-----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, YMjJSzBKQB//qJGri8oUY6qZ3DwvHvE+XuSnoaZVvbFYDutTeE0TzJL5fX68X4CN I2zRLmRAOwfgOM/rO1nR5Q== 0000950147-95-000005.txt : 19950608 0000950147-95-000005.hdr.sgml : 19950608 ACCESSION NUMBER: 0000950147-95-000005 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19941118 ITEM INFORMATION: Acquisition or disposition of assets FILED AS OF DATE: 19950131 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONTINENTAL HOMES HOLDING CORP CENTRAL INDEX KEY: 0000796122 STANDARD INDUSTRIAL CLASSIFICATION: OPERATIVE BUILDERS [1531] IRS NUMBER: 860554624 STATE OF INCORPORATION: DE FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-10700 FILM NUMBER: 95504113 BUSINESS ADDRESS: STREET 1: 7001 N SCOTTSDALE RD STE 2050 CITY: SCOTTSDALE STATE: AZ ZIP: 85253 BUSINESS PHONE: 6024830006 MAIL ADDRESS: STREET 1: 7001 N SCOTTSDALE ROAD STREET 2: SUITE 2050 CITY: SCOTTSDALE STATE: AZ ZIP: 85253 8-K/A 1 FORM 8-K/A SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K/A-1 CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) November 18, 1994 CONTINENTAL HOMES HOLDING CORP. (Exact name of registrant as specified in its charter) Delaware 0-14830 86-0554624 (State or other jurisdiction of (Commission (I.R.S. Employer incorporation or organization) File Number) Identification No.) 7001 North Scottsdale Road, Suite 2050 Scottsdale, Arizona 85253 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (602) 483-0006 Not Applicable ------------------------------------------------------------ (Former name or former address, if changed since last report) Item 7. Financial Statements and Exhibits (a) 1. Financial Statements of Heftler Realty Co. Report of Independent Public Accountants Balance Sheets - May 31, 1994 and 1993. Statements of Income - years ended May 31, 1994 and 1993. Statements of Stockholders' Equity - years ended May 31, 1994 and 1993. Statements of Cash Flows - years ended May 31, 1994 and 1993. Notes to Financial Statements. Balance Sheet - August 31, 1994. (Unaudited) Statements of Income for the three months ended August 31, 1994 and 1993. (Unaudited) Statements of Cash Flows for the three months ended August 31, 1994 and 1993. (Unaudited) Notes to Unaudited Financial Statements. (b) 1. Pro Forma Consolidated Financial Statements of Continental Homes Holding Corp. and Subsidiaries. Pro Forma Consolidated Balance Sheet - August 31, 1994. (Unaudited) Pro Forma Consolidated Statements of Income - year ended May 31, 1994 and three months ended August 31, 1994. (Unaudited) Notes to Unaudited Pro Forma Consolidated Financial Statements HEFTLER REALTY CO. FINANCIAL STATEMENTS MAY 31, 1994 AND 1993 TOGETHER WITH REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Continental Homes Holding Corp.: We have audited the accompanying balance sheets of HEFTLER REALTY CO. (a Florida Subchapter S corporation) as of May 31, 1994 and 1993, and the related statements of income, stockholders' equity and cash flows for the years then ended. 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 financial statements referred to above present fairly, in all material respects, the financial position of Heftler Realty Co. as of May 31, 1994 and 1993, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. Arthur Andersen LLP Phoenix, Arizona, January 13, 1995.
HEFTLER REALTY CO. BALANCE SHEETS MAY 31, 1994 AND 1993 1994 1993 ------------ ------------ ASSETS CASH AND CASH EQUIVALENTS (Note 2) ............................................. $ 11,312,455 $ 2,803,183 ACCOUNTS RECEIVABLE ............................................................ 37,446 19,419 MORTGAGE NOTE RECEIVABLE (Note 2) .............................................. -- 5,000,000 HOMES, LOTS AND IMPROVEMENTS IN PRODUCTION (Notes 2 and 3) ..................................................... 17,498,279 20,399,648 PROPERTY AND EQUIPMENT, net (Notes 2 and 6) .................................... 54,479 356,944 PREPAID EXPENSES AND OTHER ASSETS .............................................. 451,920 1,519,968 ------------ ------------ Total assets ............................................................ $ 29,354,579 $ 30,099,162 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY ACCOUNTS PAYABLE AND OTHER LIABILITIES (Note 2) ................................ $ 3,734,562 $ 5,596,467 DIVIDEND PAYABLE ............................................................... 481,000 -- NOTES PAYABLE TO MAJORITY STOCKHOLDER, interest at prime (7.25% and 6.0% at May 31, 1994 and 1993, respectively), due on demand, unsecured ..................................................... 2,309,950 4,259,097 DEFERRED GAIN (Notes 2 and 6) .................................................. 155,775 1,737,500 ------------ ------------ Total liabilities .......................................................... 6,681,287 11,593,064 ------------ ------------ COMMITMENTS AND CONTINGENCIES (Notes 2, 3, 4, 5, 6 and 7) STOCKHOLDERS' EQUITY: Common stock, $1 par value, 10,000 shares authorized, 1,000 shares issued and outstanding .......................................... 1,000 1,000 Treasury stock, at cost (10 shares) ............................................ (94,005) (94,005) Capital in excess of par value ................................................. 1,109,283 1,109,283 Retained earnings .............................................................. 21,657,014 17,572,100 ------------ ------------ Total stockholders' equity ................................................ 22,673,292 18,588,378 Less: Unamortized deferred compensation expense ............................... -- (82,280) ------------ ------------ Net stockholders' equity .................................................. 22,673,292 18,506,098 ------------ ------------ Total liabilities and stockholders' equity ................................ $ 29,354,579 $ 30,099,162 ============ ============ The accompanying notes to financial statements are an integral part of these balance sheets.
HEFTLER REALTY CO. STATEMENTS OF INCOME FOR THE YEARS ENDED MAY 31, 1994 AND 1993 1994 1993 ----------- ----------- REVENUES (Note 2): Home sales ................................ $49,014,004 $30,386,109 Land sales ................................ 5,238,000 3,758,000 Interest income ........................... 350,780 195,392 Gain on sale of office building (Note 6) .. 385,786 -- Other, net ................................ 150,689 9,238 ----------- ----------- Total revenues ............. 55,139,259 34,348,739 ----------- ----------- COSTS AND EXPENSES: Cost of home sales ........................ 41,041,370 25,178,793 Cost of land sales ........................ 3,460,742 2,620,691 Inventory writedown ....................... 411,584 -- Selling, general and administrative ....... 2,110,649 2,097,594 ----------- ----------- Total costs and expenses ... 47,024,345 29,897,078 ----------- ----------- NET INCOME ................................... $ 8,114,914 $ 4,451,661 ============ =========== The accompanying notes to financial statements are an integral part of these statements.
HEFTLER REALTY CO. STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED MAY 31, 1994 AND 1993 Common Stock Treasury Stock Capital in -------------- --------------- Excess of Deferred Retained Shares Amount Shares Amount Par Value Compensation Earnings Total ------ ------ ------ ------ ----------- ------------ ----------- ----------- BALANCE, May 31, 1992 1,000 $1,000 - $ - $1,109,283 $(328,880) $14,395,439 $15,176,842 Amortization of deferred compensation - - - - - 246,600 - 246,600 Purchase of treasury stock - - (10) (94,005) - - - (94,005) Dividend declared - - - - - - (1,275,000) (1,275,000) Net income - - - - - - 4,451,661 4,451,661 ------ ------ ------ -------- ----------- ------------ ----------- ----------- BALANCE, May 31, 1993 1,000 1,000 (10) (94,005) 1,109,283 (82,280) 17,572,100 18,506,098 Amortization of deferred compensation - - - - - 82,280 - 82,280 Dividend declared - - - - - - (4,030,000) (4,030,000) Net income - - - - - - 8,114,914 8,114,914 ------ ------- ------ --------- ----------- ------------ ----------- ------------ BALANCE, May 31, 1994 1,000 $1,000 (10) $(94,005) $1,109,283 $ - $21,657,014 $ 22,673,292 ====== ======= ====== ========= =========== ============ =========== ============ The accompanying notes to financial statements are an integral part of these statements.
HEFTLER REALTY CO. STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED MAY 31, 1994 AND 1993 1994 1993 ------------- ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income ........................................................................ $ 8,114,914 $ 4,451,661 Adjustments to reconcile net income to net cash provided by operating activities- Depreciation and amortization ................................................. 10,664 38,873 Amortization of deferred compensation ......................................... 82,280 246,600 Gain on sale of land .......................................................... (1,737,500) -- Gain on sale of office building ............................................... (385,786) -- Inventory writedown ........................................................... 411,584 -- Changes in operating assets and liabilities- (Increase) decrease in accounts receivable .................................. (18,027) 38,300 Decrease (increase) in prepaid expenses and other assets .................... 1,068,048 (1,283,613) Decrease (increase) in homes, lots and improvements in production ............................................................. 2,489,785 (5,887,705) (Decrease) increase in accounts payable and other liabilities ............................................................... (1,861,905) 2,793,050 ------------ ------------ Net cash provided by operating activities .............................. 8,174,057 397,166 ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of fixed assets .......................................................... (3,156) (84,531) Proceeds from sale of land ........................................................ 1,035,000 -- Proceeds from sale of office building ............................................. 836,518 -- Proceeds from maturity of investments ............................................. -- 2,000,000 ------------ ------------ Net cash provided by investing activities .............................. 1,868,362 1,915,469 ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Net borrowings (payments) on notes payable to majority stockholder ..................................................................... 1,737,853 (1,169,087) Dividend paid ..................................................................... (3,271,000) (997,000) Purchase of treasury stock ........................................................ -- (94,005) ------------ ------------ Net cash used in financing activities .................................. (1,533,147) (2,260,092) ------------ ------------ NET INCREASE IN CASH AND CASH EQUIVALENTS ............................................ 8,509,272 52,543 CASH AND CASH EQUIVALENTS, beginning of year ......................................... 2,803,183 2,750,640 ------------ ------------ CASH AND CASH EQUIVALENTS, end of year ............................................... $ 11,312,455 $ 2,803,183 ============ ============ SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Interest paid during the year, net of amounts capitalized ....................... $ -- $ -- NONCASH FINANCING AND INVESTING TRANSACTIONS: Assignment of note receivable to majority stockholder (Note 2) ............................................................ 3,965,000 -- Dividend added to notes payable to majority stockholder ........................... 278,000 278,000 Mortgage note received on sale of land (Note 2) ................................... -- 5,000,000 The accompanying notes to financial statements are an integral part of these statements.
HEFTLER REALTY CO. NOTES TO FINANCIAL STATEMENTS MAY 31, 1994 AND 1993 (1) NATURE OF BUSINESS: Heftler Realty Co. (the Company), a Florida Subchapter S corporation, is a builder of single family homes in the markets of Dade and Broward counties in southeast Florida. (2) ACCOUNTING POLICIES: SALES RECOGNITION The Company recognizes income from home and land sales in accordance with Statement of Financial Accounting Standards No. 66. This ordinarily occurs at the close of escrow. Sales of undeveloped land or finished lots are recognized when title passes to the buyer, a specified down payment has been received and there is reasonable assurance that any remaining receivables will be collected. During May 1993, the Company sold land to a third party for $7,500,000 consisting of $2,500,000 in cash and a $5,000,000 note receivable. The gain recognized in fiscal 1993 totaled $1,262,500. The remaining gain of $1,737,500 was deferred at May 31, 1993, and was recognized as income during the year ended May 31, 1994, when the remaining balance on the note receivable of $3,965,000 was used to satisfy a portion of certain notes payable to the majority stockholder. This transaction has been reflected in the accompanying statements of income as follows: 1994 1993 ---------- ---------- Land sales ........................... $5,000,000 $2,500,000 Cost of land sales ................... 3,262,500 1,237,500 ---------- ---------- $1,737,500 $1,262,500 ========== ========== CASH AND CASH EQUIVALENTS The Company considers all financial instruments with initial maturities of 90 days or less to be cash equivalents. Included in cash and cash equivalents at May 31, 1994 and 1993, is $463,000 and $1.2 million, respectively, in restricted escrow deposits and $10.1 million and $1.5 million, respectively, of uninsured bank deposits secured by U.S. Treasury Notes. HOMES, LOTS AND IMPROVEMENTS IN PRODUCTION Homes, lots and improvements in production are stated at the lower of accumulated cost or net realizable value. Interest and certain project overhead costs (employee related costs) incurred during construction or development activities are capitalized and subsequently charged to cost of home sales as the units associated with such costs are sold. Interest and other costs capitalized totaled $2,059,000 and $1,737,000 during fiscal 1994 and 1993, respectively. Capitalized interest and other costs related to homes sold and charged to cost of home sales totaled $2,159,000 and $1,938,000 during fiscal 1994 and 1993, respectively. The components of homes, lots and improvements in production are as follows as of May 31: 1994 1993 ----------- ----------- Homes, lots and improvements in production, including capitalized interest and overhead of $329,000 and $429,000, respectively ......... $15,936,074 $18,425,858 Land held for development or sale ................ 1,562,205 1,973,790 ----------- ----------- $17,498,279 $20,399,648 =========== =========== Included in homes, lots and improvements in production at May 31, 1994, are $5,300,000 of land and development costs paid during 1994 which represent the Company's 37.9% interest in a Land Trust Agreement (the Agreement). There are two other unrelated homebuilders which are beneficiaries of the Trust. A bank serves as trustee to the Agreement. On August 1, 1994, the Company provided a $2,275,000 letter of credit related to the funding of future development costs associated with this development. On January 10, 1995, each homebuilder was deeded their respective land parcels from the Trust. PROPERTY AND EQUIPMENT Property and equipment is stated at cost and consists primarily of office furniture and equipment. Depreciation expense is provided using accelerated methods over the estimated useful lives of the assets (5 to 7 years). The costs of maintenance and repairs are charged to expense as incurred. ACCOUNTS PAYABLE AND OTHER LIABILITIES Accounts payable and other liabilities consisted of the following as of May 31: 1994 1993 ---------- ---------- Customer deposits .................... $1,920,912 $3,949,761 Accounts payable ..................... 1,248,740 945,925 Accrued expenses ..................... 564,910 700,781 ---------- ---------- $3,734,562 $5,596,467 ========== ========== INCOME TAXES As of August 1, 1987, the Company elected to be taxed under the provisions of Subchapter S of the Internal Revenue Code, wherein its income is taxable to its stockholders and not to the Company. Accordingly, no provision for income taxes has been recorded in the accompanying financial statements. FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and other liabilities approximate fair value because of the short maturity of these financial instruments. The value of the Company's notes payable to the majority stockholder approximates fair value as it bears interest at the prime rate. Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment, and therefore, cannot be determined with precision. Changes in assumptions could significantly affect estimates. (3) LINES OF CREDIT: As of May 31, 1994, the Company had available a $5 million line of credit with a bank. Amounts borrowed under the line bear interest at prime plus .25% to 1%, as defined, and are secured by land as defined in the agreement. The line matures in May 1995. No amounts were outstanding under the line as of May 31, 1994, and no amounts were borrowed during the year. During 1993 the Company did not have a line of credit. Subsequent to May 31, 1994, the Company entered into two line of credit agreements with two banks. The lines permit borrowings of up to $30 million for construction lending and letters of credit, limited to the Company's calculated borrowing base, as defined in the agreements. Amounts borrowed under the new lines of credit bear interest at prime plus .5% and are secured by homes, lots and improvements in production. The new lines mature in August 1996 and November 1996. The above lines require the Company to maintain compliance with certain restrictive covenants, including the maintenance of a minimum net worth and liquidity and certain ratios, as defined in the agreements. Subsequent to year-end, the Company borrowed approximately $18 million under these lines of credit, including approximately $10 million which was used to purchase land which was acquired from the acquiring party described in Note 7. (4) STOCK INCENTIVE PLAN: Effective September 9, 1988, the Company adopted a stock incentive plan (the Plan) which reserved 250 shares of common stock for issuance to certain employees in recognition of past and future service under a deferred compensation arrangement. Under the terms of the Plan, 233 shares of the Company's common stock were awarded to certain employees subject to restrictions as defined in the Plan. The shares vested 20% per year over five years. These shares are subject to a buy/sell agreement which could require the Company to repurchase the shares for Adjusted Book Value, as defined (see Note 7). (5) EMPLOYEE BENEFIT PLAN: Effective August 1, 1988, the Company adopted the Heftler Realty Co. Retirement Plan (the Retirement Plan). Employees become eligible upon reaching age 21 and performing one year of service (defined as 1,000 hours). Employees may contribute a percentage of their income, subject to certain limitations. The Company matches 50% of employee contributions up to 6% of the employee's salary and may make a yearly discretionary contribution. Employees become fully vested in employer matching contributions after six years of service or upon termination of the Retirement Plan. Employer matching contributions during the fiscal years ended May 31, 1994 and 1993, amounted to approximately $30,000 and $21,000, respectively. (6) COMMITMENTS AND CONTINGENCIES: In management's opinion, the Company is not involved in any legal proceedings which would have a material effect on the Company's financial position or results of operations. In November 1993, the Company sold its 13,300 square foot office facility for net cash proceeds of $836,518 and leased back 5,270 square feet under a three year operating lease. The sale resulted in a gain of $572,716. The portion of this gain representing the present value of the minimum leaseback payments of $186,930 has been deferred and will be recognized ratably over the remaining term of the lease as a reduction of rental expense. At May 31, 1994, the unamortized portion of the gain amounted to $155,775. Rental expense for the years ended May 31, 1994 and 1993, was not material. Future minimum rental payments due under the office leaseback are as follows as of May 31, 1994: 1995 .............. $ 69,000 1996 .............. 69,000 1997 .............. 35,000 -------- $173,000 ======== At May 31, 1994 and 1993, the Company had letters of credit outstanding totaling approximately $697,000 and $536,000, respectively. (7) SUBSEQUENT EVENT: On September 12, 1994, the stockholders of the Company signed a letter of intent to sell 100% of the issued and outstanding stock to an unrelated party. On November 18, 1994, the sale was consummated. Total consideration received by the stockholders consisted of $28.5 million in cash paid at closing. Effective with the close of the sale, all agreements between the stockholders and the Company, including the Plan discussed in Note 4, were terminated. HEFTLER REALTY CO. BALANCE SHEET (UNAUDITED) AUGUST 31, 1994 ASSETS Cash and cash equivalents .................................. $ 6,466,696 Accounts receivable ........................................ 12,187 Homes, lots and improvements in production ................. 32,601,452 Property and equipment ..................................... 45,200 Prepaid expenses and other assets .......................... 276,531 ------------ Total assets .......................................... $ 39,402,066 ============ LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable and other liabilities ..................... $ 4,650,945 Dividend payable ........................................... 1,188,404 Notes payable .............................................. 11,349,793 Deferred gain .............................................. 140,197 ------------ Total liabilities ..................................... 17,329,339 ------------ Commitments and contingencies Stockholders' equity: Common stock, $1 par value, 10,000 shares authorized, 1,000 shares issued and outstanding ................................. 1,000 Treasury stock, at cost (10 shares) ...................... (94,005) Capital in excess of par value ........................... 1,109,283 Retained earnings ........................................ 21,056,449 ------------ Total stockholders' equity ............................ 22,072,727 ------------ Total liabilities and stockholders' equity ............ $ 39,402,066 ============ The accompanying notes to unaudited financial statements are an integral part of this unaudited balance sheet. HEFTLER REALTY CO. STATEMENTS OF INCOME (UNAUDITED) Three months ended August 31, ------------------------------- 1994 1993 ------------ ------------ Revenues: Home sales ............................... $ 5,413,345 $ 13,329,889 Interest income .......................... 45,042 116,217 Other, net ............................... (509) (3,649) ------------ ------------ Total revenues ......................... 5,457,878 13,442,457 ------------ ------------ Costs and expenses: Cost of homes sales ...................... 4,481,181 11,151,955 Selling, general and administrative ...... 469,858 540,028 ------------ ------------ Total costs and expenses ............... 4,951,039 11,691,983 ------------ ------------ Net Income ................................ $ 506,839 $ 1,750,474 ============ ============ The accompanying notes to unaudited financial statements are an integral part of these unaudited statements. HEFTLER REALTY CO. STATEMENTS OF CASH FLOWS (UNAUDITED) Three months ended August 31, -------------------------------- 1994 1993 ------------ ------------ Cash flows from operating activities: Net income ................................. $ 506,839 $ 1,750,474 Adjustments to reconcile net income to net cash provided (used) by operating activities: Depreciation and amortization ............ (6,299) 11,849 Amortization of deferred compensation .... -- 61,650 Changes in operating assets and liabilities: Decrease (increase) in accounts receivable .................. 25,259 (80,881) Decrease (increase) in prepaids and other assets ............ 175,389 (17,802) Decrease (increase) in homes, lots and improvements in production ........................... (15,103,173) 1,990,462 Increase in accounts payable and other liabilities ................ 916,383 311,429 ------------ ------------ Net cash provided (used) by operating activities .......... (13,485,602) 4,027,181 ------------ ------------ Cash flows from investing activities: Purchase of fixed assets ................. -- (3,155) ------------ ------------ Net cash used by investing activities ............. -- (3,155) ------------ ------------ Cash flows from financing activities: Increase in notes payable to financial institutions ................. 8,005,500 -- Net borrowings on notes payable to majority stockholder ................... 1,034,343 64,736 Dividends paid ........................... (400,000) (500,000) ------------ ------------ Net cash provided (used) by financing activities .......... 8,639,843 (435,264) ------------ ------------ Net increase (decrease) in cash and cash equivalents ......................... (4,845,759) 3,588,762 Cash and cash equivalents, beginning of period ...................... 11,312,455 2,803,183 ------------ ------------ Cash and cash equivalents, end of period ............................ $ 6,466,696 $ 6,391,945 ------------ ------------ Supplemental disclosures of cash flow information: Interest paid during the period, net of amounts capitalized ............. -- -- Noncash financing and investing transactions: Dividends declared, not paid ............. $ 707,404 -- The accompanying notes to unaudited financial statements are an integral part of these unaudited statements. HEFTLER REALTY CO. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS August 31, 1994 Note 1. Basis of Presentation The financial statements include the accounts of Heftler Realty Co. ("Heftler"). In the opinion of Heftler, the accompanying unaudited financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly Heftler's financial position, results of operations and cash flows for the periods presented. These statements should be read in conjunction with the financial statements and the related disclosures contained in Heftler's audited financial statements as of and for the years ended May 31, 1994 and 1993 included in this Form 8-K/A-1. The results of operations for the three months ended August 31, 1994 are not necessarily indicative of the results to be expected for the full year. CONTINENTAL HOMES HOLDING CORP. AND SUBSIDIARIES PRO FORMA FINANCIAL STATEMENTS (UNAUDITED) The following unaudited Pro Forma Consolidated Balance Sheet gives effect to the acquisition of Heftler as if the transaction had occurred on August 31, 1994. The following unaudited Pro Forma Consolidated Statements of Income for the year ended May 31, 1994, and the quarter ended August 31, 1994 combine the historical results of operations of Continental Homes Holding Corp. and Subsidiaries ("Company"), Milburn Investments, Inc. and Subsidiaries ("Milburn") and Heftler and assumes that the acquisitions had been effective as of the beginning of each period. The Milburn acquisition was completed July 29, 1993. The Heftler acquisition will be accounted for as a purchase. The pro forma adjustments are based upon the estimated fair value of the assets and liabilities of Heftler as of August 31, 1994 and are based on preliminary estimates, evaluations and other data which are currently available and may change as a result of events subsequent to August 31, 1994. The Pro Forma Statements of Income are not necessarily indicative of the actual results which would have occurred had the acquisitions been consummated at the beginning of each such period or of future consolidated operations of the Company. The pro forma financial information has been prepared by the Company and all calculations have been made by the Company based upon assumptions deemed appropriate by the Company. Certain of these assumptions are set forth under the Notes to the Unaudited Pro Forma Consolidated Financial Statements. These statements should be read in conjunction with the historical consolidated financial statements and the notes thereto of the Company included in the Company's latest annual report on Form 10-K, the Company's latest quarterly report on Form 10-Q and the historical financial statements and the notes thereto of Heftler filed with this Form 8-K/A-1.
CONTINENTAL HOMES HOLDING CORP. AND SUBSIDIARIES PRO FORMA CONSOLIDATED BALANCE SHEET (UNAUDITED) August 31, 1994 (In thousands) Pro Forma Company Heftler Adjustments Pro Forma ---------- --------- ------------- --------- ASSETS Homebuilding: Cash ............................................... $ 14,672 $ 6,467 $ (21,032)(a) $ 107 Receivables ........................................ 8,165 12 -- 8,177 Homes, lots and improvements in production ....................................... 229,793 32,539 3,000 (b) 265,332 Property and equipment, net ........................ 1,916 45 -- 1,961 Prepaid expenses and other assets .................. 14,688 339 (62)(c) 14,965 Excess of cost over related net assets acquired .................................. 6,488 -- 4,719 (d) 11,207 --------- --------- --------- --------- 275,722 39,402 (13,375) 301,749 --------- --------- --------- --------- Mortgage banking and title operations: Mortgage loans held for sale ....................... 12,319 -- -- 12,319 Mortgage loans held for long-term investment, net .................................. 18,687 -- -- 18,687 Other assets ....................................... 1,445 -- -- 1,445 --------- --------- --------- --------- 32,451 -- -- 32,451 --------- --------- --------- --------- Total assets ....................................... $ 308,173 $ 39,402 $ (13,375) $ 334,200 ========= ========= ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Homebuilding: Accounts payable and other liabilities ...................................... $ 36,470 $ 5,979 $ (1,188)(e) $ 41,261 Notes payable, senior and convertible debt ................................. 144,058 11,350 8,656 (f) 164,064 Deferred income taxes .............................. 3,100 -- 1,230 (b) 4,330 --------- --------- --------- --------- 183,628 17,329 8,698 209,655 --------- --------- --------- --------- Mortgage banking and title operations: Notes payable ...................................... 1,350 -- -- 1,350 Bonds payable ...................................... 19,044 -- -- 19,044 Other .............................................. 1,427 -- -- 1,427 --------- --------- --------- --------- 21,821 -- -- 21,821 --------- --------- --------- --------- Total liabilities .................................. 205,449 17,329 8,698 231,476 --------- --------- --------- --------- Commitments and contingencies Stockholders' equity Preferred stock, $.01 par value: Authorized - 2,000,000 shares Issued - none .................................... -- -- -- -- Common stock, $.01 par value: Authorized - 20,000,000 shares Issued - 7,080,900 shares ........................ 71 1 (1)(g) 71 Treasury stock, at cost - 118,130 shares............ (83) (94) 94 (g) (83) Capital in excess of par value ..................... 59,610 1,109 (1,109)(g) 59,610 Retained earnings .................................. 43,126 21,057 (21,057)(g) 43,126 --------- --------- --------- --------- Total stockholders' equity ......................... 102,724 22,073 (22,073) 102,724 --------- --------- --------- --------- Total liabilities and stockholders' equity ............................. $ 308,173 $ 39,402 $ (13,375) $ 334,200 ========= ========= ========= ========= The accompanying notes to the unaudited pro forma consolidated financial statements are an integral part of this unaudited consolidated balance sheet.
CONTINENTAL HOMES HOLDING CORP. AND SUBSIDIARIES PRO FORMA CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) Year ended May 31, 1994 (In thousands, except per share data) Milburn Heftler Pro Forma Pro Forma Company Milburn(l) Heftler Adjustments Adjustments Pro Forma --------- -------- --------- ------------ ------------- ----------- REVENUES Home sales ................... $ 340,031 $ 17,661 $ 49,014 -- -- $ 406,706 Land sales ................... 1,095 -- 5,238 -- (5,000)(k) 1,333 Mortgage banking ............. 6,967 851 -- -- -- 7,818 Other income, net ............ 527 731 537 -- (629)(k) 1,166 --------- --------- --------- --------- --------- --------- Total revenues ............. 348,620 19,243 54,789 -- (5,629) 417,023 --------- --------- --------- --------- --------- --------- COSTS AND EXPENSES Homebuilding: Cost of home sales ........... 277,878 12,974 41,041 917(b) 2,548(b) 335,358 Cost of land sales ........... 1,499 -- 3,461 -- (3,263)(k) 1,697 Selling, general and administrative expenses .... 37,065 3,678 2,111 175(h) 880(h) 43,909 Interest, net ................ 4,456 209 (351) 365(i) 1,420(i) 6,099 Inventory writedown .......... -- -- 412 -- -- 412 Mortgage banking and title operations: Selling, general and administrative expenses .... 4,818 404 -- -- -- 5,222 Interest, net ................ (233) 4 -- -- -- (229) --------- --------- --------- --------- --------- --------- Total costs and expenses ................. 325,483 17,269 46,674 1,457 1,585 392,468 --------- --------- --------- --------- --------- --------- Income before income taxes ..... 23,137 1,974 8,115 (1,457) (7,214) 24,555 Income taxes ................... 10,054 730 -- (654)(j) 702(j) 10,832 --------- --------- --------- --------- --------- --------- Net income ..................... $ 13,083 $ 1,244 $ 8,115 $ (803) $ (7,916) $ 13,723 ========= ========= ========= ========= ========= ========= Earnings per common share $ 2.11 $ 2.21 Earnings per common share assuming full dilution $ 1.88 $ 1.97 The accompanying notes to the unaudited pro forma consolidated financial statements are an integral part of this unaudited consolidated statement.
CONTINENTAL HOMES HOLDING CORP. AND SUBSIDIARIES PRO FORMA CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) Three months ended August 31, 1994 (In thousands, except per share data) Pro Forma Company Heftler Adjustments Pro Forma --------- ---------- ----------- ---------- REVENUES Home sales ................................ $ 105,100 $ 5,413 -- $ 110,513 Mortgage banking .......................... 1,866 -- -- 1,866 Other income, net ......................... 77 -- -- 77 ---------- ---------- ---------- ---------- Total revenues .......................... 107,043 5,413 -- 112,456 ---------- ---------- ---------- ---------- COSTS AND EXPENSES Homebuilding: Cost of home sales ........................ 85,617 4,481 615(b) 90,713 Cost of land sales ........................ 75 -- -- 75 Selling, general and administrative expenses ................. 11,118 470 135(h) 11,723 Interest, net ............................. 938 (45) 301(i) 1,194 Mortgage banking and title operations: Selling, general and administrative expenses ................. 1,439 -- -- 1,439 Interest, net ............................. (173) -- -- (173) ---------- ---------- ---------- ---------- Total costs and expenses ................ 99,014 4,906 1,051 104,971 ---------- ---------- ---------- ---------- Income before income taxes .................. 8,029 507 (1,051) 7,485 Income taxes ................................ 3,513 -- (175)(j) 3,338 ---------- ---------- ---------- ---------- Net income .................................. $ 4,516 $ 507 $ (876) $ 4,147 ========== ========== ========== ========== Earnings per common share $ .65 $ .60 Earnings per common share assuming full dilution $ .58 $ .53 The accompanying notes to the unaudited pro forma consolidated financial statements are an integral part of this unaudited consolidated statement.
CONTINENTAL HOMES HOLDING CORP. AND SUBSIDIARIES NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS Note 1. Reclassifications Certain reclassifications have been made to Heftler's historical financial statements to conform to the Company's classifications. Note 2. Pro Forma Adjustments (a) To reflect consideration paid for the purchase of Heftler and related net incurrence of debt. (b) To record the profit of acquired inventories and the related tax effect. (c) Adjusted to eliminate assets not purchased. (d) To reflect the excess purchase price over the underlying value of net assets acquired. (e) To reflect payment of dividend. (f) To record net adjustments to indebtedness. (g) To adjust Heftler equity. (h) To amortize the excess purchase price over the underlying value of net assets acquired. (i) To record additional interest on acquisition indebtedness. (j) To adjust income taxes for the pro forma adjustments. (k) To eliminate non-recurring operations. (l) Represents the historical results of Milburn from June 1, 1993 to July 29, 1993, the date the Company acquired Milburn. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. CONTINENTAL HOMES HOLDING CORP. Date: January 25, 1995 /s/ Kenda B. Gonzales -------------------- ----------------------------- Kenda B. Gonzales Secretary and Treasurer (Chief Financial Officer) -----END PRIVACY-ENHANCED MESSAGE-----