Exhibit 99.1
TECHNICAL OLYMPIC USA REPORTS RESULTS
FOR ITS FOURTH QUARTER AND YEAR ENDED DECEMBER 31, 2002
Company Reports Earnings From Continuing
Operations Before Merger And Unusual Charges Of $82.9 Million
For Year Ended December 31, 2002
FOR IMMEDIATE RELEASE: February 12, 2003
Hollywood, Florida — Technical Olympic USA, Inc. (TOUSA) (Nasdaq: TOUS) today reported results for its fourth quarter and year ended December 31, 2002. For the quarter ended December 31, 2002, earnings from continuing operations before merger and unusual charges were $21.1 million, or $0.76 per share,as compared to $22.2 million, or $0.80 per share,for the corresponding quarter in 2001. For the year ended December 31, 2002, earnings from continuing operations before merger and unusual charges were $82.9 million, or $2.98 per share,as compared to $89.4 million, or $3.21 per share,for the year ended December 31, 2001.
On June 25, 2002, Engle Holdings Corp. (Engle) was merged into Newmark Homes Corp. (Nasdaq: NHCH) and the combined company was renamed Technical Olympic USA, Inc. This merger was accounted for in a manner similar to a pooling of interests due to both entities being under the common control of Technical Olympic, Inc. (Technical Olympic). As a result of the merger, Technical Olympic increased its ownership interest in TOUSA to 91.75%. In accordance with generally accepted accounting principles, historical comparisons represent pooled results of the two former companies.
Comparison of Quarter Ended December 31, 2002 to Quarter Ended December 31, 2001
For the quarter ended December 31, 2002, income from continuing operations decreased to $20.2 million, or $0.73 per share,as compared to $21.7 million, or $0.78 per share, for the corresponding quarter in 2001. The decrease in income from continuing operations primarily relates to a decline in pretax homebuilding income of $5.3 million which was partially offset by an increase in financial services pretax income of $1.4 million.
Homebuilding revenues increased to $380.4 million during the quarter ended December 31, 2002 from $363.0 million during the quarter ended December 31, 2001. The increase of 5% was due to an increase in revenues from home sales, to $364.9 million in the quarter ended December 31, 2002 from $358.9 million during the quarter ended December 31, 2001 as well as an increase in revenue from land/lot sales, to $15.4 million during the quarter ended December 31, 2002, from $4.1 million during the quarter ended December 31, 2001. Home closings increased to 1,372 during the quarter ended December 31, 2002 from 1,357 during the quarter ended December 31, 2001. The average selling price on homes closed increased slightly to $266,000 during the quarter ended December 31, 2002 from $264,500 during the quarter ended December 31, 2001.
Homebuilding gross profit increased to $73.0 million during the quarter ended December 31, 2002 from $72.1 million during the quarter ended December 31, 2001. Gross margin on home sales decreased to 19.5% during the quarter ended December 31, 2002 from 20.0% during the quarter ended December 31, 2001. The decline in gross margin is primarily attributable to increased incentives. Additionally, due to the allocation of purchase price to the units which were in backlog at the time of the acquisition of both DS Ware Homes and Masonry Homes, the company recognized minimal gross profit on the approximate $17.1 million in revenue generated from home closings from these companies.
For the quarter ended December 31, 2002, selling, general and administrative (SG&A) expenses increased to $45.7 million from $39.0 million. As a percentage of revenues from home sales, SG&A increased to 12.5% from 10.9%. This increase during the quarter ended December 31, 2002, relates to increases in compensation, technology, insurance and advertising expenses as compared to the corresponding period in 2001.
Comparison of Year Ended December 31, 2002 to Year Ended December 31, 2001
For the year ended December 31, 2002, income from continuing operations decreased to $67.0 million,or $2.40 per share, from $87.8 million, or $3.15 per share, for the year ended December 31, 2001. The decrease in income from continuing operations is attributable to a decrease in Homebuilding pretax income to $87.6 million during the year ended December 31, 2002 from $125.0 million during the year ended December 31, 2001. The decrease in Homebuilding pretax income was partially offset by an increase in Financial Services pretax income to $19.4 million during the year ended December 31, 2002 from $15.0 million during the year ended December 31, 2001.
Homebuilding revenues decreased to $1.38 billion during the year ended December 31, 2002 from $1.39 billion during the year ended December 31, 2001. The decrease of 1% was due to a decline in revenues from home sales, to $1.35 billion in the year ended
December 31, 2002 from $1.37 billion during the year ended December 31, 2001, which was offset by an increase in revenues from land/lot sales, to $27.4 million from $18.4 million during the same periods. Home closings decreased to 5,085 during the year ended December 31, 2002 from 5,304 during the year ended December 31, 2001.
The decrease in home closings and revenue from home sales was primarily attributable to a decline in the number of communities in which the company was actively marketing during the year ended December 31, 2002 as compared to the year ended December 31, 2001 and a weakening in housing demand in the Texas and Western regions. These factors were partially offset by a strong housing demand in Florida.
At the beginning of 2002, the company was actively marketing in 146 communities. As a result of a prior strategic decision to consolidate our home sales activities and reduce our lot acquisitions during 2001 and throughout the first half of 2002, the number of active communities declined to a low of 132 in June 2002. In the second half of 2002, the company began to increase the number of communities in which it was marketing, both through organic growth and through acquisition. Consequently, at December 31, 2002 TOUSA was actively marketing in 159 communities. However, due to a lag time between the date marketing homes in a community begins and the date that closing homes begins, home closings from these new communities will generally not begin to contribute to our home sales revenue until 2003.
During 2002, our Texas region generated revenues from home sales of $397.1 million on 1,539 home closings as compared to revenues of $433.4 million on home closings of 1,623 during the year ended December 31, 2001. The weakening in demand in this market also caused an increase in the level of incentives offered which is reflected in the decline in the average sales price per home closed to $258,000 during the year ended December 31, 2002 from $267,000 during the year ended December 31, 2001. Additionally, our West region experienced a decline in revenues from home sales to $258.1 million on 958 home closings during the year ended December 31, 2002 from $289.8 million on 1,057 home closings during the year ended December 31, 2001. The decline in revenues in the West region is primarily due to a decline in the average number of active selling communities during the first part of 2002, as compared to the prior year and a continued weakness in demand in our Colorado markets. This softness in the market caused us to increase incentives offered to homebuyers resulting in a slight decrease in the average sales price per home closed, to $269,000 in the year ended December 31, 2002 from $274,000 in the year ended December 31, 2001.
These declines in revenue from the Texas and West regions were partially offset by an increase in revenues generated in our Florida region to $496.7 million on 2,024 home closings during the year ended December 31, 2002 from $437.8 million on 1,931 home closings during the year ended December 31, 2001. The revenue increase in this region is primarily due to the increase in our average sales price per home closed to $245,000 during the year ended December 31, 2002 from $227,000 during the year ended December 31, 2001. Additionally, we generated revenue from home sales of $13.7 million as a result of our acquisition of DS Ware during October 2002.
The average sales price per home closed increased 2% to $265,400 during the year ended December 31, 2002 as compared to $259,200 during the year ended December 31, 2001. The increase is primarily attributable to increases in the Florida and Mid-Atlantic regions, where the company has continued to realize higher average sales prices from steady demand for product. The increases in average sales price in these regions were partially offset by declines in the Texas and West regions, where during the year ended December 31, 2002 TOUSA experienced significant increases in incentives provided to homebuyers as compared to the year ended December 31, 2001.
Homebuilding cost of sales decreased to $1.10 billion during the year ended December 31, 2002 from $1.11 billion during the year ended December 31, 2001. The decline of 1% is attributable to the decline in the number of home closings offset by an increase in cost of land/lot sales. Our gross margin on home sales decreased to 20.3% during the year ended December 31, 2002 as compared to 20.6% during the year ended December 31, 2001. The decline in gross margin is primarily attributable to increased incentives and an increase in the average lot cost per closing, partially offset by an increase in our gross margin on options and upgrades.
SG&A expenses increased by 8% to $163.7 million during the year ended December 31, 2002 from $152.1 million for the year ended December 31, 2001. As a percentage of revenues from home sales, SG&A expenses increased to 12.1% for the year ended December 31, 2002 from 11.1% for the year ended December 31, 2001. The increase in SG&A expenses is primarily attributable to increases in compensation, information technology, insurance and professional fees.
During the year ended December 31, 2002, TOUSA incurred $20.0 million in severance and merger related charges as compared to $2.6 million in the year ended December 31, 2001. These charges include severance accrued related to the termination of executives who were employed by either TOUSA or Engle prior to the merger. Additionally, in connection with the merger with Engle, the company incurred approximately $6.0 million in legal, consulting and advisory fees.
During the year ended December 31, 2002, in connection with the offering of $200.0 million senior notes and $150.0 million senior subordinated notes, the company recognized a loss on the early retirement of debt of $5.4 million. This charge relates to the exit fees incurred and the write off of unamortized deferred finance costs associated with the then existing borrowings.
Financial Services revenues increased to $40.2 million during the year ended December 31, 2002 from $32.7 million during the year ended December 31, 2001. The increase of 23% is primarily attributable to an increase in the mortgage and title operations capture of
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home sale closings. The increase in the capture ratio of mortgage operations is due primarily to the expansion into the Texas region.
Financial Services expenses increased to $20.8 million during the year ended December 31, 2002 from $17.7 million during the year ended December 31, 2001. The increase of 18% is primarily attributable to increased expenses incurred in connection with the company’s expansion of its Financial Services operations.
Backlog
As of December 31, 2002, the company has 2,280 units in backlog representing $636.9 million in revenue, as compared to 2,149 units in backlog representing $573.4 million in revenue as of December 31, 2001. This increase in revenue in backlog of 11% is attributable to several factors: TOUSA experienced a slow down in new sales contracts during the 4th quarter of 2001 as a result of the effects of September 11th; we increased our active selling communities to 159 as of December 31, 2002 as compared to 146 as of December 31, 2001; and we experienced an increase in the average selling price of units in backlog to $279,000 from $267,000. This increase in the average selling price of the company’s units in backlog relates primarily to an increase in backlog in its Mid-Atlantic and West regions where our average selling prices are higher. As of December 31, 2002, 31% of the company’s units in backlog are from the Mid-Atlantic and West regions, where our average selling prices are $368,000 and $281,000 respectively. As of December 31, 2001, 22% of TOUSA’s units in backlog were from these regions.
* * * * *
TOUSA is a leading homebuilder operating throughout Florida and Texas, and in Northern Virginia, Phoenix, Denver, Nashville, Baltimore and Las Vegas. It provides financial services to its homebuyers and others through its subsidiaries, Preferred Home Mortgage Company and Universal Land Title, Inc.
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements regarding the Company’s expectations (i) that home closings from new communities will begin to contribute to home sales revenue in 2003 and (ii) regarding the impact of steady demand for homes in our Florida and Mid-Atlantic regions on average sales prices. These forward-looking statements may be affected by the risks and uncertainties in the Company’s business. This information is qualified in its entirety by cautionary statements and risk factor disclosure contained in the Company’s Securities and Exchange Commission filings, including the Company’s report on Form S-4 (Registration Statement No. 333-100013). The Company wishes to caution readers that certain important factors may have affected and could in the future affect the Company’s actual results and could cause the Company’s actual results for subsequent periods to differ materially from those expressed in any forward-looking statement made by or on behalf of the Company. With respect to the statement regarding the Company’s expectations relating to these statements, such factors include (i) economic and other business conditions that affect the desire or ability of our customers to purchase new homes in markets in which we conduct business and (ii) an increase in the cost of, or shortages in the availability of, skilled labor or construction materials. The Company undertakes no obligation to update forward-looking statements to reflect events or circumstances after the date hereof.
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TECHNICAL OLYMPIC USA, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL AND OPERATING DATA
(Dollars in thousands, except share amounts)
| Quarter Ended December 31, | Year Ended December 31, | |||||||||||||||||
| 2001 | 2002 | 2001 | 2002 | |||||||||||||||
FINANCIAL DATA: | ||||||||||||||||||
| Homebuilding: | ||||||||||||||||||
| Revenues: | ||||||||||||||||||
| Homes sales | $ | 358,927 | $ | 364,944 | $ | 1,374,551 | $ | 1,349,713 | ||||||||||
| Land/lot sales | 4,061 | 15,423 | 18,361 | 27,379 | ||||||||||||||
| 362,988 | 380,367 | 1,392,912 | 1,377,092 | |||||||||||||||
| Cost of sales: | ||||||||||||||||||
| Home sales | 287,102 | 293,698 | 1,091,626 | 1,075,875 | ||||||||||||||
| Land/lot sales | 3,793 | 13,645 | 16,660 | 24,430 | ||||||||||||||
| 290,895 | 307,343 | 1,108,286 | 1,100,305 | |||||||||||||||
| Gross profit | 72,093 | 73,024 | 284,626 | 276,787 | ||||||||||||||
| Selling, general and administrative expenses | 39,017 | 45,733 | 152,063 | 163,726 | ||||||||||||||
| Depreciation and amortization | 2,253 | 1,412 | 8,849 | 5,952 | ||||||||||||||
| Severance and merger related expenses | 779 | 1,370 | 2,643 | 19,963 | ||||||||||||||
| Loss on early retirement of debt | — | — | — | 5,411 | ||||||||||||||
| Other (income) expense | (1,432 | ) | (1,700 | ) | (3,941 | ) | (5,838 | ) | ||||||||||
| Homebuilding pretax income | 31,476 | 26,209 | 125,012 | 87,573 | ||||||||||||||
| Financial Services: | ||||||||||||||||||
| Revenues | 9,594 | 11,615 | 32,659 | 40,214 | ||||||||||||||
| Expenses | 4,951 | 5,592 | 17,688 | 20,846 | ||||||||||||||
| Financial Services pretax income | 4,643 | 6,023 | 14,971 | 19,368 | ||||||||||||||
| Income from continuing operations before income taxes | 36,119 | 32,232 | 139,983 | 106,941 | ||||||||||||||
| Income tax expense | 14,406 | 12,021 | 52,218 | 39,900 | ||||||||||||||
| Income from continuing operations | 21,713 | 20,211 | 87,765 | 67,041 | ||||||||||||||
| Income from discontinued operations, net of taxes | 3,198 | — | 6,272 | 4,963 | ||||||||||||||
| Net income | $ | 24,911 | $ | 20,211 | $ | 94,037 | $ | 72,004 | ||||||||||
| Earnings per common share (basic and diluted): | ||||||||||||||||||
| From continuing operations | $ | 0.78 | $ | 0.73 | $ | 3.15 | $ | 2.40 | ||||||||||
| From discontinued operations | 0.11 | — | 0.22 | 0.18 | ||||||||||||||
| Net income | $ | 0.89 | $ | 0.73 | $ | 3.37 | $ | 2.58 | ||||||||||
| Weighed average number of shares outstanding (basic and diluted) | 27,878,787 | 27,878,787 | 27,878,787 | 27,878,787 | ||||||||||||||
OPERATING DATA: | ||||||||||||||||||
| Homes closed | 1,357 | 1,372 | 5,304 | 5,085 | ||||||||||||||
| Average sales price per home closed | $ | 265 | $ | 266 | $ | 259 | $ | 265 | ||||||||||
| Gross margin on home sales | 20.0 | % | 19.5 | % | 20.6 | % | 20.3 | % | ||||||||||
| EBITDA | $ | 46,929 | $ | 42,212 | $ | 184,160 | $ | 142,757 | ||||||||||
| Ratio of SG&A expenses to revenues from home sales | 10.9 | % | 12.5 | % | 11.1 | % | 12.1 | % | ||||||||||
| Backlog at end of period in number of homes | 2,149 | 2,280 | 2,149 | 2,280 | ||||||||||||||
| Backlog at end of period in sales value | $ | 573,405 | $ | 636,922 | $ | 573,405 | $ | 636,922 | ||||||||||
| Total active communities at period end | 146 | 159 | 146 | 159 | ||||||||||||||
Reconciliation of income from continuing operations before merger and unusual charges: | ||||||||||||||||||
| Income from continuing operations, before income taxes | $ | 36,119 | $ | 32,232 | $ | 139,983 | $ | 106,941 | ||||||||||
| Add: | ||||||||||||||||||
| Severance and merger related expenses | 779 | 1,370 | 2,643 | 19,963 | ||||||||||||||
| Loss on early retirement of debt | — | — | — | 5,411 | ||||||||||||||
| 36,898 | 33,602 | 142,626 | 132,315 | |||||||||||||||
| Income taxes | 14,717 | 12,532 | 53,204 | 49,367 | ||||||||||||||
| Income from continuing operations before merger and unusual charges | $ | 22,181 | $ | 21,070 | $ | 89,422 | $ | 82,948 | ||||||||||
| Earnings per common share (basic and diluted) from continuing operations before merger and unusual charges | $ | 0.80 | $ | 0.76 | $ | 3.21 | $ | 2.98 | ||||||||||
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TECHNICAL OLYMPIC USA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands, except share amounts)
| December 31, | |||||||||
| 2001 | 2002 | ||||||||
ASSETS | |||||||||
| Homebuilding: | |||||||||
| Cash and cash equivalents: | |||||||||
| Unrestricted | $ | 67,206 | $ | 44,82 | |||||
| Restricted | 7,738 | 23,645 | |||||||
| Inventory | 645,986 | 753,872 | |||||||
| Property and equipment, net | 10,694 | 13,862 | |||||||
| Other assets | 10,897 | 30,681 | |||||||
| Goodwill, net | 57,726 | 78,252 | |||||||
| Westbrooke assets held for sale | 117,160 | — | |||||||
| 917,407 | 945,137 | ||||||||
| Financial Services: | |||||||||
| Cash and cash equivalents: | |||||||||
| Unrestricted | 7,930 | 4,386 | |||||||
| Restricted | 19,605 | 22,866 | |||||||
| Mortgage loans held for sale | 50,933 | 58,840 | |||||||
| Other assets | 3,295 | 3,659 | |||||||
| 81,763 | 89,751 | ||||||||
| Total assets | $ | 999,170 | $ | 1,034,888 | |||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||
| Homebuilding: | |||||||||
| Accounts payable and other liabilities | $ | 56,295 | $ | 96,820 | |||||
| Customer deposits | 25,674 | 24,564 | |||||||
| Consolidated land bank obligations | 30,022 | 16,288 | |||||||
| Homebuilding borrowings | 308,697 | 413,110 | |||||||
| Westbrooke liabilities associated with assets held for sale | 71,800 | — | |||||||
| 492,488 | 550,782 | ||||||||
| Financial Services: | |||||||||
| Accounts payable and other liabilities | 18,828 | 21,560 | |||||||
| Financial services borrowings | 38,689 | 48,309 | |||||||
| 57,517 | 69,869 | ||||||||
| Total liabilities | 550,005 | 620,651 | |||||||
| Minority interest | 35,795 | 9,092 | |||||||
| Commitments and contingencies | — | — | |||||||
| Stockholders’ equity: | |||||||||
| Common stock — $.01 par value; 67,000,000 shares authorized and 27,878,787 shares issued and outstanding | 279 | 279 | |||||||
| Additional paid-in capital | 322,400 | 322,400 | |||||||
| Retained earnings | 90,691 | 82,466 | |||||||
| Total stockholders’ equity | 413,370 | 405,145 | |||||||
| Total liabilities and stockholders’ equity | $ | 999,170 | $ | 1,034,888 | |||||
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