Cash flows from financing activities Proceeds from bank borrowings 73,848,978 28,631,913 1,575,101 Principal payments of bank borrowings (70,007,682) (12,522,555) (13,239,114) Financing costs (1,461,180) -- -- Repayment of line of credit (10,000) -- -- Repurchase of senior notes (34,864,000) (8,260,000) (13,168,000) ------------ ------------ ------------ Net cash (used in) provided by financing activities (32,493,884) 7,849,358 (24,832,013) ------------ ------------ ------------ Net increase (decrease) in cash and cash equivalents (13,631,288) 2,999,675 8,150,309 Cash and cash equivalents at beginning of year 21,707,756 18,708,081 10,557,772 ------------ ------------ ------------ Cash and cash equivalents at end of year $ 8,076,468 $ 21,707,756 $ 18,708,081 ============ ============ ============ Supplemental disclosures of cash flow information Cash paid during the year for: Interest (net of amount capitalized) $ 559,243 $ 1,358,648 $ 820,159 Income taxes $ -- $ -- $ --
The accompanying notes are an integral part of these statements. 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. Certain prior year balances have been reclassified to conform to the current year presentation. 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, 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. The Company's principal source of revenue is the sale of residential homes. Sales, including profit recognition, of residential homes and land are recognized upon delivery and closing. Payments received from customers prior to closing are recorded as deposits. All sales require a written (and signed) contract with the buyer communicating a final understanding between parties as to the specific nature and terms of the transaction. The buyer places a deposit (10% or more of the sales price) with Oriole. A sales price is set at the contract signing subject to amendment for subsequent sales of options at the customer's request. Revenue is recognized on the delivery and closing date of the sale, at which time title is transferred. On this date, 100% of the cash sales price is collected by Oriole. INVENTORIES The Company records inventory at land cost, plus accumulated land development and construction costs, including capitalized interest, real estate taxes, and other carrying costs. These capitalized costs are included in cost of home sales when delivered. Also, certain other project costs are capitalized as the project is developed. The total capitalized costs of our real estate projects are assigned to residential units based on specific identification and/or relative value and/or area methods, where applicable. This allocation is necessary to properly charge inventory to cost of sales upon the delivery of homes. The accumulated costs of land and homes are 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 to fair value. Of the inventory amounts represented as homes completed or under construction, homes which are completed aggregate approximately $4,477,000, or 17% of the total, in 2001 and $8,213,000, or 25% of the total, in 2000. 32 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION - Continued PROPERTY AND EQUIPMENT Property and equipment is stated at cost. The Company provides for depreciation of property and equipment by the straight-line method for buildings and the MACRS method for furniture, fixtures and equipment over the following estimated useful lives of the various classes of depreciable assets: Buildings 25 to 31.5 years Furniture, fixtures and equipment 3 to 7 years UNAMORTIZED FINANCING COSTS Certain prepaid costs incurred in connection with the construction loan agreements entered into in 2001 have been deferred and are being amortized as the units financed are delivered over the term of the debt. CASH EQUIVALENTS Cash equivalents consist of highly liquid investments with maturities of one month or less when purchased. NET LOSS PER SHARE Net loss per common share is computed by dividing net loss by the weighted average shares outstanding during each year. The computation of diluted net income per share includes all dilutive common stock equivalents in the weighted average shares outstanding during each year, except in loss years when their inclusion would be antidilutive. ADVERTISING The Company expenses advertising costs as incurred. Advertising expense for the years ended December 31, 2001, 2000, and 1999 was $2,174,875, $2,557,809, and $1,584,483, 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. 33 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION - Continued NEW ACCOUNTING PRONOUNCEMENTS In June 2001 the Financial Accounting Standards Board issued Statements of Financial Accounting Standards (SFAS) No. 141, "Business Combinations", No. 142, "Goodwill and Other Intangible Assets", and No. 143, "Accounting for Asset Retirement Obligations". In August 2001, the Financial Accounting Standards Board issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets". SFAS No. 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001 and requires the acquired intangible assets to be recognized as assets apart from goodwill if certain criteria are met. Implementation of SFAS No. 141 did not have an effect on the financial statements of the Company. SFAS No. 142 is effective for fiscal years beginning December 15, 2001 and provides guidance on accounting for intangible assets and eliminates the amortization of both goodwill and certain identifiable intangible assets. Under the provisions of SFAS No. 142, intangible assets, including goodwill, that are not subject to amortization will be tested for impairment at least annually. Impairment testing must be performed more frequently if events or changes in circumstances indicate that the asset might be impaired. We do not expect the adoption of SFAS No. 142 to have a material impact on the Company's financial position or results of operations. SFAS No. 143 is effective for fiscal years beginning after June 15, 2002, with earlier application encouraged. This statement addresses the diverse accounting practices for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. This statement requires recognition in the period in which it is incurred of the fair value of liabilities associated with the retirement of long-lived assets when a legal obligation to incur such costs arises as a result of the acquisition, construction, development and/or the normal operation of a long-lived asset. We do not expect this statement to have a material effect on our financial position or results of operations. 34 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION - Continued SFAS No. 144 supersedes both SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" and the accounting and reporting provisions of APB Opinion No. 30, "Reporting the Results of Operations - Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions", for the disposal of a segment of a business (as previously defined in that Opinion). SFAS No. 144 retains the fundamental provisions in SFAS No. 121 for recognizing and measuring impairment losses on long-lived assets held for use and long-lived assets to be disposed of by sale, while also resolving significant implementation issues associated with SFAS No. 121. It also retains the basic provisions of Opinion 30 on how to present discontinued operations in the income statement but broadens that presentation to include a component of an entity (rather than a segment of a business). Unlike SFAS No. 121, an impairment assessment under SFAS No. 144 will never result in a write-down of goodwill. Rather, goodwill is evaluated for impairment under SFAS No. 142, "Goodwill and Other Intangible Assets". The Company is required to adopt SFAS No. 144 no later than the year beginning after December 15, 2001, which will be our fiscal 2002. We do not expect the adoption of SFAS No. 144 to have a material impact on the Company's financial position or results of operations. NOTE B - ACQUISITION On August 8, 2000, pursuant to a Purchase and Sale Agreement and a Builder's Agreement dated as of the same date between a wholly owned subsidiary of the Company (OH Investments, Inc.) and the Seller, the Company acquired a real estate project known as the "Vizcaya Project". This community consists of 504 single-family units being marketed to active adults at least 55 years of age. The seller is a homebuilder with operations in Southeast Florida. The total cost for the acquisition of the Vizcaya Project was $27,510,034, which consists of amounts paid to seller, liabilities assumed and transaction costs paid by the Company. Since the acquisition of the Vizcaya Project consisted of developed and undeveloped land, no goodwill was recorded in connection with the acquisition. Under the terms of the Builder's Agreement, Centerline Homes at Delray, Inc. ("Centerline-Delray") agreed, among other things, to complete and manage the Vizcaya Project. The Builder's Agreement provides that Centerline-Delray will be entitled to receive certain bonus payments depending upon the performance of the Project after the Company has been repaid its cash investment of $6.5 million and a preferred return of 25% per annum on its cash investment. For 2001 and 2000, this preferred return included in net income amounted to $960,000 and $401,000, respectively. The builder is entitled, out of available profits as defined, to earn a bonus up to the total cumulative preferred return received by the Company. Thereafter, excess net income, as defined, is shared equally. Based upon the Vizcaya results of operations to December 31, 2001, the Company has accrued a potential bonus to the builder of $760,000. The Company's initial cash investment has been substantially reduced and because the builder may receive a bonus as described above, future net income accruing to the Company is expected to be significantly lower. The accompanying consolidated statement of operations of the Company includes results of operations relating to the Vizcaya Project from August 8, 2000, the acquisition date. 35 NOTE B - ACQUISITION - Continued Unaudited pro forma consolidated revenues and net loss of the Company, giving effect to the acquisition of the Vizcaya Project as if it had occurred on January 1, 2000, equal revenues of $108,695,587 and a loss of $2,216,106 for the year ended December 31, 2000. These pro forma results do not include any adjustments and do not purport to be indicative of the actual results of operations that would have been reported had the acquisition of the Vizcaya Project actually occurred on January 1, 2000. NOTE C - INVENTORIES Information related to the interest component capitalized in the Company's inventories is as follows:
Years Ended December 31, -------------------------------------------------- 2001 2000 1999 ------------ ------------ ------------ Interest capitalized in inventories, beginning of period $ 10,585,472 $ 10,593,706 $ 14,221,491 Interest capitalized 4,362,383 5,963,505 6,477,555 Interest expensed to cost of sales - operations (9,505,903) (5,971,739) (6,480,654) Interest expensed - valuation adjustment -- -- (3,624,686) ------------ ------------ ------------ Interest capitalized in inventories, end of period $ 5,441,952 $ 10,585,472 $ 10,593,706 ============ ============ ============
NOTE D - INVENTORY AND FIXED ASSET VALUATION ADJUSTMENTS The Company follows 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. The Company recorded in the second and fourth quarters of 1999, non-cash inventory valuation adjustments totaling $2,480,695 and $2,379,941 respectively or $.54 and $.51 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. 36 NOTE E - INVESTMENT IN UNCONSOLIDATED JOINT VENTURE On September 14, 2001, the Company contributed capital of $5,000,000 to a special purpose limited liability company formed to operate a joint venture between the Company and Centerline Homes at the Equestrian Club, Inc. to construct and sell homes in Palm Beach County. On February 27, 2002 an additional $1,000,000 was contributed by the Company. Under the terms of the joint venture, the Company is entitled to a preferential distribution equal to the greater of (a) the first $7,841,000 of Available Cash (as defined in the operating agreement) or (b) a return of all of its capital contributions plus an internal rate of return equal to 25% on its contributions to the venture. Under the terms of the joint venture, the Company may, but is not obligated to, make further capital contributions, make any loan to the joint venture or guarantee any of the joint venture's obligations. The Company's interest in the joint venture is accounted for using the equity method of accounting. The Company received no distribution from its interest in the joint venture during the period ended December 31, 2001 and there was no undistributed profit or loss at December 31, 2001. NOTE F - INVESTMENT IN REGENCY JOINT VENTURE The Company had one investment in a joint venture with Regency Homes in 1999. The joint venture constructed and sold homes. During the year ended December 31, 1999, there was no advance 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 $1,430,083 was unrecoverable and was written off as of December 31, 1999. In August, 2001, a final settlement of $115,000 was received from the joint venture partner, and was recorded as miscellaneous income. NOTE G - LIFE INSURANCE The Company has advanced premiums for life insurance policies 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 Company on the above policies through the years ended December 31, 2001 and 2000 were $1,314,329 and $1,160,466, respectively, and are classified as other assets. At December 31, 2001 the cash surrender value of the policies was $800,000. In connection with the premium advances, the Company obtained an option from 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 H - LINE OF CREDIT At June 30, 2001, the Company did not renew its $10.0 million Revolving Line of Credit facility and decided to rely, instead, on its available cash and new credit facilities discussed at Note I. 37 NOTE I - MORTGAGE NOTES PAYABLE Mortgage notes payable at December 31, 2001 and 2000, are as follows: 2001 2000 ----------- ----------- Construction Loan $ -- $ 2,167,046 Vizcaya Loan 9,743,763 18,248,684 Mortgage Notes 13,222,242 -- Land Loan 1,291,021 -- ----------- ----------- $24,257,026 $20,415,730 =========== =========== On December 22, 1998, the Company entered into a Construction Loan Agreement with a bank providing for a loan totaling $6,750,000 (the "Construction 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 was 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"). Interest charged on the loan was 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, 2000, the interest rate on the loan was 9.5%. Accrued interest on the loan was payable monthly and partial payments of principal were made upon the delivery of homes. The loan was secured by certain land and improvements. The loan was paid in full during 2001. On August 8, 2000, in connection with the Vizcaya Project, a wholly owned subsidiary of the Company borrowed an aggregate principal amount of $26,787,200, of which $9,580,430 is for future construction costs (the "Vizcaya Loan"). The Vizcaya Loan is secured by real property and other assets acquired in connection with the acquisition of the Vizcaya Project. The Company has agreed to guarantee up to an aggregate of $2.0 million of the Vizcaya Loan. Certain individual guarantors, not related to the Company, have agreed to jointly and severally guarantee the Vizcaya Loan. The Vizcaya Loan bears interest at the prime rate of the bank, which was 4.75% and 9.50% as of December 31, 2001 and 2000, respectively. Accrued interest on the loan is payable monthly and partial payments of principal are made upon the delivery of homes. The Vizcaya Loan is collateralized by certain land and land improvements. On July 16, 2001, the Company entered into agreements that provided for borrowing an aggregate principal amount of $49,878,136, of which $15,451,742 was for future construction costs (the "Mortgage Notes"). Four separate mortgage notes encumbering different parcels of real property (land and related improvements) collateralize the loans. Interest is at the specified prime rate of the bank plus 0.50%, which was 5.25% at December 31, 2001. Interest is payable monthly and partial payments of principal are to be made upon the delivery of homes. The principal must be paid in full at various maturities ranging from January 16, 2003 to July 16, 2003. 38 NOTE I - MORTGAGE NOTES PAYABLE - Continued On August 23, 2001, the Company entered into an agreement that provided for borrowing an aggregate principal amount of $1,265,000 for the purchase of land (the "Land Loan"). A mortgage note encumbering a parcel of real property secures the Land Loan. Interest is at the specified prime rate of the bank plus 0.50%, or 5.25% as of December 31, 2001. Interest is payable monthly, and the principal must be paid in full at maturity on August 23, 2002. NOTE J - 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, 2001 and 2000, the significant components of the Company's deferred tax assets and liabilities were:
2001 2000 ------------ ------------ AMT credit carryover $ 113,877 $ 113,877 Federal net operating loss carryforward 11,149,296 9,269,465 State net operating loss carryforward 2,590,983 2,286,892 Inventory valuation adjustment 596,607 1,715,847 Reserve for warranties and other accrued expenses 380,933 334,472 Percentage of completion 752,786 421,224 Inventory capitalization 56,476 51,433 ------------ ------------ Total deferred tax asset, before valuation allowance 15,640,958 14,193,210 Less valuation allowance 13,310,528 12,092,561 ------------ ------------ Total deferred tax assets, net of valuation allowance 2,330,430 2,100,649 ------------ ------------ Deferred expenses (2,217,660) (2,090,708) Accelerated depreciation (112,770) (9,941) ------------ ------------ Total deferred tax liabilities (2,330,430) (2,100,649) ------------ ------------ Net deferred tax (liability) asset $ -- $ -- ============ ============
39 NOTE J - INCOME TAXES - Continued The net change in the valuation allowance for the years ended December 31, 2001 and 2000 were increases of $1,217,967 and $1,047,284, 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, 2001, the Company has federal and state net operating loss carryforwards (NOLs) of $32,792,047 and $47,108,781, respectively. Of this amount, $6,128,138 of the federal NOLs expire in 2012 and $21,134,995 will begin to expire in 2018. The Company's state NOLs will begin to expire principally in the year 2012. The complete realization of the value of the NOLs is dependent on various factors, including future profitability. NOTE K - 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, 2001 and 2000, cash in the amounts of $5,849,729 and $3,631,248, respectively, was so restricted and classified as restricted cash on the consolidated balance sheets. The Company previously entered into an escrow agreement with a certain bank and the Division of Florida Land Sales and Condominiums which allowed the Company to use customer deposits which were maintained in an escrow account. Deposits of up to $107,229 in 2000 which could be released to the Company were guaranteed by bonds aggregating $1,250,000. As of December 31, 2001, the Company had discontinued use of performance bonds, and placed customer deposits in escrow accounts as provided for by State regulations. NOTE L - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES Accounts payable and accrued liabilities include the following: 2001 2000 ----------- ----------- Accounts payable $ 6,995,586 $ 7,618,760 Accrued interest 991,903 2,513,191 Accrued warranties on homes 700,000 941,974 Other accrued liabilities 1,367,210 588,569 ----------- ----------- $10,054,699 $11,662,494 =========== =========== 40 NOTE M - SENIOR NOTES Senior notes consist of the following:
2001 2000 ------------ ------------ 12 1/2% senior notes due January 15, 2003 at par with an effective interest rate of 13.02% $ -- $ 70,000,000 Repurchase of senior notes to be used as part of sinking fund -- (35,136,000) Unamortized discount -- (279,723) ------------ ------------ $ -- $ 34,584,277 ============ ============
On January 13, 1993, the Company issued 12 1/2% senior notes ("Senior Notes"), due January 15, 2003. The Senior Notes had a face value of $70,000,000 and were issued at a discount of $1,930,600. The Senior Notes were senior unsecured obligations of the Company subject to redemption at the Company's option on or after January 15, 2001 at 100% of the principal amount. On July 16, 2001, the Company effected an optional redemption of all of its outstanding 12 1/2% Senior Notes due 2003. The total redemption price, including accrued interest of $2,112,688, was $35,915,688. Of this amount, $33,313,737 was provided by the financing arrangement for $49,878,136 described at Note I above and $2,601,951 from available cash. Prior to this transaction, Senior Notes had been purchased in the open market at varying prices. Certain costs incurred in connection with the Senior Notes were deferred and were amortized by using the interest method over the term of the debt, with the remaining unamortized portion of these costs, plus a loan discount, recognized as an extraordinary item of $572,008. NOTE N - INCOME (LOSS) PER SHARE In the years 2001, 2000 and 1999, common stock equivalents have been excluded in the computation of loss per share as the Company incurred net losses during these years and their inclusion would be anti-dilutive. Potential common stock equivalents at December 31, 2001 consist of options to purchase 71,100 shares of common stock at prices ranging from $1.50 to $8.62 per share. NOTE O - 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% each on the date of the first and second Annual Meeting of Shareholders subsequent to the grant of options. 41 NOTE O - STOCK OPTIONS - Continued 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 SFAS No. 123, "Accounting for Stock-Based Compensation", the Company's net loss would have been increased to the proforma amounts indicated below.
2001 2000 1999 ------------- ------------- ------------- Net income (loss) As reported $ (3,565,878) $ (2,581,386) $ (5,041,821) Pro forma $ (3,585,143) $ (2,595,618) $ (5,047,666) Basic income As reported $ (.77) $ (.56) $ (1.09) (loss) per share Pro forma $ (.77) $ (.56) $ (1.09)
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 2001, 2000, and 1999, respectively: expected volatility of 60.29, 52.18, and 37.59 percent; risk-free interest rate of 4.63, 6.56, and 5.91 percent; and expected life of 5.9, 5.5, and 5.7 years. A summary of the status of the Company's stock option plans as of December 31, 2001, 2000, and 1999, and changes during the years ending on those dates is presented below:
2001 2000 1999 ---------------------- --------------------- ------------------- Weighted Weighted Weighted Average Average Average Shares Exercise Shares Exercise Shares Exercise (000) Price (000) Price (000) Price ------ --------- ------- --------- ------ -------- Outstanding at beginning of year 72.1 $ 3.87 71.3 $ 5.99 61.0 $ 7.06 Granted 20.6 $ 1.46 26.7 $ 1.75 19.0 $ 2.06 Exercised -- -- -- -- -- -- Forfeited 21.6 $ 6.88 25.9 $ 7.52 8.7 $ 7.37 ---- ---- ---- Outstanding at end of year 71.1 $ 2.25 72.1 $ 3.87 71.3 $ 5.99 Options exercisable at year end 25.0 $ 3.42 34.2 $ 6.28 52.3 $ 7.28 Weighted average fair value of options granted during the year $ 0.90 $ 0.96 $ 1.20
42 NOTE O - STOCK OPTIONS - Continued The following information applies to options outstanding at December 31, 2001:
Options Outstanding Options Exercisable --------------------------------------------------- ----------------------------- Weighted Weighted Weighted Range of Avg. Avg. Avg. Exercise Shares Contractual Exercise Shares Exercise Prices (000) Life Price (000) Price -------------------- ----------- ---------------- ---------------- ---------- --------------- $1.06 to $1.50 34.0 4.04 $ 1.27 10.0 $ 1.50 $1.81 to $2.80 28.7 4.72 $ 2.09 6.6 $ 2.06 $4.50 to $4.50 2.4 6.39 $ 4.50 2.4 $ 4.50 $7.37 to $8.62 6.0 4.18 $ 7.70 6.0 $ 7.70 ---- ---- $1.06 to $8.62 71.1 25.0 ==== ====
NOTE P - 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. NOTE Q - LEASING ARRANGEMENTS RENTAL PROPERTIES In connection with certain developments, the Company holds leases on specific recreation facilities. 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, 2001 and 2000: 2001 2000 -------- -------- Land $ 80,885 $ 81,379 Buildings 457,216 664,065 -------- -------- 538,101 745,444 Less accumulated depreciation 457,216 582,198 -------- -------- $ 80,885 $163,246 ======== ======== The approximate future minimum rental income expected under these leases as of December 31, 2001 is $161,116 annually through the year 2006. Subsequently, the leases are subject to rental escalations for cost of living and expire through various periods ending 2019, 2021 and 2069. 43 NOTE Q - LEASING ARRANGEMENTS - Continued OFFICE AND OTHER LEASES The Company leases its corporate office, sales office, a warehouse, certain model homes, office equipment, vehicles and trailers under lease agreements extending through 2006. These are accounted for as operating leases. The lease on the corporate office expires in December, 2002, with an option to renew for up to five years. The approximate future minimum lease payments under non-cancellable leases as of December 31, 2001 are as follows: 2002 $571,016 2003 82,012 2004 62,485 2005 39,909 2006 5,197 -------- $760,619 ======== Total net rent expense, including common area maintenance expenses, for each of the years ended December 31, 2001, 2000, and 1999 amounted to approximately $360,000, $360,000, and $384,000, respectively. NOTE R - 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 $50,482 in 2001, $48,757 in 2000, and $47,925 in 1999. NOTE S - 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. LINE OF CREDIT The carrying amount of the line of credit approximates fair value due to the length of the maturity and the interest rate being tied to market indices. MORTGAGE NOTES The carrying amount of the mortgage notes approximates fair value due to the interest rates not being significantly different from the current market rates available to the Company. 44 NOTE S - FINANCIAL INSTRUMENTS - Continued SENIOR NOTES The Senior Notes were not listed on any exchange. Prices offered to the Company by individual holders and dealers in the Senior Notes were used to estimate fair value of the Senior Notes. The estimated fair value of the outstanding Senior Notes at December 31, 2001, 2000 and 1999 was $0, $ 32,772,160 and $41,399,040, respectively. NOTE T - 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. On January 1, 1999, the rental operations segment consisted of 529 units in two separate properties. A 480 unit complex was sold in 1999, with the remaining units being sold as individual units. On January 1, 2000 the rental operations segment consisted of 39 units, 34 of which were sold in 2000. On January 1, 2001 the rental operations segment consisted of five remaining units, all of which were sold in 2001. There was no material revenue from the remaining units in the rental segment in 2000 and 2001; gains on sale of units were recorded in the home building segment. 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 and administrative costs. 45 NOTE T - SEGMENT INFORMATION - Continued The following information about the two segments is for the years ended December 31, 2001, 2000, and 1999, in thousands (000).
Home Rental Building Operations Other Total -------- ---------- ----- ----- DECEMBER 31, 2001 Revenues $ 141,891 -- $ 874 $ 142,765 Interest expense 9,506 -- -- 9,506 Depreciation and amortization 2,377 -- -- 2,377 Segment net income (loss) (4,252) -- 686 (3,566) Segment assets 79,327 -- 538 79,865 Expenditures for segment assets 105 -- -- 105 DECEMBER 31, 2000 Revenues $ 94,986 -- $ 669 $ 95,655 Interest expense 6,012 -- -- 6,012 Depreciation and amortization 437 -- 39 476 Segment net income (loss) (2,822) -- 241 (2,581) Segment assets 115,473 -- 745 116,218 Expenditures for segment assets 1,110 -- -- 1,110 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
During 1999, the Company recorded valuation adjustments to its homebuilding segment in the amount of $4,860,636. 46 NOTE U - SELECTED QUARTERLY FINANCIAL DATA (Unaudited) A summary of selected quarterly information for the years ended December 31 is as follows:
2000 Quarter Ended ---------------------------------------------------------- (In thousands, except per share data) MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 -------- -------- ------------ ---------- Total revenue $ 17,202 $ 13,214 $ 21,667(1) $ 43,572(1) Net income (loss) (793) (1,582) (1,505) 1,299 Net income (loss) per Class A and B common share - Basic & Diluted $ (0.17) $ (0.34) $ (0.33) $ 0.28
2001 Quarter Ended ------------------------------------------------------- (In thousands, except per share data) (as restated)(2) MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 -------- -------- ------------ ----------- Total revenue $ 30,567 $ 22,673 $ 40,737 $ 48,788 ======== ======== ======== ======== Loss before extraordinary item (1,103) (1,172) (160) (559) Extraordinary item -- -- (572) -- -------- -------- -------- -------- Net loss (1,103) (1,172) (732) (559) ======== ======== ======== ======== Net loss per Class A and B common share - Basic & Diluted Loss before extraordinary item $ (0.24) $ (0.25) $ (0.04) $ (0.12) Extraordinary item -- -- $ (0.12) -- -------- -------- -------- -------- Net loss $ (0.24) $ (0.25) $ (0.16) $ (0.12) ======== ======== ======== ========
(1) Includes the acquisition of the Vizcaya Project, which contributed aggregate revenue of $4.2 million and $8.9 million in the third and fourth quarters, respectively. (2) During the fourth quarter, the Company recorded a $760,000 potential bonus payable under a Builder's Agreement, a portion of which is reflected in prior quarters. Previously, the reported net loss for the earlier three quarters were $717,000, $1,273,000 and $459,000, respectively. NOTE V - RELATED PARTY TRANSACTIONS In December 2000 the Company sold and leased back nine model homes used by the Vizcaya Project from an entity controlled by certain officers/shareholders of the Company (the "Related Party"). The selling prices of the model homes approximated fair market value. The Related Party paid $1,365,010 in cash and issued an unsecured promissory note in the amount of $588,800. Interest on the note of 8.0% per annum is payable monthly beginning December 30, 2000 and the principal must be paid in full no later than maturity on December 30, 2003. On February 27, 2002 principal of $400,000 on the promissory note was repaid. In connection with this transaction, the results of operations for the fiscal year 2000 includes revenue of $1,953,810, rent expense of $18,630 and interest income of $3,925. The results of operations for the fiscal year 2001 includes revenue of $204,458, rent expense of $263,489 and interest income of $47,104. 47 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, 2001 and 2000, and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 2001. 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 auditing standards generally accepted in the United States. 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, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States. Grant Thornton LLP Miami, Florida February 22, 2002 48 ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE This item is not applicable. PART III ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The directors and executive officers of Oriole Homes Corp. as of March 18, 2002 were as follows:
NAME AGE POSITION WITH THE COMPANY ---- --- ------------------------- George R. Richards 68 Director Paul R. Lehrer 52 Director Maurice E. Levenson 75 Director Richard D. Levy 72 Chairman of the Board, Chief Executive Officer, Director Mark Levy 49 President, Chief Operating Officer, Director Harry A. Levy 68 Vice-Chairman of the Board, Secretary, Director Joseph Pivinski 54 Chief Financial Officer, Vice President - Finance, Treasurer Christopher Feller 49 Vice-President - Construction
George R. Richards, age 68, now retired, practiced law in Dade County, Florida from 1966 until April 1996. From May 1994 until April 1996, Mr. Richards was a solo practitioner, and from July 1989 to May 1994, Mr. Richards practiced with the law firm of Fine Jacobson Schwartz Nash & Block. Prior to his retirement, Mr. Richards was outside counsel for the Company on various matters. Mr. Richards has been a Director since 1997. Paul R. Lehrer, age 52, is with St. Joe Real Estate Services Inc. since September, 2001, a commercial real estate service provider, and was formerly President & Chief Executive Officer of Colliers Lehrer International d/b/a Colliers International, Inc., a commercial real estate service provider from 1986 to 2000. Mr. Lehrer has been a Director since 1992. Maurice E. Levenson, age 75, has been a practicing Certified Public Accountant since 1959, and is a partner and shareholder in Levenson, Katzin and Ballotta, P.A. Mr. Levenson has been a Director since 2001. Richard D. Levy has served as Chairman of the Board and Chief Executive Officer of the Company since January 1976. Mr. Levy has been an executive officer and Director of the Company since its organization in 1963. Mark Levy has served as President and Chief Operating Officer since December 1984 and has been employed by the Company since January 1975. Mr. Levy has been a Director since 1982. Mark Levy is the son of Richard D. Levy. Harry A. Levy has served as Vice Chairman of the Board since May 1991 and as Secretary of the Company since 1968. Mr. Levy is presently devoting the majority of his time at the Company, in addition to overseeing other family interests and investments. Mr. Levy has been a Director since 1963. Harry A. Levy is the brother of Richard D. Levy. 49 Joseph Pivinski has served as Vice President-Finance, Treasurer and Chief Financial Officer of the Company since October 1997. From 1994 until October 1997, Mr. Pivinski was employed as the Vice President - Finance and Chief Financial Officer of New York City based ECCO Staffing Services, Inc. Christopher A. Feller has served as Vice President-Construction of the Company since 1985. From 1977 through 1984, Mr. Feller was the Construction Manager at several communities developed by the Company covering a variety of products. SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Securities Exchange Act of 1934 requires the Company's directors and executive officers, and persons who own more than ten percent of the Company's outstanding Common Stock, to file with the Securities and Exchange Commission (the "SEC") initial reports of ownership and reports of changes in ownership of Common Stock. Such persons are required by SEC regulation to furnish the Company with copies of all such reports they file. Based solely on a review of the copies of such reports furnished to the Company and written representations that no other reports were required, the Company believes that, except for the following, all such filing requirements applicable to its officers, directors and ten percent shareholders were complied with during fiscal 2001: Mr. Pivinski filed a late Form 4 reporting one transaction and Mr. Levenson filed his Form 3 late. 50 ITEM 11 EXECUTIVE COMPENSATION SUMMARY COMPENSATION TABLE (numbers shown as dollars except for shares)
Long Term Annual Compensation Compensation --------------------------------- Awards All Other Name and Principal Position Year Salary Bonus Options/SARs(1) Compensation(2) --------------------------- ---- -------- -------- -------------- --------------- Richard D. Levy 2001 $244,327 -- -- $ 23,425 Chairman of the 2000 $245,250 -- -- $ 20,950 Board and Chief 1999 $255,941 -- -- $ 23,683 Executive Officer Mark Levy 2001 $272,500 -- -- $ 8,625 President and Chief 2000 $272,500 -- -- $ 6,125 Operating Officer 1999 $272,500 -- -- $ 8,000 Harry A. Levy 2001 $173,846 -- -- $ 12,469 Vice Chairman of the 2000 $160,000 -- -- $ 20,485 Board and Secretary 1999 $160,000 -- -- $ 13,590 Joseph Pivinski 2001 $160,418 $ 20,000 7,000 $ 11,625 Vice President-Finance, 2000 $141,250 -- 7,000 $ 8,019 Treasurer and Chief 1999 $126,429 $ 8,700 -- $ 7,027 Financial Officer Michael A. Rich(3) 2001 $183,413 $ 60,000 10,000 $ 1,585 Vice President- 2000 $175,000 $ 25,000 17,314 -- Sales & Marketing 1999 $ 37,019 -- 10,000 --
(1) Represents options to purchase Class B Common Stock granted. See below table for individual grants. (2) Represents the Company contribution to the Deferred Compensation Plan for Richard Levy, Mark Levy, Joseph Pivinski and Michael Rich. Also, for Richard Levy, Harry Levy, Mark Levy and Joseph Pivinski amounts include reimbursements under an executive medical reimbursement plan. In the cases of Richard D. Levy and Harry A. Levy it also includes the economic benefits of the premiums paid by the Company under an executive split dollar life insurance program. The Company is entitled to recover the premiums from any amounts paid by the insurer on such a split dollar life policy and has retained an interest in the policies to the extent of the premiums paid. (3) Mr. Rich joined the Company on October 4, 1999. Amounts shown as compensation for 1999 are for the period from such date through December 31, 1999. Mr. Rich left the Company's employ on January 18, 2002. 51 COMPENSATION PURSUANT TO STOCK OPTIONS The following table sets forth information on option grants in fiscal 2001 to the Named Executive Officers. Option Grants In Last Fiscal Year
Number of Shares Percentage of Potential Realizable Value Underlying Total Options at Assumed Rates of Stock Options Granted to Exercise Appreciation for Option Term Granted Employees in Price Expiration ----------------------------- (1) Fiscal Year ($/share) Date 5%($) 10%($) -------- ------------- --------- ---------- -------- ------- Joseph Pivinski 7,000 41.8% $ 1.44 10/04/2006 $ 2,785 $ 6,154 Michael A. Rich 10,000 58.2% $ 1.0625 12/31/2006 $ 2,935 $ 6,487
(1) All options listed were granted pursuant to the 1994 Stock Option Plan. Option exercises were at the market price when granted. The options have a term of five years and vest over two years. The following table provides information on option exercises in fiscal 2001 by the Named Executive Officers and the value of such officers' unexercised options at December 31, 2001.
Aggregated Option Exercises In Last Fiscal Year And Fiscal Year-End Option Values Number of Securities Value of Unexercised Underlying Unexercised Options In-the-Money Options Shares at Fiscal Year-End at Fiscal Year-End Acquired on Value ------------------------------- ------------------------------ Exercise Realized Exercisable Unexercisable Exercisable Unexercisable ----------- -------- ------------- ------------- ----------- ------------- Joseph Pivinski -- -- 3,000 14,000 -- $ 7,975 Michael A. Rich -- -- 10,000 27,314 $ 3,500 $ 7,875
COMPENSATION OF DIRECTORS Richard D. Levy, Mark Levy, and Harry Levy receive no cash compensation for serving on the Board. The non-employee directors are each paid $12,000 per year and are reimbursed for travel expenses in connection with their attendance at meetings. Non-employee directors also receive options under the Company 1994 Stock Option Plan for non-employee directors (the "Director Option Plan"). During fiscal 2001, Messrs. Richards, Lehrer and Levenson each received an option to purchase 1,200 shares of the Company's Class B Common Stock. 52 The Compensation Committee consists solely of independent, non-employee members of the Board. The members of the Compensation Committee are currently Paul R. Lehrer, Maurice E. Levenson and George R. Richards. Its principal functions are recommending to the full Board compensation arrangements for senior management, recommending to the full Board the adoption and implementation of compensation and incentive plans and approving grants of stock options to officers and other employees of the Company. ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth certain information with respect to the ownership of the Company's Class A Common Stock ("Class A Shares"), of which 1,863,149 shares were outstanding as of March 18, 2002, and Class B Common Stock ("Class B Shares"), of which 2,762,375 shares were outstanding as of March 18, 2002, by (i) persons known by the Company to be beneficial owners of more than 5% of the Class A Common Stock and more than 5% of the Class B Common Stock, (ii) the Directors of the Company, (iii) the named executive officers and (iv) all executive officers and Directors as of March 18, 2002, as a group:
Name and Address Class A Class B ---------------- ------- ------- Andrew J. McLaughlin, Jr C/o Loeb Partners Corporation 61 Broadway New York, NY 10006 150,200(2) 8.1% 844,700(2) 29.0% Dimensional Fund Advisors Inc. 1299 Ocean Ave, 11th Floor Santa Monica, CA 90401 127,000(3) 6.8% 297,300(3) 10.3% U.S.A. Fund Limited Partnership C/o Gordon, Feinblatt et al 233 East Redwood Street Baltimore, MD 21202-2332 117,400(4) 6.3% 117,400(4) 4.1% Richard D. Levy (1) 668,239(5)(6) 35.9% 918,963(5)(6) 26.8% Harry A. Levy (1) 620,538(5)(7) 33.3% 849,674(5)(6) 25.1% Mark Levy (1) 116,622(8) 6.3% 273,539(8) 9.5% Paul R. Lehrer (1) -- -- 10,000(9) * George R. Richards (1) -- -- 5,400(10) * Maurice E. Levenson (1) -- -- 600(11) * Joseph Pivinski (1) -- -- 3,000(12) * Michael A. Rich -- -- 10,000(13) * All Officers and Directors as a Group (includes 8 persons) 1,405,399 75.4% 2,071,176 45.1%
(*) Denotes less than 1%. (1) The address of each of these shareholders is 1690 South Congress Avenue, Suite 200, Delray Beach, Florida 33445. (2) Andrew J. McLaughlin, Jr., a registered representative of Loeb Partners Corporation, a registered broker/dealer, in New York, NY, reported beneficial ownership of 150,200 Class A Shares and 844,700 Class B 53 Shares pursuant to a Schedule 13D filed on January 9, 2001. Included in the 844,700 Class B Shares disclosed on such Schedule 13D are 150,200 Class B Shares that would be issued upon conversion of immediately convertible Class A Shares. (3) Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment advisor, is deemed to have beneficial ownership of 127,000 Class A Shares and 297,300 Class B Shares as of December 31, 2001, pursuant to a Schedule 13G filed on February 12, 2002. Included in the 297,300 Class B Shares are 127,000 Class B Shares that would be issued upon conversion of immediately convertible Class A Shares. Dimensional furnishes investment advice to four investment companies registered under the Investment Company Act of 1940, and serves as investment manager to certain other commingled group trusts and separate accounts. These investment companies, trusts and accounts are the "Funds". Dimensional stated in its Schedule 13G filed February 12, 2002 that in its role as investment advisor or manager, Dimensional possesses voting and/or investment power over the securities that are owned by the Funds and disclaims beneficial ownership of all such shares. (4) U.S.A. Fund, whose sole general partner is World Total Return, Inc., reported ownership of 117,400 Class A Shares pursuant to a Schedule 13D filed on November 19, 1999. Included in the 117,400 Class B Shares are 117,400 Class B Shares that would be issued upon conversion of immediately convertible Class A Shares. (5) Richard D. Levy and Harry A. Levy ("the Levys") are brothers. The above figures include 426,095 Class A Shares and 100,758 Class B Shares which the Levys each have shared voting power. (6) Includes 25,334 Class A Shares and 23,384 Class B Shares held by the wife of Richard D. Levy and 44,312 Class A Shares and 37,000 Class B Shares held by Jo Ann Levy, the daughter of Richard D. Levy, and 100,758 Class A Shares and 100,758 Class B Shares held by Mr. Levy as custodian or trustee for various trusts for his children or the grandchildren of the Levy family. Includes 300,000 Class A Shares held by Levor Associates, a partnership, for the benefit of the Levys (each nine percent), their wives (each five percent) and their children (includes Mark Levy), and various partnerships for the benefit of the Levys, their children and grandchildren. Richard D. Levy disclaims beneficial ownership of all such Class A Shares and Class B shares held by his wife and daughter and by such trusts and partnerships for his wife, children and grandchildren except to the extent of his pecuniary interest in such trusts and partnerships, if any. Included in the 918,963 Class B Shares are 668,239 Class B Shares that would be issued upon conversion of immediately convertible Class A Shares. (7) Includes 5,038 Class A Shares and 5,038 Class B Shares held by the wife of Harry A. Levy and 100,758 Class A Shares and 100,758 Class B Shares held by Mr. Levy as custodian or trustee for various trusts or partnerships for his children or the grandchildren of the Levy family. Includes 300,000 Class A Shares held by Levor Associates, a partnership, for the benefit of the Levys (each nine percent), their wives (each five percent) and their children (includes Mark Levy), and various partnerships for the benefit of the Levys, their children and grandchildren. Harry A. Levy disclaims beneficial ownership of all such Class A Shares and Class B shares held by his wife and by such trusts and partnerships for his wife, children and grandchildren except to the extent of his pecuniary interest in such trusts and partnerships, if any. Included in the 849,674 Class B Shares are 620,538 Class B Shares that would be issued upon conversion of immediately convertible Class A Shares. (8) Includes 2,210 Class A Shares and 1,585 Class B Shares owned by the wife of Mark Levy, and 21,000 Class A Shares and 66,700 Class B Shares held as co-trustee of trusts for the grandchildren of Richard D. Levy. Mark Levy disclaims any beneficial interest in the shares owned by his wife and by such trusts and partnerships for his wife, children, nieces and nephews except to the extent of his pecuniary interest in such trusts and partnerships, if any. Does not include Class A Shares held by Levor Associates for the benefit of Mark Levy or Class A Shares held by other partnerships to the extent held for his benefit. These shares are reported in footnotes (6) and (7) above. Included in the 273,539 Class 54 B Shares are 116,622 Class B Shares that would be issued upon conversion of immediately convertible Class A Shares. (9) Includes options exercisable immediately for 7,800 Class B Shares and an option exercisable within 60 days after March 18, 2002 for 1,200 Class B Shares. (10) Includes options exercisable immediately for 4,200 Class B Shares and an option exercisable within 60 days after March 18, 2002 for 1,200 Class B Shares. (11) Includes an option exercisable within 60 days after March 18, 2002 for 600 Class B Shares. (12) Includes an option exercisable immediately for 3,000 Class B Shares. (13) Includes an option exercisable immediately for 10,000 Class B Shares forfeitable as of April 18, 2002. Mr. Rich left the Company's employ on January 18, 2002. 55 ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS In December 2000 the Company sold and leased back nine model homes used by the Vizcaya Project from an entity controlled by certain officers/shareholders of the Company (the "Related Party"), 50% of which is owned by Daniel H. Levy, an Assistant Vice President of the Company. The selling prices of the model homes approximated fair market value. The Related Party paid $1,365,010 in cash and issued an unsecured promissory note in the amount of $588,800. Interest on the note of 8.0% per annum is payable monthly beginning December 30, 2000 and the principal must be paid in full no later than maturity on December 30, 2003. On February 27, 2002 principal of $400,000 on the promissory note referred to above was repaid. In connection with this transaction, the results of operations for the fiscal year 2000 includes revenue of $1,953,810, rent expense of $18,630 and interest income of $3,925. The results of operations for the fiscal year 2001 includes revenue of $204,458, rent expense of $263,489 and interest income of $47,104. 56 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, 2001. (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. 10.13 Construction Loan Agreement dated December 22, 1998 between First Union National Bank and the Registrant. 57 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. 10.36 Purchase and Sale Agreement between OH Investments, Inc. and Upjohn-Delray Limited Partnership dated August 8, 2000. 10.37 Builder's Agreement between OH Investments, Inc. and Centerline Homes at Delray, Inc. dated August 8, 2000. 10.37a Stock Option Agreement with Paul Lehrer dated May 10, 2001. 58 10.38 Master Loan Agreement between OH Investments, Inc. and Guaranty Federal Savings Bank, F.S.B. dated August 8, 2000. 10.38a Stock Option Agreement with George Richards dated May 10, 2001. 10.39 Acquisition Loan Agreement between Guaranty Federal Savings Bank, F.S.B. and OH Investments, Inc. dated August 8, 2000. 10.39a Promissory Note (Non-Revolver) with Ocean Bank in amount of $3,120,000 dated July 16, 2001. 10.40 Sale and Lease Back Agreement between OH Investments, Inc. and C.V.M.H. Inc. dated December 1, 2000. 10.40a Promissory Note (Revolver) with Ocean Bank in amount of $9,840,000 dated July 16, 2001. 10.41 Lease (Specimen) between OH Investments, Inc. and C.V.M.H. Inc. dated December 1, 2000. 10.41a Mortgage Deed with Ocean Bank in amount of $12,960,000 dated July 16, 2001. 10.42 Stock Option Agreement with Paul Lehrer dated May 10, 2000. 10.42a Construction Loan Agreement between Ocean Bank and Oriole Homes Corp. dated July 16, 2001. 10.43 Stock Option Agreement with George Richards dated May 10, 2000. 10.43a Promissory Note (Non-Revolver) with Ocean Bank in amount of $2,296,586 dated July 16, 2001. 10.44 Mortgage and Loan Modification and Extension Agreement. 10.44a Promissory Note (Revolver) with Ocean Bank in amount of $4,950,000 dated July 16, 2001. 10.45 Mortgage Deed with Ocean Bank in amount of $7,246,586 dated July 16, 2001. 10.46 Construction Loan Agreement between Ocean Bank and Oriole Homes Corp. dated July 16, 2001. 10.47 Promissory Note (Non-Revolver) with Ocean Bank in amount of $10,809,668 dated July 16, 2001. 10.48 Promissory Note (Revolver) with Ocean Bank in amount of $9,135,000 dated July 16, 2001. 10.49 Mortgage Deed with Ocean Bank in amount of $19,944,668 dated July 16, 2001. 10.50 Construction Loan Agreement between Ocean Bank and Oriole Homes Corp. dated July 16, 2001. 10.51 Promissory Note with Ocean Bank in amount of $12,176,882 dated July 16, 2001. 10.52 Mortgage Deed with Ocean Bank in amount of $12,176,882 dated July 16, 2001. 59 10.53 Construction Loan Agreement between Ocean Bank and Oriole Homes Corp. in amount of $12,176,882 dated July 16, 2001. 10.54 Mortgage Deed and Security Agreement with Ocean Bank in amount of $1,375,000 dated August 23, 2001. 10.55 Promissory Note with Ocean Bank in amount of $1,375,000 dated August 23, 2001. 10.56 Amended and Restated Operating Agreement of Brighton at Wellington, L.C. dated September 14, 2001 between OH INVESTMENTS II, INC., a Florida corporation ("Oriole"), and CENTERLINE HOMES AT THE EQUESTRIAN CLUB, INC., a Florida corporation ("Centerline"). 10.57 Stock Option Agreement with Maurice E. Levenson dated August 8, 2001. 10.58 Stock Option Agreement with Joseph Pivinski dated October 4, 2000. 10.59 Stock Option Agreement with Joseph Pivinski dated October 4, 2001. 10.60 Stock Option Agreement with Michael Rich dated May 10, 2000. 10.61 Stock Option Agreement with Michael Rich dated January 22, 2001. 21.1 List of Registrant's Subsidiaries. 23.1 Consent of Grant Thornton LLP. ---------- (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). (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. 60 (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. (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 A to the Company's Proxy Statement dated April 5, 1994 for the Company's Annual meeting of Shareholders held on May 9, 1994. (36) Filed as Exhibit B to the Company's Proxy Statement dated April 5, 1994 for the Company's Annual meeting of Shareholders held on May 9, 1994. 61 (37) Filed as Exhibit 10.33 to the Company's Annual Report on Form 10-K for the year ended December 31, 1999. (38) Filed as Exhibit 10.34 to the Company's Annual Report on Form 10-K for the year ended December 31, 1999. (39) Filed as Exhibit 10.35 to the Company's Annual Report on Form 10-K for the year ended December 31, 1999. (40) Filed as Exhibit 10.36 to the Company's Annual Report on Form 10-K for the year ended December 31, 2000. (41) Filed as Exhibit 10.37 to the Company's Annual Report on Form 10-K for the year ended December 31, 2000. (42) Filed as Exhibit 10.37 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001. (43) Filed as Exhibit 10.38 to the Company's Annual Report on Form 10-K for the year ended December 31, 2000. (44) Filed as Exhibit 10.38 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001. (45) Filed as Exhibit 10.39 to the Company's Annual Report on Form 10-K for the year ended December 31, 2000. (46) Filed as Exhibit 10.39 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001. (47) Filed as Exhibit 10.40 to the Company's Annual Report on Form 10-K for the year ended December 31, 2000. (48) Filed as Exhibit 10.40 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001. (49) Filed as Exhibit 10.41 to the Company's Annual Report on Form 10-K for the year ended December 31, 2000. (50) Filed as Exhibit 10.41 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001. (51) Filed as Exhibit 10.42 to the Company's Annual Report on Form 10-K for the year ended December 31, 2000. (52) Filed as Exhibit 10.42 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001. (53) Filed as Exhibit 10.43 to the Company's Annual Report on Form 10-K for the year ended December 31, 2000. (54) Filed as Exhibit 10.43 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001. (55) Filed as Exhibit 10.44 to the Company's Annual Report on Form 10-K for the year ended December 31, 2000. (56) Filed as Exhibit 10.44 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001. (57) Filed as Exhibit 10.45 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2001. (58) Filed as Exhibit 10.46 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2001. (59) Filed as Exhibit 10.47 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2001. 62 (60) Filed as Exhibit 10.48 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2001. (61) Filed as Exhibit 10.49 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2001. (62) Filed as Exhibit 10.50 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2001. (63) Filed as Exhibit 10.51 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2001. (64) Filed as Exhibit 10.52 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2001. (65) Filed as Exhibit 10.53 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2001. (66) Filed as Exhibit 10.54 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2001. (67) Filed as Exhibit 10.55 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2001. (68) Filed as Exhibit 10.56 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2001. (69) Filed as Exhibit 10.57 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2001. (70) Filed as Exhibit 10.58 to the Company's Annual Report on Form 10-K for the year ended December 31, 2001. (71) Filed as Exhibit 10.59 to the Company's Annual Report on Form 10-K for the year ended December 31, 2001. (72) Filed as Exhibit 10.60 to the Company's Annual Report on Form 10-K for the year ended December 31, 2001. (73) Filed as Exhibit 10.61 to the Company's Annual Report on Form 10-K for the year ended December 31, 2001. 63 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 27, 2002 /s/ R.D. LEVY --------------------- ------------------------------- R.D. Levy, Chairman of the Board, Chief Executive Officer, Director 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. DATE March 27, 2002 /s/ R.D. LEVY --------------------- ------------------------------- R.D. Levy, Chairman of the Board, Chief Executive Officer, Director (Principal Executive Officer) DATE March 27, 2002 /s/ J. PIVINSKI --------------------- ------------------------------- J. Pivinski, Vice President - Finance, Treasurer, Chief Financial Officer (Principal Financial and Accounting Officer) DATE March 27, 2002 /s/ HARRY A. LEVY --------------------- ------------------------------- Harry A. Levy, Vice-Chairman, Secretary, Director DATE March 27, 2002 /s/ MARK LEVY --------------------- ------------------------------- Mark Levy, President, Chief Operating Officer, Director DATE March 27, 2002 /s/ PAUL R. LEHRER --------------------- ------------------------------- Paul R. Lehrer, Director DATE March 27, 2002 /s/ GEORGE R. RICHARDS --------------------- ------------------------------- George R. Richards, Director DATE March 27, 2002 /s/ MAURICE E. LEVENSON --------------------- ------------------------------- Maurice E. Levenson, Director 64 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) 65 10.18 Stock Option Agreement with Harry A. Levy dated May 14, 1996. (24) 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. (37) 10.34 Stock Option Agreement with George Richards dated May 12, 1999. (38) 10.35 Stock Option Agreement with Michael Rich dated October 4, 1999. (39) 10.36 Purchase and Sale Agreement between OH Investments, Inc. and Upjohn-Delray Limited Partnership dated August 8, 2000. (40) 10.37 Builder's Agreement between OH Investments, Inc. and Centerline Homes at Delray, Inc. dated August 8, 2000. (41) 10.37a Stock Option Agreement with Paul Lehrer dated May 10, 2001. (42) 10.38 Master Loan Agreement between OH Investments, Inc. and Guaranty Federal Savings Bank, F.S.B. dated August 8, 2000. (43) 10.38a Stock Option Agreement with George Richards dated May 10, 2001. (44) 10.39 Acquisition Loan Agreement between Guaranty Federal Savings Bank, F.S.B. and OH Investments, Inc. dated August 8, 2000. (45) 10.39a Promissory Note (Non-Revolver) with Ocean Bank in amount of $3,120,000 dated July 16, 2001. (46) 66 10.40 Sale and Lease Back Agreement between OH Investments, Inc. and C.V.M.H. Inc. dated December 1, 2000. (47) 10.40a Promissory Note (Revolver) with Ocean Bank in amount of $9,840,000 dated July 16, 2001. (48) 10.41 Lease (Specimen) between OH Investments, Inc. and C.V.M.H. Inc. dated December 1, 2000. (49) 10.41a Mortgage Deed with Ocean Bank in amount of $12,960,000 dated July 16, 2001. (50) 10.42 Stock Option Agreement with Paul Lehrer dated May 10, 2000. (51) 10.42a Construction Loan Agreement between Ocean Bank and Oriole Homes Corp. dated July 16, 2001. (52) 10.43 Stock Option Agreement with George Richards dated May 10, 2000. (53) 10.43a Promissory Note (Non-Revolver) with Ocean Bank in amount of $2,296,586 dated July 16, 2001. (54) 10.44 Mortgage and Loan Modification and Extension Agreement. (55) 10.44a Promissory Note (Revolver) with Ocean Bank in amount of $4,950,000 dated July 16, 2001. (56) 10.45 Mortgage Deed with Ocean Bank in amount of $7,246,586 dated July 16, 2001. (57) 10.46 Construction Loan Agreement between Ocean Bank and Oriole Homes Corp. dated July 16, 2001. (58) 10.47 Promissory Note (Non-Revolver) with Ocean Bank in amount of $10,809,668 dated July 16, 2001. (59) 10.48 Promissory Note (Revolver) with Ocean Bank in amount of $9,135,000 dated July 16, 2001. (60) 10.49 Mortgage Deed with Ocean Bank in amount of $19,944,668 dated July 16, 2001. (61) 10.50 Construction Loan Agreement between Ocean Bank and Oriole Homes Corp. dated July 16, 2001. (62) 10.51 Promissory Note with Ocean Bank in amount of $12,176,882 dated July 16, 2001. (63) 10.52 Mortgage Deed with Ocean Bank in amount of $12,176,882 dated July 16, 2001. (64) 10.53 Construction Loan Agreement between Ocean Bank and Oriole Homes Corp. in amount of $12,176,882 dated July 16, 2001. (65) 10.54 Mortgage Deed and Security Agreement with Ocean Bank in amount of $1,375,000 dated August 23, 2001. (66) 67 10.55 Promissory Note with Ocean Bank in amount of $1,375,000 dated August 23, 2001. (67) 10.56 Amended and Restated Operating Agreement of Brighton at Wellington, L.C. dated September 14, 2001 between OH INVESTMENTS II, INC., a Florida corporation ("Oriole"), and CENTERLINE HOMES AT THE EQUESTRIAN CLUB, INC., a Florida corporation ("Centerline"). (68) 10.57 Stock Option Agreement with Maurice E. Levenson dated August 8, 2001. (69) 10.58 Stock Option Agreement with Joseph Pivinski dated October 4, 2000. (70) 10.59 Stock Option Agreement with Joseph Pivinski dated October 4, 2001. (71) 10.60 Stock Option Agreement with Michael Rich dated May 10, 2000. (72) 10.61 Stock Option Agreement with Michael Rich dated January 22, 2001. (73) 21.1 List of Registrant's Subsidiaries. 23.1 Consent of Grant Thornton LLP. ---------- 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). 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. 68 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. 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. 69 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 A to the Company's Proxy Statement dated April 5, 1994 for the Company's Annual meeting of Shareholders held on May 9, 1994. 36. Filed as Exhibit B to the Company's Proxy Statement dated April 5, 1994 for the Company's Annual meeting of Shareholders held on May 9, 1994. 37. Filed as Exhibit 10.33 to the Company's Annual Report on Form 10-K for the year ended December 31, 1999. 38. Filed as Exhibit 10.34 to the Company's Annual Report on Form 10-K for the year ended December 31, 1999. 39. Filed as Exhibit 10.35 to the Company's Annual Report on Form 10-K for the year ended December 31, 1999. 40. Filed as Exhibit 10.36 to the Company's Annual Report on Form 10-K for the year ended December 31, 2000. 41. Filed as Exhibit 10.37 to the Company's Annual Report on Form 10-K for the year ended December 31, 2000. 42. Filed as Exhibit 10.37 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001. 43. Filed as Exhibit 10.38 to the Company's Annual Report on Form 10-K for the year ended December 31, 2000. 44. Filed as Exhibit 10.38 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001. 45. Filed as Exhibit 10.39 to the Company's Annual Report on Form 10-K for the year ended December 31, 2000. 46. Filed as Exhibit 10.39 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001. 47. Filed as Exhibit 10.40 to the Company's Annual Report on Form 10-K for the year ended December 31, 2000. 48. Filed as Exhibit 10.40 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001. 70 49. Filed as Exhibit 10.41 to the Company's Annual Report on Form 10-K for the year ended December 31, 2000. 50. Filed as Exhibit 10.41 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001. 51. Filed as Exhibit 10.42 to the Company's Annual Report on Form 10-K for the year ended December 31, 2000. 52. Filed as Exhibit 10.42 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001. 53. Filed as Exhibit 10.43 to the Company's Annual Report on Form 10-K for the year ended December 31, 2000. 54. Filed as Exhibit 10.43 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001. 55. Filed as Exhibit 10.44 to the Company's Annual Report on Form 10-K for the year ended December 31, 2000. 56. Filed as Exhibit 10.44 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001. 57. Filed as Exhibit 10.45 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2001. 58. Filed as Exhibit 10.46 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2001. 59. Filed as Exhibit 10.47 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2001. 60. Filed as Exhibit 10.48 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2001. 61. Filed as Exhibit 10.49 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2001. 62. Filed as Exhibit 10.50 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2001. 63. Filed as Exhibit 10.51 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2001. 64. Filed as Exhibit 10.52 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2001. 65. Filed as Exhibit 10.53 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2001. 66. Filed as Exhibit 10.54 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2001. 71 67. Filed as Exhibit 10.55 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2001. 68. Filed as Exhibit 10.56 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2001. 69. Filed as Exhibit 10.57 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2001. 70. Filed as Exhibit 10.58 to the Company's Annual Report on Form 10-K for the year ended December 31, 2001. 71. Filed as Exhibit 10.59 to the Company's Annual Report on Form 10-K for the year ended December 31, 2001. 72. Filed as Exhibit 10.60 to the Company's Annual Report on Form 10-K for the year ended December 31, 2001. 73. Filed as Exhibit 10.61 to the Company's Annual Report on Form 10-K for the year ended December 31, 2001. 72