ITEM 3 LEGAL PROCEEDINGS
The Company is a party to various lawsuits, all of which are of a routine nature and are incidental to the Company's present business activities. These proceedings are not material, nor would the adverse resolution thereof materially affect the business or properties of the Company.
ITEM 4
ITEM 4 SUBMISSION OF MATTERS TO A VOTE BY SECURITY HOLDER
No matters were submitted to security holders during the 4th quarter. The annual Meeting of Shareholders of the Registrant has been scheduled for May 22, 1997. The Company will file its definitive proxy material pursuant to Regulation 14, prior to April 30, 1997.
PART II
ITEM 5
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 1996 Annual Report to Shareholders.
ITEM 6
ITEM 6 SELECTED FINANCIAL DATA
Information required by this item is incorporated by reference to the Registrant's 1996 Annual Report to Shareholders.
ITEM 7
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:
Backlog. The following table sets forth the Company's backlog at December 31, 1994, 1995 and 1996.
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 mortgage contingency, the buyer 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, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
The Company's revenues from home sales increased $27.3 million (or 37.1%) during the calendar year 1996 as compared to the same period in 1995. The Company delivered 597 homes in 1996 compared to 433 in 1995, with a decrease of 0.5% in the average selling price of homes delivered (from $169,500 to $168,600). The number of new contracts signed (670) and the aggregate dollar value of those new contracts ($110.1 million) increased in 1996 from 483 and $79.4 million, repectively, in 1995. The average selling price of new contracts entered into in 1996 was $164,361, which was subtantially the same as 1995.
Other operating revenues increased to $3.2 million during 1996 from $3.1 million in 1995 due to a lower vacancy rate on our rental apartments. Interest, rentals and other income decreased to $3.8 million in 1996 from $4.0 million in 1995 due to a lower return on joint venture investments.
Cost of home sales increased to $87.6 million in 1996 from $62.2 million in 1995 primarily as a result of an increase in the number of homes delivered. As a percentage of home sales, cost of home sales increased to 87.1% in 1996 from 85.7% in 1995 due to the absorption of higher construction costs and the impact of higher previously capitalized interest.
It should be noted that the Company's gross margins during 1996 were adversely impacted by the decision made last year to reduce prices on certain models in order to spur sales at some of our communities. This action was undertaken following an evaluation of the marketplace in 1995 resulting in a determination that there was growing buyer resistance to the higher home prices the Company was seeking to obtain. The Company's higher prices resulted from increases in costs of building homes due to increases in material and labor costs, new building code provisions and accumulated capitalized interest on units in older subdivisions. Throughout 1996, the Company focused its efforts on promoting its reduced pricing in the marketplace and generating sales and cash flow. At the same time, the Company has sought to introduce new models that can be priced competitively and sold at a faster pace. The Company believes that through these efforts it will be able to increase cash flow, reduce interest expense and increase net income. There can be no assurance that the Company will be successful in these efforts.
Selling, general and administrative expenses ("SG&A") increased to $17.3 million in 1996 from $15.5 million in 1995, but as a percentage of total revenues, these expenses decreased to 15.5% in 1996 from 18.9% in 1995. The Company's interest cost incurred in 1996 was $11.0 million as compared to $10.7 million the same period in 1995.
Net income increased to $0.08 million in 1996 from a net loss of $11,761,564 in 1995. Included in these net results are non cash pre-tax writedowns of $1.7 million in 1996 and $13.9 million in 1995, pertaining to the carrying cost of certain land inventory.
Included in net results for 1996 is a pre-tax gain of $2,355,119 on the sale of non-residential parcels of land, the sale of a Recreation Lease and the sale of a group of residential lots.
RESULTS OF OPERATIONS YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
The Company's revenues from home sales decreased $36.7 million (or 33.3%) during the calendar year 1995 as compared to the same period in 1994. The Company delivered 433 homes in 1995 compared to 775 in 1994, with an increase of 19.3% in the average selling price of homes delivered (from $142,100 to $169,500). 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 decrease in home sales is believed to be the result of resistance to higher home prices that were precipitated by increases in material costs and by new building codes requiring greater hurricane protection. Also, resales were weak thoughout the country which negatively affected the ability of the Company's prime customers, active adults, to sell their present homes and use those funds to purchase retirement homes in Florida.
The number of new contracts signed (483) and the aggregate dollar value of these new contracts ($79.4 million) decreased in 1995 from 661 and $100.1 million in 1994.
The Company's backlog has increased from $29.3 million at December 31, 1994 to $35.3 million as of December 31, 1995. A decrease in interest rates in the second half of 1995 contributed to a larger number of new sales contracts received by the Company and this trend continued in early 1996 and is expected to remain through 1996.
Other operating revenues decreased to $3.1 million during 1995 from $3.4 million in 1994 primarily as a result of higher vacancies in the rental units project. Interest, rentals and other income decreased to $4.0 million from $4.3 million in 1994.
Cost of home sales decreased to $62.2 million in 1995 from $91.8 million in 1994 as a result of a decrease in the dollar volume of homes delivered. As a percentage of home sales, cost of home sales increased to 84.8% from 83.4% 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") decreased to $15.5 million in 1995 from $16.3 million in 1994, but as a percentage of total revenues, these expenses increased to 18.9% from 13.6% in the same period of 1994. Interest costs incurred in 1995 increased to $10.7 million from $10.4 million in 1994.
The Company incurred a net loss for the year ended December 31, 1995 of $11.8 million or $2.54 per share, after a non-cash pre-tax write down of $13.9 million as of December 31, 1995, pertaining to the carrying cost of certain land inventory. In 1994 the Company had a net income of $4.1 million or $.89 per share. The write-down affects the carrying cost of land inventory for approximately 360 unsold housing units located in three developments originally purchased in 1989 and 1991. Land inventories are carried at cost, plus accumulated development and construction costs, including capitalized interest and real estate taxes. As these developments are among the Company's oldest and slower selling projects, they have been materially affected by the accumulated cost allocations. As a result, the accumulated cost of this inventory was in excess of its net realizable value. Results for 1995 also include a reduction of $686,744 in the Company's reserve for construction defects, which reflects unused warranty reserve related to finished projects.
LIQUIDITY AND CAPITAL RESOURCES
The Company's financing needs depend primarily upon sales volume, asset turnover, land acquisition, inventory balances and disposition of non-residential parcels of land. The Company has financed its working capital needs through funds generated by operations, sale of land, borrowings and the periodic issuance of common stock.
On January 13, 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, 1996, dividend payments were restricted and will continue to be restricted until the Company posts cumulative net income in excess of $20.5 million.
The Company had, as of December 31, 1996, a $20.0 million revolving line of credit of which $17.3 million was available at a rate of prime plus 1.5%, which line expires on July 1, 1997. This line is secured by assets aggregating not less than 2 times
the amount of the line and in addition to typical restrictions and covenants the Company must:
a) maintain a consolidated tangible net worth of not less than $60.0 million.
b) The issuance of additional debt is restricted by covenants in the agreement.
The Company anticipates that it would be able to either renew its existing line of credit or obtain a new line of credit on terms satisfactory to the Company prior to the expiration of the existing line. This line can be used to finance ongoing development, construction of residential real estate and other short-term capital needs.
The Company had outstanding an aggregate balance of approximately $12.6 million of a purchase money mortgage at an interest rate of 7.15% which is collateralized by land and buildings. Of this mortgage, $.2 million is due in 1997 and $12.4 million is payable by 2003.
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 and capitalized interest costs. There is no assurance that inflation will not have a material adverse impact on the Company's future results of operations.
ACCOUNTING METHODS
The Company is required to apply the provisions of Statement of Financial Accounting Standards No. 121 ("SFAS 121"), "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." SFAS 121 establishes guidance for when to recognize and how to measure impairment losses of long-lived assets and certain identifiable intangible assets. The Company was required to implement this standard in its fiscal year 1996. The implementation of SFAS 121 did not have a material effect on the Company's financial position or results of operations.
The Company is required to apply the provisions of Statement of Financial Accounting Standards No. 123 ("SFAS No.123"), "Accounting for Stock-Based Compensation." The Company is required to present additional disclosures regarding the fair value of stock options. The Company was required to implement this standard in fiscal year 1996. The implementation of SFAS No. 123 did not have a material effect on the Company's financial position or results of operations.
ORIOLE HOMES CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
ASSETS
(continued)
ORIOLE HOMES CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - CONTINUED
DECEMBER 31,
LIABILITIES AND SHAREHOLDERS' EQUITY
The accompanying notes are an integral part of these statements.
ORIOLE HOMES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31,
The accompanying notes are an integral part of these statements.
ORIOLE HOMES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
The accompanying notes are an integral part of these statements.
ORIOLE HOMES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31,
The accompanying notes are an integral part of these statements.
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 engaged principally in the design, construction, marketing and sale of single and multi-family residential homes (including condominiums) primarily in southeast (Palm Beach, Broward and Martin Counties) Florida. The Company also has developments in Naples and Ocala, Florida.
REVENUE RECOGNITION
The Company records revenues and profits from sales of real estate in accordance with generally accepted accounting principles governing profit recognition for real estate transactions.
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 $13,516,000 in 1996 and $13,275,000 in 1995. The accumulated costs of land, houses and condominiums are not in excess of estimated net realizable value. Estimated net realizable value is based upon sales achieved and backlog in the normal course of business less estimated cost to complete and dispose of the property. The Company's management, on an on-going basis, reviews individual projects in inventory for impairment.
INTEREST CAPITALIZATION
The Company capitalizes 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 1996, 1995, and 1994 respectively, the Company capitalized interest in the amount of $10,336,279, $9,898,999 and $9,736,452 and expensed as a component of cost of goods sold $6,727,484, $6,270,173 and $9,313,121.
(continued)
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 5 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.
NET INCOME PER SHARE
Net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares outstanding during each year: 4,625,524 shares in 1996, 1995 and 1994.
ADVERTISING
The Company expenses advertising costs as incurred, except for sales brochures and site plans which are accounted for in "Other Assets." Sales brochures and site plans are expensed as the materials are used or distributed to customers. Advertising expense for the years ended December 31, 1996, 1995 and 1994 was $2,112,364, $1,411,412 and $1,713,158, respectively.
(continued)
Oriole Homes Corp. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION - Continued
ESTIMATES
In preparing financial statements in conformity with generally accepted accounting principles, management makes estimates and assumptions that affect the reported amounts and disclosures of assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
INCOME TAXES
The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
FINANCIAL STATEMENT RECLASSIFICATION
Certain amounts reflected in the consolidated financial statements for the year ended December 31, 1995 have been reclassified to conform to the presentation for the year ended December 31, 1996.
NOTE B - MORTGAGE NOTES
First and second mortgage notes receivable bear interest at rates ranging from 8% to 10%. The Company's receivables are primarily mortgages which are collateralized by real estate. Minimum payments required on the first and second mortgage notes subsequent to December 31, 1996 are: 1997 - $3,844; 1998 - $4,167; 1999 - $266,421 and 2000 - $2,773.
NOTE C - SPECIAL CHARGES
The Company recorded, in the fourth quarter 1996, a non-recurring charge of $1,723,130 ($1,137,266, net of tax benefit, or $.25 per common share) related to the write-down in the book value of a parcel of land located in southern Broward County that is under contract for sale and scheduled to close in 1997.
(continued)
Oriole Homes Corp. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE C - SPECIAL CHARGES - Continued
During the fourth quarter 1995, the Company recorded a non-recurring charge of $13,917,025 ($11,079,381, net of tax benefit, or $2.40 per common share) related to the write-down of certain land inventory to its estimated net realizable value. The write-down pertains to land inventory for approximately 360 unsold housing units located in three developments. These three developments were originally purchased in 1989 and 1991.
NOTE D - LIFE INSURANCE
The Company purchased life insurance on the lives of two of its officers and their spouses who own significant shares of common stock of the Company. An irrevocably designated trustee of the officers is the beneficiary. Upon the death of the officers or termination of the policies, the Company shall receive an amount equal to the aggregated premiums paid less any policy loans and unpaid interest or cash withdrawals received by the Company. The accumulated premiums paid by the Company on the above policies during the years ended December 31, 1996 and 1995 were $668,085 and $641,352, respectively, and are classified as other assets.
In connection with the policies, the Company has an option with the officers to acquire all or any part of the Class A or Class B common stock of the Company owned by such individuals at the market price of such securities at the time of their death.
NOTE E - INVESTMENT IN JOINT VENTURES
The Company has three and two joint venture agreements in 1996 and 1995, respectively. The joint ventures construct and sell homes. The Company is guaranteed a preferred return ranging from 10% to 15% on these investments. All risks of loss are borne by the joint venturee. The joint ventures are accounted for using the cost method. At December 31, 1996 and 1995, there were no advances from the Company to the joint ventures.
NOTE F - LINE OF CREDIT
A revolving loan agreement (line of credit) with a bank, collateralized by land, provides up to $20,000,000 of borrowings, at an interest rate of prime plus 1.5%, of which $17,300,000 is available at December 31, 1996. The agreement expires July 1, 1997.
(continued)
Oriole Homes Corp. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE F - LINE OF CREDIT - Continued
The line of credit can be used to finance ongoing development and construction of residential real estate and short-term capital needs and only requires monthly interest payments. The 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 $60,000,000.
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:
NOTE G - MORTGAGE NOTES PAYABLE
Mortgage notes payable at December 31, 1996 and 1995, are summarized as follows:
Oriole Homes Corp. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE G - MORTGAGE NOTES PAYABLE - Continued
Aggregate maturities of the mortgage note payable as of December 31, 1996, is as follows:
1997 $ 185,577 1998 216,768 1999 232,785 2000 249,986 2001 268,458 Thereafter 11,487,927 ----------- $12,641,501 ===========
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:
(continued)
Oriole Homes Corp. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE H - INCOME TAXES - Continued
At December 31, 1995, the Company recorded a valuation allowance for the deferred tax assets relating to the inventory adjustment as the Company's ability to realize these benefits is not "more likely than not". During 1996, the Company decreased the valuation based on management's reevaluation of the likelihood of realization.
The Company files consolidated income tax returns. The components of the provision for (benefit from) income taxes are as follows:
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:
(continued)
Oriole Homes Corp. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE H - INCOME TAXES - Continued
The Company has a Federal net operating loss carryback and a State net operating loss carryforward of $7,055,630 and $11,581,273, respectively. The Federal net operating loss will be carried back and fully absorbed in 1993 and 1994. The State net operating loss carryforward expires in the years 2010 and 2011.
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, 1996 and 1995, cash in the amounts of approximately $216,000 and $289,000, 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 $900,000 in 1996 and $1,100,000 in 1995, which could be released to the Company, are guaranteed by performance bonds aggregating $2,500,000 for 1996 and $5,000,000 for 1995.
NOTE J - ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities include the following:
Oriole Homes Corp. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE K - SENIOR NOTES
Senior Notes are comprised as follows:
On January 13, 1993, the Company issued 12 1/2% senior notes ("Notes"), due January 15, 2003. The Notes have a face value of $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, 1996, dividend payments are restricted and will be restricted until the Company posts cumulative net income in excess of $20,500,000.
NOTE L - STOCK OPTIONS
The Company has two stock option plans accounted for under APB Opinion 25 and Related Interpretations. The plans allow the Company to grant options to employees for up to 400,000 shares of Class B common stock and nonemployee directors for up to 20,000 shares of Class B common stock. The options have terms of five years for employees and ten years for nonemployee directors when issued. The stock options for employees vest at the end of the second year, and stock options for nonemployee directors vest 50% each after the first and second year. The exercise price of each option equals the market price of the Company's stock on the date of grant.
(continued)
Oriole Homes Corp. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE L - STOCK OPTIONS - Continued
Accordingly, no compensation cost has been recognized for the plan. Had compensation cost for the plan been determined based on the fair value of the options at the grant dates consistent with the method of Statement of Financial Accounting Standards 123, Accounting for Stock-Based Compensation (SFAS 123), the Company's net income and earnings per share would have been reduced to the proforma amounts indicated below. Disclosure of such amounts is not required for the fiscal year ended December 31, 1994 and accordingly is not presented below:
The fair value of each option grant is estimated on the date of grant using the binomial options-pricing model with the following weighted-average assumptions used for grants in 1996 and 1995, respectively: expected volatility of 37.18 and 36.33 percent; risk-free interest rate of 6.43 and 7.45 percent; and expected life of 5.3 and 5.4 years.
A summary of the status of the Company's fixed stock option plan as of December 31, 1996 and 1995, and changes during the years ending on those dates is presented below:
Oriole Homes Corp. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE L - STOCK OPTIONS - Continued
The following information applies to options outstanding at December 31, 1996:
Number outstanding 88,700 Range of exercise prices $6 to $9 Weighted-average exercise price $7.34 Weighted-average remaining contractual life 4.5 years
NOTE M - COMMON STOCK
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.
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, 1996 and 1995:
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, 1996:
1997 $ 2,204,000 1998 562,000 1999 562,000 2000 562,000 2001 562,000 Thereafter 46,404,000 -----------------
$ 50,856,000 =================
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 approximate future minimum rental payments as of December 31, 1996 are as follows: 1997 - $135,000.
Total rent expense, including common area maintenance expenses, for each of the years ended December 31, 1996, 1995 and 1994 amounted to approximately $300,000, $320,000 and $320,000, respectively.
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 $68,238 in 1996, $72,981 in 1995 and $63,685 in 1994.
Oriole Homes Corp. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE P - FINANCIAL INSTRUMENTS
The estimated fair value of the Company's financial instruments does not purport to represent the aggregate net fair value of the Company.
The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:
CASH AND CASH EQUIVALENTS
The carrying amount approximates fair value because of the short maturity of those instruments.
MORTGAGE NOTES RECEIVABLES
The carrying amount approximates fair value due to interest rates currently offered for loans with similar terms to borrowers of similar credit quality not being significantly different.
LINE OF CREDIT
The carrying amount of the line of credit approximates fair value due to the length of the maturities and interest rates being tied to market indices.
MORTGAGE NOTES PAYABLE
The carrying amounts of mortgage notes payable approximate fair value due to the interest rates not being significantly different from the current market rates available to the Company.
SENIOR NOTES
Quoted market prices offered to the Company are used to estimate fair value of the Company's senior notes.
All of the Company's financial instruments are held for purposes other than trading. The carrying amounts in the table below are the amounts at which the financial instruments are reported in the financial statements.
(continued)
Oriole Homes Corp. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE P - FINANCIAL INSTRUMENTS - Continued
The estimated fair values of the Corporation's financial instruments, at December 31, are as follows:
NOTE Q - 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.
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, 1996 and 1995, and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 1996. 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, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles.
/s/ Grant Thornton LLP
Miami, Florida March 7, 1997
ITEM 9
ITEM 9 DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
This item is not applicable.
PART III
ITEM 10
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
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
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
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
ITEM 14 EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
(a) 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 1996 Annual Report to Shareholders.
Consolidated balance sheets as of December 31, 1996 and 1995.
Consolidated statements of operations for the three years ended December 31, 1996.
Consolidated statements of cash flows for the three years ended December 31, 1996.
Consolidated statements of shareholders' equity for the three years ended December 31, 1996.
Notes to consolidated financial statements.
Report of independent certified public accountants.
Selected Quarterly Financial Data for the years ended December 31, 1996 and 1995 included in the Company's 1996 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.
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
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 3-24-97 s/ R.D. Levy ----------------------- -------------------------------- R.D. Levy, Chairman of the Board Chief Executive Officer, Director
DATE 3-24-97 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