FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
--------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the transition period from to
--------------------- ---------------------
Commission file number 0-20832
-------
MILES HOMES, INC.
- - --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 41-1625724
- - --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
20 Realty Drive, Cheshire, Connecticut 55446-0106
- - --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(203) 271-0011
- - --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
Shares of Common Stock outstanding as of May 10, 1996: 10,810,193
MILES HOMES, INC.
INDEX TO FORM 10-Q
PART I. FINANCIAL INFORMATION PAGE NO.
ITEM 1. FINANCIAL STATEMENTS:
Consolidated Balance Sheets as of March 31, 3
1996 and December 31, 1995.
Consolidated Statements of Operations for the 4
three months ended March 31, 1996 and 1995
Consolidated Statements of Cash Flows for the 5
three months ended March 31, 1996 and 1995
Notes to Consolidated Financial Statements 6-10
ITEM 2. Management's Discussion and Analysis of Financial 11-13
Condition and Results of Operations
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION 14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 14
2
MILES HOMES, INC.
CONSOLIDATED BALANCE SHEETS
($ IN THOUSANDS)
(Unaudited)
March 31, December 31,
1996 1995
------------ ------------
ASSETS
Cash and cash equivalents $ 4,203 $ 2,838
Notes receivable, net 27,411 35,074
Receivable from related parties 506 466
Inventory 8,094 6,958
Prepaid expenses and other assets 11,726 7,024
Deposits 9,407 8,644
Real estate owned 3,987 2,943
Property, plant and equipment, net 8,590 6,416
Property held for sale, net 1,091 5,144
Assets of discontinued operations 4,858 7,663
Intangible assets, net 2,378 2,492
-------- --------
Total assets $ 82,251 $ 85,662
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 5,628 $ 6,414
Accrued construction costs and unearned
revenue on sold notes receivable 17,221 14,113
Accrued expenses 8,135 9,867
Customer deposits 867 857
12% Senior notes 44,250 44,215
Notes payable 3,687 3,634
Capital lease obligations 1,074 1,244
-------- --------
Total liabilities 80,862 80,344
-------- --------
Commitments and contingencies (Note 7)
Stockholders' equity:
Common Stock; par value $.10, 25,000,000 shares
authorized, 10,810,193 shares outstanding 1,081 1,081
Paid in capital 47,384 47,384
Accumulated deficit (47,076) (43,147)
-------- --------
Total stockholders' equity 1,389 5,318
-------- --------
Total liabilities and stockholders' equity $ 82,251 $ 85,662
-------- --------
-------- --------
See Accompanying Notes to Consolidated Financial Statements
3
MILES HOMES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDING MARCH 31, 1996 AND 1995
($ IN THOUSANDS EXCEPT PER SHARE DATA)
(Unaudited)
1996 1995
---------- ----------
Net housing revenue $ 9,587 $ 7,799
Financial services revenue 841 2,004
---------- ----------
Total revenue 10,428 9,803
Costs and expenses:
Cost of sales 6,900 5,494
Selling 2,577 1,951
General & administrative 3,708 3,443
Provision for credit losses 359 330
Interest expense 1,593 2,468
Other (income) expense (468) 5
---------- ----------
Income (loss) from continuing operations
before income taxes (4,241) (3,888)
Income tax benefit (provision) 0 1,555 (1)
---------- ----------
Income (loss) from continuing operations (4,241) (2,333)
Discontinued operations-Patwil Homes, Inc.
Income (loss) from operations 312 (944)
---------- ----------
Net income (loss) $ (3,929) $ (3,277)(1)
---------- ----------
---------- ----------
Earnings per common share:
Income (loss) from continuing operations $ (0.39) $ (0.21)
Income (loss) from discontinued operations 0.03 (0.09)
---------- ----------
Net income (loss) $ (0.36) $ (0.30)(1)
---------- ----------
---------- ----------
Weighted average number of
common shares outstanding 10,810,193 10,810,193
---------- ----------
---------- ----------
(1)This benefit was reversed in its entirety in the second quarter of 1995. Had
the Company not recorded this benefit, the net loss would have been $4,832 or
$0.45 per share.
See Accompanying Notes to Consolidated Financial Statements
4
MILES HOMES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDING MARCH 31, 1996 AND 1995
($ IN THOUSANDS)
(Unaudited)
1996 1995
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (3,929) $ (3,277)
---------- ----------
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 375 525
Provision for credit losses 359 330
Provision for sales promotions and incentives 698 875
Loss (gain) on sale of property,
equipment and land (156) 14
Discontinued operations (312) 944
Decrease (increase) in other operating
assets (Note 9) (3,684) (1,515)
Increase (decrease) in other operating
liabilities (Note 9) 3,749 (33)
---------- ----------
Total adjustments 1,029 1,140
---------- ----------
Net cash provided (used) by operating
activities of:
Continuing operations (2,900) (2,137)
Discontinued operations (722) (388)
---------- ----------
Net cash provided (used) by operating activities (3,622) (2,525)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Amortization of mortgage loan servicing rights 2,083 0
Proceeds from sales of property,
equipment and land 5,333 177
Purchase of property, equipment and land (2,295) (553)
---------- ----------
Net cash provided (used) by investing activities 5,121 (376)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on notes payable-revolver -- (31,077)
Borrowings on notes payable-revolver -- 33,400
Borrowings on notes payable-other 36 --
Principal payments on capital leases (170) (165)
Deferred debt issue cost -- (26)
---------- ----------
Net cash provided by financing activities (134) 2,132
---------- ----------
Net change in cash and cash equivalents 1,365 (769)
Cash and cash equivalents-beginning of period 2,838 1,301
---------- ----------
Cash and cash equivalents-end of period $ 4,203 $ 532
---------- ----------
---------- ----------
Supplemental disclosures of cash flow information:
Interest paid $ 133 $ 3,187
Income taxes paid (refunded), net $ (33) $ 6
See Accompanying Notes to Consolidated Financial Statements.
5
MILES HOMES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1--BASIS OF PRESENTATION:
The accompanying unaudited consolidated financial statements have been
prepared in accordance with Form 10-Q instructions and in the opinion of
management, contain all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the financial position as of March 31,
1996, the results of operations for the three months ended March 31, 1996 and
1995 and cash flows for the three months ended March 31, 1996 and 1995. The
results of operations for the three months ended March 31, 1996 are not
necessarily indicative of the results to be expected for the full year. These
results have been determined on the basis of generally accepted accounting
principles and practices applied consistently with those used in the preparation
of the Company's 1995 Annual Report on Form 10-K.
The Company is a holding company whose only significant assets are its
investment in its wholly-owned operating subsidiaries Miles Homes Services, Inc.
("Miles Homes") and its wholly-owned subsidiary, Plymouth Capital Company, Inc.
("Plymouth Capital"), and Patwil Homes, Inc. ("Patwil Homes"). The combined
assets, liabilities, earnings and equity of Miles Homes, Patwil Homes and
Plymouth Capital are substantially equivalent to the assets, liabilities,
earnings and equity of the Company on a consolidated basis. Accordingly,
separate financial statements and other disclosures concerning Miles Homes,
Patwil Homes and Plymouth Capital are not deemed to be material to investors.
In November 1995, the Company announced the close down of the Patwil Homes
business (see "Discontinued Operations").
Certain information and footnote disclosures normally included in financial
statements presented in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that the accompanying
consolidated financial statements be read in conjunction with the financial
statements and notes thereto incorporated by reference in the Company's Annual
Report on Form 10-K.
Certain reclassifications have been made to the results of operations and
statements of cash flows for the three months ended March 31, 1995 to conform to
the presentation for the three months ended March 31, 1996.
NOTE 2--NOTES RECEIVABLE:
Notes receivable at March 31, 1996 and December 31, 1995 are as follows (in
thousands):
March 31, December 31,
1996 1995
---------- ------------
Contractual value of notes receivable $ 44,530 $ 51,010
Less: unearned income (12,442) (9,535)
-------- --------
Total 32,088 41,475
Less:
Allowance for sales promotion and incentives (3,871) (4,777)
Allowance for credit losses (643) (1,371)
Deferred loan processing fees, net (163) (253)
-------- --------
Notes receivable, net $ 27,411 $ 35,074
-------- --------
-------- --------
6
NOTE 3--INVENTORY:
Inventory at March 31, 1996 and December 31, 1995 are as follows (in
thousands):
March 31, December 31,
1996 1995
---------- ------------
Raw materials $4,794 $4,282
Speculation and model homes 3,300 2,676
------ ------
Inventory $8,094 $6,958
------ ------
------ ------
NOTE 4--DEPOSITS:
Deposits at March 31, 1996 and December 31, 1995 consist of approximately
$8.7 million and $7.9 million, respectively, of net holdback funding pursuant to
the terms of the Construction Loan Purchasing and Servicing Agreement dated
April 14, 1995. Additionally, at March 31, 1996 and December 31, 1995,
approximately $731,000 and $720,000, respectively, relate to lease and other
deposits.
NOTE 5--INCOME TAXES:
Significant components of deferred income taxes at March 31, 1996 and
December 31, 1995 are as follows (in thousands):
March 31, December 31,
1996 1995
---------- ------------
Credit and refinancing allowances $ 3,611 $ 4,015
Goodwill 1,957 1,972
Net operating loss carryforward 9,225 6,748
Other, net 1,437 1,923
-------- --------
Total gross deferred tax assets 16,230 14,658
Less valuation allowance (16,230) (14,658)
-------- --------
Deferred income taxes $ -0- $ -0-
-------- --------
-------- --------
At March 31, 1996, and December 31, 1995 the Company had net operating loss
carryforwards for federal income tax purposes of $23.1 million and $16.9
million, respectively, which expire in 2010.
Income tax benefit for the three months ended March 31, 1996 and 1995
comprises the following (in thousands):
Three Months Ended
March 31
-----------------------
1996 1995
------- -------
Statutory U.S. tax rate $ 1,336 $ 1,322
State taxes, net of federal income tax benefit 236 233
Valuation allowance (1,572) -0-
------- -------
Income tax benefit $ -0- $ 1,555
------- -------
------- -------
The income tax benefit recorded at March 31, 1995, which was based on then
current estimates, was reversed in its entirety in the second quarter of 1995.
7
NOTE 6--SUMMARIZED FINANCIAL INFORMATION:
Summarized financial information of Miles Homes as of March 31, 1996 and
December 31, 1995 and for the three months ended March 31, 1996 and 1995 is as
follows (in thousands):
March 31, December 31,
1996 1995
---------- ------------
Total assets $84,022 $87,524
Total liabilities 74,891 74,586
Total assets include intercompany receivables of $25.7 million and $27.7
million, respectively, at March 31, 1996 and December 31, 1995.
March 31,
----------------------
1996 1995
------ ------
Net revenues 9,724 9,803
Net income (loss) (3,897) (2,176)
NOTE 7--COMMITMENTS AND CONTINGENCIES:
There has been no significant change in the status of lawsuits or
commitments described in Note 13 to the Consolidated Financial Statements
contained in the Company's 1995 Annual Report on Form 10-K.
NOTE 8--DISCONTINUED OPERATIONS:
On November 27, 1995, the Company formally announced its intent to phase
out and close down the operations of its Patwil Homes subsidiary. Contracts for
the construction of Patwil Homes' customers' homes will be completed during the
phase-out period, and all selling and marketing activities have ceased at
December 31, 1995.
The results of Patwil Homes have been classified as discontinued operations
for all periods presented in the Consolidated Statements of Operations. The
assets of Patwil Homes have been classified as Assets of Discontinued Operations
in the Consolidated Balance Sheet as of March 31, 1996 and December 31, 1995.
Additionally, discontinued operations have been segregated in the Consolidated
Statement of Cash Flows for all periods presented.
As a result of the Company's decision to discontinue the operations of
Patwil Homes, the Company recorded, as of December 31, 1995, an estimated loss
on disposal of approximately $8.2 million, which includes a provision of
approximately $1.7 million for losses during the phase-out period, the write-off
of approximately $5.7 million of goodwill and deferred costs, approximately
$600,000 relating to the write-down of fixed assets (to net realizable value)
and approximately $200,000 of accrued severance wages and benefits for 41
employees.
8
Summarized below are the Assets of Discontinued Operations (in thousands):
March 31, December 31,
1996 1995
---------- ------------
Notes receivable $ 422 $ 147
Inventory 706 798
Prepaid expenses and other assets 189 152
Deposits -0- 59
Costs of uncompleted contracts in excess
of related billings 1,260 3,434
Assets held for sale, net 2,281 3,073
------ ------
Assets of discontinued operations $4,858 $7,663
------ ------
------ ------
Condensed income (loss) from operations of Patwil Homes for the three
months ended March 31, 1996 and 1995 follows (in thousands):
March 31,
------------------------
1996 1995
-------- --------
Net revenues $ 3,010 $ 12,344
Cost of sales (2,698) (10,805)
Selling, general and administrative expenses -0- (3,112)
Income tax benefit -0- 629
------- --------
$ 312 $ (944)
------- --------
------- --------
NOTE 9--CONSOLIDATED STATEMENTS OF CASH FLOWS:
Changes in other operating assets and liabilities in the Consolidated
Statements of Cash Flows are as follows (in thousands):
March 31,
------------------------
1996 1995
-------- --------
Decrease (increase) in:
Notes receivable, net $ 6,605 $ 4,233
Receivable from related parties (39) (162)
Inventory (1,136) (1,714)
Prepaid expenses and other assets (8,057) (2,115)
Real estate owned (1,057) (307)
Deferred income taxes -0- (1,450)
-------- --------
Total decrease (increase) in other
operating assets $ (3,684) $ 1,515
-------- --------
-------- --------
Increase (decrease) in:
Accounts payable and accrued expenses $ (6) $ (310)
Accrued construction costs and unearned
revenue on sold notes receivable 3,108 -0-
Payable to related parties 636 (61)
Customer deposits 11 638
-------- --------
Total increase (decrease) in other
operating liabilities $ 3,749 $ (33)
-------- --------
-------- --------
9
NOTE 10--SIGNIFICANT TRANSACTION:
On January 12, 1996 through its newly formed subsidiary, DeGeorge Aviation,
Inc., and pursuant to a Used Aircraft Purchase Agreement, the Company acquired a
one-half interest in a jet aircraft for a total purchase price of $1.5 million.
The aircraft will be used to facilitate the travel of Company executives to
distant meetings with investment banking clients of Endquest Strategies, Inc.,
and to facilitate travel of groups of individuals between the Company's offices
in Plymouth, Minnesota and Cheshire, Connecticut during the process of moving
operations from Minnesota to Connecticut. Charter revenues from the aircraft
are anticipated to significantly offset operating costs.
NOTE 11--SUBSEQUENT EVENTS:
On April 11, 1996, Herbert L. Getzler, Vice Chairman of the Board of
Directors and Chief Financial Officer of the Company, borrowed approximately
$608,000 from the Company. This amount was used (i) to repay approximately
$154,000 borrowed from the Company by Mr. Getzler on December 30, 1994 to pay
taxes on restricted common stock of the Company purchased by him on December 23,
1994 at a discount plus interest of approximately $20,000 on that amount, (ii)
to repay a loan by the Company to Mr. Getzler of $160,000 made on January 3,
1995 to meet margin calls on his common stock plus interest on that amount of
approximately $20,000, and (iii) to repay a loan from Mr. Peter R. DeGeorge,
Chairman and Chief Executive Officer of the Company, to Mr. Getzler of $200,000
made on December 3, 1992 plus interest on that amount at 7% per annum totaling
approximately $52,000.
Also, on April 11, 1996, James G. Einloth, Executive Vice President of
Patwil Homes, Inc., borrowed approximately $309,000 from the Company. This
amount was used (i) to repay approximately $106,000 borrowed from the Company by
Mr. Einloth on December 30, 1994 to pay taxes on restricted common stock of the
Company purchased by him on December 23, 1994 at a discount plus interest of
approximately $14,000 on that amount, and (ii) to repay a loan from Mr. DeGeorge
to Mr. Einloth of $150,000.00 made on December 3, 1992 plus interest on that
amount at 7% per annum totaling approximately $39,000.
These loans will be secured by 303,752 shares of common stock of the
Company, in the case of Mr. Getzler, and 154,727 shares of common stock of the
Company, in the case of Mr. Einloth. The notes are demand notes and bear
interest at the rate of 10% per annum. Interest accrues and is payable on the
date the outstanding principal balance is paid. These notes are non-recourse to
the individuals involved, except for the stock to be pledged as security. There
is no prepayment penalty on these notes.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
REVENUE
Total revenue from continuing operations for the quarter ended March
31, 1996 increased by 6.4% to $10.4 million from $9.8 million for the
same period in 1995. Net housing revenue from continuing operations
for the quarter ended March 31, 1996 increased $1.8 million or 22.9%
compared to the same period last year. The increase was primarily
attributable to shipments to customers for houses in later stages of
construction, an increase in turnkey and other non-traditional housing
revenue ($1.1 million in 1996 versus $300,000 in 1995), a 6.3%
increase in homes shipped in the first quarter of 1996 (102 units
compared to 96 for the same period a year earlier) and a reduction in
discounts ($697,000 during the quarter, or 6.8% of gross housing
revenue, as compared to discounts of $865,000, or 10.0%, in 1995).
This increase was partially offset by a 2.9% decrease in the average
selling price of a home to $60,400 in the first quarter of 1996
compared to $62,200 during the same period the prior year.
Financial services revenue decreased $1.2 million primarily due to the
sale of construction loans pursuant to an April 14, 1995 Construction
Loan Purchase and Servicing Agreement entered into with a mortgage
financing company. The Company collects fees for servicing loans sold
to the mortgage financing company, which are offset by an amortization
of the mortgage servicing right.
COST OF SALES
Cost of sales from continuing operations, which includes cost of
materials, warehousing, material handling, shipping and construction
monitoring, increased to $6.9 million, or 72.0% of net housing revenue
for the first quarter of 1996 compared to $5.5 million, or 70.4%, of
net housing revenue for the same period in 1995. This increase is the
result of higher cost of sales for turnkey homes in Florida (which
recorded no housing revenue and cost of sales in the first quarter of
1995 and $700,000 of net housing revenue and $600,000 of cost of sales
in the first quarter of 1996) and a slight increase in the cost of
sales for shipments to customers for houses under construction, which
resulted from a change in marketing plans that reduced both gross
selling prices and sales discounts offered to customers.
SELLING EXPENSES
Selling expenses from continuing operations of $2.6 million for the
first quarter of 1996 increased $600,000 or 32.1% compared to the same
period in 1995. This increase is primarily attributable to incentives
paid to sales personnel in connection with increased order activity as
well as additional marketing and advertising expenses that resulted
from obtaining new orders.
At March 31, 1996 and 1995, Miles Homes had 144 and 153 sales
representatives, respectively.
11
GENERAL AND ADMINISTRATIVE
General and administrative expenses from continuing operations were
$3.7 million for the first quarter of 1996 as compared to $3.4 million
for the same period in 1995, an increase of 7.7%. This increase is
primarily due to non-recurring personnel and travel expenses incurred
in connection with the movement of operations from Plymouth, Minnesota
to Cheshire, Connecticut and legal expenses associated with the
Company's compliance with requests for information from the United
States Securities and Exchange Commission pursuant to their on-going
investigation.
INTEREST EXPENSE
Interest expense for the first quarter of 1996 decreased by $900,000
compared to the same period in 1995. On April 14, 1995, the Company
entered into a Construction Loan Purchase and Servicing Agreement with
a mortgage finance company. A portion of the initial proceeds from
sales of construction loans pursuant to this agreement were used to
repay the outstanding balance of the secured revolving credit facility
with BT Commercial Corporation.
Interest expense from continuing operations includes $1.4 million
relating to the 12% Senior Notes of Miles Homes Services, Inc. of
which $44.3 million of principal was outstanding as of March 31, 1996.
INCOME TAX
At March 31, 1996, the Company had net operating loss carryforwards
for federal income tax purposes of $23.1 million. At December 31,
1995 the Company recorded a valuation reserve of $14.7 million.
During the first quarter of 1996 the Company did not record a tax
benefit which, if recorded, would have reduced the loss by $1.6
million. This benefit was instead added to the valuation reserve
against deferred income taxes ($16.2 million at March 31, 1996).
NET LOSS
Loss from continuing operations before income taxes for the first
quarter ended March 31, 1996 was $4.2 million or $0.39 per share
compared to a loss from continuing operations before income taxes of
$3.9 million or $0.36 per share for the same period in 1995. During
the first quarter of 1995, a tax benefit of $1.6 million was recorded
which reduced the loss from continuing operations to $2.3 million or
$0.21 per share. The Company reversed this tax benefit in the second
quarter of 1995. The total net loss for the first quarter of 1996
(which includes $300,000 income for the discontinued operations of
Patwil Homes) was $3.9 million or $0.36 per share compared to a loss
of $4.8 million (excluding the $1.6 million income tax benefit
reversed in the second quarter and including a $900,000 loss, net of
taxes, for the discontinued operations of Patwil Homes) or $0.45 per
share for the same period in 1995.
QUARTERLY RESULTS
First quarter 1996 total revenues and gross margin increased $600,000
and $400,000, respectively, though the loss from continuing operations
before income taxes increased $400,000 compared to the same period
last year. The increase in total revenues reflects an increase of
$1.8 million in net housing revenue and a decrease in financial
services revenue of $1.2 million. The decrease in financial services
revenue is primarily attributable to a
12
$1.0 million reduction in interest earnings from the sale of
construction loans to a mortgage finance company, which reduction is
partially offset by a $500,000 decrease in interest expense and an
increase of $200,000 in interest income earned on reserves maintained
for sold accounts.
Gross orders received during the first quarter of 1996 were 1,144 or
an increase of 15.2% over the 993 orders received in the comparable
period in 1995. Incentives paid to sales personnel to generate higher
order activity are the primary component of the $600,000 increase in
selling expenses, which contributed to the increased first quarter
loss but will result in future revenues and margin.
On February 7, 1996, as part of the Company's relocation plan from
Plymouth, Minnesota to Cheshire, Connecticut, Miles Homes sold its
corporate facility located in Plymouth and other miscellaneous assets.
During the first quarter, the Company recorded gains of $200,000 on
sales of fixed assets, principally on the sale of the Plymouth
facility, where operational and administrative functions are
performed.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1996, cash and cash equivalents were $4.2 million as
compared to $2.8 million at December 31, 1995. During the first
quarter of 1996, the Company sold approximately $27.4 million (net of
$1.1 million of repurchased accounts) face value of construction loans
pursuant to a Construction Loan Purchase and Servicing Agreement (the
"Agreement") with a mortgage finance company. Net proceeds to the
Company after discounts and deposits retained pursuant to the
Agreement were approximately $24.0 million. At March 31, 1996, the
Company was servicing, on behalf of the mortgage finance company,
approximately $79.9 million face value of construction loans.
As a result of write-offs occasioned by the discontinuance of
operations of Patwil Homes and losses incurred by the Company for the
fiscal year ended December 31, 1995, the Company is in violation of
the minimum tangible net worth covenant in the Agreement. Although a
waiver of this violation has not been obtained, management has had
discussions with the mortgage financing company concerning this issue
and believes that the Agreement can be revised to accommodate the
Company's present financial condition and anticipated operating
results. If the mortgage financing company should stop purchasing
construction loans under the Agreement, which it may have a right to
do as a result of the covenant violation, a serious and immediate
working capital shortage would result.
13
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION:
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
10.36 Promissory note, in the principal amount of $607,503.33
dated as of April 11, 1996 from Herbert L. Getzler to Miles
Homes, Inc. is attached hereto as Exhibit 10.36.
10.37 Promissory note, in the principal amount of $309,453.98
dated as of April 11, 1996 from James G. Einloth to Miles
Homes, Inc. is attached hereto as Exhibit 10.37.
(b) Reports on Form 8-K:
There have been no reports on Form 8-K since the filing of
the Company's 1995 Annual Report on Form 10-K.
14
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 thereunto duly authorized.
MILES HOMES, INC.
(Registrant)
Dated: May 10, 1996
BY: /S/ Herbert L. Getzler
----------------------------------------
Herbert L. Getzler
Chief Financial Officer
BY: /S/ James E. Fenske
----------------------------------------
James E. Fenske
Chief Accounting Officer
15
EXHIBIT INDEX
EXHIBIT # DESCRIPTION OF EXHIBIT SEQUENTIAL PAGE
- - --------- ---------------------- ---------------
10.36 Promissory note, in the principal 17
amount of $607,503.33 dated as of
April 11, 1996 from Herbert L.
Getzler to Miles Homes, Inc.
10.37 Promissory note, in the principal 29
amount of $309,453.98 dated as of
April 11, 1996 from James G. Einloth
to Miles Homes, Inc.
16