-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, L3Q0kHWgFLn2Sn8e2Huj08Xg5uZ7Kd8oda6+w/KPeQFOyejI4g2ZDq+6TN1bi+vb WE0RLSs3NdWleWjCfKrQuw== 0000950144-95-000795.txt : 199507120000950144-95-000795.hdr.sgml : 19950711 ACCESSION NUMBER: 0000950144-95-000795 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19950328 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: ORIOLE HOMES CORP CENTRAL INDEX KEY: 0000074928 STANDARD INDUSTRIAL CLASSIFICATION: OPERATIVE BUILDERS [1531] IRS NUMBER: 591228702 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-06963 FILM NUMBER: 95523959 BUSINESS ADDRESS: STREET 1: 1690 S CONGRESS AVE STE 200 CITY: DELRAY BEACH STATE: FL ZIP: 33445 BUSINESS PHONE: 4072742000 FORMER COMPANY: FORMER CONFORMED NAME: ORIOLE LAND & DEVELOPMENT CORP DATE OF NAME CHANGE: 19720615 10-K 1 ORIOLE HOMES CORP. FORM 10-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------------------ FORM 10-K Annual Report pursuant to Section 13 of The Securities Exchange Act of 1934 For the fiscal year ended December 31, 1994 File No. 1-6963 ORIOLE HOMES CORP. ------------------ 1690 South Congress Avenue, Suite 200, Delray Beach, Florida 33445 (407) 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 12 1/2% Senior Notes due 2003 ----------------------------------- 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 February 28, 1995, the Company had outstanding 1,893,349 shares of its Class A Common Stock and 2,732,175 shares of its Class B Common Stock. The aggregate market value of voting stock held by non-affiliates of the Registrant is $32,378,668 as of February 28, 1995. Part II is partially incorporated by reference from the Registrant's Annual Report to Shareholders for the year ended December 31, 1994, and Part III is incorporated by reference from the Registrant's Proxy statement for the 1995 Annual Meeting. 2 PART I ITEMS 1 AND 2 BUSINESS AND PROPERTIES Oriole Homes Corp. ("Oriole" or the "Company") has built and sold single-family homes, patio homes, townhouses, villas, duplexes and low- and mid-rise condominiums in planned communities in southeast Florida since 1963. During each of the last five years, Oriole was the largest builder of condominiums for active adults in Palm Beach County, both in dollar volume and number of units sold. The Company attributes its success to (i) construction of quality homes within communities that offer a wide range of amenities, (ii) satisfied customers who provide a continual source of referrals, (iii) offering a wide selection of moderately priced housing, (iv) extensive knowledge of the southeast Florida market, (v) effective cost control policies, and (vi) a land acquisition and development strategy that reduces land costs per unit, permits development and construction in phases, and ensures availability of strategically located land for future development. Approximately 78 percent of Oriole's revenues are derived from sales in communities designed exclusively for active adults (age 55 and over), the fastest growing demographic segment in the United States. The Company alters its product mix to meet changes in the housing preferences of this market, which enjoys a high percentage of discretionary income. Home prices range from $100,000 to $170,000 in the Company's active adult communities except for Fairway Point, a new luxury project where prices range from $375,000 to $600,000. In 1994, approximately 70 percent of Oriole's sales of homes and condominiums in communities designed for active adults were cash sales. The sales prices of Oriole's residences averaged approximately $131,403 for condominiums and $175,442 for single-family homes during the year ended December 31, 1994. The Company was incorporated in the State of Florida in 1968 as the successor to six corporations engaged in the construction and sale of single-family homes since 1963. Unless the context otherwise requires, the terms "Company" and "Oriole" refer to Oriole Homes Corp. and its consolidated subsidiaries. The Company's principal executive offices are located at 1690 South Congress Avenue, Suite 200, Delray Beach, Florida 33445, and its telephone number is (407) 274-2000. 1 3 HOME BUILDING DATA The following table sets forth information concerning sales, new contracts and backlog for each of the past five years for the Company's single-family homes, patio homes, townhomes, villas, duplexes and low- and mid-rise condominiums.
Years Ended December 31, -------------------------------------------------------------------------- 1990 1991 1992 1993 1994 ---- ---- ---- ---- ---- Total Sales Sales value $85,549 $70,101 $89,423 $ 98,302 $110,116 Number of homes 767 614 708 771 775 Total New Contracts Sales value $70,697 $74,260 $91,216 $108,180 $100,109 Number of homes 626 629 743 788 661 Total Backlog (1) Sales value $23,525 $27,684 $29,477 $ 39,355 $ 29,348 Number of homes 190 205 240 257 143
__________________________ (1) Backlog as of the end of the period. The Company expects to fill substantially all backlog, both in number of homes and dollar amount, within twelve months. It typically takes the Company four to eight months after receipt of a sales contract to build and deliver the completed home to the purchaser. The Company's backlog historically tends to increase between January and May. These contracts are generally with active adults who are planning their retirement and desire occupancy of their homes in the months of October through December. OPERATING POLICIES Quality Construction and Diverse Amenities. The Company is a developer of moderately-priced residential housing and related amenities, which create a total lifestyle unique to Oriole communities. The Company's communities included extensive recreational facilities, which range from social clubhouses and swimming pools in its single-family communities to multi-million dollar clubhouses, with tennis courts, indoor and outdoor swimming pools, theaters for the performing arts and health clubs/spas, in its active adult communities. 2 4 The development of planned communities and the construction of such amenities require financial resources unavailable to many home builders, thereby limiting the number of builders that might otherwise compete directly with the Company. The Company believes that its planned communities appeal to purchasers and permit the Company to offer its customers various housing products in one location. The Company has built over 20,000 homes in southeast Florida, and satisfied purchasers provide the Company with a continual source of referrals. Product Diversification. The Company's homes appeal to a wide variety of buyers and lifestyles. Accordingly, the Company offers a diversity of home styles and price ranges at various locations, including waterfront communities. The Company sells single-family homes, patio homes, townhomes, villas, duplexes and low- and mid-rise condominiums. Home designs are continually reviewed and refined to reflect changing tastes. Sales prices presently range from approximately $70,000 to $600,000, and the average sales price of homes delivered during 1994 was approximately $142,100. See "Communities Currently Under Development or Construction." Southeast Florida Market. All but one of the Company's residential developments are located in Palm Beach and Broward counties, rapidly growing areas of Florida, and management anticipates that the Company's revenues will continue to be derived substantially from these markets. The Company also has 230 duplex units in Martin County, which is the county directly north of Palm Beach County. The Company believes that it has achieved certain competitive advantages by concentrating its efforts in southeast Florida, including (i) senior management's extensive knowledge of the local market, (ii) controls and cost savings, that result from the Company's centralized operations, and (iii) an experienced sales force. Cost Controls and Company Policies. The Company attempts to control costs by (1) acquiring large tracts of undeveloped land and developing the land in phases (ii) developing planned communities, which permit the Company to take advantage of certain economies of scale, (iii) generally beginning construction only when homes are under contract, and (iv) acting as general contractor and hiring subcontractors on a fixed-price or other cost-effective basis. The Company'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 maintains a limited inventory of completed homes for sale primarily to families transferred to Florida by their employers. There were twenty single family 3 5 homes completed and unsold in inventory (not including model homes) at December 31, 1994. In many instances, the Company will begin multi-family construction (duplex, townhouse, villa and multi-story complexes) when sales contracts are in effect for a predetermined percentage of the units. As of December 31, 1994, the Company's inventory included 102 unsold completed units in multi-family projects. Land Acquisition and Development. The Company selects locations for its developments on the basis of accessibility to major highways and thoroughfares, proximity to shopping areas, medical facilities and community cultural and recreation centers. The Company generally acquires large tracts of land that require site improvements prior to construction. The tracts of land are separated into phases for both development and construction. The Company typically acquires land on which construction can begin within three years. The Company spends considerable effort in developing design and marketing concepts for each of its communities. The design concepts determine the size, style and price range of homes, the layout of streets and individual lots and the overall community design. The product line offered in a particular community depends upon many factors, including the housing generally available in the area, the needs of the particular market and the cost of building lots. After finalizing the design concepts, the Company undertakes development activities that include site planning and engineering, construction of roads, sewer, water and drainage facilities, recreational facilities and other amenities. 4 6 RESIDENTIAL PROJECTS AND PRODUCT LINES The following table summarizes information as of December 31, 1994 with respect to the Company's principal projects under development or construction during 1994.
Name and Units Sold and Units Sold Location of Year Development Total Units Delivered Thru and Delivered Development Started Type Planned 1994 in 1994 - ------------------------------- ---------------- ------ ----------- -------------- ------------- Lakeshore at University Park 1981 Mixed 1,160 426(3) - Miramar Country Glen 1993 Single 300 - - Cooper City Family Cypress Bend 1980 Mixed 1,583 1,513(4) 33 Pompano Beach Boca Springs 1990 Single 214 186 54 Boca Raton Family Island Lakes 1986 Single 240 239(5) 13 Boca Raton Family Whisper Walk 1982 Active 1,446 1,446 18 Boca Raton Adult Fairway Point 1993 Active 60 20 20 Boca Raton Adult Reflections 1993 Mixed 56 56 56 Boca Raton Huntington Pointe 1989 Active 1,096 1,085 180 Delray Beach Adult Coral Lakes 1992 Active 1,313 66 66 Delray Beach Adult Name and Location of Units Under Units Under Remaining Development Construction(1) Contract Units(2) - ------------------------------- --------------- ----------- --------- At December 31, 1994 ------------------------------------------- Lakeshore at University Park - - 200 Miramar Country Glen 14 21 279 Cooper City Cypress Bend - 2 45 Pompano Beach Boca Springs 19 6 22 Boca Raton Island Lakes - - - Boca Raton Whisper Walk - - - Boca Raton Fairway Point 30 13 27 Boca Raton Reflections - - - Boca Raton Huntington Pointe - 6 5 Delray Beach Coral Lakes 48 37 1,210 Delray Beach
(continued) 5 7 RESIDENTIAL PROJECTS AND PRODUCT LINES - Continued
Name and Units Sold and Units Sold Location of Year Development Total Units Delivered Thru and Delivered Development Started Type Planned 1994 in 1994 - ------------------------------- ---------------- ------ ----------- -------------- ------------- Palm Isles 1991 Active 992 675 258 Boynton Beach Adult Majestic Isles 1994 Active 450 - - Boynton Beach (6) Adult Palm Isles West Active 235 - - Boynton Beach (6) Adult Palm Shores 1989 Active 222 222 1 Boynton Beach Adult Cypress Woods 1989 Single 152 26 21 Lake Worth Family Summer Chase 1989 Active 221 91 20 Lake Worth Adult Whispering Sound 1991 Active 230 61 35 Palm City/Stuart Adult Name and Location of Units Under Units Under Remaining Development Construction(1) Contract Units(2) - ------------------------------- --------------- ----------- --------- At December 31, 1994 ------------------------------------------- Palm Isles 42 38 279 Boynton Beach Majestic Isles - - 450 Boynton Beach (6) Palm Isles West - - 235 Boynton Beach (6) Palm Shores - - - Boynton Beach Cypress Woods 6 7 119 Lake Worth Summer Chase 6 6 124 Lake Worth Whispering Sound 15 7 162 Palm City/Stuart
(1) Includes model units. (2) Includes model units and potential units to be constructed. (3) Does not include 534 rental units. (4) Does not include 23 rental units. (5) Does not include one lot sold without a building. (6) Development will start in 1995. 6 8 COMMUNITIES CURRENTLY UNDER DEVELOPMENT OR CONSTRUCTION COUNTRY GLEN is a community of single-family homes located in Cooper City, Florida. The community consists of 300 units and is presently under development and construction. Prices are expected to range from $220,000 to $320, 000. CYPRESS BEND is a complex of five- and nine story lakefront condominium buildings located in Pompano Beach priced from $70,000 to $110,000. The community features over $1 million of recreational amenities, including social clubhouses with swimming pools, tennis and racquetball courts, and jogging and exercise trails. BOCA SPRINGS is comprised of 214 single-family homes in west Boca Raton. The community features one- and two-story homes with two-car garages. Prices are from $140,000 to $160,000. Recreational facilities include a private park with a swimming pool and deck area, basketball, tennis court and a play area for children. This neighborhood has top-rated schools, parks and medical facilities. ISLAND LAKES, a single-family home community located in west Boca Raton, featuring 220 waterfront homesites was completely sold out in 1994. WHISPER WALK, a community for active adults located in Boca Raton was completely sold out in 1994. FAIRWAY POINT consists of two, 30 unit 8-story buildings located in Boca West, Boca Raton, Florida. Boca West is a luxury country club community. Fairway Point is being built on the last available parcel of land in Boca West. The units contain approximately 3,350 square feet of air-conditioned space and 800 square feet of balconies. They contain all luxury amenities. Prices range from $370,000 to $600,000. REFLECTIONS, a community of 56 one - and two - story townhomes located at Mission Bay, west of Boca Raton was completely sold out in 1994. HUNTINGTON POINTE is a community for active adults at Delray Beach. This community of 1,096 units features a variety of homestyles, including quadplexes, villas and duplexes, and lakefront four story condominium buildings. One thousand eighty-five units have been sold through 1994 and the remaining 11 units are expected to be sold early in 1995. 7 9 CORAL LAKES is an active adult community at Delray Beach. The community of 1,313 units features condominiums in two- and four-story buildings, villas, duplexes and a section of single-family residences with two-car garages. Prices range from $120,000 to $180,000. This community will have a multi-million dollar on-site clubhouse and spa, similar to but larger than the completed facility at Huntington Pointe, and will also feature satellite swimming pools. PALM ISLES is an active adult community of 992 residences at Boynton Beach. Prices in this community range from $100,000 to $170,000, and home styles include villas, duplexes, lakefront two-story condominiums and single-family residences. The community has a multi-million dollar on-site clubhouse and spa with eight tennis courts. The community also features satellite swimming pools. MAJESTIC ISLES is an active adult community of 450 duplexes and single-family residences located at Boynton Beach. Prices are from $130,000 to $180,000. The community will feature an intimate, luxury clubhouse with swimming pool and tennis courts. PALM ISLES WEST , an active adult community at Boynton Beach, features 235 duplexes and single-family residences priced from $130,000 to $180,000. Residents of this community will share Palm Isles multi-million dollar clubhouse, spa, and tennis courts, plus enjoy the convenience of a satellite swimming pool and sun deck within Palm Isles West. PALM SHORES AT GABLES END a single-family community for active adults at Boynton Beach was completely sold out in 1994. CYPRESS WOODS is a single-family home community located at Lake Worth and consists of 152 luxury single-family homes. Prices are from $140,000 to $180,000. Recreational facilities include a private family park area with basketball, tennis courts and a play area for children. SUMMER CHASE is a community for active adults located at Lake Worth. The community features 221 single-family residences with two-car garages. The price range is from $140,000 to $170,000. A social clubhouse is available to all residents along with tennis courts and pool. WHISPERING SOUND is an active adult community of 230 duplex residences located in Martin county at Palm City/Stuart. The residences range in price from $110,000 to $117,000. The community includes natural preserved areas offering backyard privacy for nearly every residence. The social clubhouse is available to all residents along with tennis courts and pool. 8 10 CONSTRUCTION The Company acts as 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 the subcontractor to complete construction at a fixed price. Agreements with the Company's subcontractors are generally entered into after competitive bidding. The Company does not have any long-term contractual commitments with any of its subcontractors. The Company generally constructs single-family homes only after the execution of a sales contract. The Company attempts to minimize cancellations by requiring a down payment and qualifying its customers for mortgage approval prior to commencement of construction. The Company offers a variety of options for each of its homes. These options permit buyers to customize their homes and permit the Company to offer variations on standard models while maintaining the efficiencies of a production builder. The Company believes the availability of these options increase the appeal of the Company's homes and makes them suitable to the needs of a wide variety of buyers. At December 31, 1994, the Company employed approximately 55 people in the construction operation. Most construction materials are obtained by subcontractors and are readily available from numerous sources. The Company has not experienced any material delays in construction due to shortages of materials or labor, however, the fact that there has been a significant increase in construction activities in Southeast Florida could result in the Company or its subcontractors experiencing shortages in the labor market. MARKETING AND SALES The Company sells its homes through sales managers and independent commissioned salespersons, who typically work in model sales centers or from sales offices located in model homes and condominiums in the Company's communities. The Company also cooperates with independent real estate brokers. The Company trains sales personnel on the availability of financing, construction schedules, marketing and advertising plans. The Company's sales and marketing organization consists of approximately 31 Company employees and sales personnel, all of whom are licensed real estate agents in the State of Florida. The 9 11 concentration of the Company's projects in southeast Florida permits the Company to engage salespersons on a long-term, rather than a project-by-project basis, which management believes results in reduced training costs and a more motivated sales force with extensive knowledge of the Company's operating policies and housing products. The Company advertises in newspapers and magazines, by direct mail and on billboards. In fiscal 1994, the Company's aggregate advertising costs were approximately $1.8 million. The Company maintains model homes and condominiums in all its communities, and management believes that these model units play a particularly important role in the Company's marketing efforts. The Company expends a significant effort in creating an attractive atmosphere at its models, where interior decorations are based upon the lifestyles of the target buyers. COMPETITION AND MARKET FACTORS The development and sales of residential properties is highly competitive and fragmented. The Company competes on the basis of a number of interrelated factors, including location, reputation, amenities, design, quality and price, with numerous large and small builders. Some of these competing builders have nationwide operations and greater financial resources. The Company's products must also compete with resales of existing homes and condominiums and available rental housing. Management believes that the Company's primary competitive strengths have been (i) satisfied customers who provide a continual source of referrals, (ii) its ability to offer quality residences with certain customized features at a wide range of prices, (iii) the location of its communities, and (iv) its reputation for service, innovative design and value pricing. The Company maintains a strong position in the active adult community marketed in southeast Florida and has been the leading builder of condominiums in Palm Beach County in each of the last five years. The Company focuses on providing a high-quality, active lifestyle for adults. The Company also believes that the high capital costs required to develop a community with substantial amenities effectively limits the number of competitors in the active adult market. The housing industry is cyclical and is affected by consumer confidence levels, prevailing economic conditions and interest rates. A variety of other factors affect the housing industry and the demand for new homes, including the availability and increase in the cost of labor and materials, changes in costs associated with home ownership, such as increases in 10 12 property taxes and energy cost, changes in consumer preferences, demographic trends and the availability of mortgage financing programs. CUSTOMER FINANCING The Company works with a number of mortgage lenders to provide home buyers with a variety of conventional mortgage financing programs. By making available a variety of attractive mortgage programs, the Company is able to better coordinate and expedite the entire sales transaction by ensuring that mortgage commitments are obtained and that closings take place on a timely and efficient basis. In 1994, approximately 70 percent of Oriole's sales of homes and condominiums were cash sales. RENTAL APARTMENTS The Company owns 480 rental units known as The Pier Club, in Miramar, Florida. The Company also rents an additional 90 units in other developments. The Company rents these apartments, typically under one-year leases. The Company's future plans do not presently include the construction of any additional rental communities. JOINT VENTURE WITH REGENCY HOMES As of December 31, 1994, Oriole had funded $7.0 million with an affiliated limited partnership to engage in joint ventures with Regency Homes, Inc., a prominent builder of residential housing in South Florida. The initial joint venture project, funded in 1993, involved the development and construction of 108 single-family homes in southwest Broward County in a development known as Silver Lakes and a second joint venture approved for 1,100 units known as Regency Lakes. Oriole Homes Corp. has purchased from the joint venture 145 sites. GOVERNMENT 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 including Broward and Palm Beach counties, have imposed impact fees as a means of 11 13 defraying the costs of providing certain governmental services to developing areas. The amount of these impact fees has increased significantly during recent years. Building codes in these counties require the use of specific construction material which increase the energy efficiency of homes. In addition, Broward County and Palm Beach County have attempted to impose restrictive zoning and density requirements in order to limit the number of persons who live and work within their boundaries. Counties and cities within the State of 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. To date, restrictive zoning laws 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 according to 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 such land for the presence of hazardous or toxic materials, wastes, or substances. The Company has not been adversely affected to date by the presence or potential presence of such materials. Certain permits and approvals will be required to complete the communities currently being planned by the Company. The ability to obtain necessary permits and approvals is often beyond the Company's control and could restrict or prevent the development of otherwise desirable property. The length of time necessary to obtain permits and approvals increases the carrying costs of unimproved property. In addition, the continued effectiveness of permits already granted is subject to factors such as changes in policies, and the interpretation and application of rules and regulations. The Florida Local Government Comprehensive Planning and Land Development Regulation Act (the "Act") provides that public facilities, including, but not limited to, sewer, solid waste, drainage, potable water, parks, roads and recreation facilities, shall be available concurrently with the impact of land development projects that would use such facilities. This requirement is known as the "concurrency" requirement. Counties and cities are required to implement concurrency by adopting local comprehensive plans and land development 12 14 regulations. These plans and regulations establish the guidelines for concurrency review and the exemptions from the concurrency requirement. All of the Company's development projects in Palm Beach County have been found to satisfy concurrency requirements. In recent years, regulation by federal and state authorities relating to the sale and advertising of residential real estate has also become more restrictive. In order to advertise and sell condominiums in many jurisdictions, the Company has been required to prepare registration statements or other disclosure documents and, in some cases, to file such materials with designated regulatory agencies. The Company advertises its condominium units in New York and New Jersey and prepares registration statements in connection with sales in those states and in the State of Florida. The State of Florida requires that customer deposits be held in segregated bank accounts. As of December 31, 1994, the Company has posted bonds of $5.0 million and had entered into an escrow agreement with a bank and the State of Florida that allows the Company to use customer deposits. See Note I of Notes to Consolidated Financial Statements. EMPLOYEES The Company employs approximately 236 persons, of whom approximately 42 are executive and supervisory 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. CORPORATE HEADQUARTERS The Company rents 22,500 square feet of space in a two-story office building. The lease expires January 1, 1998. See Note N of Notes to Consolidated Financial Statements. 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. 13 15 ITEM 4 SUBMISSION OF MATTERS TO A VOTE BY SECURITY HOLDERS No matters were submitted to security holders during the 4th quarter. The annual Meeting of Shareholders of the Registrant has been scheduled for May 15, 1995. The Company will file its definitive proxy material pursuant to Regulation 14, prior to April 30, 1995. PART II ITEM 5 MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS Information required by this item is incorporated by reference to the Registrant's 1994 Annual Report to Shareholders. ITEM 6. SELECTED FINANCIAL DATA Information required by this item is incorporated by reference to the Registrant's 1994 Annual Report to Shareholders. ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW General. The following table sets forth for the periods indicated certain items of the Company's Consolidated Financial Statements expressed as a percentage of the Company's total revenues:
- --------------------------------------------------------------------------------------------------- Percentage of Total Revenues Years Ended December 31, - --------------------------------------------------------------------------------------------------- 1992 1993 1994 ---------------------------------------- Sale of houses and condominiums 92.6% 92.7% 91.8% Sale of land 0.6 0.8 1.6 Other operating revenues 3.3 3.4 2.8 Interest, rentals and other income 3.1 3.1 3.6 Gain on sale of property and land held for investment, net 0.5 - 0.2 Selling, general and administrative expenses 15.1 15.1 13.6 Net income 5.2 2.5 3.4 - ---------------------------------------------------------------------------------------------------
14 16 Backlog. The following table sets forth the Company's backlog at December 31, 1992, 1993 and 1994.
- ------------------------------------------------------------------------------------------------------ December 31, Number of Units Aggregate Dollar Value - ------------------------------------------------------------------------------------------------------ 1992 240 $29,477,000 1993 257 $39,355,000 1994 143 $29,348,000 - ------------------------------------------------------------------------------------------------------
The Company's backlog generally represents units under contract for which a full deposit has been received, any statutory rescission right has expired, and in the case of a borrower, such borrower has been qualified for a mortgage loan. The Company generally fills all backlog within twelve months. The Company estimates that the period between receipt of a sales contract and delivery of the completed home to the purchaser is four to eight months. The Company's backlog historically tends to increase between January and May. Trends in the Company's backlog are subject to change from period to period for a number of economic conditions including consumer confidence levels, interest rates and the availability of mortgages. RESULTS OF OPERATIONS YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993 The Company's revenues from home sales increased $11.8 million (or 12.0%) during the calendar year 1994 as compared to the same period in 1993. The Company delivered 775 homes in 1994 compared to 771 in 1993, with an increase of 11.5% in the average selling price of homes delivered (from $127,500 to $142,100). The increase in the average selling price per home is primarily the result of the Company's entry into an upscale condominium community where the average selling price is $565,000 and a single family home community where the average selling price is $272,000. The number of new contracts signed (661) and the aggregate dollar value of these new contracts ($100.1 million) decreased in 1994 from 788 and $108.2 million in 1993. The Company's backlog has decreased from $39.4 million at December 31, 1993 to $29.3 million as of December 31, 1994. An increase in interest rates, higher home prices and increased competition have contributed to a decline in the number of new sales contracts received by the Company. This trend is expected to continue at least through the first six months of 1995. The rise in interest rates should have a less pronounced effect on the Company compared to other homebuilders, since 70% of 1994 sales were completed for cash, without the need for mortgage financing. 15 17 Other operating revenues decreased to $3.4 million during 1994 from $3.6 million in 1993 primarily as a result of higher vacancies in the rental units project. Interest, rentals and other income increased to $4.3 million from $3.3 million in 1993 as a result of the return on investment in Joint Ventures. Cost of home sales increased to $91.8 million in 1994 from $80.7 million in 1993 as a result of an increase in the dollar volume of homes delivered. As a percentage of home sales, cost of home sales increased to 83.4% from 82.1% due to increased competition, the absorption of higher construction costs and the impact of higher previously capitalized interest. Selling, General and Administrative Expenses ("SG&A") increased to $16.3 million in 1994 from $16.0 million in 1993, but as a percentage of total revenues, these expenses decreased to 13.6% from 15.1% in the same period of 1993. Interest costs incurred in 1994 amounted to $10.4 million from $10.2 million in 1993. Net income increased $1.5 million in 1994 or 56.6% over 1993. As a percentage of total revenues, the 1994 net income increased to 3.44% as compared to 2.48% in 1993, which reflected an extraordinary item in 1993 of $999,288 net of taxes, from the write-off of unamortized debentures and loan costs. RESULTS OF OPERATIONS YEAR ENDED DECEMBER 31, 1993 COMPARED TO YEAR ENDED DECEMBER 31, 1992 The Company's revenues from home sales increased $8.9 million (or 9.9%) during the calendar year 1993 as compared to the same period in 1992. The Company delivered 771 homes in 1993 compared to 708 in 1992, with an increase of 1.0% in the average selling price of homes delivered (from $126,300 to $127,500). The number of new contracts signed (788) and the aggregate dollar value of those new contracts ($108.2 million) increased in 1993 from 743 and $91.2 million in 1992. Other operating revenues increased to $3.6 million during 1993 from $3.2 million in 1992 due to a larger occupancy rate on our rental apartments. Interest, rentals and other income increased to $3.3 million in 1993 from $2.9 million in 1992 due to additional interest on short term investments and the increased number of units subject to recreation leases. Cost of home sales increased to $80.7 million in 1993 from $70.2 million in 1992 as a result of an increase in the number of homes delivered. As a percentage of home sales, cost of home sales increased to 82.1% from 78.5%. 16 18 Selling, General and Administrative expenses ("SG&A") increased to $16.0 million in 1993 from $14.5 million in 1992, but as a percentage of total revenues, these expenses remained at 15.1%. The $2.6 million (or 35.2%) increase in the Company's interest cost incurred in 1993 as compared to the same period in 1992 was primarily attributable to the larger outstanding debt following the issuance of the 12 1/2% Senior Notes due 2003 in January 1993. Net income decreased to $2.6 million in 1993 from $5.1 million in the comparable period in 1992, due mainly to the reduced margins from the sale of homes and the effect of a nonrecurring expense of $999,288, net of taxes from the write-off of unamortized debentures and loan costs. The reasons for lower margins are the inability to meaningfully increase selling prices, increased competition which resulted in the absorption of higher construction costs and the impact of higher capitalized interest. LIQUIDITY AND CAPITAL RESOURCES The Company's financing needs depend primarily upon sales volume, asset turnover, land acquisition and inventory balances. The Company has financed its working capital need through funds generated by operations, borrowings and the periodic issuance of common stock. On January 12, 1993, the Company issued $70.0 million of its 12 1/2% Senior Notes ("Notes") due January 15, 2003. The Notes are senior unsecured obligations of the Company subject to redemption, at the Company's option, on or after January 15, 1998 at 105% of the principal amount and thereafter at prices declining annually to 100% on or after January 15, 2001. The indenture under which the Notes were issued requires sinking fund payments of $17.5 million on January 15, 2001 and January 15, 2002. The indenture contains provisions restricting the amount and type of indebtedness the Company may incur, the purchase by the Company of its stock and the payment of dividends. At December 31, 1994, approximately $1,478,000 of consolidated retained earnings were unrestricted for the payment of cash dividends. The Company has also entered into a $10.0 million revolving line of credit available at a rate of prime plus 1.5%, which expires June 30, 1996. This line can be used to finance on going development, construction of residential real estate and other short-term capital needs. 17 19 As of December 31, 1994, $10.0 million of this line of credit was available for use by the Company. The Company also has outstanding an aggregate balance of approximately $17.4 million of purchase money mortgages at interest rates from 9.2% - 11.5% which are collateralized by land and buildings. All of these mortgages are payable in 1995 and 1996. The Company does not have any current commitments for capital expenditures and believes it has adequate liquidity from the proceeds of the Notes, additional borrowing permitted under the indenture, its line of credit and amounts generated from operations to provide funds, on both a short and long term basis to finance its home building activities and meet its debt service requirements. On December 12, 1994, the Company declared a dividend of $.20 per share on its Class A common stock and $.225 on its Class B common stock to shareholders of record as of December 30, 1994, which dividends were paid on January 12, 1995. The Company intends to continue the payment of semi-annual dividends. The payment of cash dividends is at the discretion of the Board of Directors and will depend on results of operations, capital requirements, the Indenture, the Company's financial condition and such other factors as the Board of Directors of the Company may consider. There can be no assurance as to the amount, if any, or timing of cash dividends. INFLATION The Company, as well as the home building industry in general, may be adversely affected during periods of high inflation, primarily because of higher land and construction costs. In addition, higher mortgage interest rates may significantly affect the affordability and availability of permanent mortgage financing to prospective purchasers. Inflation also increases the Company's cost of labor and materials. The Company attempts to pass through to its customers any increases in its costs through increased selling prices. During the last three years, the Company has experienced a reduction in gross margins on the sale of homes. In some part, these reduced margins are the result of the Company being unable to raise selling prices and pass on increased construction costs. There is no assurance that inflation will not have a material adverse impact on the Company's future results of operations. 18 20 ACCOUNTING METHODS During 1987, the Company changed its method of accounting for income taxes to conform to Statement of Financial Accounting Standards No. 96 "Accounting for Income Taxes, " which requires the liability method as measured by the provisions of the enacted tax laws. The amount of deferred taxes payable is recognized under the liability method at the date of the Consolidated Financial Statements. During 1992, the Financial Accounting Standards Board adopted Statement of Financial Accounting Standards No. 109, which supersedes Statement of Financial Accounting Standards No. 96, and became effective for fiscal years beginning after December 15, 1992. The effect of the adoption of this Statement did not have a material effect on the Consolidated Financial Statements. 19 21 ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ORIOLE HOMES CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, ASSETS
1994 1993 ------------ ----------- Cash and cash equivalents $ 14,609,489 $14,650,532 ------------ ----------- Receivables Mortgage notes 1,266,297 1,618,659 Other - 4,000 ------------ ----------- 1,266,297 1,622,659 ------------ ----------- Inventories Land 112,721,638 111,959,716 Houses and condominiums completed or under construction 40,497,339 38,057,470 Model houses and condominiums 2,199,908 2,416,948 ------------ ----------- 155,418,885 152,434,134 Less estimated costs of completion included in inventories 28,592,120 24,031,951 ------------ ----------- 126,826,765 128,402,183 ------------ ----------- Property and equipment (at cost) Land 7,170,113 7,172,279 Buildings 22,473,045 23,130,421 Furniture, fixtures and equipment 5,432,784 5,357,097 ------------ ----------- 35,075,942 35,659,797 Less accumulated depreciation 10,447,207 9,920,818 ------------ ----------- 24,628,735 25,738,979 ------------ ----------- Other Prepaid expenses 1,990,535 1,812,081 Unamortized debt issuance costs 2,277,529 2,497,438 Investment in and advances to joint venture 7,000,000 3,500,000 Land held for investment (at cost) 2,996,901 2,791,450 Other assets 2,413,479 727,271 ------------ ----------- 16,678,444 11,328,240 ------------ ----------- Total assets $184,009,730 $181,742,593 ============ ============
The accompanying notes are an integral part of these statements. 20 22 ORIOLE HOMES CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, LIABILITIES AND SHAREHOLDERS' EQUITY
1994 1993 ------------ ------------ Liabilities Notes payable - banks $ - $ 96,317 Mortgage notes payable 17,419,250 14,399,479 Accounts payable 6,464,417 6,507,891 Dividends payable 993,409 762,078 Customer deposits 4,975,199 6,091,570 Accrued expenses and other liabilities 7,820,330 7,933,622 Deferred income taxes 456,430 722,362 Senior notes 66,457,682 68,187,694 ------------ ------------ Total Liabilities 104,586,717 104,701,013 ------------ ------------ Shareholders' equity Class A common stock, $.10 par value Authorized - 10,000,000 shares Issued - 1,893,349 in 1994 and 1,895,549 in 1993 189,335 189,555 Class B common stock, $.10 par value Authorized - 10,000,000 shares Issued - 2,732,175 in 1994 and 2,729,975 in 1993 273,218 272,998 Additional paid-in capital 19,267,327 19,267,327 Retained earnings 59,693,133 57,311,700 ------------ ------------ Total shareholders' equity 79,423,013 77,041,580 ------------ ------------ Total liabilities and shareholders' equity $184,009,730 $181,742,593 ============ ============
The accompanying notes are an integral part of these statements. 21 23 ORIOLE HOMES CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME YEARS ENDED DECEMBER 31,
1994 1993 1992 ------------ ------------ ----------- Revenues Sales of houses and condominiums $110,116,572 $ 98,302,003 $89,423,637 Sales of land 1,959,779 891,041 550,250 Other operating revenues 3,365,024 3,600,196 3,156,503 Gain on sales of property and land held for investment, net 202,374 42,258 522,758 Interest, rentals and other income 4,333,548 3,260,305 2,939,373 ------------ ------------ ----------- 119,977,297 106,095,803 96,592,521 ------------ ------------ ----------- Costs and expenses Cost of houses and condominiums sold 91,778,577 80,682,884 70,178,172 Cost of land sold 1,726,119 772,020 461,016 Costs relating to other operating revenues 2,804,767 2,517,756 2,665,967 Selling, general and administrative expenses 16,313,685 16,001,923 14,543,802 Interest costs incurred 10,430,616 10,154,739 7,510,382 Interest capitalized (deduct) (9,736,452) (9,997,908) (6,944,173) ------------ ------------ ----------- 113,317,312 100,131,414 88,415,166 ------------ ------------ ----------- Income before provision for income taxes and extraordinary charge 6,659,985 5,964,389 8,177,355 Provision for income taxes 2,523,065 2,324,023 3,126,618 ------------ ------------ ----------- Income before extraordinary charge 4,136,920 3,640,366 5,050,737 Extraordinary charge - loss on early retirement of debt, net of income taxes - (999,288) - ------------ ------------ ----------- Net income $ 4,136,920 $ 2,641,078 $ 5,050,737 ============ ============ =========== Net income per common share before extraordinary charge $ .89 $ .79 $ 1.17 Extraordinary charge - (.22) - ------------ ------------ ----------- Net income per Class A and Class B common share $ .89 $ .57 $ 1.17 ============ ============ ===========
The accompanying notes are an integral part of these statements. 22 24 ORIOLE HOMES CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31,
1994 1993 1992 ----------- ------------ ----------- Increase (decrease) in cash Cash flows from operating activities Net income $ 4,136,920 $ 2,641,078 $ 5,050,737 Adjustments to reconcile net income to net cash provided by operating activities Depreciation 1,234,118 1,265,836 1,266,013 Amortization 474,897 333,062 778,532 Deferred income taxes (265,932) (11,748) (585,449) Gain on sales of property and land held for investment, net (202,374) (42,258) (522,758) Loss on early retirement of debt - 1,602,194 - Changes in assets and liabilities Decrease in receivables 356,362 250,624 524,358 (Increase) decrease in inventories 1,575,418 (10,058,507) 4,984,512 (Increase) in other assets (1,864,662) (650,765) (152,297) Increase (decrease) in accounts payable (43,474) 1,256,048 (400,351) Increase (decrease) in customer deposits (1,116,371) 1,110,379 369,163 Increase (decrease) in accrued expenses and other liabilities (113,292) 3,773,250 (2,601,836) ----------- ------------ ----------- Total adjustments 34,690 (1,171,885) 3,659,887 ----------- ------------ ----------- Net cash provided by operating activities 4,171,610 1,469,193 8,710,624 ----------- ------------ ----------- Cash flows from investing activities Investment in joint venture (3,500,000) (3,500,000) - Land held for investment (205,451) - - Capital expenditures (702,466) (416,120) (1,049,969) Proceeds from sales of property and equipment 780,966 152,771 1,245,445 ----------- ------------ ----------- Net cash (used in) provided by investing activities (3,626,951) (3,763,349) 195,476 ----------- ------------ ----------- Cash flows from financing activities Proceeds from mortgage notes 3,444,962 - - Payment of mortgage notes (425,191) (160) (146) Borrowings under line of credit agreement 9,500,000 196,317 6,200,000 Repayments under line of credit agreement (9,596,317) (13,100,000) (9,000,000) Payment of term loan - (22,000,000) (9,000,000) Proceeds from Class B common stock issued - - 7,978,880 Repurchase of debentures - (18,563,000) (2,677,000) Proceeds from issuance of 12 1/2% senior notes - 68,069,400 - Repurchase of senior notes (1,910,000) - - Issuance costs (75,000) (2,681,514) (338,860) Dividends paid (1,524,156) (1,918,458) (995,387) ----------- ------------ ----------- Net cash (used in) provided by financing activities (585,702) 10,002,585 (7,832,513) ----------- ------------ ----------- Net (decrease) increase in cash (41,043) 7,708,429 1,073,587 Cash and cash equivalents at beginning of year 14,650,532 6,942,103 5,868,516 ----------- ------------ ----------- Cash and cash equivalents at end of year $14,609,489 $ 14,650,532 $ 6,942,103 =========== ============ =========== Supplemental disclosures of cash flow information Cash paid during the year for: Interest (net of amount capitalized) $ 624,828 $ - $ 768,849 Income taxes $ 3,268,315 $ 1,501,243 $ 4,041,341
The accompanying notes are an integral part of these statements. 23 25 ORIOLE HOMES CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
Common Stock ---------------------------------------------------- Class A Class B ---------------------- ----------------------- Additional Paid-in Retained Shares Amount Shares Amount Capital Earnings --------- -------- --------- -------- ----------- ----------- Balance at January 1, 1992 1,913,274 $191,328 1,880,250 $188,025 $11,710,507 $52,300,421 Net income for 1992 - - - - - 5,050,737 Stock conversion (17,710) (1,771) 17,710 1,771 - - Class B common stock issued pursuant to public offering - - 832,000 83,200 7,556,820 - --------- -------- --------- -------- ----------- ----------- Balance at December 31, 1992 1,895,564 189,557 2,729,960 272,996 19,267,327 57,351,158 Net income for 1993 - - - - - 2,641,078 Stock conversion (15) (2) 15 2 - - Cash dividends Class A common stock $.55 per share - - - - - (1,042,555) Class B common stock $.60 per share - - - - - (1,637,981) --------- -------- --------- -------- ----------- ----------- Balance at December 31, 1993 1,895,549 189,555 2,729,975 272,998 19,267,327 57,311,700 Net income for 1994 - - - - - 4,136,920 Stock conversion (2,200) (220) 2,200 220 - - Cash dividends Class A common stock $.35 per share - - - - - (663,002) Class B common stock $.40 per share - - - - - (1,092,485) --------- -------- --------- -------- ----------- ----------- Balance at December 31, 1994 1,893,349 $189,335 2,732,175 $273,218 $19,267,327 $59,693,133 ========= ======== ========= ======== =========== ===========
The accompanying notes are an integral part of these statements. 24 26 ORIOLE HOMES CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION Principles of Consolidation The accompanying Consolidated Financial Statements include the accounts of Oriole Homes Corp. and all wholly-owned subsidiaries (the Company). Significant intercompany accounts and transactions have been eliminated in consolidation. Operations The Company, a Florida corporation, is a developer of single and multi-family residential communities in southeast Florida. The Company's receivables are primarily mortgages which are collateralized by real estate. Revenue Recognition The Company records revenues and profits from sales of real estate in accordance with Statement of Financial Accounting Standards No. 66, "Accounting for Sales of Real Estate." Inventories Inventories are carried at cost, plus accumulated development and construction costs (including capitalized interest and real estate taxes). House and condominium inventories which are completed and being held for sale aggregate approximately $12,152,000 in 1994 and $11,505,000 in 1993. The accumulated costs of land, houses and condominiums are not in excess of estimated net realizable value. Interest Capitalization The Company follows the practice of capitalizing certain interest costs incurred on land under development and houses and condominiums under construction. Such capitalized interest is included in cost of house and condominium sales when the units are delivered. During the years 1994, 1993, and 1992 respectively, the Company capitalized interest in the amount of $9,736,452, $9,997,908 and $6,944,173 and expensed as a component of cost of goods sold $9,313,121, $10,036,456 and $7,685,554. (continued) 25 27 ORIOLE HOMES CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION - Continued Depreciation The Company provides for depreciation of property and equipment by the straight-line and accelerated methods over the following estimated useful lives of the various classes of depreciable assets: Buildings 25 to 27 years Furniture, fixtures and equipment 3 to 7 years Debt Issuance Costs and Unamortized Discount Costs incurred in connection with obtaining debt have been deferred and are being amortized by the interest method over the term of the debt. Cash Equivalents Cash equivalents consist of highly liquid investments with maturities of three months or less when purchased. Concentration of Credit Risk The Company's cash and cash equivalents are placed mainly with one institution with a high credit rating. The carrying amount approximates fair value due to the short maturity of these instruments. Net Income Per Share Earnings per common share is computed by dividing net income by the weighted average number of shares outstanding during each year: 4,625,524 shares in 1994; 4,625,524 shares in 1993; 4,334,650 shares in 1992. Income Taxes The Company has adopted Statement of Financial Accounting Standards No. 109. The effect of the adoption of this Statement did not have a material effect on the Consolidated Financial Statements. (continued) 26 28 ORIOLE HOMES CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION - Continued Financial Statement Reclassification Certain amounts reflected in the consolidated financial statements for the year ended December 31, 1993 have been reclassified to conform to the presentation for the year ended December 31, 1994. NOTE B - RECEIVABLES First and second mortgage notes receivable bear interest at rates ranging from 6% to 14%. Minimum payments required on the first and second mortgage notes in each of the five years subsequent to December 31, 1994 are: 1995 - $228,943; 1996 - $23,097; 1997 - $23,736; 1998 - $20,783; and 1999 - $18,722. NOTE C - LIFE INSURANCE The Company purchased life insurance on the lives of two of its officers and their spouses (officers) who own significant shares of common stock of the Company. An irrevocably designated trustee of the officers is the beneficiary. The accumulated premiums on the above policies during the years ended December 31, 1994 and 1993 were $427,568 and $213,784, respectively, and are classified as other assets. 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. In connection with the policies, the Company has an option with the officers to acquire all or any part of the Class A or Class B common stock of the Company owned by such individuals at the market price of such securities at the time of their death. NOTE D - INVESTMENT IN AND ADVANCES TO JOINT VENTURE The Company entered into two joint venture agreements, during 1994 and 1993, to construct and sell homes. The joint ventures are accounted for using the cost method. The Company's investment and advances are as follows: Advances $1,350,000 Investment 5,650,000 ---------- $7,000,000 ==========
27 29 ORIOLE HOMES CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED NOTE E - MORTGAGE SUBSIDIARY South Florida Residential Mortgage Company (SFRMC), a wholly-owned subsidiary of the Company, provides mortgage financing services. Summarized financial information for SFRMC is as follows:
1994 1993 -------- -------- Assets First mortgage notes receivable $513,465 $909,288 Other assets 20,645 28,855 Due from parent company 414,875 47,190 -------- -------- Total assets $948,985 $985,333 ======== ======== Liabilities and shareholder's equity Other liabilities $ 29,787 $ 84,231 Shareholder's equity 919,198 901,102 -------- -------- Total liabilities and shareholder's equity $948,985 $985,333 ======== ======== Revenues $293,734 $413,218 Expenses 264,720 268,448 -------- -------- Income before provision for income taxes 29,014 144,770 Provision for income taxes 10,918 54,477 -------- -------- Net income $ 18,096 $ 90,293 ======== ========
NOTE F - REVOLVING LOAN AGREEMENT A revolving loan agreement (line of credit), collateralized by land, was entered into during 1993 with a bank. The line of credit provides up to $10,000,000 of borrowings, all of which is available at an interest rate of prime plus 1.5%. The agreement expires June 30,1996. The line of credit can be used to finance ongoing development and construction of residential real estate and short-term capital needs and will only require monthly interest payments. The credit agreement has no compensating balance arrangements and contains typical restrictions and covenants, the most restrictive of which include the following: a. The Company shall maintain, at all times through the life of the loan, its consolidated tangible net worth at not less than $70,000,000. (continued) 28 30 ORIOLE HOMES CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED NOTE F - REVOLVING LOAN AGREEMENT - Continued b. The Company's ability to incur additional debt is restricted by covenants in the agreement. Average interest rates and balances outstanding, for revolving lines of credit payable to banks, based on a weighted average are as follows:
1994 1993 1992 ---------- ----------- ----------- Daily average outstanding borrowings $1,805,944 $ 2,962,230 $40,278,688 Average interest rate during the period 8.6% 6.2% 7.6% Interest rate at the end of the period 10.0% 7.5% 7.0% Maximum outstanding during the year $7,010,000 $35,000,000 $47,200,000
NOTE G - MORTGAGE NOTES PAYABLE Mortgage notes payable at December 31, 1994 and 1993, are summarized as follows:
1994 1993 ---------- ---------- Mortgage note, interest at 9.75%, requires monthly interest payments of $56,062 with principal balance due on May 1, 1995; collateralized by land, buildings and equipment $6,900,000 $6,900,000 Mortgage note, interest at 9.2%, requires monthly payments of $57,510, including interest, matures on May 1, 1995; collateralized by land, buildings, equipment and rents 7,499,304 7,499,479 Mortgage note, interest at 10%, requires monthly payments of $25,766, including interest, matures on July 1, 1995; collateralized by land 2,669,946 -
(continued) 29 31 ORIOLE HOMES CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED NOTE G - MORTGAGE NOTES PAYABLE - Continued
1994 1993 ----------- ----------- Mortgage note, interest at 11.5%, requires interest with principal payments as land is sold, matures February 1, 1996; collateralized by land 350,000 - ----------- ----------- $17,419,250 $14,399,479 =========== ===========
Minimum payments required in periods subsequent to December 31, 1994, are as follows: 1995 $17,069,250 1996 350,000 ----------- $17,419,250 ===========
NOTE H - INCOME TAXES Deferred income taxes and benefits are provided for significant income and expense items recognized in different years for tax and financial reporting purposes. Temporary differences which give rise to significant deferred tax assets (liabilities) follow:
1994 1993 ----------- ----------- Warranties on houses and condominiums $ 925,592 $ 851,836 Percentage of completion 342,490 172,836 Uniform cost capitalization 178,463 286,863 ----------- ----------- Total deferred tax assets 1,446,545 1,311,535 ----------- ----------- Installment sales (13,990) (28,155) Deferred expenses (1,667,365) (1,726,542) Accelerated depreciation (221,620) (268,993) Other items - (10,207) ----------- ----------- Total deferred tax liabilities (1,902,975) (2,033,897) ----------- ----------- Net deferred tax liability $ (456,430) $ (722,362) =========== ===========
(continued) 30 32 ORIOLE HOMES CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED NOTE H - INCOME TAXES - Continued The Company files consolidated income tax returns. The components of the provision for income taxes are as follows:
Current Deferred Total ---------- --------- ---------- Year Ended December 31, 1994, Federal $2,383,274 $(229,125) $2,154,149 State 405,723 (36,807) 368,916 ---------- --------- ---------- $2,788,997 $(265,932) $2,523,065 ========== ========= ========== Year Ended December 31, 1993, Federal $1,478,474 $ (3,500) $1,474,974 State 254,391 (8,248) 246,143 ---------- --------- ---------- $1,732,865 $ (11,748) $1,721,117 ========== ========= ========== Year Ended December 31, 1992, Federal $2,814,865 $(137,691) $2,677,174 State 467,988 (18,544) 449,444 ---------- --------- ---------- $3,282,853 $(156,235) $3,126,618 ========== ========= ==========
The reasons for the difference between the total tax expense and the amount computed by applying the statutory federal income tax rate to income before income taxes are as follows:
1994 1993 1992 ---------- ---------- ---------- Provision for taxes at statutory rates (34%) $2,264,395 $1,483,147 $2,780,300 State income taxes, net of federal tax benefit 241,644 158,193 296,633 Other 17,026 79,777 49,685 ---------- ---------- ---------- Tax expense $2,523,065 $1,721,117 $3,126,618 ========== ========== ==========
(continued) 31 33 ORIOLE HOMES CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED NOTE H - INCOME TAXES - Continued Deferred income tax provision results from temporary differences in the recognition of revenues and expenses for tax and financial statement purposes. The sources of these differences are as follows:
Years ended December 31, ------------------------------------------------ 1994 1993 1992 --------- ---------- ---------- Net effect of development and other costs $ (59,224) $ (80,256) $(171,402) Net profit realized, applicable to sales reported on the installment basis for tax purposes (14,165) (10,938) (79,355) Net effect of (increase) decrease in reserve for warranties on houses and condominiums (73,756) (156,920) 196,022 Net effect of uniform cost capitalization and percentage of completion (61,254) 218,765 (102,527) Net effect of depreciation (57,533) 17,601 1,027 --------- ---------- ---------- $(265,932) $ (11,748) $(156,235) ========= ========= =========
NOTE I - CUSTOMER DEPOSITS Certain customer deposits, pursuant to statutory regulations of the State of Florida or by agreement between the buyer and seller, are held in segregated bank accounts. At December 31, 1994 and 1993, cash in the amounts of approximately $253,000 and $385,000, respectively, was so restricted. The Company entered into an escrow agreement with a bank and the Division of Florida Land Sales and Condominiums which allowed the Company to use customer deposits which were previously maintained in an escrow account. Deposits of up to $1,900,000 in 1994 and $2,700,000 in 1993, which could be released to the Company, are guaranteed by performance bonds aggregating $5,000,000 for 1994 and $4,500,000 for 1993. 32 34 ORIOLE HOMES CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED NOTE J - ACCRUED EXPENSES AND OTHER LIABILITIES Accrued expenses and other liabilities include the following:
1994 1993 ---------- ---------- Accrued interest $3,899,765 $4,010,417 Reserve for warranties on houses and condominiums 2,419,218 2,263,715 Income Taxes Payable 296,904 775,872 Other accrued liabilities 1,204,443 883,618 ---------- ---------- $7,820,330 $7,933,622 ========== ==========
NOTE K - SENIOR NOTES Senior Notes are comprised as follows:
1994 1993 ---------- ---------- 12 1/2% senior notes due January 15, 2003 with an effective interest rate of 13.02% $70,000,000 $70,000,000 Repurchase of senior note to be used as part of sinking fund (1,910,000) - Unamortized discount (1,632,318) (1,812,306) ----------- ----------- $66,457,682 $68,187,694 =========== ===========
On January 13, 1993, the Company issued 12 1/2% senior notes ("Notes"), due January 15, 2003. The Notes have a face value $70,000,000 and were issued at a discount of $1,930,000. The notes are senior unsecured obligations of the Company subject to redemption at the Company's option on or after January 15, 1998 at 105% of the principal amount and thereafter at prices declining annually to 100% of the principal amount on or after January 15, 2001. The indenture under which senior notes were issued requires sinking fund payments of $17,500,000 on January 15, 2001 and January 15, 2002. The indenture contains provisions restricting the amount and type of indebtedness the Company may incur, the purchase by the Company of its stock and the payment of cash dividends. At December 31, 1994, approximately $1,478,000 of consolidated retained earnings were unrestricted for the payment of cash dividends. 33 35 ORIOLE HOMES CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED NOTE L - STOCK OPTIONS The Company adopted two stock option plans: one for employees and one for non-employee directors, both effective in 1994. Under the stock option plan for employees (the "Plan"), 400,000 shares of Class B common stock are reserved for issuance upon exercise of stock options. The Plan is designed as a means to retain and motivate employees who provide management services. The Compensation Committee administers and interprets the Plan and is authorized to grant options thereunder to all regular employees of the Company. The Plan provides for the granting of incentive stock options on such terms and at such prices as may be determined by the Board of Directors. The per share exercise price of incentive stock options cannot be less than the fair market value per share of the Class B common stock on the date of the grant. Each option is exercisable after the period or periods specified in the option agreement, but no option may be exercised more than ten years after the date of the grant. No participant may be granted options for more than 20,000 shares in any year or an aggregate of 80,000 shares. Options granted under the Plan are not transferable other than by will or by the laws of descent and distribution. Options under the Plan may not be granted after November 23, 2003. No options have been granted to date under the Plan. Under the stock option plan for non-employee directors (the "Plan"), 20,000 shares of class B common stock are available for issuance. The Plan is designed to retain and motivate non-employee directors. The Executive Committee administers the Plan and is authorized to grant options to each non-employee director. The Plan provides for the granting of stock options at an exercise price per share equal to the fair market value on the business day immediately preceding the Annual Meeting of Shareholders. Each option is excercisable after the period or periods specified in the option agreement, but no option may be exercised more than 10 years after the date of the grant. Options will expire earlier if an optionee terminates services as a director. No participant may be granted options for more than 6,000 shares. Options are not assignable. The Plan may be terminated at any time as determined by the Board of Directors or Stockholders. As of December 31, 1994, options for 3,600 shares have been granted. NOTE M - COMMON STOCK During the second quarter of 1992 the Company issued 832,000 shares of Class B common stock, par value $.10 per share, for $10.25 per share. The net proceeds from the sales were $7,978,880 after expenses, underwriting discounts and commissions. (continued) 34 36 ORIOLE HOMES CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED NOTE M - COMMON STOCK - Continued Class A common stock 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. During 1994, the Board of Directors canceled the Class A (96,422 shares) and Class B (165,464) common stock in treasury. NOTE N - LEASING ARRANGEMENTS Rental properties In connection with certain housing developments, the Company leases recreation facilities. The Company also leases rental units. 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, 1994 and 1993:
1994 1993 ----------- ----------- Land $ 7,170,113 $ 7,172,279 Buildings 22,473,045 23,130,421 Furniture, fixtures and equipment 986,134 1,075,321 ----------- ----------- 30,629,292 31,378,021 Less accumulated depreciation 6,697,665 6,374,930 ----------- ----------- $23,931,627 $25,003,091 =========== ===========
(continued) 35 37 ORIOLE HOMES CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED NOTE N - LEASING ARRANGEMENTS - Continued The following is a schedule of approximate future minimum rental income required under these leases as of December 31, 1994: 1995 $ 2,121,000 1996 633,000 1997 633,000 1998 633,000 1999 633,000 Thereafter 54,375,000 ----------- $59,028,000 ===========
Offices and Warehouse The Company leases its offices and warehouse under lease agreements extending through 1997,with options to renew for up to five years, accounted for as operating leases. The following is a schedule, by years, of the approximate future minimum rental payments as of December 31, 1994: 1995 $199,922 1996 162,007 1997 134,922 -------- $496,851 ========
Total rent expense for each of the years ended December 31, 1994, 1993 and 1992 amounted to $199,922. NOTE O - DEFERRED COMPENSATION PLAN The Company has a defined contribution plan established pursuant to Section 401(K) of the Internal Revenue Code. Employees contribute to the plan a percentage of their salaries, subject to certain dollar limitations, and the Company matches a portion of the employees' contributions. The Company's contribution to the plan amounted to $67,807 in 1994, $60,851 in 1993 and $56,962 in 1992. NOTE P - CONTINGENCIES The Company is involved, from time to time, in litigation arising in the ordinary course of business, none of which is expected to have a material adverse effect on the Company's consolidated financial position or results of operations. 36 38 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, 1994 and 1993, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 1994. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Oriole Homes Corp. and Subsidiaries at December 31, 1994 and 1993, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. GRANT THORNTON Miami, Florida February 10, 1995 37 39 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON SCHEDULES Board of Directors Oriole Homes Corp. In connection with our audit of the consolidated financial statements of Oriole Homes Corp. and subsidiaries referred to in our report dated February 10, 1995, which is included in the annual report to security holders and incorporated by reference in Part II of Form 10-K, we have also audited Schedule X for each of the three years in the period ended December 31, 1994. In our opinion, these schedules present fairly, in all material respects, the information required to be set forth therein. GRANT THORNTON Miami, Florida February 10, 1995 38 40 ITEM 9 DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE This item is not applicable. PART III ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by this item of this part is incorporated by reference to Registrant's definitive proxy statement for the Annual Meeting of Shareholders. ITEM 11 EXECUTIVE COMPENSATION The information required by this item of this part is incorporated by reference to Registrant's definitive proxy statement for the Annual Meeting of Shareholders. ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this item of this part is incorporated by reference to Registrant's definitive proxy statement for the Annual Meeting of Shareholders. ITEM 13 CERTAIN RELATIONSHIP AND RELATED TRANSACTIONS The information required by this item of this part is incorporated by reference to Registrant's definitive proxy statement for the Annual Meeting of Shareholders. PART IV ITEM 14 EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K (1) 1. Financial Statements The following consolidated financial statements of Oriole Homes Corp. and subsidiaries are included in Part II of this annual report and in the Company's 1994 Annual Report to Shareholders. Consolidated balance sheets as of December 31, 1994 and 1993. Consolidated statements of income for the three years ended December 31, 1994. Consolidated statements of cash flows for the three years ended December 31, 1994. Consolidated statements of shareholders' equity for the three years ended December 31, 1994. Notes to consolidated financial statements. 39 41 Report of independent certified public accountants. Selected Quarterly Financial Data for the years ended December 31, 1994 and 1993 included in the Company's 1994 Annual Report to Shareholders which is incorporated by reference as Part II of this annual report. 2. Financial Statement Schedules The following financial statement schedules of Oriole Homes Corp. and subsidiaries are included in Part IV of this report: Report of independent certified public accountants. Schedule X - Supplementary income statement information. All other schedules are omitted because they are not applicable or not required or because the required information is included in the consolidated financial statements or notes thereto. 3. Exhibits
Page No. -------- 3.1 Articles of Incorporation of Registrant * 3.2 By-Laws of Registrant * 4.2 Form of indenture between the Registrant and Sun Bank National Association, Trustee. * 10.1 Lease Agreement, dated May 7, 1991 between Oriole Homes Corp. and Arbors Associates, Ltd. * 10.3 Mortgage Note payable to Home Life Insurance Company on October 1, 1994 * 10.4 Mortgage Modification and Mortgage Note payable to The Manufacturers Life Insurance Company on May 1, 1995. 10.6 Registrant's 401(k) Defined Contribution Benefit Plan * 10.7 Joint Venture between the Company and Regency Homes, Inc. dated December 31, 1993. ** 22.1 List of Registrant's Subsidiaries (Filed as Exhibit 22 to the Company's Form 10-K for the fiscal year ended December 31, 1990 and incorporated herein by reference). 27.1 Financial Data Schedule (*) Filed as exhibits to the Registration Statement of the Registrant on Form S-2 declared effective on January 13, 1993. (File No. 33-51680). (**) Filed as an exhibit to the Registrant's Annual Report on Form 10-K filed in March 1994. (2) Reports on Form 8-K There were no reports on Form 8-K for the three months ended December 31, 1994.
40 42 SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION ORIOLE HOMES CORP. AND SUBSIDIARIES
---------------------------------------------------------------- COLUMN A COLUMN B ---------------------------------------------------------------- CHARGED TO COSTS ITEM AND EXPENSES ----------------------------------------------------------------
1994 1993 1992 ---------- ---------- ---------- Maintenance and Repairs $ 872,202 $ 694,237 $ 437,159 Taxes, other than payroll $1,773,751 $1,683,925 $1,553,648 and income taxes Advertising Costs $1,775,379 $2,010,459 $1,750,935
41 43 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 28, 1995 s/R.D.Levy ------------------------ ----------------------------------- R.D. Levy, Chairman of the Board Chief Executive Officer, Director DATE March 28, 1995 s/A. Nunez ------------------------ ----------------------------------- A. Nunez, Senior Vice President, Treasurer, Chief Financial Officer, Chief Accounting 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. MEMBER OF THE BOARD OF DIRECTORS DATE March 28, 1995 s/Harry A. Levy ------------------------ ----------------------------------- Harry A. Levy, Director DATE March 28, 1995 s/E.E. Hubshman ------------------------ ----------------------------------- E.E. Hubshman, Director DATE March 28, 1995 s/Mark A.Levy ------------------------ ----------------------------------- Mark A. Levy, Director DATE March 28, 1995 s/Eugene H. Berns ------------------------ ----------------------------------- Eugene H. Berns, Director DATE March 28, 1995 s/Donald C. McClosky ------------------------ ----------------------------------- Donald C. McClosky, Director DATE March 28, 1995 s/Richard E. Deems ------------------------ ----------------------------------- Richard E. Deems, Director DATE March 28, 1995 s/Paul R. Lehrer ------------------------ ----------------------------------- Paul R. Lehrer, Director 42 EX-27 2 COVER LETTER TO SEC
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ORIOLE HOMES CORPORATION FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. YEAR DEC-31-1994 JAN-01-1994 DEC-31-1994 14,609,489 0 1,266,297 0 126,826,765 0 35,075,942 10,447,207 184,009,730 0 83,876,932 462,553 0 0 78,960,460 184,009,730 112,076,351 119,977,297 93,504,696 96,309,463 16,094,988 0 912,861 6,659,985 2,523,065 4,136,920 0 0 0 4,136,920 .89 .89 Company reports on a non-classified balance sheet.
-----END PRIVACY-ENHANCED MESSAGE-----