1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION MAY 21, 2001
REGISTRATION NO. 333-58500
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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WCI COMMUNITIES, INC.
(EXACT NAME OF REGISTRANT ISSUER AS SPECIFIED IN ITS CHARTER)
DELAWARE 1531 59-2857021
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
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24301 WALDEN CENTER DRIVE
BONITA SPRINGS, FLORIDA 34134
(941) 947-2600
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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VIVIEN N. HASTINGS
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
WCI COMMUNITIES, INC.
24301 WALDEN CENTER DRIVE
BONITA SPRINGS, FLORIDA 34134
(941) 947-2600
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
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WITH A COPY TO:
JOHN B. TEHAN, ESQ.
SIMPSON THACHER & BARTLETT
425 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
(212) 455-2000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering: [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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TABLE OF ADDITIONAL REGISTRANT GUARANTORS
STATE OR OTHER ADDRESS INCLUDING ZIP CODE AND
EXACT NAME OF JURISDICTION OF I.R.S. EMPLOYER INDUSTRIAL TELEPHONE NUMBER INCLUDING AREA
REGISTRANT GUARANTOR AS INCORPORATION OR IDENTIFICATION CLASSIFICATION CODE OF REGISTRANT GUARANTOR'S
SPECIFIED IN ITS CHARTER ORGANIZATION NUMBER CODE NUMBER PRINCIPAL EXECUTIVE OFFICERS
- ---------------------------- ---------------- --------------- ---------------- -------------------------------
Bay Colony-Gateway, Inc. ... Delaware 36-4025714 1531 24301 Walden Center Drive
Bonita Springs, Florida 34134
(941) 947-2600
Financial Resources Group, Florida 59-3279648 1531 24301 Walden Center Drive
Inc. ..................... Bonita Springs, Florida 34134
(941) 947-2600
First Fidelity Title, Delaware 59-3321774 1531 24301 Walden Center Drive
Inc. ..................... Bonita Springs, Florida 34134
(941) 947-2600
Florida Lifestyle Management Florida 59-1505694 1531 24301 Walden Center Drive
Company................... Bonita Springs, Florida 34134
(941) 947-2600
Livingston Naples, Inc. .... Florida 65-1024731 1531 24301 Walden Center Drive
Bonita Springs, Florida 34134
(941) 947-2600
Livingston Road, Inc. ...... Florida 59-3658689 1531 24301 Walden Center Drive
Bonita Springs, Florida 34134
(941) 947-2600
Panther Developments, LLC... Delaware 59-3707342 1531 24301 Walden Center Drive
Bonita Springs, Florida 34134
(941) 947-2600
Sun City Center Golf Delaware 59-3439449 1531 24301 Walden Center Drive
Properties, Inc. ......... Bonita Springs, Florida 34134
(941) 947-2600
Sun City Center Realty, Florida 59-1581628 1531 24301 Walden Center Drive
Inc. ..................... Bonita Springs, Florida 34134
(941) 947-2600
Watermark Realty, Inc. ..... Delaware 65-0619884 1531 24301 Walden Center Drive
Bonita Springs, Florida 34134
(941) 947-2600
WI Ultracorp of Florida, Delaware 59-3684971 1531 24301 Walden Center Drive
Inc. ..................... Bonita Springs, Florida 34134
(941) 947-2600
The Colony at Pelican Florida 59-2415982 1531 24301 Walden Center Drive
Landing Golf Club, Bonita Springs, Florida 34134
Inc. ..................... (941) 947-2600
Communities Amenities, Florida 59-3431364 1531 24301 Walden Center Drive
Inc. ..................... Bonita Springs, Florida 34134
(941) 947-2600
Communities Home Builders, Florida 59-3431554 1531 24301 Walden Center Drive
Inc. ..................... Bonita Springs, Florida 34134
(941) 947-2600
Gateway Communications Florida 65-0133017 1531 24301 Walden Center Drive
Services, Inc. ........... Bonita Springs, Florida 34134
(941) 947-2600
JYC Holdings, Inc. ......... Florida 59-3555684 1531 24301 Walden Center Drive
Bonita Springs, Florida 34134
(941) 947-2600
3
STATE OR OTHER ADDRESS INCLUDING ZIP CODE AND
EXACT NAME OF JURISDICTION OF I.R.S. EMPLOYER INDUSTRIAL TELEPHONE NUMBER INCLUDING AREA
REGISTRANT GUARANTOR AS INCORPORATION OR IDENTIFICATION CLASSIFICATION CODE OF REGISTRANT GUARANTOR'S
SPECIFIED IN ITS CHARTER ORGANIZATION NUMBER CODE NUMBER PRINCIPAL EXECUTIVE OFFICERS
- ---------------------------- ---------------- --------------- ---------------- -------------------------------
Marbella at Pelican Bay, Florida 65-0738244 1531 24301 Walden Center Drive
Inc. ..................... Bonita Springs, Florida 34134
(941) 947-2600
Pelican Landing Golf Resort Delaware 59-3543449 1531 24301 Walden Center Drive
Ventures, Inc. ........... Bonita Springs, Florida 34134
(941) 947-2600
Sarasota Tower, Inc. ....... Florida 65-1012613 1531 24301 Walden Center Drive
Bonita Springs, Florida 34134
(941) 947-2600
Tarpon Cove Yacht & Racquet Florida 59-3413469 1531 24301 Walden Center Drive
Club, Inc. ............... Bonita Springs, Florida 34134
(941) 947-2600
Tiburon Golf Ventures, Delaware 59-3515983 1531 24301 Walden Center Drive
Inc. ..................... Bonita Springs, Florida 34134
(941) 947-2600
Watermark Pools, Inc. ...... Florida 65-0999370 1531 24301 Walden Center Drive
Bonita Springs, Florida 34134
(941) 947-2600
Watermark Realty Referral, Florida 59-3227694 1531 24301 Walden Center Drive
Inc. ..................... Bonita Springs, Florida 34134
(941) 947-2600
WCI Communities Property Florida 65-0734347 1531 24301 Walden Center Drive
Management, Inc. ......... Bonita Springs, Florida 34134
(941) 947-2600
WCI Golf Group, Inc. ....... Florida 59-3518710 1531 24301 Walden Center Drive
Bonita Springs, Florida 34134
(941) 947-2600
WCI Realty, Inc. ........... Florida 59-3408628 1531 24301 Walden Center Drive
Bonita Springs, Florida 34134
(941) 947-2600
Bay Colony Realty Florida 65-0227049 1531 24301 Walden Center Drive
Associates, Inc. ......... Bonita Springs, Florida 34134
(941) 947-2600
Bay Colony of Naples, Florida 65-0323732 1531 24301 Walden Center Drive
Inc. ..................... Bonita Springs, Florida 34134
(941) 947-2600
Coral Ridge Communities, Florida 65-0615045 1531 24301 Walden Center Drive
Inc. ..................... Bonita Springs, Florida 34134
(941) 947-2600
Coral Ridge Properties, Florida 25-1184789 1531 24301 Walden Center Drive
Inc. ..................... Bonita Springs, Florida 34134
(941) 947-2600
Coral Ridge Realty, Inc. ... Florida 59-0980280 1531 24301 Walden Center Drive
Bonita Springs, Florida 34134
(941) 947-2600
Coral Ridge Realty Sales, Florida 59-2103316 1531 24301 Walden Center Drive
Inc. ..................... Bonita Springs, Florida 34134
(941) 947-2600
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STATE OR OTHER ADDRESS INCLUDING ZIP CODE AND
EXACT NAME OF JURISDICTION OF I.R.S. EMPLOYER INDUSTRIAL TELEPHONE NUMBER INCLUDING AREA
REGISTRANT GUARANTOR AS INCORPORATION OR IDENTIFICATION CLASSIFICATION CODE OF REGISTRANT GUARANTOR'S
SPECIFIED IN ITS CHARTER ORGANIZATION NUMBER CODE NUMBER PRINCIPAL EXECUTIVE OFFICERS
- ---------------------------- ---------------- --------------- ---------------- -------------------------------
Florida Design Communities, Florida 65-0585945 1531 24301 Walden Center Drive
Inc. ..................... Bonita Springs, Florida 34134
(941) 947-2600
Florida National Properties, Florida 65-0615052 1531 24301 Walden Center Drive
Inc. ..................... Bonita Springs, Florida 34134
(941) 947-2600
Gateway Communities, Florida 59-2167649 1531 24301 Walden Center Drive
Inc. ..................... Bonita Springs, Florida 34134
(941) 947-2600
Gateway Realty Sales, Florida 59-2741697 1531 24301 Walden Center Drive
Inc. ..................... Bonita Springs, Florida 34134
(941) 947-2600
Heron Bay, Inc. ............ Florida 65-0540040 1531 24301 Walden Center Drive
Bonita Springs, Florida 34134
(941) 947-2600
Heron Bay Golf Course Florida 65-0583106 1531 24301 Walden Center Drive
Properties, Inc. ......... Bonita Springs, Florida
34134
(941) 947-2600
Pelican Bay Properties, Florida 59-1906557 1531 24301 Walden Center Drive
Inc. ..................... Bonita Springs, Florida
34134
(941) 947-2600
Pelican Landing Communities, Florida 25-1629089 1531 24301 Walden Center Drive
Inc. ..................... Bonita Springs, Florida
34134
(941) 947-2600
Pelican Landing Properties, Florida 25-1629086 1531 24301 Walden Center Drive
Inc. ..................... Bonita Springs, Florida
34134
(941) 947-2600
Pelican Marsh Properties, Florida 65-0348731 1531 24301 Walden Center Drive
Inc. ..................... Bonita Springs, Florida
34134
(941) 947-2600
Tarpon Cove Realty, Inc. ... Florida 59-2000931 1531 24301 Walden Center Drive
Bonita Springs, Florida
34134
(941) 947-2600
WCI Homes, Inc. ............ Florida 59-3557486 1531 24301 Walden Center Drive
Bonita Springs, Florida
34134
(941) 947-2600
Communities Finance Company, Delaware 65-1062263 1531 24301 Walden Center Drive
LLC....................... Bonita Springs, Florida
34134
(941) 947-2600
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT
AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY
THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED MAY 21, 2001
PROSPECTUS
$250,000,000
WCI COMMUNITIES, INC.
Offer to Exchange All Outstanding 10 5/8% Senior Subordinated Notes due 2011 for
10 5/8% Senior Subordinated Notes due 2011, which have been registered under the
Securities Act of 1933
Unconditionally Guaranteed on a Senior Subordinated Basis by All Our Current
Subsidiaries
THE EXCHANGE OFFER
- We will exchange all outstanding notes that are validly tendered and not
validly withdrawn for an equal principal amount of exchange notes that
are freely tradeable, except in limited circumstances described below.
- You may withdraw tenders of outstanding notes at any time prior to the
expiration of the exchange offer.
- The exchange offer expires at 5:00 p.m., New York City time, on
, 2001, unless extended. We do not currently intend to extend
the expiration date.
- The exchange of outstanding notes for exchange notes in the exchange
offer will not be a taxable event for U.S. federal income tax purposes.
- We will not receive any proceeds from the exchange offer.
THE EXCHANGE NOTES
- - The exchange notes are being offered in order to satisfy certain of our
obligations under the registration rights agreement entered into in connection
with the placement of the outstanding notes.
- - The terms of the exchange notes to be issued in the exchange offer are
substantially identical to the outstanding notes, except that the exchange
notes will be freely tradeable, except in limited circumstances described
below.
RESALES OF EXCHANGE NOTES
- - The exchange notes may be sold in the over-the-counter market, in negotiated
transactions or through a combination of such methods.
If you are a broker-dealer and you receive exchange notes for your own account,
you must acknowledge that you will deliver a prospectus in connection with any
resale of the exchange notes. By making such acknowledgment, you will not be
deemed to admit that you are an "underwriter" under the Securities Act of 1933.
Broker-dealers may use this prospectus in connection with any resale of exchange
notes received in exchange for outstanding notes where the outstanding notes
were acquired by the broker-dealer as a result of market-making activities or
trading activities. We will make this prospectus available to any broker-dealer
for use in any such resale for a period of up to 180 days after the date of the
prospectus. A broker-dealer may not participate in the exchange offer with
respect to outstanding notes acquired other than as a result of market-making
activities or trading activities. See "Plan of Distribution."
If you are an affiliate of WCI Communities, Inc. or are engaged in, or intend to
engage in, or have an agreement or understanding to participate in, a
distribution of the exchange notes, you cannot rely on the applicable
interpretations of the Securities and Exchange Commission and you must comply
with the registration requirements of the Securities Act of 1933 in connection
with any resale transaction.
YOU SHOULD CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 13 OF THIS
PROSPECTUS BEFORE PARTICIPATING IN THE EXCHANGE OFFER.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is , 2001.
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TABLE OF CONTENTS
PAGE
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PROSPECTUS SUMMARY...................... 1
RISK FACTORS............................ 13
FORWARD-LOOKING STATEMENTS.............. 20
THE COMPANY............................. 21
THE EXCHANGE OFFER...................... 22
USE OF PROCEEDS......................... 32
CAPITALIZATION.......................... 33
SELECTED HISTORICAL CONSOLIDATED
FINANCIAL DATA........................ 34
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS............................ 36
BUSINESS................................ 48
FLORIDA REAL ESTATE MARKET.............. 68
MANAGEMENT.............................. 74
MATERIAL RELATIONSHIPS AND RELATED
TRANSACTIONS.......................... 80
PAGE
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PRINCIPAL STOCKHOLDERS.................. 82
DESCRIPTION OF MATERIAL INDEBTEDNESS.... 85
DESCRIPTION OF NOTES.................... 89
REGISTRATION RIGHTS; LIQUIDATED
DAMAGES............................... 126
BOOK-ENTRY; DELIVERY AND FORM........... 128
UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES.......................... 130
PLAN OF DISTRIBUTION.................... 134
LEGAL MATTERS........................... 135
EXPERTS................................. 135
WHERE YOU CAN FIND MORE INFORMATION..... 135
INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS............................ F-1
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PROSPECTUS SUMMARY
This summary highlights all material information contained elsewhere in
this prospectus. This summary is not complete and does not contain all of the
information that is important to you in making a decision to exchange the
outstanding notes for exchange notes. Unless the context otherwise requires, all
references to "WCI," "WCI Communities," the "Company," "we," "us" or "our"
include WCI Communities, Inc. and its subsidiaries and predecessors as a
combined entity. All references to "Watermark" or "Watermark Communities" mean
Watermark Communities Inc., the parent company of WCI Communities. Any reference
to "Florida Design" includes Florida Design Communities, Inc. together with each
of five related entities that were acquired by Watermark Communities in November
1998.
WCI
We are a fully integrated homebuilding and real estate services company
with over 50 years of experience in the design, construction and operation of
leisure-oriented, amenity-rich master-planned communities. We offer a full
complement of products and services to enhance our customers' lifestyles and
increase our recurring revenues. We have developed master-planned communities
where today there are over 150,000 residents who enjoy lifestyle amenities such
as award-winning golf courses, country clubs, deep-water marinas, tennis and
recreational facilities, luxury hotels, upscale shopping and a variety of
restaurants.
Our master-planned communities are in Florida, a highly sought-after
retirement and leisure-oriented home destination, and one of the nation's
fastest growing economies. We believe we are well-positioned to take advantage
of favorable demographic trends, including the aging of the "baby boom"
generation, as well as the overall strength of the Florida economy and real
estate market. Furthermore, the United States Census Bureau predicts that
Florida will experience one of the largest total increases in population in the
United States over the next ten years.
At March 31, 2001, we had 33 master-planned communities under development.
We expect these master-planned communities to contain 594 holes of golf, over
1,000 marina slips and various country clubs, tennis and recreational facilities
and other amenities. In total, we control approximately 16,000 acres of land,
where we plan to develop up to 28,000 future residences.
For the twelve months ended December 31, 2000, we closed 1,823 homes,
constituting 1,614 single-and multi-family homes and 209 tower residences and
for the three months ended March 31, 2001, we closed 291 homes, constituting 238
single- and multi-family homes and 53 tower residences. At March 31, 2001, we
had a contract backlog of 1,028 units representing $340.9 million of single- and
multi-family homes and 478 units representing $281.1 million of remaining
revenue from tower residences. As of March 31, 2001, we had eight high-rise
towers under construction.
Our revenue, EBITDA, net income and EBITDA margin were $882.2 million,
$185.4 million, $81.9 million and 21.0%, respectively, for the twelve months
ended December 31, 2000 and $197.0 million, $32.9 million, $9.1 million and
16.7%, respectively, for the three months ended March 31, 2001.
OUR OPERATIONS
We typically begin a master-planned community by purchasing undeveloped or
partially developed real estate. We then construct infrastructure improvements
and build amenities in accordance with our development permits. Following
completion of these improvements and the building of the amenities, we build a
full range of homes for sale to primary, retirement and second home buyers. In
certain situations, we elect to sell parcels and lots to third party builders or
end users.
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As part of our marketing strategy, we target move-up, retirement and
affluent second-home buyers for most of our communities. To reach these
customers, we use national database marketing campaigns and local, point of
purchase advertising and sales programs.
We profit from the efficiencies created by our integrated delivery of all
aspects of community development, including community design, land development,
homebuilding, parcel and lot sales, amenities operations and real estate
services businesses. We believe that this integrated approach reduces risk as it
provides us with greater control over our costs and provides us with recurring
amenities and services revenues.
Homebuilding
We believe the breadth of our homebuilding activities and the scope of our
target market distinguish us from our competitors and position us to take
advantage of favorable regional and national demographic and income trends. Like
traditional homebuilding companies, we design, sell and build single- and
multi-family homes serving move-up, pre-retirement and retirement home buyers.
We build most of these homes within our master-planned communities, where we
create attractive amenities through affiliations with hotel operators and golf
course designers. Unlike our traditional homebuilding competitors, we also
design, sell and build luxury towers targeting affluent, leisure-oriented home
purchasers. For the twelve months ended December 31, 2000 homebuilding revenues
were $614.7 million, which accounted for 69.7% of total revenues, and for the
three months ended March 31, 2001 homebuilding revenues were $143.6 million,
which accounted for 72.9% of total revenues.
Amenities Operations
Our amenities serve as the recreational and social hub of each of our
communities and enhance the marketability and sales value of the residences that
surround each amenity. We design and construct most of the amenities in our
communities and retain ownership of some of these amenities as income producing
properties. For the twelve months ended December 31, 2000 amenities operations
revenues were $71.0 million, which accounted for 8.0% of total revenues, and for
the three months ended March 31, 2001 amenities operations revenues were $19.3
million, which accounted for 9.8% of total revenues.
Real Estate Services
We provide real estate services, such as real estate brokerage, title
insurance, mortgage banking and property management to enhance our position as
an integrated provider of residential products and services. In June 1999, we
entered into an agreement with Prudential Real Estate Affiliates, Inc. under
which we have become the exclusive Prudential real estate franchisee in six
regions in Florida. For the twelve months ended December 31, 2000 real estate
services and other revenues were $65.6 million, which accounted for 7.4% of
total revenues, and for the three months ended March 31, 2001 real estate
services and other revenues were $18.1 million, which accounted for 9.2% of
total revenues.
Parcel and Lot Sales
We leverage our expertise and experience in master-planning by
strategically selling parcels and lots within our communities to developers for
the construction of products like commercial, industrial and rental properties
that we do not ordinarily develop. We also sell selected lots directly to buyers
for the design and construction of large custom homes. For the twelve months
ended December 31, 2000, we sold 120 single-family building lots for $50.9
million and 2,636 acres of land for $80.0 million, and for the three months
ended March 31, 2001, we sold 16 single-family building lots for $5.5 million
and 326.1 acres of land for $10.5 million. Total parcel and lot sale revenues
represent 14.8% of total revenues for the twelve month period ending December
31, 2000 and 8.1% of total revenues for the three month period ending March 31,
2001.
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BUSINESS STRATEGY
Key elements of our on-going business strategy include:
- Capitalize on Favorable Demographic Trends. We intend to continue to take
advantage of the favorable long-term demographic trends that make Florida
a highly sought-after retirement and leisure-oriented home destination,
including the aging of the "baby boom" generation and the increasing
affluence of pre-retirement and retirement-aged purchasers of our
products and services.
- Develop Community Portfolio. We expect to build substantially all of the
remaining single- and multi-family homes and luxury residential towers in
our communities while continuing to acquire additional sites for our
master planned communities and towers. In addition, we intend to grow the
name brand recognition of our products and services by developing branded
resort and golf communities.
- Expand Strategic Partnerships and Real Estate Services. We expect to
capitalize on our expertise in community master-planning, development and
construction management by continuing to develop projects such as our
resort ventures with the Ritz-Carlton and Hyatt hotels. We expect to
generate incremental profits from these relationships from marketing
fees, construction fees, development fees and golf course management
fees. We also believe that this approach helps us to attract affluent
home buyers. In addition, we expect to expand our real estate services
business.
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SUMMARY OF TERMS OF THE EXCHANGE OFFER
On February 20, 2001, we completed the private offering of the outstanding
notes. References to the "notes" in this prospectus are references to both the
outstanding notes and the exchange notes.
We and the guarantors entered into a registration rights agreement with the
initial purchasers in the private offering in which we and the guarantors agreed
to deliver to you this prospectus as part of the exchange offer and we agreed to
complete the exchange offer within 190 days after the date of original issuance
of the outstanding notes. You are entitled to exchange in the exchange offer
your outstanding notes for exchange notes which are identical in all material
respects to the outstanding notes except:
- the exchange notes have been registered under the Securities Act of 1933
or the Securities Act,
- the exchange notes are not entitled to certain registration rights which
are applicable to the outstanding notes under the registration rights
agreement, and
- certain contingent interest rate provisions are no longer applicable.
The Exchange Offer............ We are offering to exchange up to $250,000,000
aggregate principal amount of outstanding notes
for up to $250,000,000 million aggregate
principal amount of exchange notes. Outstanding
notes may be exchanged only in integral
multiples of $1,000.
Resale........................ Based on an interpretation by the staff of the
Securities and Exchange Commission, or the SEC,
set forth in no-action letters issued to third
parties, we believe that the exchange notes
issued pursuant to the exchange offer in
exchange for outstanding notes may be offered
for resale, resold and otherwise transferred by
you (unless you are an "affiliate" of WCI
Communities, Inc., within the meaning of Rule
405 under the Securities Act) without
compliance with the registration and prospectus
delivery provisions of the Securities Act,
provided that you are acquiring the exchange
notes in the ordinary course of your business
and that you have not engaged in, do not intend
to engage in, and have no arrangement or
understanding with any person to participate
in, a distribution of the exchange notes.
Each participating broker-dealer that receives
exchange notes for its own account pursuant to
the exchange offer in exchange for outstanding
notes that were acquired as a result of
market-making or other trading activity must
acknowledge that it will deliver a prospectus
in connection with any resale of the exchange
notes. See "Plan of Distribution."
Any holder of outstanding notes who:
- is an affiliate of WCI Communities,
Inc.;
- does not acquire exchange notes in the
ordinary course of its business; or
- tenders in the exchange offer with the
intention to participate, or for the
purpose of participating, in a
distribution of exchange notes
cannot rely on the position of the staff of the
SEC enunciated in Exxon Capital Holdings
Corporation, Morgan Stanley & Co. Incorporated
or similar no-action letters and, in the
absence of an exemption therefrom, must comply
with the registration and
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11
prospectus delivery requirements of the
Securities Act in connection with the resale of
the exchange notes.
Expiration Date; Withdrawal of
Tender........................ The exchange offer will expire at 5:00 p.m.,
New York City time, on , 2001, or
such later date and time to which we extend it
(the "expiration date"). We do not currently
intend to extend the expiration date. Under the
registration rights agreement that we have
entered into with the initial purchasers, we
have agreed to complete the exchange offer by
August 29, 2001 which is 190 days after the
issuance of the outstanding notes. A tender of
outstanding notes pursuant to the exchange
offer may be withdrawn at any time prior to the
expiration date. Any outstanding notes not
accepted for exchange for any reason will be
returned without expense to the tendering
holder promptly after the expiration or
termination of the exchange offer.
Material Conditions to the
Exchange Offer................ The exchange offer is subject to customary
conditions, which we may waive. Please read the
section captioned "The Exchange
Offer -- Material Conditions to the Exchange
Offer" of this prospectus for more information
regarding the conditions to the exchange offer.
Procedures for Tendering
Outstanding Notes............. If you wish to accept the exchange offer, you
must complete, sign and date the accompanying
letter of transmittal, or a facsimile of the
letter of transmittal, according to the
instructions contained in this prospectus and
the letter of transmittal. You must also mail
or otherwise deliver the letter of transmittal,
or a facsimile of the letter of transmittal,
together with the outstanding notes and any
other required documents, to the exchange agent
at the address set forth on the cover page of
the letter of transmittal. If you hold
outstanding notes through The Depository Trust
Company, or DTC, and wish to participate in the
exchange offer, you must comply with the
Automated Tender Offer Program procedures of
DTC, by which you will agree to be bound by the
letter of transmittal. By signing, or agreeing
to be bound by the letter of transmittal, you
will represent to us that, among other things:
- any exchange notes that you receive will
be acquired in the ordinary course of
your business;
- you have no arrangement or understanding
with any person or entity to participate
in a distribution of the exchange notes;
- if you are a broker-dealer that will
receive exchange notes for your own
account in exchange for outstanding
notes that were acquired as a result of
market-making activities, that you will
deliver a prospectus, as required by
law, in connection with any resale of
such exchange notes; and
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- you are not an "affiliate," as defined
in Rule 405 of the Securities Act, of
WCI Communities, Inc. or, if you are an
affiliate, you will comply with any
applicable registration and prospectus
delivery requirements of the Securities
Act.
Special Procedures for
Beneficial Owners............. If you are a beneficial owner of outstanding
notes which are registered in the name of a
broker, dealer, commercial bank, trust company
or other nominee, and you wish to tender your
outstanding notes in the exchange offer, you
should contact that registered holder promptly
and instruct the registered holder to tender on
your behalf. If you wish to tender on your own
behalf, you must, prior to completing and
executing the letter of transmittal and
delivering your outstanding notes, either make
appropriate arrangements to register ownership
of the outstanding notes in your name or obtain
a properly completed bond power from the
registered holder. The transfer of registered
ownership may take considerable time and may
not be able to be completed prior to the
expiration date of the exchange offer.
Guaranteed Delivery
Procedures.................... If you wish to tender your outstanding notes
and your outstanding notes are not immediately
available or you cannot deliver your
outstanding notes, the letter of transmittal or
any other documents required by the letter of
transmittal or to comply with the applicable
procedures under DTC's Automated Tender Offer
Program prior to the expiration date of the
exchange offer, you must tender your
outstanding notes according to the guaranteed
delivery procedures set forth in this
prospectus under "The Exchange Offer --
Guaranteed Delivery Procedures."
Effect on Holders of
Outstanding Notes............. As a result of the making of, and upon
acceptance for exchange of all validly tendered
outstanding notes pursuant to the terms of the
exchange offer, we will have fulfilled a
covenant contained in the registration rights
agreement and, accordingly, there will be no
liquidated damages on the outstanding notes
under the circumstances described in the
registration rights agreement. If you are a
holder of outstanding notes and you do not
tender your outstanding notes in the exchange
offer, you will continue to hold the
outstanding notes and you will be entitled to
all the rights and limitations applicable to
the outstanding notes in the indenture, except
for any rights under the registration rights
agreement that by their terms terminate upon
the consummation of the exchange offer.
To the extent that outstanding notes are
tendered and accepted in the exchange offer,
the trading market for outstanding notes could
be adversely affected.
Consequences of Failure to
Exchange...................... All untendered outstanding notes will continue
to be subject to the restrictions on transfer
provided for in the outstanding notes and in
the indenture. In general, the outstanding
notes may not
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be offered or sold, unless registered under the
Securities Act, except pursuant to an exemption
from, or in a transaction not subject to, the
Securities Act and applicable state securities
laws. Other than in connection with the
exchange offer, the issuer does not currently
anticipate that it will register the
outstanding notes under the Securities Act.
Material Income Tax
Considerations................ The exchange of outstanding notes for exchange
notes in the exchange offer will not be a
taxable event for United States federal income
tax purposes. See "United States Federal Income
Tax Consequences."
Use of Proceeds............... We will not receive any cash proceeds from the
issuance of exchange notes pursuant to the
exchange offer.
Exchange Agent................ The Bank of New York is the exchange agent for
the exchange offer. The address and telephone
number of the exchange agent are set forth in
the section captioned "The Exchange
Offer -- Exchange Agent" of this prospectus.
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SUMMARY OF TERMS OF THE EXCHANGE NOTES
Issuer........................ WCI Communities, Inc.
Notes Offered................. $250,000,000 aggregate principal amount of
10 5/8% Senior Subordinated Notes due 2011.
Interest...................... The notes will accrue interest from the date of
their issuance at the rate of 10 5/8% per year.
Interest on the notes will be payable semi-
annually in arrears on each February 15 and
August 15, commencing on August 15, 2001.
Maturity Date................. February 15, 2011.
Guarantees.................... Our Subsidiaries guarantee the notes on a
senior subordinated basis. See "Description of
Notes."
Ranking....................... The notes are unsecured senior subordinated
obligations and are subordinated to all our
existing and future senior debt. The notes rank
equally with all our other existing and future
senior subordinated debt and rank senior to all
our subordinated debt.
Our Subsidiaries' guarantees with respect to
the notes are general unsecured senior
subordinated obligations of the guarantor
subsidiaries and are subordinated to all of the
guarantor subsidiaries' existing and future
senior debt. The guarantees rank equally with
any senior subordinated indebtedness of the
guarantor subsidiaries and rank senior to the
guarantor subsidiaries' subordinated debt, if
any.
Because the notes are subordinated, in the
event of bankruptcy, liquidation or
dissolution, holders of the notes will not
receive any payment until holders of senior
debt have been paid in full. The term "senior
debt" is defined in the "Description of Notes"
section of this prospectus.
At March 31, 2001, after giving effect to the
offering and the application of the net
proceeds, we had $372.1 million of senior debt
outstanding on a consolidated basis.
Optional Redemption........... We may redeem the notes, in whole or in part,
at any time on or after February 15, 2006 at a
redemption price equal to 100% of the principal
amount of the notes plus a premium declining
ratably to par plus accrued interest.
In addition, at any time prior to February 15,
2004, we may redeem up to 35% of the aggregate
principal amount of the notes and any
additional notes issued under the indenture
with the net cash proceeds of one or more
equity offerings at a redemption price equal
to 110.625% of the principal amount of the
notes, plus accrued and unpaid interest,
provided that:
- at least 65% of the aggregate principal
amount of the notes and any additional
notes remains outstanding immediately
after the occurrence of the redemption;
and
- the redemption occurs within 90 days of
the date of the closing of any equity
offering.
For more information, see "Description of
Notes -- Optional Redemption."
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Change of Control............. Upon change of control events set forth in the
indenture, if we do not redeem the notes, each
holder of notes may require us to repurchase
all or a portion of its notes at a purchase
price equal to 101% of the principal amount of
its notes, plus accrued interest. Our ability
to repurchase the notes upon a change of
control event will be limited by the terms of
our debt agreements, including our senior
secured credit facility. We cannot assure you
that we will have the financial resources to
repurchase the notes. See "Description of
Notes -- Repurchase at the Option of
Holders -- Change of Control."
Consolidated Tangible Net
Worth......................... If our consolidated tangible net worth falls
below $125.0 million for any two consecutive
fiscal quarters, we have agreed to make an
offer to repurchase 10% of the notes then
outstanding. Our ability to repurchase the
notes under these circumstances will be limited
by the terms of our debt agreements, including
our senior secured credit facility. We cannot
assure you that we will have the financial
resources to repurchase the notes. See
"Description of Notes --
Covenants -- Maintenance of Consolidated
Tangible Net Worth."
Covenants..................... The indenture governing the notes contains
covenants that, among other things, will limit
our ability and the ability of certain of our
subsidiaries to:
- incur additional indebtedness;
- pay dividends on, redeem or repurchase
our capital stock;
- make investments;
- engage in transactions with affiliates;
- create certain liens; or
- consolidate, merge or transfer all or
substantially all our assets and the
assets of our subsidiaries on a
consolidated basis.
These covenants are subject to important
exceptions and qualifications, which are
described in the "Description of Notes" section
of this prospectus.
Absence of a Public Market for
the Exchange Notes............ The exchange notes generally will be freely
transferable but will also be new securities
for which there will not initially be a market.
Accordingly, we cannot assure you whether a
market for the exchange notes will develop or
as to the liquidity of any market. We do not
intend to apply for a listing of the exchange
notes on any securities exchange or automated
dealer quotation system. The initial purchasers
in the private offering of the outstanding
notes have advised us that they currently
intend to make a market in the exchange notes.
However, they are not obligated to do so, and
any market making with respect to the exchange
notes may be discontinued without notice.
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RISK FACTORS
You should carefully consider the information under the caption "Risk
Factors" and all other information in this prospectus before tendering your
outstanding notes.
------------------------
Our principal executive office is located at WCI Communities, Inc., 24301
Walden Center Drive, Bonita Springs, Florida 34134. Our telephone number is
(941) 947-2600. We were incorporated in Delaware on October 26, 1987.
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SUMMARY CONSOLIDATED FINANCIAL DATA OF WCI COMMUNITIES
The following summary of our consolidated financial data should be read in
conjunction with, and is qualified in its entirety by reference to "Selected
Historical Consolidated Financial Data," "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and our audited and unaudited
historical financial statements, including introductory paragraphs and related
notes to those financial statements, appearing elsewhere in this prospectus.
THREE MONTHS ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
------------------- ------------------------------
2001 2000 2000 1999 1998(1)
-------- -------- -------- -------- --------
(unaudited)
(dollars in thousands)
STATEMENT OF OPERATIONS DATA:
Revenues:
Homebuilding................................ $143,612 $ 75,859 $614,665 $428,837 $251,564
Parcel and lot.............................. 15,979 30,336 130,918 131,673 140,007
Amenity membership and operations........... 19,303 22,771 70,974 76,307 33,124
Real estate services and other.............. 18,065 11,096 65,595 44,599 23,668
-------- -------- -------- -------- --------
Total revenues......................... 196,959 140,062 882,152 681,416 448,363
-------- -------- -------- -------- --------
Total cost of sales........................... 138,268 95,828 606,934 483,928 314,428
Other expenses................................ 40,434 28,005 140,815 121,463 79,871
-------- -------- -------- -------- --------
Income from operations before income taxes and
extraordinary item.......................... 18,257 16,229 134,403 76,025 54,064
-------- -------- -------- -------- --------
Income tax (expense) benefit.................. (7,323) (6,533) (52,462) 5,562 (12,881)
Extraordinary item(2)......................... (1,870) -- -- (1,694) --
-------- -------- -------- -------- --------
Net income.................................... $ 9,064 $ 9,696 $ 81,941 $ 79,893 $ 41,183
======== ======== ======== ======== ========
OTHER DATA:
EBITDA(3)..................................... $ 32,924 $ 27,815 $185,420 $125,427 $ 92,137
EBITDA margin(4).............................. 16.7% 19.9% 21.0% 18.4% 20.5%
Depreciation and amortization................. $ 1,994 $ 1,272 $ 7,654 $ 6,781 $ 2,531
Interest incurred(5).......................... $ 15,168 $ 15,012 $ 62,100 $ 60,503 $ 44,993
Ratio of EBITDA to interest incurred.......... -- -- 2.99x 2.07x 2.05x
Ratio of debt to EBITDA....................... -- -- 2.98x 4.35x 5.49x
OPERATING DATA:
Single- and multi-family home closings........ 238 216 1,614 1,332 373
Mid-rise and high-rise closings(6)............ 53 52 209 345 53
Single- and multi-family net new contracts.... 513 535 1,754 1,346 533
Mid-rise and high-rise net new contracts...... 87 48 307 308 225
Total homebuilding net new contracts.......... $171,033 $132,145 $876,704 $496,337 $272,598
Total homebuilding backlog at period end(7)... $340,931 $228,021 $526,083 $264,044 $196,544
Average contract selling price:
Single- and multi-family homes.............. $ 333 $ 247 $ 271 $ 211 $ 221
Mid-rise and high-rise units................ $ 787 $ 737 $ 1,309 $ 690 $ 688
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AS OF AS OF
MARCH 31, 2001 MARCH 31, 2000
-------------- --------------
(unaudited)
(dollars in thousands)
BALANCE SHEET DATA:
Real estate inventories................................... $ 728,112 $ 609,618
Total assets....................................... 1,308,428 1,022,729
Debt(8)................................................... 622,108 554,565
Shareholders' equity...................................... 326,255 247,195
Ratio of debt to total capitalization..................... 65.6% 69.2%
- ---------------
(1) Financial data as of and for the year ended December 31, 1998 consist of
the accounts of WCI Communities, inclusive of Florida Design since
December 1, 1998 (the date following its acquisition) and WCI Communities
Limited Partnership for the complete year and reflects the reorganization
of WCI Communities which occurred on November 30, 1998.
(2) Extraordinary items are the unamortized balance of debt issuance costs
associated with the early retirement of a high-rise construction loan in
1999 and the unamortized balance of debt issuance costs associated with
the extinguishments of debt in conjunction with the $250,000 debt offering
in February 2001.
(3) EBITDA represents earnings before interest expense, preferred stock
dividend, income taxes, depreciation and amortization and an extraordinary
item. EBITDA is presented because it is a widely accepted financial
indicator used by certain investors and analysts to analyze and compare
companies on the basis of operating performance. EBITDA as presented may
not be comparable to similarly titled measures reported by other companies
because not all companies necessarily calculate EBITDA in an identical
manner and, therefore, is not necessarily an accurate means of comparison
between companies. EBITDA is not intended to represent cash flows in
accordance with generally accepted accounting principles or funds
available for management's discretionary use nor has it been presented as
an alternative to operating income or as an indicator of operating
performance and it should not be considered in isolation. For a
presentation of our cash flows in accordance with generally accepted
accounting principles, see "Consolidated Statements of Cash Flows" on
pages F-6 and F-55 of this prospectus.
(4) EBITDA margin is calculated by dividing EBITDA by total revenues.
(5) Interest incurred is the amount of interest paid and accrued (whether
expensed or capitalized) during such period excluding amortization of debt
issuance costs and amortization of interest previously capitalized.
(6) The timing of mid-rise and high-rise closings corresponds with the
realization of net cash proceeds due under contracts for these residences.
Revenues from these contracts are recognized under the percentage of
completion method and, as a result, precede the timing of closings.
(7) Homebuilding backlog at period end represents the sum of the value of (a)
contracts for the sale of single- and multi-family homes not yet closed
and (b) contracts for the sale of mid-rise and high-rise tower residences
not yet closed less amounts previously recognized under the percentage of
completion method of accounting.
(8) Debt excludes accounts payable and accrued expenses, customer deposits and
other liabilities (other than land repurchase liabilities), deferred
income tax liabilities and community development district obligations.
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RISK FACTORS
Before you participate in the exchange offer, you should be aware that
there are various risks. We have summarized the material risks below. You should
consider carefully these risk factors together with all of the other information
included in this prospectus before you decide whether to participate in the
exchange offer.
RISKS RELATING TO THE EXCHANGE OFFER
IF YOU CHOOSE NOT TO EXCHANGE YOUR OUTSTANDING NOTES, THE PRESENT TRANSFER
RESTRICTIONS WILL REMAIN IN FORCE AND THE MARKET PRICE OF YOUR OUTSTANDING NOTES
COULD DECLINE.
If you do not exchange your outstanding notes for exchange notes under the
exchange offer, then you will continue to be subject to the transfer
restrictions on the outstanding notes as set forth in the offering memorandum
distributed in connection with the private offering of the outstanding notes. In
general, the outstanding notes may not be offered or sold unless they are
registered or exempt from registration under the Securities Act and applicable
state securities laws. Except as required by the registration rights agreement,
we do not intend to register resales of the outstanding notes under the
Securities Act. You should refer to "Summary -- Summary of Terms of the Exchange
Notes" and "The Exchange Offer" for information about how to tender your
outstanding notes.
The tender of outstanding notes under the exchange offer will reduce the
principal amount of the outstanding notes outstanding, which may have an adverse
effect upon, and increase the volatility of, the market price of the outstanding
notes due to a reduction in liquidity. In connection with the offering of the
notes, the underwriters have informed us that they may, but are not obligated
to, create a market for the notes.
RISKS RELATING TO THE NOTES
SUBSTANTIAL INDEBTEDNESS AND HIGH LEVERAGE -- OUR SUBSTANTIAL INDEBTEDNESS AND
HIGH LEVERAGE COULD ADVERSELY AFFECT OUR FINANCIAL HEALTH AND PREVENT US FROM
FULFILLING OUR OBLIGATIONS UNDER THE NOTES.
We are, and may continue to be, significantly leveraged. At March 31, 2001,
after giving effect to the application of the net proceeds from the sale of the
outstanding notes our total debt was $622.1 million (of which approximately
$250.0 million was indebtedness incurred in the offering of the outstanding
notes). In addition, in connection with the development of certain of our
communities we pay a portion of the revenues, fees, and assessments levied by
community development or improvement districts on the property benefited by the
improvements within our communities. In addition, we guarantee district
shortfalls under some of the bond debt service agreements when the revenues,
fees, and assessments which are designed to cover principal and interest and
other operating costs of the bonds are not paid. See "Business -- Community
Development Districts."
Our high degree of leverage could have important consequences to you,
including the following:
- our ability to satisfy our obligations with respect to the notes may
be impaired in the future;
- our ability to obtain additional financing for working capital,
capital expenditures, acquisitions or general corporate or other
purposes may be impaired in the future;
- a substantial portion of our cash flow from operations must be
dedicated to the payment of principal and interest on our
indebtedness, thereby reducing the funds available to us for other
purposes;
- certain of our borrowings are and will continue to be at variable
rates of interest (including borrowings under our senior secured
credit facility), which will expose us to the risk of increased
interest rates;
- we may be substantially more leveraged than certain of our
competitors, which may place us at a competitive disadvantage; and
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- our substantial leverage may limit our flexibility to adjust to
changing economic or market conditions, reduce our ability to
withstand competitive pressures and make us more vulnerable to a
downturn in general economic conditions.
In addition, the notes, our senior secured credit facility and our other
debt instruments contain financial and other restrictive covenants that will
limit our ability to, among other things, borrow additional funds. See
"Description of Material Indebtedness."
ABILITY TO SERVICE DEBT -- IF WE ARE NOT ABLE TO GENERATE ENOUGH CASH TO SERVICE
OUR INDEBTEDNESS YOU MAY NOT RECEIVE PAYMENTS ON THE NOTES.
Our ability to make scheduled payments of principal of, or to pay the
interest on, or to refinance, our indebtedness or to fund planned capital
expenditures will depend on our future performance, which is subject in part to
general economic conditions, financial, competitive, legislative, regulatory,
political, business and other factors that are beyond our control. Our business
may not generate sufficient cash flow and future borrowings may not be available
under our senior secured credit facility or any other financing sources in an
amount sufficient to enable us to service our indebtedness, including the notes,
or to fund our other liquidity needs. We may need to refinance all or a portion
of our indebtedness, including the notes, on or before maturity or incur
additional debt. We may not be able to refinance any of our indebtedness,
including our senior secured credit facility and the notes, and we may not be
able to negotiate favorable or acceptable terms if we refinance our debt or
borrow additional money. For the year ended December 31, 2000 we paid $61.9
million of interest on our indebtedness. See "Description of Material
Indebtedness" for a discussion of principal repayments under the senior secured
credit facility and our other indebtedness.
SUBORDINATION -- YOU MAY NOT RECEIVE PAYMENTS ON THE NOTES UPON OUR OR OUR
GUARANTOR SUBSIDIARIES' BANKRUPTCY, LIQUIDATION OR REORGANIZATION BECAUSE OTHER
PARTIES WILL BE ENTITLED TO PAYMENT BEFORE YOU.
The notes and the subsidiary guarantees rank behind all of our and the
guarantor subsidiaries' existing indebtedness (other than trade payables) and
all of our and their future borrowings (other than trade payables), except any
future indebtedness that expressly provides that it ranks equal with, or
subordinated in right of payment to the notes and the guarantees. As a result,
upon any distribution to our creditors or the creditors of the guarantor
subsidiaries in a bankruptcy, liquidation or reorganization or similar
proceeding relating to us or the guarantor subsidiaries or our or their
property, the holders of our and the guarantor subsidiaries' senior debt will be
entitled to be paid in full in cash before any payment may be made with respect
to the notes or the subsidiary guarantees.
In addition, all payments on the notes and the guarantees will be blocked
in the event of a payment default on senior debt and may be blocked for up to
179 of 360 consecutive days in the event of certain non-payment defaults on
senior debt.
In the event of a bankruptcy, liquidation or reorganization or similar
proceeding relating to us or the guarantor subsidiaries, holders of the notes
will participate with trade creditors and all other holders of our and our
guarantor subsidiaries' subordinated debt in the assets remaining after we and
the subsidiary guarantors have paid all of the senior debt. However, because the
indenture requires that amounts otherwise payable to holders of the notes in a
bankruptcy or similar proceeding be paid to holders of senior debt instead,
holders of the notes may receive less, ratably, than holders of trade payables
in these proceedings. In any of these cases, we and the subsidiary guarantors
may not have sufficient funds to pay all of our creditors and holders of notes
may receive less, ratably, than the holders of senior debt.
As of March 31, 2001, the aggregate amount of our debt that ranked ahead of
the notes and guarantees (including borrowings under our senior secured credit
facility) was approximately $372.1 million. The indenture and our senior secured
credit facility permits us and the guarantor subsidiaries to incur substantial
additional debt, including debt that ranks ahead of the notes. If new debt is
added to our and our subsidiaries' current debt levels, the related risks
associated with that additional debt could increase.
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ASSET ENCUMBRANCES -- BECAUSE OTHER HOLDERS OF OUR DEBT HAVE A PRIORITY CLAIM TO
OUR ASSETS, IF WE BECOME INSOLVENT OR ARE LIQUIDATED, OR IF PAYMENT UNDER OUR
SENIOR SECURED CREDIT FACILITY IS ACCELERATED, THERE MAY NOT BE ANY ASSETS LEFT
TO SATISFY CLAIMS BY THE HOLDERS OF THE NOTES.
The notes are not secured by any of our assets so it is possible that there
may be insufficient or no assets remaining to pay noteholders if we become
insolvent or are liquidated, or if payment under our senior secured credit
facility is accelerated. If any of these events occur, the lenders under our
senior secured credit facility and the construction loans would be entitled to
exercise the remedies available to a secured lender. Accordingly, these lenders
would have a claim on substantially all of our assets and would have priority
over any claim for payment under the notes or the guarantees. See
"Capitalization," "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources," "Description of
Material Indebtedness," "Description of Notes" and the Consolidated Financial
Statements and the related notes included elsewhere in this prospectus.
FINANCING CHANGE OF CONTROL OFFER AND CONSOLIDATED TANGIBLE NET WORTH
OFFER -- WE MAY NOT HAVE THE ABILITY TO FUND THESE OFFERS REQUIRED BY THE
INDENTURE.
Upon a change of control, we will be required to offer to repurchase all
outstanding notes at 101% of the principal amount of the notes, plus accrued and
unpaid interest, if any, and may also be required to repurchase some of our
other indebtedness. In addition, if our consolidated tangible net worth falls
below $125 million for any two consecutive fiscal quarters, we are required to
make an offer to repurchase 10% of the notes outstanding at that time. We may
not have enough money at the time of either event to make any required
repurchase of notes or other indebtedness, and in addition, our senior secured
credit facility may prohibit us from making any required repurchases. As of
March 31, 2001, our consolidated tangible net worth was $269.4 million.
RESTRICTIONS IMPOSED BY TERMS OF OUR INDEBTEDNESS -- IF ANY OUTSTANDING
INDEBTEDNESS IS ACCELERATED BECAUSE WE COULD NOT COMPLY WITH ITS TERMS WE MAY
NOT HAVE ENOUGH MONEY TO MAKE PAYMENTS ON THE NOTES.
If any or all of our indebtedness were accelerated we might not have enough
money to make payments on our debt. If we fail to comply with restrictive
covenants in the indenture, we would be in default under the indenture, and the
principal and accrued interest on the notes would become due and payable
immediately. See "Description of Notes -- Covenants."
Our senior secured credit facility contains many covenants that are more
restrictive than the covenants in the indenture. Our senior secured credit
facility also requires us to maintain specified consolidated financial ratios
and satisfy certain consolidated financial tests. If we fail to meet those tests
or breach any of the covenants, the lenders under our senior secured credit
facility could declare all amounts outstanding under the credit agreement,
together with accrued interest, to be immediately due and payable.
In addition, if we default under the indenture, our senior secured credit
facility or the instruments governing our other indebtedness, that default could
constitute a cross-default under the indenture, our senior secured credit
facility or the instruments governing our other indebtedness. See "Description
of Notes" and "Description of Material Indebtedness." Our assets may not be
sufficient to repay in full this indebtedness or any other indebtedness,
including the notes.
FRAUDULENT CONVEYANCE MATTERS -- YOUR GUARANTEE COULD BE VOIDED AND YOU MAY BE
REQUIRED TO RETURN PAYMENTS RECEIVED FROM GUARANTORS UNDER FEDERAL BANKRUPTCY
LAW.
Under Federal bankruptcy law and comparable provisions of state fraudulent
transfer laws, if, among other things, any guarantor subsidiary, at the time it
incurred the debt evidenced by its guarantee of the notes:
- received less than reasonably equivalent value or fair consideration for
the guarantees;
- was insolvent or rendered insolvent as a result of issuing the
guarantees;
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- was engaged in a business or transaction for which that guarantor
subsidiary's remaining assets constituted unreasonably small capital;
- intended to incur, or believed that it would incur, debts beyond its
ability to pay as those debts matured; or
- intended to hinder, delay or defraud that guarantor subsidiary's
creditors,
then the guarantee of that guarantor subsidiary could be voided, or claims by
holders of the notes under that guarantee could be subordinated to all other
debts of that guarantor subsidiary. In addition, any payment by that guarantor
subsidiary pursuant to its guarantee could be required to be returned to that
guarantor subsidiary or to a fund for the benefit of the creditors of that
guarantor subsidiary.
The measures of insolvency for purposes of these considerations will vary
depending upon the law applied in any proceeding with respect to these
considerations. Generally, however, a guarantor subsidiary would be considered
insolvent if:
- the sum of its debts, including contingent liabilities, was greater than
the saleable value of all of its assets at a fair valuation;
- the present fair saleable value of its assets was less than the amount
that would be required to pay its probable liability on its existing
debts, including contingent liabilities, as they become absolute and
mature; or
- it could not pay its debts as they become due.
LACK OF PUBLIC MARKET -- YOU MAY NOT BE ABLE TO SELL YOUR NOTES AT A FAVORABLE
PRICE OR AT ALL.
We do not intend to apply for a listing of the notes on a securities
exchange. There is currently no established market for the notes and the
following is unknown:
- the liquidity of any market for the notes;
- the ability of holders of notes to sell their notes; and
- the price at which holders of notes will be able to sell their notes.
As a result, you may not be able to sell your notes at attractive prices or at
all.
The initial purchasers are not obligated to make a market for the notes,
and may discontinue their market making at any time without notice to the
holders of the notes. In addition, market making activity may be limited during
the pendency of the exchange offer or the effectiveness of a shelf registration
statement. A market or liquidity of any market for the notes may not develop. If
a market for the notes does develop, prevailing interest rates, the markets for
similar securities, changes in our financial performance or prospects or in the
prospects for the companies in our industry and other factors could cause the
notes to trade at prices lower than their initial market values or reduce the
liquidity of the notes.
RISKS RELATING TO OUR BUSINESS
SIGNIFICANT CAPITAL REQUIREMENTS -- IF WE ARE NOT ABLE TO RAISE SUFFICIENT
CAPITAL TO ENHANCE AND MAINTAIN THE OPERATIONS OF OUR PROPERTIES AND TO EXPAND
AND DEVELOP OUR REAL ESTATE HOLDINGS, OUR RESULTS OF OPERATIONS AND REVENUES
COULD DECLINE.
We operate in a capital intensive industry and require significant capital
expenditures to maintain our competitive position. Failure to secure needed
additional financing, if and when needed, may limit our ability to grow our
business which could reduce our results of operations and revenues. We expect to
make significant capital expenditures in the future to enhance and maintain the
operations of our properties and to expand and develop our real estate holdings.
In the event that our plans or assumptions change or prove to be inaccurate or
if cash flow proves to be insufficient due to unanticipated expenses or
otherwise, we may seek to minimize cash expenditures and/or obtain additional
financing in order to support our plan of
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operations. Additional funding, whether obtained through public or private debt
or equity financing, or from strategic alliances, may not be available when
needed or may not be available on terms acceptable to us, if at all.
REAL ESTATE MARKET RISK -- NUMEROUS FACTORS BEYOND OUR CONTROL IN THE REAL
ESTATE MARKET COULD IMPAIR OUR ABILITY TO GENERATE REVENUE FROM REAL ESTATE
DEVELOPMENT.
Real estate development and our ability to generate revenues from that
development may be adversely affected by numerous factors, many of which are
beyond our control. These factors include national, regional or local economic
or real estate conditions, competition for available property or space, interest
rate risk, costs to satisfy environmental compliance and remediation
requirements associated with new development/renovation and ongoing operations,
our ability to obtain all necessary zoning, land use, building, occupancy and
other required governmental permits and authorizations and costs associated with
changes in real estate zoning, land use or environmental laws. These risks could
result in substantial unanticipated delays or expense and, under certain
circumstances, could prevent completion of development activities and could
reduce our investments or profitability.
INABILITY TO SUCCESSFULLY DEVELOP COMMUNITIES -- IF WE ARE NOT ABLE TO DEVELOP
OUR COMMUNITIES SUCCESSFULLY, OUR EARNINGS COULD BE DIMINISHED.
Before a community generates any revenues, material expenditures are
required to obtain development approvals, to construct project infrastructure,
amenities, model homes and sales facilities and, where opportunities are
suitable and appropriate, to acquire land. It generally takes several years for
a community development to achieve cumulative positive cash flow. Our inability
to develop and market our communities successfully and to generate positive cash
flows from these operations in a timely manner would have a material adverse
effect on our ability to service our debt and to meet our working capital
requirements.
RISKS ASSOCIATED WITH CONSTRUCTION -- PROBLEMS IN THE CONSTRUCTION OF OUR
COMMUNITIES COULD RESULT IN SUBSTANTIAL INCREASES IN COST AND COULD DISRUPT OUR
BUSINESS WHICH WOULD REDUCE OUR REVENUES.
We must contend with the risks associated with construction activities,
including cost overruns, shortages of lumber or other materials, shortages of
labor, labor disputes, unforeseen environmental or engineering problems, work
stoppages and natural disasters, any of which could delay construction and
result in a substantial increase in cost which would reduce our revenues. Where
we act as the general contractor, we are responsible for the performance of the
entire contract, including work assigned to unaffiliated subcontractors. Claims
may be asserted against us for construction defects, personal injury or property
damage caused by the subcontractors, and these claims may give rise to
liability. Where we hire general contractors, if there are unforeseen events
like bankruptcy of, or an uninsured or under-insured loss claimed against, our
general contractors, we may become responsible for the losses or other
obligations of the general contractors, which may materially and adversely
affect our results of operations. Should losses or losses in excess of insured
limits occur, the losses could adverse effect our results of operations.
RISK OF INCREASED INTEREST RATES -- BECAUSE MANY OF OUR CUSTOMERS FINANCE THEIR
HOME PURCHASES, INCREASED INTEREST RATES COULD LEAD TO FEWER HOME SALES WHICH
WOULD REDUCE OUR REVENUES.
Many purchasers of our homes obtain mortgage loans to finance a substantial
portion of the purchase price of their homes. In general, housing demand is
adversely affected by increases in interest rates, housing costs and
unemployment and by decreases in the availability of mortgage financing. In
addition, there have been discussions of possible changes in the federal income
tax laws which would remove or limit the deduction for home mortgage interest.
If effective mortgage interest rates increase and the ability or willingness of
prospective buyers to finance home purchases is adversely affected, our
operating results may also be negatively affected which may impair our ability
to make payments on the notes.
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AVAILABILITY OF LAND -- BECAUSE OUR BUSINESS DEPENDS ON THE ACQUISITION OF NEW
LAND, THE UNAVAILABILITY OF LAND COULD REDUCE OUR REVENUES OR NEGATIVELY AFFECT
OUR RESULTS OF OPERATIONS.
Our operations and revenues are highly dependent on our ability to expand
our portfolio of land parcels. We may compete for available land with entities
that possess significantly greater financial, marketing and other resources.
Competition generally may reduce the amount of land available as well as
increase the bargaining power of property owners seeking to sell. An inability
to effectively carry out any of our sales activities and development resulting
from the unavailability of land may reduce our revenues or negatively affect our
results of operations.
NATIONAL AND REGIONAL ECONOMIC CONDITIONS -- A DETERIORATION IN NATIONAL AND
REGIONAL ECONOMIC CONDITIONS COULD REDUCE OUR REAL ESTATE SALES AND REVENUES.
Our real estate sales and revenues could decline due to a deterioration in
the regional or national economy. Our sales and revenues would be
disproportionately affected by worsening economic conditions in the Midwestern
and Northeastern United States because we generate a disproportionate amount of
our sales from customers in those regions. In addition, a significant percentage
of our residential units are second home purchases which are particularly
sensitive to the state of the economy.
COMMUNITY RELATIONS -- POOR RELATIONS WITH THE RESIDENTS OF OUR COMMUNITIES
COULD NEGATIVELY IMPACT SALES OF OUR COMMUNITY-BASED PRODUCTS AND SERVICES,
WHICH COULD CAUSE OUR REVENUES OR RESULTS OF OPERATIONS TO DECLINE.
As a community developer, we may be expected by community residents from
time to time to resolve any real or perceived issues or disputes that may arise
in connection with the operation or development of our communities. Any efforts
made by us in resolving these issues or disputes could be deemed unsatisfactory
by the affected residents and any subsequent action by these residents could
negatively impact sales of our community-based products and services, which
could cause our revenues or results of operations to decline. In addition, we
could be required to make material expenditures related to the settlement of
these issues or disputes or modify our community development plans.
RISKS AND COSTS OF EXPANSION -- WE MAY NOT BE SUCCESSFUL IN OUR EFFORTS TO
IDENTIFY, COMPLETE OR INTEGRATE ACQUISITIONS WHICH COULD ADVERSELY AFFECT OUR
RESULTS OF OPERATIONS AND PROSPECTS.
A principal component of our strategy is to continue to grow profitably in
a controlled manner in both existing and new markets by acquiring and developing
land or by acquiring other property developers or homebuilders. However, we may
not be successful in implementing our acquisition strategy and growth may not
continue at historical levels or at all. The failure to identify, acquire and
integrate other businesses or real estate development opportunities effectively
could adversely affect our business, assets, financial condition, results of
operations and prospects.
VARIABILITY IN OUR RESULTS -- WE EXPERIENCE VARIABILITY IN OUR RESULTS OF
OPERATIONS IN EACH QUARTER AND ACCORDINGLY, QUARTER-TO-QUARTER COMPARISONS
SHOULD NOT BE RELIED UPON AS AN INDICATOR OF OUR FUTURE PERFORMANCE.
We have historically experienced, and in the future expect to continue to
experience, variability in our revenue, profit and cash flow. Our historical
financial performance is not necessarily a meaningful indicator of future
results and, in particular, we expect financial results to vary from project to
project and from quarter to quarter. Our revenue may therefore fluctuate
significantly on a quarterly basis and we believe that quarter-to-quarter
comparisons of our results should not be relied upon as an indicator of future
performance. See "Business -- Seasonality" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
We commence construction of a portion of our single- and multi-family homes
prior to obtaining non-cancellable sales contracts for those residences. As of
March 31, 2001, we had 416 unsold homes in inventory, 64 of which had been
completed. Fourteen of the completed homes have been unsold for more than twelve
months. Depending on the level of demand for these residences, some or all of
these residences may not be sold at the prices or in the quantities originally
expected.
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RISK OF NONRECEIPT OF ALREADY RECOGNIZED REVENUE AND PROFIT ON TOWER RESIDENCE
SALES -- IF WE DO NOT RECEIVE CASH CORRESPONDING TO PREVIOUSLY RECOGNIZED
REVENUES, OUR ACTUAL REVENUES COULD BE LOWER THAN EXPECTED WHICH COULD AFFECT
OUR ABILITY TO PAY OUR INDEBTEDNESS.
In accordance with generally accepted accounting principles, we recognize
revenues and profits from sales of tower residences during the course of
construction. Revenue is recorded when construction is beyond a preliminary
stage, the buyer is committed to the extent of being unable to require a refund
of a significant deposit except for nondelivery of the residence, a majority of
residences are under firm contract and costs can be reasonably estimated. Due to
various contingencies, like delayed construction and buyer defaults or cost
overruns, we may receive less cash than the amount of revenue already recognized
or the cash may be received at a later date than we expected which could affect
our profitability and ability to pay our debts. As of March 31, 2001, we had 579
residences under construction, of which 463 residences met the criteria for
partial revenue recognition.
RISKS ASSOCIATED WITH OUR GEOGRAPHIC CONCENTRATION IN FLORIDA -- AN ECONOMIC
DOWNTURN IN FLORIDA COULD REDUCE OUR REVENUES OR ABILITY TO GROW OUR BUSINESS.
We currently develop and sell our properties only in Florida. Consequently,
any economic downturn in Florida could reduce our revenues or ability to grow
our business. In addition, the appeal of becoming an owner of one of our
residential units may decrease if potential purchasers do not continue to view
the locations of our communities as attractive second home or retirement
destinations.
RISKS ASSOCIATED WITH NATURAL DISASTERS -- OUR REVENUES AND PROFITABILITY, AND
OR AS A RESULT OUR ABILITY TO REPAY OUR INDEBTEDNESS, MAY BE ADVERSELY AFFECTED
BY NATURAL DISASTERS.
The Florida climate presents risks of natural disasters. To the extent that
hurricanes, severe storms, floods or other natural disasters or similar events
occur, our business may be adversely affected. Our insurance may not be adequate
to cover business interruption or losses resulting therefrom, which may reduce
our revenues and profitability and or as a result adversely affect our ability
to pay our indebtedness.
RISKS ASSOCIATED WITH OUR INDUSTRY -- LAWS AND REGULATIONS RELATED TO PROPERTY
DEVELOPMENT MAY SUBJECT US TO ADDITIONAL COSTS AND DELAYS WHICH COULD REDUCE OUR
REVENUES AND PROFITS.
We are subject to a variety of statutes, ordinances, rules and regulations
governing certain developmental matters, building and site design which may
impose additional costs and delays on us which could reduce our revenues,
profits or prospects. In particular, we may be required to obtain the approval
of numerous governmental authorities regulating matters like permitted land
uses, levels of density and the installation of utility services like gas,
electric, water and waste disposal. In addition, fees, some of which may be
substantial, may be imposed to defray the cost of providing certain governmental
services and improvements. We also may be subject to additional costs or delays
or may be precluded from building a project entirely because of "no growth" or
"slow growth" initiatives, building permit allocation ordinances, building
moratoriums, restrictions on the availability of utility services or similar
governmental regulations that could be imposed in the future. These ordinances,
moratoriums or restrictions, if imposed, could reduce our revenues, profits or
ability to grow our business.
In addition, some of our recently acquired land, including the land
acquired from the MacArthur Foundation, as described in the section captioned
"Business," has not yet received planning approvals or entitlements necessary
for development. Failure to obtain entitlement of this land on a timely basis
may adversely affect our future results and prospects. This land may not become
entitled on a timely basis.
ENVIRONMENTAL REGULATION -- COMPLIANCE WITH APPLICABLE ENVIRONMENTAL LAWS MAY
SUBSTANTIALLY INCREASE OUR COSTS OF DOING BUSINESS WHICH COULD REDUCE OUR
REVENUES.
We are subject to various laws and regulations relating to the operation of
our properties, which are administered by numerous federal, state and local
governmental agencies. See "Business -- Regulatory and Environmental Matters."
Our growth and development opportunities in Florida may be limited and more
costly as a result of legislative, regulatory or municipal requirements. The
inability to grow our business or pay these costs could reduce our revenues. In
addition, our operating costs may also be affected by our
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compliance with, or our being subject to, environmental laws, ordinances and
regulations relating to hazardous or toxic substances of, under, or in such
property. These costs could be significant and could result in decreased
revenues or the inability to develop the land as originally intended. See
"Business -- Regulatory and Environmental Matters."
FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements that relate to our
future prospects, developments and business strategies. The statements contained
in this prospectus that are not statements of historical fact may include
forward-looking statements that involve a number of risks and uncertainties. We
have used the words "may," "will," "expect," "anticipate," "believe,"
"estimate," "plan," "intend" and similar expressions in this prospectus to
identify forward-looking statements. These forward-looking statements are made
based on our expectations and beliefs concerning future events affecting us and
are subject to uncertainties and factors relating to our operations and business
environment, all of which are difficult to predict and many of which are beyond
our control, that could cause our actual results to differ materially from those
matters expressed in or implied by these forward-looking statements. The
following factors are among those that could cause our actual results to differ
materially from the forward-looking statements:
- our ability to grow our operations on a profitable basis;
- our ability to compete in the Florida real estate market;
- our ability to obtain necessary permits and approvals for the development
of our land;
- our ability to retain or replace our executive officers and other key
members of management;
- our ability to pay principal and interest on our substantial debt;
- our ability to borrow in the future;
- adverse legislation or regulation;
- our ability to sustain or increase historical revenues and profit
margins; and
- continuation of certain trends and general economic conditions in our
industry.
All forward-looking statements attributable to us or any persons acting on
our behalf are expressly qualified in their entirety by these cautionary
statements.
Our risks are more specifically described in "Risk Factors." If one or more
of these risks or uncertainties materializes, or if underlying assumptions prove
incorrect, our actual results may vary materially from those expected, estimated
or projected.
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THE COMPANY
The original predecessor to WCI Communities was established in 1946 as
Coral Ridge Properties, Inc., which undertook as its first project the
development of the Galt Ocean Mile, a 2,500-acre oceanfront community located in
Fort Lauderdale. Today, the area is home to approximately 8,000 homes and
approximately 7,000 apartments and condominiums. In the early 1960s, Coral Ridge
began acquiring large sections of land in rural Broward County, which by 1963
had become the city of Coral Springs, now Florida's eleventh largest city with a
population of approximately 116,000. In 1966, Coral Ridge was sold to the
Westinghouse Electric Corporation. Under Westinghouse Electric's ownership, our
predecessor began its west coast Florida operations in the early 1970s with the
purchase of approximately 2,500 acres in North Naples, known today as the
community of Pelican Bay, and continued its west coast expansion by acquiring
additional large tracts of land for the development of its Gateway, Pelican
Landing and Pelican Marsh communities. In 1989, marking its entry into
homebuilding, our predecessor began building the first of its highly amenitized
luxury high-rise complexes. In 1995, Coral Ridge began building homes in certain
of its communities.
In 1985, members of our senior management, Messrs. Hoffman and Ackerman,
began building a real estate business which, in 1994, began operating as Florida
Design. Florida Design was a fully integrated developer of leisure-oriented
master-planned communities that built most of the homes in its communities.
During its history, Florida Design's growth was characterized by the acquisition
of underperforming assets which it developed into a number of successful
master-planned communities. From 1987 to November 1998, Florida Design
constructed approximately 4,500 homes and, from 1985 to November 1998, developed
five communities located throughout central and southern Florida. Florida Design
offered single-and multi-family homes marketed primarily to pre-retirement and
retirement buyers. Florida Design owned and operated several of the amenities at
its communities and operated other companies that supported its core business,
including residential brokerage entities, a mortgage company, a title insurance
agency and a property management company.
Certain stockholders of Florida Design led a group of equity investors in
acquiring Westinghouse Electric's real estate business unit in a transaction
valued at approximately $600.0 million. In the July 1995 acquisition, this
business unit was merged with and into WCI Communities Limited Partnership and
was restructured as a limited partnership. From July 1995 until the merger of
WCI Communities Limited Partnership and Florida Design, Mr. Hoffman served as
Chief Executive Officer of WCI Communities Limited Partnership and Mr. Ackerman
served as Chairman of the board of directors and Executive Vice President of WCI
Communities Limited Partnership, and both have continued to serve in these
capacities for WCI Communities since the merger and reorganization. In April
1998, we purchased from CBS Corporation, the successor to Westinghouse Electric
Corporation, its remaining investment in WCI Communities Limited Partnership.
In November 1998, Watermark Communities completed a reorganization of WCI
Communities Limited Partnership pursuant to which each of WCI Communities
Limited Partnership and Florida Design became wholly-owned subsidiaries of
Watermark Communities, a new holding company, and each of the limited partners
of WCI Communities Limited Partnership and shareholders of Florida Design became
shareholders in Watermark Communities. In June 1999, WCI Communities Limited
Partnership merged with and into Florida Design, and simultaneously with the
merger, Florida Design, the surviving corporation in the merger, changed its
name to WCI Communities, Inc., the issuer of the notes. As a result of the
merger, WCI Communities became the sole wholly-owned subsidiary of Watermark
Communities.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
We have entered into a registration rights agreement with the initial
purchasers of the outstanding notes in which we and our subsidiaries agreed,
under some circumstances, to file a registration statement relating to an offer
to exchange the outstanding notes for exchange notes. We and our subsidiaries
also agreed to use our reasonable best efforts to cause the offer to be
consummated within 190 days following the original issue of the outstanding
notes. The exchange notes will have terms substantially identical to the
outstanding notes, except that the exchange notes will not contain terms with
respect to transfer restrictions, registration rights and liquidated damages for
failure to observe some obligations in the registration rights agreement. The
outstanding notes were issued on February 20, 2001.
Under the circumstances set forth below, we will use our reasonable best
efforts to cause the SEC to declare effective a shelf registration statement
with respect to the resale of the outstanding notes and keep the statement
effective for up to two years after the effective date of the shelf registration
statement. These circumstances include:
- because of any change in law or applicable interpretations of those laws
by the staff of the SEC do not permit us to effect the exchange offer as
contemplated by the registration rights agreement;
- if any outstanding notes validly tendered in the exchange offer are not
exchanged for exchange notes within 190 days after the original issue of
the outstanding notes;
- if any initial purchaser of the outstanding notes so requests, but only
with respect to any outstanding notes not eligible to be exchanged for
exchange notes in the exchange offer; or
- if any holder of the outstanding notes notifies us that it is not
permitted to participate in the exchange offer or would not receive fully
tradeable exchange notes in the exchange offer and so requests a shelf
registration statement.
If we fail to comply with some obligations under the registration rights
agreement, we will be required to pay additional cash to holders of the
outstanding notes.
Each holder of outstanding notes that wishes to exchange outstanding notes
for transferable exchange notes in the exchange offer will be required to make
the following representations:
- any exchange notes will be acquired in the ordinary course of its
business;
- the holder has no arrangement with any person to participate in the
distribution of the exchange notes;
- the holder is not an "affiliate," as defined in Rule 405 of the
Securities Act, of ours or if it is an affiliate, that it will comply with
applicable registration and prospectus delivery requirements of the
Securities Act;
- if the holder is not a broker-dealer, that it is not engaged in, and does
not intend to engage in, the distribution of the exchange notes; and
- if the holder is a broker-dealer, that it will receive exchange notes for
its own account in exchange for outstanding notes that were acquired as a
result of market-making activities or other trading activities and that it
will be required to acknowledge that it will deliver a prospectus in
connection with any resale of the exchange notes. See "Plan of
Distribution."
RESALE OF EXCHANGE NOTES
Based on interpretations of the SEC staff set forth in no action letters
issued to unrelated third parties, we believe that exchange notes issued under
the exchange offer in exchange for outstanding notes
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may be offered for resale, resold and otherwise transferred by any exchange note
holder without compliance with the registration and prospectus delivery
provisions of the Securities Act, if:
- the holder is not an "affiliate" of ours within the meaning of Rule 405
under the Securities Act;
- the exchange notes are acquired in the ordinary course of the holder's
business; and
- the holder does not intend to participate in the distribution of the
exchange notes.
Any holder who tenders in the exchange offer with the intention of
participating in any manner in a distribution of the exchange notes:
- cannot rely on the position of the staff of the SEC enunciated in Exxon
Capital Holdings Corporation or similar interpretive letters; and
- must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with a secondary resale transaction.
This prospectus may be used for an offer to resell, for the resale or for
other retransfer of exchange notes only as specifically set forth in this
prospectus. With regard to broker-dealers, only broker-dealers that acquired the
outstanding notes as a result of market-making activities or other trading
activities may participate in the exchange offer. Each broker-dealer that
receives exchange notes for its own account in exchange for outstanding notes,
where the outstanding notes were acquired by the broker-dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of the exchange notes.
Please read the section captioned "Plan of Distribution" for more details
regarding the transfer of exchange notes.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this prospectus
and in the accompanying letter of transmittal, we will accept for exchange any
outstanding notes properly tendered and not withdrawn prior to the expiration
date. We will issue $1,000 principal amount of exchange notes in exchange for
each $1,000 principal amount of outstanding notes surrendered under the exchange
offer. Outstanding notes may be tendered only in integral multiples of $1,000.
The form and terms of the exchange notes will be substantially identical to
the form and terms of the outstanding notes except the exchange notes will be
registered under the Securities Act, will not bear legends restricting their
transfer and will not provide for any liquidated damages upon our failure to
fulfill our obligations under the registration rights agreement to file, and
cause to be effective, a registration statement. The exchange notes will
evidence the same debt as outstanding notes. The exchange notes will be issued
under and entitled to the benefits of the same indenture that authorized the
issuance of the outstanding notes.
The exchange offer is not conditioned upon any minimum aggregate principal
amount of outstanding notes being tendered for exchange.
As of the date of this prospectus, $250.0 million aggregate principal
amount of the outstanding notes are outstanding. This prospectus and a letter of
transmittal are being sent to all registered holders of outstanding notes. There
will be no fixed record date for determining registered holders of outstanding
notes entitled to participate in the exchange offer.
We intend to conduct the exchange offer in accordance with the provisions
of the registration rights agreement, the applicable requirements of the
Securities Act and the Exchange Act of 1934 or the Exchange Act and the rules
and regulations of the SEC. Outstanding notes that are not tendered for exchange
in the exchange offer will remain outstanding and continue to accrue interest
and will be entitled to the rights and benefits the holders have under the
indenture relating to the outstanding notes, except for any rights under the
registration rights agreement that by their terms terminate upon the
consummation of the exchange offer.
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We will be deemed to have accepted for exchange properly tendered
outstanding notes when we have given oral or written notice of the acceptance to
the exchange agent. The exchange agent will act as agent for the tendering
holders for the purposes of receiving the exchange notes from us and delivering
exchange notes to the holders. Under the terms of the registration rights
agreement, we reserve the right to amend or terminate the exchange offer, and
not to accept for exchange any old notes not previously accepted for exchange,
upon the occurrence of any of the conditions specified below under the caption
"-- Material Conditions to the Exchange Offer."
Holders who tender outstanding notes in the exchange offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the letter of transmittal, transfer taxes with respect to the exchange of
outstanding notes. We will pay all charges and expenses, other than certain
applicable taxes described below, in connection with the exchange offer. It is
important that you read the section labeled "-- Fees and Expenses" below for
more details regarding fees and expenses incurred in the exchange offer.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The exchange offer will expire at 5:00 p.m., New York City time on
, 2001, unless in our sole discretion we extend it.
In order to extend the exchange offer, we will notify the exchange agent
orally or in writing of any extension. We will notify the registered holders of
outstanding notes of the extension no later than 9:00 a.m., New York City time,
on the business day after the previously scheduled expiration date.
We reserve the right, in our sole discretion:
- to delay accepting for exchange any outstanding notes;
- to extend the exchange offer or to terminate the exchange offer and to
refuse to accept outstanding notes not previously accepted if any of the
conditions set forth below under "-- Material Conditions to the Exchange
Offer" have not been satisfied, by giving oral or written notice of such
delay, extension or termination to the exchange agent; or
- under the terms of the registration rights agreement, to amend the terms
of the exchange offer in any manner.
Any delay in acceptance, extension, termination, or amendment will be
followed as promptly as practicable by oral or written notice to the registered
holders of outstanding notes. If we amend the exchange offer in a manner that we
determine constitutes a material change, we will promptly disclose the amendment
in a manner reasonably calculated to inform the holder of outstanding notes of
the amendment.
Without limiting the manner in which we may choose to make public
announcements of any delay in acceptance, extension, termination or amendment of
the exchange offer, we will have no obligation to publish, advertise, or
otherwise communicate any public announcement, other than by making a timely
release to a financial news service.
MATERIAL CONDITIONS TO THE EXCHANGE OFFER
Despite any other term of the exchange offer, we will not be required to
accept for exchange, or exchange any exchange notes for, any outstanding notes,
and we may terminate the exchange offer as provided in this prospectus before
accepting any outstanding notes for exchange if in our reasonable judgment:
- the exchange notes to be received will not be tradable by the holder,
without restriction under the Securities Act, the Exchange Act and without
material restrictions under the blue sky or securities laws of
substantially all of the states of the United States;
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- the exchange offer, or the making of any exchange by a holder of
outstanding notes, would violate applicable law or any applicable
interpretation of the SEC staff; or
- any action or proceeding has been instituted or threatened in any court
or by or before any governmental agency with respect to the exchange offer
that, in our judgment, would reasonably be expected to impair our ability
to proceed with the exchange offer.
In addition, we will not be obligated to accept for exchange the
outstanding notes of any holder that has not made to us:
- the representations described under "-- Purpose and Effect of the
Exchange Offer," "-- Procedures for Tendering" and "Plan of Distribution";
and
- other representations as may be reasonably necessary under applicable SEC
rules, regulations or interpretations to make available to it an
appropriate form for registration of the exchange notes under the
Securities Act.
We expressly reserve the right, at any time or at various times, to extend
the period of time during which the exchange offer is open. Consequently, we may
delay acceptance of any outstanding notes by giving oral or written notice of
the extension to their holders. During any extensions, all outstanding notes
previously tendered will remain subject to the exchange offer, and we may accept
them for exchange. We will return any outstanding notes that we do not accept
for exchange for any reason without expense to their tendering holder as
promptly as practicable after the expiration or termination of the exchange
offer.
We expressly reserve the right to amend or terminate the exchange offer,
and to reject for exchange any outstanding notes not previously accepted for
exchange, upon the occurrence of any of the conditions of the exchange offer
specified above. We will give oral or written notice of any extension,
amendment, non-acceptance, or termination to the holders of the outstanding
notes as promptly as practicable.
Those conditions are for our sole benefit and we may assert them regardless
of the circumstances that may give rise to them or waive them in whole or in
part at any or at various times in our sole discretion. If we fail at any time
to exercise any of these rights, this failure will not constitute a waiver of
this right. Each right will be deemed an ongoing right that we may assert at any
time or at various times.
In addition, we will not accept for exchange any outstanding notes
tendered, and will not issue exchange notes in exchange for any outstanding
notes, if at the time any stop order will be threatened or in effect with
respect to the registration statement of which this prospectus constitutes a
part or the qualification of the indenture under the Trust Indenture Act.
PROCEDURES FOR TENDERING
Only a holder of outstanding notes may tender the outstanding notes in the
exchange offer. To tender in the exchange offer, a holder must:
- complete, sign and date the accompanying letter of transmittal, or a
facsimile of the letter of transmittal; have the signature on the letter
of transmittal guaranteed if the letter of transmittal so requires; and
mail or deliver the letter of transmittal or facsimile to the exchange
agent prior to the expiration date; or
- comply with DTC's Automated Tender Offer Program procedures described
below.
In addition, either:
- the exchange agent must receive the outstanding notes along with the
accompanying letter of transmittal; or
- the exchange agent must receive, prior to the expiration date, a timely
confirmation of book-entry transfer of the outstanding notes into the
exchange agent's account at DTC according to the procedures for book-entry
transfer described below or a properly transmitted agent's message; or
- the holder must comply with the guaranteed delivery procedures described
below.
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To be tendered effectively, the exchange agent must receive any physical
delivery of a letter of transmittal and other required documents at the address
set forth below under "-- Exchange Agent" prior to the expiration date.
The tender by a holder of outstanding notes that is not withdrawn prior to
the expiration date will constitute an agreement between the holder of
outstanding notes and us in accordance with the terms and subject to the
conditions set forth in this prospectus and in the accompanying letter of
transmittal.
The method of delivery of outstanding notes, the letter of transmittal and
all other required documents to the exchange agent is at the holder's election
and risk. Rather than mail these items, we recommend that holders use an
overnight or hand delivery service. In all cases, holders should allow
sufficient time to assure delivery to the exchange agent before the expiration
date. Holders should not send the letter of transmittal or outstanding notes to
us. Holders may request their respective brokers, dealers, commercial banks,
trust companies or other nominees to effect the above transactions for them.
Any beneficial owner whose outstanding notes are registered in the name of
a broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and instruct it to
tender on the owners' behalf. If the beneficial owner wishes to tender on its
own behalf, it must, prior to completing and executing the accompanying letter
of transmittal and delivering its outstanding notes either:
- make appropriate arrangements to register ownership of the outstanding
notes in such owner's name; or
- obtain a properly completed bond power from the registered holder of
outstanding notes.
The transfer of registered ownership may take considerable time and may not
be completed prior to the expiration date.
Signatures on a letter of transmittal or a notice of withdrawal described
below must be guaranteed by a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the United
States or another "eligible institution" within the meaning of Rule 17Ad-15
under the Exchange Act, unless the outstanding notes are tendered:
- by a registered holder who has not completed the box entitled "Special
Issuance Instructions" or "Special Delivery Instructions" on the
accompanying letter of transmittal; or
- for the account of an eligible institution.
If the accompanying letter of transmittal is signed by a person other than
the registered holder of any outstanding notes listed on the outstanding notes,
the outstanding notes must be endorsed or accompanied by a properly completed
bond power. The bond power must be signed by the registered holder as the
registered holder's name appears on the outstanding notes and an eligible
institution must guarantee the signature on the bond power.
If the accompanying letter of transmittal or any outstanding notes or bond
powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, these persons should so indicate when signing. Unless
waived by us, they should also submit evidence satisfactory to us of their
authority to deliver the accompanying letter of transmittal.
The exchange agent and DTC have confirmed that any financial institution
that is a participant in DTC's system may use DTC's Automated Tender Offer
program to tender. Participants in the program may, instead of physically
completing and signing the accompanying letter of transmittal and delivering it
to the exchange agent, transmit their acceptance of the exchange offer
electronically. They may do so by causing DTC to transfer the outstanding notes
to the exchange agent in accordance with its procedures for transfer. DTC will
then send an agent's message to the exchange agent. The term "agent's message"
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means a message transmitted by DTC, received by the exchange agent and forming
part of the book-entry confirmation, to the effect that:
- DTC has received an express acknowledgment from a participant in its
Automated Tender Offer Program that is tendering outstanding notes that
are the subject of the book-entry confirmation;
- the participant has received and agrees to be bound by the terms of the
accompanying letter of transmittal, or, in the case of an agent's message
relating to guaranteed delivery, that the participant has received and
agrees to be bound by the applicable notice of guaranteed delivery; and
- the agreement may be enforced against that participant.
We will determine in our sole discretion all outstanding questions as to
the validity, form, eligibility, including time or receipt, acceptance of
tendered outstanding notes and withdrawal of tendered outstanding notes. Our
determination will be final and binding. We reserve the absolute right to reject
any outstanding notes not properly tendered or any outstanding notes the
acceptance of which would, in the opinion of our counsel, be unlawful. We also
reserve the right to waive any defects, irregularities or conditions of tender
as to particular outstanding notes. Our interpretation of the terms and
conditions of the exchange offer, including the instructions in the accompanying
letter of transmittal, will be final and binding on all parties. Unless waived,
any defects or irregularities in connection with tenders of outstanding notes
must be cured within the time as we will determine. Although we intend to notify
holders of defects or irregularities with respect to tenders of outstanding
notes, neither we, the exchange agent nor any other person will incur any
liability for failure to give any notification. Tenders of outstanding notes
will not be deemed made until any defects or irregularities have been cured or
waived. Any outstanding notes received by the exchange agent that are not
properly tendered and as to which the defects or irregularities have not been
cured or waived will be returned to the exchange agent without cost to the
tendering holder, unless otherwise provided in the letter of transmittal, as
soon as practicable following the expiration date.
In all cases, we will issue exchange notes for outstanding notes that we
have accepted for exchange under the exchange offer only after the exchange
agent timely receives:
- outstanding notes or a timely book-entry confirmation of the outstanding
notes into the exchange agent's account at DTC; and
- a properly completed and duly executed letter of transmittal and all
other required documents or a properly transmitted agent's message.
By signing the accompanying letter of transmittal or authorizing the
transmission of the agent's message, each tendering holder of outstanding notes
will represent or be deemed to have represented to us that, among other things:
- any exchange notes that the holder receives will be acquired in the
ordinary course of its business;
- the holder has no arrangement or understanding with any person or entity
to participate in the distribution of the exchange notes;
- if the holder is not a broker-dealer, that is not engaged in and does not
intend to engage in the distribution of the exchange notes;
- if the holder is a broker-dealer that will receive exchange notes for its
own account in exchange for outstanding notes that were acquired as a
result of market-making activities, that it will deliver a prospectus, as
required by law, in connection with any resale of any exchange notes; and
- the holder is not an "affiliate," as defined in Rule 405 of the
Securities Act, of ours or, if the holder is an affiliate, it will comply
with any applicable registration and prospectus delivery requirements of
the Securities Act.
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BOOK-ENTRY TRANSFER
The exchange agent will make a request to establish an account with respect
to the outstanding notes at DTC for purposes of the exchange offer promptly
after the date of this prospectus. Any financial institution participating in
DTC's system may make book-entry delivery of outstanding notes by causing DTC to
transfer the outstanding notes into the exchange agent's account at DTC in
accordance with DTC's procedures for transfer. Holders of outstanding notes who
are unable to deliver confirmation of the book-entry tender of their outstanding
notes into the exchange agent's account at DTC or all other documents required
by the letter of transmittal to the exchange agent on or prior to the expiration
date must tender their outstanding notes according to the guaranteed delivery
procedures described below.
GUARANTEED DELIVERY PROCEDURES
Holders wishing to tender their outstanding notes but whose outstanding
notes are not immediately available or who cannot deliver their outstanding
notes, the accompanying letter of transmittal or any other required documents to
the exchange agent or comply with the applicable procedures under DTC's
Automated Tender Offer Program prior to the expiration date may tender if:
- the tender is made through an eligible institution;
- prior to the expiration date, the exchange agent receives from the
eligible institution either a properly completed and duly executed notice
of guaranteed delivery, by facsimile transmission, mail or hand delivery,
or a properly transmitted agent's message and notice of guaranteed
delivery:
- setting forth the name and address of the holder, the registered
number(s) of the outstanding notes and the principal amount of
outstanding notes tendered;
- stating that the tender is being made thereby; and
- guaranteeing that, within three New York Stock Exchange trading days
after the expiration date, the accompanying letter of transmittal, or
facsimile of the letter of transmittal, together with the outstanding
notes or a book-entry confirmation, and any other documents required by
the accompanying letter of transmittal will be deposited by the
eligible institution with the exchange agent; and
- the exchange agent receives the properly completed and executed letter of
transmittal, or facsimile of the executed letter of transmittal, as well
as all tendered outstanding notes in proper form for transfer or a
book-entry confirmation, and all other documents required by the
accompanying letter of transmittal, within three New York Stock Exchange
trading days after the expiration date.
Upon request to the exchange agent, a notice of guaranteed delivery will be
sent to holders who wish to tender their outstanding notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided in this prospectus, holders of outstanding
notes may withdraw their tenders at any time prior to the expiration date.
For a withdrawal to the effective:
- the exchange agent must receive a written notice of withdrawal, which
notice may be by telegram, telex, facsimile transmission or letter of
withdrawal at one of the addresses set forth below under "-- Exchange
Agent"; or
- holders must comply with the appropriate procedures of DTC's Automated
Tender Offer Program system.
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35
Any notice of withdrawal must:
- specify the name of the person who tendered the outstanding notes to be
withdrawn;
- identify the outstanding notes to be withdrawn, including the principal
amount of the outstanding notes; and
- where certificates for outstanding notes have been transmitted, specify
the name in which the outstanding notes were registered, if different from
that of the withdrawing holder.
If certificates for outstanding notes have been delivered or otherwise
identified to the exchange agent, then, prior to the release of the
certificates, the withdrawing holder must also submit:
- the serial numbers of the particular certificates to be withdrawn; and
- a signed notice of withdrawal with signatures guaranteed by an eligible
institution unless the holder is an eligible institution.
If outstanding notes have been tendered pursuant to the procedure for
book-entry transfer described above, any notice of withdrawal must specify the
name and number of the account at DTC to be credited with the withdrawn
outstanding notes and otherwise comply with the procedures of that facility. We
will determine all questions as to the validity, form and eligibility, including
time of receipt, of the notices, and our determination will be final and binding
on all parties. We will deem any outstanding notes so withdrawn not to have
validly tendered for exchange for purposes of the exchange offer. Any
outstanding notes that have been tendered for exchange but that are not
exchanged for any reason will be returned to their holder without cost to the
holder, or, in the case of outstanding notes tendered by book-entry transfer
into the exchange agent's account at DTC according to the procedures described
above, the outstanding notes will be credited to an account maintained with DTC
for outstanding notes, as soon as practicable after withdrawal, rejection of
tender or termination of the exchange offer. Properly withdrawn, outstanding
notes may be retendered by following one of the procedures described under
"-- Procedures for Tendering" above at any time on or prior to the expiration
date.
EXCHANGE AGENT
The Bank of New York has been appointed as exchange agent for the exchange
offer. You should direct questions and requests for assistance, requests for
additional copies of this prospectus or of the letter of transmittal and
requests for the notice of guaranteed delivery to the exchange agent as follows:
FOR DELIVERY BY REGISTERED OR CERTIFIED MAIL: FOR OVERNIGHT DELIVERY ONLY:
The Bank of New York The Bank of New York
101 Barclay Street 101 Barclay Street
New York, New York 10286 New York, New York 10286
Attention: Reorganization Section/7E Attention: Reorganization Section/7E
BY HAND: BY FACSIMILE TRANSACTION
The Bank of New York (for eligible institutions only):
101 Barclay Street
New York, New York 10286
Confirm facsimile by telephone only:
Attention: Reorganization Section/7E
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT
CONSTITUTE A VALID DELIVERY OF THE LETTER OF TRANSMITTAL.
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FEES AND EXPENSES
We will bear the expenses of soliciting tenders. The principal solicitation
is being made by mail; however, we may make additional solicitations by
telephone or in person by our officers and regular employees and those of our
affiliates.
We have not retained any dealer-manager in connection with the exchange
offer and will not make any payments to broker-dealers or others soliciting
acceptance of the exchange offer. We will, however, pay the exchange agent
reasonable and customary fees for its services and reimburse it for its related
reasonable out-of-pocket expenses.
We will pay the cash expenses to be incurred in connection with the
exchange offer. The expenses are estimated in the aggregate to be approximately
$500,000. They include:
- SEC registration fees;
- fees and expenses of the exchange agent and trustee;
- accounting and legal fees and printing costs; and
- related fees and expenses.
TRANSFER TAXES
We will pay all transfer taxes, if any, applicable to the exchange of
outstanding notes under the exchange offer. The tendering holder, however, will
be required to pay any transfer taxes, whether imposed on the registered holder
or any other person, if:
- certificates representing outstanding notes for principal amounts not
tendered or accepted for exchange are to be delivered to, or are to be
issued in the name of, any person other than the registered holder of
outstanding notes tendered;
- tendered outstanding notes are registered in the name of any person other
than the person signing the letter of transmittal; or
- a transfer tax is imposed for any reason other than the exchange of
outstanding notes under the exchange offer.
If satisfactory evidence of payment of the taxes is not submitted with the
letter of transmittal, the amount of the transfer taxes will be billed to that
tendering holder.
Holders who tender their outstanding notes for exchange will not be
required to pay any transfer taxes. However, holders who instruct us to register
exchange notes in the name of, or request that outstanding notes not tendered or
not accepted in the exchange offer be returned to, a person other than the
registered tendering holder will be required to pay any applicable transfer tax.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of outstanding notes who do not exchange their outstanding notes
for exchange notes under the exchange offer will remain subject to the
restrictions on transfer of the outstanding notes:
- as set forth in the legend printed on the outstanding notes as a
consequence of the issuance of the outstanding notes under the exemption
from, or in transactions not subject to, the registration requirements of
the Securities Act and applicable state securities laws; and
- otherwise as set forth in the prospectus distributed in connection with
the private offering of the outstanding notes.
In general, you may not offer or sell the outstanding notes unless they are
registered under the Securities Act, or if the offer or sale is exempt from
registration under the Securities Act and applicable state securities laws.
Except as required by the registration rights agreement, we do not intend to
register
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resales of the outstanding notes under the Securities Act. Based on
interpretations of the SEC staff, exchange notes issued under the exchange offer
may be offered for resale, resold or otherwise transferred by their holders
(other than any holder that is our "affiliate" within the meaning of Rule 405
under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that the holders
acquired the exchange notes in the ordinary course of the holders' business and
the holders have no arrangement or understanding with respect to the
distribution of the exchange notes to be acquired in the exchange offer. Any
holder who tenders in the exchange offer for the purpose of participating in a
distribution of the exchange notes:
- cannot rely on the applicable interpretations of the SEC; and
- must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with a secondary resale transaction.
ACCOUNTING TREATMENT
We will record the exchange notes in our accounting records at the same
carrying value as the outstanding notes, which is the aggregate principal
amount, as reflected in our accounting records on the date of exchange.
Accordingly, we will not recognize any gain or loss for accounting purposes in
connection with the exchange offer. The expenses of the exchange offer will be
deferred and amortized over the term of the related notes.
OTHER
Participation in the exchange offer is voluntary, and you should carefully
consider whether to accept. You are urged to consult your financial and tax
advisors in making your own decision on what action to take.
We may in the future seek to acquire untendered outstanding notes in open
market or privately negotiated transactions, through subsequent exchange offers
or otherwise. We have no present plans to acquire any outstanding notes that are
not tendered in the exchange offer or to file a registration statement to permit
resales of any untendered outstanding notes.
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USE OF PROCEEDS
We will not receive any cash proceeds from the issuance of the exchange
notes. In consideration for issuing the exchange notes as contemplated in this
prospectus, we will receive in exchange a like principal amount of the
outstanding notes, the terms of which are identical in all material respects to
the exchange notes. The outstanding notes surrendered in exchange for the
exchange notes will be retired and canceled and cannot be reissued. Accordingly,
issuance of the exchange notes will not result in any change in our
capitalization.
We received net proceeds of $241.0 million from the sale of the outstanding
notes (after deducting the underwriting discount and approximate expenses of the
offering of the outstanding notes) which were used to repay the indebtedness set
forth below as of March 31, 2001:
Senior secured credit facility(1)........................... $ 80.4 million
Finance subsidiary debt(2).................................. 72.5 million
Subordinated notes payable to related parties(3)............ 44.6 million
Subordinated notes payable to bank(4)....................... 12.4 million
Pelican Sound land repurchase liability(5).................. 6.2 million
Sun City Center Ft. Myers land repurchase liability(6)...... 13.1 million
--------------
Total....................................................... $229.2 million
==============
We are using the remaining net proceeds of $11.8 million from the sale of the
outstanding notes for general corporate purposes.
- ---------------
(1) Our senior secured credit facility matures in February 2004 and has a term
component of $250.0 million and a revolving component of $200.0 million. The
senior secured credit facility bears interest at a rate, at our option, of
the lender's base rate plus 0.25% or the Eurodollar rate plus 2.75%.
(2) Represents repayment of our finance subsidiary debt of $72.5 million, which
matures in December 2002 and bears interest at a rate of LIBOR plus 6.0%.
(3) Represents repayment of the $27.0 million of subordinated notes due June
2004, bearing interest at a rate of 13% originally issued by WCI Communities
Limited Partnership in July 1995 to affiliates of its limited partners in
connection with the purchase of WCI Communities Limited Partnership from
Westinghouse Electric; $2.6 million of subordinated notes due May 2001, at
rates ranging from the prime rate plus 2.5% to the prime rate plus 3.0%,
originally issued by Florida Design to its stockholders in March 1993; and
$15.0 million of subordinated notes due June 2004, bearing interest at 13%,
issued by Florida Design to its stockholders in July 1998.
(4) Represents $10.6 million of subordinated notes due January 2004 payable to
Fleet National Bank, N.A., bearing interest at a rate of 15% compounded
monthly; and $1.8 million of subordinated notes due January 2004 payable to
Fleet National Bank, N.A., bearing interest at rates ranging from the prime
rate plus 2.5% to the prime rate plus 3.0%.
(5) Represents the amount required to repurchase the remaining property within
the Pelican Sound Community, previously sold to a third party. This
liability accrues interest at a rate equal to prime plus 9.75% times the
unpaid amount of the liability.
(6) Represents the amount required to repurchase the remaining property within
the Sun City Center Ft. Myers Community, previously sold to a third party.
This liability accrues interest at a rate equal to prime plus 8.25% times
the unpaid amount of the liability.
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CAPITALIZATION
The following table sets forth our consolidated capitalization as of March
31, 2001. This table should be read in conjunction with our historical financial
statements including the introductory paragraphs and notes appearing elsewhere
in this prospectus. The issuance of the exchange notes will not result in any
change in our capitalization.
MARCH 31, 2001
--------------
(in thousands)
Cash and cash equivalents................................... $ 20,863
========
Debt obligations (including current portion):
Revolving credit facility................................. $ 17,200(1)
Term loan facility........................................ 250,000
Project debt.............................................. 104,908
Land repurchase liabilities............................... --
Notes..................................................... 250,000
Subordinated debt......................................... --
--------
Total debt obligations................................. 622,108
Total shareholders' equity.................................. 326,255
--------
Total capitalization................................... $948,363
========
- ---------------
(1) As of March 31, 2001, we had approximately $182.8 million available for
borrowing under the revolving credit facility.
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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The following table sets forth our selected historical consolidated
financial data for each of the five years in the period ended December 31, 2000.
Balance sheet data as of December 31, 2000 and 1999 and statements of operations
data for the years ended December 31, 2000, 1999 and 1998 have been derived from
our audited consolidated financial statements which are included elsewhere in
this prospectus. The selected consolidated financial data as of March 31, 2001
and for the three months ended March 31, 2001 and 2000 are derived from our
unaudited consolidated financial statements which appear elsewhere in this
prospectus and, in our management's opinion, include all adjustments, consisting
only of normal recurring adjustments, necessary for a fair presentation of the
information. The following information should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our audited historical Consolidated Financial Statements,
including the introductory paragraphs and related notes thereto, appearing
elsewhere in this prospectus.
THREE MONTHS ENDED YEARS ENDED
MARCH 31, DECEMBER 31,
------------------------ ------------------------------------------------------------
2001 2000 2000 1999 1998(1) 1997 1996
---------- ---------- ---------- ---------- -------- -------- --------
(unaudited)
(dollars in thousands)
STATEMENT OF OPERATIONS
DATA:
Revenues:
Homebuilding........... $ 143,612 $ 75,859 $ 614,665 $ 428,837 $251,564 $123,345 $101,898
Parcel and lot......... 15,979 30,336 130,918 131,673 140,007 123,470 123,101
Amenity membership and
operations........... 19,303 22,771 70,974 76,307 33,124 31,864 20,230
Real estate services
and other............ 18,065 11,096 65,595 44,599 23,668 24,993 30,140
---------- ---------- ---------- ---------- -------- -------- --------
Total revenues.... 196,959 140,062 882,152 681,416 448,363 303,672 275,369
---------- ---------- ---------- ---------- -------- -------- --------
Total cost of sales...... 138,268 95,828 606,934 483,928 314,428 212,346 210,122
Other expenses........... 40,434 28,005 140,815 121,463 79,871 69,403 84,548
---------- ---------- ---------- ---------- -------- -------- --------
Income (loss) from
operations before
income taxes and
extraordinary items.... 18,257 16,229 134,403 76,025 54,064 21,923 (19,301)
Income tax (expense)
benefit................ (7,323) (6,533) (52,462) 5,562 (12,881) -- --
---------- ---------- ---------- ---------- -------- -------- --------
Income (loss) before
extraordinary items.... 10,934 9,696 81,941 81,587 41,183 21,923 (19,301)
Extraordinary items(2)... (1,870) -- -- (1,694) -- (7,537) --
---------- ---------- ---------- ---------- -------- -------- --------
Net income (loss)........ $ 9,064 $ 9,696 $ 81,941 $ 79,893 $ 41,183 $ 14,386 $(19,301)
========== ========== ========== ========== ======== ======== ========
Net income (loss) pro
forma for C corporation
status(3).............. $ -- $ -- $ -- $ -- $ 36,125 $ 8,836 $(11,855)
========== ========== ========== ========== ======== ======== ========
OTHER DATA:
EBITDA(4)................ $ 32,924 $ 27,815 $ 185,420 $ 125,427 $ 92,137 $ 59,553 $ 30,774
EBITDA margin(5)......... 16.7% 19.9% 21.0% 18.4% 20.5% 19.6% 11.2%
Depreciation and
amortization........... 1,994 1,272 7,654 6,781 2,531 1,571 2,775
Interest incurred(6)..... $ 15,168 $ 15,012 $ 62,100 $ 60,503 $ 44,993 $ 42,590 $ 49,063
Ratio of earnings to
fixed charges(7)....... 2.08x 1.55x 2.64x 1.82x 1.81x 1.21x --
BALANCE SHEET DATA (END OF
PERIOD):
Real estate
inventories............ $ 728,112 $ 609,618 $ 649,007 $ 594,459 $445,065 $338,821 $314,449
Total assets...... 1,308,428 1,022,729 1,213,096 1,004,099 923,517 593,820 550,473
Debt(8).................. 622,108 554,565 553,256 545,416 506,128 375,335 375,687
Shareholders'
equity/Partners'
capital................ 326,255 247,195 319,222 237,500 157,956 85,109 71,140
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- ---------------
(1) Financial data as of and for the year ended December 31, 1998 consist of the
accounts of WCI Communities, inclusive of Florida Design since December 1,
1998 (the date following the acquisition) and WCI Communities Limited
Partnership for the complete year and reflects the reorganization of WCI
Communities which occurred on November 30, 1998.
(2) Extraordinary items are (a) the unamortized balance of debt issuance costs
associated with the acquisition of WCI Communities Limited Partnership in
July 1995 that was written off in 1997 when this debt was refinanced, (b)
the unamortized balance of debt issuance cost associated with the early
retirement of a high-rise construction loan in 1999 and (c) the unamortized
balance of debt issuance costs associated with the extinguishment of debt in
conjunction with the $250,000 debt offering in February 2001.
(3) Prior to November 30, 1998, WCI Communities Limited Partnership reported its
taxable income to its partners. As a result, prior to November 30, except
for earnings recorded by Bay Colony-Gateway, a C corporation, WCI
Communities Limited Partnership's consolidated taxable earnings were taxed
directly to WCI Communities Limited Partnership's then-existing partners.
Net income (loss) pro forma for C corporation status assumes that WCI
Communities filed a consolidated return as a C corporation and was taxed as
a C corporation at the statutory tax rates that would have applied for all
periods.
(4) EBITDA represents earnings before interest expense, preferred stock
dividend, income taxes, depreciation and amortization and an extraordinary
item. EBITDA is presented because it is a widely accepted financial
indicator used by certain investors and analysts to analyze and compare
companies on the basis of operating performance. EBITDA as presented may not
be comparable to similarly titled measures reported by other companies
because not all companies necessarily calculate EBITDA in an identical
manner and, therefore, is not necessarily an accurate means of comparison
between companies. EBITDA is not intended to represent cash flows in
accordance with generally accepted accounting principles or funds available
for management's discretionary use nor has it been presented as an
alternative to operating income or as an indicator of operating performance
and it should not be considered in isolation. For a presentation of our cash
flows in accordance with generally accepted accounting principles, see
"Consolidated Statements of Cash Flows" on pages F-6 and F-55 of this
prospectus.
(5) EBITDA margin is calculated by dividing EBITDA by total revenues.
(6) Interest incurred is the amount of interest paid and accrued (whether
expensed or capitalized) during the period excluding amortization of debt
issuance costs and amortization of interest previously capitalized.
(7) Earnings have been calculated as (a) pre-tax income or loss from operations
before adjustment for income or loss from equity investees, plus (b) fixed
charges, plus (c) amortization of capitalized interest, plus (d) distributed
income from equity investees, minus (e) interest capitalized. Fixed charges
are comprised of (a) interest incurred, both expensed and capitalized, (b)
debt issue cost amortization in the period, (c) the portion of rental
expense representative of the interest factor and (d) the amount of
preferred stock dividend requirements of a subsidiary, adjusted for the
effective tax rate. For the year ended December 31, 1996 earnings were not
sufficient to cover fixed charges by an amount equal to $31.2 million.
(8) Debt excludes accounts payable and accrued expenses, customer deposits and
other liabilities (other than land repurchase liabilities), deferred income
tax liabilities and community development district obligations.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of
operations should be read in conjunction with our audited historical financial
statements and the related notes and the other financial information appearing
elsewhere in this prospectus. Results of Operations sets forth separate
management's discussions and analyses for WCI and its predecessors. Liquidity
and Capital Resources sets forth a management discussion and analysis for WCI
only.
OVERVIEW
We are engaged in the development of master-planned communities, the
construction and sale of residences and commercial real estate, and the
construction, operation and sale of amenities and other related real estate
services. Our business segments include: homebuilding (single- and multi-family
homes and villas as well as luxury tower residences), land sales (developed lots
and land parcels to third party builders and developers), amenities (the
operation of golf, marina and resort amenity services and the sale of equity and
non-equity memberships) and real estate related services (real estate brokerage,
title insurance, mortgage banking and other development services.)
Until 1989, we focused on developing master-planned communities from large
tracts of land. This developed land was sold to third party developers who
marketed residential products to homebuyers. We entered the homebuilding
business in 1989 and began selling and building our first luxury, high-rise
residences. After the acquisition from Westinghouse Electric, we further
diversified our business segments by entering into the single- and multi-family
homebuilding business. We sell selected parcels to third party developers
primarily for commercial development, rental apartments and retail and other
uses which do not directly compete with our existing homebuilding products.
In November 1998, we enhanced our homebuilding operations by acquiring
Florida Design, a fully integrated developer of master-planned communities that
had been building most of the homes in its communities since 1987. The 1998
results discussed below include eleven months of operations ending November 30,
1998 for WCI Communities Limited Partnership and the month of December for the
combined WCI Communities, Inc., which includes Florida Design and WCI
Communities Limited Partnership. Florida Design typically had its highest sales
level during the month of December so results should not be viewed as indicative
of an average year of operations.
SIGNIFICANT ACCOUNTING POLICIES AND NEW ACCOUNTING PRONOUNCEMENTS
We recognize revenues for single- and multi-family homebuilding and land
sales at the time of closing under the completed contract method. We recognize
the related profit in full when collectibility of the sales price is reasonably
assured and the earnings process is substantially complete. The earnings process
is normally considered complete when title has passed to the buyer, we are not
obligated to perform significant additional activities after sale and delivery
and there are no contingencies allowing the customer to require a refund. When a
sale does not meet the requirements for income recognition, profit is deferred
until the requirements are met and the related sold inventory is classified as
completed inventory.
Revenue for tower residences under construction is recognized on the
percentage-of-completion method. Revenue recognized is calculated based upon the
percentage of total costs incurred in relation to total estimated costs. Revenue
is recorded when construction is beyond a preliminary stage, the buyer is
committed to the extent of being unable to require a refund except for
non-delivery of the residence, the majority of residences are under firm
contracts, collection of the sales price is assured and costs can be reasonably
estimated. Any sales made after the building is finished are accounted for using
the completed contract method described above.
Revenues from amenity operations include the sale of memberships, billed
dues relating to memberships and fees for services provided. Dues are billed on
an annual basis in advance and are recorded as deferred revenue and then
recognized as revenue over the term of the membership year. Revenues for
services are
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recorded when the service is provided. Revenues from sales of equity memberships
are recorded when the collectibility of the sales price is reasonably certain,
costs can be reasonably estimated and the earnings process is complete. Costs
for amenities are recorded as incurred. A loss, if any, from the sale of equity
club memberships would be reallocated to the benefited real estate inventory.
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 133 (FASB 133), "Accounting for
Derivative Instruments and Hedging Activities," as amended by FASB 137, which
becomes effective, and is required to be adopted in years beginning after, June
15, 2000. FASB 133 requires all derivatives to be recorded on the balance sheet
at fair value. It establishes the accounting procedures for hedges that will
affect the timing of recognition and the manner in which hedging gains and
losses are recognized in our financial statements. Derivatives that are not
hedges must be adjusted to fair value through income. If derivatives are hedges,
depending on the nature of the hedge, changes in the fair value of derivatives
will either be offset against the change in fair value of the hedged assets,
liabilities, or firm commitments through earnings or will be recognized in other
comprehensive income until the hedged item is recognized in earnings. Based on
existing operations, we do not anticipate that the adoption of FASB 133 will
have a material impact on our earnings, cash flows or financial position. We
adopted FASB 133 on January 1, 2001.
In December 1999, the SEC issued Staff Accounting Bulletin (SAB) No. 101,
"Revenue Recognition in Financial Statements", which provides guidance on the
recognition, presentation and disclosure of revenue in financial statements
filed with the SEC. The Company completed its review and believes its current
revenue recognition policies are, in all material respects, in compliance with
SAB 101.
In March 2000, the Financial Accounting Standards Board issued FASB
Interpretation No. 44, "Accounting for Certain Transactions Involving Stock
Compensation" (FIN 44), which is effective July 1, 2000, and contains rules
designed to clarify the application of APB 25, "Accounting for Stock Issued to
Employees." The implementation of FIN 44 did not have a material impact on the
Company's results of operations or financial position.
THREE MONTHS ENDED MARCH 31, 2001 COMPARED TO THREE MONTHS ENDED MARCH 31, 2000
Overview
Total revenues were $197.0 million for the three months ended March 31,
2001 compared to $140.1 million for the same period in 2000. Contribution margin
for the first quarter of 2001 was $58.7 million compared to $44.2 million for
the first quarter of 2000. Net income for the period, after an extraordinary
charge net of tax of $1.9 million relating to the early retirement of debt, was
$9.1 million compared to $9.7 million for the same period in 2000.
Revenues and Sales
Homebuilding. Total homebuilding revenues increased 89.2% to $143.6
million for the three months ended March 31, 2001 compared to $75.9 million for
the same period in 2000. Single- and multi-family homebuilding revenues
increased 42.4% to $65.5 million for the three-month period in 2001 compared
with $46.0 million for the same period in 2000. The increase in single- and
multi-family homebuilding revenue is primarily attributable to a 22 unit or
10.2% increase in the number of homes closed and a 29.1% increase in the average
selling price of homes closed to $275,000 in 2001 from $213,000 in 2000.
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THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 2001 MARCH 31, 2000
----------------------------- -----------------------------
AVERAGE AVERAGE
SINGLE- AND MULTI-FAMILY HOMEBUILDING NUMBER VALUE* PRICE NUMBER VALUE* PRICE
- ------------------------------------- ------ -------- ------- ------ -------- -------
Number of communities with active
homebuilding at period end....... 17 -- -- 17 -- --
Net new contracts.................. 513 $171,033 $333 535 $132,145 $247
Closed sales....................... 238 65,467 275 216 45,984 213
Ending backlog..................... 1,028 340,931 332 932 228,021 245
- ---------------
*Dollar amounts in thousands.
The increase in the number of homes closed is primarily a result of the
larger backlog at the beginning of the first quarter of 2001 as compared to the
beginning of the same quarter in 2000.
The value of net new contracts for single- and multi-family homebuilding
increased 29.4% to $171.0 million for the first quarter of 2001 compared to
$132.1 million for the same period in 2000. The increase in the average selling
price was attributable to price increases in some of WCI's existing communities
due to strong market demand and an increase in the proportion of larger,
higher-priced units sold.
Mid-rise and high-rise homebuilding revenues increased 161.2% to $78.1
million in the first quarter of 2001 compared to $29.9 million for the same
period in 2000.
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 2001 MARCH 31, 2000
------------------ ------------------
MID-RISE AND HIGH-RISE HOMEBUILDING NUMBER VALUE* NUMBER VALUE*
- ----------------------------------- ------ -------- ------ --------
Number of towers under construction................. 8 -- 6 --
Net new contracts................................... 87 $ 68,479 48 $ 35,357
Reported revenues................................... -- 78,145 -- 29,875
Ending backlog...................................... -- 281,052 -- 127,666
- ---------------
*Dollar amounts in thousands.
The increase in mid-rise and high-rise homebuilding revenue is attributable
primarily to an increase in the number of tower residences that qualified for
recognition of revenue and an increase in the value of sold units in those
towers. We delivered tower units or met the requirements for percentage of
completion revenue recognition in 11 towers in 2001 and 7 towers in 2000.
The value of net new contracts for mid-rise and high-rise homebuilding
increased by $33.1 million or 93.7% for the first quarter in 2001 compared to
the same period in 2000, due to the conversion of reservations to sales
contracts in a planned luxury high rise tower during the quarter. Backlog at
March 31, 2001 was $281.1 million or 120.1% higher than the $127.7 million at
March 31, 2000.
Parcel and lot. Total parcel and lot sales revenues decreased 47.2% to
$16.0 million for the first three months of 2001 compared to $30.3 million for
the same three months in 2000. Sales of lots for the three month period in 2001
decreased 30.4% to $5.5 million compared to $7.9 million for the same period in
2001, residential parcel sales for 2001 decreased 85.7% to $1.4 million compared
to $9.8 million for 2000, while sales of commercial parcels decreased by 27.8%
to $9.1 million compared to $12.6 million in 2000. Sales of lots and residential
parcels decreased due to the sell-out of lots and parcels in certain
communities, while commercial parcel sales decreased as a result of fewer sales
of the MacArthur parcels, which is attributable to the sell-down of this
inventory of parcels.
Amenity membership and operations. Total amenity membership and operating
revenues for the first three months of 2001 decreased 15.4% to $19.3 million
compared to $22.8 million for the same three months in 2000. Equity membership
revenue decreased 32.1% to $5.7 million for the three month period in 2001
compared to $8.4 million for the same period in 2000, while membership dues and
amenity services revenue decreased 5.6% to $13.6 million from $14.4 million. The
decrease in membership revenue
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and operating revenue is attributable primarily to the turnover of one of WCI's
high-end equity clubs to its members at the beginning of 2001.
Real estate services and other. Real estate services and other revenues,
including gains and losses on assets held for investment, increased 63.1% to
$18.1 million for the first three months of 2001 compared to revenues of $11.1
million for the same period in 2000. This increase in revenues is primarily
attributable to a $6.4 million increase in real estate brokerage revenue, that
was generated by the increased volume of transactions closed by the real estate
brokerage operation.
Costs, Expense and Contribution Margin
Homebuilding. Homebuilding cost of sales increased 77.8% to $99.2 million
for the first three months of 2001 compared to $55.8 million for the same period
in 2000. Cost of sales as a percentage of revenue was 69.1% in 2001 compared to
73.5% in 2000. This decrease in cost of sales percentage was primarily Due to
improved homebuilding margins relating to the increase in the average sales
price of single- and multi-family homes and tower residence units and to the
Company's ongoing focus on reducing and controlling construction costs.
Overall, homebuilding contribution margin as a percentage of revenue for
the first three months increased 4.4% to 30.9% in 2001 from 26.5% in 2000.
Contribution margin percentage from single- and multi-family homebuilding
increased to 17.7% in 2001 from 15.6% in 2000, due to a higher average sales
price and reduced cost of construction. For our mid-rise and high-rise
homebuilding products, contribution margin percentage decreased slightly to
42.0% in 2001 compared to 43.1% for 2000.
Parcel and lot. The cost of parcel and lot sales increased to 65.0% of
related revenue for the first three months of 2001 compared to 47.9% for the
same period in 2000. Total costs of sales decreased to $10.4 million for 2001
compared to $14.5 million for 2000 due to a decrease in total revenue for 2000.
The increase in cost of sales percentage and the associated decrease in
contribution margin percentage are due primarily to the change in mix of parcel
sales.
Amenity membership and operations. The amenity cost of sales decreased to
$14.5 million for the first three months of 2001 compared to $17.0 million for
the same period in 2000 primarily due to a decrease in membership sales and
operating revenues. The associated contribution margin of 25.1% for 2001
decreased slightly from 25.4% in 2000, primarily due to a decrease in membership
sales which generate a higher margin than amenity service revenue.
Real estate services and other. The 67.1% increase in real estate services
and other costs to $14.2 million for the first three months of 2001 compared to
$8.5 million for the same period in 2000 was due to the costs associated with
the increased volume of real estate brokerage transactions. Cost as a percentage
of related revenues increased to 78.5% in 2001 compared to 76.6% in 2000 due
primarily to the 90.1% increase in brokerage revenues where margins are lower
than other real estate services.
Selling, general and administrative expenses, including real estate taxes,
as a percentage of revenues were 13.1% for the first three months of 2001
compared to 11.7% for the same period in 2000. The increase to $25.8 million for
2001 compared to $16.4 million for 2000 was primarily due to increased wages and
related benefits costs as well as administrative expenses associated with the
required increase in personnel to support the Company's growth and increased
sales and marketing expenditures relating to newly introduced communities under
development.
YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999
Revenues and Sales
Homebuilding. Total homebuilding revenues increased 43.4% to $614.7
million for 2000 compared with $428.8 million for 1999. Single- and multi-family
homebuilding revenues increased 41.3% to $381.2 million in 2000 compared with
$269.7 million for 1999. The increase in single- and multi-family homebuilding
revenue is primarily attributable to a 282 unit or 21.2% increase in the number
of homes
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closed and the continuation of the trend towards delivering a greater proportion
of larger, higher priced homes as seen in the 28.4% increase in the average
sales price between the periods.
YEAR ENDED DECEMBER 31, 2000 YEAR ENDED DECEMBER 31, 1999
------------------------------ ------------------------------
AVERAGE AVERAGE
SINGLE- AND MULTI-FAMILY HOMEBUILDING NUMBER VALUE* PRICE* NUMBER VALUE* PRICE*
- ------------------------------------- ------- --------- -------- ------- --------- --------
Number of communities with active
homebuilding at period end......... 15 -- -- 17 -- --
Net new contracts.................... 1,754 $474,713 $271 1,346 $283,775 $211
Closed sales......................... 1,614 381,208 236 1,332 269,720 202
Ending backlog....................... 753 235,365 313 613 141,860 231
- ---------------
* Dollar amounts in thousands.
The increase in the number of homes closed was due primarily to increased
home sales in newly introduced subdivisions in our Heron Bay, West Jensen,
Parkland Isles, Gulf Harbour and Waterlefe communities and in our existing
master-planned communities of Pelican Sound and Tiburon.
The value of net new contracts for single- and multi-family homes increased
by $190.9 million or 67.3% from 1999 to 2000. Backlog at December 31, 2000 was
$235.4 million or 65.9% higher than at December 31, 1999. These increases were
due primarily to strong sales at existing master-planned communities including
Pelican Sound, Heron Bay and Parkland Isles, and initial sales at our Waterlefe
community where we are the only homebuilder.
Mid-rise and high-rise homebuilding revenues increased 46.8% to $233.5
million in 2000 compared to $159.1 million in 1999.
YEAR ENDED YEAR ENDED
DECEMBER 31, 2000 DECEMBER 31, 1999
------------------- -------------------
MID-RISE AND HIGH-RISE HOMEBUILDING NUMBER VALUE* NUMBER VALUE*
- ----------------------------------- ------ -------- ------ --------
Number of towers under construction............. 9 -- 11 --
Net new contracts............................... 307 $401,991 308 $212,562
Reported revenues............................... -- 233,457 -- 159,117
Ending backlog.................................. -- 290,718 -- 122,184
- ---------------
* Dollar amounts in thousands.
The increase in mid-rise and high-rise homebuilding revenue was
attributable to an increase in the number of towers in which we recognized
revenue and an increase in the average price of these tower residences. We
delivered tower units or met the requirements for percentage of completion
revenue recognition in 14 towers in 2000 and 11 towers in 1999. We began
construction of five new residential towers -- Trieste, Montego, Seasons, Pointe
and Siena -- which met the requirement for recognizing percentage of completion
revenue in 2000 and contributed $87.1 million in additional revenue.
The value of net new contracts for mid-rise and high-rise homebuilding
increased by $189.4 million or 89.1% from 1999 to 2000. Backlog at December 31,
2000 was $290.7 million or 137.9% higher than at December 31, 1999. Both
increases were primarily due to the 88.4% increase in the average price of tower
units sold from $690,000 in 1999 to $1.3 million in 2000. We began taking
contracts for three towers -- Montenero, Caribe and Harbor Towers II -- during
1999 and began taking contracts for five towers -- Trieste, Montego, Seasons,
Pointe and Siena -- during 2000. The 249 residential units in towers introduced
in 1999 had a projected sellout value of $183.3 million compared to the
projected sellout value of $514.0 million for the 303 units in towers introduced
in 2000.
Parcel and lot. Total parcel and lot sales revenues decreased 0.6% to
$130.9 million for 2000 compared to $131.7 million for 1999. Sales of lots for
2000 increased 48.8% to $50.9 million compared to $34.2 million for 1999;
residential parcel sales for 2000 increased 88.0% to $28.2 million compared to
$15.0 million for 1999 while sales of commercial parcels decreased by 37.2% to
$51.8 million compared to
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47
$82.5 million for 1999. The increase in lot sales is attributable to the
implementation of our program for sale of waterfront, custom home lots in our
Harbour Isles community, while residential parcel sales increased as a result of
the sale of land in The Colony at Pelican Landing community. Sales of commercial
parcels decreased due to the sell-out of Pelican Marsh in 1999 and as a result
of the reduction in sales of the MacArthur parcels which is attributable to the
sell-down of this inventory of parcels.
Amenity membership and operations. Total amenity membership and operating
revenues for 2000 decreased 6.9% to $71.0 million compared to $76.3 million for
1999. Equity membership revenue decreased 10.0% to $26.1 million for 2000
compared to $29.0 million for 1999 while membership dues and amenity services
revenue decreased 5.1% to $44.9 million from $47.3 million. The decrease in
membership revenue is attributable primarily to decreased sales at our Pelican
Marsh and Gulf Harbour clubs, which were converted to equity clubs in 1999,
while the decrease in operating revenues is the result of the turnover of the
Deering Bay and Pelican's Nest clubs to their members.
Real estate services and other. Total real estate services and other
revenues increased 47.1% to $65.6 million for 2000 compared to revenues of $44.6
million in 1999. This increase in revenues is primarily attributable to a $26.4
million increase in real estate brokerage revenue, an increase in mortgage
banking revenue of $1.9 million and a $4.5 million increase in other income from
the sale of Burnt Store Marina, which was offset by the reduction of the
brokerage commission received in 1999 of $13.2 million from the sale of the
MacArthur properties.
Costs, Expenses and Contribution Margin
Homebuilding. Homebuilding cost of sales increased 37.1% to $445.4 million
for 2000 compared to $324.8 million for 1999. Cost of sales as a percentage of
revenue was 72.5% in 2000 compared to 75.7% in 1999. This decrease in cost of
sales percentage was primarily due to improved homebuilding margins relating to
the increase in the average sales price of single- and multi-family as well as
tower residence units.
Overall, homebuilding contribution margin as a percentage of revenue
increased 3.2% to 27.5% in 2000 from 24.3% in 1999. Contribution margin
percentage from single- and multi-family homebuilding increased to 18.0% in 2000
from 17.6% in 1999, due to a higher average sales price and, consequently,
improved contribution margins particularly at our Pelican Sound, Harbor Isles
and Tiburon communities. For our mid-rise and high-rise homebuilding products,
contribution margin percentage increased to 43.1% in 2000 compared to 35.6% for
1999, as a result of a higher average selling price.
Parcel and lot. The cost of parcel and lot sales decreased to 45.4% of
related revenue for 2000 compared to 57.6% for 1999. Total costs of sales
decreased to $59.4 million for 2000 compared to $75.9 million for 1999 due to a
decrease in total revenue for 2000. The decrease in cost of sales percentage and
the associated increase in contribution margin percentage are due primarily to
the change in mix of land sales. Contribution margin percentage from sales of
our lots and residential parcels increased as a larger portion of these sales
occurred in our high-end communities of Harbour Isles and The Colony at Pelican
Landing. Contribution margin for commercial parcels improved primarily due to
increased margins on the sale of the MacArthur parcels in 2000. In 1999,
commercial parcel contribution margins were lower because a greater proportion
of the cost of the MacArthur land portfolio purchased in March 1999 was
allocated to immediately saleable parcels which closed during that year.
Amenity membership and operations. The 12.3% decrease in the cost of
amenity sales to $55.8 million for 2000 compared to $63.6 million for 1999 was
primarily due to a decrease in membership sales and operating revenues.
Contribution margin increased to 21.4% for 2000 from 16.6% in 1999, primarily
due to an increase in membership sales at our Bay Colony and Deering Bay clubs,
which generate a higher margin than amenity service revenue and an increase in
membership dues revenue of $4.9 million.
Real estate services and other. The 135.5% increase in real estate
services and other costs to $46.4 million for 2000 compared to $19.7 million for
1999 was due to the costs associated with the increased volume of real estate
brokerage transactions. Cost as a percentage of related revenues increased to
70.7%
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in 2000 compared to 44.2% in 1999 due primarily to the net brokerage revenue
earned from the sale of the MacArthur properties in 1999 and increased overhead
costs incurred in 2000 to operate our new or expanded realty brokerage, title
insurance and mortgage banking offices.
Selling, general and administrative expenses, including real estate taxes,
as a percentage of revenues were 10.2% for 2000 compared to 10.6% for 1999. The
increase to $89.8 million for 2000 compared to $72.1 million for 1999 was
primarily due to increased professional fees for legal and accounting services,
increased sales and marketing expenditures relating to newly introduced
communities under development and an increase in management incentive
compensation.
Interest expense, net of capitalization, increased 1.9% to $43.4 million in
2000 from $42.6 million in 1999. Interest incurred increased 2.6% over the same
period due to a marginal increase in our level of debt as well as a small
increase in our effective borrowing rate. As a percentage of total revenue,
interest incurred declined to 7.0% for 2000 compared to 8.9% of total revenue
for 1999. Amortization of previously capitalized interest decreased to 1.6% for
2000 compared to 2.3% of total revenue for 1999 due to the change in the mix of
real estate sold between the two years. Interest capitalized decreased 1.6% to
$37.6 million for 2000 compared to $38.2 million in 1999 due to a change in the
mix of properties undergoing active development.
Income from Operations Before Income Taxes and Extraordinary Item
Income from operations before income taxes and extraordinary items
increased 76.8% to $134.4 million for 2000 compared to $76.0 million in 1999 due
primarily to increased revenues and improved contribution margins. Total
revenues increased 29.5% to $882.2 million in 2000 compared to $681.4 million in
1999. At the same time, our costs and expenses as a percentage of revenue
decreased 4.0% to 84.8% for 2000 from 88.8% for 1999.
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998
Revenues and Sales
Homebuilding. Total homebuilding revenues increased 70.4% to $428.8
million for 1999 compared with $251.6 million for 1998. Single- and multi-family
homebuilding revenues increased 285.8% to $269.7 million for 1999 compared with
$69.9 million for 1998. The increase in revenue is primarily attributable to a
959-residence or 257.1% increase in the number of homes closed.
YEAR ENDED DECEMBER 31, 1999 YEAR ENDED DECEMBER 31, 1998
----------------------------- -----------------------------
AVERAGE AVERAGE
SINGLE- AND MULTI-FAMILY HOMEBUILDING NUMBER VALUE* PRICE* NUMBER VALUE* PRICE*
- ------------------------------------- ------ -------- ------- ------ -------- -------
Number of communities with active
homebuilding at period end....... 17 -- -- 11 -- --
Net new contracts.................. 1,346 $283,775 $211 533 $117,912 $221
Closed sales....................... 1,332 269,720 202 373 69,858 187
Ending backlog..................... 613 141,860 231 599 127,805 213
- ---------------
* Dollar amounts in thousands.
The increase in the number of homes closed was due primarily to an increase
in the number of communities delivering homes and an increase in the number of
production homes built and closed during the year, which was due to some of the
new communities which started in 1998 having a full year of production in 1999.
The increase in the number of selling communities was the result of the further
expansion of homebuilding activities at existing master-planned communities,
particularly Parkland Isles and Pelican Sound, where revenues increased $97.4
million for 1999.
The value of net new contracts for single- and multi-family homebuilding
increased by $165.9 million or 140.7% from 1998 to 1999. The backlog of single-
and multi-family homes at December 31, 1999 had increased $14.1 million or 11.0%
from December 31, 1998. This increase was due primarily to the further
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49
expansion of homebuilding activities at existing master-planned communities, the
new contracts at Pelican Sound and Parkland Isles in which we are the only
homebuilder, and the addition of Florida Design's five communities.
Mid-rise and high-rise homebuilding revenues decreased 12.4% to $159.1
million in 1999 compared to $181.7 million in 1998. This revenue is recognized
on the percentage of completion method of accounting while towers are under
construction.
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
------------------ ------------------
MID-RISE AND HIGH-RISE HOMEBUILDING NUMBER VALUE* NUMBER VALUE*
- ----------------------------------- ------ -------- ------ --------
Number of towers under construction................. 11 -- 7 --
Net new contracts................................... 308 $212,562 225 $154,686
Reported revenues................................... -- 159,117 -- 181,706
Ending backlog...................................... -- 122,184 -- 68,739
- ---------------
* Dollar amounts in thousands.
The decrease in mid-rise and high-rise homebuilding revenue was
attributable to the change in mix of tower residences being constructed and
sold. Two towers that were completed and sold out in 1998 contributed $26.7
million of revenue in 1998. Six other towers were under construction in both
years and contributed $142.9 million in 1998 compared to $99.7 million in 1999.
Five new towers -- Montenero, Caribe, Verona, Sorrento and Harbor Towers
II -- began construction and three of these met the requirement for recognizing
percentage of completion revenue in 1999, and contributed $51.3 million in
revenue. In addition, the sales of all remaining condominium unit inventory
acquired at Deering Bay generated $7.6 million in revenue in 1999 compared to
$12.2 million in 1998.
The value of net new contracts for towers increased by 37.4% from 1998 to
1999. We began taking contracts in three towers -- Salerno, Bequia and
Verona -- during 1998 and began taking contracts in three other
towers -- Montenero, Caribe and Harbor Towers II -- during 1999. The three
towers introduced in 1998 had a total sellout value of $116.8 million compared
to the sellout value of $183.3 million for the three towers introduced in 1999.
Tower backlog is calculated by deducting the value of percentage of completion
revenue recorded to date from the gross contracts received in each building. The
value of this backlog at December 31, 1999 was 77.8% higher than at December 31,
1998. Backlog increased because of the increased number of contracts and the
increased residence prices of the three new towers introduced in 1999.
Parcel and lot. Total parcel and lot sales revenues decreased 5.9% to
$131.7 million for 1999 compared to $140.0 million for 1998. Sales of
single-family lots to third party builders increased 15.9% to $34.2 million for
1999 compared to from $29.5 million for 1998, while sales of developed
residential parcels decreased 71.8% to $15.0 million from $53.1 million. The
decrease in developed parcel sales was the result of management's decision to
primarily develop lots for our own homebuilding operations.
Amenity membership and operations. Total amenity membership and operating
revenues for 1999 increased 130.5% to $76.3 million compared to $33.1 million
for 1998. Equity membership sales increased 383.3% to $29.0 million for 1999
compared to from $6.0 million for 1998, while membership dues and amenity
services sales increased 74.5% to $47.3 million from $27.1 million. This
increase in equity membership revenue is attributable to increased sales at our
equity clubs, the conversion of our Pelican Marsh Club to an equity club, which
resulted in the recognition of $14.1 million of revenue and the addition of the
Florida Design amenities. The increase in membership dues and amenity service
revenue is the result of $21.1 million from the Florida Design amenities and
increased membership levels at other amenities in 1999 compared to 1998.
Real estate services and other. Total real estate services and other
revenues increased 88.2% to $44.6 million for 1999 compared to revenues of $23.7
million in 1998. This increase was due in part to a 10% brokerage commission
received from the sale of $132.5 million of MacArthur properties to third party
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50
developers coincident with the acquisition of the MacArthur properties. In
addition, an increase in real estate brokerage revenue and the addition of
Florida Design's real estate service businesses also contributed to the increase
in revenue.
Costs, Expenses and Contribution Margins
Homebuilding. Homebuilding cost of sales increased 79.0% to $324.8 million
for 1999 compared to $181.5 million for 1998. Cost of sales as a percentage of
revenue increased to 75.7% in 1999 compared to 72.1% in 1998. This increase in
cost of sales as a percentage of revenue was primarily due to the increase in
the proportion of single- and multi-family home revenue to 62.9% of total
homebuilding revenue in 1999 from 27.8% in 1998.
In total, homebuilding contribution as a percentage of revenue decreased
3.6% from 27.9% in 1998 to 24.3% in 1999. Contribution margin from single- and
multi-family homebuilding increased to 17.6% in 1999 from 11.5% in 1998 as a
result of higher average sales prices, particularly at Parkland Isles, Pelican
Sound and Tiburon Naples. For our mid-rise and high-rise homebuilding products,
contribution margins as a percentage of revenue also increased to 35.6% in 1999
from 34.2% in 1998 as a result of higher average residence prices.
Parcel and lot. The cost of parcel and lot sales decreased to 57.6% of
related revenue for 1999 compared to 62.9% for 1998. This decrease in cost of
sales percentage is due primarily to the change in mix of land sales. Margins
improved in sales of our single-family lots and residential parcels, as a larger
portion of these sales occurred in our high-end communities of Bay Colony and
Pelican Marsh. Total costs decreased to $75.9 million for 1999 compared to $88.0
million for 1998 due to a reduction in total revenue for 1999.
Amenity membership and operations. The 101.9% increase in the amenity cost
of sales to $63.6 million for 1999 compared to $31.5 million for 1998 was
primarily due to the increased number of clubs, marinas and golf courses we
operated in 1999 and the addition of $15.2 million of costs related to Florida
Design amenities for a full year of operations. Contribution margin increased to
16.7% for 1999 from 4.8% in 1998, due to an increase in membership sales of
$23.0 million, which generates a higher margin than other amenity operations.
Real estate services and other. The increase of 47.0% in real estate
services and other costs to $19.7 million for 1999 compared to $13.4 million for
1998 is due to the addition of Florida Design's real estate services and the
costs associated with the increased volume of real estate brokerage revenue.
Contribution margins from real estate services and other operations increased
from 43.4% to 55.9% from 1998 to 1999 due in part to a 10% brokerage commission
received from the sale of $132.5 million of the MacArthur properties to third
party developers coincident with the acquisition of the MacArthur properties.
Selling, general and administrative expenses, including real estate taxes,
as a percentage of revenues were 10.6% in 1999 as compared to 8.3% in 1998. The
increase to $72.1 million for 1999 compared to $37.4 million for 1998 and the
2.3% increase as a percentage of revenues were attributable to increased sales
and marketing related to newly introduced communities under development, the
increase in communities delivering homes, the addition of new amenity operations
and the addition of Florida Design's five communities.
Interest expense, net of capitalization, increased 23.1% to $42.6 million
in 1999 from $34.6 million in 1998. Interest incurred increased 34.5% for 1999
compared to 1998 due to the increased need for capital to meet production
requirements in order to construct and deliver the growing backlog. As a
percentage of total revenue, interest incurred declined to 8.9% for 1999
compared to 10.0% of total revenue for 1998. Amortization of previously
capitalized interest decreased as a percentage of total revenue to 2.3% for 1999
compared to 3.5% for 1998 due to the change in the mix of real estate sold
between the two years to include a greater proportion of homebuilding. Interest
capitalized increased 29.1% to $38.2 million for 1999 compared to $29.6 million
for 1998 due to the increase in properties under development requiring interest
capitalization, including the land acquired in the MacArthur purchase.
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Income from Operations Before Income Taxes and Extraordinary Item
Income from operations before income taxes and extraordinary item increased
40.5% to $76.0 million for 1999 compared to $54.1 million in 1998 primarily due
to increased revenues. Total revenues increased 52.0% to $681.4 million for 1999
compared to $448.4 million for 1998. The effect of increased revenues was
partially offset by an increase in costs and expenses as a percentage of revenue
from 87.9% for 1998 to 88.8% for 1999.
Income Tax Benefit (Expense)
During 1999, we recognized a tax benefit primarily due to the reversal of a
previously established valuation reserve of $35.2 million. This reserve was
established for built-in tax losses and net operating loss carryforwards
originally purchased from Westinghouse Electric in 1995. The basis for the
release of the deferred tax allowance results from improved profitability during
1999 and increasing taxable income, resulting in cumulative taxable income over
the prior two years and the current year and projected future taxable income.
Extraordinary Item
In March 1999, $1.7 million of prepayment penalties were paid and included
as an extraordinary item associated with the early retirement of the Marbella
construction loan.
LIQUIDITY AND CAPITAL RESOURCES
Our needs for capital resources include parcel and lot purchases, land
development, homebuilding and tower construction, the cost to construct new
amenities desired by our customers, and for normal working capital purposes. We
generate cash to meet our capital needs from the sale of our products and
borrowings under our credit facilities.
As of March 31, 2001, we had three contracts or options aggregating $70.1
million to acquire approximately 1,700 acres of land that are expected to yield
approximately 1,800 residential units. Payments of $30.1 million will be made
during 2001 with the balance being paid in subsequent years.
In February 2001, we amended our senior secured credit facility. The new
facility provides us with a $250.0 million term loan and a $200.0 million
revolving loan. This facility matures in February 2004 and currently accrues
interest at the lender's base rate plus a spread of 0.25% or the Eurodollar base
rate plus a spread of 2.75%, payable monthly in arrears. These spreads can be
increased by up to 0.25% if the rating of the facility is downgraded. The base
rate spread can be decreased by up to 0.25%, and the Eurodollar rate spread can
be decreased by up to 0.50% if the rating of the facility is upgraded. The
facility is secured by blanket first liens on substantially all of our assets,
except in certain circumstances where other first liens or mortgages are
permitted and is guaranteed by our significant subsidiaries and by Watermark.
The senior secured credit facility requires us to make semi-annual
principal installments of $5.0 million commencing January 31, 2002. The facility
allows us to prepay and borrow up to the maximum amount under the revolving
loan, provided we maintain an adequate collateral borrowing base. As of March
31, 2001, we had $267.2 million outstanding, $1.8 million committed pursuant to
letters of credit and $181.0 million available for borrowing under the senior
secured credit facility. The facility contains significant restrictions with
respect to payment of distributions, maintenance of certain financial ratios,
use of proceeds from sale of assets and acquisition of capital assets. In
addition, we are required to maintain $150.0 million of interest rate
protection.
To finance the construction of certain on-site and off-site infrastructure
improvements at many of our projects, we have used community development
district and improvement district bond financing. User fees and special
assessments payable upon sale of the property benefited by the underlying
improvements are designed to fund bond debt service, including principal and
interest payments, as well as program operating and maintenance cost. Although
we are not obligated directly to repay all of the outstanding bonds, we do pay a
portion of the fees and assessments securing the bonds and have guaranteed debt
service shortfalls of
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certain district bond programs. We may, subject to limitations in the senior
secured credit facility, use district financing to a greater extent in the
future.
We have also entered into construction loan agreements, principally to
construct towers. Subject to certain requirements of the senior secured credit
facility, we will use construction loans and customer deposits to construct our
towers. We generally guarantee construction loans although, in some cases, the
projects are placed in separate entities owned by us and are subject to limited
guarantees. After the construction loans are repaid from the proceeds of
closings with buyers, any additional funds will be available for general use.
Future towers will require new construction loans and there is no assurance that
this funding will be available when required. The inability to obtain
construction financing could defer the realization of future revenues from tower
sales.
At March 31, 2001, WCI had cash and cash equivalents of $20.9 million and
$181.0 million of funding available under its senior secured credit facility.
The maximum amount available for borrowing under the senior secured credit
facility is subject to a borrowing base computation. For the first quarter of
2001, net cash used in operations was applied primarily to increase inventory
through land acquisition, land development and vertical construction and to
reduce accounts payable. The purchase of property and equipment of $5.1 million
for the period net of $2.7 million in mortgage receivable reductions resulted in
a $2.4 million net use of cash in investing activities. Financing activities for
the quarter resulted in the generation of $97.5 million of net cash flow for the
period. In February 2001, WCI successfully completed a $250.0 million offering
of 10.625% of senior subordinated notes, which resulted in the generation of
approximately $241.0 million of net cash, the proceeds of which were used to
retire existing debt and land repurchase obligations totaling approximately
$229.2 million.
Our ability to make scheduled payments of principal of, or to pay the
interest on, or to refinance, our indebtedness or to fund planned capital
expenditures will depend on our future performance, which, to a certain extent,
is subject to general economic, financial, competitive, legislative, regulatory
and other factors that are beyond our control. Based upon our current level of
operations, management believes that cash flow from operations and available
cash, together with available borrowings under our senior secured credit
facility, will be adequate to meet our liquidity needs for the foreseeable
future. However, our business may not generate sufficient cash flow and future
borrowings may not be available under our senior secured credit facility or any
other financing sources in an amount sufficient to enable us to service our
indebtedness, including the notes, or to fund our other liquidity needs. We may
need to refinance all or a portion of our indebtedness, including the notes on
or before maturity. We may not be able to refinance any of our indebtedness,
including our senior secured credit facility and the notes, on commercially
reasonable terms or at all.
SEASONALITY
We have historically experienced, and in the future expect to continue to
experience variability in our results on a quarterly basis. A substantial
percentage of our homes are targeted towards retirement and second-home buyers
who frequently prefer to take ownership of their homes during the fall.
Therefore, although new home contracts are obtained throughout the year, a
significant portion of our single- and multi-family home closings occur during
the fourth calendar quarter. Our revenue therefore may fluctuate significantly
on a quarterly basis and we must maintain sufficient liquidity generally through
availability under our $200.0 million revolving loan. Our EBITDA and single- and
multi-family homebuilding closings for the three months ended March 31, 2001
were $32,924 and 238, respectively. The following chart
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describes quarterly fluctuations of our EBITDA and single- and multi-family
homebuilding closings for the years ended 2000 and 1999:
2000
----------------------------------------------------------------------------------------------------
1ST PERCENTAGE 2ND PERCENTAGE 3RD PERCENTAGE 4TH PERCENTAGE
QUARTER OF TOTAL QUARTER OF TOTAL QUARTER OF TOTAL QUARTER OF TOTAL TOTAL
------- ---------- ------- ---------- ------- ---------- ------- ---------- --------
(dollars in thousands)
EBITDA..................... $27,815 15.0 $34,701 18.7 $30,937 16.7 $91,967 49.6 $185,420
Single- and multi-family
homebuilding closings..... 216 13.3 272 16.9 331 20.5 795 49.3 1,614
1999
----------------------------------------------------------------------------------------------------
1ST PERCENTAGE 2ND PERCENTAGE 3RD PERCENTAGE 4TH PERCENTAGE
QUARTER OF TOTAL QUARTER OF TOTAL QUARTER OF TOTAL QUARTER OF TOTAL TOTAL
------- ---------- ------- ---------- ------- ---------- ------- ---------- --------
(dollars in thousands)
EBITDA..................... $30,693 24.5 $29,360 23.4 $8,765 7.0 $56,609 45.1 $125,427
Single- and multi-family
homebuilding closings..... 208 15.6 274 20.6 204 15.3 646 48.5 1,332
INFLATION
Our costs of operations may be impacted by inflation as the strength of the
current economic environment places upward pressure on the cost of labor and
materials. In addition, certain raw materials used by us in our homebuilding
operations are susceptible to commodity price increases. Unless these cost
increases are passed on to customers through increased home and service prices,
our operating margins may be reduced. In addition, in times of inflation, the
reduced availability of attractive mortgage financing for purchasers of our
homes may have an adverse effect on sales.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are subject to interest rate risk on the variable rate portion of our
debt. We hedge a portion of our exposure to changes in interest rates by
entering into interest rate swap agreements to lock in a fixed interest rate.
The following table sets forth, as of March 31, 2001, WCI debt obligations,
principal cash flows by scheduled maturity, weighted average interest rates and
estimated fair market value. In addition, the table sets forth the notional
amounts and weighted average interest rates of WCI interest rate swaps.
YEAR ENDED DECEMBER 31,
------------------------------------------------ FMV AT
2001 2002 2003 2004 2005 THEREAFTER TOTAL 3/31/01
------- -------- ------- -------- ------ ---------- -------- --------
DEBT:
Fixed rate.............. $ 1,000 $ 3,612 $ -- $ -- $ -- $250,000 $254,612 $261,487
Average interest rate... 10.54% 10.59% 10.63% 10.63% 10.63% 10.63% 10.62% --
Variable rate........... 34,062 29,807 30,880 272,747 -- -- 367,496 367,496
Average interest rate... 7.66% 7.70% 7.75% 7.96% -- -- 7.72% --
INTEREST RATE SWAPS:
Variable to fixed....... -- 135,000 40,000 50,000 -- -- 225,000 (3,493)
Average pay rate........ 6.03% 5.85% 5.70% 5.68% -- -- -- --
Average receive rate.... * * * * * * * *
- ---------------
*90-Day Libor
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BUSINESS
GENERAL
We are a fully integrated homebuilding and real estate services company
with over 50 years of experience in the design, construction and operation of
leisure-oriented, amenity-rich master-planned communities. We offer a full
complement of products and services to enhance our customers' lifestyles and
increase our recurring revenues. Like traditional homebuilding companies, we
design, sell and build single-and multi-family homes serving move-up,
pre-retirement and retirement home buyers. Unlike our traditional homebuilding
competitors, we also design, sell and build luxury residential towers targeting
affluent, leisure-oriented home purchasers. We have developed master-planned
communities where today there are over 150,000 residents who enjoy lifestyle
amenities like award-winning golf courses, country clubs, deep-water marinas,
tennis and recreational facilities, luxury hotels, upscale shopping and a
variety of restaurants. Our master-planned communities offer a wide range of
residential products from moderately priced homes to higher priced semi-custom,
single- and multi-family homes and luxury residential towers.
Our master-planned communities are in Florida, a highly sought-after
retirement and leisure-oriented home destination, and one of the nation's
fastest growing economies. Our communities are located in prime locations on
Florida's gulf coast near Naples, Ft. Myers, Sarasota and Tampa, and on the east
coast near Ft. Lauderdale, Miami and Palm Beach. We believe we are
well-positioned to take advantage of favorable demographic trends, including the
aging of the "baby boom" generation, as well as the overall strength of the
Florida economy and real estate market. Furthermore, the United States Census
Bureau predicts that Florida will experience one of the largest total increases
in population in the United States over the next ten years.
At March 31, 2001, we had 33 master-planned communities under development.
We expect these master-planned communities to contain 594 holes of golf, over
1,000 marina slips and various country clubs, tennis and recreational facilities
and other amenities. In total, we control approximately 16,000 acres of land,
where we plan to develop up to 28,000 future residences.
For the twelve months ended December 31, 2000, we closed 1,823 homes,
constituting 1,614 single-and multi-family homes and 209 tower residences and
for the three months ended March 31, 2001, we closed 291 homes, constituting 238
single- and multi-family homes and 53 tower residences. At March 31, 2001, we
had a contract backlog of 1,028 units representing $340.9 million of single- and
multi-family homes and 478 units representing $281.1 million of remaining
revenue from tower residences. As of March 31, 2001, we had eight high-rise
towers under construction.
Our revenue, EBITDA, net income and EBITDA margin were $882.2 million,
$185.4 million, $81.9 million and 21.0%, respectively, for the twelve months
ended December 31, 2000 and $197.0 million, $32.9 million, $9.1 million and
16.7%, respectively, for the three months ended March 31, 2001.
OUR OPERATIONS
We typically begin a master-planned community by purchasing undeveloped or
partially developed real estate. We then construct infrastructure improvements
and build amenities in accordance with our development permits. Following
completion of these improvements and the building of the amenities, we build a
full range of homes for sale to primary, retirement and second home buyers. In
certain situations, we elect to sell parcels and lots to third party builders or
end users.
As part of our marketing strategy, we target move-up, retirement and
affluent second-home buyers for most of our communities. To reach these
customers we use national marketing campaigns and local, point of purchase
advertising and sales programs. Our national marketing efforts employ a
proprietary database marketing system that maintains contact with the thousands
of new prospects generated annually by our focused national advertising. This
program has been enhanced by the integration of ongoing e-commerce initiatives
that have increased the flow of qualified customers to our communities. We
manage our marketing efforts through our in-house creative and production teams.
We believe that these efforts contribute to a higher-than-average conversion
rate of prospective customers to homebuyers.
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We profit from the efficiencies created by our integrated delivery of all
aspects of community development, including community design, land development,
homebuilding, parcel and lot sales, amenities operations and real estate
services businesses. See "-- Our Homebuilding Activities," "-- Amenities
Development and Operation," "-- Parcel and Lot Sales" and "-- Other Real Estate
Services Businesses" for an explanation of these operations and services. We
believe that this integrated approach reduces risk as it provides us with
greater control over our costs and provides us with recurring amenities and
services revenues.
MARKET OVERVIEW
We believe that we are well-positioned to take advantage of favorable
demographic trends as well as the overall strength of the Florida economy and
real estate market. Furthermore, we stand to benefit from a rapid population
growth in Florida. The United States Census Bureau predicts that Florida will
experience a 15.5% increase in total population over the next ten years, one of
the largest total increases in population in the United States over that period.
According to the University of Florida 1998 Florida Statistical Abstract,
persons over 50 are expected to account for approximately 40% of Florida's
population, or 7.1 million people, by 2010. The United States Census Bureau
expects the segment of the population over 50 to increase by approximately 52%
from the year 2000 to 2020 and account for approximately 35% of the total
population by 2020. This segment includes our primary buyers in the
retirement/active adult market segment who average over 50 years in age and
typically are purchasing second or retirement homes.
BUSINESS STRATEGY
Capitalize on Favorable Demographic Trends
We intend to continue to take advantage of the favorable long-term
demographic trends that make Florida a highly sought-after retirement and
leisure-oriented home destination. By offering residential products and services
designed to appeal to specific sections of the population, we expect to
capitalize on the following demographic trends:
- the continued high population growth in Florida resulting from increasing
numbers of people choosing Florida for retirement or second-home
purchases;
- the strength of the Florida economy, which is expanding at a higher and
more consistent rate than the nation as a whole;
- the aging of the "baby boom" generation, which we believe has, and will
continue to, significantly increase demand for high quality
master-planned pre-retirement and retirement communities; and
- the increasing affluence of pre-retirement and retirement-aged purchasers
of our products and services.
Develop Community Portfolio
We control approximately 16,000 acres of land, where we plan to develop up
to 28,000 future residences. We intend to maximize revenues and earnings from
our land holdings by targeting affluent, leisure-oriented home purchasers and
building substantially all of the single- and multi-family homes and luxury
residential towers remaining to be built within our communities. Approximately
2,700 of the residential units that we plan to build in our communities are
expected in 42 residential towers that are under construction, announced or
planned for future development.
Expand Strategic Partnerships and Real Estate Services
We expect to capitalize on our expertise in community master-planning,
development and construction management by continuing to develop projects like
our resort ventures with the Ritz-Carlton and Hyatt hotels. We expect to
generate incremental profits from these relationships from marketing fees,
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construction fees, development fees and golf course management fees. In
addition, we expect to expand our real estate brokerage, title insurance,
mortgage banking and property management operations to enhance our position as
an integrated single-source provider of residential products and services.
We expect timely acquisitions to remain an integral part of our business
plans. We will seek acquisitions that capitalize on our strength as a leader in
the design, construction and operation of leisure-oriented, master-planned
communities. We also intend to acquire sites outside our current communities for
the continued development of our towers. In addition, we intend to continue to
grow the name brand recognition of our many products and services by developing
sites in Florida for additional Sun City Center communities and by developing
branded resort and golf communities, like Tiburon Naples. During the twelve
months ended March 31, 2001 we acquired 596.3 acres of property which we expect
will contain approximately 1,577 residential units. As of March 31, 2001, we had
three contracts or options aggregating $70.1 million to acquire approximately
1,700 acres of land that are expected to yield approximately 1,800 residential
units. Payments of $30.1 million will be made during 2001 with the balance being
paid in subsequent years.
COMMUNITIES UNDER DEVELOPMENT
We have communities under development in ten Florida counties including
Collier County and Lee County on the west coast between Naples and Ft. Myers;
Hillsborough County, Sarasota County and Manatee County on the west coast
between Tampa and Sarasota; and Dade County, Broward County, Palm Beach County,
Martin County and St. Lucie County on the East Coast encompassing much of Miami,
Ft. Lauderdale, Boca Raton and West Palm Beach. The following map of Florida
highlights the ten counties where we have communities under development.
[MAP]
Unless otherwise specified, the following descriptions of our communities
set forth information as of March 31, 2001. Estimated selling prices of our
homes set forth below are subject to change.
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COLLIER COUNTY
Pelican Bay. Pelican Bay exemplifies our vision, talent and experience as
a developer of master-planned communities. It was awarded the Urban Land
Institute's Award of Distinction in 1995. Located on approximately 1,856 acres
fronting the Gulf of Mexico, Pelican Bay was designed and permitted to preserve
a 570-acre mangrove estuary between the community and the beachfront by us in
the early 1970s. Miles of boardwalks were constructed over the mangroves to
access the beach by using a construction technique in which no machinery
disturbed the mangrove floor. The community homeowner's association provides
tram service over the boardwalks and has educated buyers and residents about the
ecological value of the estuary.
The master plan for Pelican Bay encompasses over 6,000 residences priced
from $120,000 to $3.7 million in a mix of single- and multi-family homes and
towers. Upon completion of our final tower, the Montenero, the community will be
completely sold out. Amenities include a 27-hole private golf club, a 100,000
square foot, 1,500-seat cultural and arts center, 33 acres of parks, a small
hotel and two luxury resorts, the Ritz-Carlton Naples and the Registry Resort
Hotel.
Pelican Bay has approximately 800,000 square feet of office and commercial
space located at the north and south ends of the community. The south commercial
area is anchored by a 240,000 square foot specialty shopping center, which
includes Saks Fifth Avenue, Jacobsons, 50 retail boutiques and three
restaurants. The south commercial area also includes a Barnes & Noble bookstore,
banks and several multi-story office buildings. The north commercial area
includes a 140,000 square foot neighborhood center with a grocery, small retail
shops and restaurants, a 65,000 square foot office building and the Pelican Bay
Financial Center that we built in 1995.
We have also created a master community association for Pelican Bay, to
which all homeowners belong and which manages the boardwalks and associated tram
service, beachside restaurants and pavilions, neighborhood parks and tennis
facilities. The community also contains public facilities, including a fire
station, police station, library and church.
Bay Colony. Approximately 245 acres, Bay Colony, a luxury gated
residential enclave, anchors Pelican Bay's northwest corner. The residential mix
includes single- and multi-family estates, villas and tower residences priced
from $490,000 to $9.5 million, most of which we designed and built. Bay Colony
includes a private beach club with formal and casual dining, a swimming pool and
a tennis club. Bay Colony residents also belong to the Pelican Bay community
association and have the opportunity to join the Bay Colony Golf Club and the
Pelican Isle Yacht Club.
Pelican Marsh. Pelican Marsh, excluding The Estates at Bay Colony Golf
Club, is located on 1,326 acres immediately northeast of Pelican Bay and
includes a residential mix of coach homes, carriage homes, mid-rise residences,
detached villas and custom single- and multi-family homes ranging in price from
$125,000 to $2.2 million. Amenities include an 18-hole championship golf course
designed by Robert von Hagge with an accompanying 25,300 square foot clubhouse
and pro shop, a community center offering fitness classes and lifestyle
seminars, a sports complex offering basketball and tennis, a playground and
beach access via a private water shuttle. Pelican Marsh is home to Cocohatchee
Strand, a nature preserve for which we have received several awards for
environmental preservation.
The Estates at Bay Colony Golf Club. Approximately 284 acres, The Estates
at Bay Colony Golf Club is a private community located within Pelican Marsh with
custom estate homes priced from $2.3 million to $5.3 million. The Estates at Bay
Colony Golf Club features a limited-membership golf club with an 18-hole
championship golf course designed by Robert von Hagge, which was home to the
1997, 1998 and 1999 Naples Senior PGA Tour event. The golf club features a
21,400 square foot clubhouse with formal and casual dining and a fully-equipped
pro shop. Residents are also members of the Bay Colony Community Association and
have the opportunity to join the Pelican Isle Yacht Club. The club was turned
over to the members in December 2000.
Tiburon Naples. Tiburon Naples, located on approximately 943 acres
adjacent to Pelican Marsh, is being constructed by us to offer estate homes,
mid-rise residences, coach homes and villas ranging in price
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from $345,000 to over $3.7 million. When complete, this community will feature a
36-hole championship resort golf course designed by Greg Norman. The golf course
and clubhouse are operated by a joint venture with Host Marriott Corporation. An
accompanying 295-room luxury golf resort, which is scheduled to open in late
2001, will be operated by Ritz-Carlton Hotel Company, L.L.C. The golf course
opened in November 1998 with 27 holes of golf, with an additional nine holes
scheduled to open in the second quarter of 2002. Residences became available in
late 1999. The Tiburon Naples golf club features a 27,100 square foot clubhouse
with formal and casual dining and a fully equipped pro shop and fitness area.
The Seasons at Naples Cay. We purchased approximately seven acres of land
located in Naples Cay, a gated residential community on the northwestern edge of
Naples. We are currently building The Seasons, a 43-unit luxury residential
tower on the site. Within walking distance of the beach, The Seasons offers both
beachfront and bay views. The tower residences are priced from $1.5 million to
$10.9 million. This tower will have its own amenity package that will include a
swimming pool, tennis courts and indoor recreation facilities.
Tarpon Cove. Tarpon Cove, an approximately 97-acre award-winning gated
community built exclusively by us, offered condominiums, coach homes and
duplexes priced from $125,000 to $295,000. Residents of Tarpon Cove are members
of the Tarpon Cove Yacht & Racquet Club. Amenities include a swimming pool, a
tennis center with lighted courts and pro shop, beach access via a private water
shuttle, a planned fitness center and casual dining.
Cove Towers at Tarpon Cove. Cove Towers, an 18-acre community, will offer
a total of five towers consisting of 50 to 58 residences each. Aruba, completed
in 1999, offered residences ranging from 1,621 square feet to 3,222 square feet,
priced from $270,000 to $750,000. Bequia, completed in 2000, offered similar
residences priced from the low $300,000's to the mid $800,000's. The third
tower, Caribe, completed in March 2001, features 56 two- and three-bedroom and
penthouse residences ranging from 1,854 to 4,270 square feet priced from
$340,000 to over $1.1 million. Montego, currently under construction, features
58 three-bedroom and penthouse residences ranging from 2,380 to 4,881 square
feet priced from the $500,000's to $1.7 million. The remaining tower, Nevis, was
offered for pre-sale in January 2001 and will feature residences ranging from
2,380 to 4,811 square feet priced from $600,000 to $1.7 million. Residents have
membership opportunities to the amenities at Tarpon Cove.
Cape Marco. We have purchased two luxury beachfront high-rise sites
totaling approximately 22 acres in Cape Marco on Marco Island. We have finalized
the design of our first tower, Belize, which offers 148 residences ranging from
2,600 to 11,400 square feet and priced from $900,000 to over $8.9 million. We
released this tower for presale in February 2001.
Tarpon Bay. Tarpon Bay is planned as an approximately 91-acre gated
community. We plan to build approximately 350 residences, including duplex,
coach and condominiums priced from $132,000 to $237,000. Residents of Tarpon Bay
may purchase membership privileges in the Tarpon Cove Yacht & Racquet Club.
Planned amenities include a clubhouse, fitness center, canoe rental and a
non-swimming beach.
Tuscany Reserve. Tuscany Reserve is planned as an approximately 463 acre
luxury community with an 18-hole golf course.
LEE COUNTY
Pelican Landing. Pelican Landing, located on approximately 1,838 acres,
offers garden condominiums, coach homes, villas, single- and multi-family and
estate homes priced from $91,000 to $1.7 million. Most of the parcels in Pelican
Landing have been sold to third party builders; however, we are currently
selling and constructing 23 homes ranging in price from $550,000 to $848,000.
Amenities include 36 holes of championship golf spread over two courses designed
by Tom Fazio with accompanying clubhouses, a tennis center with six lighted
courts and clubhouse, a boardwalk, a canoe park, boat slips, formal and casual
dining and a private 34-acre beach park accessed by a private water shuttle.
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The Colony at Pelican Landing. The Colony at Pelican Landing is comprised
of approximately 799 acres located in Pelican Landing. The community offers a
mix of residential homes including custom estate homesites, villas and twelve
luxury towers that presently offers residences priced from $360,000 to $4.1
million. Two of these towers are under construction and a third was released for
pre-sale in February 2001. Amenities include a Bay Club restaurant, which is
under construction, an 18-hole championship golf course designed by Jerry Pate,
a 21,300 square foot country club with dining, which is under construction,
tennis and fitness facilities and a spa. In addition, the community will feature
a 450-room luxury Hyatt resort, up to approximately 300 up-scale timeshare
residences, with planned amenities including 27 holes of golf and a
comprehensive recreational complex.
Pelican Sound. Pelican Sound, located on approximately 549 acres, offers
1,299 single- and multi-family residences priced from $146,000 to $460,000.
Amenities include 27 holes of championship golf, with an adjoining 18,000 square
foot clubhouse, casual dining facility, six lighted tennis courts, a health and
fitness center, a swimming pool and a river club featuring boat ramps,
restaurant and a private riverboat to transport residents to beach and river
destinations.
Gulf Harbour. Gulf Harbour is an approximately 548-acre gated retirement
and second home community located on southwest Florida's Intracoastal Waterway
in Ft. Myers. Gulf Harbour includes single-family, estate, penthouse, carriage
and villa homes ranging in price from $63,000 to $2.5 million. Although selected
land parcels within Gulf Harbour have been sold to third party homebuilders, we
maintain a significant homebuilding presence in the community and are building
and selling homes ranging in price from $241,000 to $1.7 million. Gulf Harbour
features an 18-hole championship golf course with a 28,300 square foot clubhouse
and pro shop, a 192-protected slip floating deep-water marina capable of
accommodating vessels up to 90 feet, an eight-court tennis complex, an 8,000
square foot spa and fitness center and retail tennis shop, a heated community
swimming pool and over 7,000 feet of Intracoastal frontage. Other on-site
amenities include a restaurant and a private beach club, both of which are made
available to residents through membership packages.
Sun City Center Ft. Myers. With development scheduled to begin in 2001,
Sun City Center Ft. Myers will be the first age-restricted community of its kind
in Southwest Florida. In accordance with Federal law, substantially all of the
purchasers in the community must be over 55 years of age, and no one under the
age of 18 is permitted to permanently reside in a residence. Modeled after our
Sun City Center in Tampa, the community encompasses approximately 1,375 acres in
Ft. Myers, of which 122 acres are still under option, and will offer a variety
of home styles ranging in price from $140,000 to $306,000. Planned amenities
include a 27-hole golf course and a comprehensive recreational complex including
indoor and outdoor swimming, tennis, fitness center, library, restaurant and
multi-purpose rooms.
Gateway. Gateway, located on approximately 2,458 acres, offers
single-family homesites, custom homes and attached and detached villas ranging
in price from $100,000 to $495,000. Several single- and multi-family home
neighborhoods are being developed by independent developers. We are the
exclusive builder in three neighborhoods with price ranges from $139,000 to
$388,000. Amenities include a 27-hole championship golf course designed by Tom
Fazio offering full equity memberships as well as daily fee play, a 13,500
square foot clubhouse with a 230-seat dining room, pro shop, fitness center,
tennis center with eight lighted courts and a pro shop, a 35-acre polo and
equestrian center offering boarding stables and a lighted polo and dressage
arena. A 15-acre park provides residents with a place to swim, fish, picnic and
play sports, and 15 miles of riding and fitness trails wind through the
community. Commercial properties include a 15-acre office park for general
business and professional use and sites offering up to ten acres zoned for other
commercial uses.
Wildcat Run. Wildcat Run is an approximately 584-acre gated community
featuring single- and multi-family homes and custom homes priced from $190,000
to $765,000. Amenities include an 18-hole championship golf course designed by
Arnold Palmer with an accompanying 26,000 square foot clubhouse and pro shop, a
tennis center with five courts, a pro shop and a swimming pool.
Burnt Store Marina. Burnt Store Marina is an approximately 777-acre
master-planned retirement and second home community designed to attract middle-
and upper middle-income buyers. We offer
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homes ranging in price from $159,000 to $647,000. We have built two towers, each
offering 60 residences ranging from 890 square feet to 2,436 square feet and
priced from $100,000 to over $400,000. A third tower was released for pre-sale
in May 2001. An additional five towers are planned. Burnt Store Marina features
a deep-water marina, providing direct access to the Gulf of Mexico and
containing 425 wet slips with capacity for vessels of up to 70 feet and 188 dry
slips. The marina also features a heated pool, yacht care services and shower
and laundry facilities. A yacht club located just east of the marina offers
regattas, club races, special events and cruises. The athletic club and fitness
facility includes a heated pool, lighted tennis courts and an aerobics studio.
Burnt Store Marina also contains a 27-hole executive golf course and a pro shop.
A restaurant overlooking the marina contains a banquet room for meetings of up
to 300 people. The marina operations and the restaurant were sold in December
2000.
BROWARD COUNTY
Heron Bay. Situated on approximately 1,490 acres, Heron Bay is a gated
golf community located in the cities of Coral Springs and Parkland. Heron Bay
features eleven neighborhoods offering single- and multi-family and estate
residences priced from $170,000 to $1.2 million, several of which are being
developed by independent builders. We are the exclusive builder in six
neighborhoods offering single- and multi-family homes ranging from $165,000 to
$610,000. Amenities at Heron Bay include a daily fee championship golf course,
an 18,500 square foot clubhouse owned and operated by the Tournament Player's
Club, and the home of the PGA Tour's annual Honda Classic golf tournament. In
addition, the community includes a 10,000 square foot Heron Bay Commons
clubhouse which features a fitness center, indoor racquetball courts and meeting
facilities. The clubhouse is part of a complex available for use by Heron Bay
residents, which includes tennis courts, basketball and volleyball courts and a
children's playground. Heron Bay is also home to the new 224-room Radisson Plaza
Hotel, which includes a restaurant, outdoor dining terrace, health club, outdoor
swimming pool and retail shops.
Parkland. We owned approximately 2,255 acres in the city of Parkland,
which is located just south of Boca Raton. Parkland Isles, a 294-acre community
within Parkland, is being developed and built exclusively by us. Divided into
four distinct neighborhoods separated by waterways, Parkland Isles offers
homesites with more than 15 floorplans and dozens of elevations ranging in price
from $180,000 to $430,000. Amenities available to Parkland Isles residents
include The Club, a complex that includes a swimming pool, spa, children's play
area, tennis and basketball courts, a putting practice green and a
three-building clubhouse featuring a teen center, fitness club and a business
center with catering kitchen. Our remaining land holdings within the city of
Parkland are planned for development into similar communities.
Coral Springs. Planned and developed in the early 1960s by us, Coral
Springs has evolved into the eleventh largest city in Florida with approximately
116,000 residents. The city offers a planned mix of rental and condominium
apartments, townhomes, courtyard and estate homes. In 2000, we substantially
completed the sale of our remaining residential properties in Coral Springs. We
offered a variety of home designs in several neighborhoods throughout Coral
Springs. Coral Springs is conveniently located near major attractions like a
regional shopping mall, a performing arts center and an aquatic complex and
fitness center. Coral Springs features some of the highest rated schools in the
state, which makes the area especially attractive to families.
MANATEE COUNTY
Waterlefe. Waterlefe is an approximately 602-acre community bordering the
Manatee River, which is minutes away from the cities of Sarasota and Bradenton.
Waterlefe currently features single-family homes, villas and condominiums priced
from $140,000 to $550,000. Planned amenities include an 18-hole golf course and
fitness center, a 4,300 square foot clubhouse with dining facilities and a
73-slip marina and River Club.
HILLSBOROUGH COUNTY
Sun City Center. Sun City Center, a master-planned age-restricted
retirement community, is situated on approximately 4,875 acres located on the
west coast of Florida between the cities of Tampa and
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Sarasota. Housing is tailored for middle-income retirees with housing prices
ranging from $70,000 to $370,000. In accordance with Federal law, substantially
all of the purchasers must be over 55 years of age, and no one under the age of
18 is permitted to permanently reside in a residence. Amenities include 126
holes of golf over six courses, 17 tennis courts, five heated swimming pools,
two of which are Olympic-sized, three health and fitness clubs, lawn bowling
greens, shuffleboard courts, volleyball courts, two restaurants and more than
150,000 square feet of indoor recreational facilities. The 13,000 square foot
golf and racquet club features four dining rooms with a combined seating
capacity of 200. We also own a corporate office building that houses the Sun
City Center local staff and the 100-room Sun City Center hotel that includes a
350 seat restaurant. We recently completed a 27,000 square foot recreation
facility expansion.
Walden Lake. Walden Lake is an approximately 2,088-acre gated community
located approximately 30 miles east of Tampa. Walden Lake's primary target
customers are middle- and upper-income families who live and work in the
surrounding cities of Tampa, Plant City, Lakeland and, to a lesser extent,
Orlando. Walden Lake also actively sells its homes to retirees. Housing prices
range from $115,000 to $1.3 million. Amenities include two 18-hole championship
golf courses, a 26,000 square foot clubhouse, a swimming pool, six lighted
tennis courts, a fitness center, a 62-acre lake for boating freshwater fishing,
six miles of biking and fitness trails, equestrian facilities and a polo field,
on-site elementary school and two daycare facilities.
SARASOTA COUNTY
The Tower Residences at The Ritz-Carlton, Sarasota. In July 2000, we
purchased a two-acre parcel of land adjacent to the new Ritz-Carlton which is
currently under construction in downtown Sarasota. We released for presale a 80
unit luxury residential tower in February 2001. We have entered into an
agreement with the Ritz-Carlton Hotel Company, L.L.C. to act as the exclusive
manager for this tower. Residences are expected to range from 2,800 to 5,200
square feet and be priced from $850,000 to over $4.5 million.
Henry Ranch. We have a contract to purchase approximately 1,087-acres, and
expect to close on this property by October 2001 and begin development
immediately thereafter. We plan to offer a total of approximately 1,600
residences in a gated community with a product mix featuring carriage homes,
patio homes, executive and estate homes priced from $140,000 to $340,000.
Planned amenities include a clubhouse with a dining facility, an 18-hole golf
course with clubhouse, a fitness center, outdoor pool and walking trails.
DADE COUNTY
Keys Gate. Approximately 1,150 acres, Keys Gate is a community located
south of Miami. The community features single- and multi-family homes ranging in
price from $72,000 to $360,000. Keys Gate is targeted at middle-income customers
who primarily live and work in the Miami area. Amenities include eight lighted
tennis courts, a health and fitness center, an entertainment amphitheater,
racquetball courts, an 11,600 square foot recreation center featuring hobby and
game rooms and a library and an 18-hole golf course with an adjoining
full-service 24,000 square foot clubhouse featuring restaurants, a banquet hall
and a pro shop.
Deering Bay. Deering Bay, an approximately 222-acre gated community
overlooking Biscayne Bay, offers tower residences, villas and homesites. We are
developing three towers for this community, each offering 38 to 48 residences,
priced from $325,000 to over $2.5 million. We have completed one of the towers,
are constructing the second and have released the third tower for pre-sales.
Amenities include an 18-hole championship golf course designed by Arnold Palmer,
a 30,000 square foot clubhouse with three restaurants, two marinas with 93 slips
able to accommodate yachts of up to 110 feet, seven lighted tennis courts, a
fully-equipped health club and a swimming pool. A third marina with an
additional 27 slips is planned and expected to be completed in May.
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Williams Island. Williams Island is planned as a 165-unit high-rise tower
located in Adventura, Florida.
PALM BEACH COUNTY
Harbour Isles. Located on approximately 112 acres, Harbour Isles is a
105-lot waterfront community in North Palm Beach featuring custom homes ranging
in price from $1.1 million to $1.4 million, plus homesite. We offer six home
designs that allow the purchaser to customize, within established design
guidelines, floorplans and elevations to a homeowner's specific needs.
Jupiter Yacht Club. Jupiter Yacht Club is an approximately 40-acre
waterfront community located in Jupiter, Florida along the Intracoastal Highway.
We plan to develop five mid-size towers that will offer residences ranging from
2,100 to 4,100 square feet and priced from $400,000 to $1.2 million. Just a
short distance from the Atlantic Ocean, the community features an 89-slip
deep-water marina, which accommodates yachts up to 65 feet in length, and
includes commercially-zoned land capable of accommodating 66,000 square feet of
retail and office space, as well as a 100-room hotel.
One Watermark Place. We purchased approximately three acres of land
located in West Palm Beach in April 2001. We released this tower for pre-sale in
January 2001. The tower will be located directly on the Intracoastal Waterway
providing views of the Atlantic Ocean. Tower residences will range from 4,000 to
9,800 square feet and be priced from $1.2 million to $8.4 million. Planned
amenities include a swimming pool, marina and indoor recreation facility.
Evergrene. Evergrene is planned as an approximately 364-acre community
nestled within a vast array of wooded uplands and vegetation in Palm Beach
Gardens, Florida. We plan to build approximately 1,000 single- and multi-family
residences ranging from 1,050 to 3,500 square feet and priced from $115,000 to
$540,000. Proposed amenities may include a 38-acre lake, with a 14,000 square
foot clubhouse, pools, playground, and three miles of walking trail through
preserved areas. We expect to begin development in the fourth quarter of 2001.
Palm Beach Resort Community. Palm Beach Resort is planned as an
approximately 1,183-acre resort and residential community located near Jupiter,
Florida. We expect to build approximately 900 single- and multi-family homes
ranging from 1,900 to over 5,000 square feet with estimated sales prices of
$250,000 to over $2.5 million. A 36-hole golf course, a clubhouse, and a
corporate center are planned within the community. On the north portion of this
parcel we plan to develop a 300-room resort hotel, 100 timeshare residences and
golf condominiums. We expect to begin developing the project during the fourth
quarter of 2001.
Palm Beach Upscale Golf. Palm Beach Upscale Golf is planned as an
approximately 652-acre community development in Palm Beach Gardens, Florida. We
expect to offer single-family estate homes, villas and golf cottages priced from
$400,000 to over $3.2 million. Planned amenities include a 18-hole golf course,
state-of-the-art practice facility and a 31,000 square foot clubhouse. We expect
to commence development of this community in the fourth quarter of 2001.
Jupiter Waterfront. Jupiter Waterfront is an eight-acre parcel located on
the Intracoastal Waterway near Jupiter, Florida. The current development plan
provides 8 single family estate homes with approximately 5,200 square feet of
living area priced over $2.0 million each. Development of this neighborhood is
expected to start during the first quarter of 2002.
Juno Beach Waterfront. Juno Beach Waterfront is an approximately 64-acre
parcel planned for a marina and residential community. This community is
expected to include approximately 250 mid-rise tower residences with
approximately 2,600 square feet of living space priced at $350,000 to $700,000.
The community is also planned to include a hotel, conference center, boat slips
and a ship store. We expect to commence development of this community during the
fourth quarter of 2003.
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MARTIN COUNTY
West Jensen Country Club. We have purchased two parcels within the
654-acre community of West Jensen Country Club, located in northern Martin
County. The first parcel is expected to be comprised of twin villas, ranging
from 1,353 to 1,472 square feet and priced from $155,000 to $235,000, all
enjoying golf course views. We also plan to market a neighborhood of 49
multi-family homes from 1,332 to 2,147 square feet priced from $155,000 to
$185,000, all with preserve or water views. Planned amenities include an 18-hole
daily fee golf course, an 8,000 square feet clubhouse with dining and banquet
facilities, a community pool and tennis courts.
ST. LUCIE COUNTY
St. James Country Club. We have purchased a single-family neighborhood of
50 homesites within St. James Country Club, a 449-acre golf course community
located in central St. Lucie County. Home designs offer from 1,475 to over 2,277
square feet with prices ranging from $130,000 to $175,000. Amenities within St.
James include an 18-hole daily fee golf course, which opened in December 1999,
and a planned seven-acre recreational complex that will include a 2,500 square
foot clubhouse, two lighted tennis courts and a community pool. As of May 15,
2001 we have a contract to sell all of our remaining homesites within the St.
James Country Club.
OUR HOMEBUILDING ACTIVITIES
We believe the breadth of our homebuilding activities and the scope of our
target market distinguish us from our competitors and position us to take
advantage of favorable regional and national demographic and income trends. Like
traditional homebuilding companies, we design, sell and build single- and
multi-family homes serving move-up, pre-retirement and retirement home buyers.
These homes range from approximately 1,500 square feet to 7,100 square feet and
are priced from approximately $90,000 to $4.8 million. We build most of these
homes within our master-planned communities, where we create attractive
amenities through affiliations with hotel operators and golf course designers
like the Ritz-Carlton and Greg Norman. We believe that this approach increases
the value of our homes and communities and helps us attract affluent purchasers.
Further, in order to serve our customers who are looking for near-term
occupancy, we produce an inventory of available homes to meet their
requirements. We carefully manage this inventory through model and site
selection and promotional programs designed to sell these homes prior to
completion.
Unlike our traditional homebuilding competitors, we also design, sell and
build luxury residential towers targeting affluent, leisure-oriented home
purchasers. Since 1988, we have built or have under construction 1,726 tower
residences, of which 1,586 residences have been sold. Our towers have ranged in
size from six to 22 stories and have included 26 to 133 residences with average
unit prices of $174,000 to $3.4 million. Our sales contracts for these towers
require substantial non-refundable down-payments, generally ranging from 20% to
30% of the purchase price, and we typically do not start construction of towers
until there are sufficient pre-sales to cover the majority of the costs to
construct the towers.
For the twelve months ended December 31, 2000, homebuilding revenues were
$614.7 million, which accounted for 69.7% of total revenues and for the three
months ended March 31, 2001, homebuilding revenues were $143.6 million, which
accounted for 72.9% of total revenues.
Single- and Multi-Family Homes
Design. We employ an award-winning in-house design group comprised of
experienced architects and computer-assisted design technicians. Our product
design experience along with our land planning expertise has enhanced our
ability to charge view premiums for homes located on waterfront, conservation
and golf course sites within our communities. Our design expertise has also
provided us with the flexibility to respond to changing consumer demands as
determined through our customer surveys and focus groups. The information
gathered through these surveys and focus groups will continue to serve as the
model for the development of our new products.
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Sales. We maintain large sales centers with community scale models and
lifestyle and home demonstration displays. The sales centers are staffed with
licensed professionals who are either employees or independent contractors
working through our brokerage businesses. We also maintain professionally
decorated model homes, which demonstrate the benefits and features of our
products and the community lifestyles.
Sales associates initiate the contracting process with home buyers and
collect deposits from customers. Customers are then directed to our affiliated
mortgage banking company to complete financing arrangements, if required.
Largely due to the affluence of many of our luxury and second home purchasers,
we believe that we complete more cash transactions with customers than is
typical in the industry.
We maintain an inventory both of homes that are available immediately or
within a few months and of homes built to order. For homes that are built to
order or selected from inventory at an early stage of construction, we offer
customers a wide selection of standard options and upgrades to finish their
homes. We also allow customization of the structural design in many of our
product lines through our in-house design group. In addition, some of our larger
communities offer design studios staffed with professional designers where the
many options and upgrades available to purchasers of our products are displayed
and demonstrated prior to incorporation into a home. Finally, home closings are
typically conducted through our title agency companies.
Construction. We typically act as the general contractor in the
construction of single- and multi-family residences. Our employees provide
purchasing and quality assurance for, and construction management of, the homes
we build, while the material and labor components of our houses are provided by
subcontractors. Our construction techniques are consistent with local market
practices and generally consist of concrete block exterior walls covered with a
painted stucco finish and engineered truss roofs covered with shingles or tile.
We comply in all material respects with local and state building codes,
including Florida's stringent hurricane and energy efficiency regulations.
Depending upon the size and complexity of a home's design, our construction time
ranges from about 70 to 135 calendar days for our single-family homes and up to
180 calendar days for our multi-family homes.
Accounting. We recognize revenue under the completed contract method. The
related profit is recognized when collectibility of the sales price is
reasonably assured and the earnings process is virtually complete. The earnings
process is normally considered complete when title has passed to the buyer, we
are not obligated to perform significant additional activities after sale and
delivery and there are no contingencies allowing the customer to require a
refund. When a sale does not meet the requirements for income recognition,
profit is deferred until the requirements are met and the related sold inventory
is classified as completed inventory.
Mid-rise and High-rise Tower Residences
General. We expect our tower development business to continue to be a
significant component of our future growth. For over 50 years, we have entitled
and developed premium sites for residential development. Before 1987, we elected
to sell entitled, and in many cases developed, sites to third party developers
who constructed tower residences on the sites acquired from us. In 1987, we, in
a joint venture, constructed a high-rise tower adjacent to the beach in our Bay
Colony community. Known as the Contessa, the high-rise was completed and sold
out in 1990. The Carlysle, our second high-rise, also located adjacent to the
beach in Bay Colony, was completed and sold out in 1992. Through March 31, 2001,
we have successfully designed, marketed, constructed and sold 18 towers totaling
1,123 residences, which have generated revenues of approximately $809.7 million
and have sold at an average price of $721,000 per residence. We had eight
residential towers under construction at March 31, 2001.
Design. We commence the design and planning of towers by conducting
extensive research relating to the market, product requirements, pricing and
absorption. Our research effort is directed by dedicated project managers
specializing in the development of towers. Based on the results of this
research, we organize an experienced team of architects, engineers and specialty
consultants under the leadership of the project manager to create the design of
the mid-rise or high-rise tower. We also contract for the services
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of an experienced third party general contractor during the early stages of
design to assist in design, engineering and the estimation of construction
costs.
Sales. Once the design for a mid-rise or high-rise tower has been
completed and its construction costs have been estimated, marketing of the
residences commences. Brochures, scaled architectural models, walk-in kitchen
and bathroom models and other marketing materials are used to assist sales
associates in explaining and demonstrating the residences to be built. Often,
computer videos are developed which integrate three dimensional computer
assisted design drawings of the interior and exterior elevations of the towers
with video of the site and its surroundings, which may include beaches, golf
courses and bodies of water. These videos provide a "virtual tour" that is
extremely useful for pre-selling our residences.
Because Federal and Florida law requires that condominiums be completed and
closed to a consumer within 24 months following a consumer's execution of a
purchase contract, and because construction of towers typically takes 15 to 22
months, it is necessary to engage in extensive pre-selling activities prior to
commencement of construction. Pre-selling ensures that the completion of the
construction of a tower coincides with the substantial sell out of the tower and
the compliance with statutory requirements relating to the timing of condominium
delivery to the consumer. To facilitate our pre-sales process, we engage in a
"reservation" selling process by which buyers select specific residences, sign a
reservation agreement and pay a refundable deposit. Once a sufficient number of
residences are "reserved" indicating substantial consumer acceptance,
reservations are converted to contracts and the customer's deposit becomes
nonrefundable after a 15-day rescission period under Florida law.
Generally, construction is not commenced until a majority of units are
under firm contracts. For towers that take more than 18 months to build, we will
generally collect from each purchaser a deposit equaling 30% of a residence
purchase price to cover a portion of estimated construction costs. For towers
that take less than 18 months to build, generally a 20% deposit is collected.
Our experience has been that over 98% of the contacts for which nonrefundable
deposits have been collected by us close upon the completion of the tower. Once
construction is completed, closings of sold residences usually occur within one
month, at which time we are paid the balance of the purchase price for the
residences sold.
Construction. As the developer of the towers that we build, we manage the
entire process from planning and closing of completed residences to turnover of
the condominium association to residents, and hire experienced and bonded third
party general contractors specializing in the construction of towers to
construct these buildings. Typically, we negotiate a guaranteed maximum price
with these contractors for the construction and delivery of completed towers. By
hiring experienced general contractors to construct our towers, we mitigate many
of the risks associated with the construction of these structures.
Financing. We generally obtain separate construction financing for our
tower projects. A lender typically provides a construction loan when the value
of sales contracts on a project is sufficient to cover a substantial portion of
the cost of the project's construction. Buyers typically provide deposits equal
to 20% to 30% of the purchase price of their residence. Under Florida law, a
portion of the deposit representing 10% of the purchase price must be deposited
into an escrow account, unless we have provided a letter of credit or a surety
bond. Any amount of the down payment in excess of this 10% may be used to fund
construction. We then generally seek a construction loan commitment to cover
remaining construction costs, based on the number of residences sold at the time
of the commitment. To the extent that we sell additional residences during the
course of construction, subsequent deposits may also be utilized to fund
construction, resulting in a lower amount outstanding under the construction
loan than originally committed. We have developed a financing concept with banks
to bundle multiple high-rise projects in a single construction loan facility.
Accounting. Revenue for tower residences is recognized on the percentage
of completion method. Revenue is recorded when construction is beyond a
preliminary stage, the buyer is committed to the extent of being unable to
require a refund of a significant deposit except for nondelivery of the
residence, a majority of residences have been contracted and costs can be
reasonably estimated. Any amounts due from
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sales recognized are recorded as contracts receivable. After the initial closing
of the residences, revenue and related costs for the remaining residences are
recorded at closing.
A portion of each sales commission is paid after the tower is under
construction at the time a customer enters into a sales contract, with the
balance paid at closing. Sales commissions are expensed as a component of the
cost of mid-rise and high-rise revenue. Marketing expenditures related to tower
developments are expensed as incurred.
Mid-rise and High-rise Descriptions. Set forth below are descriptions of
our towers that we recently completed or currently have under development.
The Marbella, The Coronado and Montenero at Pelican Bay. Completed in
January 1999, The Marbella offers 118 two- and three-bedroom and penthouse
residences ranging from 1,725 square feet to 3,860 square feet priced from
$350,000 to $1.2 million. The Marbella features hotel type services and a health
service facility staffed by medical professionals. The Coronado, completed in
February 1999, offers 99 two- and three-bedroom and penthouse residences ranging
from 1,600 square feet to 3,800 square feet priced from $265,000 to $1.4
million. Scheduled for occupancy in 2001, Montenero offers 133 two- and
three-bedroom and penthouse residences ranging from 2,675 to 6,940 square feet
priced from $500,000 to $3.5 million. Residents of The Marbella, The Coronado
and Montenero have access to and membership opportunities with the amenities at
Pelican Bay.
The Windsor, Toscana, Salerno and Trieste at Bay Colony. Completed in
April 1998, The Windsor offers 31 three- and four-bedroom and penthouse
residences ranging from 6,100 square feet to 8,850 square feet and priced from
$2.3 million to $5.5 million. Completed in April 1999, Toscana offers 65 two-
and three-bedroom and penthouse residences ranging from 2,520 square feet to
5,013 square feet priced from $630,000 to $2.0 million. Completed in April 2000,
Salerno offers 69 two- and three-bedroom and penthouse residences ranging from
2,600 square feet to 5,285 square feet priced from $705,000 to $2.4 million.
Scheduled for occupancy in 2002, Trieste offers 106 three- and four-bedroom and
penthouse residences ranging from 3,415 square feet to 7,500 square feet priced
from $1.3 million to $7.0 million. The Windsor, Toscana, Salerno and Trieste
also offer cabanas for purchase, which include a full bath, living room and wet
bar. Residents of The Windsor, Toscana, Salerno and Trieste enjoy pool and spa
facilities and have access to the amenities of Pelican Bay, Bay Colony and
membership opportunities with the Pelican Isle Yacht Club.
Sorrento at The Colony at Pelican Landing. Scheduled for completion in
2001, Sorrento offers 72 two- and three-bedrooms residences ranging from 1,930
square feet to 2,932 square feet priced from the mid $300,000s to the mid
$900,000s. Residents have access to recreational facilities of the Pelican
Landing Association and membership opportunities at The Colony Golf and Bay
Club.
Verona and Siena at Deering Bay. Completed in May 2000, Verona offers 48
two- and three-bedroom and penthouse residences ranging from 2,160 square feet
to 4,475 square feet priced from $395,000 to $1.7 million. Scheduled for
occupancy in 2001, Siena offers 48 two- and three-bedroom and penthouse
residences ranging from 2,300 square feet to 4,600 square feet priced from
$560,000 to $1.9 million. Residents have access to and membership opportunities
with the amenities of Deering Bay Yacht and Country Club.
Aruba, Bequia and Caribe at Cove Towers. Completed in May 1999, Aruba
offers 50 two- and three-bedroom and penthouse residences ranging from 1,621
square feet to 3,216 square feet priced from $271,000 to $740,000. Completed in
January 2000, Bequia offers 50 two- and three-bedroom and penthouse residences
ranging from 1,621 square feet to 3,121 square feet priced from $320,000 to
$825,000. Scheduled for completion in 2001, Caribe offers 56 two-and
three-bedroom and penthouse residences ranging from 1,854 square feet to 4,270
square feet priced from $340,000 to $1.1 million. Amenities at Aruba, Bequia and
Caribe include a pool and spa facility, and residents have access to and
membership opportunities with the Tarpon Cove Yacht and Racquet Club.
Harbor Towers II at Burnt Store Marina. Completed in September 2000,
Harbor Towers II offers 60 two- and three-bedroom and penthouse residences
ranging from 890 square feet to 2,436 square feet
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priced from $100,000 to $400,000. Residents have access to and membership
opportunities with the amenities of Burnt Store Marina and Country Club.
The Seasons at Naples Cay. Scheduled for occupancy in 2002, The Seasons
offers 43 three- to four-bedroom and penthouse residences from 4,740 square feet
to 11,698 square feet priced from $1.5 million to $10.9 million. Amenities
include a pool and spa as well as indoor social and recreational facilities.
AMENITIES DEVELOPMENT AND OPERATION
General. The provision of amenities, like championship golf courses with
clubhouses, fitness, tennis and recreational facilities, guest lodging, marinas
and a variety of restaurants, is central to our mission to deliver high quality
residential lifestyles. To ensure that the amenities in our communities are
designed, constructed and operated at a level of quality consistent with the
residences that we build, we have established an amenities development and
operations group. Although many of the amenities facilities that we currently
own or manage were constructed by various unaffiliated community developers from
which we purchased ownership, we have developed the amenities of several
communities, including those at Walden Lake Polo and Country Club, Gulf Harbour
Yacht and Country Club, The Estates at Bay Colony Golf Club, Pelican Marsh Golf
and Country Club, Gateway Golf and Country Club, Tiburon Naples Golf Club,
Pelican Sound Golf and River Club, The Colony Golf and Bay Club, Waterlefe Golf
and River Club, Tarpon Cove Yacht and Racquet Club, Jupiter Yacht Club and
Pelican Nest Golf Club at Pelican Landing and have worked with noted amenities
designers, particularly golf course architects, to enhance the marketability of
our amenities and, thereby, our communities.
Ownership. Amenities at our communities are owned by either community
residents or non-residents in equity membership programs, or by us or
unaffiliated third parties through non-equity membership structures. In newly
developed or acquired communities, ownership of the amenities is structured to
cater to the preferences and expectations of community residents.
Due to the high costs of entry at equity clubs, we have found that in
communities offering homes at lower price points, residents typically prefer
non-equity memberships programs, which require lower initiation fees, but higher
annual dues. Since residents' preferences change over time, we may choose to
sell the ownership and operation of the amenities to a resident group on an
equity basis.
An alternative to non-equity programs, bundled home and amenities
membership structures allow home buyers in moderately priced communities to
receive club memberships bundled with their home purchase. In these cases, the
amenities are owned and operated by the community homeowners association.
In communities offering higher-priced homes, all or a select group of
residents own the golf and other amenities assets on a full equity basis. The
conveyance of amenities assets to residents is accomplished through an equity
subscription and sales process at an established price. These equity ownership
offerings are usually completed in two to six years, depending upon the pace of
residential build-out in the community.
Operation. In communities with bundled or equity ownerships, we typically
enter into an operating agreement with the association or club entity which
holds title to the facilities. The operating agreements generally provide that
we will continue to control, manage and operate the amenities' facilities until
substantially all of the homes in the community, in the case of bundled
ownerships, or all of the resident equity ownership interests, in the case of
equity ownerships, have been sold. During this period, we generally receive the
net profits, and incur any losses, of the amenities business.
Accounting. Revenues from amenities operations include membership dues and
charges for services provided. Dues from members are recorded as deferred
revenues when collected and are recognized as revenues over the membership term.
Revenues for services are recorded when the service is provided. Costs of
amenities operations are recorded as incurred.
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Revenues from sales of equity memberships are recorded when the
collectibility of the sales price is reasonably certain, costs can be reasonably
estimated and the earnings process is complete. Revenues for the sale of
non-equity membership initiation fees are included in revenue over the estimated
period of member benefits. The amount of non-equity membership initiation fees
collected in excess of the cumulative amount recorded as revenue is reflected as
deferred revenue.
MARKETING
Targeting move up, retirement and affluent second-home buyers, we have been
developing and executing award-winning, multi-media marketing plans for our
homes and communities for more than 50 years. We have local market and point of
sale expertise and have also operated as the chief marketing agent for many of
the third party homebuilders constructing homes in our communities. We have
traditionally entered into fee-based marketing agreements with many of the
builders in our communities pursuant to which we are compensated for developing
and implementing marketing programs on behalf of these builders. We employ an
experienced staff of copywriters, creative art directors and graphic designers
who are responsible for the design and development of most of our marketing
materials and advertising messages, including newspaper and magazine print,
direct mail and billboards.
We believe our proprietary marketing systems and the depth of experience of
our marketing group create an increased number of selling opportunities for us
and has generally enhanced our marketing presence and brand recognition. Our
marketing program reaches prospective purchasers, locally, regionally and
nationally through advertisements placed in demographic specific periodicals and
other media. Our Internet website displays a comprehensive review of each of our
communities including locations, promotions, amenities, calendars of activities,
lifestyle testimonials, product floorplans, elevations and views of most of the
homes we build. The advertisements and website include response mechanisms, like
a coupon or toll-free number, by which a prospective purchaser may request
additional information about our housing products. When a prospective purchaser
responds to one of our advertisements or at our website, purchaser-specific
information is entered into our database creating a personalized customer
record, which is used to record every interaction we have with this purchaser.
As a prospective purchaser's interest in our products and communities
evolves, we individualize our marketing program by tailoring direct mail and
regular telephone follow-up that will apprise the prospective purchaser of
relevant activities, developments and products being offered. Through the
process, we are able to collect a wide range of demographic and psychographic
data about prospective purchasers, including home product preferences, hobby and
recreational interests and the motivation for, and urgency of, the decision to
purchase a home, which provides us with valuable information that we utilize to
improve our target marketing success rate. Our targeted marketing allows us to
develop a relationship with prospective purchasers, tending to predispose them
toward visits to our communities during their home shopping or vacation trips to
Florida. Some prospective purchasers may receive over 15 direct mail or
telephone contacts a year from us. As of March 31, 2001, our database contained
records of approximately 140,000 prospective purchasers qualified by age and
income that had expressed an interest in purchasing a home in Florida.
We believe that our relationship and database marketing results in the
efficient use of expenditures. The relative success and productivity of each of
our marketing programs is measured to determine which programs yield the most
qualified leads, prospects and customers per dollar spent. The results of these
measurements are the primary determining factors for where future marketing
expenditures will be directed. In addition, our database is a source of ongoing
customer research, which influences our homebuilding design and the type and
price range of the amenities to be integrated within our master-planned
communities.
PARCEL AND LOT SALES
We leverage our expertise and experience in master-planning by
strategically selling lots and parcels at premium prices within our communities
for construction of products we do not wish to build. This enables
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us to create a more well-rounded community by selling parcels and lots to
developers who will construct commercial, industrial and rental properties,
which we ordinarily do not develop. We sometimes sell selected lots directly to
buyers for the design and construction of large custom homes.
OTHER REAL ESTATE SERVICES BUSINESSES
Resale Brokerage
Prudential Florida WCI Realty. On June 10, 1999, Watermark Realty, Inc., a
wholly owned subsidiary of WCI, entered into a six-year franchise agreement with
Prudential Real Estates Affiliates, Inc. This agreement, as subsequently
amended, allows us to provide exclusive residential brokerage services as
Prudential Florida WCI Realty in six geographic areas across eight counties in
Florida. The exclusive franchise areas are in Broward, Charlotte, Hillsborough,
Manatee, Lee, Collier, Dade and Palm Beach Counties. To maintain this exclusive
arrangement we must substantially grow our market share in each of these
exclusive areas during the six-year franchise period. As consideration under the
agreement, we pay Prudential a royalty based on gross commission revenue on a
monthly basis. At March 31, 2001, we had 21 offices, 120 employees and over 780
sales agents.
WCI Realty, Inc. WCI Realty, Inc. provides new home and certain resale
brokerage services. At March 31, 2001, WCI Realty, Inc. had 24 offices and 166
employees.
Title Insurance
First Fidelity Title, Inc. First Fidelity Title Company, Inc., and
Communities Title Insurance, Inc. which merged into First Fidelity Title in
2000, provides title insurance and closing services to our customers. First
Fidelity underwrites its policies on behalf of large national title insurers and
derives its revenues from three sources: fees paid to it for title insurance
provided to our customers, third party residential closings and commercial
closings. First Fidelity has a significant third party customer base. First
Fidelity has historically generated net revenues that average 0.6% of the dollar
value of the transactions it closes; it conducted over 3000 closings in 2000. At
March 31, 2001, First Fidelity had 7 offices and 41 employees.
Mortgage Banking
Financial Resources Group, Inc. Financial Resources Group, Inc. provides
residential mortgage banking services to our buyers, as well as third party
purchasers. The majority of Financial Resources' revenue is generated from fees
earned on loans generated as a correspondent mortgage lender with various
financial institutions located throughout the country. Financial Resources has
historically averaged fees of about 2.0% on the loan principal amount in gross
fee revenue. At March 31, 2001, Financial Resources Group had 38 employees in 6
offices located in Naples, Coral Springs, Coral Gables, Palm Beach Gardens,
Bonita Springs and Sun City Center.
Property Management
WCI Communities Management, Inc. We provide management services to our
master-planned community developments and oversee the business affairs of over
60 condominium and homeowners' associations and 14 community master associations
encompassing over 10,000 residences throughout Florida. The management companies
derive their revenue from two primary sources: monthly flat fees received for
managing homeowner, master and condominium associations and a management fee
equal to 4% of the expenses paid to third party services providers at the Kings
Point community in Sun City Center. The services provided by the management
companies include accounting, security, common area maintenance and insurance
policy administration. The companies operate ten regional and community offices
located in Collier, Lee, Broward, Palm Beach, Dade and Hillsborough counties,
with headquarters located in Bonita Springs, Florida. At March 31, 2001, our
property management operations had 211 employees.
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Development Services
Our development services business derives fee-based income from the
supervision of major commercial projects. For a nominal increase in overhead,
this business allows us to apply the expertise we have gained directing
large-scale real estate projects.
We provide various services for the property owner during both the design
and construction phases of a project. We manage, coordinate and supervise each
step in the development process. During the design phase we consult on all
project aspects from obtaining zoning approvals, to selection of the design
team, to managing the design process. We then develop project budgets and
schedules and assist in selecting the general contractor. During construction,
we act as the owner's representative to oversee the general contractor.
To date we have provided this service for the Ritz-Carlton Hotels unit of
the Host Marriott Corporation and Hyatt Hotels Corporation. It is our intent to
expand this business to serve other customers that have a need for high-quality
project management, but do not wish to create their own in-house support
organization. As we acquire additional properties, we anticipate creating new
opportunities for this division to support construction of hotels and other
resort-related projects included at new locations.
OTHER INVESTMENTS
Pelican Isle. We have invested in two partnerships with investments in
Pelican Isle, a community being developed in North Naples, Florida, which
includes 137 residences and the Pelican Isle Yacht Club. Pelican Isle is being
developed by the Eco Group, a Tampa-based developer of residential communities.
We have a 49% interest in a partnership that owns and operates the Pelican Isle
Yacht Club. The second partnership that developed and sold luxury high-rise
residences sold out all of these units and was dissolved. Residents of Bay
Colony, Pelican Landing, Pelican Marsh and Wildcat Run are all eligible for
membership in the Pelican Isle Yacht Club.
Walden Woods Business Center Ltd. We are 50% partners with TECO Properties
Corporation in Walden Woods Business Center Ltd., a limited partnership, which
was formed to develop a 550-acre mixed-use industrial park in Plant City,
Florida. We also provide marketing, accounting and other services to the
partnership.
Tiburon Golf Ventures Limited Partnership. Tiburon Golf Ventures Limited
Partnership was formed with an affiliate of Host Marriott Corporation in 1998 to
complete construction of, and then operate a 36-hole, Greg Norman-designed golf
course in its Tiburon Naples community. The primary market for this high-end
daily fee course is the guests of the adjacent Ritz-Carlton Golf Lodge currently
under construction, guests of the existing Ritz-Carlton Beach Hotel and the
future residents of the surrounding Tiburon Naples community. In addition, the
partnership has sold 171 of 350 non-equity golf memberships, which are currently
being sold for $110,000 each. The first 27 holes of the course opened for play
in November 1998 and the clubhouse opened in December 2000. The partnership
acquired adjacent land in 2000 to construct an additional nine holes of golf
expected to be completed in 2002 and for future residential property
development. We hold a 51% interest in the venture and collect management fees
for operating the golf course. To date, all acquisition and development costs
have been funded by the partners in proportion to their partnership interests.
Norman Estates at Tiburon Limited Partnership. Norman Estates at Tiburon
Limited Partnership was formed in 1998 for the purpose of constructing and
developing a Norman Estates community which will consist of 27 villas priced
from $1.2 million to $1.4 million. As of March 31, 2001, we had closed on three
residences at an average sales price of $1.5 million and there were 22
residences in backlog for $30.2 million. Bay Colony holds a 49.5% limited
partnership interest in the venture as well as having 50% ownership in the
general partner which holds 1% of the venture. Bay Colony also collects
developer and construction fees for operating the project. The venture currently
has a $2.5 million credit facility with a
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bank (of which $1.0 million is outstanding as of March 31, 2001), to fund
development and construction costs, which is non-recourse to the partners.
Pelican Landing Golf Ventures Limited Partnership. Pelican Landing Golf
Resort Ventures Limited Partnership was formed with Hyatt Equities, LLC in 1998
to develop and operate a 27-hole golf course adjacent to the resort hotel being
constructed by Hyatt in Pelican Landing. The course, which is currently under
construction, and clubhouse will be built on 476 acres purchased from us on
additional land acquired by the partnership in 2000. The golf course and
clubhouse are scheduled to open concurrently with the hotel in 2001. Both
partners will contribute cash to construct the golf course and related club
facilities. We retain a 51% interest in the venture and will also earn
development fees for directing course construction as well as management fees
for operating the facility. Although subject to change, it is anticipated that
Hyatt will retain operation of the food and beverage portion of the venture.
Pelican Landing Timeshare Ventures Limited Partnership. We own 51% of
Pelican Landing Timeshare Ventures Limited Partnership, which was formed with
HTS-Coconut Point, Inc., an affiliate of the Hyatt Hotels Corporation during
1998 to develop up to approximately 300 upscale timeshare residences on 32 acres
within the resort golf course being constructed by Pelican Landing Golf Resort
Ventures Limited Partnership. In addition, we will earn development fees for
managing the construction of the project. HTS-Coconut Point will be the general
partner and will also earn fees for sales, marketing, purchasing and property
management. This project is currently in the planning stages.
Bighorn. We have a 50% limited partnership interest in Bighorn
Development, L.P., which owns two-thirds of Bighorn Development L.L.C., the
owner and developer of Bighorn, an exclusive community located in the heart of
Palm Desert, California. Bighorn features an 18-hole championship golf course
and a 40,000 square foot clubhouse. Bighorn Development L.L.C. acquired the
operating assets of Bighorn Development L.P. and developed a neighboring
property with an 18-hole golf course.
PROPERTY
We own and use a 26,670 square foot office building in Sun City Center,
Florida which is subject to a lien under our senior credit facility. We lease
60,212 square feet of office space in Bonita Springs, which serves as our
headquarters, and 75,320 square feet of office space at Sun City Center, Ft.
Myers, Coral Springs and Palm Beach, which serves as branch office space for our
related real estate services businesses.
EMPLOYEES
At March 31, 2001, we had approximately 2,600 employees. We have no
unionized employees and believe that our relationship with our employees is
good.
COMMUNITY DEVELOPMENT DISTRICTS
In connection with the development of certain of our communities, community
development or improvement districts may utilize bond financing to fund
construction or acquisition of certain on-site and off-site infrastructure
improvements, near or at these communities. The obligation to pay principal and
interest on the bonds issued by the districts is assigned to each parcel within
the district. If the owner of the parcel does not pay this obligation, a lien
will be placed on the property to secure the unpaid obligation. The bonds,
including interest and redemption premiums, if any, and the associated lien on
the property are typically payable, secured and satisfied by revenues, fees, or
assessments levied on the property benefited. The amount of bond obligations
issued by districts with respect to our communities totaled $204.2 million at
March 31, 2001.
The districts raise the money to make the principal and interest payments
on the bonds by imposing assessments and user fees on the properties benefited
by the improvements from the bond offerings. We pay a portion of the revenues,
fees, and assessments levied by the districts on the properties we own in our
communities that are benefited by the improvements. In addition, we guarantee
district shortfalls under some of the bond debt service agreements that we are a
party to when the revenues, fees, and assessments
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which are designed to cover principal and interest and other operating costs of
the bonds, are not paid. We can make no assurances that debt service shortfalls
guaranteed by us will not occur.
We record a liability for the estimated assessments and user fees levied by
the districts on the properties that we own that are fixed and determinable. We
reduce this liability by the corresponding assessment assumed by property
purchasers at the time of closing and transfer of the property and by cash held
by the districts available to offset the particular bond obligation. We have
accrued $46.1 million as of March 31, 2001 as the estimated amount of the
assessments and user fees that we may be required to pay. The amount we may have
to pay in may be more or less than the amount we have accrued.
SEASONALITY
We have historically experienced, and in the future expect to continue to
experience, variability in revenue, profit and cash flow. Factors expected to
contribute to this variability include:
- the timing of the introduction of new towers and the closing of tower
residences, homes and lot and parcel sales;
- our ability to continue to acquire land and options on that land on
acceptable terms;
- the timing of receipt of regulatory approvals for development and
construction;
- the condition of the real estate market and general economic conditions
in Florida;
- the prevailing interest rates and the availability of financing, both for
us and for the purchasers of our homes; and
- the cost and availability of materials and labor.
Our historical financial performance is not necessarily a meaningful indicator
of future results and, in particular, we expect financial results to vary from
project to project and from quarter to quarter. Our revenue may therefore
fluctuate significantly on a quarterly basis, and we believe that
quarter-to-quarter comparisons of our results should not be relied upon as an
indication of future performance.
COMPETITION
The homebuilding industry and real estate development is highly
competitive. In each of our business components, we compete against numerous
developers and others in the real estate business in and near the areas where
our communities are located. Some of our principal competitors include Toll
Brothers, Inc., Lennar Corporation, Pulte Corporation and Centex Corporation.
We, therefore, may be competing for investment opportunities, financing,
available land, raw materials and skilled labor with entities that possess
greater financial, marketing and other resources. Competition generally may
increase the bargaining power of property owners seeking to sell, and industry
competition may be increased by future consolidation in the real estate
development industry.
REGULATORY AND ENVIRONMENTAL MATTERS
We are subject to various laws and regulations relating to the operation of
our properties, which are administered by numerous Federal, state and local
governmental agencies. In particular, development of property in Florida is
subject to comprehensive Federal and Florida environmental legislation,
including wildlife, endangered species and wetlands regulation, as well as other
state administrative regulations. This regulatory framework, in general,
encompasses areas like water quantity and quality, air quality, traffic
considerations, availability of municipal services, use of natural resources,
impact of growth, energy conservation and utility services, conformity with
local and regional plans, and public building approvals, together with a number
of other safety and health regulations. Additionally, each municipality has its
own planning and zoning requirements. Permits and approvals mandated by
regulation for development of any magnitude are often numerous, significantly
time-consuming and onerous to obtain, and not guaranteed. The permit processes
are administered by numerous Federal, state, regional and local boards and
agencies
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with independent jurisdictions. Permits, when received, are subject to appeal or
collateral attack and are of limited duration. Such permits, once expired, may
or may not be renewed and development for which the permit is required may not
be completed if such renewal is not granted. These requirements have a direct
bearing on our ability to further develop communities in Florida. Although we
believe that our operations are in full compliance in all material respects with
applicable Federal, state and local requirements, our growth and development
opportunities in Florida may be limited and more costly as a result of
legislative, regulatory or municipal requirements.
Our operating costs may also be affected by the obligation to pay for the
cost of complying with existing environmental laws, ordinances and regulations,
which require a current or previous owner or operator of real property to bear
the costs of removal or remediation of hazardous or toxic substances on, under
or in property. These laws often impose liability whether or not the owner or
operator knew of, or was responsible for, the presence of hazardous or toxic
substances. In addition, the presence of hazardous or toxic substances, or the
failure to remediate property properly, may adversely affect the owner's ability
to borrow by using the real property as collateral. Persons who arrange for the
disposal or treatment of hazardous or toxic substances may also be liable for
the costs of removal or remediation of any substance at the disposal or
treatment facility, whether or not the facility is or ever was owned or operated
by the person. Environmental laws and common law principles could be used to
impose liability for releases of hazardous materials, including
asbestos-containing materials, into the environment, and third parties may seek
recovery from owners as operators of real properties for personal injury
associated with exposure to released materials containing asbestos or other
hazardous materials.
Environmental site assessments conducted at our properties have not
revealed any environmental liability or compliance concerns that we believe
would have a material adverse effect on our business, assets, results of
operations or liquidity, nor are we aware of any material environmental
liability or concerns. Although we conduct environmental site assessments with
respect to our own properties, there can be no assurance that the environmental
assessments that we have undertaken have revealed all potential environmental
liabilities, or that an environmental condition does not otherwise exist as to
any one or more of our properties that could have a material adverse effect on
our business, results of operations and financial condition.
LEGAL PROCEEDINGS
From time to time, we have been involved in various litigation matters
involving ordinary and routine claims incidental to our business. In addition,
in May 2000, Richard Ahlborg, Carol Ahlborg, and other individuals who purchased
lots in Pelican Landing filed a lawsuit against us in the United States District
Court for the Middle District of Florida, Ft. Myers Division. The lawsuit seeks
class action status and was instituted against us and a subsidiary, WCI Realty,
Inc. It arose out of a preferred builder program under which plaintiffs
purchased vacant lots and then contracted with a builder of their choice to
construct a residence on their lots. In consideration of the extensive costs
incurred by us and WCI Realty associated with the marketing, sales and
advertising of the community for the benefit of the builders who participated in
the program, these builders were required to pay a marketing fee to WCI Realty
based on a percentage of the construction cost of the home. The plaintiffs
asserted that we had an obligation to disclose to them that the preferred
builder would pay a marketing fee to us. The plaintiffs have demanded
unspecified money damages and have alleged, among other things, violation of the
federal Racketeering, Influenced and Corrupt Organizations Act and the Real
Estate Settlement Procedures Act. Since the Court has not yet ruled on whether
to certify this lawsuit as a class, this litigation is still in its early
stages. Therefore, we are not yet able to determine whether the resolution of
this matter will have a material adverse effect on our financial condition or
results of operations. We have objected to the certification of this lawsuit as
a class action. We believe we have meritorious defenses and intend to vigorously
defend this action.
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FLORIDA REAL ESTATE MARKET
GENERAL
Florida is the nation's fourth most populated state and is one of the most
popular destinations for retirees, leisure home buyers, businesses and
working-age people. With its natural amenities, tropical climate, approximately
1,200 mile coastline, variety of year-round recreational activities, range of
housing styles and prices, transportation network, diverse and expanding economy
with a variety of major employment centers and no state income tax, Florida
offers a high quality of life and a low cost of living. Demand for housing in
Florida is strong, reflecting the state's population growth, favorable economic
environment and strong demographics. The information contained in this section
is based on numerous assumptions, including assumptions regarding the continued
population growth rate in Florida and the continued economic health of Florida.
These assumptions are subject to numerous factors which are subject to change
and are outside of our control. Results may differ substantially from those
anticipated, and in the event results differ materially from those anticipated,
our business and results of operations could be materially and adversely
affected.
MACROECONOMIC CONDITIONS
Because our operations are located in Florida, the state's economic health
and growth rate are important to our success. According to the Bureau of
Economic Analysis of the Department of Commerce, from 1992 to 1998, Florida's
gross state product grew at a compound annual rate of approximately 6.6%. During
the same period, the national gross domestic product grew at a compound annual
rate of 5.7%.
Florida's employment, income and population growth have created substantial
demand for new residential construction, as evidenced by the following data:
- Employment in Florida grew at an average annual rate of 3.5% from 1980 to
1995 and is predicted to continue to increase at an average annual rate
of 2.1% until 2010.(1)
- Florida's compound annual population growth rate of 1.8% over the last
ten years has been 80% higher than the national average of 1.0%.(2)
- Florida ranked second nationally behind California in total job creation
for 1999 having added 285,000 jobs in 1999.
TOP TEN STATES BY 1999 JOB GROWTH
[BAR CHART]
SOURCE: The Meyers Group
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(1) Bureau of Economic Analysis of the Department of Commerce
(2) United States Census Bureau
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POPULATION TRENDS
Over the past twenty-five years, there has been significant migration to
the southern and western regions of the United States. Today, the southern
states comprise approximately 35% of the national population. By 2010,
approximately 6% of the United States population is projected to reside in the
state of Florida.(2)We are well positioned to benefit from favorable long-term
demographic trends in Florida. As the following chart illustrates, Florida has
been outpacing the average population growth rate of the rest of the country.
This disparity in growth rates is expected to continue with Florida's population
expected to increase 15.5% between 2000 and 2010, compared to the United States
Census Bureau's projection of 8.4% for the United States as a whole.(2)
Furthermore, the United States Census Bureau predicts that Florida will
surpass New York as the third most populous state by 2025. Population growth in
the Florida marketplace derives from a number of sources, including domestic
immigration of families, vacation home purchasers and retirees, a vibrant
tourist industry, and an influx of international families. In fact, Florida is
expected to experience the largest net gain in population through migration from
other states in the United States between 1995 and 2025, gaining 1.9 million
persons.(2)
COMPARATIVE TEN YEAR UNITED STATES AND FLORIDA POPULATION GROWTH RATES
[BAR CHART]
- ---------------
SOURCES: United States Census Bureau for United States numbers; University of
Florida, Bureau of Economic and Business Research (1998 Florida
Statistical Abstract) for Florida numbers
- ---------------
(2) United States Census Bureau
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Our strategy of developing and managing highly amenitized master-planned
communities caters directly to a large proportion of the population expected to
migrate to the south. The first members of the "baby boom" generation (those
born between 1946 and 1964) will soon reach retirement age and we expect that
many of these people will be potential customers. Approximately 40 million
Americans are expected to reach the age of 50 in the United States from 2000 to
2010.(2) By the year 2010 the population of the state of Florida is projected to
include 7.1 million people over the age of 50, representing approximately 40% of
the state's population.(3)
PERCENTAGE OF FLORIDA AND UNITED STATES
AMERICANS TURNING 50* POPULATION OVER 50
[BAR CHART]
[BAR CHART]
*Based on birth statistics
- --------------- ---------------
SOURCE: United States Census Bureau SOURCES: United States Census Bureau for United
States numbers; University of Florida, Bureau of
Economic and Business Research (1998 Florida
Statistical Abstract) for Florida numbers
- ---------------
(2) United States Census Bureau
(3) University of Florida, Bureau of Economic and Business Research (1998
Florida Statistical Abstract)
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INCREASING AFFLUENCE WITHIN THE UNITED STATES
Our target market is comprised of individuals with high household income or
net worth who desire a home with highly amenitized, upscale life style
offerings. This market encompasses retirees, secondary home purchasers and
move-up buyers. Affluent households (defined as households earning more than
$100,000 per year or having net worth over $500,000) grew to more than 18
million in 1999 from approximately 11 million in 1994, representing a compound
annual growth rate of approximately 9%. The total number of affluent households
is expected to rise to more than 30 million by the year 2004, representing a
compound annual growth rate of more than 10% from 2000 to 2004. Additionally,
the number of households with $5 million or more in net worth is expected to
grow from approximately 860,000 in 2000 to more than 3.9 million by 2004,
representing a compound annual growth rate of 45% during this period.
MILLIONS OF AFFLUENT UNITED STATES HOUSEHOLDS
(ESTIMATED/PROJECTED) GROWTH IN THE PENTAMILLIONAIRE MARKET
(AFFLUENT MEANS INCOME OF OVER $100,000 AND/OR (ESTIMATED/PROJECTED)
net worth of over $500,000, not including primary (Pentamillionaire means net worth of over
residence) $5 million)
[MILLIONS OF AFFLUENT U.S. HOUSEHOLDS GRAPH] [GROWTH IN THE PENTAMILLIONAIRE MARKET GRAPH]
- --------------- ---------------
SOURCE: Spectrem Group SOURCE: Spectrem Group
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The coming transfer of wealth to the "baby boom" generation from the
generations preceeding it is also a key driver for growth in our markets. The
total amount of money to be passed on to the "baby boom" generation during the
next 15 years has been estimated to be in excess of $300 billion, underscoring
the "wealth effect" that the country is projected to experience during this
period. Furthermore, the number of persons through 2005 expected to have more
than $1 million in assets available for investment is forecast to grow
approximately eight times faster than the rest of the population.
ESTIMATED GENERATIONAL WEALTH TRANSFER (INHERITANCE)
[BAR CHART]
- ---------------
SOURCE: Cornell University Department of Consumer Economics and Housing, 1994.
AFFLUENT UNITED STATES MARKET EXPECTED TO
OUTPACE NATIONAL ANNUAL POPULATION GROWTH
FROM 2000-2005
[BAR CHART]
- ---------------
SOURCE: Claritas, Inc.
HOUSING ACTIVITY
From 1992 to 1997 and in 1999, Florida ranked first in the nation for
number of single-family housing residences permitted for construction.(2) In
addition, as the following chart suggests, housing starts in Florida tend to
track the trend of housing starts on a national basis.
FLORIDA AND THE UNITED STATES: SINGLE-FAMILY BUILDING PERMITS 1989-2000
[LINE GRAPH]
- ---------------
SOURCE: Real Estate Center at Texas A&M University and United States Census
Bureau
(2) United States Census Bureau
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TOURISM
Tourism is another basic source of economic growth in the state of Florida.
We believe that growth in tourism will help fuel growth in our leisure home
target market by showing potential home buyers the attractiveness of living in
Florida. As the following chart illustrates, Florida has continued to attract an
increasing number of visitors.
FLORIDA TOURISM
[BAR CHART]
- ---------------
SOURCE: Visit Florida Inc.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of WCI Communities and their
respective ages as of March 31, 2001 and positions are as follows:
NAME AGE POSITION
- ---- --- --------
Alfred Hoffman, Jr........... 67 Chief Executive Officer and Director
Don E. Ackerman.............. 67 Chairman of the Board of Directors and Executive Vice President
Jerry L. Starkey............. 41 President and Chief Operating Officer
James P. Dietz............... 36 Senior Vice President and Chief Financial Officer
Steven C. Adelman............ 49 Senior Vice President and Treasurer
R. Michael Curtin............ 53 Senior Vice President, Marketing
Milt Flinn................... 45 Senior Vice President, Real Estate Services Division
David Fry.................... 41 Senior Vice President, Amenities Division
Michael R. Greenberg......... 46 Senior Vice President, Homebuilding Division
Vivien N. Hastings........... 49 Senior Vice President and General Counsel
S. Charles Mattoff........... 57 Senior Vice President, Human Resources
George R. Page............... 57 Senior Vice President, Tower Division
F. Philip Handy.............. 56 Director
Lawrence L. Landry........... 57 Director
Thomas F. McWilliams......... 58 Director
Joshua J. Mintz.............. 45 Director
Jay Sugarman................. 38 Director
Stewart Turley............... 66 Director
Alfred Hoffman, Jr. is the Chief Executive Officer and a Director of WCI.
From July 24, 1995 until the date of the merger of WCI Communities Limited
Partnership and Florida Design, Mr. Hoffman served as Chief Executive Officer of
WCI Communities Limited Partnership, and from July 1998 until the date of the
merger, he served as a Director of WCI Communities Limited Partnership. From
1985 until the date of the merger, Mr. Hoffman also served as Chief Executive
Officer and Chairman of the Board of Directors of Florida Design. He also served
as President of Florida Design from 1985 to 1989 and 1993 to 1994. Mr. Hoffman
is Chief Executive Officer and Chairman of the Board of Directors of First
Fidelity Title, Inc., Financial Resources Group, Inc., Florida Lifestyle
Management Company, Courtyards at Sun City Center, Inc. and Sun City Center
Office Plaza, Inc. He also is Chief Executive Officer and a Director of Sun City
Center Land Company and is a Director of Aston Care Systems, Inc. Prior to
establishing Florida Design, Mr. Hoffman founded Tekton Corporation, a
homebuilder which he sold to Union Camp Corporation in 1970, and from 1970 to
1975, he served as head of Union Camp Corporation's real estate homebuilding
subsidiary. From 1975 to 1985, Mr. Hoffman was a private developer in the Tampa
Bay area.
Don E. Ackerman is the Chairman of the Board of Directors and Executive
Vice President of WCI. From July 24, 1995 until the date of the merger, Mr.
Ackerman served as Chairman of the Board of Directors and Executive Vice
President of WCI Communities Limited Partnership. From 1985 until the date of
the merger, Mr. Ackerman also served as a Director of Florida Design. He is also
a Director of First Fidelity Title, Inc., Financial Resources Group, Inc.,
Florida Lifestyle Management Company, Courtyards at Sun City Center, Inc., Sun
City Center Office Plaza, Inc., Sun City Center Land Company and Aston Care
Systems, Inc. From 1967 until 1991, Mr. Ackerman was a partner at J.H. Whitney &
Co., a venture capital firm. Mr. Ackerman is President of Chandelle Ventures,
Inc., his private investment company, and serves as Chairman of the Board of
Walden University, Inc. Mr. Ackerman is Chairman of the Board of Directors of
Genicom Corporation and a Director of Schlumberger Limited.
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Jerry L. Starkey is the President and Chief Operating Officer of WCI. From
1998 until the date of the merger, Mr. Starkey was the President and Chief
Operating Officer of WCI Communities Limited Partnership. From 1994 until the
date of the merger, he also served as President and Secretary of Florida Design.
Since joining Florida Design in 1988, Mr. Starkey has also held the office of
Chief Operating Officer. Mr. Starkey is President of First Fidelity Title, Inc.,
Financial Resources Group, Inc., Courtyards at Sun City Center, Inc., Sun City
Center Land Company and Sun City Center Office Plaza, Inc. Prior to joining the
predecessor to Florida Design, Mr. Starkey was Executive Vice President of
George Thomas Homes, a production homebuilder with operations in Texas and
Florida. Mr. Starkey is a member of the State Bar of Texas. In addition, Mr.
Starkey was President and Secretary of Aston Care Systems, Inc. from 1996 to
1998.
James P. Dietz is a Senior Vice President and Chief Financial Officer of
WCI. From October 1996 until the date of the merger, Mr. Dietz was the Chief
Financial Officer and Treasurer of Florida Design. Since joining Florida Design
in 1995, Mr. Dietz has also held the position of Corporate Controller. In
addition, from 1996 until 1998, Mr. Dietz served as Chief Financial Officer of
Aston Care Systems, Inc. Prior to joining Florida Design, Mr. Dietz was Manager
of Business Development at GTE Leasing Corporation, an affiliate of GTE. From
1986 until 1993, Mr. Dietz held various professional positions, including audit
manager, at Arthur Andersen & Co.
Steven C. Adelman is the Senior Vice President and Treasurer of WCI. From
1996 until the date of the merger, Mr. Adelman served as Senior Vice President
and Treasurer of WCI Communities Limited Partnership. Prior to joining WCI
Communities Limited Partnership, Mr. Adelman was Vice President of Finance and
Accounting at Inco Homes Corporation. From 1981 until 1993, Mr. Adelman held
various management positions, including partner, at Kenneth Leventhal and
Company, a public accounting firm specializing in the real estate industry.
R. Michael Curtin is the Senior Vice President, Marketing and Sales of WCI.
From 1997 until the date of the merger, Mr. Curtin was the Senior Vice
President, Marketing and Sales of Florida Design. Since joining Florida Design
in 1995, Mr. Curtin has also held the office of Vice President, Marketing. Prior
to joining Florida Design, Mr. Curtin was employed by The Hunt Group as the
Marketing and Sales Director for Rosedale Golf and Country Club.
Milt G. Flinn is the Senior Vice President, Real Estate Services Division
of WCI. From 1993 until the date of the merger, Mr. Flinn was Chief
Administrative Officer of Florida Design. Since joining Florida Design in 1983,
Mr. Flinn has also held the office of Vice President of Human Resources. Prior
to joining Florida Design, Mr. Flinn was Personnel Administrator Tropicana
Products.
David L. Fry is the Senior Vice President, Amenities Division of WCI. From
1995 until the date of the merger, Mr. Fry was Vice President, Amenities of WCI
Communities Limited Partnership. From 1989 until 1995, Mr. Fry was Golf
Operations Director of the South Seas Resort Company. Prior to joining the South
Seas Resort Company, Mr. Fry was Assistant Superintendent of the Bonita Bay
Club, Bonita Springs Florida.
Michael R. Greenberg has been Senior Vice President, Homebuilding Division
of WCI since the fall of 1999. Since joining WCI in 1998, Mr. Greenberg has also
held the office of Division President of the Naples/Bonita Springs Homebuilding
Division. Prior to joining WCI, Mr. Greenberg was Executive Vice President for
Avatar Properties in Coral Gables, Florida. From 1991 to 1997, Mr. Greenberg
held various positions with Toll Brothers, Inc., including Vice President.
Vivien N. Hastings is the Senior Vice President and General Counsel of WCI.
From 1995 until the date of the merger, Ms. Hastings was Senior Vice President
and General Counsel of WCI Communities Limited Partnership. Prior to serving as
General Counsel, Ms. Hastings held various positions in WCI Communities Limited
Partnership's legal department. Prior to joining WCI Communities Limited
Partnership, from 1982 to 1989, Ms. Hastings was Vice President and Co-General
Counsel of Merrill Lynch Hubbard, Inc., a real estate division of Merrill Lynch
& Co. From 1977 until 1982 Ms. Hastings was an associate with the Chicago law
firm of Winston & Strawn.
S. Charles Mattoff is the Senior Vice President, Human Resources of WCI.
From 1995 until the date of the merger, Mr. Mattoff held the positions of Vice
President and Senior Vice President in charge of
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human resources for WCI Communities Limited Partnership. Prior to joining WCI,
Mr. Mattoff was Vice President of Human Resources for the Aerospace Division of
Vickers, Inc. from 1974 to 1994.
George R. Page is the Senior Vice President, Tower Division of WCI. From
1996 until the date of the merger, Mr. Page was General Manager of Bay Colony
and Pelican Bay. Since joining WCI Communities Limited Partnership in 1990, Mr.
Page also held the positions of Project Manager and Vice President of
Development for Bay Colony. Prior to joining WCI Communities Limited
Partnership, Mr. Page was Vice President of Development and Treasurer of
Relleum, Inc. in Naples, Florida. From 1968 until 1987, Mr. Page held various
management positions in marketing and sales with DVI Marketing Services, Inc.,
EWA Corporation, Scott USA and The Lange Company.
F. Philip Handy has been a Director of WCI since February 1999. Mr. Handy
is the Chairman and President of Winter Park Capital Company, a private
investment firm that he founded. From June 1997 until December 1998, Mr. Handy
was managing partner of Equity Group Investments, a private investment firm.
From 1980 to 1997, Mr. Handy was Chairman and President of Winter Park Capital.
Mr. Handy also serves on the board of Anixter International, Chart House
Enterprises, Transmedia Network, Inc. and Banca Quadrum S.A.
Lawrence L. Landry has been a Director of WCI since May 1999. From July 24,
1995 until August 1998, Mr. Landry served as a Director of WCI Communities
Limited Partnership. From January 1996 until March 1999, Mr. Landry served as a
Director of Florida Design. Mr. Landry is the President and Chief Executive
Officer of Westport Advisors, Ltd., which is the general partner of Westport
Senior Living Investment Fund L.P. Prior to forming Westport, Mr. Landry was the
chief finance and investment officer of the John D. and Catherine T. MacArthur
Foundation.
Thomas F. McWilliams has been a Director of WCI since March 1999. Mr.
McWilliams has been employed by Citicorp Venture Capital, Ltd. since 1983 and
has been a member of its investment committee since 1984. Mr. McWilliams serves
on the boards of Chase Industries, MMI Products, Polar Corporation, HydroChem
Industrial Services, Ergo Science Corporation, Pen-Tab Industries, Airxcel Inc.,
Pursell Industries, Strategic Industries and Royster-Clark Group Inc.
Joshua J. Mintz has been a Director of WCI since October 2000. Mr. Mintz is
the Vice President and General Counsel of the John D. and Catherine T. MacArthur
Foundation. Prior to joining the foundation in 1994, Mr. Mintz was a partner
with the law firm Sidley & Austin for five years, specializing in commercial
litigation and business reorganization.
Jay Sugarman has been a Director of WCI since 1995. Mr. Sugarman is
Chairman, President and Chief Executive Officer of iStar Financial, Inc., a
publicly traded REIT. From 1996 to 1997, he was Senior Managing Director of
Starwood Capital Group, LLC and from 1993 to 1996, was President of Starwood
Mezzanine Investors, L.P. Mr. Sugarman serves on the boards of iStar Financial
Inc. and Commercial Guaranty Assurance, Ltd.
Stewart Turley has been a Director of WCI since February 1999. Mr. Turley
was Chairman of the Board and Chief Executive Officer of Eckerd Corporation and
also held the positions of manager of Eckerd's non-drug operations, Vice
President, Senior Vice President, President and Chief Executive Officer before
retiring in 1997. Mr. Turley also serves on the boards of Sprint Corporation,
Springs Industries, Inc., and MarineMax, Inc.
TERM OF OFFICE
There are currently eight members of the Board of Directors. Directors are
elected and removed pursuant to the terms of our By-laws and the Investors
Agreement dated November 30, 1998, as amended, among Watermark Communities and
its stockholders. Each director holds office until his successor is elected or
qualified. Pursuant to the terms of the Investors Agreement, the directors of
the key subsidiaries of Watermark Communities (including WCI Communities and Bay
Colony-Gateway), are the same as that of Watermark Communities.
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The Investors Agreement requires each shareholder of Watermark to do all
things necessary or desirable (including voting) to elect:
- Messrs. Hoffman and Ackerman;
- a person designated by the John D. and Catherine T. MacArthur Foundation,
Hartsel Ranch Corporation and their affiliates (the "MacArthur
designee");
- a person designated by Kamehameha Activities Association and its
affiliates (the "Bishop designee");
- a person designated by Citicorp Venture Capital, Ltd. and its affiliates
(the "Citicorp designee"); and
- up to four directors designated by a majority of the persons referred to
above.
The current MacArthur designee is Mr. Mintz; there is no Bishop designee
presently on the board; the current Citicorp designee is Mr. McWilliams; and the
four directors designated by the named directors are Messrs. Handy, Landry,
Sugarman and Turley.
The Investors Agreement contains certain supermajority voting provisions
with respect to Watermark Communities and its subsidiaries, regarding the sale
of assets and property in excess of $25.0 million, the issuance of stock or
incurrence of indebtedness in excess of $25.0 million and the termination of
employment or amendment to the respective employment and consulting agreements
of Al Hoffman, Jr. and Don E. Ackerman. The Investors Agreement terminates in
the event of an initial public offering of common stock of Watermark
Communities.
COMMITTEES OF THE BOARD OF DIRECTORS
There are two committees of the board of directors: the Audit Committee and
the Compensation Committee. The board of directors may also establish from time
to time any other committees that it deems necessary or advisable.
The Audit Committee is responsible for making recommendations to the board
of directors regarding the selection of independent accountants to audit our
annual financial statements, conferring with the independent accountants and
reviewing the scope and the fees of the annual audit, reviewing our audited
financial statements, accounting and financial procedures, monitoring our ethics
and conflict of interest procedures and approving the nature and scope of
nonaudit services performed by the independent accountants. The Audit Committee
is comprised of Mr. Handy and Mr. Landry, with Mr. Handy serving as the
chairman.
The Compensation Committee is responsible for reviewing and making
recommendations to the board of directors on all matters concerning compensation
of management. The Compensation Committee is comprised of Mr. Turley, Mr.
Sugarman, Mr. McWilliams, Mr. Handy and Mr. Landry with Mr. Turley serving as
the chairman.
DIRECTOR COMPENSATION
Each director who is not our employee will receive a fee of $5,000 for each
full-day board meeting attended, $2,500 for each half-day board meeting attended
and $2,000 for each committee meeting attended. Directors who are also our
employees will receive no remuneration for serving as directors. Directors' fees
may be applied toward the exercise of vested stock options under the
Non-Employee Directors' Stock Incentive Plan.
Non-Employee Directors' Stock Incentive Plan
Watermark Communities has adopted the 1998 Watermark Communities, Inc.
Non-Employee Directors' Stock Incentive Plan, pursuant to which non-qualified
stock options to purchase up to 150,000 shares of the common stock of Watermark
Communities may be granted to non-employee directors of Watermark Communities or
any of its subsidiaries. The Compensation Committee administers the plan,
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and will from time to time grant options under the plan in a form and having
terms, conditions and limitations as the committee may determine in accordance
with the plan. The terms, conditions and limitations must be set forth in a
stock option agreement. No option may be granted under the plan after December
4, 2008, but the terms of options granted on or before that date may extend
beyond December 4, 2008. Participants may defer all or a portion of their
directors' meeting fees to apply to the exercise price of vested shares under
the plan. In the event of any change in the outstanding common stock of
Watermark Communities by reason of stock split, spin-off, stock dividend,
reorganization, merger, consolidation or similar event, the number of shares
subject to the plan and available for or covered by options and related option
prices will be adjusted. Except as otherwise provided in a stock option
agreement, in the event of a change of control, as defined in the plan, the
committee may, in its discretion, take any actions it deems necessary or
desirable, including without limitation, acceleration of exercisability of an
option, cash out of an option or substitution of benefits to substantially
preserve the value, rights and benefits of an affected option. The committee has
the authority to amend the terms and conditions applicable to outstanding
options granted under the plan, provided that no action may modify any
outstanding option in a manner adverse to a participant without the
participant's consent, other than as provided for in the plan. The board of
directors of Watermark Communities may amend, suspend or terminate the plan,
except that no action, other than as provided for in the plan, may be taken
which would, without shareholder approval, increase the aggregate number of
shares available for options under the plan, decrease the option price of
outstanding options, change the requirements relating to the committee or extend
the term of the plan.
EXECUTIVE COMPENSATION
The following table sets forth all compensation earned and/or paid for
services rendered to us for the year ended December 31, 2000, with respect to
our Chief Executive Officer and our four other most highly compensated executive
officers.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM
-------------------------------------- COMPENSATION
OTHER ANNUAL ------------ ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION LTIP PAYOUTS COMPENSATION TOTAL
- --------------------------- -------- ---------- ------------ ------------ ------------ ----------
Alfred Hoffman, Jr./Chief
Executive Officer......... $750,000 $1,275,000 -- -- -- $2,025,000
Jerry L.
Starkey/President/COO..... 450,000 982,400 -- -- 96,448(2) 1,528,848
George R. Page/Senior Vice
President................. 300,000 338,400 -- -- 48,050(1) 686,450
Michael R. Greenberg/Senior
Vice President............ 275,000 330,000 -- -- -- 605,000
James P. Dietz/Senior Vice
President/CFO............. 275,000 264,000 -- -- 20,000(2) 559,000
- ---------------
(1) One-time payout related to the elimination of Age Weighted 401(k) bonus.
(2) Reflects payment during 2000 related to terminated Florida Design Deferred
Compensation Bonus Plan. Under the plan, payment was made after the fifth
anniversary of the date of grant, subject to a five-year vesting schedule.
Management Incentive Compensation Plan
Watermark Communities has established The Watermark Communities Inc.
Management Incentive Compensation Plan which provides selected employees with
the opportunity to receive a cash bonus based on the employee's and Watermark
Communities' annual performance. The Management Incentive Compensation Plan
covers individuals employed at Watermark Communities for the entire calendar
year in positions designated by senior management as those that impact corporate
earnings. Individual awards under the Management Incentive Compensation Plan are
expressed as a percentage of salary ranging from 20% to 100% depending on job
classification and are determined based on the degree to which certain
performance and financial targets are achieved by the employee and Watermark
Communities. These
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targets are proposed by the Chief Executive Officer or President/Chief Operating
Officer, subject to approval by the Compensation Committee, at the beginning of
each year. Awards may be more or less than targeted amounts depending upon
actual results compared with the goals established.
Stock Purchase and Option Plan for Key Employees
Watermark Communities has adopted the 1998 Stock Purchase and Option Plan
for Key Employees, pursuant to which incentive stock options (as defined under
Section 422 of the Code), non-qualified stock options, restricted stock or other
stock-based awards to purchase up to 10% of the issued and outstanding shares of
Watermark Communities common stock may be granted to employees or other persons
having a relationship with Watermark Communities or one of its subsidiaries. The
Compensation Committee shall administer the plan, and may from time to time
grant awards in a form and having terms, conditions and limitations as the
committee may determine in accordance with the plan. The terms, conditions and
limitations are set forth in grant agreements. No award may be granted under the
plan more than ten years after shareholder approval of the Plan, but the terms
of awards granted on or before that date may extend beyond that date. In the
event of any change in the outstanding common stock of Watermark Communities by
reason of stock split, spin-off, stock dividend, reorganization, merger,
consolidation or similar event, the committee must adjust appropriately the
number of shares subject to the plan and make any other revisions as it deems
equitably required. The committee has the authority to amend the terms and
conditions applicable to outstanding awards granted under the plan, but not to
modify any outstanding award in a manner adverse to a participant without that
participant's consent (other than as provided for in the plan). The board of
directors of Watermark Communities may amend, suspend or terminate the plan,
except that no action (other than as provided for in the plan) may be taken
which would, without shareholder approval, increase the aggregate number of
shares available for awards under the plan, decrease the price of outstanding
awards, change the requirements relating to the committee or extend the term of
the plan.
Employment Agreements
Mr. Hoffman has an employment agreement with WCI, pursuant to which he is
employed as its Chief Executive Officer for four years ending on December 31,
2002. The agreement automatically renews for successive one-year terms unless
either Mr. Hoffman or WCI notifies the other party to the contrary. Mr.
Hoffman's annual salary for 2001 is $900,000 and he will receive advances
against his future bonus that are paid simultaneously with his salary that will
result in aggregate annual compensation of $1,285,000. Mr. Hoffman is entitled
to be paid a bonus of 120% to 170% of his annual salary, depending on the level
of achievement of certain objectives by WCI and its affiliates. Mr. Hoffman may
terminate his employment and become a consultant to WCI, after providing notice
of his intention to do so. During the four-year term of Mr. Hoffman's agreement,
the board of directors of WCI has the right to approve or disapprove of Mr.
Hoffman's election to act as a consultant. If Mr. Hoffman becomes a consultant,
he will be paid consulting compensation equal to 50% of his then aggregate
annual compensation. Any consulting period will end on June 30, 2005.
If Mr. Hoffman's employment is terminated by WCI without cause, Mr. Hoffman
will continue to be paid at an annual rate equal to his aggregate annual
compensation for the balance of the then current employment term; plus the next
renewal term, if any, unless notice of termination is given and neither party
had given notice of non-renewal prior to the notice of termination. If the board
of directors materially diminishes Mr. Hoffman's powers or duties, Mr. Hoffman
may terminate the agreement, in which circumstance WCI must continue to pay him
his aggregate annual compensation for the greater of (1) the balance of the then
current employment term, plus the next renewal term, if any, unless notice of
termination is given and neither party had given notice of non-renewal prior to
the notice of termination or (2) 30 months. During the term of the agreement and
for the three years thereafter, Mr. Hoffman may not compete with WCI and may not
solicit any employee of WCI to accept employment with him or any other person.
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MATERIAL RELATIONSHIPS AND RELATED TRANSACTIONS
In February 2001, we paid $718,750 to Citicorp Venture Capital, Ltd. for
services rendered in connection with the offering of the outstanding notes.
In June 2000, Jerry L. Starkey received an advance of his vested and
unvested deferred compensation in an amount equal to $349,000 in connection with
the purchase of a home. In exchange for the advance, he executed a promissory
note in favor of Watermark, our parent, in an amount equal to the advance, which
bears interest at 10%. The promissory note was subsequently amended to be
payable to WCI. Principal in the amount of $190,365 was paid on March 15, 2001
and the amount of $158,635 is due on March 15, 2002. Prior to March 15, 2003
interest accrues and becomes due and payable in the event of the voluntary
termination of employment of Mr. Starkey. In the event Mr. Starkey remains
employed by WCI on March 15, 2003, WCI will forgive the payment of all accrued
interest.
In April 2000, Thomas F. McWilliams contracted for the purchase of a
residence for $460,000, the list price. WCI and Mr. McWilliams simultaneously
entered into a lease agreement wherein Mr. McWilliams will lease the residence
to WCI for a period of one year from the date of closing in consideration of a
decorator allowance in the amount of $37,940 to be credited against the purchase
price at closing.
In August 2000, the remaining balance of the $82.5 million Ohio Savings
Bank loan and the $50.5 million Starwood Financial loan were combined under a
restated loan agreement with iStar Financial representing a total balance of
$72.5 million. The loan was fully repaid in February 2001. See "Description of
Material Indebtedness."
In December 1999, we entered into a month-to-month lease agreement with
N501EK, L.L.C. for the non-exclusive use of a 1978 Cessna 501 aircraft. During
the term of the lease, we pay a lease payment of $25,600, per month, and $700
per flight hour. Mr. Ackerman and Mr. Hoffman own 75% of N501EK, L.L.C.
In June 1999, Communities Finance sold multi-family residential parcels to
an entity in which Mr. Landry is a principal for the list price of $6.0 million.
The parcels had been marketed at that price for several months. Mr. Landry is a
member of our board of directors.
In March 1999, we acquired approximately 14,800 acres of non-contiguous
land in Palm Beach and Martin Counties from the John D. and Catherine T.
MacArthur Foundation for $227.5 million. We simultaneously sold approximately
2,200 acres for $132.5 million. The remainder of the land, approximately 12,600
acres, was acquired with the proceeds of a loan by Ohio Savings Bank in the
amount of $82.5 million and $20.0 million of cash. We have begun the entitlement
process on this land and we expect to continue to sell some of this property to
third parties. As of March 31, 2001, we sold approximately 9,200 of the 12,600
acres for $101.6 million in property sales and had contracts to sell
approximately 12 additional acres for approximately $247,000. We expect to sell
an additional 700 acres and develop the remaining 2,700 acres for our own
homebuilding and amenities operations. The MacArthur Foundation is a principal
stockholder in Watermark Communities. See "Material Relationships and Related
Transactions," "Principal Stockholders" and "Use of Proceeds."
A portion of the $82.5 million loan from Ohio Savings Bank that was used to
finance the acquisition of the MacArthur Foundation land was syndicated to an
affiliate of iStar Financial Inc. Jay Sugarman, a member of our board of
directors, is the Chairman and Chief Executive Officer of iStar Financial Inc.
Mr. Sugarman did not vote in connection with this transaction.
In April 1998, Communities Finance purchased certain interests of WCI
Communities Limited Partnership from CBS for approximately $70.0 million of
which $50.5 million was financed by an affiliate of Starwood Financial Inc.
Starwood Financial Inc. had observation rights at the time of the loan closing,
which included the right to have a representative attend and participate in all
meetings of our board of directors, but included no right to vote or attend any
portion of any board meeting during which the loan
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of Starwood Financial was discussed. Mr. Sugarman is Chairman and Chief
Executive Officer of iStar Financial, the successor entity to Starwood
Financial.
On November 19, 1997, Mr. Ackerman purchased an equity membership in the
Bay Colony Golf Club for $115,000 consisting of a $90,000 down payment and a
$25,000 interest-free loan from us. Upon the resale of this membership, Mr.
Ackerman will receive 80% of the resale price of the membership and the loan
will become due and payable in full.
Pursuant to a lease agreement, dated March 18, 1996, with Walden
University, we lease approximately 55,300 square feet of commercial office space
from Walden University for use as our headquarters. The term of the lease is ten
years with two five-year renewal options. Base rent under the lease is $14.00
per square foot, which is adjusted annually based on United States Consumer
Price Index. Lease payments aggregated approximately $1.4 million in 2000. Mr.
Ackerman serves as Chairman of the Board of Walden University, and he and his
immediate family beneficially own 100% of Walden University.
Pursuant to five separate lease agreements between Sun City Center Office
Plaza, Inc. ("SCCOP") and each of Financial Resources Group, Inc., First
Fidelity Title Company, Sun City Center Realty, Inc., WCI Planning and Design
Center and Interior Home WCI (collectively, the "SCCOP Lessees"), SCCOP leases
to the SCCOP Lessees commercial office space in Sun City Center Office Plaza.
Financial Resources leases 2,268 square feet for $14.20 per square foot under a
lease expiring August 2007. First Fidelity leases 2,988 square feet for $14.00
per square foot under a lease expiring August 2007. Sun City Center Realty
leases 5,242 square feet for $12.48 per square foot under a lease expiring
August 2001. WCI Planning and Design Center leases 3,558 square feet for $14.00
per square foot under a lease expiring November 2002. Interior HomeWCI leases
2,966 square feet for $15.13 per square foot under a lease expiring September
2001. Messrs. Ackerman and Hoffman beneficially own approximately 19.6% and
approximately 60.7% of SCCOP, respectively. Messrs. Starkey, Flinn and Dietz
together beneficially own 3.5% of SCCOP.
Mr. Ackerman has an agreement with WCI, pursuant to which he provides
advice on major financial and strategic business planning to WCI for ten years,
ending on July 24, 2005. Under the agreement, Mr. Ackerman is paid $500,000
annually and he receives a benefit allowance of $100,000 in lieu of employee
welfare benefits otherwise provided by WCI for health, life and disability
insurance, 401(k) savings plans and other similar benefit programs. Mr. Ackerman
receives a further allowance of $60,000 for support expenses, since he maintains
a separate office and does not lease office space or secretarial support from
us. If Mr. Ackerman's agreement is terminated by WCI without cause, we must pay,
at our option, either: (1) a termination payment representing the net present
value of the annual compensation for the balance of the term of his agreement or
(2) his annual compensation in equal monthly installments for the balance of the
term of his agreement, as if no termination had occurred. In either case, we
must continue to pay Mr. Ackerman his benefit allowance on a monthly basis, as
if no termination had occurred. If the board materially diminishes Mr.
Ackerman's powers or duties, Mr. Ackerman may terminate the agreement, which
termination will be treated as termination without cause by us for the purpose
of payments to Mr. Ackerman. If Mr. Ackerman's agreement is terminated by his
disability or death, we will continue to pay to his estate the annual salary and
benefit allowance for the remaining term of the agreement, reduced by 50% if the
termination occurs prior to July 24, 2001 and reduced by 25% if the termination
occurs after that date. During the term of the agreement and for the following
three years, Mr. Ackerman may not compete with us and may not solicit any of our
employees to accept employment with him or any other person.
WCI and certain of its subsidiaries have entered into a tax allocation
agreement. Under the tax allocation agreement, Watermark Communities will file a
consolidated income tax return for so long as it is required or permitted. In
addition, Watermark Communities will allocate appropriate portions of any
current tax liability incurred to us and our subsidiaries who are in turn
required to pay these amounts to Watermark Communities.
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PRINCIPAL STOCKHOLDERS
We are a wholly-owned subsidiary of Watermark Communities. The following
table sets forth certain information with respect to the beneficial ownership of
the common stock of Watermark Communities as of April 30, 2001 for:
- each person or entity known by Watermark to own of record or beneficially
more than 5% of the common stock,
- each director and executive officer of Watermark, and
- all directors and executive officers as a group.
Unless otherwise noted, the address of each of the stockholders named below is
WCI Communities' principal executive office.
NUMBER OF SHARES OF PERCENT OF
BENEFICIAL OWNER COMMON STOCK(1) COMMON STOCK
- ---------------- ------------------- ------------
Communities Investor Limited Partnership.................... 17,500,000(2) 67.07%
c/o Watermark Communities Inc.
24301 Walden Center Drive
Bonita Springs, Florida 34134
Alfred Hoffman, Jr.(2)(3)................................... 22,322,393 85.55%
Don E. Ackerman(2)(4)....................................... 19,058,948 73.05%
Donald K. Basta(5).......................................... 1,844,470 7.07%
Elisabeth Hoffman(6)........................................ 1,773,672 6.80%
Jerry L. Starkey(7)......................................... 124,315 *
James P. Dietz(8)........................................... 64,829 *
Steven C. Adelman(9)........................................ 26,888 *
R. Michael Curtin(10)....................................... 23,834 *
Milt Flinn(11).............................................. 25,417 *
David Fry(12)............................................... 36,010 *
Michael R. Greenberg(13).................................... 36,400 *
Vivien N. Hastings(14)...................................... 38,670 *
S. Charles Mattoff(15)...................................... 22,759 *
George R. Page(16).......................................... 115,211 *
F. Phillip Handy(17)........................................ 6,667 *
Lawrence L. Landry(18)...................................... 6,667 *
Thomas F. McWilliams(18).................................... 6,667 *
Joshua J. Mintz(18)......................................... 6,667 *
Jay Sugarman(18)............................................ 6,667 *
Stewart Turley(18).......................................... 6,667 *
All directors and executive officers as a group (18
persons).................................................. 24,435,676 93.65%
- ---------------
* Less than one percent.
(1) The amounts and percentage of common stock beneficially owned are reported
on the basis of regulations of the Securities and Exchange Commission
governing the determination of beneficial ownership of securities. Under
the rules of the Commission, a person is deemed to be a "beneficial owner"
of a security if that person has or shares "voting power," which includes
the power to vote or to direct the voting of the security, or "investment
power," which includes the power to dispose of or
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to direct the disposition of the security. A person is also deemed to be a
beneficial owner of any securities of which that person has a right to
acquire beneficial ownership within 60 days. Under these rules, more than
one person may be deemed a beneficial owner of the same securities and a
person may be deemed to be a beneficial owner of securities as to which he
has no economic interest. The number of common stock shares reflected in
the table would be converted at a rate of approximately 139.6 between
Watermark and the Company.
(2) The number of shares of Watermark Communities shown as owned by Communities
Investor Limited Partnership are beneficially owned by Kamehameha,
Citicorp, MacArthur and Messrs. Hoffman, Ackerman and Peter. Under
Communities Investor's partnership agreement, 25.5% of its votes are
directed by the John D. and Catherine T. MacArthur Foundation, 31.9% of its
votes are directed by Citicorp Venture Capital Ltd., 31.9% of its votes are
directed by Kamehameha Activities Association, 5.1% of its votes are
directed by Alfred Hoffman, Jr., and 5.1% of its votes are directed by Don
E. Ackerman, and 0.5% of its votes are directed by E. Leslie Peter.
Citicorp Venture Capital Ltd. is an indirect wholly-owned subsidiary of
Citigroup Inc. Kamehameha Activities Association is controlled by a board
of trustees which consists of Robert Kalanivichi Kihune, Constance Hee Lau,
James Douglas Keauhou Ing, Diane Joyce Plotts and Charles Nainoa Thompson.
Each of the trustees disclaims beneficial ownership of the shares held by
Kamehameha Activities Association. The number of shares of common stock of
Watermark Communities which Communities Investor will distribute to its
partners may be different than the number of shares which they may vote
under the Communities Investor partnership agreement. Those numbers will be
based on the fair market value of the shares of common stock of Watermark
Communities at the time certain distributions or other events like an
initial public offering and the satisfaction of a preferred return to
Kamehameha, MacArthur and Citicorp.
(3) Includes 1,800,505 shares of common stock owned by Al Hoffman, 3,021,888
shares owned by his children and, because he may be deemed to be a
beneficial owner of the shares owned by Communities Investor, 17,500,000
shares attributable to his ownership interest in Communities Investors. Mr.
Hoffman disclaims ownership in the shares attributed to him but with
respect to which he has no rights.
(4) Includes 1,558,948 shares of common stock owned by Don E. Ackerman as
Trustee of the Don E. Ackerman Trust dated December 14, 1996 and, because
he may be deemed to be a beneficial owner of the shares owned by
Communities Investor, 17,500,000 shares attributable to his ownership
interest in Communities Investors. Mr. Ackerman disclaims ownership in the
shares attributed to him but with respect to which he has no rights.
(5) Includes 624,108 shares held by Donald K. Basta, as Voting Trustee for
Elisabeth Hoffman under Trust dated January 4, 1999; 624,108 shares held by
Donald K. Basta, as Voting Trustee for Melissa Hoffman under Trust dated
January 4, 1999 and 596,254 shares held by Donald K. Basta, as Voting
Trustee for Matthew P. Hoffman under Trust dated January 4, 1999.
(6) Includes 1,149,564 shares held by Elisabeth Hoffman as Personal
Representative of the Estate of Marcia P. Hoffman and 624,108 shares held
by Donald K. Basta, as Voting Trustee for Elisabeth Hoffman under Trust
dated January 4, 1999.
(7) The number of shares of common stock shown as beneficially owned includes
101,347 options to acquire common stock of Watermark Communities that are
exercisable within 60 days of the date hereof.
(8) The number of shares of common stock shown as beneficially owned includes
55,259 options to acquire common stock of Watermark Communities that are
exercisable within 60 days of the date hereof.
(9) The number of shares of common stock shown as beneficially owned includes
17,315 options to acquire common stock of Watermark Communities that are
exercisable within 60 days of the date hereof.
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(10) The number of shares of common stock shown as beneficially owned includes
19,527 options to acquire common stock of Watermark Communities that are
exercisable within 60 days of the date hereof.
(11) The number of shares of common stock shown as beneficially owned includes
20,632 options to acquire common stock of Watermark Communities that are
exercisable within 60 days of the date hereof.
(12) The number of shares of common stock shown as beneficially owned includes
24,523 options to acquire common stock of Watermark Communities that are
exercisable within 60 days of the date hereof.
(13) The number of shares of common stock shown as beneficially owned includes
36,400 options to acquire common stock of Watermark Communities that are
exercisable within 60 days of the date hereof.
(14) The number of shares of common stock shown as beneficially owned includes
21,441 options to acquire common stock of Watermark Communities that are
exercisable within 60 days of the date hereof.
(15) The number of shares of common stock shown as beneficially owned includes
12,709 options to acquire common stock of Watermark Communities that are
exercisable within 60 days of the date hereof.
(16) The number of shares of common stock shown as beneficially owned includes
63,524 options to acquire common stock of Watermark Communities that are
exercisable within 60 days of the date hereof.
(17) The number of shares of common stock shown as beneficially owned includes
1,466 options to acquire common stock of Watermark Communities that are
exercisable within 60 days of the date hereof.
(18) The number of shares of common stock shown as beneficially owned includes
6,667 options to acquire common stock of Watermark Communities that are
exercisable within 60 days of the date hereof.
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DESCRIPTION OF MATERIAL INDEBTEDNESS
The following is a summary of certain of our and our subsidiaries'
indebtedness. The descriptions of the agreements set forth below do not purport
to be complete and are qualified in their entirety by reference to the
documents.
Senior Secured Credit Facility. On February 20, 2001, we entered into a
senior secured credit facility with a group of lenders and Fleet National Bank,
as agent for the lenders. The senior secured credit facility is guaranteed by
Watermark and each of our pledgor subsidiaries. The guarantees are full,
unconditional, joint and several. The senior secured credit facilities rank
senior in right of payments to all of our subordinated indebtedness.
The senior secured credit facility consists of a $250.0 million term loan
and a $200.0 million revolving loan, which includes a sublimit of $30.0 million
available for letters of credit. The outstanding balance at March 31, 2001 was
$250.0 million for the term loan and $17.2 million for the revolving loan. As of
March 31, 2001, we had letters of credit in the amount of $1.8 million. As of
March 31, 2001 we had $181.0 available for borrowing under our senior secured
credit facility. The maximum amount available for borrowing under the senior
secured credit facility is subject to a borrowing base computation.
The term loan requires mandatory principal payments of $5.0 million on
January 31 and July 31 of each year commencing January 31, 2002. The senior
secured credit facility matures in February 2004, when all remaining principal
under the term loan and revolving loan are payable.
The term loan and revolving loan each bear interest at a rate, at our
option, equal to the lender's base rate plus 0.50% or the Eurodollar rate plus
3.00%. The base rate can be reduced by up to 0.50% and the Eurodollar rate can
be reduced by up to 0.75%, if the facility meets certain rating criteria. As of
March 31, 2001, the base rate and Eurodollar rate have each been reduced by
0.25%, to 0.25% over the base rate and 2.75% over the Eurodollar rate. At March
31, 2001, the weighted average interest rate was 7.63% on the term loan and
8.25% on the revolving loan.
Under the senior secured credit facility, we have agreed to pay a
commitment fee equal to 0.3% of the average daily unutilized commitment under
the revolving loan, which could increase to 0.5% if the unutilized commitment is
greater that 60% of the total commitment amount. We have also agreed to pay fees
with respect to the issuance of letters of credit and an annual bank
administration fee.
The senior secured credit facility is secured by blanket first mortgages or
liens on substantially all of our significant assets, except in certain
circumstances where other first mortgages or liens are permitted and except for
assets of certain excluded subsidiaries.
The senior secured credit facility contains certain financial covenants,
based on definitions in the senior secured credit facility, including:
- the ratio of EBITDA to interest incurred must exceed 2.0 to 1. If the
ratio is less than 2.0 to 1, then there are limitations on the acquisition
of real property;
- we must maintain a minimum level of tangible net worth equal to $240.0
million plus 50% of net income earned after January 1, 2000 plus 75% of
increases in investors' equity from the issuance of equity;
- the ratio of total liabilities less unrestricted cash to adjusted
tangible net worth cannot exceed 2.90 to 1.0;
- the ratio of total senior debt to adjusted tangible net worth shall be
equal to or less than 1.75 to 1; and
- the ratio of EBITDA to fixed charges must be greater than 1.50 to 1.
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The senior secured credit facility also contains various affirmative
covenants including, without limitation:
- a requirement to maintain $150.0 million of interest rate protection; and
- requirements to maintain insurance, comply with laws and maintain
properties.
The senior secured credit facility also contains negative covenants that
restrict, among other things:
- the incurrence of additional indebtedness;
- the incurrence of liens;
- transactions with affiliates;
- investments, including investments in our joint ventures;
- acquisitions of land;
- capital expenditures;
- distributions and dividends; and
- mergers and consolidations.
The principal amount of senior debt of WCI and its Subsidiaries outstanding
at March 31, 2001 was approximately $380.9 million. The indenture limits,
subject to financial tests, the amount of additional indebtedness, including
senior debt, that WCI and its Subsidiaries can incur. See "Description of
Notes -- Covenants -- Incurrence of Indebtedness and Issuance of Preferred
Stock."
Project and Construction Loans. We generally obtain construction loans in
connection with each tower development. Typically, the loans are secured by the
specific projects and bear interest at a rate of prime plus 0.0% to 0.5% or
LIBOR plus 2.00% to 2.5%, at our option, with a 0.5% upfront fee. Loans are
funded as interest payments are due or as disbursements are made during the
course of construction after utilizing customer deposits received from sales
contracts. The loans are secured by the underlying land, construction in
progress, all related construction contracts and the underlying sales contracts,
and are payable from proceeds from the sale of residences at the earlier of
completion of construction or a stated maturity date. We have entered into a
$94.3 million construction loan in connection with the construction of the four
towers which matures in November 2001, $33.8 million of which was outstanding as
of March 31, 2001. In December 2000, we entered into a $108.0 million
construction loan in connection with the construction of four additional towers
which matures in December 2002, $19.5 million of which was outstanding as of
March 31, 2001. In March 2001, we entered into an $85.6 million construction
loan in connection with the construction of two additional towers which matures
in March 2003, $7.5 million of which was outstanding as of March 31, 2001.
Other WCI Communities Debt. One of our wholly-owned subsidiaries obtained
a $27.0 million loan from Textron Financial Corporation in July 1999. The loan
is secured by a first mortgage and a security interest on certain of the
underlying assets of our amenities business. The loan bears interest at LIBOR
plus 3.20%, payable monthly, and matures in August 2004. At March 31, 2001, the
balance of the loan was approximately $26.5 million.
We had a loan from a bank that bore interest at the prime rate plus 1%,
payable monthly, and would have matured in April 2002. At December 31, 2000, the
balance of the loan was approximately $4.8 million. This loan was repaid in
February 2001.
We have a loan from a bank that bears interest at the prime rate or LIBOR
plus 2.75%, payable monthly, matures in October 2003 and is secured by a first
mortgage on the underlying property. As of March 31, 2001, the balance of the
loan was approximately $13.0 million.
Wildcat Run. In connection with the acquisition of the land for the
Wildcat Run community in December 1997, we issued a note in aggregate principal
amount of approximately $4.0 million. The note
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matures November 2002 and is secured by memberships in the golf club at Wildcat
Run. An aggregate principal amount of $20,000 is payable upon the sale of each
golf membership and $2,500 is payable upon the sale of each equity membership.
The note bears interest at 7.0% per annum, payable quarterly in arrears
commencing February 1999. The outstanding balance at March 31, 2001 was
approximately $1.4 million.
Jupiter Yacht Club. In March 1999, we acquired the Jupiter Yacht Club for
cash and three separate notes. The first note, which was refinanced in June 1999
with a bank would have matured February 2001 and was secured by a surety bond.
This note bore interest at prime plus 0.75% and was payable quarterly in
arrears. The principal balance of this note was approximately $6.8 million as of
December 31, 2000, and it was fully repaid in February 2001. The second note
bears interest at 8% per annum and matures October 2002 and is secured by a
second mortgage lien against the underlying property. The note requires
principal payments of $1.0 million annually each October in 1999, 2000 and 2001,
with the balance due at maturity. The principal balance of this note was
approximately $2.3 million as of March 31, 2001. The third note matures February
2002, is non-interest bearing and is secured by a surety bond. Principal is
payable based on stated release prices as certain portions of the property are
sold. We may extend the maturity date of this third note if the maturity date of
the surety bond is extended. The principal balance of this note was $1.0 million
as of March 31, 2001.
Pelican Sound Land Repurchase Liabilities. Through a series of land
repurchase transactions, we sold land in our Pelican Sound community in April
1997 to a third party for approximately $7.3 million, additional land in August
1998 to the third party for approximately $5.9 million and additional land in
January 1999 to the third party for $2.4 million. These transactions are treated
as financing transactions in accordance with GAAP and the proceeds received as a
loan payable. As part of these transactions, we simultaneously entered into an
agreement that requires us to purchase lots with certain minimum takedowns
required by specified dates and to pay interest equal to prime plus 9.75% with a
floor rate of 18.0% and a ceiling of 20% per annum. The balance due on the
repurchase liability as of December 31, 2000 was approximately $6.2 million, and
it was fully repaid in February 2001.
Sun City Center Ft. Myers Land Repurchase Liabilities. In June 1999, we
sold land in our Gateway property to a third party for approximately $11.8
million. This transaction is treated as a financing transaction in accordance
with GAAP and the proceeds received as a loan payable. As part of the
transaction, we provided a $1.2 million letter of credit, which remains in place
until 20% of the property is repurchased. Thereafter, the letter of credit is
reduced on a pro rata basis. Property takedowns are required by specified dates
and we pay interest on the land repurchase liability equal to prime plus 8.25%
with a floor rate of 16.0% and a ceiling of 18% per annum. The balance due on
the land repurchase liability as of December 31, 2000 was approximately $13.1
million, and it was fully repaid in February 2001.
Communities Finance Company. In December 1996, we created Communities
Finance Company, a wholly-owned, limited purpose finance subsidiary, in order to
finance certain of our and Bay Colony's mortgage and other receivables. On April
27, 1998, Communities Finance acquired all of the equity ownership interests in
WCI Communities Limited Partnership owned by CBS as well as certain subordinated
debt of WCI Communities Limited Partnership and preferred stock of Bay
Colony-Gateway owned by CBS. The total acquisition price of $69.8 million was
financed by available cash of Communities Finance and a $50.5 million loan from
an affiliate of iStar Financial Inc. The iStar loan bore interest at a rate of
17% per annum, with 10% payable monthly in arrears and 7% accrued and compounded
until maturity.
To finance the MacArthur land acquisition, Communities Finance entered into
a land loan agreement with Ohio Savings Bank for up to $85.5 million, which was
allocated equally to Ohio Savings and to an affiliate of iStar Financial. The
land loan was secured by the acquired land and bore interest at LIBOR plus 3.0%
on the Ohio Savings portion and LIBOR plus 6.0% on the iStar Financial portion,
payable monthly in each case.
In August 2000, Communities Finance sold sufficient land to fully repay the
portion of the land loan due to Ohio Savings. At that time, we consolidated,
amended and restated the Ohio Savings and iStar Financial Loan agreements with
iStar. The combined loan aggregated $72.5 million as of December 31,
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2000 and would have matured in December 2002. This loan was fully repaid in
February 2001. The loan bore interest at LIBOR plus 6.0%, payable monthly.
Principal was payable from 65% of the net sales proceeds from the sale of the
MacArthur land, after payment of $20.0 million to us. In addition, there were
covenants and restrictions. The loan could be prepaid without penalty upon 90
days' notice. The loan was secured by a mortgage on the MacArthur land and
certain related assets and was secured by a senior security interest in
Community Finance's other assets, other than the $43.9 million notes receivable
from Watermark Communities described above. The loan was guaranteed by
Communities Investor Limited Partnership, the primary shareholder of Watermark
Communities.
Subordinated Notes and Bay Colony-Gateway Preferred Stock. WCI Communities
Limited Partnership issued approximately $45.0 million of subordinated notes
payable to affiliates of its limited partners in July 1995 in connection with
the purchase of WCI Communities Limited Partnership from Westinghouse Electric.
These notes bore interest at a rate of 13%, payable semi-annually in arrears,
and would have matured in June 2004. In April 1998, Communities Finance acquired
$18.0 million of these notes from CBS (the successor to Westinghouse Electric).
These notes were fully repaid in February 2001.
In addition, in July 1995, WCI Communities Limited Partnership issued a
subordinated note in the amount of $10.0 million to an affiliate of its limited
partners. This note was subsequently acquired by an affiliate of Fleet National
Bank. This note, which had an aggregate principal amount of approximately $10.6
million and bore interest at 15% per annum, was fully repaid in February 2001.
On November 28, 1998, WCI Communities Limited Partnership and Investors of
WCI, Inc., its general partner, issued subordinated notes in a principal amount
of approximately $43.6 million to Communities Finance in connection with the
purchase from Communities Finance of the equity ownership interest in WCI
Communities Limited Partnership that Communities Finance purchased from CBS. On
June 1, 1999, Watermark Communities purchased these notes from Communities
Finance in exchange for subordinated notes of Watermark Communities in principal
amount of $43.9 million, including accrued interest, and immediately thereafter
contributed the purchased notes to us as a capital contribution. The
subordinated notes of Watermark Communities would have matured in September 2012
and bore interest at a rate of 7%, with $250,000 payable monthly and the balance
payable at maturity. These notes were fully repaid in February 2001.
Florida Design issued $5.0 million of subordinated notes to certain of its
stockholders in March 1993. The notes bore interest, payable in quarterly
installments, at rates ranging from the prime rate of interest plus 2.5% to
3.0%. The remaining principal balance of approximately $4.4 million would have
matured in May 2001. Florida Design also issued $15.0 million of subordinated
notes to its stockholders in July 1998. The notes bore interest at 13%. These
notes were fully repaid as of March 31, 2001.
In connection with the purchase of WCI Communities Limited Partnership from
Westinghouse Electric, Bay Colony-Gateway issued 23,585,719 shares, par value $1
per share, of redeemable preferred stock to Westinghouse Electric. In April
1998, Communities Finance purchased the preferred stock for $21.8 million from
CBS (the successor to Westinghouse Electric). Our preferred stock was retired in
February 2001.
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DESCRIPTION OF NOTES
You can find the definitions of certain terms used in this description
under the subheading "Certain Definitions." In this description, the word
"Company" refers only to WCI Communities, Inc. and any and all successors and
not to any of its subsidiaries.
The Company issued the Notes under an Indenture (the "Indenture") among the
Company, the Guarantors and The Bank of New York, as trustee (the "Trustee") in
a private transaction that is not subject to the registration requirements of
the Securities Act. See "Transfer Restrictions." The terms of the Notes include
those stated in the Indenture and those made part of the Indenture by reference
to the Trust Indenture Act of 1939 (the "Trust Indenture Act").
The following description is a summary of the material provisions of the
Indenture. It does not restate the Indenture in its entirety. We urge you to
read the Indenture because it, and not this description, defines your rights as
holders of the Notes. Copies of the Indenture, the form of Note and the
Registration Rights Agreement are available upon request to the Company at the
address set forth below under "-- Additional Information."
BRIEF DESCRIPTION OF THE NOTES AND THE GUARANTEES
The Notes
The Notes:
- are general unsecured obligations of the Company;
- are subordinated in right of payment to all existing and future Senior
Debt of the Company;
- are pari passu in right of payment with any future senior subordinated
Indebtedness of the Company; and
- are unconditionally guaranteed by the Guarantors.
The Subsidiary Guarantees
The Notes are guaranteed by all of our current Subsidiaries and any other
Restricted Subsidiary that executes a Guarantee (each a "Subsidiary Guarantee")
in accordance with the provisions of the Indenture and their respective
successors and assigns (the "Guarantors"). Notwithstanding the prior sentence,
Wildcat Run of Lee County, Inc. is not a Guarantor of the Notes.
The Subsidiary Guarantees of the Notes:
- are general unsecured obligations of each Guarantor; are subordinated in
right of payment to all existing and future Senior Debt of each
Guarantor; and
- are pari passu in right of payment to any future senior subordinated
Indebtedness of each Guarantor.
If:
(1) the Company sells or disposes of all of the assets of any Guarantor, by
way of merger, consolidation or otherwise,
(2) the Company sells or disposes of all of the Capital Stock of any
Guarantor, or
(3) the Company properly designates any Restricted Subsidiary that is a
Guarantor as an Unrestricted Subsidiary or any Guarantor is released
from Guarantees of Indebtedness of the Company such that such Guarantor
would not be required to provide a Guarantee of the Notes under the
covenant "Additional Subsidiary Guarantees;"
then that Guarantor, or the corporation acquiring the property (in the event of
a sale or other disposition of all of the assets of the Guarantor), will be
released and relieved of any obligations under its Subsidiary Guarantee.
The operations of the Company are conducted in large part through its
subsidiaries and joint ventures and, therefore, the Company depends upon the
cash flow of its subsidiaries and joint ventures to meet its
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obligations, including its obligations under the Notes. The Notes are
effectively subordinated in right of payment to all Indebtedness and other
liabilities and commitments (including trade payables and lease obligations) of
the Company's non-guarantor subsidiaries and joint ventures. Any right of the
Company to receive assets of any of its non-guarantor subsidiaries and joint
ventures upon their liquidation or reorganization (and, with respect to
non-guarantor subsidiaries, the consequent right of the Holders of the Notes to
participate in those assets) is effectively subordinated to the claims of that
subsidiary's and joint venture's creditors, except to the extent that the
Company is itself recognized as a creditor of the subsidiary or joint venture,
in which case the claims of the Company would still be subordinate to any
security in the assets of such subsidiary or joint venture and any indebtedness
of the subsidiary or joint venture senior to that held by the Company.
As of March 31, 2001, the Company and the Guarantors had approximately
$380.9 million in aggregate principal amount of Senior Debt, including $8.8
million of acquisition obligations, capital lease obligations and letters of
credit, after giving effect to the offering of the Notes.
PRINCIPAL, MATURITY AND INTEREST
The Notes are limited in aggregate principal amount to $350.0 million of
which $250.0 million were issued in the offering of the Notes. The Company may
issue additional notes (the "Additional Notes") from time to time after the
offering of the Notes. Any offering of Additional Notes is subject to the
covenant described below under the caption "Covenants -- Incurrence of
Indebtedness and Issuance of Preferred Stock." The Notes and any Additional
Notes subsequently issued under the Indenture will be treated as a single class
for all purposes under the Indenture, including, without limitation, waivers,
amendments, redemptions and offers to purchase. The Company issued Notes in
denominations of $1,000 and integral multiples of $1,000. The Notes will mature
on February 15, 2011.
Interest on the Notes accrues at the rate of 10 5/8% per annum and is
payable semi-annually in arrears on February 15 and August 15, commencing on
August 15, 2001. The Company makes each interest payment to the Holders of
record on the immediately preceding February 1 and August 1.
Interest on the Notes accrues from the date of original issuance or, if
interest has already been paid, from the date it was most recently paid.
Interest is computed on the basis of a 360-day year comprised of twelve 30-day
months.
METHODS OF RECEIVING PAYMENTS ON THE NOTES
If a Holder has given wire transfer instructions to the Company, the
Company will pay all principal, interest, premium, if any, and Liquidated
Damages, if any, on that Holder's Notes in accordance with those instructions.
All other payments on Notes are at the office or agency of the Paying Agent and
Registrar within the City and State of New York unless the Company elects to
make interest payments by check mailed to the Holders at their addresses set
forth in the register of Holders.
PAYING AGENT AND REGISTRAR FOR THE NOTES
The Trustee is acting as Paying Agent and Registrar. The Company may change
the Paying Agent or Registrar without prior notice to the Holders, and the
Company or any of its Subsidiaries may act as Paying Agent or Registrar.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and the Company may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. The Company is not required to transfer or exchange any Note selected
for redemption. Also, the Company is not required to transfer or exchange any
Note for a period of 15 days before a selection of Notes to be redeemed.
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The registered Holder of a Note will be treated as the owner of it for all
purposes.
SUBORDINATION
The payment of principal of, premium, if any, interest and Liquidated
Damages, if any, on the Notes is subordinated to the prior payment in full in
cash of all Senior Debt of the Company, including Senior Debt incurred after the
date of the Indenture.
The holders of Senior Debt of the Company are entitled to receive payment
in full in cash of all Obligations due in respect of such Senior Debt (including
interest after the commencement of any bankruptcy proceeding at the default rate
specified in the applicable Senior Debt) before the Holders of Notes are
entitled to receive any payment with respect to the Notes (except that Holders
of Notes may receive and retain Permitted Junior Securities and payments made
from the trust described under "-- Legal Defeasance and Covenant Defeasance"),
in the event of any distribution to creditors of the Company:
(1) in a liquidation or dissolution of the Company;
(2) in a bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to the Company or its property;
(3) in an assignment for the benefit of creditors; or
(4) in any marshaling of the Company's assets and liabilities.
The Company also may not make any payment in respect of the Notes (except
in Permitted Junior Securities or from the trust described under "-- Legal
Defeasance and Covenant Defeasance") if:
(1) a payment default on Designated Senior Debt occurs and is continuing
beyond any applicable grace period; or
(2) any other default occurs and is continuing on any series of Designated
Senior Debt that permit holders of that series of Designated Senior
Debt to accelerate its maturity and the Trustee receives a notice of
such default (a "Payment Blockage Notice") from the Company or the
holders of any Designated Senior Debt.
Payments on the Notes may and will be resumed:
(1) in the case of a payment default, upon the date on which the default is
cured or waived; and
(2) in case of a nonpayment default, the earlier of the date on which such
nonpayment default is cured or waived or 179 days after the date on
which the Payment Blockage Notice is received,
unless the maturity of any Designated Senior Debt has been accelerated.
No new Payment Blockage Notice may be delivered unless and until 360 days
have elapsed since the delivery of the immediately prior Payment Blockage
Notice.
No nonpayment default that existed or was continuing on the date of
delivery of any Payment Blockage Notice to the Trustee will be, or be made, the
basis for a subsequent Payment Blockage Notice unless that default has been
cured or waived.
If the Trustee or any Holder of the Notes receives a payment in respect of
the Notes (except in Permitted Junior Securities or from the trust described
under "-- Legal Defeasance and Covenant Defeasance") when the payment is
prohibited by these subordination provisions, the Trustee or the Holder, as the
case may be, will hold the payment in trust for the benefit of the holders of
Senior Debt. Upon the proper written request of the holders of Senior Debt, the
Trustee or the Holder, as the case may be, will deliver the amounts in trust to
the holders of Senior Debt or their proper representative.
The Company must promptly notify holders of its Senior Debt if payment of
the Notes is accelerated because of an Event of Default. See "Risk
Factors -- Subordination -- Your right to receive payments on
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the notes is junior to our existing indebtedness and possibly all of our future
borrowings." Furthermore, the guarantees of these Notes are junior to all of our
guarantor subsidiaries' existing indebtedness and possibly to all their future
borrowings.
The principal amount of Senior Debt of the Company and its Restricted
Subsidiaries outstanding at March 31, 2001 was approximately $380.9 million. The
Indenture limits, subject to certain financial tests, the amount of additional
Indebtedness, including Senior Debt, that the Company and its Restricted
Subsidiaries can incur. See "-- Covenants -- Incurrence of Indebtedness and
Issuance of Preferred Stock."
OPTIONAL REDEMPTION
Except as described below, the Notes are not redeemable at the Company's
option prior to February 15, 2006.
On or after February 15, 2006, the Company may redeem all or a part of the
Notes upon not less than 30 nor more than 60 days' notice, at the redemption
prices (expressed as percentages of principal amount) set forth below plus
accrued, unpaid interest and Liquidated Damages, if any, thereon, to the
applicable redemption date, if redeemed during the twelve-month period beginning
on February 15 of the years indicated below:
YEAR PERCENTAGE
- ---- ----------
2006...................................................... 105.313%
2007...................................................... 103.542%
2008...................................................... 101.771%
2009 and thereafter....................................... 100.00%
At any time on or before February 15, 2004, the Company may on any one or
more occasions redeem up to an aggregate of 35% of the aggregate principal
amount of Notes issued under the Indenture at a redemption price of 110.625% of
the principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages thereon, if any, to the redemption date, with the net cash proceeds of
one or more Equity Offerings of the Company or its parent, Watermark, to the
extent the net cash proceeds are contributed to the Company as a capital
contribution to the common equity of the Company; provided that:
(1) at least 65% of the aggregate principal amount of Notes issued under
the Indenture remains outstanding immediately after the occurrence of
such redemption (excluding Notes held by the Watermark Communities and
its Subsidiaries); and
(2) the redemption must occur within 90 days of the date of the closing of
such Equity Offering.
SELECTION AND NOTICE
If less than all of the Notes are to be redeemed at any time, the Trustee
will select Notes for redemption as follows:
(1) if the Notes are listed, in compliance with the requirements of the
principal national securities exchange on which the Notes are listed;
or
(2) if the Notes are not so listed, on a pro rata basis, by lot or by such
method as the Trustee shall deem fair and appropriate.
No Notes of $1,000 or less shall be redeemed in part. Notices of redemption
shall be mailed by first class mail at least 30 but not more than 60 days before
the redemption date to each Holder of Notes to be redeemed at its registered
address. Notices of redemption may not be conditional.
If any Note is redeemed in part only, the notice of redemption that relates
to that Note will state the portion of the principal amount of that Note to be
redeemed. A new Note in principal amount equal to
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the unredeemed portion thereof will be issued in the name of the Holder of that
Note upon cancellation of the original Note. Notes called for redemption become
due on the date fixed for redemption. On and after the redemption date, interest
ceases to accrue on Notes or portions of them called for redemption.
MANDATORY REDEMPTION
The Company is not required to make mandatory redemption or sinking fund
payments with respect to the Notes.
REPURCHASE AT THE OPTION OF HOLDERS
Change of Control
If a Change of Control occurs, each Holder of Notes will have the right to
require the Company to repurchase all or any part (equal to $1,000 or an
integral multiple thereof) of that Holder's Notes pursuant to a change of
control offer on the terms set forth in the Indenture. In the change of control
offer, the Company will offer a change of control payment in cash equal to 101%
of the aggregate principal amount of Notes repurchased plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the date of purchase. Within
thirty days following any Change of Control, the Company will mail a notice to
each Holder describing the transaction or transactions that constitute the
Change of Control and offering to repurchase Notes on the change of control
payment date, which date shall be no earlier than 30 days and no later than 60
days from the date such notice is mailed, pursuant to the procedures required by
the Indenture and described in such notice.
The Company will comply with the requirements of Section 14(e) under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of the Notes as a result of a Change of Control. To the extent that
the provisions of any securities laws or regulations conflict with the Change of
Control provisions of the Indenture, the Company will comply with the applicable
securities laws and regulations and will not be deemed to have breached its
obligations under the Change of Control provisions of the Indenture by virtue of
such conflict.
On the change of control payment date, the Company will, to the extent
lawful:
(1) accept for payment all Notes or portions thereof properly tendered
pursuant to the change of control offer;
(2) deposit with the Paying Agent an amount equal to the change of control
payment in respect of all Notes or portions thereof so tendered; and
(3) deliver or cause to be delivered to the Trustee for cancellation the
Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased
by the Company.
The Paying Agent will promptly mail to each Holder of Notes so tendered the
change of control payment for such Notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each Holder
a new Note equal in principal amount to any unpurchased portion of the Notes
surrendered, if any; provided that each such new Note will be in a principal
amount of $1,000 or an integral multiple thereof.
Prior to complying with any of the provisions of this "Change of Control"
covenant, but in any event within 90 days following a Change of Control, the
Company will either repay all outstanding Senior Debt or obtain the requisite
consents, if any, under all agreements governing outstanding Senior Debt to
permit the repurchase of Notes required by this covenant. The Company will
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the change of control payment date.
The provisions described above that require the Company to make a change of
control offer following a Change of Control are applicable regardless of whether
any other provisions of the Indenture are
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applicable. Except as described above with respect to a Change of Control, the
Indenture does not contain provisions that permit the Holders of the Notes to
require that the Company repurchase or redeem the Notes in the event of a
takeover, recapitalization or similar transaction.
The Credit Agreement restricts the ability of the Company to repurchase
Notes, including following a Change of Control. In addition, a Change of Control
may constitute a default under the Credit Agreement. Any future credit
agreements or other agreements relating to Senior Debt to which the Company
becomes a party may contain similar restrictions and provisions. In the event a
Change of Control occurs at a time when the Company is prohibited from
purchasing Notes, the Company could seek the consent of its lenders to the
purchase of Notes or could attempt to refinance the borrowings that contain such
prohibition. If the Company does not obtain such a consent or repay such
borrowings, the Company will remain prohibited from purchasing Notes. The
Company's failure to make a change of control offer or failure to purchase Notes
tendered in a change of control offer would constitute an Event of Default under
the Indenture which would, in turn, constitute a default under the Credit
Agreement. In such circumstances, the subordination provisions in the Indenture
would likely restrict payments to the Holders of Notes. See "-- Subordination."
Also, there can be no assurance that sufficient funds will be available at the
time of any change of control offer to make any required purchases.
The Company is not be required to make a change of control offer upon a
Change of Control if a third party makes the change of control offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture applicable to a change of control offer made by the Company and
purchases all Notes validly tendered and not withdrawn under such change of
control offer.
The definition of Change of Control includes a phrase relating to the
direct or indirect sale, lease, transfer, conveyance or other disposition of
"all or substantially all" of the properties or assets of the Company and its
Restricted Subsidiaries taken as a whole. Although there is a limited body of
case law interpreting the phrase "substantially all," there is no precise
established definition of the phrase under applicable law. Accordingly, the
ability of a Holder of Notes to require the Company to repurchase such Notes as
a result of a sale, lease, transfer, conveyance or other disposition of less
than all of the assets of the Company and its Restricted Subsidiaries taken as a
whole to another Person or group may be uncertain.
CERTAIN COVENANTS
Maintenance of Consolidated Tangible Net Worth
If the Company's Consolidated Tangible Net Worth declines below $125.0
million (the "Minimum Tangible Net Worth") at the end of any fiscal quarter, the
Company must deliver an Officers' Certificate to the Trustee within 55 days
after the end of that fiscal quarter (110 days after the end of any fiscal year)
to notify the Trustee. If, on the last day of each of any two consecutive fiscal
quarters (the last day of the second fiscal quarter being referred to as a
"Deficiency Date"), the Company's Consolidated Tangible Net Worth is less than
the Minimum Tangible Net Worth of the Company, then the Company must make an
offer (an "Offer") to all Holders of Notes to purchase 10% of the aggregate
principal amount of the Notes originally issued (the "Offer Amount") at a
purchase price equal to 100% of the principal amount of the Notes, plus accrued
and unpaid interest and Liquidated Damages, if any, to the date of purchase;
provided, however, that no such Offer shall be required if, after the Deficiency
Date but prior to the date the Company is required to make the Offer, capital in
cash or Cash Equivalents is contributed for Equity Interests of the Company
other than Disqualified Stock of the Company or its Restricted Subsidiaries
sufficient to increase the Company's Consolidated Tangible Net Worth after
giving effect to such contribution to an amount equal to or above the Minimum
Tangible Net Worth.
The Company must make the Offer no later than 65 days after each Deficiency
Date (120 days if such Deficiency Date is the last day of the Company's fiscal
year). The Offer is required to remain open for a period of 20 business days
following its commencement (unless required to remain open for a longer period
by applicable law). The Company is required to purchase the Offer Amount of the
Notes on a designated date no later than five business days after the
termination of the Offer, or if less than the Offer
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Amount of Notes shall have been tendered, all Notes then tendered. The Company
will not be obligated to purchase any Notes unless Holders of Notes of at least
10% of the Offer Amount shall have tendered and not subsequently withdrawn their
Notes for repurchase.
If the aggregate principal amount of Notes tendered exceeds the Offer
Amount, the Company is required to purchase the Notes tendered to it pro rata
among the Notes tendered (with such adjustments as may be appropriate so that
only Notes in denominations of $1,000 and integral multiples thereof shall be
purchased). The Company will comply with all applicable federal and state
securities laws in connection with each Offer.
In no event will the failure of the Company's Consolidated Tangible Net
Worth to equal or exceed the Minimum Tangible Net Worth at the end of any fiscal
quarter be counted toward the making of more than one Offer. The Company may
reduce the principal amount of Notes to be purchased pursuant to the Offer by
subtracting 100% of the principal amount (excluding premium) of the Notes
acquired, redeemed or called for redemption by the Company prior to the purchase
(otherwise than under this provision). The Company, however, may not credit
Notes that have been previously used as a credit against any obligation to
repurchase Notes pursuant to this provision. Any Offer shall be conducted in
compliance with applicable regulations under the federal securities law,
including Exchange Act Rule 14e-1.
The Credit Agreement restricts the ability of the Company to repurchase
Notes, including following a decline in the Company's Consolidated Tangible Net
Worth. In addition, a decline in the Company's Consolidated Tangible Net Worth
may constitute a default under the Credit Agreement. Any future credit
agreements or other agreements relating to Senior Debt to which the Company
becomes a party may contain similar restrictions and provisions. In the event a
decline in the Company's Consolidated Tangible Net Worth results in an Offer
when the Company is prohibited from purchasing Notes, the Company could seek the
consent of its lenders to the purchase of Notes or could attempt to refinance
the borrowings that contain such prohibition. If the Company does not obtain
such a consent or repay such borrowings, the Company will remain prohibited from
purchasing Notes. The Company's failure to make an Offer or purchase Notes
tendered in an Offer would constitute an Event of Default under the Indenture
which would, in turn, constitute a default under the Credit Agreement. In such
circumstances, the subordination provisions in the Indenture would likely
restrict payments to the holders of Notes. See "-- Subordination."
The Company's Consolidated Tangible Net Worth was approximately $269.4
million as of March 31, 2001.
Restricted Payments
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly:
(1) declare or pay any dividend or make any other payment or distribution
on account of the Company's or any of its Restricted Subsidiaries'
Equity Interests (including, without limitation, any payment in
connection with any merger or consolidation involving the Company or
any of its Restricted Subsidiaries) (other than dividends or
distributions payable in Equity Interests of the Company (other than
Disqualified Stock) or dividends or distributions to the Company or a
Restricted Subsidiary of the Company);
(2) purchase, redeem or otherwise acquire or retire for value (including,
without limitation, in connection with any merger or consolidation
involving the Company) any Equity Interests of the Company or any
direct or indirect parent of the Company (other than any such Equity
Interests owned by the Company, a Wholly Owned Restricted Subsidiary or
any Guarantor);
(3) make any payment on or with respect to, or purchase, redeem, defease or
otherwise acquire or retire for value any Indebtedness that is
subordinated to the Notes or the Subsidiary Guarantees, except payments
of interest or a payment of principal at Stated Maturity (other than
Indebtedness permitted under clause (6) of the covenant described below
under "-- Incurrence of Indebtedness and Issuance of Preferred Stock");
or
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(4) make any Restricted Investment,
(all such payments and other actions set forth in clauses (1) through (4) above
being collectively referred to as "Restricted Payments"), unless, at the time of
and after giving effect to such Restricted Payment:
(a) no Default or Event of Default has occurred and is continuing or
would occur as a consequence thereof;
(b) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had
been made at the beginning of the applicable four-quarter period,
have been permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Consolidated Coverage Ratio test set
forth in the first paragraph of the covenant described below under
the caption "-- Incurrence of Indebtedness and Issuance of Preferred
Stock"; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted
Subsidiaries after the date of the Indenture (excluding Restricted
Payments permitted by clauses (2), (3), (4), (5), (7), (8), (10),
(11), (12), (13) and (14) of the next succeeding paragraph), is less
than the sum, without duplication, of
(I) 50% of the Consolidated Net Income after Grossed Up Preferred
Stock Dividends of the Company for the period (taken as one
accounting period) from December 31, 2000 to the end of the
Company's most recently ended fiscal quarter for which internal
financial statements are available at the time of such
Restricted Payment (or, if such Consolidated Net Income for
such period is a deficit, less 100% of such deficit), plus
(II) 100% of the aggregate net cash proceeds and the Fair Market
Value as determined by an independent third party appraiser,
accounting firm or valuation firm not affiliated with the
Company of real property or securities constituting a
controlling interest in any Person received by the Company
since the date of the Indenture as a contribution to its common
equity capital or from the issue or sale of Equity Interests of
the Company (other than Disqualified Stock) or from the issue
or sale (other than to a Restricted Subsidiary of the Company)
of convertible or exchangeable Disqualified Stock or
convertible or exchangeable debt securities of the Company that
have been converted into or exchanged for such Equity Interests
(other than Disqualified Stock), plus
(III) to the extent that any Restricted Investment, in whole or in
part, is sold or otherwise liquidated or repaid, redeemed or
repurchased, the sum of (A) 100% of such cash proceeds and the
Fair Market Value of other assets that do not otherwise
constitute a Restricted Investment (net of the cost of
disposition or sale, if any, and tax liabilities arising from
such transaction) up to the aggregate amount invested in such
Restricted Investment outstanding at such time plus (B) 50% of
such cash proceeds and the Fair Market Value of other assets
that do not otherwise constitute a Restricted Investment in
excess of the aggregate amount invested in such Restricted
Investment, in each case, to the extent not otherwise included
in Consolidated Net Income of the Company for such period, plus
(IV) 50% of the amount received from any cash dividends, cash
distributions, cash interest or other cash payments received by
the Company or a Guarantor after the date of the Indenture from
any Restricted Investment, to the extent that such dividends or
cash distributions were not otherwise included in Consolidated
Net Income of the Company for such period or in Clause (III)
above and excluding any such payments to pay obligations and
expenses of Restricted Investments such as income taxes which
were not paid prior to the date of the Indenture, plus
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(V) to the extent that any Unrestricted Subsidiary of the Company is
redesignated as a Restricted Subsidiary after the date of the
Indenture, the Fair Market Value of the Company's Investment in
such Unrestricted Subsidiary as of the date of such
redesignation, plus
(VI) 100% of the reduction or release since the date of the Indenture
of Indebtedness under Guarantees of the Company or any
Restricted Subsidiary which are Restricted Investments, to the
extent that such reduction or release is not due to any payment
under such Guarantee, plus
(VII) $10.0 million.
The preceding provisions will not prohibit:
(1) the payment of any dividend within 60 days after the date of
declaration thereof, if at date of declaration, such payment would
have complied with the provisions of the Indenture;
(2) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness of the Company or any
Guarantor or of any Equity Interests of the Company in exchange
for, or out of the net cash proceeds of the substantially
concurrent sale, issuance of or contribution for, (other than to a
Restricted Subsidiary of the Company), Equity Interests of the
Company (other than Disqualified Stock); provided that the amount
of any such net cash proceeds that are utilized for any such
payment, redemption, repurchase, retirement, defeasance, other
acquisition or dividend or distribution shall be excluded from
clause (c) of the preceding paragraph;
(3) so long as no Default or Event of Default has occurred and is
continuing or would be caused thereby, the defeasance, redemption,
repurchase or other acquisition of subordinated Indebtedness with
the net cash proceeds from an incurrence of Permitted Refinancing
Indebtedness;
(4) so long as no Default or Event of Default has occurred and is
continuing or would be caused thereby, the payment of any dividend
or distribution by a Restricted Subsidiary of the Company to the
holders of its common Equity Interests on a pro rata basis;
(5) so long as no Default or Event of Default has occurred and is
continuing or would be caused thereby, the repurchase, redemption
or other acquisition or retirement for value of any Equity
Interests of the Company or any Restricted Subsidiary of the
Company held by any present, former or future employee, director
or Consultant of the Company's (or any of its Restricted
Subsidiaries' or any parent of the Company) pursuant to any
management equity subscription agreement or stock option agreement
in effect as of the date of the Indenture or any other similar
agreement; provided that the aggregate price paid for all such
repurchased, redeemed, acquired or retired Equity Interests shall
not exceed $2.0 million in any twelve-month period (with unused
amounts in any calendar year being carried over to succeeding
calendar years subject to a maximum (without giving effect to the
following proviso) of $4.0 million in any calendar year); provided
further that such amount in any calendar year may be increased by
an amount not to exceed
(A) the cash proceeds from the sale of Equity Interests of the
Company, any parent of the Company or any of its Restricted
Subsidiaries to present, former or future directors,
Consultants or employees of the Company, its Restricted
Subsidiaries or any parent of the Company that occurs after the
date of the Indenture (to the extent the cash proceeds from the
sale of such Equity Interest have not otherwise been included
in clause (c) of the immediately preceding paragraph), plus
(B) the cash proceeds of key man life insurance policies received
by the Company, its Restricted Subsidiaries or any parent of
the Company after the date of the Indenture;
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and; provided further that cancellation of Indebtedness owing
to the Company from present, former or future directors,
Consultants, or employees of the Company, any of its Restricted
Subsidiaries or any parent of the Company the proceeds of which
were used solely to purchase Equity Interests of the Company
will not be deemed to constitute a Restricted Payment so long
as the value of such Equity Interests issued did not increase
clause (c) of the preceding paragraph;
(6) so long as no Default or Event of Default has occurred and is
continuing or would be caused thereby, Restricted Investments
made after the date of the Indenture having an aggregate Fair
Market Value, taken together with all other Investments made
pursuant to this clause (6) that are at that time outstanding
(without giving effect to any write-up, write-off or write-down),
not to exceed 5% of the Company's Consolidated Tangible Assets as
of the end of the fiscal quarter most recently completed (with
Fair Market Value of each Investment being measured at the time
made and without giving effect to subsequent changes in value);
(7) repurchases of Equity Interests deemed to occur upon exercise of
stock options if such Equity Interests represent a portion of the
exercise price of such options;
(8) distributions to Watermark (A) for payments pursuant to the Tax
Sharing Agreements in existence on the date of the Indenture and
(B) in amounts necessary for Watermark, Communities Investor
Limited Partnership and Communities Investor Corp. to operate in
the ordinary course, provided that such amounts that are
incremental or additional to costs and expenses incurred by the
Company without regard to Watermark, Communities Investor Limited
Partnership and Communities Investor Corp. under this clause
(8)(B) do not exceed $500,000 in any fiscal year;
(9) so long as no Default or Event of Default has occurred and is
continuing or would be caused thereby, the payment of dividends
on the Company's Capital Stock, following the first public
offering of the Company's or Watermark's Capital Stock after the
Issue Date, of up to 6% per annum of the net proceeds received by
the Company or Watermark in such public offering, other than
public offerings with respect to the Company's Capital Stock
registered on Form S-8;
(10) Investments in Unrestricted Subsidiaries that are made with
Excluded Contributions;
(11) non-cash Investments in Unrestricted Subsidiaries in the form of
administrative, financial, accounting, management, or other
similar services (together with a non-cash allocation of
corporate overhead), in each case in the ordinary course of
business;
(12) so long as no Default or Event of Default has occurred and is
continuing or would be caused thereby, the payment of dividends
on Disqualified Stock which is issued in accordance with the
covenant described under "Incurrence of Indebtedness and Issuance
of Preferred Stock";
(13) repayment at any time on or prior to August 15, 2001 of the
Watermark Shareholder Debt; and
(14) the transactions contemplated under "Use of Proceeds."
The amount of all Restricted Payments (other than cash) will be the Fair
Market Value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued to or by the Company or such Restricted
Subsidiary, as the case may be, pursuant to the Restricted Payment; provided
that, notwithstanding the other provisions of the Indenture, with respect to
this covenant, an MAI appraiser, accounting firm or valuation firm with
experience in such valuation and not affiliated with the Company will be
required if the fair market value of such Restricted Payment or Restricted
Payments for any series of transactions exceeds $2.0 million. At least
quarterly, the Company will deliver to the Trustee an Officers' Certificate
stating that all Restricted Payments during the quarter are permitted and
setting forth the basis upon which the calculations required by this "Restricted
Payments" covenant were computed, together with a copy of any fairness opinion
or appraisal required by the Indenture.
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If a Guarantee constitutes a Restricted Investment at the time made, then
the payment under such Guarantee will not constitute an additional Restricted
Investment.
The board of directors can designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation does not cause a Default or an Event
of Default. In the event of any such designation, all outstanding Investments
owned by the Company and its Restricted Subsidiaries in the Subsidiary so
designated will be deemed to be an Investment made as of the time of such
designation and will reduce the amount available for Restricted Payments under
the first paragraph of this covenant or Permitted Investments, as applicable.
All such outstanding Investments will be deemed to constitute Restricted
Investments in an amount equal to the fair market value of such Investments at
the time of such designation. Such designation will only be permitted if such
Restricted Payment is permitted at such time and if such Restricted Subsidiary
otherwise meets the definition of an Unrestricted Subsidiary. The board of
directors may redesignate any Unrestricted Subsidiary to be a Restricted
Subsidiary if such redesignation does not cause a Default or an Event of
Default.
Any such designation by the board of directors will be evidenced to the
Trustee by filing with the Trustee a certified copy of the board resolution
giving effect to such designation and an Officers' Certificate certifying that
such designation complies with the foregoing conditions and is permitted by the
covenant described above. If, at any time, any Unrestricted Subsidiary fails to
meet the definition of an Unrestricted Subsidiary, it shall thereafter cease to
be an Unrestricted Subsidiary for purposes of the Indenture and any Indebtedness
of such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of
the Company as of such date (and, if such Indebtedness is not permitted to be
incurred as of such date under the covenant described under the caption
"Incurrence of Indebtedness and Issuance of Preferred Stock," the Company shall
be in default of such covenant). The board of directors of the Company may at
any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary;
provided that such designation shall be deemed to be an incurrence of
Indebtedness by a Restricted Subsidiary of the Company of any outstanding
Indebtedness of such Unrestricted Subsidiary and such designation shall only be
permitted if (a) such Indebtedness is permitted under the caption "Incurrence of
Indebtedness and Issuance of Preferred Stock," calculated on a pro forma basis
as if such designation had occurred at the beginning of the four-quarter
reference period, and (b) no Default or Event of Default would be in existence
following such designation.
Incurrence of Indebtedness and Issuance of Preferred Stock
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, "incur") any Indebtedness (including Acquired
Debt) and the Company will not issue any Disqualified Stock and will not permit
any of its Restricted Subsidiaries to issue any shares of preferred stock;
provided, however, that the Company may incur Indebtedness (including Acquired
Debt) or issue Disqualified Stock and any Guarantor may incur Indebtedness or
issue preferred stock if the Consolidated Coverage Ratio for the Company's most
recently ended four full fiscal quarters for which internal financial statements
are available immediately preceding the date on which such additional
Indebtedness is incurred or such Disqualified Stock is issued would have been at
least 2 to 1, or the ratio of the Consolidated Indebtedness less Unrestricted
Cash to Consolidated Tangible Net Worth of the Company is less than 3 to 1, in
each case determined on a pro forma basis (including a pro forma application of
the net proceeds therefrom), as if the additional Indebtedness had been
incurred, or the Disqualified Stock had been issued, as the case may be, at the
beginning of such four-quarter period.
The first paragraph of this covenant will not prohibit the incurrence of
any of the following items of Indebtedness (collectively, "Permitted Debt"):
(1) the incurrence by the Company and the Guarantors of Indebtedness or
Disqualified Stock under Credit Facilities in an aggregate
principal amount at any one time outstanding not to exceed the
greater of (a) $450.0 million or (b) the amount of the Borrowing
Base as of
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the date of such incurrence (with letters of credit being deemed to
have a principal amount equal to the maximum potential liability of
the Company and the Guarantors thereunder);
(2) the incurrence by the Company and its Restricted Subsidiaries of
the Existing Indebtedness;
(3) the incurrence by the Company and the Guarantors of Indebtedness
represented by the Notes and the related Subsidiary Guarantees to
be issued on the date of the Indenture and the Exchange Notes and
the related Subsidiary Guarantees to be issued pursuant to the
Registration Rights Agreement;
(4) the incurrence by the Company or a Restricted Subsidiary of
Indebtedness or Disqualified Stock (i) in connection with the
acquisition of assets or a new Subsidiary or (ii) to finance the
purchase, lease or improvement of property (real or personal) or
equipment (whether through the direct purchase of assets or the
Capital Stock of any Person owning such assets); provided that, in
the case of clause (i), such Indebtedness or Disqualified Stock was
incurred by the prior owner of such assets or the Company or such
Restricted Subsidiary prior to such acquisition by the Company or a
Restricted Subsidiary and was not incurred in connection with, or
in contemplation of, such acquisition by the Company or a
Restricted Subsidiary and, in the case of clause (ii), any such
Indebtedness incurred may not exceed the cost of such property or
equipment; and provided further that the principal amount (or
accreted value, as applicable) of such Indebtedness, together with
any other outstanding Indebtedness incurred pursuant to this clause
(4) and including all Permitted Refinancing Indebtedness incurred
to refund, refinance or replace any other Indebtedness incurred
pursuant to this clause (4) does not exceed $30.0 million;
(5) the incurrence by the Company or any Guarantor of Permitted
Refinancing Indebtedness in exchange for, or the net proceeds of
which are used to refund, refinance or replace Indebtedness (other
than intercompany Indebtedness) that was permitted by the Indenture
to be incurred under the first paragraph hereof or clauses (2),
(3), (4), (9), (15) or (16) of this paragraph;
(6) the incurrence by the Company or any Restricted Subsidiary of
intercompany Indebtedness between or among the Company and any of
its Restricted Subsidiaries; provided, however, that:
(A) if the Company is the obligor on such Indebtedness, such
Indebtedness is expressly subordinated to the prior payment in
full in cash of all Obligations with respect to the Notes; and
(B) (1) any subsequent issuance or transfer of Equity Interests that
results in any such Indebtedness being held by a Person other
than the Company or a Restricted Subsidiary thereof, and (2) any
sale or other transfer of any such Indebtedness to a Person that
is not either the Company or a Restricted Subsidiary thereof,
shall be deemed, in each case, to constitute an incurrence of
such Indebtedness by the Company or such Restricted Subsidiary,
as the case may be, that was not permitted by this clause (6);
(7) the incurrence by the Company or any Guarantor of Hedging
Obligations that are incurred for the purpose of fixing or hedging
interest rate risk with respect to any floating rate Indebtedness
that is permitted by the terms of this Indenture to be outstanding;
(8) the guarantee by the Company or any Guarantor of Indebtedness of
the Company or a Restricted Subsidiary of the Company that was
permitted to be incurred by another provision of this covenant;
(9) the incurrence by the Company or any Guarantor of additional
Indebtedness in an aggregate principal amount (or accreted value,
as applicable) at any time outstanding,
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including all Permitted Refinancing Indebtedness incurred to
refund, refinance or replace any Indebtedness incurred pursuant to
this clause (9), not to exceed $20.0 million (it being understood
that any Indebtedness incurred under this clause (9) shall cease to
be deemed incurred or outstanding for purposes of this clause (9)
but shall be deemed to be incurred for purposes of the first
paragraph of this covenant from and after the first date on which
the Company could have incurred such Indebtedness under the first
paragraph of this covenant without reliance upon this clause (9));
(10) Non-Recourse Financing incurred by the Company or any Restricted
Subsidiary for the acquisition, development and/or improvement of
real property or any infrastructure related thereto; provided that
such Non-Recourse Financing is at the date of acquisition or the
commencement of the development and/or improvement at least 70% of
the estimated cost of the assets so acquired, developed or
improved;
(11) the incurrence by the Company or any Restricted Subsidiary of
direct obligations to repay or guarantee shortfalls in payments of
bond financing issued by community development districts and local
government districts to construct infrastructure improvements ("CDD
Obligations") provided that the aggregate amount of all CDD
Obligations of the Company and its Restricted Subsidiaries that is
due and payable at any one time does not exceed $10.0 million;
(12) the incurrence by the Company and the Restricted Subsidiaries of
Indebtedness in connection with letters of credit (including,
without limitation, letters of credit in respect of workers'
compensation claims or self insurance), Indebtedness with respect
to reimbursement type obligations regarding workers compensation
claims, escrow agreements, bankers' acceptances and surety and
performance bonds (in each case to the extent that such incurrence
does not result in the incurrence of any obligation to repay any
obligation relating to borrowed money), all in the ordinary course
of business;
(13) shares of preferred stock of a Restricted Subsidiary issued to the
Company or another Restricted Subsidiary; provided that any
subsequent issuance or transfer of any Capital Stock or any other
event which results in any such Restricted Subsidiary ceasing to be
a Restricted Subsidiary or any other subsequent transfer of any
such shares of preferred stock (except to the Company or another
Restricted Subsidiary) shall be deemed, in each case to be an
issuance of shares of preferred stock;
(14) Indebtedness arising from agreements of the Company or a Restricted
Subsidiary providing for indemnification, adjustment of purchase
price or similar obligations, in each case, incurred or assumed in
connection with the acquisition or disposition of any business,
assets or a Subsidiary, other than guarantees of Indebtedness
incurred by any Person acquiring all or any portion of such
business, assets or a Subsidiary for the purpose of financing such
acquisition; provided, however, that such Indebtedness is not
reflected on the balance sheet of the Company or any Restricted
Subsidiary (contingent obligations referred to in a footnote to
financial statements and not otherwise reflected on the balance
sheet will not be deemed to be reflected on such balance sheet for
purposes of this clause);
(15) Indebtedness incurred by the Company or any Restricted Subsidiary
pursuant to any Construction Loan provided that (A) at the time the
Construction Loan is entered into or amended to include a new
project or projects, as the case may be, the Construction Loan is
not in excess of 85% of the estimated total cost of the projects
under such Construction Loan taken as a whole, including land at
fair market value, interest and soft costs (net of unrestricted
deposits) and (B)(1) at the time any Construction Loan is entered
into that relates to a single project, there are Valid Purchase
Contracts Proceeds in excess of 65% of the maximum Construction
Loan amount taken as a whole or (2) at the time any Construction
Loan is entered into that relates to more than one project or if an
existing Construction Loan is amended to include a new project or
projects, there are Valid
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Purchase Contracts Proceeds in excess of 70% of the maximum
Construction Loan amount taken as a whole; provided, however, that
under clause(B)(2), for each individual project there are Valid
Purchase Contract Proceeds for such project in excess of 30% of the
maximum Construction Loan amount for such project, and provided,
further, that in the event a Default or Event of Default has
occurred and is continuing or would be caused thereby, this clause
(15) shall be unavailable to enter into a new Construction Loan or
amend an existing Construction Loan to include a new project or
projects; and
(16) Indebtedness incurred by the Company or any of its Restricted
Subsidiaries pursuant to Construction Loans existing as of the
Issue Date up to the limits of such Construction Loan existing on
the Issue Date.
For purposes of determining compliance with this "Incurrence of
Indebtedness and Issuance of Preferred Stock" covenant, in the event that an
item of proposed Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (1) through (16) above, or is
entitled to be incurred pursuant to the first paragraph of this covenant, the
Company will be permitted to classify such item of Indebtedness on the date of
its incurrence in any manner that complies with this covenant. Accrual of
interest, accretion or amortization of original issue discount, the payment of
interest on any Indebtedness in the form of additional Indebtedness with the
same terms will not be deemed to be an incurrence of Indebtedness for purposes
of this covenant; provided, in each such case, that the amount thereof is
included in fixed charges of the Company as accrued.
Indebtedness outstanding and not repaid under the Credit Facilities on the
Issue Date is deemed to have been incurred under clause (1) of the second
paragraph of this covenant.
The Indenture does not restrict any Unrestricted Subsidiary from incurring
Indebtedness, nor will Indebtedness of any Unrestricted Subsidiary be included
in the Consolidated Coverage Ratio or the ratio of Consolidated Indebtedness
less Unrestricted Cash to Consolidated Tangible Net Worth or any other ratio
hereunder, as long as the Unrestricted Subsidiary incurring such Indebtedness
remains an Unrestricted Subsidiary. However, neither the Company nor any
Restricted Subsidiary may guarantee Indebtedness of an Unrestricted Subsidiary
unless it complies with the terms of this covenant and the "Restricted Payments"
covenant. As of the date hereof, all of the Company's operating subsidiaries are
Restricted Subsidiaries under the Indenture.
Currently, the Company and its Restricted Subsidiaries can incur
significant additional borrowings notwithstanding the limitations set forth
above.
Liens
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien of any kind securing Subordinated Indebtedness on any asset now
owned or hereafter acquired or any income or profit therefrom, unless all
payments due under the Indenture and the Notes are secured on an equal and
ratable basis with the obligations so secured until such time as such
obligations are no longer secured by a Lien.
Dividend and Other Payment Restrictions Affecting Subsidiaries
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or permit to exist or become
effective any consensual encumbrance or restriction on the ability of any
Restricted Subsidiary to:
(1) pay dividends or make any other distributions on its Capital Stock
to the Company or any of its Restricted Subsidiaries or with respect
to any other interest or participation in, or measured by, its
profits, or pay any indebtedness owed to the Company or any of its
Restricted Subsidiaries;
(2) make loans or advances to the Company or any of its Restricted
Subsidiaries; or
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(3) transfer any of its properties or assets to the Company or any of
its Restricted Subsidiaries.
However, the foregoing restrictions do not apply to encumbrances or
restrictions existing under or by reason of:
(a) any agreement, including with respect to the Existing
Indebtedness, as in effect on the date of the Indenture (and all
amendments thereto, so long as such amendments are not
disadvantageous to the holders of the Notes in any material
respect);
(b) the Credit Agreement and its related documentation as in effect
as of the date of the Indenture, and any amendments,
modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings thereof, provided that
such amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacement or refinancings
are no more restrictive, taken as a whole, with respect to such
dividend and other payment restrictions than those contained in
the Credit Agreement as in effect on the date of the Indenture;
(c) the Indenture, the Notes, the Subsidiary Guarantees and the
Exchange Notes and related Subsidiary Guarantees;
(d) applicable law, statute, rule, regulation or governmental order;
(e) any instrument governing Indebtedness or Capital Stock of a
Person acquired by the Company or any of its Restricted
Subsidiaries as in effect at the time of such acquisition (except
to the extent such Indebtedness was incurred in connection with
or in contemplation of such acquisition) and any amendments,
modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings thereof, provided that
such amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacements or refinancings
thereof are no more restrictive, taken as a whole, with respect
to such dividend and other payment restrictions than those
contained in such instruments at the time of such acquisition,
which encumbrance or restriction is not applicable to any Person,
or the properties or assets of any Person, other than the Person,
or the property or assets of the Person, so acquired, provided
that, in the case of Indebtedness, such Indebtedness was
permitted by the terms of the Indenture to be incurred;
(f) customary non-assignment provisions in leases, licenses or
contracts entered into in the ordinary course of business and
consistent with past practices;
(g) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions on the property so
acquired of the nature described in clause (3) above;
(h) any agreement for the sale or other disposition of a Restricted
Subsidiary that restricts distributions by that Restricted
Subsidiary pending its sale or other disposition;
(i) Permitted Refinancing Indebtedness, provided that the
restrictions contained in the agreements governing such Permitted
Refinancing Indebtedness are no more restrictive, taken as a
whole, than those contained in the agreements governing the
Indebtedness being refinanced;
(j) Liens securing Indebtedness that limit the right of the Company
or any of its Restricted Subsidiaries to dispose of the assets
subject to such Lien;
(k) provisions with respect to the disposition or distribution of
assets or property in joint venture agreements, asset sale
agreements, stock sale agreements and other similar agreements
entered into in the ordinary course of business; and
(l) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of
business; and
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(m) any agreement entered into in connection with the incurrence of
Indebtedness permitted under the Indenture, provided that such
agreement, taken as a whole, is not more restrictive with respect
to dividend and other payment restrictions than those existing as
of the date of the Indenture.
Merger, Consolidation, or Sale of Assets
Neither the Company nor any Guarantor may directly or indirectly,
consolidate or merge with or into (whether or not the Company or such Guarantor
is the surviving corporation), or sell, assign, transfer, convey or otherwise
dispose of all or substantially all of its properties or assets, in one or more
related transactions, to another Person unless:
(1) the Company or such Guarantor is the surviving corporation or the
Person formed by or surviving any such consolidation or merger (if
other than the Company or such Guarantor) or to which such sale,
assignment, transfer, conveyance or other disposition shall have
been made is a corporation or other legal entity organized or
existing under the laws of the United States, any state thereof or
the District of Columbia;
(2) the Person formed by or surviving any such consolidation or merger
(if other than the Company or such Guarantor) or the Person to which
such sale, assignment, transfer, conveyance or other disposition
shall have been made assumes all the obligations of the Company or
such Guarantor under the Notes and the Indenture pursuant to a
supplemental indenture in a form reasonably satisfactory to the
Trustee;
(3) immediately after such transaction no Default or Event of Default
exists; and
(4) except in the case of a merger of the Company or a Guarantor with or
into a Wholly Owned Restricted Subsidiary of the Company or a
Guarantor, or the merger or consolidation of a Restricted Subsidiary
with or into the Company or a transfer of all or substantially all
of the assets of a Restricted Subsidiary to the Company, the Company
or the Person formed by or surviving any such consolidation or
merger (if other than the Company), or to which such sale,
assignment, transfer, conveyance or other disposition shall have
been made:
(A) will have Consolidated Net Worth immediately after the
transaction equal to or greater than the Consolidated Net Worth
of the Company immediately preceding the transaction; and
(B) will, immediately after such transaction after giving pro forma
effect thereto and any related financing transactions as if the
same had occurred at the beginning of the applicable four-quarter
period, be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Consolidated Coverage Ratio test set
forth in the first paragraph of the covenant described above
under the caption "-- Incurrence of Indebtedness and Issuance of
Preferred Stock."
In addition, the Company may not, directly or indirectly, lease all or
substantially all of its properties or assets, in one or more related
transactions, to any other Person. The provisions of this covenant are not
applicable to a sale, assignment, transfer, conveyance or other disposition of
assets between or among the Company and the Guarantors.
Transactions with Affiliates
The Company will not, and will not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan,
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advance or guarantee with, or for the benefit of, any Affiliate involving
aggregate consideration in excess of $50,000 (each, an "Affiliate Transaction"),
unless:
(1) such Affiliate Transaction is on terms that taken as a whole are not
materially less favorable to the Company or the relevant Restricted
Subsidiary than those that would have been obtained in a comparable
transaction by the Company or such Restricted Subsidiary with a
person who is not an Affiliate; and
(2) the Company delivers to the Trustee:
(a) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in
excess of $1.0 million, an Officers' Certificate certifying that
such Affiliate Transaction complies with this covenant;
(b) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in
excess of $2.0 million, a resolution of the board of directors
set forth in an Officers Certificate to the effect that such
Affiliate Transaction complies with this covenant and has been
approved by a majority of the Independent Members of the board of
directors or if there are no Independent Members, then such
Affiliate Transaction has received unanimous approval of the
board of directors and an opinion as to the fairness to the
Holders of such Affiliate Transaction from a financial point of
view issued by an accounting or investment banking firm of
national standing or an appraisal from a MAI appraiser, if
appropriate; and
(c) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in
excess of $5.0 million, an opinion as to the fairness to the
Holders of such Affiliate Transaction from a financial point of
view issued by an accounting or investment banking firm of
national standing or an appraisal from a MAI appraiser, if
appropriate.
The following items are not deemed Affiliate Transactions and therefore are
not subject to the provisions of the prior paragraph:
(1) any employment, consulting or other compensation agreement entered
into by the Company or any of its Restricted Subsidiaries in the
ordinary course of business provided that any consulting or other
compensation agreement entered into with a current or former senior
officer or director of the Company or any of its Restricted
Subsidiaries providing for the payment of fees in excess of $100,000
annually per person must be approved by a majority of the
disinterested members of the board of directors or the Compensation
Committee thereof or if there are no such disinterested members by
unanimous approval of the board of directors or such committee;
(2) transactions between or among the Company and/or its Restricted
Subsidiaries;
(3) sales of Equity Interests (other than Disqualified Stock) to
Affiliates of the Company;
(4) Restricted Payments that are permitted by the provisions of the
Indenture described above under the caption "-- Restricted
Payments;"
(5) the payment of reasonable and customary fees paid to, and indemnity
provided on behalf of, officers, directors, employees or Consultants
of the Company or any Subsidiary;
(6) loans in the ordinary course of business to officers, directors,
employees or Consultants which are approved by a majority of the
Independent Members of the board of directors of the Company in good
faith or, if there are no Independent Members, by a unanimous vote
of the board of directors;
(7) any agreement as in effect as of the Issue Date or any amendment or
modification thereto (so long as any such amendment or modification
is not disadvantageous to the holders of the
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Notes in any material respect) or any transaction contemplated
thereby (see "Material Relationships and Related Transactions");
(8) transactions contemplated by Tax Sharing Agreements, provided such
services are provided in exchange for Fair Market Value
consideration or are permitted under the "Restricted Payments"
covenant; and
(9) agreements between the Company or any Restricted Subsidiary and
officers and directors of the Company with respect to home purchases
pursuant to a home purchase program available to officers and
directors of the Company.
Business Activities
The Company will not, and will not permit any Restricted Subsidiary to,
engage in any business other than Permitted Businesses, except to such extent as
would not be material to the Company and its Restricted Subsidiaries taken as a
whole.
Additional Subsidiary Guarantees
The Company will not permit any of its Restricted Subsidiaries, directly or
indirectly, to Guarantee or pledge any assets to secure the payment of any other
Indebtedness of the Company unless such Restricted Subsidiary simultaneously
executes and delivers a supplemental indenture providing for the Guarantee of
the payment of the Notes by such Restricted Subsidiary, which Guarantee shall be
senior to or pari passu with such Subsidiary's Guarantee of or pledge to secure
such other Indebtedness, unless such other Indebtedness is Senior Debt, in which
case the Guarantee of the Notes may be subordinated to the Guarantee of such
Senior Debt to the same extent as the Notes are subordinated to such Senior
Debt.
Notwithstanding the preceding paragraph, any Subsidiary Guarantee of the
Notes will provide by its terms that it will be automatically and
unconditionally released and discharged under the circumstances described above
under the caption "-- The Subsidiary Guarantees." The form of the Subsidiary
Guarantee is attached as an exhibit to the Indenture.
Payments for Consent
Neither the Company nor any of its Subsidiaries will, directly or
indirectly, pay or cause to be paid any consideration to or for the benefit of
any Holder of Notes for or as an inducement to any consent, waiver or amendment
of any of the terms or provisions of the Indenture or the Notes unless such
consideration is offered to be paid and is paid to all Holders of the Notes that
consent, waive or agree to amend in the time frame set forth in the solicitation
documents relating to such consent, waiver or agreement.
Reports
Whether or not required by the Commission, so long as any Notes are
outstanding, the Company will furnish to the Holders of Notes within the time
periods specified in the Commission's rules and regulations:
(1) all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms
10-Q and 10-K if the Company and its Subsidiaries were required to
file such Forms, including a "Management's Discussion and Analysis
of Financial Condition and Results of Operations" that describes the
financial condition and results of operations of the Company and its
consolidated Subsidiaries and, with respect to the annual
information only, a report thereon by the Company's certified
independent accountants; and
(2) all current reports that would be required to be filed with the
Commission on Form 8-K if the Company and its Subsidiaries were
required to file such reports.
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In addition, following the consummation of the exchange offer contemplated
by the Registration Rights Agreement whether or not required by the Commission,
the Company will file a copy of all such information and reports with the
Commission for public availability within the time periods specified in the
Commission's rules and regulations (unless the Commission will not accept such a
filing) and make such information available to securities analysts and
prospective investors upon request if not then publicly available. In addition,
the Company and the Guarantors will agree that, for so long as any Notes remain
outstanding, they will furnish to holders of the Notes and prospective
investors, upon their request, the information required to be delivered pursuant
to Rule 144A(d)(4) under the Act.
Notwithstanding the foregoing, such requirements will be deemed satisfied
prior to the commencement of the exchange offer or the effectiveness of the
shelf registration statement by the filing with the Commission the registration
statement relating to the exchange offer and/or the shelf registration
statement, and any amendments thereto, of the Securities; provided that any such
registration statement is filed within the time periods specified in the
Registration Rights Agreement.
No Senior Subordinated Debt
The Company will not incur, create, issue, assume, guarantee or otherwise
become liable for any Indebtedness that is subordinate or junior in right of
payment to any Senior Debt of the Company and senior in any respect in right of
payment to the Notes and no Guarantor will incur, create, issue, assume,
guarantee or otherwise become liable for any Indebtedness that is subordinate or
junior in right of payment to any Senior Debt of such Guarantor and senior in
any respect in right of payment to such Guarantor's Subsidiary Guarantee.
EVENTS OF DEFAULT AND REMEDIES
Each of the following is an Event of Default:
(1) default for 30 days in the payment when due of interest on, or
Liquidated Damages, if any, with respect to, the Notes (whether or
not prohibited by the subordination provisions of the Indenture);
(2) default in payment when due of the principal of or premium, if any,
on the Notes (whether or not prohibited by the subordination
provisions of the Indenture);
(3) failure by the Company or any of its Restricted Subsidiaries to
comply with the provisions described under the captions "-- Change
of Control, "-- Maintenance of Consolidated Tangible Net Worth," or
"-- Merger, Consolidation or Sale of Assets;"
(4) failure by the Company or any of its Subsidiaries for 30 days after
notice to comply with any of its other agreements in the Indenture
or the Notes;
(5) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced
any Indebtedness for money borrowed by the Company or any of its
Restricted Subsidiaries (or the payment of which is guaranteed by
the Company or any of its Restricted Subsidiaries) (other than
Indebtedness owed to the Company or any of its Restricted
Subsidiaries or Non-Recourse Financing to the extent such default is
not due to the default by the Company under any other Indebtedness)
whether such Indebtedness or guarantee now exists, or is created
after the date of the Indenture, if that default:
(a) is caused by a failure to pay such Indebtedness at its stated
maturity and such Indebtedness together with other Indebtedness
in default for failure to pay principal at stated maturity (or
the maturity of which as then accelerated) exceeds $10.0 million
in the aggregate (a "Payment Default"); or
(b) results in the acceleration of such Indebtedness prior to its
express maturity and, in each case, the principal amount of any
such Indebtedness, together with the principal
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amount of any other such Indebtedness under which there has been
a Payment Default or the maturity of which has been so
accelerated, aggregates $10.0 million or more;
(6) failure by the Company or any of its Restricted Subsidiaries to pay
final judgments aggregating in excess of $10.0 million (except to
the extent the judgment or judgments are in respect of Non-Recourse
Financing), which judgments are not paid, discharged or stayed for a
period of 60 days;
(7) except as permitted by the Indenture, any Subsidiary Guarantee shall
be held in any judicial proceeding to be unenforceable or invalid or
shall cease for any reason to be in full force and effect or any
Guarantor, or any Person acting on behalf of any Guarantor, shall
deny or disaffirm its obligations under its Subsidiary Guarantee;
and
(8) certain events of bankruptcy or insolvency with respect to the
Company or any of its Significant Subsidiaries or group of
Restricted Subsidiaries that, taken together (as of the latest
audited consolidated financial statements for the Company and its
Restricted Subsidiaries), would constitute a Significant Subsidiary.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes to be due and payable immediately. Notwithstanding the
foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency, with respect to the Company, any Significant
Subsidiary or any group of Restricted Subsidiaries that, taken together (as of
the latest audited consolidated financial statements for the Company and its
Restricted Subsidiaries), would constitute a Significant Subsidiary, all
outstanding Notes will become due and payable without further action or notice.
Holders of the Notes may not enforce the Indenture or the Notes except as
provided in the Indenture. Subject to certain limitations, Holders of a majority
in principal amount of the then outstanding Notes may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Holders of the
Notes notice of any continuing Default or Event of Default (except a Default or
Event of Default relating to the payment of principal, interest or Liquidated
Damages, if any), if it determines that withholding notice is in their interest.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
interest on, or the principal of, the Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture. Promptly following becoming aware of
any Default or Event of Default, the Company is also required to deliver to the
Trustee a statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Company
or any Guarantor has any liability for any obligations of the Company or any
Guarantor under the Notes, the Indenture or, the Subsidiary Guarantees or any
Guarantor for any claim based on, in respect of, or by reason of, those
obligations or their creation. Each Holder of Notes by accepting a Note waives
and releases all liability. The waiver and release are part of the consideration
for issuance of the Notes. Such waiver may not be effective to waive liabilities
under the federal securities laws.
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LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Notes and all obligations
of the Guarantors discharged with respect to the Subsidiary Guarantees ("Legal
Defeasance") except for:
(1) the rights of Holders of outstanding Notes to receive payments in
respect of the principal of, premium, if any, interest and
Liquidated Damages, if any, on such Notes when such payments are due
from the trust referred to below;
(2) the Company's obligations with respect to the Notes concerning
issuing temporary Notes, registration of Notes, mutilated,
destroyed, lost or stolen Notes and the maintenance of an office or
agency for payment and money for security payments held in trust;
(3) the rights, powers, trusts, duties and immunities of the Trustee,
and the Company's and the Guarantors' obligations in connection
therewith; and
(4) the Legal Defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time, elect to have
the obligations of the Company and the Guarantors released with respect to
certain covenants that are described in the Indenture ("Covenant Defeasance")
and thereafter any omission to comply with those covenants shall not constitute
a Default or Event of Default with respect to the Notes. In the event Covenant
Defeasance occurs, certain events (not including non-payment, bankruptcy,
receivership, rehabilitation and insolvency events) described under "Events of
Default" will no longer constitute an Event of Default with respect to the
Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(1) the Company must irrevocably deposit with the Trustee, in trust, for
the benefit of the Holders of the Notes, cash in United States
dollars, non-callable Government Securities, or a combination
thereof, in such amounts as will be sufficient, in the opinion of a
nationally recognized firm of independent public accountants, to pay
the principal of, premium, if any, interest and Liquidated Damages,
if any, on the outstanding Notes on the stated maturity or on the
applicable redemption date, as the case may be, and the Company must
specify whether the Notes are being defeased to maturity or to a
particular redemption date;
(2) in the case of Legal Defeasance, the Company shall have delivered to
the Trustee an opinion of counsel reasonably acceptable to the
Trustee confirming that (A) the Company has received from, or there
has been published by, the Internal Revenue Service a ruling or (B)
since the date of the Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect
that, and based thereon such opinion of counsel shall confirm that,
the Holders of the outstanding Notes will not recognize income, gain
or loss for federal income tax purposes as a result of such Legal
Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been
the case if such Legal Defeasance had not occurred;
(3) in the case of Covenant Defeasance, the Company shall have delivered
to the Trustee an opinion of counsel reasonably acceptable to the
Trustee confirming that the Holders of the outstanding Notes will
not recognize income, gain or loss for federal income tax purposes
as a result of such Covenant Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at
the same times as would have been the case if such Covenant
Defeasance had not occurred;
(4) no Default or Event of Default shall have occurred and be continuing
either (A) on the date of such deposit (other than a Default or
Event of Default resulting from the borrowing of funds to be applied
to such deposit); or (B) or insofar as Events of Default from
bankruptcy
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or insolvency events are concerned, at any time in the period ending
on the 91st day after the date of deposit;
(5) such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under any material
agreement or instrument (other than the Indenture) to which the
Company or any of its Subsidiaries is a party or by which the
Company or any of its Subsidiaries is bound;
(6) the Company must have delivered to the Trustee an opinion of counsel
to the effect that, assuming no intervening bankruptcy of the
Company or any Guarantor between the date of deposit and the 91st
day following the deposit and assuming that no Holder is an
"insider" of the Company under applicable bankruptcy law, after the
91st day following the deposit, the trust funds will not be subject
to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights
generally;
(7) the Company must deliver to the Trustee an Officers' Certificate
stating that the deposit was not made by the Company with the intent
of preferring the Holders of Notes over the other creditors of the
Company with the intent of defeating, hindering, delaying or
defrauding creditors of the Company or others; and
(8) the Company must deliver to the Trustee an Officers' Certificate and
an opinion of counsel, each stating that all conditions precedent
provided for relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture or
the Notes may be amended or supplemented with the consent of the Holders of at
least a majority in principal amount of the Notes then outstanding (including,
without limitation, consents obtained in connection with a purchase of, or
tender offer or exchange offer for, Notes), and any existing default or
compliance with any provision of the Indenture or the Notes may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding Notes (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder):
(1) reduce the principal amount of Notes whose Holders must consent to
an amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any Note or
alter the provisions with respect to the redemption of the Notes
(other than provisions relating to the covenants described above
under the captions "-- Repurchase at the Option of Holders" or
"-- Maintenance of Consolidated Tangible Net Worth");
(3) reduce the rate of or change the time for payment of interest on any
Note;
(4) waive a Default or Event of Default in the payment of principal of
or premium, if any, or interest on the Notes (except a rescission of
acceleration of the Notes by the Holders of at least a majority in
aggregate principal amount of the Notes and a waiver of the payment
default that resulted from such acceleration);
(5) make any Note payable in money other than that stated in the Notes;
(6) make any change in the provisions of the Indenture relating to
waivers of past Defaults or the rights of Holders of Notes to
receive payments of principal of or premium, if any, or interest on
the Notes;
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(7) waive a redemption payment with respect to any Note (other than a
payment required by one of the covenants described above under the
captions "-- Repurchase at the Option of Holders" or "-- Maintenance
of Consolidated Tangible Net Worth");
(8) make any change in the provisions of the Indenture relating to
subordination of the Notes if such change would adversely affect the
rights of such Holder of Notes;
(9) make any change in the foregoing amendment and waiver provisions; or
(10) release any Guarantor from any of its obligations under its
Guarantee or the Indenture, except in accordance with the terms of
the Indenture.
In addition, any amendment to the provisions of the Indenture which relate
to the covenants described above under the captions " -- Repurchase at the
Option of Holders" or " -- Maintenance of Consolidated Tangible Net Worth" will
require the consent of the Holders of at least 66 2/3% in aggregate principal
amount of the Notes then outstanding if such amendment would adversely affect
the rights of Holders of Notes.
Notwithstanding the preceding, without the consent of any Holder of Notes,
the Company, the Guarantors and the Trustee may amend or supplement the
Indenture or the Notes to cure any ambiguity, defect or inconsistency, to
provide for uncertificated Notes in addition to or in place of certificated
Notes, to provide for the assumption of the Company's or a Guarantor's
obligations to Holders of Notes in the case of a merger or consolidation or sale
of all or substantially all of the Company's assets, to make any change that
would provide any additional rights or benefits to the Holders of Notes or that
does not adversely affect the legal rights under the Indenture of any such
Holder, to comply with requirements of the Commission in order to effect or
maintain the qualification of the Indenture under the Trust Indenture Act, to
provide for the issuance of Additional Notes in accordance with the limitations
set forth in the Indenture or to allow a Guarantor to execute a supplemental
indenture and/or a Guarantee with respect to such notes.
CONCERNING THE TRUSTEE
If the Trustee becomes a creditor of the Company or any Guarantor, the
Indenture limits its right to obtain payment of claims in certain cases, or to
realize on certain property received in respect of any such claim as security or
otherwise. The Trustee is permitted to engage in other transactions; however, if
it acquires any conflicting interest it must eliminate such conflict within 90
days and apply to the Commission for permission to continue or resign.
The Holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
occurs and is continuing, the Trustee will be required, in the exercise of its
power, to use the degree of care of a prudent man in the conduct of his own
affairs. Subject to such provisions, the Trustee will be under no obligation to
exercise any of its rights or powers under the Indenture at the request of any
Holder of Notes, unless such Holder has offered to the Trustee security and
indemnity satisfactory to it against any loss, liability or expense.
ADDITIONAL INFORMATION
Anyone who receives this prospectus may obtain a copy of the Indenture
without charge by writing to WCI Communities, Inc., 24301 Walden Center Drive,
Suite 300, Bonita Springs, Florida 34134, Attention: Vivien N. Hastings, Esq.
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CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person,
(1) Indebtedness of any other Person existing at the time such other
Person is merged with or into or became a Subsidiary of such
specified Person whether or not such Indebtedness is incurred in
connection with, or in contemplation of, such other Person merging
with or into, or becoming a Subsidiary of, such specified Person;
and
(2) Indebtedness secured by a Lien encumbering any asset acquired by
such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
as used with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise; provided that beneficial ownership of 10% or more of the
Voting Stock of a Person shall be deemed to be control. For purposes of this
definition, the terms "controlling," "controlled by" and "under common control
with" shall have correlative meanings. Notwithstanding the foregoing, the term
"Affiliate" shall not include, with respect to the Company or any Restricted
Subsidiary, any Restricted Subsidiary.
"Amenities" means the golf courses, marinas, clubhouses and swimming,
restaurants, tennis and other recreational facilities owned and operated by the
Company or any Restricted Subsidiary and all activities reasonably related
thereto.
"Beneficial Owner" has the meaning assigned to such term in Rule 13d-3 and
Rule 13d-5 under the Exchange Act, except that in calculating the beneficial
ownership of any particular "person" (as that term is used in Section 13(d)(3)
of the Exchange Act), such "person" shall be deemed to have beneficial ownership
of all securities that such "person" has the right to acquire by conversion or
exercise of other securities, whether such right is currently exercisable or is
exercisable only upon the occurrence of a subsequent condition. The terms
"Beneficially Owns" and "Beneficially Owned" shall have a corresponding meaning.
"Borrowing Base" means, at any time of determination, the sum of the
following, without duplication:
(1) 100% of all cash and Cash Equivalents held by the Company or any
Restricted Subsidiary, including cash or Cash Equivalents held by a
title insurance company in trust for the benefit of the Company or
any Restricted Subsidiary;
(2) 75% of the book value of Developed Land for which no construction
has occurred;
(3) 95% of the cost of the land and construction costs (as reasonably
allocated by the Company) for all Units for which there is an
executed purchase contract with a buyer not Affiliated with the
Company, less any deposits, down payments or earnest money;
(4) 80% of the cost of the land and construction costs (as reasonably
allocated by the Company) for all Units for which construction has
begun and for which there is not an executed purchase agreement with
a buyer not Affiliated with the Company;
(5) 75% of Receivables;
(6) 75% of the cost of Amenities less the portion of such costs
allocated on a pro rata basis to sold memberships or marina slips;
(7) 50% of the costs of Developable Land (other than Developed Land) on
which improvements have not commenced, less CDD Obligations and
mortgage Indebtedness (other than under a
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Credit Facility) applicable to such land, up to the greater of $75.0
million or 30% of Consolidated Tangible Net Worth;
(8) 65% of all Restricted Investments up to $25.0 million; and
(9) capitalized interest and taxes up to a maximum of 10% of the
Borrowing Base, exclusive of this clause (9), at the time of
determination.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at that time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means
(1) in the case of a corporation, corporate stock,
(2) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents
(however designated) of corporate stock,
(3) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited),
and
(4) any other interest or participation that confers on a Person the
right to receive a share of the profits and losses of, or
distributions of assets of, the issuing Person.
"Cash Equivalents" means
(1) United States dollars,
(2) securities issued or directly and fully guaranteed or insured by the
United States government or any agency or instrumentality thereof
(provided that the full faith and credit of the United States is
pledged in support thereof) having maturities of not more than one
year from the date of acquisition,
(3) certificates of deposit and eurodollar time deposits with maturities
of one year or less from the date of acquisition, bankers'
acceptances with maturities not exceeding one year and overnight
bank deposits, in each case with any domestic commercial bank having
capital and surplus in excess of $500.0 million and rated A-1 or
better by Standard & Poor's Rating Services or P-1 or better by
Moody's or the equivalent of such rating by a successor rating
agency,
(4) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (2) and (3)
above entered into with any financial institution meeting the
qualifications specified in clause (3) above,
(5) commercial paper having the highest rating obtainable from Moody's
Investors Service, Inc. or Standard & Poor's Rating Services and in
each case maturing within one year after the date of acquisition,
and
(6) money market funds at least 95% of the assets of which constitute
Cash Equivalents of the kinds described in clauses (1) through (5)
of this definition.
"CDD Obligations" has the meaning set forth in clause 11 of the second
paragraph of the covenant entitled "Incurrence of Indebtedness and Issuance of
Preferred Stock," to the extent that such obligation is reflected as an
obligation of the consolidated balance sheet of the Company and its subsidiaries
in accordance with GAAP.
"Change of Control" means the occurrence of any of the following:
(1) the direct or indirect sale, transfer, conveyance or other
disposition (other than by way of merger or consolidation), in one
or a series of related transactions, of all or substantially all of
the properties or assets of the Company and its Restricted
Subsidiaries taken as a whole
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to any "person" (as that term is used in Section 13(d)(3) of the
Exchange Act or any successor provision) other than a Principal or a
Related Party of a Principal, provided that a transaction where the
Principals and/or Related Parties of a Principal own directly or
indirectly 50% or more of all classes of Capital Stock of such
Person or group immediately after such transaction shall not be a
Change of Control;
(2) the adoption of a plan relating to the liquidation or dissolution of
the Company,
(3) the consummation of any transaction (including, without limitation,
any merger or consolidation) the result of which is that any
"person" (as defined above), other than the Principals and their
Related Parties, becomes the Beneficial Owner, directly or
indirectly, of more than 50% of the Voting Stock of the Company
(measured by voting power rather than number of shares) or
Watermark, or
(4) the first day on which a majority of the members of the board of
directors, of the Company are not Continuing Directors.
"Consolidated Coverage Ratio" means with respect to any Person for any
period, the ratio of the EBITDA of such Person and its Restricted Subsidiaries
for such period to the Consolidated Interest Incurred of such Person and its
Restricted Subsidiaries for such period. In the event that the referent Person
or any of its Restricted Subsidiaries incurs, assumes, Guarantees, repays,
repurchases or redeems any Indebtedness (other than ordinary working capital
borrowings) or issues, repurchases or redeems preferred stock subsequent to the
commencement of the period for which the Consolidated Coverage Ratio is being
calculated but prior to the date on which the event for which the calculation of
the Consolidated Coverage Ratio is made (the "Calculation Date"), then the
Consolidated Coverage Ratio shall be calculated giving pro forma effect to such
incurrence, assumption, Guarantee, repayment, repurchase or redemption of
Indebtedness, or such issuance, repurchase or redemption of preferred stock, and
the use of proceeds therefrom as if the same had occurred at the beginning of
the applicable four-quarter reference period.
In addition, for purposes of calculating the Consolidated Coverage Ratio,
(1) acquisitions that have been made by the Company or any of its
Restricted Subsidiaries, including through mergers or consolidations
and including any related financing transactions, during the
four-quarter reference period or subsequent to such reference period
and on or prior to the Calculation Date shall be given pro forma
effect as if they had occurred on the first day of the four-quarter
reference period and EBITDA for such reference period shall be
calculated without giving effect to clause (3) of the proviso set
forth in the definition of Consolidated Net Income, and
(2) the EBITDA attributable to Discontinued Operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior
to the Calculation Date, shall be excluded, and
(3) the Consolidated Interest Incurred attributable to Discontinued
Operations, as determined in accordance with GAAP, and operations or
businesses disposed of prior to the Calculation Date, shall be
excluded, but only to the extent that the obligations giving rise to
such Consolidated Interest Incurred will not be obligations of the
referent Person or any of its Restricted Subsidiaries following the
Calculation Date.
"Consolidated Indebtedness" means the Indebtedness of the Company and its
Restricted Subsidiaries on a consolidated basis, calculated in accordance with
GAAP, including, without duplication, the amount of all Guarantees, letters of
credit or other items of Indebtedness that are reflected as liabilities on the
balance sheet of the Company and its Restricted Subsidiaries, including Land
Bank Obligations reflected as liabilities on the balance sheet of the Company
and its Restricted Subsidiaries excluding, however, any amounts attributable to
surety and performance bonds.
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"Consolidated Interest Incurred" means, with respect to any Person for any
period, without duplication,
(1) the consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued (including,
without limitation, amortization of debt issuance costs and original
issue discount, non-cash interest payments, the interest component
of any deferred payment obligations, the interest component of all
payments associated with Capital Lease Obligations, commissions,
discounts and other fees and charges incurred in respect of letter
of credit or bankers' acceptance financings, and net of the effect
of all payments made or received pursuant to Hedging Obligations,
but excluding amortization of debt issuance costs paid on or prior
to the Issue Date), plus
(2) the consolidated interest of such Person and its Restricted
Subsidiaries, that was capitalized during such period, plus
(3) any Consolidated Interest and Preferred Stock Dividends Incurred on
Indebtedness of another Person that is Guaranteed by such Person or
one of its Restricted Subsidiaries or secured by a Lien on assets of
such Person or one of its Restricted Subsidiaries (subject, however,
to the amount of the guarantee or the value of the assets
constituting the Lien) (whether or not such Guarantee or Lien is
called upon), plus
(4) all capitalized interest and all interest incurred in connection
with Investments in Discontinued Operations for such period; plus
(5) the product of (a) all dividends, whether paid or accrued and
whether or not in cash, on any series of preferred stock of such
Person or any of its Restricted Subsidiaries, other than dividends
on Equity Interests payable solely in Equity Interests of the
Company (other than Disqualified Stock) or to the Company or a
Restricted Subsidiary of the Company, times (b) a fraction, the
numerator of which is one and the denominator of which is one minus
the then current combined federal, state and local statutory tax
rate of such Person, expressed as a decimal, in each case, on a
consolidated basis and in accordance with GAAP; minus
(6) to the extent included above, the amortization of previously
capitalized interest, minus
(7) to the extent included above, the amortization of debt issuance
costs paid on or prior to the Issue Date.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
provided that, without duplication,
(1) the Net Income (or net loss) of any Person that is not a Restricted
Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of
dividends or distributions are received in cash to the referent
Person or a Restricted Subsidiary during the referent period or
receivable (without legal or contractual restrictions) or to the
extent such loss has been funded with cash or other assets from the
Company or a Restricted Subsidiary during the referent period,
(2) the Net Income of any Restricted Subsidiary shall be excluded to the
extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is
not at the date of determination permitted without any prior
governmental approval (that has not been obtained) or, directly or
indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Restricted Subsidiary or
its stockholders, unless such restriction with respect to the
payments of dividends or similar distributions has been waived (and
when and to the extent such dividend or other distribution is
permitted, such income not previously recognized shall then be
recognized, in the period when such dividend
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or other distribution was permitted and to the extent of such
permission for purposes of calculation of Net Income under the
covenant "Restricted Payments" but Net Income from prior periods
will not be included for any other purpose);
(3) the Net Income or net loss of any Person acquired in a pooling of
interests transaction for any period prior to the date of such
acquisition shall be excluded,
(4) the cumulative effect of a change in accounting principles shall be
excluded, and
(5) the Net Income and net loss of any Unrestricted Subsidiary shall be
excluded, unless such Net Income shall be distributed to the Company
or one of its Restricted Subsidiaries in which case such Net Income
shall be included.
"Consolidated Net Income After Grossed-up Preferred Stock Dividends" means,
with respect to any Person for any period, the aggregate of the Net Income of
such Person and its Restricted Subsidiaries for such period, on a consolidated
basis, determined in accordance with GAAP; provided that, without duplication,
(1) the Net Income (or net loss) of any Person that is not a Restricted
Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of
dividends or distributions are received in cash to the referent
Person or a Restricted Subsidiary during the referent period
(regardless of whether such cash represented Net Income in such
period or a prior period) or to the extent such loss has been funded
with cash or other assets from the Company or a Restricted
Subsidiary during the referent period,
(2) the Net Income of any Restricted Subsidiary shall be excluded to the
extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is
not at the date of determination permitted without any prior
governmental approval (that has not been obtained) or, directly or
indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Restricted Subsidiary or
its stockholders, unless such restriction with respect to the
payments of dividends or similar distributions has been waived (and
when and to the extent such dividend or other distribution is
permitted, such income not previously recognized shall then be
recognized, in the period when such dividend or other distribution
was permitted and to the extent of such permission for purposes of
calculation of Net Income under the covenant "Restricted Payments"
but Net Income from prior periods will not be included for any other
purpose);
(3) the Net Income or net loss of any Person acquired in a pooling of
interests transaction for any period prior to the date of such
acquisition shall be excluded,
(4) the cumulative effect of a change in accounting principles shall be
excluded,
(5) the Net Income and net loss of any Unrestricted Subsidiary shall be
excluded, whether or not distributed to the Company or one of its
Restricted Subsidiaries, and
(6) the product of (a) all dividends, whether paid or accrued and
whether or not in cash, on any series of preferred stock or
Disqualified Stock of such Person or any of its Restricted
Subsidiaries, times (b) a fraction, the numerator of which is one
and the denominator of which is one minus the then current combined
federal, state and local statutory tax rate of such Person,
expressed as a decimal, in each case, on a consolidated basis and in
accordance with GAAP shall be deducted.
"Consolidated Net Worth" of any Person as of any date means the
stockholders' equity (including any Preferred Stock that is classified as equity
under GAAP, other than Disqualified Stock) of such Person and its Restricted
Subsidiaries on a consolidated basis at the end of the fiscal quarter
immediately preceding such date, as determined in accordance with GAAP, less any
amount attributable to Unrestricted Subsidiaries.
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Consolidated Tangible Assets" of the Company as of any date means the total
amount of assets of the Company and its Restricted Subsidiaries (less applicable
reserves) on a consolidated basis at the end of the fiscal quarter immediately
preceding such date, as determined in accordance with GAAP, less (1) Intangible
Assets and (2) appropriate adjustments on account of minority interests of other
Persons holding equity investments in Restricted Subsidiaries.
"Consolidated Tangible Net Worth" means, with respect to any Person as of
any date, the sum of
(1) the consolidated equity of the common stockholders of such Person
and its consolidated Restricted Subsidiaries as of such date, plus
(2) the respective amounts reported on such Person's balance sheet as of
such date with respect to any series of preferred stock (other than
Disqualified Stock) that by its terms is not entitled to the payment
of dividends unless such dividends may be declared and paid only out
of net earnings in respect of the year of such declaration and
payment, but only to the extent of any cash received by such Person
upon issuance of such preferred stock, less
(3) all write-ups (other than write-ups resulting from foreign currency
translations and write-ups of tangible assets of a going concern
business made within twelve months after the acquisition of such
business) subsequent to the date of the Indenture in the book value
of any asset owned by such Person or a consolidated Restricted
Subsidiary of such Person, except to the extent the write-up is a
reversal of a write-down or a previously recorded reserve, less
(4) all investments as of such date in Unrestricted Subsidiaries and in
Persons that are not Subsidiaries (except, in each case, Permitted
Investments, to the extent included in calculating the consolidated
equity in clause (1)), less
(5) Intangible Assets reflected on the consolidated balance sheet of
such Person or a consolidated Restricted Subsidiary of such Person,
all of the foregoing determined in accordance with GAAP.
"Construction Loan" means, a loan made for the purpose of financing the
construction and development of multifamily residential condominium projects or
commercial real estate projects.
"Consultant" means a natural person who is a consultant hired by the
Company or a Restricted Subsidiary to perform services.
"Continuing Directors" means, as of any date of determination, any member
of the board of directors of the Company who:
(1) was a member of such board of directors on the date of the
Indenture, or
(2) was nominated for election or elected to such board of directors
with the approval of a majority of the Continuing Directors who were
members of such Board at the time of such nomination or election.
"Credit Agreement" means that certain Credit Agreement, dated as of April
26, 2000, by and among the Company, Fleet National Bank and the other parties
named therein, providing for up to $450.0 million of borrowings, including any
related notes, guarantees, collateral documents, instruments and agreements
executed in connection therewith, and in each case as amended, modified,
renewed, refunded, replaced or refinanced from time to time.
"Credit Facilities" means one or more debt facilities (including, without
limitation, the Credit Agreement and the iStar Loan) or commercial paper
facilities, in each case with banks or other institutional lenders providing for
revolving credit loans, term loans, receivables financing (including through the
sale of receivables to such lenders or to special purpose entities formed to
borrow from such lenders against such receivables) or letters of credit, in each
case, as amended, restated, modified, renewed, refunded, replaced or refinanced
in whole or in part from time to time. Indebtedness under
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Credit Facilities outstanding on the date on which Notes are first issued and
authenticated under the Indenture shall be deemed to have been incurred on such
date in reliance on the exception provided by clause (1) of the definition of
Permitted Debt.
"Default" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.
"Designated Senior Debt" means (1) Indebtedness outstanding under the
Credit Agreement and the iStar Loan and (2) any other Senior Debt of the Company
permitted under the Indenture the principal amount of which is $25.0 million or
more and that has been designated by the Company as "Designated Senior Debt."
"Developable Land" all land of the Company and its Restricted Subsidiaries
(a) on which Units may be constructed or which may be utilized for commercial,
retail or industrial uses, in each case, under applicable laws and regulations
and (b) the intended use by the Company for which is permissible under the
applicable regional plan, development agreement or applicable zoning ordinance.
"Developed Land" means all Developable Land of the Company and its
Restricted Subsidiaries which is undergoing active development or is ready for
vertical construction.
"Discontinued Operations" means with respect to the Company those
operations of the Company and its Subsidiaries which were classified as
"discontinued operations" of the Company and its Subsidiaries on a consolidated
basis in accordance with GAAP as of the date of determination.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the Holder
thereof, in whole or in part, on or prior to the date that is 91 days after the
date on which the Notes mature, provided that only the portion of Capital Stock
which so matures or is mandatorily redeemable or redeemable at the option of the
holder thereof prior to such date will be deemed to be Disqualified Stock;
provided, however, that any Capital Stock that would constitute Disqualified
Stock solely because the holders thereof have the right to require the Company
to repurchase such Capital Stock upon the occurrence of a change of control or
an asset sale shall not constitute Disqualified Stock if the terms of such
Capital Stock provide that the Company may not repurchase or redeem any such
Capital Stock pursuant to such provisions unless such repurchase or redemption
complies with the covenant described above under the caption "-- Certain
Covenants -- Restricted Payments."
"Domestic Restricted Subsidiary" means any Restricted Subsidiary that was
formed under the laws of the United States or any state thereof or the District
of Columbia or that guarantees or otherwise provides direct credit support for
any Indebtedness of the Company.
"EBITDA" means, with respect to any Person for any period, the Consolidated
Net Income of such Person for such period plus
(1) provision for taxes based on income or profits of such Person and
its Subsidiaries for such period, to the extent that such provision
for taxes was deducted in computing such Consolidated Net Income,
plus
(2) consolidated interest expense of such Person and its Subsidiaries
for such period, whether paid or accrued, whether expensed directly
or included as a component of cost of goods sold or allocated to
Joint Ventures (including, without limitation, amortization of debt
issuance costs and original issue discount, non-cash interest
payments, the interest component of any deferred payment
obligations, the interest component of all payments associated with
Capital Lease Obligations, commissions, discounts and other fees and
charges incurred in respect of letter of credit or bankers'
acceptance financings, and net of the effect of all payments made or
received pursuant to Hedging Obligations), to the extent that any
such expense was deducted in computing such Consolidated Net Income,
plus
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(3) depreciation, amortization (including amortization of goodwill and
other intangibles but excluding amortization of prepaid cash
expenses that were paid in a prior period) and other non-cash
expenses (excluding any such non-cash expense to the extent that it
represents an accrual of or reserve for cash expenses in any future
period or amortization of a prepaid cash expense that was paid in a
prior period occurring after the date of the Indenture) of such
Person and its Subsidiaries for such period to the extent that such
depreciation, amortization and other non-cash expenses were deducted
in computing such Consolidated Net Income, minus
(4) non-cash items increasing such Consolidated Net Income for such
period, other than the accrual of revenue in the ordinary course of
business, in each case, on a consolidated basis and determined in
accordance with GAAP.
Notwithstanding the preceding, the provision for taxes based on the income or
profits of, and the depreciation and amortization and other non-cash expenses
of, a Subsidiary of the Company shall be added to Consolidated Net Income to
compute EBITDA of the Company only to the extent that a corresponding amount
would be permitted at the date of determination to be dividended to the Company
by such Subsidiary without prior governmental approval (that has not been
obtained), and without direct or indirect restriction pursuant to the terms of
its charter and all agreements, instruments, judgments, decrees, orders,
statutes, rules and governmental regulations applicable to that Subsidiary or
its stockholders.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Equity Offerings" means any public or private sale of common stock or
preferred stock (excluding Disqualified Stock).
"Excluded Contributions" means the net cash proceeds received by the
Company after the Issue Date from (a) contributions to its equity capital other
than contributions from the issuance of Disqualified Stock or (b) the sale
(other than to a Restricted Subsidiary or to any Company, Restricted Subsidiary
or parent company management equity plan or stock option plan or any other
management or employee benefit plan or agreement) of Capital Stock (other than
Disqualified Stock) of the Company, in each case designated as Excluded
Contributions pursuant to an Officers' Certificate executed by the principal
executive officer and the principal financial officer of the Company on the date
such capital contributions are made or the date such Equity Interests are sold,
as the case may be, the cash proceeds of which are excluded from the calculation
set forth in paragraph (c) of the "Limitation on Restricted Payments" covenant.
"Existing Indebtedness" means up to $159.6 million in aggregate principal
amount of Indebtedness of the Company and its Restricted Subsidiaries (other
than Indebtedness under the Credit Agreement) in existence on the date of the
Indenture.
"Fair Market Value" means, with respect to any property or assets, the fair
market value thereof, as established by a responsible officer of the Company,
and, with respect to any property or asset the fair market value of which
exceeds $5.0 million, by an independent third party appraiser, accounting firm
or valuation firm with expertise in such valuation that is not affiliated with
the Company or any Subsidiary of the Company.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of the Indenture.
"Government Securities" means direct obligation of, or obligations
guaranteed by, the United States of America, and the payment of which the United
States pledges its full faith and credit.
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"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof), of all or any part of any Indebtedness.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (1) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (2) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates,
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, if and
to the extent any of the foregoing (other than letters of credit and Hedging
Obligations) would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, as well as all Indebtedness of others secured
by a Lien on any asset of such Person, subject, however, to the Fair Market
Value of the assets securing such Indebtedness (whether or not such Indebtedness
is assumed by such Person) and, to the extent not otherwise included, the
Guarantee by such Person of any indebtedness of any other Person; provided,
however, Indebtedness shall not include Indebtedness that constitutes an accrued
expense, trade payables, customer deposits or deferred income taxes. The amount
of any Indebtedness outstanding as of any date shall be (1) the accreted value
thereof, in the case of any Indebtedness issued with original issue discount,
and (2) the principal amount thereof, together with any interest thereon that is
more than 30 days past due, in the case of any other Indebtedness.
Notwithstanding the foregoing, Indebtedness shall not include (1) Indebtedness
which has been defeased or discharged, (2) Indebtedness arising from the
honoring by a bank or other financial institution of a check, draft or similar
instrument drawn against insufficient funds in the ordinary course of business,
provided that such Indebtedness is extinguished within five business days of its
incurrence or (3) CDD Obligations, other than that portion of any CDD
Obligations that is due and payable at the time of determination.
"Independent Member" means, with respect to any board of directors of a
company, a member who is not an officer or employee of such company and does not
receive compensation or other payments from such company in excess of $100,000
per year and, in connection with any transaction, a member of such board of
directors who is disinterested with respect to such transaction.
"Intangible Assets" means all unamortized debt discount and expense,
unamortized deferred charges, goodwill, patents, trademarks, service marks,
trade names, copyrights, write-ups of assets over their carrying value at the
date of the Indenture or the date of acquisition, if acquired subsequent
thereto, and all other items which would be treated as intangibles on the
consolidated balance sheet of such Person prepared in accordance with GAAP. For
purposes of this definition, deferred tax assets shall not be deemed to be
Intangible Assets.
"Interest Expense" means, with respect to any fiscal period, the sum of (a)
all charges that are considered interest expense under generally accepted
accounting principles excluding amounts capitalized and including amortization
of previously capitalized interest, plus (b) the portion of rent paid by the
Company or any of its Restricted Subsidiaries (without duplication) for that
fiscal period under capital lease obligations that should be treated as interest
in accordance with financial Accounting Standards Board Statement No. 13, in
each case determined on a consolidated basis in accordance with generally
accepted accounting principles, consistently applied.
"Interest Incurred" means for any period, the total interest paid or
accrued by the Company and its Subsidiaries (including the interest component of
any capital leases and excluding fees paid in connection with the closing of the
loans under the Credit Agreement or thereafter and excluding interest on the
Subordinated Debt and interest or fees payable under the Construction Loans to
the extent drawn under the Construction Loans).
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"Investments" means, with respect to any Person, all direct or indirect
investments by such Person in other Persons (including Affiliates) in the forms
of loans (including Guarantees or other obligations), advances or capital
contributions (excluding commission, travel loans and advances to officers and
employees made in the ordinary course of business), purchases or other
acquisitions for consideration of Indebtedness, Equity Interests or other
securities, together with all items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP. If the Company
or any Restricted Subsidiary of the Company sells or otherwise disposes of any
Equity Interests of any direct or indirect Restricted Subsidiary of the Company
such that, after giving effect to any such sale or disposition, such Person is
no longer a Restricted Subsidiary of the Company, the Company shall be deemed to
have made an Investment on the date of any such sale or disposition equal to the
fair market value of the Equity Interests of such Subsidiary not sold or
disposed of in an amount determined as provided in the third paragraph of the
covenant described above under the caption "-- Restricted Payments." The
acquisition by the Company or any Restricted Subsidiary of the Company of a
Person that holds an Investment in a third Person shall be deemed to be an
Investment by the Company or such Restricted Subsidiary in such third Person in
an amount equal to the fair market value of the Investment held by the acquired
Person in such third Person in an amount determined as provided in the third
paragraph of the covenant described above under the caption "-- Certain
Covenants -- Restricted Payments." Notwithstanding the foregoing, the following
are not Investments (i) Hedging Obligations entered into in the ordinary course
of business and in compliance with the Indenture; (ii) endorsements of
negotiable instruments and documents in the ordinary course of business; and
(iii) an acquisition of assets, Capital Stock or other securities by the Company
for consideration consisting exclusively of Equity Interests of the Company
(other than Disqualified Stock) and which Equity Interests are excluded from the
calculation set forth in Paragraph (c) of the first paragraph of the "Limitation
on Restricted Payments" covenant.
"iStar Loan" means the credit agreement dated as of August 16, 2000 by SFT
II, Inc. in favor of CFC in the original principal amount of $72.5 million as
amended or supplemented or otherwise modified.
"Issue Date" means February 20, 2001.
"Joint Venture" means a corporation, partnership or other entity engaged in
one or more of the Permitted Businesses in which the Company or its Restricted
Subsidiaries does not have control but owns, directly or indirectly, at least
10% of the Equity Interests.
"Land Bank Obligations" means all obligations of the Company and its
Restricted Subsidiaries reflected on its balance sheet as a liability in
accordance with GAAP with respect to land sold to a third party and as to which
the Company or any Restricted Subsidiary has an option to repurchase.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction
provided that in no event shall any operating lease be deemed a Lien).
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, without duplication,
(1) any gain or loss, together with any related provision for taxes on
such gain or loss, realized in connection with the disposition of
any Restricted Investment by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such
Person or any of its Restricted Subsidiaries and
(2) any extraordinary gain (but not loss), together with any related
provision for taxes on such extraordinary gain (but not loss).
"Non-Recourse Financing" means Indebtedness incurred in connection with the
purchase, development or construction of personal or real property useful in the
Permitted Business as to which the lender
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upon default (1) may seek recourse or payment against the Company or any
Restricted Subsidiary only through the return or sale of the property so
purchased and (2) may not otherwise assert a valid claim for payment on such
Indebtedness against the Company or any Restricted Subsidiary or any other
property of the Company or any Restricted Subsidiary.
"Notes" means the $250.0 million in aggregate principal amount of the
outstanding 10 5/8% Senior Subordinated Notes due February 15, 2011 together
with any Additional Notes, if any, permitted to be issued in accordance with the
Indenture.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Officers' Certificate" means a certificate signed by the Chief Executive
Officer, the President, the Chief Financial Officer, any Vice President, the
Treasurer, any Assistant Treasurer, the Secretary or any Assistant Secretary of
the Company and delivered to the Trustee.
"Permitted Business" means the business of the Company and its Subsidiaries
engaged in as of the date of the Indenture, including but not limited to,
planning, designing, engineering, development, construction, marketing, sale,
financing, management and operation of real estate including business and
commercial projects, office buildings, residential subdivisions, condominiums
and cooperatives (including low-, mid- and high-rise condominiums), villa
developments and single family residences, timeshares, related amenity
operations, which include golf clubs, marinas, tennis facilities, restaurants,
including leisure, hospitality (hotels) and health care services, and any and
all other businesses reasonably related thereto including, but not limited to,
pest control and security services. In addition, Permitted Businesses shall
include the operation of an amenities business and other real estate services
businesses, including but not limited to, title insurance, property management,
mortgage banking, insurance brokerage, E-commerce related businesses and real
estate brokerage.
"Permitted Investments" means:
(1) any Investment in the Company or in a Restricted Subsidiary of the
Company;
(2) cash and any Investment in Cash Equivalents;
(3) any Investment by the Company or any Restricted Subsidiary of the
Company in a Person, if as a result of such Investment (a) such
Person becomes a Restricted Subsidiary of the Company or (b) such
Person is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or a Restricted Subsidiary of the
Company;
(4) any acquisition of assets solely in exchange for the issuance of
Equity Interests (other than Disqualified Stock) of the Company or
Watermark;
(5) stock, obligations or securities received in settlement of debts
created in the ordinary course of business and owing to the Company
or any Restricted Subsidiary or in satisfaction of judgments or
pursuant to any plan of reorganization or similar arrangement upon
the bankruptcy or insolvency of a debtor;
(6) Investments in existence on the Issue Date;
(7) Investments made in a simultaneous exchange for a prior Permitted
Investment; and
(8) the fair market value of any investment in securities or other
assets not constituting cash or Cash Equivalents received in
connection with the sale of assets (a) where the securities are
secured by a first priority lien on the assets sold or (b) where at
least 25% of the consideration for such sale consists of cash or
Cash Equivalents and provided that no more than an aggregate amount
of $10.0 million of such securities may be outstanding at any one
time under this clause 8(b).
"Permitted Junior Securities" of a Person means (1) Equity Interests in
such Person and (2) debt securities of such Person that are subordinated to all
Senior Debt (and any debt securities issued in exchange for Senior Debt) of such
Person to substantially the same extent as, or to a greater extent than, the
Notes are subordinated to Senior Debt of the Company.
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"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries
(other than intercompany Indebtedness); provided that:
(1) the principal amount (or accreted value, if applicable) of such
Permitted Refinancing Indebtedness does not exceed the principal
amount of (or accreted value, if applicable), plus accrued interest
on, the Indebtedness so extended, refinanced, renewed, replaced,
defeased or refunded (plus the amount of reasonable expenses
incurred in connection therewith); unless such excess would be
permitted by the "Incurrence of Indebtedness and Issuance of
Preferred Stock" covenant.
(2) such Permitted Refinancing Indebtedness has a final maturity date
later than the final maturity date of, and has a Weighted Average
Life to Maturity equal to or greater than the Weighted Average Life
to Maturity of, the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded;
(3) if the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded is subordinated in right of payment to the
Notes, such Permitted Refinancing Indebtedness has a final maturity
date later than the final maturity date of the indebtedness being
extended, refinanced, renewed, replaced deferred or refunded, and is
subordinated in right of payment to the Notes on terms at least as
favorable to the Holders of Notes as those contained in the
documentation governing the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded; and
(4) such Indebtedness is incurred either by the Company or by the
Subsidiary who is the obligor on the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded.
"Person" means an individual, corporation, partnership, joint venture,
association, joint-stock company, limited liability company, limited liability
partnership, trust, unincorporated organization, or government or any agency or
political subdivision thereof.
"Principals" means Alfred Hoffman, Jr., Don E. Ackerman, the Kamehameha
Activities Association, the John D. and Catherine T. MacArthur Foundation,
Citicorp Venture Capital Ltd. or any of their affiliates.
"Receivables" means an amount owed with respect to completed sales of
housing units, lots, parcels and amenities services sold to an unaffiliated
purchaser.
"Related Party" with respect to any Principal means (A) any controlling
stockholder, 80% (or more) owned Subsidiary, or spouse or immediate family
member (in the case of an individual) of such Principal or (B) any trust,
corporation, partnership or other entity, the beneficiaries, stockholders,
partners, owners or Persons beneficially holding an 80% or more controlling
interest of which consist of such Principal and/or such other Persons referred
to in the immediately preceding clause (A).
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"Senior Debt" of any Person means:
(1) all Indebtedness of such Person under Credit Facilities and all
Hedging Obligations with respect thereto,
(2) any other Indebtedness of such Person permitted to be incurred under
the terms of the Indenture, unless the instrument under which such
Indebtedness is incurred expressly provides that it is on a parity
with or subordinated in right of payment to the Notes or the
Subsidiary Guarantees, as the case may be, and
(3) all Obligations with respect to the foregoing.
Notwithstanding anything to the contrary in the foregoing, Senior Debt will
not include
(a) any liability for federal, state, local or other taxes owed or
owing by such Person,
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(b) any Indebtedness of such Person to any of its Subsidiaries or
other Affiliates,
(c) any trade payables, customer deposits, reserves and accrued
expenses,
(d) any Indebtedness that is incurred in violation of the Indenture,
(e) Indebtedness represented by the Notes, the Guarantees, the
Exchange Notes or guarantees relating to the Exchange Notes,
(f) any Watermark Shareholder Debt; and
(g) any CDD Obligations other than that portion of CDD Obligations
that is due and payable at the time of determination.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Act, as such Regulation is in effect on the date hereof except
that the standard of significance will be 10% instead of 20%.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person,
(1) any corporation, association or other business entity of which more
than 50% of the total voting power of shares of Capital Stock
entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof is
at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a
combination thereof) and
(2) any partnership (a) the sole general partner or the managing general
partner of which is such Person or a Subsidiary of such Person or
(b) the only general partners of which are such Person or of one or
more Subsidiaries of such Person (or any combination thereof, except
in each case with respect to joint ventures when such person or
Subsidiary of such person does not exercise control of the joint
venture).
Notwithstanding the foregoing, the term "Subsidiary" shall not include any
entity referred to in (1) or (2) above to the extent the Company does not
consolidate its interest in any such entity in its consolidated financial
statements prepared in accordance with GAAP. Notwithstanding the immediately
preceding sentence, not-for-profit golf clubs and common interest realty
associations that do not guarantee our Credit Facilities are not Subsidiaries.
"Subordinated Indebtedness" means any Indebtedness which is expressly
subordinated in right of payment to any other Indebtedness provided however that
Subordinated Indebtedness shall not include debt which would otherwise be Senior
Debt but for a junior lien on assets of the Company or any of its Subsidiaries.
"Tax Sharing Agreements" mean tax sharing agreements between or among any
of Watermark, the Company and the Subsidiaries of the Company and any amendment
or modification thereto so long as such amendments or modifications are not
adverse to the holders of Notes in any material respect.
"Total Assets" means the total consolidated assets of the Company and its
Restricted Subsidiaries calculated in accordance with GAAP.
"Unit" means a residence, whether single or part of a multifamily building,
whether completed or under construction, held by the Company or any Restricted
Subsidiary for sale or rental in the ordinary course of business; provided,
however, that the number of Units that are rental Units at the time of
determination shall not exceed 25% of the total Units sold or rented by the
Company and its Restricted Subsidiaries during the immediately preceding twelve
month period.
"Unrestricted Cash" means all cash of the Company and its Restricted
Subsidiaries which is not allocated for an expenditure or distribution or held
as a deposit for a housing purchase contract or otherwise characterized as a
deposit.
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"Unrestricted Subsidiary" means any Subsidiary of the Company that is
designated by the board of directors of the Company as an Unrestricted
Subsidiary pursuant to a board resolution; but only to the extent that such
Subsidiary:
(1) has no Indebtedness other than debt that is non-recourse to the
Company or any Restricted Subsidiary except to the extent that any
credit support or guarantee by the Company or any Restricted
Subsidiary may be incurred as Indebtedness and a Restricted
Investment;
(2) is not party to any agreement, contract, arrangement or
understanding with the Company or any Restricted Subsidiary of the
Company unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to the Company or
such Restricted Subsidiary than those that might be obtained at the
time from Persons who are not Affiliates of the Company; and
(3) is a Person with respect to which neither the Company nor any of its
Restricted Subsidiaries has any direct or indirect obligation (a) to
subscribe for additional Equity Interests or (b) to maintain or
preserve such Person's financial condition or to cause such Person
to achieve any specified levels of operating results; unless the
maximum amount of such obligation is treated as a Restricted
Investment and such Restricted Investment may be made at the time of
the giving of such obligation.
"Valid Purchase Contract Proceeds" means valid purchase contracts for
condominium units which produce proceeds from sales (net of selling expenses and
contract deposits used for construction costs).
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the board of
directors of such Person.
"Watermark" means Watermark Communities Inc.
"Watermark Shareholder Debt" means the approximately $30.0 million of debt
owed by WCI to shareholders of Watermark on the Issue Date.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing:
(1) the sum of the products obtained by multiplying (a) the amount of
each then remaining installment, sinking fund, serial maturity or
other required payments of principal, including payment at final
maturity, in respect thereof, by (b) the number of years (calculated
to the nearest one-twelfth) that will elapse between such date and
the making of such payment, by
(2) the then outstanding principal amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person or by such Person and one or more Wholly Owned
Restricted Subsidiaries of such Person.
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REGISTRATION RIGHTS; LIQUIDATED DAMAGES
We and some of our subsidiaries have agreed pursuant to the registration
rights agreement that we will, subject to some exceptions,
- within 75 days after February 20, 2001, file a registration statement
(the "exchange offer registration statement") with the SEC with
respect to a registered offer (the "registered exchange offer") to
exchange the outstanding notes for new notes of the Company (the
"exchange notes") having terms substantially identical in all material
respects to the outstanding notes (except that the exchange notes will
not contain terms with respect to transfer restrictions);
- use our reasonable best efforts to cause the exchange offer
registration statement to be declared effective under the Securities
Act within 150 days after February 20, 2001;
- use our reasonable best efforts to offer, on or prior to 40 business
days after the effectiveness of the exchange offer registration
statement (the "effectiveness date"), the exchange notes in exchange
for surrender of the outstanding notes; and
- keep the registered exchange offer open for not less than 20 business
days (or longer if required by applicable law) after the date notice
of the registered exchange offer is mailed to the holders of the
outstanding notes.
For each outstanding note tendered to us pursuant to the registered
exchange offer, we will issue to the holder of the note an exchange note having
a principal amount equal to that of the surrendered outstanding note. Interest
on each exchange note will accrue from the last interest payment date on which
interest was paid on the outstanding note surrendered in exchange therefor, or,
if no interest has been paid on the outstanding note, from the date of its
original issue.
Under existing SEC interpretations, the exchange notes will be freely
transferable by holders other than our affiliates after the registered exchange
offer without further registration under the Securities Act if the holder of the
exchange notes represents to us in the registered exchange offer that it is
acquiring the exchange notes in the ordinary course of its business, that it has
no arrangement or understanding with any person to participate in the
distribution of the exchange notes and that it is not an affiliate of the
Company, as such terms are interpreted by the SEC; provided, however, that
broker-dealers ("participating broker-dealers") receiving exchange notes in the
registered exchange offer will have a prospectus delivery requirement with
respect to resales of such exchange notes. The SEC has taken the position that
participating broker-dealers may fulfill their prospectus delivery requirements
with respect to exchange notes (other than a resale of an unsold allotment from
the original sale of the outstanding notes) with the prospectus contained in the
exchange offer registration statement.
A holder of outstanding notes who wishes to exchange the outstanding notes
for exchange notes in the registered exchange offer will be required to
represent that any exchange notes to be received by it will be acquired in the
ordinary course of its business and that at the time of the commencement of the
registered exchange offer it has no arrangement or understanding with any person
to participate in the distribution (within the meaning of the Securities Act) of
the exchange notes and that it is not an "affiliate" of the company, as defined
in Rule 405 of the Securities Act, or if it is an affiliate, that it will comply
with the registration and prospectus delivery requirements of the Securities Act
to the extent applicable.
In the event that:
- we are not required to file the exchange offer registration statement
or not permitted to consummate the exchange offer because of
applicable law or SEC policy; or
- any holder of the outstanding notes notifies us prior to the 30th day
following consummation of the exchange offer it is prohibited by law
or SEC policy from participating in the exchange offer or that it may
not resell the exchange notes to the public without delivering a
prospectus other than the prospectus contained in the exchange offer
registration statement,
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then, we will, subject to certain exceptions,
- use our reasonable best efforts to file with the SEC a shelf
registration statement (the "shelf registration statement") covering
resales of the outstanding notes or the exchange notes, as the case
may be on or prior to 75 days after such filing obligation arises; and
- use our reasonable best efforts to cause the shelf registration
statement to be declared effective by the SEC on or prior to 150 days
after such filing obligation arises.
We will pay additional cash on the applicable outstanding notes and
exchange notes, subject to certain exceptions,
- if we and the Subsidiaries fail to file an exchange offer registration
statement with the SEC on or prior to the 75th day after February 20,
2001,
- if the exchange offer registration statement is not declared effective
by the SEC on or prior to the 150th day after February 20, 2001,
- if the exchange offer is not consummated within 40 business days after
the exchange offer registration statement is declared effective;
- if we and the Subsidiaries are obligated to file the shelf
registration statement and we and the Subsidiaries fail to file the
shelf registration statement with the SEC on or prior to the 75th day
after such filing obligation arises,
- if we and the Subsidiaries are obligated to file the shelf
registration statement and the shelf registration statement is not
declared effective on or prior to the 150th day after the obligation
to file a shelf registration statement arises, or
- after the exchange offer registration statement or the shelf
registration statement, as the case may be, is declared effective,
such registration statement thereafter ceases to be effective or
usable (subject to certain exceptions) (each such event referred to in
the preceding clauses a "registration default");
to each holder of outstanding notes, with respect to the first 90-day period
immediately following the occurrence of the first registration default, in an
amount equal to $0.05 per week per $1,000 principal amount of outstanding notes
held by such holder (the "liquidated damages"). The amount of the liquidated
damages will increase by an additional $0.05 per week per $1,000 principal
amount of Notes with respect to each subsequent 90-day period until all
registration defaults have been cured, up to a maximum amount of liquidated
damages of $0.25 per week per $1,000 principal amount of outstanding notes.
Such liquidated damages shall be paid by us on each interest payment date
in the manner specified by the indenture for the payment of interest. Following
the cure of all registration defaults, the accrual of liquidated damages will
cease.
A holder of outstanding notes will be required to deliver information to be
used in connection with the shelf registration statement and to provide comments
on the shelf registration statement within the time periods set forth in the
registration rights agreement in order to have their outstanding notes included
in the shelf registration statement and in order to benefit from the provisions
regarding liquidated damages set forth above.
No holder of outstanding notes who is not entitled to the benefits of a
shelf registration statement shall be entitled to receive liquidated damages
because of a registration default pertaining to a shelf registration and no
holder of outstanding notes constituting an unsold allotment from the original
sale of the outstanding notes or any other holder of outstanding notes who is
entitled to the benefits of a shelf registration statement shall be entitled to
receive liquidated damages because of a registration default that pertains to an
exchange offer.
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BOOK ENTRY; DELIVERY AND FORM
BOOK-ENTRY PROCEDURES FOR THE GLOBAL NOTES
The exchange notes will initially be represented in the form of one or more
global notes in definitive, fully-registered book-entry form, without interest
coupons that will be deposited with or on behalf of The Depository Trust
Company, or DTC, and registered in the name of DTC or its participants.
Except as set forth below, the global notes may be transferred, in whole
and not in part, solely to another nominee of DTC or to a successor of DTC or
its nominee. Beneficial interests in the global notes may not be exchanged for
notes in physical, certificated form except in the limited circumstances
described below.
The descriptions of the operations and procedures of DTC set forth below
are provided solely as a matter of convenience. These operations and procedures
are solely within the control of the settlement system of DTC and are subject to
change by DTC from time to time. We take no responsibility for these operations
or procedures, and investors are urged to contact DTC or its participants
directly to discuss these matters.
DTC has advised us that it is:
- a limited purpose trust company organized under the laws of the State of
New York;
- a "banking organization" within the meaning of the New York Banking Law;
- a member of the Federal Reserve System;
- a "clearing corporation" within the meaning of the Uniform Commercial
Code, as amended; and
- a "clearing agency" registered under Section 17A of the Securities
Exchange Act of 1934.
DTC was created to hold securities for its participants and facilitates the
clearance and settlement of securities transactions between participants through
electronic book-entry changes to the accounts of its participants, which
eliminates the need for physical transfer and delivery of certificates. DTC's
participants include securities brokers and dealers; banks and trust companies;
clearing corporations and specified other organizations. Indirect access to
DTC's system is also available to other entities such as banks, brokers, dealers
and trust companies; these indirect participants clear through or maintain a
custodial relationship with a participant, either directly or indirectly.
Investors who are not participants may beneficially own securities held by or on
behalf of DTC only through participants or indirect participants.
So long as DTC or its nominee is the registered owner of a global note, DTC
or the nominee, as the case may be, will be considered the sole owner or holder
of the notes represented by the global note for all purposes under the
indenture. Except as provided below, owners of beneficial interests in a global
note:
- will not be entitled to have notes represented by the global note
registered in their names;
- will not receive or be entitled to receive physical delivery of
certificated notes; and
- will not be considered the owners or holders of the notes under the
indenture for any purpose, including with respect to the giving of any
direction, instruction or approval to the trustee under the indenture.
Accordingly, each holder owning a beneficial interest in a global note must
rely on the procedures of DTC and, if the holder is not a participant or an
indirect participant, on the procedures of the participant through which the
holder owns its interest, to exercise any rights of a holder of notes under the
indenture or the global note. We understand that under existing industry
practice, if we request any action of holders of notes or a holder that is an
owner of a beneficial interest in a global note desires to take any action that
DTC, as the holder of the global note, is entitled to take, then DTC would
authorize the participants to take the action and the participants would
authorize holders owning through participants to take the action or would
otherwise act upon the instruction of the holders. Neither we nor the trustee
will have any responsibility or liability for any aspect of the records relating
to or payments made on account of notes by DTC, or for maintaining, supervising
or reviewing any records of DTC relating to the notes.
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Payments with respect to the principal of, any premium, any liquidated
damages, and interest on any notes represented by a global note registered in
the name of DTC or its nominee on the applicable record date will be payable by
the trustee to or at the direction of DTC or its nominee, in its capacity as the
registered holder of the global note representing the notes under the indenture.
Under the terms of the indenture, we and the trustee may treat the persons in
whose names the notes, including the global notes, are registered as the owners
of the notes for the purpose of receiving payment on the notes and for any and
all other purposes whatsoever. Accordingly, neither we nor the trustee has or
will have any responsibility or liability for the payment of amounts to owners
of beneficial interests in a global note, including principal, any premium, any
liquidated damages, and interest. Payments by the participants and the indirect
participants to the owners of beneficial interests in a global note will be
governed by standing instructions and customary industry practice and will be
the responsibility of the participants or the indirect participants and DTC.
Transfers between participants in DTC will be effected in accordance with
DTC's procedures, and will be settled in same-day funds.
Although DTC has agreed to the above procedures to facilitate transfers of
interests in the global notes among its participants, it is under no obligation
to perform or to continue to perform the procedures, and the procedures may be
discontinued at any time. Neither we nor the trustee will have any
responsibility for the performance by DTC or its respective participants or
indirect participants of their respective obligations under the rules and
procedures governing their operations.
CERTIFICATED NOTES
If:
- we notify the trustee in writing that DTC is no longer willing or able to
act as a depositary or DTC ceases to be registered as a clearing agency
under the Exchange Act and a successor depositary is not appointed within
90 days of the notice or cessation;
- we, at our option, notify the trustee in writing that we elect to cause
the issuance of notes in definitive form under the indenture; or
- upon the occurrence of specified other events as provided in the
indenture;
then, certificated notes will be issued to each person that DTC identifies as
the beneficial owner of the notes represented by the global notes upon surrender
by DTC of the global notes. Upon the issuance of certificated notes, the trustee
is required to register certificated notes in the name of that person or
persons, or their nominee, and cause the certified notes to be delivered to
those persons.
Neither we nor the trustee will be liable for any delay by DTC or any
participant or indirect participant in identifying the beneficial owners of the
related notes and each of those persons may conclusively rely on, and will be
protected in relying on, instructions from DTC for all purposes, including with
respect to the registration and delivery, and the respective principal amounts,
of the notes to be issued.
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UNITED STATES FEDERAL
INCOME TAX CONSEQUENCES
The following is a summary of the material U.S. federal income tax
consequences of the acquisition, ownership and disposition of exchange notes as
of the date of this prospectus. Except where noted, this summary deals only with
exchange notes that are acquired in connection with this exchange offer and held
as capital assets and does not deal with taxpayers subject to special treatment
under the U.S. federal income tax laws, including if you are one of the
following:
- a dealer in securities or currencies;
- a financial institution;
- an insurance company;
- a tax exempt organization;
- a person holding the exchange notes as part of a hedging, integrated or
conversion transaction, a constructive sale or straddle;
- a trader in securities that has elected the mark-to-market method of
accounting for your securities;
- a person liable for alternative minimum tax; or
- a U.S. person whose "functional currency" is not the U.S. dollar.
If a partnership holds the exchange notes, the tax treatment of a partner
will generally depend upon the status of the partner and the activities of the
partnership. If you are a partner of a partnership holding the exchange notes,
you should consult your own tax advisors.
The discussion below is based upon the provisions of the Internal Revenue
Code of 1986, as amended, and regulations, rulings and judicial decisions as of
the date of this prospectus. Those authorities may be changed, perhaps
retroactively, so as to result in U.S. federal income tax consequences different
from those discussed below.
IF YOU ARE CONSIDERING THE ACQUISITION OF EXCHANGE NOTES, YOU SHOULD
CONSULT YOUR OWN TAX ADVISORS CONCERNING THE FEDERAL INCOME TAX CONSEQUENCES TO
YOU AND ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY FOREIGN, STATE, LOCAL OR
OTHER TAXING JURISDICTION.
CONSEQUENCES OF THE EXCHANGE
The exchange of the outstanding notes for the exchange notes in the
exchange offer (see "The Exchange Offer") will not constitute a taxable event to
you. As a result:
- you will not realize any gain or loss upon receipt of an exchange note;
- the holding period of the exchange note will include the holding period
of the outstanding note exchanged for the exchange note; and
- the adjusted basis of the exchange note will be the same as the adjusted
tax basis of the outstanding note exchanged for the exchange note
immediately before the exchange.
CONSEQUENCES TO U.S. HOLDERS
The following is a summary of the material U.S. federal income tax
consequences that will apply to you if you are a U.S. holder of exchange notes.
The material consequences to "non-U.S. holders" of exchange notes, who are
beneficial owners of exchange notes and who are not U.S. holders, are described
below under "Consequences to Non-U.S. Holders".
"U.S. holder" means a beneficial owner of an exchange note that is:
- a citizen or resident of the United States;
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- a corporation or partnership created or organized in or under the laws of
the United States or any political subdivision of the U.S.;
- an estate the income of which is subject to U.S. federal income taxation
regardless of its source; or
- a trust that (1) is subject to the primary supervision of a court within
the United States and the control of one or more U.S. persons or (2) has
a valid election in effect under applicable U.S. Treasury regulations to
be treated as a U.S. person.
Payments of Interest
Except as set forth below, interest on an exchange note will generally be
taxable to you as ordinary income from domestic sources at the time it is paid
or accrued in accordance with your method of accounting for tax purposes.
Amortizable Bond Premium
If you purchased an outstanding note for an amount in excess of the sum of
all amounts payable on the note after the purchase date other than stated
interest, you will be considered to have purchased the note at a "premium." You
generally may elect to amortize the premium over the remaining term of the
exchange note on a constant yield method as an offset to interest when
includible in income under your regular method of accounting. If you do not
elect to amortize bond premium, that premium will decrease the gain or increase
the loss you would otherwise recognize on disposition of the exchange note. Your
election to amortize premium on a constant yield method will also apply to all
debt obligations held or subsequently acquired by you on or after the first day
of the first taxable year to which the election applies. You may not revoke the
election without the consent of the Internal Revenue Service. You should consult
your own tax advisor before making this election.
Market Discount
If you purchased an outstanding note for an amount that is less than its
stated redemption price at maturity, the amount will be treated as "market
discount" for U.S. federal income tax purposes, unless that difference is less
than a specified de minimis amount. Under the market discount rules, you will be
required to treat any payment, other than stated interest, on, or any gain on
the sale, exchange, retirement or other disposition of, an exchange note as
ordinary income to the extent of the market discount that you have not
previously included in income and are treated as having accrued on the exchange
note at the time of its payment or disposition. In addition, you may be required
to defer, until the maturity of the exchange note or its earlier disposition in
a taxable transaction, the deduction of all or a portion of the interest expense
on any indebtedness attributable to the exchange note.
Any market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of the exchange note, unless
you elect to accrue on a constant yield interest method. You may elect to
include market discount in income currently as it accrues, on either a ratable
or constant yield interest method, in which case the rule described above
regarding deferral of interest deductions will not apply. Your election to
include market discount in income currently, once made, applies to all market
discount obligations acquired by you on or after the first taxable year to which
your election applies and may not be revoked without the consent of the Internal
Revenue Service. You should consult your own tax advisor before making this
election.
Sale, Exchange and Retirement of Notes
When you sell, exchange or retire an exchange note, you will recognize gain
or loss equal to the difference between the amount you receive (less an amount
equal to any accrued interest you have not previously included in income, which
will be taxable as interest income) and your adjusted basis in the exchange
note. Except as described above with respect to market discount, your gain or
loss realized on the sale, exchange or retirement of an exchange note will
generally be treated as capital gain or loss, and
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will be long-term capital gain or loss if at the time of the sale, exchange or
retirement of an exchange note, you have held the exchange note for more than
one year. Long-term capital gains of individuals are eligible for reduced rates
of taxation. The deductability of capital losses is subject to limitations.
CONSEQUENCES TO NON-U.S. HOLDERS
The following is a summary of the material U.S. federal income tax
consequences that will apply to you if you are a non-U.S. holder of exchange
notes. This summary does not represent a detailed description of the federal
income tax consequences to you in light of your particular circumstances. In
addition, it does not deal with non-U.S. holders that are subject to special
treatment under the U.S. federal income tax laws (including if you are a
controlled foreign corporation, passive foreign investment company, foreign
personal holding company, a corporation that accumulates earnings to avoid
federal income tax, or in certain circumstances, a United States expatriate).
U.S. Federal Withholding Tax
The 30% U.S. federal withholding tax will not apply to any payment of
principal or interest on the exchange notes provided that:
- you do not actually, or constructively, own 10% or more of the total
combined voting power of all classes of our voting stock within the
meaning of the Internal Revenue Code and applicable U.S. Treasury
regulations;
- you are not a controlled foreign corporation that is related to us
through stock ownership;
- you are not a bank whose receipt of interest on the exchange notes is
described in section 881(c)(3)(A) of the Internal Revenue Code; and
- (a) you provide your name and address on an Internal Revenue Service Form
W-BEN (or other applicable form), and certify, under penalties of
perjury, that you are not a U.S. person or (b) you hold the exchange
notes through certain foreign intermediaries and you satisfy the
certification requirements of applicable U.S. Treasury regulations.
Special certification rules apply to certain non-U.S. holders that are
entities rather than individuals.
If you cannot satisfy the requirements described above, payments of
interest made to you will be subject to the 30% U.S. federal withholding tax,
unless you provide us with a properly executed (1) Internal Revenue Service Form
W-BEN (or other applicable form) claiming an exemption from, or reduction in,
withholding under the benefit of an applicable tax treaty; or (2) Internal
Revenue Service Form W-8ECI (or successor form) stating that interest paid on an
exchange note is not subject to withholding because it is effectively connected
with your conduct of a trade or business in the United States, as described
below under "U.S. Federal Income Tax".
The 30% U.S. federal withholding tax will not generally apply to any gain
that you realize on the sale, exchange, retirement or other disposition of the
exchange notes.
U.S. Federal Estate Tax
Your estate will not be subject to U.S. federal estate tax on exchange
notes beneficially owned by you at the time of your death, provided that you are
not a U.S. citizen or resident (as specifically defined for U.S. federal estate
tax purposes) and (1) you do not own 10% or more of the total combined voting
power of all classes of our voting stock (within the meaning of the Internal
Revenue Code and the U.S. Treasury regulations) and (2) interest on the exchange
note would not have been, if received at the time of your death, effectively
connected with the conduct by you of a trade or business in the United States.
U.S. Federal Income Tax
If you are engaged in a trade or business in the United States and interest
on the exchange notes is effectively connected with the conduct of that trade or
business, you will be subject to U.S. Federal
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income tax on that interest on a net income basis in the same manner as if you
were a U.S. person as defined under the Internal Revenue Code, although that
interest income will be exempt from the 30% U.S. federal withholding tax. In
addition, if you are a foreign corporation, you may be subject to a branch
profits tax equal to 30% (or lower applicable treaty rate) of your earnings and
profits for the taxable year, subject to certain adjustments. For this purpose,
interest on the exchange notes will be included in earnings and profits.
Any gain realized on the disposition of an exchange note generally will not
be subject to U.S. federal income tax unless:
- the gain is effectively connected with the conduct by you of a trade or
business in the United States, or
- you are an individual who is present in the United States for 183 days or
more in the taxable year of that disposition, and other conditions are
met.
INFORMATION REPORTING AND BACKUP WITHHOLDING
U.S. Holders
In general, information reporting requirements will apply to certain
payments of principal, interest and premium paid on exchange notes and to the
proceeds of sale of an exchange note made to you, unless you are an exempt
recipient, like a corporation. A 31% backup withholding tax will apply to those
payments if you fail to provide a taxpayer identification number, a
certification of exempt status, or fail to report in full dividend and interest
income.
Non-U.S. Holders
In general, you will not be subject to backup withholding and information
reporting with respect to payments that we make to you provided that we do not
have actual knowledge that you are a U.S. person and we have received from you
the statement described above under "Consequences to Non-U.S. Holders -- U.S.
Federal Withholding Tax."
In addition, you will not be subject to backup withholding or information
reporting with respect to the proceeds of the sale of an exchange note within
the United States or conducted through U.S.-related financial intermediaries, if
the payor receives the statement described above and does not have actual
knowledge that you are a U.S. person, as defined under the Internal Revenue
Code, or you otherwise establish an exemption.
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PLAN OF DISTRIBUTION
Until , 2001, 180 days after the date of this prospectus, all
dealers effecting transactions in the exchange notes, whether or not
participating in this distribution, may be required to deliver a prospectus.
This is in addition to the obligation of dealers to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
Each broker-dealer that receives exchange notes for its own account
pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of the exchange notes. This prospectus,
as it may be amended or supplemented, may be used by a broker-dealer in
connection with resales of exchange notes received in exchange for outstanding
notes only where the outstanding notes were acquired as a result of
market-making activities or other trading activities. We have agreed that we
will make this prospectus, as amended or supplemented, available to any
broker-dealer for use in connection with any resale for a period of 180 days
from the date on which the exchange offer is consummated, or any shorter period
as will terminate when all outstanding notes acquired by broker-dealers for
their own accounts as a result of market-making activities or other trading
activities have been exchanged for exchange notes and the exchange notes have
been resold by the broker-dealers.
We will not receive any proceeds from any sale of exchange notes by
broker-dealers. Exchange notes received by broker-dealers for their own account
pursuant to the exchange offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the exchange notes or a combination of these methods
of resale, at market prices prevailing at the time of resale, at prices related
to the prevailing market prices or negotiated prices. Any resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any broker-dealer or
the purchasers of any exchange notes. Any broker-dealer that resells exchange
notes that were received by it for its own account pursuant to the exchange
offer and any broker or dealer that participates in a distribution of the
exchange notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any resale of exchange notes and any
commissions or concessions received by these persons may be deemed to be
underwriting compensation under the Securities Act. The letter of transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 180 days from the date on which the exchange offer is
consummated, or a shorter period as will terminate when all outstanding notes
acquired by broker-dealers for their own accounts as a result of market-making
activities or other trading activities have been exchanged for exchange notes
and the exchange notes have been resold by the broker-dealers, we will promptly
send additional copies of this prospectus and any amendment or supplement to
this prospectus to any broker-dealer that requests the documents in the letter
of transmittal. We have agreed to pay all expenses incident to the exchange
offer, including the expenses of one counsel for the holders of the outstanding
notes, other than commissions or concessions of any brokers or dealers and the
fees of any counsel or other advisors or experts retained by the holders of
outstanding notes, except as expressly set forth in the registration rights
agreement, and will indemnify the holders of outstanding notes, including any
broker-dealers, against certain liabilities, including liabilities under the
Securities Act.
134
141
LEGAL MATTERS
The validity of the exchange notes will be passed upon for us by Simpson
Thacher & Bartlett, New York, New York.
EXPERTS
The consolidated financial statements of WCI Communities, Inc. as of
December 31, 2000 and 1999 and for each of the three years in the period ended
December 31, 2000 included in this prospectus have been so included in reliance
on the report of PricewaterhouseCoopers LLP, independent certified public
accountants, given on the authority of said firm as experts in auditing and
accounting.
The combined financial statements of Florida Design Communities, Inc. and
Related Companies as of November 30, 1998 and December 31, 1997, and for the
eleven-month period ended November 30, 1998 and year ended December 31, 1997,
included in this prospectus, have been so included in reliance on the report of
KPMG LLP, independent certified public accountants, given on the authority of
said firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-4 under the
Securities Act with respect to the exchange notes. This prospectus, which forms
a part of the registration statement, does not contain all of the information in
the registration statement. You should refer to the registration statement for
further information. Descriptions contained in this prospectus about the
contents of any contract or other document summarize all material provisions of
those contracts or documents, and, where a contract or other document is an
exhibit to the registration statement, each of these descriptions is qualified
by the exhibit to which the descriptions relates.
We are not currently subject to the informational requirements of the
Exchange Act. As a result of this offering, we will become subject to the
informational requirements of the Exchange Act. Accordingly, we will file
reports and other information with the SEC unless and until we obtain an
exemption from the requirement to do so. The registration statement and other
reports or information can be inspected, and copies may be obtained, at the
Public Reference Room of the SEC, 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates, and at the regional public reference facilities
maintained by the SEC located at Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511 and Seven World Trade Center, Suite 1300, New
York, New York 10048. Information on the operation of the Public Reference Room
of the SEC may be obtained by calling the SEC at 1-800-SEC-0330. The SEC also
maintains a web site (http://www.sec.gov) that contains reports, proxy and
information statements and other information that we have filed electronically
with the SEC.
Furthermore, we agree that, even if we are not required to file periodic
reports and information with the SEC, for so long as any exchange note remains
outstanding we will furnish to you the information that would be required to be
furnished by us under Section 13 of the Exchange Act.
135
142
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
WCI COMMUNITIES, INC.
Report of Independent Certified Public Accountants........ F-2
Consolidated Financial Statements for the years ended
December 31, 2000, 1999 and 1998.......................... F-3
FLORIDA DESIGN COMMUNITIES, INC. AND RELATED COMPANIES
Independent Auditors' Report.............................. F-38
Combined Financial Statements for the eleven months ended
November 30, 1998, and the year ended December 31, 1997... F-39
WCI COMMUNITIES, INC.
Unaudited Consolidated Financial Statements for the three
months ended March 31, 2001 and 2000...................... F-54
F-1
143
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholder of WCI Communities, Inc.
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of income, of changes in shareholders'
equity/partners' capital and of cash flows present fairly, in all material
respects, the financial position of WCI Communities, Inc. and its subsidiaries
at December 31, 2000 and 1999, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 2000 in
conformity with accounting principles generally accepted in the United States of
America. 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 of these statements in
accordance with auditing standards generally accepted in the United States of
America, which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Fort Lauderdale, Florida
February 14, 2001
F-2
144
WCI COMMUNITIES, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
--------------------------
2000 1999
------------ ----------
(IN THOUSANDS OF DOLLARS,
EXCEPT SHARE DATA)
ASSETS
Cash and cash equivalents................................... $ 55,737 $ 33,492
Restricted cash............................................. 15,521 16,665
Contracts receivable........................................ 228,742 118,669
Mortgage notes and accounts receivable...................... 33,322 24,043
Real estate inventories..................................... 649,007 594,459
Investments in amenities.................................... 34,832 43,944
Property and equipment...................................... 81,317 82,388
Investments in joint ventures............................... 35,792 25,394
Other assets................................................ 46,451 34,781
Goodwill and other intangible assets........................ 32,375 30,264
---------- ----------
Total assets...................................... $1,213,096 $1,004,099
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued expenses....................... $ 146,432 $ 90,972
Customer deposits and other liabilities..................... 170,860 115,546
Deferred income tax liabilities............................. 15,715 --
Community development district obligations.................. 26,944 36,864
Senior secured credit facility.............................. 289,000 286,630
Finance subsidiary debt..................................... 72,495 96,244
Mortgages and notes payable................................. 115,418 83,333
Subordinated notes, 81%, respectively, due to related
parties................................................... 57,010 57,010
---------- ----------
893,874 766,599
---------- ----------
Commitments and contingencies (Note 19)
Shareholders' equity:
Common stock, $.01 par value; 200,000 shares authorized,
180,047 shares issued and outstanding.................. 2 2
Additional paid-in capital................................ 138,716 138,935
Retained earnings......................................... 180,504 98,563
---------- ----------
Total shareholders' equity........................ 319,222 237,500
---------- ----------
Total liabilities and shareholders' equity........ $1,213,096 $1,004,099
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
145
WCI COMMUNITIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
2000 1999 1998
-------- -------- --------
(IN THOUSANDS OF DOLLARS)
REVENUES
Homebuilding............................................... $614,665 $428,837 $251,564
Parcel and lot............................................. 130,918 131,673 140,007
Amenity membership and operations.......................... 70,974 76,307 33,124
Real estate services and other............................. 65,595 44,599 23,668
-------- -------- --------
Total revenues................................... 882,152 681,416 448,363
-------- -------- --------
COSTS OF SALES
Homebuilding............................................... 445,386 324,791 181,466
Parcel and lot............................................. 59,377 75,865 88,033
Amenity membership and operations.......................... 55,820 63,596 31,536
Real estate services and other............................. 46,351 19,676 13,393
-------- -------- --------
Total costs of sales............................. 606,934 483,928 314,428
-------- -------- --------
Contribution margin.............................. 275,218 197,488 133,935
-------- -------- --------
OTHER EXPENSES
Interest expense, net...................................... 43,363 42,621 34,620
Selling, general, administrative and other................. 80,483 64,480 34,275
Real estate taxes, net..................................... 9,315 7,581 7,523
Depreciation and amortization.............................. 4,425 4,398 2,332
Amortization of goodwill and intangible asset.............. 3,229 2,383 199
Dividend on redeemable preferred stock..................... -- -- 922
-------- -------- --------
Total other expenses............................. 140,815 121,463 79,871
-------- -------- --------
Income before income taxes and extraordinary item.......... 134,403 76,025 54,064
Income tax (expense) benefit............................... (52,462) 5,562 (12,881)
-------- -------- --------
Income before extraordinary item........................... 81,941 81,587 41,183
Extraordinary item
Loss on debt restructuring............................... -- 1,694 --
-------- -------- --------
Net income................................................. 81,941 79,893 41,183
Excess of carrying value of preferred stock over fair
value of consideration paid........................... -- -- 1,786
-------- -------- --------
Net income available to shareholders/partners.............. $ 81,941 $ 79,893 $ 42,969
======== ======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
146
WCI COMMUNITIES, INC.
CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS' EQUITY/PARTNERS' CAPITAL
SHAREHOLDERS' EQUITY
---------------------------------------- PARTNERS' CAPITAL
COMMON STOCK ------------------
PAR VALUE $.01 ADDITIONAL
---------------- PAID-IN RETAINED GENERAL LIMITED
SHARES AMOUNT CAPITAL EARNINGS PARTNER PARTNERS TOTAL
------- ------ ---------- -------- ------- -------- --------
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE DATA)
BALANCE AT DECEMBER 31, 1997................ -- $-- $ -- $ -- $ 400 $ 84,709 $ 85,109
Distributions............................... -- -- -- -- (31) (8,229) (8,260)
Redemption of ownership interest............ -- -- -- -- -- (30,484) (30,484)
Net income for the period January 1, 1998 to
November 30, 1998......................... -- -- -- -- 122 24,177 24,299
Issuance of common stock for partners'
interest in WCI LP........................ 125,390 1 70,663 -- (491) (70,173) --
Issuance of common stock for acquisition of
FDC....................................... 54,657 1 65,793 -- -- -- 65,794
Issuance of Watermark common stock to
employees................................. -- -- 2,828 -- -- -- 2,828
Net income for the month ended December 31,
1998...................................... -- -- -- 18,670 -- -- 18,670
------- -- -------- -------- ----- -------- --------
BALANCE AT DECEMBER 31, 1998................ 180,047 2 139,284 18,670 -- -- 157,956
Net income.................................. -- -- -- 79,893 -- -- 79,893
Purchase of Watermark common stock from
employees................................. -- -- (349) -- -- -- (349)
------- -- -------- -------- ----- -------- --------
BALANCE AT DECEMBER 31, 1999................ 180,047 2 138,935 98,563 -- -- 237,500
Net income.................................. -- -- -- 81,941 -- -- 81,941
Contribution................................ -- -- 227 -- -- -- 227
Purchase of Watermark common stock from
employees................................. -- -- (446) -- -- -- (446)
------- -- -------- -------- ----- -------- --------
BALANCE AT DECEMBER 31, 2000................ 180,047 $2 $138,716 $180,504 $ -- $ -- $319,222
======= == ======== ======== ===== ======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
147
WCI COMMUNITIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------
2000 1999 1998
--------- --------- ---------
(IN THOUSANDS OF DOLLARS)
Cash flows from operating activities:
Net income available to shareholders/partners............. $ 81,941 $ 79,893 $ 42,969
Adjustments to reconcile net income to net cash provided
(used) by operating activities:
Net loss on debt restructuring.......................... -- 1,694 --
Excess of carrying value of preferred stock over fair
value of consideration paid........................... -- -- (1,786)
Release of tax asset valuation allowance................ -- (18,500) --
Depreciation and amortization........................... 7,654 6,781 2,531
Amortization of debt issue costs to interest expense.... 4,630 3,048 3,628
Gain on disposal of property and equipment.............. (4,507) -- --
(Earnings) losses from investments in joint ventures,
net of write-offs..................................... (1,320) 56 117
Contributions to investments in joint ventures.......... (12,046) (1,729) (7,558)
Distributions from investments in joint ventures........ 2,968 1,884 1,035
Real estate inventories:
Additions to real estate inventories.................... (485,559) (478,479) (212,195)
Capitalized interest and real estate taxes.............. (41,858) (42,113) (34,354)
Cost of sales, including amortization of capitalized
interest and real estate taxes........................ 478,869 381,662 261,279
Changes in assets and liabilities:
Restricted cash......................................... 1,144 5,143 10,287
Contracts receivable.................................... (110,073) 42,379 (67,546)
Accounts receivable..................................... (11,041) 18,390 (8,024)
Investments in amenities................................ 9,112 4,921 3,777
Other assets............................................ (11,937) 19,232 (24,050)
Accounts payable and accrued expenses................... 58,040 (4,011) 31,842
Customer deposits and other liabilities................. 47,061 (1,229) 28,646
Deferred income tax liabilities......................... 15,715 -- 1,623
--------- --------- ---------
Net cash provided by operating activities........... 28,793 19,022 32,221
--------- --------- ---------
Cash flows from investing activities:
Additions to mortgage notes receivable.................... (5,388) (8,080) (29,808)
Principal reductions on mortgage notes receivable......... 7,150 15,932 39,461
Net proceeds from sale of investment in real estate....... -- 3,000 382
Additions to property and equipment....................... (12,089) (11,833) (1,119)
Proceeds from sale of property and equipment.............. 14,175 -- --
Payment for purchase of assets of real estate
brokerages.............................................. (4,064) (350) --
--------- --------- ---------
Net cash (used in) provided by investing
activities........................................ (216) (1,331) 8,916
--------- --------- ---------
Cash flows from financing activities:
Senior secured credit facilities:
Net (repayments) borrowings on revolving line of
credit................................................ $ (47,630) $ 1,750 $ 11,474
Borrowing on amortizing term loan....................... 50,000 200,000 --
Repayments on amortizing term loan...................... -- (141,000) (15,592)
Proceeds from borrowings on mortgages and notes payable... 85,452 38,861 45,370
Principal reductions on mortgages and notes payable....... (53,367) (92,753) (46,441)
Principal reductions on subordinated notes................ -- -- (18,000)
Net (reductions) borrowings on community development
district obligations.................................... (9,920) (5,613) 6,915
Debt issue costs.......................................... (4,281) (10,857) --
Proceeds from borrowings on finance subsidiary debt....... 72,495 84,886 50,500
Principal reduction on finance subsidiary debt............ (98,862) (80,182) (12,245)
Acquisition of redeemable preferred stock................. -- -- (21,800)
Distributions to partners, net............................ -- -- (8,260)
Redemption of ownership interest.......................... -- -- (30,484)
Issuance of Watermark common stock to employees........... -- -- 2,828
Contribution.............................................. 227 -- --
Purchase of Watermark common stock from employees......... (446) (349) --
Net cash from acquisition................................. -- -- 889
--------- --------- ---------
Net cash used in financing activities................... (6,332) (5,257) (34,846)
--------- --------- ---------
Net increase in cash and cash equivalents................... 22,245 12,434 6,291
Cash and cash equivalents at beginning of year.............. 33,492 21,058 14,767
--------- --------- ---------
Cash and cash equivalents at end of year.................... $ 55,737 $ 33,492 $ 21,058
========= ========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
148
WCI COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
(IN THOUSANDS OF DOLLARS)
1. BUSINESS ORGANIZATION
(In thousands of dollars, except share data)
WCI Communities, Inc. (the Company) is a wholly owned subsidiary of
Watermark Communities Inc. (Watermark). Watermark was formed in August 1998 to
buy, manage, own, develop and sell real estate assets and amenity facilities.
Prior to November 30, 1998, Watermark was a non-operating entity. On November
30, 1998, Watermark completed a reorganization of WCI Communities Limited
Partnership (WCI LP) in which all of the partnership interests were exchanged
for 17,500,000 shares of its common stock. This reorganization was accounted for
at the historical book value of WCI LP's assets and liabilities because it was a
transfer of WCI LP's net assets to a recently formed substitute entity chartered
by the owners of WCI LP. Simultaneously with this reorganization, all of the
common stock of Florida Design Communities, Inc. and several affiliated
companies (collectively FDC) were exchanged for 7,628,148 shares of common stock
of Watermark. Prior to the acquisition, FDC had certain common officers and
shareholders with Watermark. This transaction was accounted for as an
acquisition under purchase accounting. On June 29, 1999, Watermark merged its
commonly controlled wholly owned subsidiaries WCI LP and FDC and renamed the
surviving entity WCI Communities, Inc. The number of common stock shares
reflected in the accompanying financial statements are converted at a rate of
approximately 139.6 between Watermark and the Company.
WCI LP was formed in July 1995 to acquire substantially all of the
outstanding capital stock and certain assets of a subsidiary of CBS Corporation,
formerly known as Westinghouse Electric Corporation (WELCO). In July 1995, WCI
LP acquired the outstanding capital stock and net assets with proceeds from
$373,876 of acquisition debt, $101,000 of partners' capital contributions, and
$23,586 from issuance of 23,585,719 shares of redeemable preferred stock in Bay
Colony -- Gateway, Inc. (BCG), a wholly owned subsidiary of WCI LP. Profits and
losses were allocated to the WCI LP partners in proportion to their respective
percentage Partnership interests.
In December 1996, BCG formed Communities Finance Company (CFC), a
wholly-owned finance subsidiary. In April 1998, CFC acquired from WELCO for
$69,800 its 30% ownership interest in WCI LP, $18,000 of WCI LP subordinated
debt, and all of BCG's redeemable preferred stock. The subordinated debt was
acquired at face value of $18,000 and the ownership interests at $30,484, which
approximated WELCO's original contribution to WCI LP. The preferred stock of BCG
was acquired for $21,800, resulting in $1,786 of excess carrying value over fair
value of consideration paid, increasing net income available to
shareholders/partners.
2. SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting principles and practices used in
the preparation of the consolidated financial statements follows.
BASIS OF FINANCIAL STATEMENT PRESENTATION
The consolidated financial statements include the accounts of the Company
inclusive of WCI LP and of FDC since its acquisition. The equity method of
accounting is applied in the accompanying consolidated financial statements with
respect to those investments in joint ventures, in which the Company has less
than a controlling interest. All material intercompany balances and transactions
are eliminated in consolidation.
The Company prepares its financial statements in conformity with accounting
principles generally accepted in the United States of America. These principles
require management to make estimates and
F-7
149
WCI COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DOLLARS)
assumptions that affect the reported amounts of assets and liabilities, disclose
contingent assets and liabilities at the date of the financial statements and
report amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
REVENUE AND PROFIT RECOGNITION FROM SALES OF REAL ESTATE
Revenue from land sales is recognized at the time of closing. The related
profit is recognized in full when collectibility of the sales price is
reasonably assured and the earnings process is substantially complete. When a
sale does not meet the requirements for income recognition, profit is deferred
under the deposit method and the related inventory is classified as completed
inventory. Deferred income consists primarily of estimated profits on land
sales, which require various forms of continued involvement by the Company, and
is included in other liabilities. Deferred income is recognized as the Company's
involvement is completed.
Revenue for tower residences under construction is recognized on the
percentage-of-completion method. Revenue recognized is calculated based upon the
percentage of total costs incurred in relation to estimated total costs. Revenue
is recorded when construction is beyond a preliminary stage, the buyer is
committed to the extent of being unable to require a refund except for
nondelivery of the residence, the majority of residences are under firm
contracts, collection of the sales price is assured and costs can be reasonably
estimated. Any amounts due under sales contracts, to the extent recognized as
revenue, are recorded as contracts receivable. Any sales after the completion of
tower residence construction are recorded as revenue on the completed contract
method. As of December 31, 2000, nine tower residence projects are under
construction, eight of which are beyond the preliminary stage of construction
and sufficient units have been sold to meet the criteria for
percentage-of-completion revenue recognition.
Single and multi-family home building revenue is recognized at the time of
closing under the completed contract method. The related profit is recognized
when collectibility of the sales price is reasonably assured and the earnings
process is substantially complete. When a sale does not meet the requirements
for income recognition, profit is deferred until such requirements are met and
the related sold inventory is classified as completed inventory.
The Company's operations are in Florida. Consequently, any significant
economic downturn in the Florida market could potentially have an effect on the
Company's business, results of operations and financial condition.
REAL ESTATE INVENTORIES AND COST OF SALES
Real estate inventories consist of developed and undeveloped land, tower
residences and homes under construction and land under development. Real estate
inventories, including capitalized interest and real estate taxes, are carried
at the lower of cost or fair value determined by evaluation of individual
projects. Total land and common development costs are apportioned on the
relative sales value method for each project, while site specific development
costs are allocated directly to the benefitted land. Whenever events or
circumstances indicate that the carrying value of the real estate inventories
and investments in real estate may not be recoverable, impairment losses would
be recorded and the related assets would be adjusted to their estimated fair
market value, less selling costs. Warranty liabilities for homebuilding are
estimated by the Company based on historical experience. The Company
subcontracts all construction to others and its contracts require subcontractors
to repair or replace deficiencies related to their trades.
F-8
150
WCI COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DOLLARS)
CAPITALIZED INTEREST AND REAL ESTATE TAXES
Interest and real estate taxes incurred relating to the development of lots
and parcels and construction of tower residences are capitalized to real estate
inventories during the active development period. The Company's strategy is to
master plan, develop and build substantially all of the homes in its
communities. Accordingly, substantially all projects, exclusive of finished lots
and parcels, are undergoing active development. Interest and real estate taxes
capitalized are amortized to interest expense and real estate tax expense as
related inventories are sold. The following table is a summary of capitalized
and amortized interest and real estate taxes:
AS OF AND FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------------
2000 1999 1998
------------ ------------ ------------
Capitalized interest as of January 1............... $ 61,506 $ 39,102 $ 25,101
Interest capitalized............................... 37,600 38,163 29,594
Interest amortized................................. (14,233) (15,759) (15,593)
-------- -------- --------
Capitalized interest as of December 31............. $ 84,873 $ 61,506 $ 39,102
======== ======== ========
Total interest incurred............................ $ 62,100 $ 60,503 $ 44,993
Debt issue cost amortization....................... 4,630 4,522 3,628
Interest amortized................................. 14,233 15,759 15,593
Interest capitalized............................... (37,600) (38,163) (29,594)
-------- -------- --------
Interest expense, net.............................. $ 43,363 $ 42,621 $ 34,620
======== ======== ========
Real estate taxes incurred......................... $ 11,335 $ 10,226 $ 9,424
Real estate taxes amortized........................ 2,238 1,305 2,859
Real estate taxes capitalized...................... (4,258) (3,950) (4,760)
-------- -------- --------
Real estate taxes, net............................. $ 9,315 $ 7,581 $ 7,523
======== ======== ========
CASH, CASH EQUIVALENTS AND RESTRICTED CASH
The Company considers all amounts held in highly liquid instruments with
original purchased maturity of three months or less as cash equivalents. Cash
and cash equivalents consist primarily of demand deposit accounts and
approximate fair value due to the relatively short period to maturity of these
instruments. Restricted cash consists principally of amounts held in escrow
pursuant to certain loan agreements and escrow accounts representing customer
deposits restricted as to use. The credit risk associated with cash, cash
equivalents and restricted cash is considered low due to the quality of the
financial institutions in which these assets are held.
INVESTMENTS IN AMENITIES AND AMENITY OPERATIONS
Investments in amenities represent accumulation of costs incurred in
constructing clubhouses, golf courses, marinas, tennis courts and various other
related amenities less amount of memberships sold. The Company reclassifies
land, based on relative fair value before construction, from real estate
inventories to investment in amenities when the planning process for a new
amenity has been approved and completed. Membership sales are recorded under the
cost recovery method. A loss, if any, from the sale of equity club memberships
would be reallocated to benefited real estate inventory.
When investments in equity club memberships are part of land acquisitions,
the carrying value is allocated from the purchase price based on relative fair
value. When an operating amenity is converted to
F-9
151
WCI COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DOLLARS)
an equity club, the related assets are reclassified from property and equipment
to investment in amenities and depreciation is ceased.
Revenues from amenity operations include the sale of memberships, billed
dues relating to such memberships and fees for services provided. Dues are
billed on an annual basis in advance and are recorded as deferred revenue and
then recognized as revenue over the term of the membership year. Revenues for
services are recorded when the service is provided.
PROPERTY AND EQUIPMENT
Property and equipment, which include corporate facilities and operating
properties such as golf courses, restaurants, marinas, a hotel and recreational
facilities, are carried at cost less accumulated depreciation. Property and
equipment are depreciated on the straight-line method over their estimated
useful lives. Provisions for value impairment are recorded when estimated future
cash flows from operations and projected sales proceeds are less than the net
carrying value. Expenditures for maintenance and repairs are charged to expense
as incurred. Costs of major renewals and improvements, which extend useful
lives, are capitalized.
OTHER ASSETS
Other assets consist of the following:
DECEMBER 31,
------------------
2000 1999
------- -------
Prepaid expense and other assets............................ $20,701 $13,948
Debt issue costs............................................ 10,658 11,197
Recreation lease............................................ 8,342 8,641
Deposits on land............................................ 6,750 --
Deferred tax asset, net..................................... -- 995
------- -------
$46,451 $34,781
======= =======
Debt issue costs, principally loan origination and related fees, are
deferred and amortized over the life of the respective debt using the
straight-line method, which approximates the effective interest method. The
recreation lease asset is amortized over 30 years, the expected life of its
underlying assets.
GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill represents the excess of the Company's cost of business assets
acquired over the fair value of identifiable assets acquired and is amortized
over 15 years on a straight-line basis. Other intangible assets represent
identifiable other assets acquired and are amortized over the estimated useful
live of 5 years on the straight-line basis. Accumulated amortization was $5,189
and $2,258 at December 31, 2000 and 1999, respectively. Amortization expense was
$2,931, $2,084 and $174, respectively, for the years ended December 31, 2000,
1999 and 1998. The Company annually evaluates the recoverability of goodwill and
the amortization period. Several factors are used to evaluate goodwill,
including management's plans for future operations, recent operating results and
estimated future undiscounted cash flows associated with the related assets. In
the event facts and circumstances indicate the carrying value of goodwill is
impaired, it would be written down to its estimated fair value.
F-10
152
WCI COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DOLLARS)
CUSTOMER DEPOSITS AND OTHER LIABILITIES
Customer deposits represents amounts received from customers under real
estate and equity club membership sales contracts. Other liabilities includes
deposits, deferred income and land option obligations.
DEBT
Substantially all assets and outstanding subsidiary common stock are
pledged as collateral for the senior secured credit facility. For the years
ended December 31, 2000 and 1999, aggregate debt had a weighted average annual
effective interest rate of 10.4% and 10.2%, respectively, exclusive of amortized
debt issue costs. The Company records the net cost or net benefit of interest
rate protection arrangements monthly as an increase or decrease to interest
expense.
FINANCIAL INSTRUMENTS
In the normal course of business, the Company may invest in various
financial assets and incur various financial liabilities. The Company does not
trade in derivative financial instruments. The financial instruments of the
Company consist of mortgage notes and accounts receivable, accounts payable and
accrued expenses, customer deposits and other liabilities, senior secured credit
facilities, finance subsidiary debt, mortgage and notes payable, community
development district obligations, and subordinated debt. For financial
instruments, the carrying amounts approximate their fair value because of their
short maturity and in some cases because they bear interest at market rates. The
Company utilizes interest rate protection agreements to manage interest costs
and hedge against risks associated with changing interest rates. The Company
designates interest rate swaps as hedges of specific debt instruments and
recognizes interest differentials as adjustments to interest expense as the
differentials occur. At December 31, 2000, these swaps had a fair value and an
estimated unrealized loss of approximately $1,215, while at December 31, 1999,
these swaps had a fair value and an estimated unrealized gain of approximately
$519. The fair value of the interest rate swap agreements was estimated based on
quoted market rates of similar financial instruments. Counterparties to these
agreements are major financial institutions.
INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 (FAS 109), Accounting for Income Taxes.
This approach requires recognition of income tax currently payable, as well as
deferred tax assets and liabilities resulting from temporary differences by
applying enacted statutory tax rates applicable to future years to differences
between the financial statement carrying amounts and the tax bases of assets and
liabilities. Subsequent to November 30, 1998, Watermark's consolidated tax
returns include the taxable income of the Company.
Under the provisions of the Internal Revenue Code and applicable state tax
laws, WCI LP was not subject to taxation of income. The tax consequences of WCI
LP's profits and losses accrued to its partners. Interest, real estate taxes,
certain development costs and revenue recognition were treated differently in
WCI LP's income tax return than in the accompanying financial statements. BCG,
WCI LP's subsidiary, filed separate corporate federal and state income tax
returns through June 1999. Subsequently, BCG is included in Watermark's
consolidated tax return. Income taxes are calculated in accordance with the
Company's tax sharing agreement with its parent which allocates taxes to the
Company as if it filed a separate tax return on a stand alone basis.
F-11
153
WCI COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DOLLARS)
EMPLOYEE BENEFIT AND INCENTIVE PLANS
The Company employees who meet certain requirements as to age and service
are eligible to participate in the WCI Communities 401(k) and Retirement Plan.
The Company's expenses related to the 401(k) and retirement components of the
plans were $1,497, $967 and $706 for the years ended December 31, 2000, 1999 and
1998, respectively. Effective January 1, 2000, the Company implemented a Profit
Sharing Plan that replaced the retirement component of the plans. The Profit
Sharing Plan is available to all Company employees enrolled in the 401(k)
Retirement Plan. For the year ended December 31, 2000, the Company's expense
related to the Profit Sharing Plan was $978.
The Management Incentive Compensation Plan (MICP) rewards key employees for
their contribution to the Company's achievement of its goals. The program
establishes a targeted award based upon the level and role for each eligible
participant. A portion of the targeted award is earned by each participant based
upon the extent of achievement of assigned corporate financial,
divisional/community financial and personal objectives. The Company's expenses
related to the MICP were $7,600, $3,756 and $1,532 for the years ended December
31, 2000, 1999 and 1998, respectively.
STOCK INCENTIVE PLAN
Watermark adopted employee stock award and stock option programs in which
certain Company employees participate. These programs are designed to reward
senior employees for past service and to provide an incentive for their
continued contributions.
Under the employee stock award program, 328,200 shares of Watermark's
common stock and cash bonuses were distributed to the Company's participants in
December 1998. The value of the shares distributed and the cash paid totaled
$4,423 and were recognized by the Company as a selling, general, administrative
and other expense.
EARNINGS PER SHARE
Statement of Financial Accounting Standards No. 128, "Earnings Per Share,"
is effective for financial statements ending after December 15, 1997. Basic
earnings per share is calculated by dividing net income available to common
shareholders by the weighted average number of common shares outstanding for the
period. Diluted earnings per share is calculated by dividing net income
available to common shareholders by the weighted average number of shares
outstanding including the number of potentially issuable shares under the stock
option plan. The Company does not present earnings per share since its common
stock is closely held and not traded on the public or over-the-counter markets.
CONSOLIDATED STATEMENT OF CASH FLOWS -- SUPPLEMENTAL DISCLOSURES
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
2000 1999 1998
-------- -------- --------
Interest paid (net of amount capitalized)............. $24,268 $22,791 $12,196
======= ======= =======
Assets acquired under capital lease................... $ 978 $ -- $ 312
======= ======= =======
Net federal and state taxes paid...................... $ 6,039 $ 7,381 $ --
======= ======= =======
F-12
154
WCI COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DOLLARS)
The Company made the following non-monetary reclassifications during 2000,
1999 and 1998:
2000 1999 1998
------ ------ ------
Accounts payable and accrued expenses to finance
subsidiary debt........................................ $2,618 $3,860 $2,180
Other liabilities to real estate inventories............. -- 811 --
Mortgage notes payable to real estate inventories........ -- 1,095 --
Real estate inventories to investments in amenities...... -- 3,785 --
Real estate inventories to other assets.................. -- 1,095 --
Investments in amenities to real estate inventories...... -- -- 2,509
Real estate inventories to mortgage notes and accounts
receivable............................................. -- 5,070 --
Real estate inventories to investments in joint
ventures............................................... -- -- 2,896
Investments in amenities to property and equipment....... -- 1,371 --
Investments in amenities to investments in joint
ventures............................................... -- -- 5,903
Non-monetary transactions arising from acquisitions are discussed in Note 4
and Note 19.
Non-monetary transactions arising from deferred tax transactions are
discussed in Note 16.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 (FASB 133), "Accounting for Derivative
Instruments and Hedging Activities," as amended by FASB 137, which is required
to be adopted in years beginning after June 15, 2000. FASB 133 requires all
derivatives to be recorded on the balance sheet at fair value. FASB 133
establishes the accounting procedures for hedges that will affect the timing of
recognition and the manner in which hedging gains and losses are recognized in
the Company's financial statements. Derivatives that are not hedges must be
adjusted to fair value through income. If derivatives are hedges, depending on
the nature of the hedge, changes in the fair value of derivatives will either be
offset against the change in fair value of the hedged assets, liabilities, or
firm commitments through earnings or will be recognized in other comprehensive
income until the hedged item is recognized in earnings. Based on existing
operations, the adoption of FASB 133 will have no material impact on the
Company's earnings, cash flows or financial position. The Company currently
expects to adopt FASB 133 beginning on January 1, 2001.
In March 2000, the Financial Accounting Standards Board issued
Interpretation No. 44, "Accounting for Certain Transactions Involving Stock
Compensation" (FIN 44), which is effective July 1, 2000 and contains rules
designed to clarify the application of APB 25, "Accounting for Stock Issued to
Employees." The implementation of FIN 44 did not have a material impact on the
Company's results of operations or financial position.
In December 1999, the Securities and Exchange Commission (SEC) released
Staff Accounting Bulletin (SAB) 101, "Revenue Recognition in Financial
Statements" to provide guidance on the recognition, presentation and disclosure
of revenues in financial statements. The Company has completed its review and
believes that its current revenue recognition policies are in conformity, in all
material respects, with this SAB.
RECLASSIFICATION
Certain amounts in the prior years' financial statements have been
reclassified to conform to the current year's presentation.
F-13
155
WCI COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DOLLARS)
3. SEGMENT INFORMATION
The Company operates in three reportable business segments: homebuilding,
parcel and lot, and amenity membership and operations. The homebuilding segment
builds and markets single and multi-family homes and mid-rise and high-rise
tower residences. The parcel and lot segment develops and sells land parcels and
lots within the Company's communities to commercial developers, individuals and,
to a lesser degree, homebuilders. The amenity membership and operations segment
includes the operations and sale of memberships in golf country clubs, marinas,
tennis and recreation facilities. The Company's reportable segments are
strategic business operations that offer different products and services. They
are managed separately because each business requires different expertise and
marketing strategies. Revenues from segments below the quantitative thresholds
are primarily attributable to real estate services such as brokerage, title
company, property management and mortgage brokerage operations.
The accounting policies of the segments are the same as those described in
significant accounting policies. Transfers between segments are recorded at
cost. The Company evaluates financial performance based on the segment
contribution margin. The table below presents information about reported
operating income for the years ended December 31, 2000, 1999 and 1998. Asset
information by reportable segment is not presented since the Company does not
prepare such information.
YEAR ENDED DECEMBER 31, 2000
HOMEBUILDING
------------------------ AMENITY
MID- AND SINGLE AND PARCEL MEMBERSHIP ALL SEGMENT
HIGH-RISE MULTI-FAMILY AND LOT AND OPERATIONS OTHER TOTALS
--------- ------------ -------- -------------- ------- --------
Revenues....................... $233,457 $381,208 $130,918 $70,974 $58,656 $875,213
Interest income................ -- -- -- -- 2,197 2,197
Contribution margin............ 100,546 68,733 71,541 15,154 14,502 270,476
YEAR ENDED DECEMBER 31, 1999
HOMEBUILDING
------------------------ AMENITY
MID- AND SINGLE AND PARCEL MEMBERSHIP ALL SEGMENT
HIGH-RISE MULTI-FAMILY AND LOT AND OPERATIONS OTHER TOTALS
--------- ------------ -------- -------------- ------- --------
Revenues....................... $159,117 $269,720 $131,673 $76,307 $42,277 $679,094
Interest income................ -- -- -- -- 2,528 2,528
Contribution margin............ 56,595 47,451 55,808 12,711 25,129 197,694
YEAR ENDED DECEMBER 31, 1998
HOMEBUILDING
------------------------ AMENITY
MID- AND SINGLE AND PARCEL MEMBERSHIP ALL SEGMENT
HIGH-RISE MULTI-FAMILY AND LOT AND OPERATIONS OTHER TOTALS
--------- ------------ -------- -------------- ------- --------
Revenues....................... $181,706 $69,858 $140,007 $33,124 $20,083 $444,778
Interest income................ -- -- -- -- 3,579 3,579
Contribution margin............ 62,068 8,030 51,974 1,588 10,269 133,929
F-14
156
WCI COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DOLLARS)
A reconciliation of total segment revenue to total consolidated revenue and
of total segment contribution margin to consolidated net income before income
tax and extraordinary items for the years ended December 31, 2000, 1999 and 1998
is as follows:
2000 1999 1998
-------- -------- --------
Revenue
Total segment revenue.............................. $877,410 $681,622 $448,357
Gain (loss) assets held for investment............. 4,742 (206) 6
-------- -------- --------
Total revenue................................. $882,152 $681,416 $448,363
======== ======== ========
Net income
Segment contribution margin........................ $270,476 $197,694 $133,929
Gain (loss) assets held for investment............. 4,742 (206) 6
Corporate overhead and costs....................... (89,798) (72,061) (41,798)
Interest expense, net.............................. (43,363) (42,621) (34,620)
Depreciation and amortization...................... (7,654) (6,781) (2,531)
Dividend on redeemable preferred stock............. -- -- (922)
-------- -------- --------
Income before income taxes and extraordinary
items....................................... $134,403 $ 76,025 $ 54,064
======== ======== ========
4. ACQUISITIONS
The stock of FDC was acquired effective November 30, 1998. The acquisition
price totaled $262,137, which was paid by issuing 7,628,148 shares of Watermark
common stock and assuming $196,344 of liabilities. Deferred tax liabilities of
$28,673 were assumed in conjunction with the change in ownership. The purchase
price was allocated first to record identifiable assets and liabilities at fair
value and the remainder to goodwill. The following summarized unaudited pro
forma financial information includes the operations of the Company, which
assumes the FDC acquisition occurred on January 1, 1998.
FOR THE YEAR ENDED
DECEMBER 31,
1998
------------------
(UNAUDITED)
Revenue..................................................... $544,390
Income before extraordinary items........................... $ 33,718
Net income.................................................. $ 35,504
These amounts include FDC's actual results for the eleven months in 1998
prior to the acquisition and for the one month in 1998 after the acquisition. In
preparing the unaudited pro forma information, various assumptions were made,
and the Company does not purport this information to be indicative of what would
have occurred had these transactions been made as of January 1, 1998, nor is it
indicative of the results of future combined operations.
During 2000, Watermark Realty, Inc., a wholly owned subsidiary of the
Company, acquired the assets of six real estate brokerages. The aggregate
purchase price of $6,317 was funded with $4,064 cash and $2,253 of unsecured
obligations payable over terms of 24 to 36 months. Goodwill and other intangible
assets totaling $5,422 were recorded on the acquisitions and are amortized over
an estimated five year life.
During December 1999, Watermark Realty, Inc. acquired the assets of a real
estate brokerage. The acquisition price of $1,400 was funded with $350 cash, two
6% promissory notes payable to the seller totaling $350 maturing within 180
days, and an unsecured $700 obligation payable over 36 months
F-15
157
WCI COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DOLLARS)
beginning July 2000. Goodwill and other intangible assets totaling $1,260 were
recognized on the acquisition and are amortized over an estimated five year
life.
5. MORTGAGE NOTES AND ACCOUNTS RECEIVABLE
Mortgage notes and accounts receivable are summarized as follows:
DECEMBER 31,
------------------
2000 1999
------- -------
Mortgage notes receivable................................... $11,937 $14,157
Mortgage notes receivable -- finance subsidiary............. 1,859 1,401
Accounts receivable......................................... 19,526 8,485
------- -------
$33,322 $24,043
======= =======
Accounts receivable are generated through the normal course of business
operations and are unsecured.
Mortgage notes receivable are generated through the normal course of
business, primarily parcel and lot sales, and are collateralized by liens on
property sold. Mortgage notes receivable with below market rates are discounted
at a market rate prevailing at the date of issue. Significant concentration of
mortgage notes receivable have resulted from the sale of Florida real estate
inventories to seven independent homebuilders, approximating 98% at December 31,
2000. The interest rates on mortgage notes receivable with maturities in excess
of one year at December 31, 2000 and 1999 range from 6.5% to 9.0% and 6.5% to
9.5%, respectively. The average interest rate on mortgage notes receivable with
maturities in excess of one year approximated 6.7% and 7.3% at December 31, 2000
and 1999, respectively.
Following is a schedule of maturities of mortgage notes receivable at
December 31, 2000.
2001........................................................ $11,120
2002........................................................ 2,434
2003........................................................ 242
2004........................................................ --
2005........................................................ --
Thereafter.................................................. --
-------
Mortgage notes receivable................................... $13,796
=======
F-16
158
WCI COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DOLLARS)
6. REAL ESTATE INVENTORIES
Real estate inventories are summarized as follows:
DECEMBER 31,
--------------------
2000 1999
-------- --------
Land........................................................ $173,226 $258,213
Work in progress:
Land and improvements..................................... 284,493 111,182
Tower residences.......................................... 35,490 38,179
Homes..................................................... 68,401 66,047
Completed inventories:
Land and improvements..................................... 73,382 107,964
Tower residences.......................................... 1,274 850
Homes..................................................... 12,741 12,024
-------- --------
$649,007 $594,459
======== ========
Completed inventories at December 31, 2000 and 1999 include $1,671 and
$17,266, respectively, of inventory sold subject to significant continuing
obligations, which precluded revenue recognition.
7. INVESTMENTS IN AMENITIES
Investments in amenities consist of the following:
DECEMBER 31,
------------------
2000 1999
------- -------
Investment in equity club memberships....................... $34,255 $30,033
Investment in clubs planned for equity conversion and under
construction.............................................. 577 13,911
------- -------
$34,832 $43,944
======= =======
Equity golf course and club facility amenities are conveyed through the
sale of memberships.
8. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
ESTIMATED DECEMBER 31,
USEFUL LIFE ------------------
(IN YEARS) 2000 1999
----------- ------- -------
Land and improvements................................ 15 $28,024 $30,114
Buildings and improvements........................... 30 to 39 22,815 24,020
Furniture, fixtures and equipment.................... 3 to 8 24,572 16,018
Marinas.............................................. 20 2,658 6,740
Assets under construction............................ -- 12,895 11,120
------- -------
90,964 88,012
Less accumulated depreciation........................ (9,647) (5,624)
------- -------
$81,317 $82,388
======= =======
F-17
159
WCI COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DOLLARS)
9. INVESTMENTS IN JOINT VENTURES
Investments in joint ventures represent the Company's ownership interests
in real estate limited partnerships and are accounted for under the equity
method. At December 31, 2000 investments in joint ventures consists of the
following:
PERCENTAGE OF
NAME OF VENTURE OWNERSHIP TYPE AND LOCATION OF PROPERTY
- ----------------------------------- ------------- -----------------------------------
Tiburon Golf Ventures Limited
Partnership...................... 51% Golf club -- Naples, Florida
Pelican Landing Golf Resort
Ventures Limited Partnership..... 51% Golf club under
development -- Bonita Springs,
Florida
Pelican Landing Timeshare Ventures
Limited Partnership.............. 51% Undeveloped land planned for multi-
family timeshare units -- Bonita
Springs, Florida
Norman Estates at Tiburon Limited
Partnership...................... 50% Single-family residential units
under development -- Naples,
Florida
Walden Woods Business Center
Limited Partnership.............. 50% Mixed-use industrial park -- Plant
City, Florida
Pelican Isle Yacht Club Limited
Partnership...................... 49% Yacht club -- Naples, Florida
The Company does not consolidate investments in joint ventures where
unanimous consent by both partners is required for making major decisions such
as selling, transferring or disposing of substantial joint venture assets and it
does not have control directly or indirectly. The Company's share of net
earnings (loss) is based upon its ownership interest. The Company may be
required to make additional cash contributions to the ventures, pursuant to the
venture agreements.
The Company recognizes revenue on the contribution of land to entities in
which it has a joint venture interest only when the fair value of assets
contributed are clearly measurable, when cash is received, there is no
requirement to return the cash as contributions, and when the risks and rewards
of ownership for the land have been irrevocably transferred. The Company
eliminates profits on land contributions to investment in joint ventures to the
extent of its ownership interest. During 1998, the Company recorded aggregate
net profit of approximately $6,760 on contributions of land to four entities in
which it has a joint venture interest.
The Company enters into agreements to provide development, project
management and golf course operation management services. The Company provided
such services to entities in which it has a joint venture interest and recorded
net fee revenue of $712, $357 and $256 for the years ended December 31, 2000,
1999 and 1998, respectively. The Company eliminates these fees to the extent of
its ownership interest.
In 1996, the Bighorn property located in Palm Desert, California was sold.
In conjunction with the sale, a 50% limited partnership interest in the buyer
was received. This interest entitles the Company to receive an allocation of the
buyer's future net profits after allocation of preferred returns to other
partners as defined in the limited partnership agreement. No amounts have been
received under this interest.
Differences between the Company's investments in joint ventures and the
equity in underlying net assets are primarily attributable to acquisition
purchase accounting, agreed upon values among the Partners
F-18
160
WCI COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DOLLARS)
for contributed assets and other basis differences. The aggregate condensed
financial information reflects the financial information of the unconsolidated
joint ventures and is summarized as follows:
DECEMBER 31,
-------------------
2000 1999
-------- -------
ASSETS
Real estate inventories..................................... $ 81,237 $63,531
Property and equipment, net................................. 13,046 11,451
Other assets................................................ 15,552 6,954
-------- -------
Total assets........................................... $109,835 $81,936
======== =======
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable, deposits and other liabilities............ $ 23,950 $10,301
Notes and mortgages payable................................. 1,000 7,313
-------- -------
Total liabilities...................................... 24,950 17,614
Capital -- other partners................................... 41,943 31,740
Capital -- the Company...................................... 42,942 32,582
-------- -------
Total liabilities and partners' capital................ $109,835 $81,936
======== =======
DECEMBER 31,
----------------------------
2000 1999 1998
------- ------- ------
COMBINED RESULTS OF OPERATIONS
Revenues............................................... $18,138 $10,537 $9,026
======= ======= ======
Net earnings........................................... $ 1,104 $ 178 $3,288
======= ======= ======
Equity in earnings of unconsolidated ventures.......... $ 478 $ 95 $1,589
======= ======= ======
10. SENIOR SECURED CREDIT FACILITY
The outstanding balances of the senior secured credit facility consist of
the following:
DECEMBER 31,
--------------------
2000 1999
-------- --------
Amortizing term loan........................................ $250,000 $200,000
Revolving line of credit.................................... 39,000 86,630
-------- --------
$289,000 $286,630
======== ========
In June 1999, the Company consolidated, amended and restated its senior
secured credit facilities. The Consolidated, Amended and Restated Senior Secured
Facilities Credit Agreement (the Senior Facility) consisted of a $200,000
amortizing term loan and a $175,000 revolving loan, which initially accrued
interest at the lower of the lender's "base rate" plus .5% or the Eurodollar
base rate plus 3%, payable monthly in arrears. In connection with the amendment
and restatement, $1,709 in unamortized debt issue costs of the prior senior
secured credit facilities is included as additional loan costs of the Senior
Facility. The Company incurred fees of $250, $139 and $295 assessed by the
lender on the available revolving line of credit for December 31, 2000, 1999 and
1998, respectively.
In April 2000, the Company amended and restated its senior secured credit
facility. The new Senior Secured Facility Agreement provides for a $250,000
amortizing term loan and a $200,000 revolving loan.
F-19
161
WCI COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DOLLARS)
The loans mature in February 2004, and the initial interest rate is the lender's
"base rate" plus a spread of .25% or the Eurodollar base rate plus a spread of
2.75%, payable in arrears. The lender's and Eurodollar base rates can be reduced
by up to .25% and .50%, respectively, if certain conditions are met. The term
loan and revolving line are cross-collateralized by blanket first mortgages and
liens on substantially all assets of the Company. In connection with the
amendment and restatement, $6,945 in unamortized debt issue costs was recorded
as additional loan cost of the new Senior Facility.
The term loan agreement requires semi-annual principal installments of
$5,000 commencing on January 31, 2002. The revolving loan agreement allows for
prepayments and additional borrowings to the maximum amount, provided an
adequate collateral borrowing base is maintained. The revolving loan allows an
allocation of the unused balance for issuance of a maximum of $30,000 for
stand-by letters of credit. Outstanding letters of credit approximated $3,166 at
December 31, 2000.
11. FINANCE SUBSIDIARY DEBT
Finance subsidiary debt consists of the following:
DECEMBER 31,
------------------
2000 1999
------- -------
Consolidated and restated loan.............................. $72,495 $ --
Land acquisition loan....................................... -- 42,374
Subordinated loan........................................... -- 53,870
------- -------
$72,495 $96,244
======= =======
In April 1998, CFC entered into an agreement with an institutional lender
to borrow a base amount of $50,500 to fund a portion of the purchase of WELCO's
ownership interest. The subordinated loan accrued interest at a rate of 17% per
annum payable monthly in arrears at a rate of 10% per annum, with the excess
accrual of 7% interest added to the principal amount.
In March 1999, in connection with the acquisition of non-contiguous land in
Palm Beach and Martin Counties, Florida, CFC entered into an $85,500 land
acquisition loan from a consortium of lenders secured by a first lien on
property held. The loan accrued interest at the respective principal portions of
the loan balances at LIBOR plus 3% and LIBOR plus 6%. Interest is payable
monthly in arrears. At December 31, 1999, the rate range was 8.8% to 11.8%.
In August 2000, CFC repaid the portion of the land loan due to the lead
lender and entered into an agreement with the remaining participant to
consolidate, amend and restate the remaining portion of the land acquisition
loan and the $50,500 subordinated loan. The Consolidated, Amended and Restated
Loan aggregates $72,495 and is secured by substantially all of CFC's assets,
excluding the $43,879 in Watermark Junior Subordinated Notes. The loan is
guaranteed by a Watermark shareholder, which is collateralized by certain
shareholders' ownership interest and is non-recourse to the Company. The loan
accrues interest at a rate of LIBOR plus 6.0%, payable monthly in arrears and
matures in December 2002. The agreement contains significant restrictions with
respect to payment of distributions and use of proceeds from liquidation of
assets and acquisition of assets.
F-20
162
WCI COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DOLLARS)
12. MORTGAGES AND NOTES PAYABLE
Mortgages and notes payable consist of the following:
DECEMBER 31,
-------------------
2000 1999
-------- -------
Bequia/Salerno/Verona $48,200 construction loan............. $ -- $24,460
Caribe/Sorrento/Montenero/Harbor Towers II $94,250
construction loans........................................ 43,969 1,870
Trieste/Seasons/Montego/The Pointe $107,880 construction
loans..................................................... 15,278 --
Wildcat Run of Lee County, Inc. $4,030 promissory note...... 1,725 2,465
JYC Holdings, Inc. $11,954 loans............................ 10,051 11,051
Cape Marco $13,000 purchase money mortgage loan............. 13,000 --
Naples Cay $10,500 purchase money mortgage loan............. -- 8,800
Sun City Center amenities $27,000 promissory note........... 26,558 26,845
Burnt Store Marina amenities $6,320 promissory note......... 4,837 5,055
Other mortgage loans and promissory notes................... -- 2,787
-------- -------
$115,418 $83,333
======== =======
The Bequia/Salerno/Verona, Caribe/Sorrento/Montenero/Harbor Towers II and
Trieste/Seasons/ Montego/The Pointe construction loans represent amounts payable
to commercial banks. The loans are collateralized by first mortgages, and
interest is payable monthly in arrears at rates based on the bank's prime,
Eurodollar or LIBOR rate. The interest rates at December 31, 2000 range from
approximately 8.69% to 9.75%. The Bequia/Salerno/Verona loan was repaid in May
2000. The Caribe/Sorrento/ Montenero/Harbor Towers II loan matures November
2001. The Trieste/Seasons/ Montego/The Pointe loan matures December 2002.
In connection with acquiring the real estate assets and equity club
memberships in the Wildcat Run community, Wildcat Run of Lee County, Inc., a
wholly owned subsidiary of BCG, entered into a promissory note payable to the
seller. The note is collateralized by the related investment in golf equity and
social memberships and accrues interest at 7% commencing December 1998. The note
matures in November 2002 and requires principal payments upon the sale of each
collateralized membership and the principal balance is non-recourse.
In connection with acquiring land known as Naples Cay, BCG entered into a
purchase money mortgage loan payable to the seller. The loan was repaid in June
2000.
Sun City Center amenities promissory note is collateralized by the Sun City
Center golf courses, country club and recreational facilities. The note was
amended and restated in July 1999, and note balance increased from $24,000 to
$27,000. Interest is payable monthly in arrears at 30-day LIBOR plus 3.2% (9.8%
at December 31, 2000) and the loan is due on August 1, 2004.
Burnt Store Marina amenities promissory note is unsecured. Interest is
payable monthly in arrears at a prime rate plus 1%, as calculated annually April
1 (10.0% at April 1, 2000) and the loan is due on April 1, 2002.
In connection with acquiring the real estate assets of the Jupiter Yacht
Club community in Palm Beach County, Florida, JYC Holdings, Inc., a wholly owned
subsidiary of BCG, entered into promissory notes payable to the seller for
$1,000 and $6,704, and assumed a $4,250 mortgage and note payable to an
institutional lender. The $1,000 promissory note is non-interest bearing, is
secured by a performance bond, and matures in February 2002. The $6,704
promissory note and outstanding accrued interest, totaling
F-21
163
WCI COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DOLLARS)
$6,801 was assigned by the seller to a commercial bank. This $6,801 note accrues
interest at the bank's prime rate plus .75%, is payable monthly commencing July
1999, and matures February 2001. The $4,250 mortgage note accrues interest at
8.0%, requires annual payments of principal and accrued interest, and matures
October 2002.
In connection with acquiring land known as Cape Marco in Marco Island,
Florida, the Company and BCG collectively entered into a loan agreement with a
commercial bank. The loan is collateralized by a first mortgage on the property.
Interest is payable monthly in arrears at the bank's prime rate or LIBOR plus
2.75%. The interest rate at December 31, 2000 was 9.5%, and the loan matures in
October 2003.
Other mortgage loans consisted primarily of notes payable to individuals
for real estate purchases. Interest charged varies with each note, ranging from
approximately 6% to 12% per annum. Maturity dates range from less than 1 year to
approximately 3 years. During 2000, all of these loans were repaid.
13. SUBORDINATED NOTES
Subordinated notes consist of the following:
DECEMBER 31,
------------------
2000 1999
------- -------
13% related party subordinated notes maturing June 30,
2004...................................................... $42,000 $42,000
15% subordinated note maturing January 1, 2004.............. 10,618 10,618
Prime plus 3.0% related party subordinated notes maturing
May 2001 (interest rate of 12.5% at December 31, 2000).... 884 884
Prime plus 2.5% related party subordinated notes maturing
May 2001 (interest rate of 12% at December 31, 2000)...... 3,508 3,508
------- -------
Total............................................. $57,010 $57,010
======= =======
These notes are subordinated to substantially all other debt, and the 15%
subordinated note has payment priority over the related party subordinated
notes.
14. DEBT MATURITIES
Aggregate maturities of the senior secured credit facilities, finance
subsidiary debt, mortgages and notes payable and subordinated notes are as
follows:
2001...................................................... $ 56,673
2002...................................................... 106,715
2003...................................................... 23,370
2004...................................................... 347,165
2005...................................................... --
--------
Total........................................... $533,923
========
15. COMMUNITY DEVELOPMENT DISTRICT OBLIGATIONS
In connection with development of the Coral Springs, Heron Bay, Parkland,
Pelican Landing, Pelican Marsh, Pelican Sound, Tiburon and Gateway communities,
which are in various stages of development, bond financing is utilized to
construct certain on-site and off-site infrastructure improvements, including
major roadway and water management systems and certain amenities. Bond financing
is obtained through the establishment of a community development district, a
local governmental entity. Although the Company is not obligated directly to
repay some of the bonds, it guarantees district shortfalls under certain
F-22
164
WCI COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DOLLARS)
bond debt service agreements. User fees and special assessments payable upon
sale of property benefited by the underlying improvements are designed to fund
bond debt service, including principal and interest payments, as well as
district operating and maintenance cost.
The amount of bond obligations that have been issued over several years
with respect to the Company's communities total $177,500 and $156,832 at
December 31, 2000 and 1999, respectively. The Company has accrued $26,944 and
$36,864 as of December 31, 2000 and 1999, respectively, as its estimate of the
amount of bond obligations that it may be required to fund. The Company could be
required to fund guarantees of district shortfalls if such shortfalls exceed the
Company's estimates. Bond obligations at December 31, 2000 mature from 2004 to
2031.
16. INCOME TAXES
The provision for income taxes consists of the following:
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
2000 1999 1998
-------- -------- --------
Current:
Federal............................................. $29,790 $12,554 $ 9,706
State............................................... 6,260 3,176 1,552
------- ------- -------
36,050 15,730 11,258
------- ------- -------
Deferred:
Federal............................................. 14,072 11,947 1,392
State............................................... 2,340 1,986 231
------- ------- -------
16,412 13,933 1,623
------- ------- -------
Release of valuation allowance........................ -- (35,225) --
------- ------- -------
Total................................................. $52,462 $(5,562) $12,881
======= ======= =======
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of the assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
F-23
165
WCI COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DOLLARS)
On June 29, 1999, the Company merged its commonly controlled, wholly-owned
subsidiaries WCI LP and FDC and renamed the surviving entity WCI Communities,
Inc. As a result, BCG no longer files as a separate consolidated tax group and
is included in the consolidated tax returns of the Company for the years ended
December 31, 2000 and 1999. The net deferred income tax (liability)/asset
consists of the following:
DECEMBER 31,
-------------------
2000 1999
-------- -------
Deferred tax assets:
Net unrealized built-in losses............................ $ 15,338 $16,398
AMT credit................................................ -- 6,933
Accruals.................................................. 3,843 2,604
Deferred income........................................... 84 42
Amenities................................................. 437 --
-------- -------
Total deferred tax assets......................... 19,702 25,977
-------- -------
Deferred tax liabilities:
Amenities................................................. -- 568
Real estate inventories................................... 15,402 7,457
Investments in joint ventures............................. 2,173 783
Property and equipment.................................... 16,847 15,943
Intangibles............................................... 995 231
-------- -------
35,417 24,982
-------- -------
Net deferred income tax (liability)/asset......... $(15,715) $ 995
======== =======
The deferred tax asset is adjusted by a valuation allowance if, based on
the weight of available evidence, it is more likely than not that a portion or
all of the deferred tax asset will not be realized. For the year ended December
31, 1999, the deferred tax allowance of $35,225 was released due to a change in
realizability. The basis for the release of the deferred tax allowance results
from improved profitability during 1999 and increasing taxable income, resulting
in cumulative taxable income over the prior two years and the current year, and
forecasts projecting future taxable income. However, utilization of the
unrealized built-in losses is limited to approximately $8,369 each year for five
years beginning with the year of ownership change. Utilization of net operating
losses and net unrealized built-in losses may be further limited in the event of
an ownership change of BCG and/or the Company.
A reconciliation of the statutory rate and the effective tax rate follows:
DECEMBER 31,
% OF PRE-TAX INCOME
-----------------------
2000 1999 1998
----- ----- -----
Statutory rate.............................................. 35.0 35.0 35.0
State income taxes, net of federal income tax benefit....... 3.6 3.6 3.6
Change in valuation allowance............................... -- (47.9) (16.1)
Other....................................................... 0.4 1.7 0.6
----- ----- -----
Effective rate......................................... 39.0 (7.6) 23.1
===== ===== =====
F-24
166
WCI COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DOLLARS)
17. STOCK OPTION PLANS
(In thousands of dollars, except share data)
In December 1998, a stock option plan was approved for certain key
employees. The plan is administered by a committee of three directors (the
"Committee") who determine the employees eligible to participate and the number
of shares for which options are to be granted. The maximum number of shares
available to be granted as of December 31, 2000 were an aggregate 2,000,000
common shares in the Company's parent, Watermark. Under the terms of the plan,
generally, the option exercise price is equal to the fair market value of the
share of common stock on the date of grant and the options expire not more than
10 years after the date of grant. During 2000, 1999 and 1998, 430,750, 316,490
and 1,060,695 options to purchase Watermark common stock were granted at an
$8.63 option price, respectively. The exercise price is believed by management
to be equal to the fair market value at date of grant and accordingly, no
compensation cost was recorded. The majority of these options are classified as
qualified incentive stock options under the Internal Revenue Code. Options vest
from grant date over five years and are exercisable within ten years of the
grant date, at which time the options will expire.
In 1998, the Company adopted the 1998 Watermark Communities, Inc.
Non-Employee Director's Stock Incentive Plan, pursuant to which non-qualified
stock options to purchase up to 150,000 shares of the common stock of Watermark
Communities may be granted to non-employee directors of Watermark Communities or
any of its subsidiaries. The Compensation Committee administers the plan, and
will from time to time grant options under the plan in such form and having such
terms, conditions and limitations as the committee may determine in accordance
with the plan. Participants may defer all or a portion of their directors'
meeting fees to apply to the exercise price of vested shares in the plan. During
2000, 1999 and 1998, 0, 20,000 and 40,000 options to purchase Watermark common
stock were granted at an $8.63 option price, respectively. The exercise price is
believed by management to be equal to the fair market value at date of grant and
accordingly, no compensation cost was recorded. Options vest from grant date
over 3 years and are exercisable within 10 years from grant date at which time
the options expire. As of December 31, 2000 the weighted average remaining life
is 8.5 years.
The activity related to the options in the stock option plans is summarized
as follows:
WEIGHTED
AVERAGE NUMBER OF OPTIONS
EXERCISE EXERCISE FOR THE YEARS ENDED DECEMBER 31,
PRICE PRICE ---------------------------------
PER SHARE PER SHARE 2000 1999 1998
--------- --------- --------- --------- ---------
Outstanding beginning of year....... $8.63 $8.63 1,238,790 1,100,695 --
Granted............................. 8.63 8.63 430,750 336,490 1,100,695
Exercised........................... 8.63 8.63 (2,187) (3,014) --
Canceled............................ 8.63 8.63 (101,071) (195,381) --
----- ----- --------- --------- ---------
Outstanding options -- end of
year.............................. $8.63 $8.63 1,566,282 1,238,790 1,100,695
===== ===== ========= ========= =========
Options exercisable -- end of
year.............................. $8.63 $8.63 660,102 564,747 298,474
===== ===== ========= ========= =========
The exercise price per share and weighted average exercise price per share
remained constant during 2000, 1999 and 1998.
F-25
167
WCI COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DOLLARS)
Had the Company elected to recognize compensation expense under the fair
value method under Financial Accounting Standards Board Statement No. 123
"Accounting for Stock Based Compensation," pro-forma net income would be as
follows:
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
2000 1999 1998
-------- -------- --------
Net income:
As reported......................................... $81,941 $79,893 $42,929
Pro-forma........................................... $81,651 $79,385 $42,691
These pro-forma amounts may not be representative of the effect on
pro-forma net income in future years, since the estimated fair value of stock
options is amortized over the vesting period and additional options may be
granted in future years.
The weighted average fair value of options granted during 2000, 1999 and
1998 was $2.77, $2.54 and $2.03, respectively, per share at date of grant. The
fair values of options granted were estimated using the Black-Scholes option
pricing model with the following assumptions; expected option life of six years,
dividend yield of $0 and expected volatility of 0% for each year. The risk free
interest rate assumptions range from 5.70% to 6.69%, 5.64% to 6.33%, and 4.56%
for 2000, 1999, 1998, respectively.
18. TRANSACTIONS WITH RELATED PARTIES
Due to the nature of the following relationships, the terms of the
respective agreements might not be the same as those, which would result from
transactions among wholly unrelated parties. All significant related party
transactions require approval by the Company's non-employee board of directors.
In March 1999, the Company, through CFC, acquired for approximately
$219,090 non-contiguous land in Palm Beach and Martin Counties, Florida from a
Watermark shareholder. The acquisition was financed primarily through net
proceeds from simultaneous resale of certain acquired land to third parties for
approximately $116,120, $85,500 loan from a consortium of lenders secured by a
first lien on the property held and $17,470 in cash. No gain was recognized by
the Company on this transaction. In addition, the Company also remitted $8,100
to an escrow agent for land subject to a right of first refusal for purchase by
a third party, which the Company purchased in July 1999. In conjunction with the
acquisition, the Company assumed approximately $12,665 of future land
improvement obligations.
Certain shareholders in Watermark provided financial and management
consulting services to the Company under management contracts. Management fees
totaled $660, $725 and $1,320 for the years ended December 31, 2000, 1999 and
1998, respectively. During 1999, certain of these shareholders became Company
employees.
In 1997, a triple-net lease agreement for an office building was entered
into with a related party. The lease term expires in May 2007, and rent of
$1,370, $1,078 and $952 was incurred for the years ended December 31, 2000, 1999
and 1998, respectively. Pursuant to five separate lease agreements, a related
party leases commercial office space to the Company with lease expirations
ranging from January 2001 to January 2002. Payments under the leases aggregated
approximately $248 and $274 in 2000 and 1999, respectively.
In 1998, a land parcel located in Parkland, Florida was sold to a related
party for $2,100, and $566 of profit was recognized.
In 1998, a land parcel located in Palm Beach County, Florida was purchased
for $10,049 from a Watermark shareholder.
F-26
168
WCI COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DOLLARS)
Fees paid to related parties in conjunction with acquisitions amounted to
$1,848 for the year ended December 31, 1998.
On June 15, 1999, CFC sold multi-family residential parcels to a related
party for $6,000. As a result of this transaction, $600 of revenue was deferred
and approximately $1,517 of profit was recognized.
In October 1998, FDC distributed a boat to its stockholders. The boat was
distributed free and clear of all liens, claims and encumbrances. In connection
with the purchase of the boat, FDC incurred $750 of debt to a commercial bank.
The loan was repaid in September 2000.
A related party acquired an airplane, which is being leased from the
related party under a shared usage agreement between the related party and the
Company. Usage payments totalled $555 for the year ended December 31, 2000. No
usage payments were made for 1999.
19. COMMITMENTS AND CONTINGENCIES
The Company leases building space for its management offices, sales offices
and other equipment and facilities. Minimum future commitments under
non-cancelable operating leases having a remaining term in excess of one year as
of December 31, 2000, are as follows:
2001....................................................... $ 8,047
2002....................................................... 6,203
2003....................................................... 4,741
2004....................................................... 3,551
2005....................................................... 1,893
Thereafter................................................. 3,434
-------
$27,869
=======
Rental expense including base and operating cost reimbursements of $10,155,
$6,809 and $3,928 was incurred for the years ended December 31, 2000, 1999 and
1998, respectively.
The Company has surety bond lines with $102,222 outstanding at December 31,
2000 in connection with its land development operations.
In July 2000, the Company acquired land subject to a $6,000 unsecured
obligation to the seller, an unaffiliated party. The obligation is due no later
than June 2003. The Company is also responsible for payment of license fees.
In 1997, land was sold to an unaffiliated party subject to an option
agreement, which expires in 2003. The Company is required to repurchase a
specified amount of land to be developed annually in accordance with terms of
the agreement. The Company incurs annual option fees equal to prime rate plus
9.75%, not to exceed 20% and not less than 18% per annum of the sales value of
the land available to be repurchased. Since the sale does not meet the
requirements for income recognition, the related inventory is classified as work
in process and the repurchase obligations are classified as other liabilities.
The Company leased the golf course and club facility at Pelican's Nest
through July 1999. Lease fees of approximately $1,339 and $1,923 were incurred
for the years ended December 31, 1999 and 1998, respectively.
From time to time, the Company has been involved in various litigation
matters involving ordinary and routine claims incidental to its business. In
addition, in May 2000, individuals filed a lawsuit against the Company, which
seeks class action status, and arising out of a preferred builder program under
which plaintiffs purchased vacant lots and then contracted with a builder of
their choice to construct a residence on their lots. In consideration of the
extensive costs incurred by the Company associated with the
F-27
169
WCI COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DOLLARS)
marketing, sales and advertising of the community for the benefit of the
builders, who participated in the program, these builders were required to pay a
marketing fee to the Company based on a percentage of the construction cost of
the home. Plaintiffs assert that the Company had an obligation to disclose to
them that the preferred builder would pay a marketing fee to the Company. The
Company has objected to the certification of this lawsuit as a class action. The
plaintiffs have demanded unspecified money damages and have alleged, among other
things, violation of the federal Racketeering, Influenced and Corrupt
Organizations Act and the Real Estate Settlement Procedures Act. Since the Court
has not yet ruled on whether to certify this lawsuit as a class, this litigation
is still in its early stages, the Company is not yet able to determine whether
the resolution of this matter will have a material adverse effect on the
Company's financial condition or results of operations, although Company
believes it has meritorious defenses and intends to vigorously defend this
action.
In accordance with various amenity and equity club documents, the Company
operates the facilities until control of the amenities are transferred to the
membership. In addition, the Company is required to fund the cost of
constructing club facilities and acquiring related equipment and to support
operating deficits prior to turnover.
The Company may be responsible for funding certain condominium, homeowner
and foundation deficits in the ordinary course of business. The Company does not
currently believe these obligations will have any material adverse effect on its
financial position or results of operations and cash flows.
20. SUBSEQUENT EVENTS
In January 2001, the Company purchased 463 acres in north Naples for
approximately $29,000, where the Company plans to develop a luxury golf
community. The Company also purchased five acres in north Dade County for
$20,000, where the Company plans to construct a tower residence.
21. SUPPLEMENTAL GUARANTOR INFORMATION
The Company issued $250,000 of 10.625% senior subordinated notes on
February 14, 2001. The proceeds of these notes will be used to repay existing
debt and extinguish land repurchase liabilities. Future obligations to pay
principal and interest will be guaranteed fully and unconditionally by the
Company's wholly owned subsidiaries, including its only significant subsidiary,
BCG. Separate financial statements of the guarantors are not provided, as
subsidiaries guarantors are 100% owned by the Company and guarantees are full,
unconditional, joint and several. Supplemental consolidating financial
information of the Company, specifically including such information for the
future guarantors is presented below. The Company's non-guarantor subsidiary is
considered minor and accordingly not presented separately in the consolidating
financial information. The non-guarantor subsidiary's assets, stockholder's
equity and revenue were approximately $2,977, $417, and $4,270 at December 31,
2000 and for the year then ended and $3,815, $6, and $4,211 at December 31, 1999
and for the year then ended, respectively.
F-28
170
WCI COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DOLLARS)
CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2000
-----------------------------------------------------------
CONSOLIDATED
WCI WCI
COMMUNITIES, GUARANTOR ELIMINATING COMMUNITIES,
INC. SUBSIDIARIES ENTRIES INC.
------------ ------------ ----------- ------------
ASSETS
Cash and cash equivalents................. $ 49,143 $ 6,594 $ -- $ 55,737
Restricted cash........................... 1,549 13,972 -- 15,521
Contracts receivable...................... 155,882 72,860 -- 228,742
Mortgage notes and accounts receivable.... 17,775 16,439 (892) 33,322
Real estate inventories................... 405,809 243,198 -- 649,007
Investments in amenities.................. 9,849 24,983 -- 34,832
Property and equipment.................... 25,513 55,804 -- 81,317
Investments in joint ventures............. 10,712 25,080 -- 35,792
Investment in guarantor subsidiaries...... 192,904 -- (192,904) --
Investment in parent entities............. -- 44,572 (44,572) --
Other assets.............................. 118,274 30,336 (102,159) 46,451
Goodwill and other intangible assets...... 23,263 9,112 -- 32,375
---------- -------- --------- ----------
Total assets.................... $1,010,673 $542,950 $(340,527) $1,213,096
========== ======== ========= ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued expenses..... $ 105,352 $ 41,972 $ (892) $ 146,432
Customer deposits and other liabilities... 92,185 173,295 (94,620) 170,860
Deferred income tax liabilities........... 23,254 -- (7,539) 15,715
Community development district
obligations............................. 26,944 -- -- 26,944
Senior secured credit facilities.......... 289,000 -- -- 289,000
Finance subsidiary debt................... -- 72,495 -- 72,495
Mortgages and notes payable............... 53,134 62,284 -- 115,418
Subordinated notes........................ 100,783 -- (43,773) 57,010
---------- -------- --------- ----------
690,652 350,046 (146,824) 893,874
========== ======== ========= ==========
Commitments and contingencies
Shareholders' equity...................... 320,021 192,904 (193,703) 319,222
---------- -------- --------- ----------
Total liabilities and
shareholders' equity.......... $1,010,673 $542,950 $(340,527) $1,213,096
========== ======== ========= ==========
F-29
171
WCI COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DOLLARS)
CONSOLIDATING STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 2000
-----------------------------------------------------------
CONSOLIDATED
WCI WCI
COMMUNITIES, GUARANTOR ELIMINATING COMMUNITIES,
INC. SUBSIDIARIES ENTRIES INC.
------------ ------------ ----------- ------------
REVENUES
Homebuilding.............................. $465,816 $148,849 $ -- $614,665
Parcel and lot............................ 88,169 42,749 -- 130,918
Amenity membership and operations......... 18,632 52,342 -- 70,974
Real estate services and other............ 10,831 60,180 (5,416) 65,595
-------- -------- -------- --------
Total revenues.................. 583,448 304,120 (5,416) 882,152
-------- -------- -------- --------
COSTS OF SALES
Homebuilding.............................. 337,969 107,417 -- 445,386
Parcel and lot............................ 35,442 23,935 -- 59,377
Amenity membership and operations......... 8,726 47,094 -- 55,820
Real estate services and other............ 644 45,707 -- 46,351
-------- -------- -------- --------
Total costs of sales............ 382,781 224,153 -- 606,934
-------- -------- -------- --------
Contribution margin............. 200,667 79,967 (5,416) 275,218
-------- -------- -------- --------
OTHER EXPENSES
Interest expense, net..................... 42,186 6,593 (5,416) 43,363
Selling, general, administrative and
other................................... 65,529 14,954 -- 80,483
Real estate taxes, net.................... 6,419 2,896 -- 9,315
Depreciation and amortization............. 2,628 1,797 -- 4,425
Amortization of goodwill and intangible
asset................................... 1,801 1,428 -- 3,229
-------- -------- -------- --------
Total other expenses............ 118,563 27,668 (5,416) 140,815
-------- -------- -------- --------
Income before income taxes and equity in
income of guarantor subsidiaries........ 82,104 52,299 -- 134,403
Income tax expense........................ (31,833) (20,629) -- (52,462)
Equity in income of guarantor
subsidiaries, net of tax................ 31,670 -- (31,670) --
-------- -------- -------- --------
Net income................................ $ 81,941 $ 31,670 $(31,670) $ 81,941
======== ======== ======== ========
F-30
172
WCI COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DOLLARS)
CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2000
-----------------------------------------------------------
CONSOLIDATED
WCI WCI
COMMUNITIES, GUARANTOR ELIMINATING COMMUNITIES,
INC. SUBSIDIARIES ENTRIES INC.
------------ ------------ ----------- ------------
Cash flows from operating activities:
Net income..................................... $ 81,941 $ 31,670 $(31,670) $ 81,941
Adjustments to reconcile net income to net cash
(used) provided by operating activities:
Depreciation and amortization................ 7,114 5,170 -- 12,284
Gain on disposal of property and equipment... (4,507) -- -- (4,507)
(Earnings) losses from investments in joint
ventures, net of write-offs................ (2,682) 1,362 -- (1,320)
Contributions to investments in joint
ventures, net.............................. (23) (9,055) -- (9,078)
Equity in earnings of guarantor
subsidiaries............................... (31,670) -- 31,670 --
Distributions from guarantor subsidiaries.... 14,364 -- (14,364) --
Changes in assets and liabilities:
Restricted cash.............................. 4,369 (3,225) -- 1,144
Contracts and accounts receivable............ (130,642) 9,702 (174) (121,114)
Real estate inventories...................... (22,999) (25,549) -- (48,548)
Investments in amenities..................... 97 9,015 -- 9,112
Other assets................................. (44,589) 3,968 28,684 (11,937)
Accounts payable and accrued expenses........ 48,673 9,193 174 58,040
Customer deposits and other liabilities...... 33,813 53,897 (40,649) 47,061
Deferred income tax liabilities.............. 5,305 -- 10,410 15,715
--------- -------- -------- ---------
Net cash (used) provided by operating
activities.............................. (41,436) 86,148 (15,919) 28,793
--------- -------- -------- ---------
Cash flows from investing activities:
Principal reductions on mortgages and notes
receivable................................... 953 809 -- 1,762
Disposals of (additions to) property and
equipment.................................... 8,591 (20,680) -- (12,089)
Proceeds from sale of property and equipment... 14,175 -- -- 14,175
Payment for purchase of assets of real estate
brokerages................................... -- (4,064) -- (4,064)
--------- -------- -------- ---------
Net cash provided (used) by investing
activities.............................. 23,719 (23,935) -- (216)
--------- -------- -------- ---------
Cash flows from financing activities:
Net borrowings on senior secured credit
facilities................................... 2,370 -- -- 2,370
Net borrowings (repayments) on mortgages and
notes payable................................ 43,863 (13,334) 1,556 32,085
Net repayments on finance subsidiary debt...... -- (26,367) -- (26,367)
Net reductions on community development
district obligations......................... (6,650) (3,270) -- (9,920)
Debt issue costs............................... (2,694) (1,587) -- (4,281)
Distribution to shareholder, net............... -- (14,363) 14,363 --
Purchase of Watermark common stock from
employees.................................... (446) -- -- (446)
Other.......................................... 227 -- -- 227
--------- -------- -------- ---------
Net cash provided (used) by financing
activities.............................. 36,670 (58,921) 15,919 (6,332)
--------- -------- -------- ---------
Net increase in cash and cash equivalents........ 18,953 3,292 -- 22,245
Cash and cash equivalents at beginning of year... 30,190 3,302 -- 33,492
--------- -------- -------- ---------
Cash and cash equivalents at end of year......... $ 49,143 $ 6,594 $ -- $ 55,737
========= ======== ======== =========
F-31
173
WCI COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DOLLARS)
CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1999
-----------------------------------------------------------
CONSOLIDATED
WCI WCI
COMMUNITIES, GUARANTOR ELIMINATING COMMUNITIES,
INC. SUBSIDIARIES ENTRIES INC.
------------ ------------ ----------- ------------
ASSETS
Cash and cash equivalents................. $ 30,190 $ 3,302 $ -- $ 33,492
Restricted cash........................... 5,918 10,747 -- 16,665
Contracts receivable...................... 25,844 92,825 -- 118,669
Mortgage notes and accounts receivable.... 18,124 6,986 (1,067) 24,043
Real estate inventories................... 376,810 217,649 -- 594,459
Investments in amenities.................. 9,946 33,998 -- 43,944
Property and equipment.................... 46,400 35,988 -- 82,388
Investments in joint ventures............. 8,007 17,387 -- 25,394
Investment in guarantor subsidiaries...... 175,598 -- (175,598) --
Investment in parent entities............. -- 44,572 (44,572) --
Other assets.............................. 82,317 25,939 (73,475) 34,781
Goodwill and other intangible assets...... 16,423 13,841 -- 30,264
-------- -------- --------- ----------
Total assets.................... $795,577 $503,234 $(294,712) $1,004,099
======== ======== ========= ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued expenses..... $ 56,679 $ 35,359 $ (1,066) $ 90,972
Customer deposits and other liabilities... 52,372 117,145 (53,971) 115,546
Deferred income tax liabilities........... 17,949 -- (17,949) --
Community development district
obligations............................. 33,594 3,270 -- 36,864
Senior secured credit facilities.......... 286,630 -- -- 286,630
Finance subsidiary debt................... -- 96,244 -- 96,244
Mortgages and notes payable............... 9,271 75,618 (1,556) 83,333
Subordinated notes........................ 100,783 -- (43,773) 57,010
-------- -------- --------- ----------
557,278 327,636 (118,315) 766,599
======== ======== ========= ==========
Commitments and contingencies
Shareholders' equity...................... 238,299 175,598 (176,397) 237,500
-------- -------- --------- ----------
Total liabilities and
shareholders' equity.......... $795,577 $503,234 $(294,712) $1,004,099
======== ======== ========= ==========
F-32
174
WCI COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DOLLARS)
CONSOLIDATING STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1999
-----------------------------------------------------------
CONSOLIDATED
WCI WCI
COMMUNITIES, GUARANTOR ELIMINATING COMMUNITIES,
INC. SUBSIDIARIES ENTRIES INC.
------------ ------------ ----------- ------------
REVENUES
Homebuilding.............................. $291,792 $137,045 $ -- $428,837
Parcel and lot............................ 76,339 55,334 -- 131,673
Amenity membership and operations......... 43,636 32,671 -- 76,307
Real estate services and other............ 4,378 46,152 (5,931) 44,599
-------- -------- -------- --------
Total revenues.................. 416,145 271,202 (5,931) 681,416
-------- -------- -------- --------
COSTS OF SALES
Homebuilding.............................. 233,200 91,591 -- 324,791
Parcel and lot............................ 35,092 40,773 -- 75,865
Amenity membership and operations......... 32,741 30,855 -- 63,596
Real estate services and other............ 4,632 15,566 (522) 19,676
-------- -------- -------- --------
Total costs of sales............ 305,665 178,785 (522) 483,928
-------- -------- -------- --------
Contribution margin............. 110,480 92,417 (5,409) 197,488
-------- -------- -------- --------
OTHER EXPENSES
Interest expense, net..................... 34,792 13,238 (5,409) 42,621
Selling, general, administrative and
other................................... 47,427 17,053 -- 64,480
Real estate taxes, net.................... 5,398 2,183 -- 7,581
Depreciation and amortization............. 3,805 593 -- 4,398
Amortization of goodwill and intangible
asset................................... 1,986 397 -- 2,383
-------- -------- -------- --------
Total other expenses............ 93,408 33,464 (5,409) 121,463
-------- -------- -------- --------
Income before income taxes, equity in
income of guarantor subsidiaries and
extraordinary
item.................................... 17,072 58,953 -- 76,025
Income tax (expense) benefit.............. (6,528) 12,090 -- 5,562
Equity in income of guarantor
subsidiaries, net of tax................ 69,349 -- (69,349) --
-------- -------- -------- --------
Income before extraordinary item.......... 79,893 71,043 (69,349) 81,587
Extraordinary item
Net loss on debt restructuring.......... -- (1,694) -- (1,694)
-------- -------- -------- --------
Net income................................ $ 79,893 $ 69,349 $(69,349) $ 79,893
======== ======== ======== ========
F-33
175
WCI COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DOLLARS)
CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1999
-----------------------------------------------------------
CONSOLIDATED
WCI WCI
COMMUNITIES, GUARANTOR ELIMINATING COMMUNITIES,
INC. SUBSIDIARIES ENTRIES INC.
------------ ------------ ----------- ------------
Cash flows from operating activities:
Net income..................................... $ 79,893 $ 69,349 $(69,349) $ 79,893
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Release of tax asset valuation allowance..... (30,296) 11,796 -- (18,500)
Depreciation and amortization................ 6,961 2,868 -- 9,829
Net loss on debt restructuring............... -- 1,694 -- 1,694
Losses (earnings) from investments in joint
ventures, net of write-offs................ 266 (210) -- 56
(Contributions to) distributions from
investments in joint ventures, net......... (350) 505 -- 155
Equity in earnings of guarantor
subsidiaries............................... (69,349) -- 69,349 --
Distributions from guarantor subsidiaries.... 4,966 -- (4,966) --
Changes in assets and liabilities:
Restricted cash.............................. (2,936) 8,079 -- 5,143
Contracts and accounts receivable............ 36,052 38,797 (14,080) 60,769
Real estate inventories...................... (22,228) (116,702) -- (138,930)
Investments in amenities..................... 26,595 (21,674) -- 4,921
Other assets................................. (6,794) (22,828) 48,854 19,232
Accounts payable and accrued expenses........ (19,349) 6,458 8,880 (4,011)
Customer deposits and other liabilities...... (10,248) 45,948 (36,929) (1,229)
Deferred income tax liabilities.............. 17,949 (123) (17,826) --
-------- --------- -------- ---------
Net cash provided by operating
activities............................... 11,132 23,957 (16,067) 19,022
-------- --------- -------- ---------
Cash flows from investing activities:
(Additions to) principal reductions on
mortgages and notes receivable............... (8,245) 2,353 13,744 7,852
Disposals of (additions to) property and
equipment.................................... 23,523 (35,356) -- (11,833)
Other.......................................... -- 3,000 -- 3,000
Payment for purchase of assets of real estate
brokerages................................... -- (350) -- (350)
-------- --------- -------- ---------
Net cash provided (used) by investing
activities............................... 15,278 (30,353) 13,744 (1,331)
-------- --------- -------- ---------
Cash flows from financing activities:
Net borrowings on senior secured credit
facilities................................... 60,750 -- -- 60,750
Net repayments on mortgages and notes
payable...................................... (52,067) (269) (1,556) (53,892)
Net reductions on community development
district obligations......................... (3,333) (2,280) -- (5,613)
Net borrowings on finance subsidiary debt...... -- 4,704 -- 4,704
Debt issue costs............................... (8,000) (2,857) -- (10,857)
Distribution to shareholder, net............... -- (4,966) 4,966 --
Purchase of Watermark common stock from
employees.................................... (349) -- -- (349)
Other.......................................... 1,087 -- (1,087) --
-------- --------- -------- ---------
Net cash used by financing activities........ (1,912) (5,668) 2,323 (5,257)
-------- --------- -------- ---------
Net increase (decrease) in cash and cash
equivalents.................................... 24,498 (12,064) -- 12,434
Cash and cash equivalents at beginning of year... 5,692 15,366 -- 21,058
-------- --------- -------- ---------
Cash and cash equivalents at end of year......... $ 30,190 $ 3,302 $ -- $ 33,492
======== ========= ======== =========
F-34
176
WCI COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DOLLARS)
CONSOLIDATING STATEMENT OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1998
-----------------------------------------------------------
CONSOLIDATED
WCI WCI
COMMUNITIES, GUARANTOR ELIMINATING COMMUNITIES,
INC. SUBSIDIARIES ENTRIES INC.
------------ ------------ ----------- ------------
REVENUES
Homebuilding.............................. $123,650 $127,914 $ -- $251,564
Parcel and lot............................ 131,550 8,457 -- 140,007
Amenity membership and operations......... 15,332 17,792 -- 33,124
Real estate services and other............ 6,342 23,299 (5,973) 23,668
-------- -------- -------- --------
Total revenues.................. 276,874 177,462 (5,973) 448,363
-------- -------- -------- --------
COSTS OF SALES
Homebuilding.............................. 93,865 87,601 -- 181,466
Parcel and lot............................ 81,186 6,847 -- 88,033
Amenity membership and operations......... 14,461 17,075 -- 31,536
Real estate services and other............ 8,609 8,059 (3,275) 13,393
-------- -------- -------- --------
Total costs of sales............ 198,121 119,582 (3,275) 314,428
-------- -------- -------- --------
Contribution margin............. 78,753 57,880 (2,698) 133,935
-------- -------- -------- --------
OTHER EXPENSES
Interest expense, net..................... 14,094 22,425 (1,899) 34,620
Selling, general, administrative and
other................................... 20,935 8,917 -- 29,852
Real estate taxes, net.................... 5,198 2,325 -- 7,523
Depreciation and amortization............. 2,531 -- -- 2,531
Stock plan expense........................ 4,423 -- -- 4,423
Dividend on redeemable preferred stock.... -- 922 -- 922
-------- -------- -------- --------
Total other expenses............ 47,181 34,589 (1,899) 79,871
-------- -------- -------- --------
Income before income taxes, equity in
income of guarantor subsidiaries and
extraordinary
item.................................... 31,572 23,291 (799) 54,064
Income tax expense........................ (12,881) -- -- (12,881)
Equity in income of guarantor
subsidiaries, net of tax................ 24,278 -- (24,278) --
-------- -------- -------- --------
Income before extraordinary item.......... 42,969 23,291 (25,077) 41,183
Excess of carrying value of preferred
stock over fair value of consideration
paid.................................... -- 1,786 -- 1,786
-------- -------- -------- --------
Net income available to
shareholders/partners................... $ 42,969 $ 25,077 $(25,077) $ 42,969
======== ======== ======== ========
F-35
177
WCI COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DOLLARS)
CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1998
-----------------------------------------------------------
CONSOLIDATED
WCI WCI
COMMUNITIES, GUARANTOR ELIMINATING COMMUNITIES,
INC. SUBSIDIARIES ENTRIES INC.
------------ ------------ ----------- ------------
Cash flows from operating activities:
Net income available to
shareholders/partners........................ $ 42,969 $ 25,077 $(25,077) $ 42,969
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation and amortization................ 4,826 1,333 -- 6,159
Losses (earnings) from investments in joint
ventures, net of write-offs................ 1,292 (1,175) -- 117
Distributions from (contributions to)
investments in joint ventures, net......... 1,186 (7,709) -- (6,523)
Equity in earnings of guarantor
subsidiaries............................... (24,278) -- 24,278 --
Contributions to guarantor subsidiaries...... (12,561) -- 12,561 --
Other........................................ -- (2,585) 799 (1,786)
Changes in assets and liabilities:
Restricted cash.............................. 1,670 13,132 (4,515) 10,287
Contracts and accounts receivable............ 2,271 (87,776) 9,935 (75,570)
Real estate inventories...................... 20,254 (5,524) -- 14,730
Investments in amenities..................... 2,799 978 -- 3,777
Other assets................................. (36,634) 20,160 (7,576) (24,050)
Accounts payable and accrued expenses........ 22,501 12,125 (2,784) 31,842
Customer deposits and other liabilities...... (25,260) 45,240 8,666 28,646
Deferred income tax liabilities.............. 1,623 123 (123) 1,623
-------- -------- -------- --------
Net cash provided by operating
activities.............................. 2,658 13,399 16,164 32,221
-------- -------- -------- --------
Cash flows from investing activities:
Principal reductions on mortgages and notes
receivable................................... 3,655 14,530 (8,532) 9,653
(Additions to) disposal of property and
equipment.................................... (1,646) 527 -- (1,119)
Acquisition of ownership interest, preferred
stock and subordinated note.................. -- (48,000) 48,000 --
Net proceeds from sale of investment in real
estate....................................... -- 382 -- 382
-------- -------- -------- --------
Net cash provided (used) by investing
activities.............................. 2,009 (32,561) 39,468 8,916
-------- -------- -------- --------
Cash flows from financing activities:
Net repayments on senior secured credit
facilities................................... (4,118) -- -- (4,118)
Net (repayments) borrowings on mortgages and
notes payable................................ (8,190) 7,119 -- (1,071)
Net borrowings (reductions) on community
development district financing obligations... 9,724 (2,809) -- 6,915
Net borrowings on finance subsidiary debt...... -- 38,255 -- 38,255
Capital contributions, net..................... -- 11,762 (11,762) --
Distributions to partners, net................. (8,260) -- -- (8,260)
Redemption of ownership interest, acquisition
of redeemable preferred stock and principal
reduction in subordinated notes.............. -- (23,586) (43,870) (67,456)
Net proceeds from FDC acquisition.............. 889 -- -- 889
-------- -------- -------- --------
Net cash (used) provided by financing
activities.............................. (9,955) 30,741 (55,632) (34,846)
-------- -------- -------- --------
Net (decrease) increase in cash and cash
equivalents.................................... (5,288) 11,579 -- 6,291
Cash and cash equivalents at beginning of year... 10,980 3,787 -- 14,767
-------- -------- -------- --------
Cash and cash equivalents at end of year......... $ 5,692 $ 15,366 $ -- $ 21,058
======== ======== ======== ========
F-36
178
WCI COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DOLLARS)
22. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Quarterly financial information for the years ended December 31, 2000 and
1999 is presented below.
2000
--------------------------------------------------------------------------------
1ST PERCENTAGE 2ND PERCENTAGE 3RD PERCENTAGE 4TH
QUARTER OF TOTAL QUARTER OF TOTAL QUARTER OF TOTAL QUARTER
-------- ---------- -------- ---------- -------- ---------- --------
Revenue................................ $140,062 15.9% $162,442 18.4% $184,271 20.9% $395,377
Contribution margin.................... 44,235 16.1 54,078 19.6 48,903 17.8 128,002
Income from operations before income
taxes and extraordinary item.......... 16,229 12.1 22,860 17.0 17,703 13.2 77,611
Net income............................. 9,696 11.8 13,676 16.7 11,118 13.6 47,451
2000
---------------------
PERCENTAGE
OF TOTAL TOTAL
---------- --------
Revenue................................ 44.8% $882,152
Contribution margin.................... 46.5 275,218
Income from operations before income
taxes and extraordinary item.......... 57.7 134,403
Net income............................. 57.9 81,941
1999
--------------------------------------------------------------------------------
1ST PERCENTAGE 2ND PERCENTAGE 3RD PERCENTAGE 4TH
QUARTER OF TOTAL QUARTER OF TOTAL QUARTER OF TOTAL QUARTER
-------- ---------- -------- ---------- -------- ---------- --------
Revenue................................ $118,330 17.4% $168,310 24.7% $100,418 14.7% $294,358
Contribution margin.................... 45,327 23.0 47,400 24.0 26,475 13.4 78,286
Income (loss) from operations before
income taxes and extraordinary item... 21,736 28.6 15,521 20.4 (1,276) (1.7) 40,044
Net income (loss)...................... 18,470 23.1 34,572 43.3 (368) (0.5) 27,219
1999
---------------------
PERCENTAGE
OF TOTAL TOTAL
---------- --------
Revenue................................ 43.2% $681,416
Contribution margin.................... 39.6 197,488
Income (loss) from operations before
income taxes and extraordinary item... 52.7 76,025
Net income (loss)...................... 34.1 79,893
F-37
179
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Florida Design Communities, Inc.
and Related Companies:
We have audited the accompanying combined balance sheets of Florida Design
Communities, Inc. and Related Companies (collectively referred to as the
"Company") as of November 30, 1998, and December 31, 1997 and the related
combined statements of operations, stockholders' equity, and cash flows for the
eleven months ended November 30, 1998 and the year ended December 31, 1997.
These combined financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these combined
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 combined financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of
November 30, 1998, and December 31, 1997 and the results of its operations and
its cash flows for the eleven months ended November 30, 1998 and the year ended
December 31, 1997, in conformity with generally accepted accounting principles.
KPMG LLP
Tampa, Florida
February 12, 1999
F-38
180
FLORIDA DESIGN COMMUNITIES, INC.
AND RELATED COMPANIES
COMBINED BALANCE SHEETS
NOVEMBER 30, 1998,
DECEMBER 31, 1997
NOVEMBER 30, DECEMBER 31,
1998 1997
------------ ------------
(IN THOUSANDS)
ASSETS (NOTES 7 AND 8)
Cash and cash equivalents................................... $ 889 $ 907
Restricted cash............................................. 4,648 2,742
Contracts receivable........................................ 3,445 4,753
Mortgage notes and accounts receivable, net (note 2)........ 12,084 19,386
Real estate inventories (note 3)............................ 119,417 103,944
Property and equipment, net of accumulated depreciation of
$15,015 and $12,453, respectively (note 4)................ 39,341 41,063
Investments in joint ventures (note 5)...................... 3,647 3,438
Other assets (note 7)....................................... 4,027 4,017
-------- --------
$187,498 $180,250
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued expenses (note 6)............ $ 24,148 $ 18,045
Customer deposits and other liabilities................... 8,133 8,397
Senior secured credit facility (note 7)................... 83,735 66,000
Mortgages and notes payable (notes 8 and 11).............. 30,199 32,545
Subordinated notes due to related parties (note 9)........ 19,392 4,392
-------- --------
165,607 129,379
-------- --------
Contingencies (notes 7, 8, 10 and 11)
Stockholders' equity:
Common stock, Florida Design Communities, Inc., $.01 par
value. Authorized 200,000 shares; issued 182,398
shares................................................. 2 2
Common stock, Sun City Center Realty, Inc., $1 par value.
Authorized 10,000 shares; issued 435 shares............ -- --
Common stock, Florida Lifestyle Management, Inc., $1 par
value. Authorized 10,000 shares; issued 435 shares..... -- --
Common stock, Financial Resources Group, Inc., no par
value. Authorized 10,000 shares; issued 435 shares..... 60 60
Common stock, First Fidelity Title Company, Inc., $.01 par
value. Authorized 10,000 shares issued 4,350 shares.... -- --
Common stock, Burnt Store Marina & Resort Realty, Inc.,
$.01 par value. Authorized 1,000,000 shares; issued
4,350 shares........................................... -- --
Additional paid-in capital................................ 4,053 4,053
Retained earnings......................................... 17,776 46,756
-------- --------
Stockholders' equity................................... 21,891 50,871
-------- --------
$187,498 $180,250
======== ========
See accompanying notes to combined financial statements.
F-39
181
FLORIDA DESIGN COMMUNITIES, INC.
AND RELATED COMPANIES
COMBINED STATEMENTS OF OPERATIONS
FOR THE ELEVEN MONTHS ENDED NOVEMBER 30, 1998
AND THE YEAR ENDED DECEMBER 31, 1997
ELEVEN
MONTHS ENDED YEAR ENDED
NOVEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
(IN THOUSANDS)
Revenues:
Homebuilding.............................................. $59,932 74,997
Parcel and lot............................................ 9,259 13,634
Amenity membership and operations......................... 21,842 23,366
Real estate services and other............................ 4,994 5,583
------- -------
Total revenues.................................... 96,027 117,580
------- -------
Cost of sales:
Homebuilding.............................................. 52,574 59,435
Parcel and lot............................................ 5,398 3,386
Amenity membership and operations......................... 15,800 16,836
Real estate services and other............................ 3,275 3,140
------- -------
Total cost of sales............................... 77,047 82,797
------- -------
Contribution margin............................... 18,980 34,783
------- -------
Other expenses:
Selling, general, administrative and other................ 14,239 16,136
Interest expense, net..................................... 9,355 7,670
Real estate taxes, net.................................... 1,628 1,363
Depreciation and amortization............................. 2,699 2,558
------- -------
Total other expenses.............................. 27,921 27,727
------- -------
Net income (loss)................................. $(8,941) 7,056
======= =======
See accompanying notes to combined financial statements.
F-40
182
FLORIDA DESIGN COMMUNITIES, INC.
AND RELATED COMPANIES
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE ELEVEN MONTHS ENDED NOVEMBER 30, 1998,
AND THE YEAR ENDED DECEMBER 31, 1997
COMMON STOCK
---------------------------------------------------------------------------------
BURNT STORE
FLORIDA SUN CITY FLORIDA FINANCIAL FIRST FIDELITY MARINA &
DESIGN CENTER LIFESTYLE RESOURCES TITLE RESORT
COMMUNITIES, REALTY, MANAGEMENT, GROUP, COMPANY, REALTY,
INC. INC. INC. INC. INC. INC.
------------ -------- ----------- ---------- -------------- -----------
(IN THOUSANDS)
BALANCES AT DECEMBER 31, 1996....... $2 -- -- 60 -- --
Net income.......................... -- -- -- -- -- --
Distributions to stockholders....... -- -- -- -- -- --
BALANCES AT DECEMBER 31, 1997....... 2 -- -- 60 -- --
Net loss............................ -- -- -- -- -- --
Distributions to stockholders....... -- -- -- -- -- --
BALANCES AT NOVEMBER 30, 1998....... $2 -- -- 60 -- --
== == == == == ==
ADDITIONAL NET
PAID-IN RETAINED STOCKHOLDERS'
CAPITAL EARNINGS EQUITY
---------- -------- -------------
(IN THOUSANDS)
BALANCES AT DECEMBER 31, 1996....... 4,053 43,832 47,947
Net income.......................... -- 7,056 7,056
Distributions to stockholders....... -- (4,132) (4,132)
----- ------- -------
BALANCES AT DECEMBER 31, 1997....... 4,053 46,756 50,871
Net loss............................ -- (8,941) (8,941)
Distributions to stockholders....... -- (20,039) (20,039)
----- ------- -------
BALANCES AT NOVEMBER 30, 1998....... 4,053 17,776 21,891
===== ======= =======
See accompanying notes to combined financial statements.
F-41
183
FLORIDA DESIGN COMMUNITIES, INC.
AND RELATED COMPANIES
COMBINED STATEMENTS OF CASH FLOWS
FOR THE ELEVEN MONTHS ENDED NOVEMBER 30, 1998
AND THE YEAR ENDED DECEMBER 31, 1997
ELEVEN
MONTHS ENDED YEAR ENDED
NOVEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
(IN THOUSANDS)
Cash flows from operating activities:
Net income (loss)......................................... $ (8,941) $ 7,056
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization.......................... 2,699 2,558
Net loss on sales of property and equipment............ 47 --
Deferred gain on sale of land to affiliate............. (22) (111)
Changes in assets and liabilities:
Restricted cash........................................ (1,906) (1,284)
Contracts receivable................................... 1,308 (4,753)
Mortgage notes and accounts receivable, net............ 7,302 (4,623)
Real estate inventories................................ (16,222) (8,399)
Investment in joint ventures........................... (187) (26)
Other assets........................................... (10) (1,250)
Accounts payable and accrued expenses.................. 6,103 975
Customer deposits and other liabilities................ (264) 1,898
-------- -------
Net cash provided by (used in) operating
activities........................................ (10,093) (7,959)
-------- -------
Cash flows from investing activities:
Purchase of property and equipment..................... (1,922) (3,870)
Proceeds from sale of property and equipment........... 1,064 --
-------- -------
Net cash used in investing activities................ (858) (3,870)
-------- -------
Cash flows from financing activities:
Net borrowings (reduction) on senior secured credit
facility............................................. 17,735 12,157
Proceeds from mortgages and notes payable.............. 4,292 2,808
Principal reductions on mortgages and notes payable.... (7,105) (916)
Distributions to stockholders.......................... (3,989) (2,217)
-------- -------
Net cash provided by (used in) financing
activities........................................ 10,933 11,832
-------- -------
Net increase (decrease) in cash and cash
equivalents....................................... (18) 3
Cash and cash equivalents at beginning of year............ 907 904
-------- -------
Cash and cash equivalents at end of year.................. $ 889 $ 907
======== =======
F-42
184
FLORIDA DESIGN COMMUNITIES, INC.
AND RELATED COMPANIES
COMBINED STATEMENTS OF CASH FLOWS -- (CONTINUED)
FOR THE ELEVEN MONTHS ENDED NOVEMBER 30, 1998
AND THE YEAR ENDED DECEMBER 31, 1997
ELEVEN
MONTHS ENDED YEAR ENDED
NOVEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
(IN THOUSANDS)
Noncash investing and financing activities:
Transfer of real estate inventories to property and
equipment............................................ $ 749 $ 285
======== =======
Capital lease obligations incurred for the lease of
property and equipment............................... $ 467 $ 69
======== =======
Distribution of ownership interest in Courtyards at Sun
City Center, L.P. to the individual shareholders of
the Company.......................................... $ -- $ 1,915
======== =======
Stockholders' equity converted to subordinated notes... $ 15,000 $ --
======== =======
Distribution of property and equipment to the
individual shareholders of the Company............... $ 1,050 $ --
======== =======
Supplemental disclosure of cash flow information -- Cash
paid for interest (net of amount capitalized).......... $ 5,173 $ 4,282
======== =======
See accompanying notes to combined financial statements.
F-43
185
FLORIDA DESIGN COMMUNITIES, INC.
AND RELATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
NOVEMBER 30, 1998
DECEMBER 31, 1997
(DOLLAR AMOUNTS IN THOUSANDS)
(1) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization and Principles of Combination
Florida Design Communities, Inc. and Related Companies (collectively
referred to as the "Company") include six corporations that are owned by a
common group of stockholders. Each of the related companies (SCCR, FLM, FRG, FFT
and BSMR) was formed to support and compliment the operations of Florida Design
Communities, Inc.
The 1998 combined financial statements of the Company include the following
entities:
- Florida Design Communities, Inc. (FDC), which develops and sells dwelling
units and finished lots throughout central and south Florida. FDC also
operates 171 holes of golf, 5 restaurants, 2 marinas, a hotel and
recreational facilities at five communities under development in central
and south Florida.
- Sun City Center Realty, Inc. (SCCR), which provides real estate brokerage
services principally in the resale and rental market.
- Florida Lifestyle Management, Inc. (FLM), which provides management
services for various homeowner and condominium associations.
- Financial Resources Group, Inc. (FRG), which provides mortgage
origination services primarily to customers of FDC.
- First Fidelity Title Company, Inc. (FFT), which provides title insurance
and home sale closing services primarily to customers of FDC.
- Burnt Store Marina & Resort Realty, Inc. (BSMR), which provides real
estate brokerage services principally in the resale and rental market.
(b) Subsequent Event
Effective December 1, 1998, the Company was acquired by WCI Communities
L.P. resulting in the formation of a new company named Watermark Communities
Inc. No adjustments to the accompanying combined financial statements have been
made as a result of this acquisition.
(c) Revenue Recognition
Revenue on sales of dwelling units, exclusive of mid-rise units, and
finished lots is recognized under the completed contract method of accounting.
Revenue on sales of mid-rise units is recognized on the percentage-of-completion
method. Under this method, revenue is measured by multiplying the contract price
times the percentage of total costs incurred in relation to estimated total
costs. Revenue is recorded when construction is beyond a preliminary stage, the
buyer is committed to the extent of being unable to require a refund except for
nondelivery of the unit, sufficient units have been sold to assure that the
property will not revert to rental units and sales prices are collectible and
costs can be reasonably estimated. Amounts due from sales recognized are
recorded as contracts receivable on the accompanying combined balance sheet.
Annual membership dues received in conjunction with amenity properties are
recorded ratably over the membership period. All other revenue is recognized
when the related service is provided.
F-44
186
FLORIDA DESIGN COMMUNITIES, INC.
AND RELATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(d) Restricted Cash
Restricted cash represents customer deposits associated with sales of
dwelling units and lots that are not available for use in daily operations.
(e) Real Estate Inventories
Real estate inventories consist of approximately 2,500 acres of
agricultural, residential, and commercially zoned parcels, land and structural
improvements, and finished dwelling units. Real estate inventories are carried
at cost, which includes capitalized interest, real estate taxes and development
costs.
(f) Property and Equipment
Property and equipment, which include amenities such as golf courses,
restaurants, marinas, a hotel, and recreational facilities, are stated at cost.
Depreciation is provided by the straight-line method over the estimated useful
lives of the assets.
(g) Long-Lived Assets
The Company evaluates the recoverability of long-lived assets by measuring
the carrying amount of the assets against the estimated undiscounted future cash
flows associated with them. At the time such evaluations indicate that the
future undiscounted cash flows of certain long-lived assets are not sufficient
to recover the carrying value of such assets, the assets are adjusted to their
fair values.
(h) Capitalized Interest and Real Estate Taxes
Interest and real estate taxes incurred are capitalized to real estate
inventories during the active development period. Interest and real estate taxes
capitalized are amortized to interest expense and real estate taxes expense as
related inventories are sold. The following table is a summary of capitalized
and amortized interest and real estate taxes:
ELEVEN
MONTHS ENDED YEARS ENDED
NOVEMBER 30, DECEMBER 31,
1998 1997
------------ ------------
(IN THOUSANDS)
Interest capitalized as of January 1........................ $39,167 35,445
Interest capitalized........................................ 5,839 6,618
Interest amortized.......................................... (3,499) (2,896)
------- ------
Capitalized interest........................................ $41,507 39,167
======= ======
Total interest incurred..................................... $11,071 10,615
Debt issue cost amortization................................ 624 777
Interest amortized.......................................... 3,499 2,896
Interest capitalized........................................ (5,839) (6,618)
------- ------
Interest expense, net....................................... $ 9,355 7,670
======= ======
Real estate taxes incurred.................................. $ 1,843 1,837
Real estate taxes amortized................................. 363 216
Real estate taxes capitalized............................... (578) (690)
------- ------
Real estate taxes, net...................................... $ 1,628 1,363
======= ======
F-45
187
FLORIDA DESIGN COMMUNITIES, INC.
AND RELATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(i) Income Taxes
The Company is taxed as an S Corporation whereby income is generally
reported by the individual stockholders. Therefore, the accompanying financial
statements do not include tax-related assets or liabilities or provisions for
income tax expense.
(j) Profit-Sharing Plan
The Company has a profit-sharing plan that conforms to Section 401(k) of
the Internal Revenue Code. Under this plan, employees may contribute up to 15%
of their earnings and the Company will match 50% of the first 6% of such
earnings contributed. Contributions by the Company approximated $235 and $242 in
1998 and 1997, respectively.
(k) Incentive Compensation Plans
The Company has in effect incentive compensation plans that provide
deferred compensation to various officers and employees. The Company committed
to fund these plans in amounts ranging from 3.7% to 4.4% of net earnings for the
years ended December 31, 1998 and 1997.
(l) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(m) Financial Instruments
The Company believes the fair value of their cash, accounts receivable, and
accounts payable and accrued expenses approximates their carrying value due to
their short-term nature. The fair value of the revolving credit facility and
term loan, floating rate notes payable and subordinated debt due to stockholders
approximates their carrying value due to the interest rates being based on
current market rates. The fair value of the interest rate protection agreements
(note 7) is based on amounts the Company would expect to receive or pay to
terminate the agreements and approximates their carrying value of zero. The fair
value of the Company's other, less significant financial instruments, which
include fixed rate notes payable, capital lease obligations and letters of
credit, do not differ significantly from their carrying value.
(n) Reclassifications
Certain amounts in the prior years' financial statements have been
classified to conform to the current year's presentation.
F-46
188
FLORIDA DESIGN COMMUNITIES, INC.
AND RELATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(2) MORTGAGE NOTES AND ACCOUNTS RECEIVABLE
Mortgage notes and accounts receivable at November 30, 1998, and December
31, 1997 are summarized as follows:
NOVEMBER 30, DECEMBER 31,
1998 1997
------------ ------------
(IN THOUSANDS)
Cash due on closings....................................... $ 1,330 6,190
Due from affiliates and employees.......................... 2,394 4,108
Amenities receivables...................................... 1,935 1,565
Notes receivable........................................... 5,463 6,721
Other receivables.......................................... 1,012 952
------- ------
12,134 19,536
Allowance for uncollectible receivables.................... (50) (150)
------- ------
$12,084 19,386
======= ======
(3) REAL ESTATE INVENTORIES
Real estate inventories at November 30, 1998, and December 31, 1997 are
summarized as follows:
NOVEMBER 30, DECEMBER 31,
1998 1997
------------ ------------
(IN THOUSANDS)
Land....................................................... $ 18,727 20,891
Capitalized interest and taxes............................. 44,507 41,951
Subdivision development costs.............................. 27,945 24,714
Home construction costs.................................... 28,238 16,388
-------- -------
$119,417 103,944
======== =======
(4) PROPERTY AND EQUIPMENT
Property and equipment at November 30, 1998, and December 31, 1997 is
summarized as follows:
PREDOMINANT
NOVEMBER 30, DECEMBER 31, DEPRECIABLE
1998 1997 LIFE (YEARS)
------------ ------------ ------------
Land.......................................... $ 6,429 $ 6,429 --
Land improvements............................. 10,320 10,038 20
Buildings and improvements.................... 20,877 21,982 30
Furniture, fixtures and equipment............. 12,488 11,035 5 - 7
Docks......................................... 3,479 3,336 30
Assets under construction..................... 763 696 --
-------- --------
54,356 53,516
Less accumulated depreciation................. (15,015) (12,453)
-------- --------
Property and equipment, net................. 39,341 41,063
======== ========
F-47
189
FLORIDA DESIGN COMMUNITIES, INC.
AND RELATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(5) INVESTMENTS IN JOINT VENTURES
(a) Walden Woods Business Center
On April 7, 1989, the Company entered into a Limited Partnership Agreement
with TECO Properties Corporation (TECO) to develop a mixed-use industrial park
in Plant City, Florida called Walden Woods Business Center, Ltd. (WWBC). The
Company is the general partner and TECO is the limited partner. In conjunction
with entering the Limited Partnership Agreement, the Company sold 50% of a
parcel of property to TECO for $5,000. TECO and the Company then contributed
their respective shares of the property to the partnership. The Company recorded
its initial investment in the partnership at its cost of $1,239 and deferred
recognition of a $3,761 gain associated with the contribution of land valued at
$5,000. The agreement provides for profits and losses to be divided equally
between the Company and TECO. As part of the agreement, the Company also
provides management services to the partnership. During 1998 and 1997, the
Company charged WWBC approximately $136 and $168, respectively, for such
services.
Condensed balance sheets as of November 30, 1998, and December 31, 1997 and
statements of operations for the eleven months and years then ended for the
partnership is as follows:
NOVEMBER 30, DECEMBER 31,
1998 1997
------------ ------------
(IN THOUSANDS)
Property held for development.............................. $13,843 13,800
Other assets............................................... 203 78
------- ------
Total assets..................................... $14,046 13,878
======= ======
Revolving line of credit and mortgage loan................. $ 417 607
Other liabilities.......................................... 133 137
------- ------
Total liabilities................................ 550 744
Partners' equity......................................... 13,496 13,134
------- ------
Total liabilities and equity..................... $14,046 13,878
======= ======
Revenues................................................... $ 215 805
Expenses................................................... (453) (1,029)
------- ------
Net loss................................................. $ (238) (224)
======= ======
The partnership financial statements recorded the initial contributions at
the fair market value of the land contributed as $10,000. The Company's
investment in the limited partnership in these combined financial statements is
carried at the Company's cost of the land plus cash contributions, recognition
of a portion of the deferred gain based on the proportion of land sold by the
partnership, and its share of losses. The difference between the Company's
investment in the limited partnership in these combined financial statements and
its 50% share of partners' equity in the partnership's financial statements is
due to the unrecognized portion of the deferred gain associated with the
Company's initial contribution of land. The Company's portion of the 1998 and
1997 loss was $119 and $112, respectively, and has been included in selling,
general and administrative expense on the accompanying combined statements of
operations.
(b) The Courtyards
On October 6, 1994, the Company entered into a Limited Partnership
Agreement to develop and operate an apartment facility called Courtyards at Sun
City Center, L.P. (Courtyards) which provides services such as meals and
housekeeping to its residents. The Company was a 48.853% limited partner in the
Courtyards, and contributed cash of $1,800 and land with a book value of $751 to
the partnership in
F-48
190
FLORIDA DESIGN COMMUNITIES, INC.
AND RELATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
1994. On June 30, 1997, the Company distributed its ownership interest in
Courtyards to the individual stockholders of the Company. The partnership
financial statements recorded the initial contribution of the partners at the
fair market value of the land contributed as $1,200. The Company's investment in
the limited partnership in these financial statements was carried at the
Company's cost of the land plus certain capitalized costs, cash contributions
and its share of profits and losses. The Company's portion of income through
June 30, 1997 was $38 and has been included in general and administrative
expense on the accompanying combined statements of operations.
The Company has guaranteed a construction loan for Courtyards, which has a
maximum principal balance of $5,648. The guarantee expires on the date that a
certificate of occupancy is obtained on the apartment units currently under
construction. The Company earned loan guarantee fees and property management
fees, which were based upon Courtyard's revenues, totaling approximately $117
and $189 1998 and 1997, respectively. The Company will receive construction
management fees totaling $700 from Courtyards that are earned as construction of
the projects progress. The Company earned construction management fees totaling
approximately $85 and $168 in 1998 and 1997, respectively, of which $253 is
unpaid and included in receivables (due from affiliates and employees) at
November 30, 1998 on the accompanying combined balance sheets.
(6) ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses at November 30, 1998, and December
31, 1997 are summarized as follows:
NOVEMBER 30, DECEMBER 31,
1998 1997
------------ ------------
(IN THOUSANDS)
Accounts payable........................................... $17,425 10,259
Accrued compensation and payroll taxes..................... 3,009 4,009
Accrued sales and property tax............................. 1,791 2,076
Accrued loan fees.......................................... -- 156
Accrued interest........................................... 1,373 695
Other accrued expenses..................................... 550 850
------- ------
$24,148 18,045
======= ======
(7) SENIOR SECURED CREDIT FACILITY
The Company is party to a credit agreement with a bank which is comprised
of a revolving credit facility and a term loan.
The revolving credit facility had a maximum principal amount of $66,000 and
$60,000 at November 30, 1998 and December 31, 1997, respectively, and accrues
interest at the bank's base rate plus 1.5% (9.25% at November 30, 1998). The
base rate is equal to the higher of the prime rate or the overnight federal
funds effective rate plus 0.5%. Interest is calculated on a 360-day year and is
payable monthly in arrears. The amount available to borrow under the credit
facility is generally tied to costs incurred for lot and home construction plus
fixed amounts for certain amenities. At November 30, 1998 and December 31, 1997,
the revolving credit facility had outstanding borrowings of $62,143 and $42,000,
respectively, and unused availability of approximately $3,500 and $7,000,
respectively. Letters of credit totaling up to $5 million may be outstanding at
any one time and reduce the maximum principal balance available (note 10).
F-49
191
FLORIDA DESIGN COMMUNITIES, INC.
AND RELATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The term loan totalled $21,592 and $24,000 at November 30, 1998, and
December 31, 1997, respectively, and accrues interest at the same rate as the
revolving credit facility. Interest is calculated on a 360-day year and is
payable monthly in arrears. Principal payments on the term loan are based on set
release prices for each lot and unit sold, but are required to be at least $3
million each year.
The revolving credit facility and term loan mature on February 28, 2000.
The Company maintains an interest rate protection agreement with the bank
covering $22 million of the outstanding indebtedness. Under this agreement,
which must remain in effect throughout the term of the loan, the interest rate
on $22 million of indebtedness is capped at 11.5% and will not fall below 9.5%.
The Company is required to pay an annual agent's fee of $150,000 and letter
of credit fees equal to 1.75% of committed amounts. As of December 31, 1997 the
Company was obligated for unpaid loan fees totaling $156, incurred under a 1993
credit agreement with the bank. These unpaid loan fees were included in accounts
payable and accrued expenses on the accompanying combined balance sheets and
were paid in 1998.
The credit agreement includes restrictive covenants and requires the
Company to maintain certain financial ratios. Substantially all assets of the
Company are pledged to secure the revolving credit facility and term loan, notes
payable (note 8), and subordinated debt due to stockholders (note 9).
F-50
192
FLORIDA DESIGN COMMUNITIES, INC.
AND RELATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(8) MORTGAGES AND NOTES PAYABLE
NOVEMBER 30, DECEMBER 31,
1998 1997
------------ ------------
(IN THOUSANDS)
LIBOR plus 4.37% (10% at November 30, 1998) note payable,
due in monthly installments of approximately $235,000
including interest, balloon payment of approximately
$22,000,000 due on October 1, 2001, secured by certain
golf courses, a country club, and a recreational
facility.................................................. $23,045 23,460
Prime plus 1% as calculated each April 1 (9.5% at April 1,
1998) note payable, due in monthly installments of
approximately $58,000 including interest, balloon payment
of approximately $4,200,000 due April 1, 2002, secured by
a golf course, marina, and other amenities................ 5,282 5,448
LIBOR plus 3% (8.63% at November 30, 1998) revolving
promissory note, interest-only payments due monthly,
principal and any unpaid interest due July 15, 1999,
secured by land and a condominium project................. -- 2,090
10.5% purchase money mortgage, payable in sixty quarterly
installments of $6,323 including interest, due August 15,
2001...................................................... 60 76
9.62% promissory note, payable in thirty-six monthly
installments of $5,573, including interest, due October 1,
1999...................................................... 58 111
8.60% promissory note, payable in forty-eight monthly
installments of $12,653, including interest, due December
1, 2000................................................... 289 400
9.57% promissory note payable in thirty-six monthly
installments of $7,689, including interest, due October 1,
2000...................................................... 148 215
Prime plus 1.5% (9.25% at November 30, 1998) promissory
note, due in monthly installments of $4,167, including
interest, balloon payment of $508,508 due on September 3,
2002, secured by a boat................................... 692 478
8% - 11% capital lease obligations, payable in monthly
installments ranging from approximately $2,000 to $4,000
including interest, due at various dates through December
2001...................................................... 625 267
------- ------
$30,199 32,545
======= ======
Aggregate maturities of mortgages and notes payable, excluding capital
lease obligations (see note 11), for the next five years are approximately as
follows:
1999............................................... $ 1,066
2000............................................... 1,092
2001............................................... 22,250
2002............................................... 5,166
-------
$29,574
=======
F-51
193
FLORIDA DESIGN COMMUNITIES, INC.
AND RELATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(9) SUBORDINATED DEBT DUE TO RELATED PARTIES
Subordinated debt due to stockholders consists of promissory notes totaling
$19,392 at November 30, 1998 and $4,392 at December 31, 1997. The Company paid a
$15,000 dividend to its stockholders on July 31, 1998, through the issuance of
subordinated promissory notes. Interest on the notes ranges from 2.5% to 3% over
the prime rate (10.25% to 10.75% at November 30, 1998) on $4,392 and is fixed at
13% on $15,000 and is payable quarterly. These notes are subordinate to the
senior secured credit facility (note 7) and may not be repaid without approval
while this credit agreement is in place. Subordinated debt due to stockholders
of $4,392 and $15,000 is due in 2000 and 2002, respectively.
(10) COMMITMENTS AND CONTINGENCIES
The Company has open letters of credit totaling approximately $381 and $386
at November 30, 1998, and December 31, 1997, respectively.
In the normal course of business, the Company is party to various legal
matters. The ultimate disposition of these matters will not, in management's
judgment, have a material adverse effect on the Company's financial statements.
(11) LEASES
The Company has various operating and capital leases for automobiles,
equipment, and other items that expire at various dates over the next five
years. Rental expense was approximately $1,055 and $841 in 1998 and 1997,
respectively.
Future minimum lease payments under noncancelable operating leases and the
present value of future minimum capital lease payments are as follows:
CAPITAL OPERATING
LEASE LEASE
------- ---------
Year ending November 30:
1999........................................................ $ 279 876
2000........................................................ 229 555
2001........................................................ 175 216
2002........................................................ 29 43
2003........................................................ 23 --
----- -----
Total minimum lease payments................................ 735 1,690
=====
Less amount representing interest........................... (110)
-----
Present value of net minimum capital lease payments......... $ 625
=====
(12) RELATED PARTY TRANSACTIONS
In October 1998, the Company distributed a boat, with a net book value of
$1,050, to its stockholders. The accompanying combined financial statements
reflect a distribution to stockholders for this amount.
In October 1998, the Company distributed its rights to receive
approximately 2.4 million cubic yards of fill dirt under a contract with the
City of Homestead, Florida, with a net book value of $0, to its stockholders. As
such, no amount is shown in the accompanying combined financial statements for
this distribution.
F-52
194
WCI COMMUNITIES, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE DATA)
MARCH 31, DECEMBER 31,
2001 2000
----------- ------------
(UNAUDITED)
ASSETS
Cash and cash equivalents................................... $ 20,863 $ 55,737
Restricted cash............................................. 16,418 15,521
Contracts receivable........................................ 280,160 228,742
Mortgage notes and accounts receivable...................... 30,271 33,322
Real estate inventories..................................... 728,112 649,007
Investments in amenities.................................... 33,068 34,832
Property and equipment...................................... 85,393 81,317
Investments in joint ventures............................... 34,438 35,792
Other assets................................................ 48,168 46,451
Goodwill and other intangible assets........................ 31,537 32,375
---------- ----------
Total assets........................................... $1,308,428 $1,213,096
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued expenses....................... $ 105,195 $ 146,432
Customer deposits and other liabilities..................... 189,978 170,860
Deferred income tax liabilities............................. 18,761 15,715
Community development district obligations.................. 46,131 26,944
Senior secured credit facility.............................. 267,200 289,000
Senior subordinated notes................................... 250,000 --
Finance subsidiary debt..................................... -- 72,495
Mortgages and notes payable................................. 104,908 115,418
Subordinated notes, 81% due to related parties.............. -- 57,010
---------- ----------
982,173 893,874
---------- ----------
Commitments and contingencies
Shareholders' equity:
Common stock, $.01 par value; 200,000 shares authorized,
180,047 shares issued and outstanding.................. 2 2
Additional paid-in capital................................ 138,830 138,716
Retained earnings......................................... 189,568 180,504
Accumulated other comprehensive loss...................... (2,145) --
---------- ----------
Total shareholders' equity............................. 326,255 319,222
---------- ----------
Total liabilities and shareholders' equity............. $1,308,428 $1,213,096
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
F-53
195
WCI COMMUNITIES, INC.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(IN THOUSANDS OF DOLLARS)
FOR THE
THREE MONTHS ENDED
MARCH 31,
--------------------
2001 2000
-------- --------
(UNAUDITED)
REVENUES
Homebuilding................................................ $143,612 $ 75,859
Parcel and lot.............................................. 15,979 30,336
Amenity membership and operations........................... 19,303 22,771
Real estate services and other.............................. 18,065 11,096
-------- --------
Total revenues......................................... 196,959 140,062
-------- --------
COSTS OF SALES
Homebuilding................................................ 99,196 55,805
Parcel and lot.............................................. 10,425 14,506
Amenity membership and operations........................... 14,456 17,043
Real estate services and other.............................. 14,191 8,474
-------- --------
Total costs of sales................................... 138,268 95,828
-------- --------
Contribution margin.................................... 58,691 44,234
-------- --------
OTHER EXPENSES
Interest expense, net....................................... 12,673 10,314
Selling, general, administrative and other.................. 24,522 14,119
Real estate taxes, net...................................... 1,245 2,300
Depreciation................................................ 1,080 633
Amortization of goodwill and intangible asset............... 914 639
-------- --------
Total other expenses................................... 40,434 28,005
-------- --------
Income before income taxes and extraordinary item........... 18,257 16,229
Income tax expense.......................................... 7,323 6,533
-------- --------
Income before extraordinary item, net of tax................ 10,934 9,696
Extraordinary item, net of tax
Loss on early retirement of debt.......................... (1,870) --
-------- --------
Net income.................................................. 9,064 9,696
-------- --------
Other comprehensive loss, net of tax
Cumulative effect of a change in accounting principle..... (746) --
Unrealized derivative losses.............................. (1,399) --
-------- --------
Accumulated other comprehensive loss........................ (2,145) --
-------- --------
Comprehensive income........................................ $ 6,919 $ 9,696
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
F-54
196
WCI COMMUNITIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
FOR THE THREE
MONTHS ENDED
MARCH 31,
---------------------
2001 2000
--------- --------
UNAUDITED
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 9,064 $ 9,696
Adjustments to reconcile net income to net cash used by
operating activities:
Loss on early retirement of debt....................... 3,045 --
Depreciation and amortization.......................... 1,994 1,272
Amortization of debt issue costs to interest expense... 898 1,224
Gain on sale of property and equipment................. -- (982)
(Earnings) losses from investments in joint ventures,
net of write-offs..................................... (286) 884
Contributions to investments in joint ventures......... (1,676) (5,246)
Distributions from investments in joint ventures....... 3,316 --
Real estate inventories:
Additions to real estate inventories................... (174,441) (70,299)
Capitalized interest and real estate taxes............. (8,472) (8,744)
Cost of sales, including amortization of capitalized
interest and real estate taxes........................ 103,808 63,884
Changes in assets and liabilities:
Restricted cash........................................ (897) (100)
Contracts receivable................................... (51,418) (8,252)
Accounts receivable.................................... 332 (5,392)
Investments in amenities............................... 1,764 3,403
Other assets........................................... 4,260 (5,830)
Accounts payable and accrued expenses.................. (41,237) (8,536)
Customer deposits and other liabilities................ 15,625 10,854
Deferred income tax liabilities........................ 4,394 1,334
--------- --------
Net cash used in operating activities................ (129,927) (20,830)
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to mortgage notes receivable.................... (1,104) (4,560)
Principal reductions on mortgage notes receivable......... 3,823 2,775
Additions to property and equipment....................... (5,156) (2,696)
Proceeds from sale of property and equipment.............. -- 2,677
Payment for purchase of assets of real estate
brokerages............................................. -- (981)
--------- --------
Net cash used in investing activities................ (2,437) (2,785)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (repayments) borrowings on senior secured credit
facility............................................... $ (21,800) $ 13,650
Proceeds from borrowings on mortgages and notes payable... 15,909 9,673
Principal reductions on mortgages and notes payable....... (26,419) (10,183)
Proceeds from borrowings on senior subordinated notes..... 250,000 --
Principal repayments on subordinated notes................ (57,010) --
Principal reduction on finance subsidiary debt............ (72,495) (7,230)
Debt issue costs.......................................... (9,996) --
Net borrowings (reductions) on community development
district obligations................................... 19,187 (1,865)
Other..................................................... 114 --
--------- --------
Net cash provided by financing activities.............. 97,490 4,045
--------- --------
Net decrease in cash and cash equivalents................... (34,874) (19,570)
Cash and cash equivalents at beginning of year.............. 55,737 33,492
--------- --------
Cash and cash equivalents at end of period.................. $ 20,863 $ 13,922
========= ========
Supplemental disclosure:
Interest paid (net of amount capitalized)................. $ 8,197 $ 7,884
========= ========
Assets acquired under capital lease....................... $ 43 $ 184
========= ========
The accompanying notes are an integral part of these consolidated financial
statements.
F-55
197
WCI COMMUNITIES, INC.
NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS
MARCH 31, 2001
(IN THOUSANDS OF DOLLARS)
1. BASIS OF PRESENTATION
The Company's consolidated financial statements and notes as of March 31,
2001 and for the three months ended March 31, 2001 and 2000 have been prepared
by management without audit by independent certified public accountants and
should be read in conjunction with the December 31, 2000 audited financial
statements for the year then ended. In the opinion of management, all normal,
recurring adjustments necessary for the fair presentation of such financial
information have been included. The preparation of financial statements in
conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the
amounts reported in the financial statements and accompanying notes. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with accounting principles generally accepted in the
United States of America have been condensed or omitted.
The Company historically has experienced and expects to experience
variability in quarterly results. The consolidated statement of operations for
the three months ended March 31, 2001 is not necessarily indicative of the
results to be expected for the full year.
2. COMPREHENSIVE INCOME AND IMPLEMENTATION OF FASB 133
Effective January 1, 2001, the Company adopted Statement of Financial
Accounting Standards 133 (FASB 133), Accounting for Derivative Instruments and
Hedging Activities, as amended. FASB 133 establishes accounting and reporting
standards for derivative instruments and for hedging activities by requiring
that all derivatives be measured at fair value and recognized in the balance
sheet. Gains or losses resulting from changes in the fair value of derivatives
are recognized in earnings or recorded in other comprehensive income, and
recognized in the statement of earnings when the hedged item affects earnings,
depending on the purpose of the derivatives and whether they qualify for hedge
accounting treatment. The Company does not enter into or hold derivatives for
trading or speculative purposes.
The Company's policy is to designate at a derivative's inception the
specific liabilities being hedged and monitor the derivative to determine if it
remains an effective hedge. The effectiveness of a derivative as a hedge is
based on high correlation between changes in its value and changes in the value
of the underlying hedged item. The Company recognizes gains or losses for
amounts received or paid when the underlying transaction settles.
The Company has various interest rate swap agreements which effectively fix
the variable interest rate on approximately $250,000 of the senior secured
credit facility. The swap agreements have been designated as cash flow hedges
and, accordingly, are reflected at their fair value in the consolidated balance
sheet. The related loss is recorded in stockholders' equity as accumulated other
comprehensive loss. The Company accounts for its interest rate swaps using the
shortcut method, as described in FASB 133. Amounts to be received or paid as a
result of the swap agreements are recognized as adjustments to interest incurred
on the related debt instruments. The net effect on the Company's operating
results is that interest on the variable-rate debt being hedged is recorded
based on fixed interest rates. In accordance with the transition provisions of
FASB 133, on January 1, 2001, the Company recorded a cumulative-effect type
adjustment of $746 (net of tax benefit of $469) in customer deposits and other
liabilities and accumulated other comprehensive loss to recognize the fair value
of the interest rate swaps. Subsequent to the Company's adoption of FASB 133
through March 31, 2001, the liability and accumulated other comprehensive loss
increased $1,399 (net of tax benefit of $879) to $2,145.
F-56
198
WCI COMMUNITIES, INC.
NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS -- (CONTINUED)
3. SEGMENT INFORMATION
The Company operates in three reportable business segments: homebuilding,
parcel and lot, and amenity membership and operations. The homebuilding segment
builds and markets single and multi-family homes and mid-rise and high-rise
tower residences. The parcel and lot segment develops and sells land parcels and
lots within the Company's communities to commercial developers, individuals and,
to a lesser degree, homebuilders. The amenity membership and operations segment
includes the operations and sale of memberships in golf country clubs, marinas,
tennis and recreation facilities. The Company's reportable segments are
strategic business operations that offer different products and services. They
are managed separately because each business requires different expertise and
marketing strategies. Revenues from segments below the quantitative thresholds
are primarily attributable to real estate services such as brokerage, title
company, property management and mortgage brokerage operations.
The accounting policies of the segments are the same as those described in
significant accounting policies. Transfers between segments are recorded at
cost. The Company evaluates financial performance based on the segment
contribution margin. The table below presents information about reported
operating income for the three months ended March 31, 2001 and 2000. Asset
information by reportable segment is not presented since the Company does not
prepare such information.
THREE MONTHS ENDED MARCH 31, 2001
-----------------------------------------------------------------------------
HOMEBUILDING
------------------------- AMENITY
MID- AND SINGLE AND PARCEL MEMBERSHIP ALL SEGMENT
HIGH-RISE MULTI-FAMILY AND LOT AND OPERATIONS OTHER TOTALS
--------- ------------ ------- -------------- ------- --------
Revenues............... $78,145 $65,467 $15,979 $19,303 $17,591 $196,485
Interest income........ -- -- -- -- 476 476
Contribution margin.... 32,838 11,578 5,554 4,847 3,876 58,693
THREE MONTHS ENDED MARCH 31, 2000
----------------------------------------------------------------------------
HOMEBUILDING
------------------------- AMENITY
MID- AND SINGLE AND PARCEL MEMBERSHIP ALL SEGMENT
HIGH-RISE MULTI-FAMILY AND LOT AND OPERATIONS OTHER TOTALS
--------- ------------ ------- -------------- ------ --------
Revenues................ $29,875 $45,984 $30,336 $22,771 $9,444 $138,410
Interest income......... -- -- -- -- 437 437
Contribution margin..... 12,862 7,192 15,830 5,728 1,407 43,019
FOR THE THREE MONTHS
ENDED
MARCH 31,
--------------------
2001 2000
-------- --------
REVENUE
Total segment revenue....................................... $196,961 $138,847
(Loss) gain on assets held for investment................... (2) 1,215
-------- --------
Total revenue.......................................... $196,959 $140,062
======== ========
NET INCOME
Segment contribution margin................................. $ 58,693 $ 43,019
(Loss) Gain on assets held for investment................... (2) 1,215
Corporate overhead and costs................................ (25,767) (16,419)
Interest expense, net....................................... (12,673) (10,314)
Depreciation and amortization............................... (1,994) (1,272)
-------- --------
Income before income taxes and extraordinary item......... $ 18,257 $ 16,229
======== ========
F-57
199
WCI COMMUNITIES, INC.
NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS -- (CONTINUED)
4. REAL ESTATE INVENTORIES
Real estate inventories are summarized as follows:
MARCH 31, DECEMBER 31,
2001 2000
--------- ------------
LAND........................................................ $203,083 $173,226
Work in progress:
Land and improvements..................................... 265,799 284,493
Tower residences.......................................... 63,534 35,490
Homes..................................................... 121,388 68,401
Completed inventories:
Land and improvements..................................... 56,839 73,382
Tower residences.......................................... 1,475 1,274
Homes..................................................... 15,994 12,741
-------- --------
$728,112 $649,007
======== ========
5. CAPITALIZED INTEREST
The following table is a summary of capitalized and amortized interest.
AS OF AND FOR
THE PERIOD ENDED AS OF AND FOR
MARCH 31, THE YEAR ENDED
------------------ DECEMBER 31,
2001 2000 2000
------- ------- --------------
Capitalized interest as of January 1...................... $84,873 $61,506 $ 61,506
Interest capitalized...................................... 7,516 7,915 37,600
Interest amortized........................................ (4,123) (1,993) (14,233)
------- ------- --------
Capitalized interest...................................... $88,266 $67,428 $ 84,873
======= ======= ========
Total interest incurred................................... $15,168 $15,012 $ 62,100
Debt issue cost amortization.............................. 898 1,224 4,630
Interest amortized........................................ 4,123 1,993 14,233
Interest capitalized...................................... (7,516) (7,915) (37,600)
------- ------- --------
Interest expense, net..................................... $12,673 $10,314 $ 43,363
======= ======= ========
6. DEBT
The Company issued $250,000 of 10.625% senior subordinated notes (the
"Notes") on February 14, 2001. The Notes mature on February 15, 2011. Interest
on the Notes is payable semi-annually in arrears on each February 15 and August
15, commencing August 15, 2001. The Notes are not collateralized senior
subordinated obligations and are subordinated to all existing and future senior
debt. The Note indenture agreement contains certain financial and operational
covenants that may limit the Company's and its subsidiaries' ability to incur
additional debt, pay dividends, repurchase capital stock, and make investment
acquisitions. Proceeds of the Notes were used to repay $80,400 of the senior
secured credit facility, $72,495 of finance subsidiary debt, $57,010 of
subordinated notes, $19,333 of land repurchase liabilities and for general
corporate purposes.
F-58
200
WCI COMMUNITIES, INC.
NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS -- (CONTINUED)
7. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of the assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. A
reconciliation of the statutory rate and the effective tax rate follows:
% OF PRE-TAX
INCOME
MARCH 31,
------------
2001 2000
---- ----
Statutory rate.............................................. 35.0 35.0
State income taxes, net of federal income tax benefit....... 3.6 3.6
Goodwill amortization and other............................. 1.5 1.7
---- ----
Effective rate......................................... 40.1 40.3
==== ====
8. COMMITMENTS AND CONTINGENCIES
From time to time, the Company has been involved in various litigation
matters involving ordinary and routine claims incidental to its business. In
addition, in May 2000, individuals filed a lawsuit against the Company, which
seeks class action status, and arising out of a preferred builder program under
which plaintiffs purchased vacant lots and then contracted with a builder of
their choice to construct a residence on their lots. In consideration of the
extensive costs incurred by the Company associated with the marketing, sales and
advertising of the community for the benefit of the builders, who participated
in the program, these builders were required to pay a marketing fee to the
Company based on a percentage of the construction cost of the home. Plaintiffs
assert that the Company had an obligation to disclose to them that the preferred
builder would pay a marketing fee to the Company. The Company has objected to
the certification of this lawsuit as a class action. The plaintiffs have
demanded unspecified money damages and have alleged, among other things,
violation of the federal Racketeering, Influenced and Corrupt Organizations Act
and the Real Estate Settlement Procedures Act. Since the Court has not yet ruled
on whether to certify this lawsuit as a class, the litigation is still in its
early stages, the Company is not yet able to determine whether the resolution of
this matter will have a material adverse effect on the Company's financial
condition or results of operations, although Company believes it has meritorious
defenses and intends to vigorously defend this action.
9. SUPPLEMENTAL GUARANTOR INFORMATION
Obligations to pay principal and interest on the Company's senior
subordinated notes are guaranteed fully and unconditionally by the Company's
wholly owned subsidiaries, including its only significant subsidiary, Bay
Colony-Gateway, Inc. Separate financial statements of the guarantors are not
provided, as subsidiary guarantors are 100% owned by the Company and guarantees
are full, unconditional, joint and several. Supplemental consolidating financial
information of the Company for the future guarantors is presented below. The
Company's non-guarantor subsidiary is considered minor and accordingly not
presented separately in the consolidating financial information. The
non-guarantor subsidiary's assets, stockholder's equity and revenues were
approximately $2,977, $417 and $4,270 at December 31, 2000 and for the year then
ended and $2,910 $821 and $1,774 at March 31, 2001 and for the three months then
ended, respectively.
F-59
201
WCI COMMUNITIES, INC.
NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATING BALANCE SHEET
MARCH 31, 2001
-----------------------------------------------------------
CONSOLIDATED
WCI WCI
COMMUNITIES, GUARANTOR ELIMINATING COMMUNITIES,
INC. SUBSIDIARIES ENTRIES INC.
------------ ------------ ----------- ------------
ASSETS
Cash and cash equivalents................. $ 11,939 $ 8,924 $ -- $ 20,863
Restricted cash........................... 1,432 14,986 -- 16,418
Contracts receivable...................... 202,528 77,632 -- 280,160
Mortgage notes and accounts receivable.... 16,947 13,324 -- 30,271
Real estate inventories................... 430,304 297,808 -- 728,112
Investments in amenities.................. 19,568 13,500 -- 33,068
Property and equipment.................... 29,713 55,680 -- 85,393
Investments in joint ventures............. 9,618 24,820 -- 34,438
Investment in guarantor subsidiaries...... 192,366 -- (192,366) --
Other assets.............................. 182,136 22,426 (156,394) 48,168
Goodwill and other intangible assets...... 22,813 8,724 -- 31,537
---------- -------- --------- ----------
Total assets......................... $1,119,364 $537,824 $(348,760) $1,308,428
========== ======== ========= ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued expenses..... $ 59,361 $ 45,834 $ -- $ 105,195
Customer deposits and other liabilities... 122,077 222,884 (154,983) 189,978
Deferred income tax liabilities........... 19,373 -- (612) 18,761
Community development district
obligations............................. 25,050 21,081 -- 46,131
Senior secured credit facility............ 267,200 -- -- 267,200
Senior subordinated notes................. 250,000 -- -- 250,000
Mortgages and notes payable............... 49,249 55,659 -- 104,908
---------- -------- --------- ----------
792,310 345,458 (155,595) 982,173
---------- -------- --------- ----------
Commitments and contingencies
Shareholders' equity...................... 327,054 192,366 (193,165) 326,255
---------- -------- --------- ----------
Total liabilities and shareholders'
equity............................. $1,119,364 $537,824 $(348,760) $1,308,428
========== ======== ========= ==========
F-60
202
WCI COMMUNITIES, INC.
NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2000
-----------------------------------------------------------
CONSOLIDATED
WCI WCI
COMMUNITIES, GUARANTOR ELIMINATING COMMUNITIES,
INC. SUBSIDIARIES ENTRIES INC.
------------ ------------ ----------- ------------
ASSETS
Cash and cash equivalents................. $ 49,143 $ 6,594 $ -- $ 55,737
Restricted cash........................... 1,549 13,972 -- 15,521
Contracts receivable...................... 155,882 72,860 -- 228,742
Mortgage notes and accounts receivable.... 17,775 16,439 (892) 33,322
Real estate inventories................... 405,809 243,198 -- 649,007
Investments in amenities.................. 9,849 24,983 -- 34,832
Property and equipment.................... 25,513 55,804 -- 81,317
Investments in joint ventures............. 10,712 25,080 -- 35,792
Investment in guarantor subsidiaries...... 192,904 -- (192,904) --
Investment in parent entities............. -- 44,572 (44,572) --
Other assets.............................. 118,274 30,336 (102,159) 46,451
Goodwill and other intangible assets...... 23,263 9,112 -- 32,375
---------- -------- --------- ----------
Total assets......................... $1,010,673 $542,950 $(340,527) $1,213,096
========== ======== ========= ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued expenses..... $ 105,352 $ 41,972 $ (892) $ 146,432
Customer deposits and other liabilities... 92,185 173,295 (94,620) 170,860
Deferred income tax liabilities........... 23,254 -- (7,539) 15,715
Community development district
obligations............................. 26,944 -- -- 26,944
Senior secured credit facility............ 289,000 -- -- 289,000
Finance subsidiary debt................... -- 72,495 -- 72,495
Mortgages and notes payable............... 53,134 62,284 -- 115,418
Subordinated notes........................ 100,783 -- (43,773) 57,010
---------- -------- --------- ----------
690,652 350,046 (146,824) 893,874
---------- -------- --------- ----------
Commitments and contingencies
Shareholders' equity...................... 320,021 192,904 (193,703) 319,222
---------- -------- --------- ----------
Total liabilities and shareholders'
equity............................. $1,010,673 $542,950 $(340,527) $1,213,096
========== ======== ========= ==========
F-61
203
WCI COMMUNITIES, INC.
NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATING STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2001
-----------------------------------------------------------
CONSOLIDATED
WCI WCI
COMMUNITIES, GUARANTOR ELIMINATING COMMUNITIES,
INC. SUBSIDIARIES ENTRIES INC.
------------ ------------ ----------- ------------
REVENUES
Homebuilding............................... $ 99,021 $ 44,591 $ -- $143,612
Parcel and lot............................. 6,623 9,356 -- 15,979
Amenity membership and operations.......... 6,451 12,852 -- 19,303
Real estate services and other............. 1,522 35,100 (18,557) 18,065
-------- -------- -------- --------
Total revenues........................ 113,617 101,899 (18,557) 196,959
-------- -------- -------- --------
COSTS OF SALES
Homebuilding............................... 66,900 32,296 -- 99,196
Parcel and lot............................. 4,714 5,711 -- 10,425
Amenity membership and operations.......... 4,295 10,161 -- 14,456
Real estate services and other............. 147 14,044 -- 14,191
-------- -------- -------- --------
Total costs of sales.................. 76,056 62,212 -- 138,268
-------- -------- -------- --------
Contribution margin................... 37,561 39,687 (18,557) 58,691
-------- -------- -------- --------
OTHER EXPENSES
Interest expense, net...................... 30,618 612 (18,557) 12,673
Selling, general, administrative and
other.................................... 18,729 5,793 -- 24,522
Real estate taxes, net..................... 468 777 -- 1,245
Depreciation............................... 567 513 -- 1,080
Amortization of goodwill and intangible
asset.................................... 451 463 -- 914
-------- -------- -------- --------
Total other expenses.................. 50,833 8,158 (18,557) 40,434
-------- -------- -------- --------
(Loss) income before income taxes, equity
in income of guarantor subsidiaries and
extraordinary item....................... (13,272) 31,529 -- 18,257
Income tax benefit (expense)............... 4,625 (11,948) -- (7,323)
Equity in income of guarantor subsidiaries,
net of tax............................... 17,711 -- (17,711) --
-------- -------- -------- --------
Income before extraordinary item........... 9,064 19,581 (17,711) 10,934
Extraordinary item......................... -- -- -- --
Loss on early retirement of debt......... -- (1,870) -- (1,870)
-------- -------- -------- --------
Net income................................. $ 9,064 $ 17,711 $(17,711) $ 9,064
======== ======== ======== ========
F-62
204
WCI COMMUNITIES, INC.
NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATING STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2000
--------------------------------------------------------
CONSOLIDATED
WCI WCI
COMMUNITIES, GUARANTOR ELIMINATING COMMUNITIES,
INC. SUBSIDIARIES ENTRIES INC.
------------ ------------ ----------- ------------
REVENUES
Homebuilding.................................... $53,328 $22,531 $ -- $ 75,859
Parcel and lot.................................. 17,926 12,410 -- 30,336
Amenity membership and operations............... 4,385 18,386 -- 22,771
Real estate services and other.................. 1,783 10,667 (1,354) 11,096
------- ------- ------- --------
Total revenues............................. 77,422 63,994 (1,354) 140,062
------- ------- ------- --------
COSTS OF SALES
Homebuilding.................................... 40,372 15,433 -- 55,805
Parcel and lot.................................. 8,136 6,370 -- 14,506
Amenity membership and operations............... 2,615 14,428 -- 17,043
Real estate services and other.................. 140 8,334 -- 8,474
------- ------- ------- --------
Total costs of sales....................... 51,263 44,565 -- 95,828
------- ------- ------- --------
Contribution margin........................ 26,159 19,429 (1,354) 44,234
------- ------- ------- --------
OTHER EXPENSES
Interest expense, net........................... 10,130 1,538 (1,354) 10,314
Selling, general, administrative and other...... 11,264 2,855 -- 14,119
Real estate taxes, net.......................... 878 1,422 -- 2,300
Depreciation.................................... 234 399 -- 633
Amortization of goodwill and intangible asset... 450 189 -- 639
------- ------- ------- --------
Total other expenses....................... 22,956 6,403 (1,354) 28,005
------- ------- ------- --------
Income before income taxes and equity in income
of guarantor subsidiaries..................... 3,203 13,026 -- 16,229
Income tax expense.............................. (999) (5,534) -- (6,533)
Equity in income of guarantor subsidiaries, net
of tax........................................ 7,492 -- (7,492) --
------- ------- ------- --------
Net income...................................... $ 9,696 $ 7,492 $(7,492) $ 9,696
======= ======= ======= ========
F-63
205
WCI COMMUNITIES, INC.
NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2001
--------------------------------------------------------
CONSOLIDATED
WCI WCI
COMMUNITIES, GUARANTOR ELIMINATING COMMUNITIES,
INC. SUBSIDIARIES ENTRIES INC.
------------ ------------ ----------- ------------
Cash flows from operating activities:
Net income....................................... $ 9,064 $ 17,711 $(17,711) $ 9,064
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization.................. 1,771 1,121 -- 2,892
Loss on early retirement of debt............... 3,045 -- -- 3,045
Losses (earnings) from investments in joint
ventures, net of write-offs................. 19 (305) -- (286)
Distributions from investments in joint
ventures, net............................... 1,075 565 -- 1,640
Equity in earnings of guarantor subsidiaries... (17,711) -- 17,711 --
Distributions from guarantor subsidiaries,
net......................................... 18,249 -- (18,249) --
Repayment of investments in parent entities.... -- 43,773 (43,773) --
Other.......................................... --
Changes in assets and liabilities................ --
Restricted cash................................ 117 (1,014) -- (897)
Contracts and accounts receivable.............. (47,277) (2,917) (892) (51,086)
Real estate inventories........................ (24,495) (54,610) -- (79,105)
Investments in amenities....................... (9,719) 11,483 -- 1,764
Other assets................................... (57,665) 8,489 53,436 4,260
Accounts payable and accrued expenses.......... (45,991) 3,862 892 (41,237)
Customer deposits and other liabilities........ 26,399 49,589 (60,363) 15,625
Deferred income tax liabilities................ (2,533) -- 6,927 4,394
--------- -------- -------- ---------
Net cash (used in) provided by operating
activities................................ (145,652) 77,747 (62,022) (129,927)
--------- -------- -------- ---------
Cash flows from investing activities:
Principal reductions on mortgages and notes
receivable..................................... 1,459 1,260 -- 2,719
Additions to property and equipment.............. (4,767) (389) -- (5,156)
--------- -------- -------- ---------
Net cash (used in) provided by investing
activities................................ (3,308) 871 -- (2,437)
--------- -------- -------- ---------
Cash flows from financing activities:
Net repayments on senior secured credit
facilities..................................... (21,800) -- -- (21,800)
Net repayments on mortgages and notes payable.... (3,885) (6,625) -- (10,510)
Proceeds from borrowings on senior subordinated
notes.......................................... 250,000 -- -- 250,000
Principal repayments on subordinated notes....... (100,783) -- 43,773 (57,010)
Principal repayments on finance subsidiary
debt........................................... -- (72,495) -- (72,495)
Debt issue costs................................. (9,996) -- -- (9,996)
Community development district obligations....... (1,894) 21,081 -- 19,187
Distribution to shareholder, net................. -- (18,249) 18,249 --
Other............................................ 114 -- -- 114
--------- -------- -------- ---------
Net cash provided by (used in) financing
activities................................ 111,756 (76,288) 62,022 97,490
--------- -------- -------- ---------
Net (decrease) increase in cash and cash
equivalents...................................... (37,204) 2,330 -- (34,874)
Cash and cash equivalents at beginning of year..... 49,143 6,594 -- 55,737
--------- -------- -------- ---------
Cash and cash equivalents at end of year........... $ 11,939 $ 8,924 $ -- $ 20,863
========= ======== ======== =========
F-64
206
WCI COMMUNITIES, INC.
NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2000
--------------------------------------------------------
CONSOLIDATED
WCI WCI
COMMUNITIES, GUARANTOR ELIMINATING COMMUNITIES,
INC. SUBSIDIARIES ENTRIES INC.
------------ ------------ ----------- ------------
Cash flows from operating activities:
Net income....................................... $ 9,696 $ 7,492 $ (7,492) $ 9,696
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation and amortization.................. 1,342 1,154 -- 2,496
Gain on disposal of property and equipment..... (982) -- -- (982)
Losses from investments in joint ventures, net
of write-offs............................... 18 866 -- 884
Contributions to investments in joint ventures,
net......................................... (33) (5,213) -- (5,246)
Equity in earnings of guarantor subsidiaries... (7,492) -- 7,492 --
Distributions from guarantor subsidiaries...... 9,244 -- (9,244) --
Changes in assets and liabilities:
Restricted cash................................ 371 (471) -- (100)
Contracts and accounts receivable.............. (12,423) (403) (818) (13,644)
Real estate inventories........................ (15,783) 624 -- (15,159)
Investments in amenities....................... (1,475) 4,878 -- 3,403
Other assets................................... (10,253) 15,984 (11,561) (5,830)
Accounts payable and accrued expenses.......... (13,778) 4,424 818 (8,536)
Customer deposits and other liabilities........ 10,689 (2,691) 2,856 10,854
Deferred income tax liabilities................ (17,949) 12,134 7,149 1,334
-------- -------- -------- --------
Net cash (used in) provided by operating
activities................................ (48,808) 38,778 (10,800) (20,830)
-------- -------- -------- --------
Cash flows from investing activities:
(Additions to) reductions on mortgages and notes
receivable..................................... (2,578) 793 -- (1,785)
Disposals of (additions to) property and
equipment...................................... 11,052 (13,748) -- (2,696)
Proceeds from sale of property and equipment..... 2,677 -- -- 2,677
Payment for purchase of assets of real estate
brokerages..................................... -- (981) -- (981)
-------- -------- -------- --------
Net cash provided by (used in) investing
activities................................ 11,151 (13,936) -- (2,785)
-------- -------- -------- --------
Cash flows from financing activities:
Net repayments on senior secured credit
facility....................................... 13,650 -- -- 13,650
Net borrowings (repayments) on mortgages and
notes payable.................................. 2,373 (4,439) 1,556 (510)
Net repayments on finance subsidiary debt........ -- (7,230) -- (7,230)
Net repayments on community development district
obligations.................................... (1,849) (16) -- (1,865)
Distributions to shareholder, net................ -- (9,244) 9,244 --
-------- -------- -------- --------
Net cash provided by (used in) financing
activities................................ 14,174 (20,929) 10,800 4,045
-------- -------- -------- --------
Net (decrease) increase in cash and cash
equivalents...................................... (23,483) 3,913 -- (19,570)
Cash and cash equivalents at beginning of year..... 30,190 3,302 -- 33,492
-------- -------- -------- --------
Cash and cash equivalents at end of year........... $ 6,707 $ 7,215 $ -- $ 13,922
======== ======== ======== ========
F-65
207
WCI COMMUNITIES, INC.
OFFER TO EXCHANGE ALL OUTSTANDING 10 5/8% SENIOR SUBORDINATED NOTES DUE
2011 FOR 10 5/8% SENIOR SUBORDINATED NOTES DUE 2011, WHICH HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933
UNCONDITIONALLY GUARANTEED ON A SENIOR SUBORDINATED BASIS BY ALL OUR CURRENT
SUBSIDIARIES
---------------------
PROSPECTUS
-------------------------
UNTIL , 2001, ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THE UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
MAY , 2001
208
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
(a) WCI Communities, Inc., Bay Colony-Gateway, Inc., Pelican Landing Golf
Resort Ventures, Inc., First Fidelity Title, Inc., Sun City Center Golf
Properties, Inc., Watermark Realty, Inc., Tiburon Golf Ventures, Inc. and WI
Ultracorp of Florida, Inc.
Section 145 of the Delaware General Corporation Law (the "DGCL") permits
the companies to indemnify their officers and directors against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him or her in connection with any
threatened, pending or completed action (except settlements or judgments in
derivative suits), suit or proceeding in which such person is made a party by
reason of his or her being or having been a director, officer, employee or agent
of the company, in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act of 1933, as amended (the "Securities
Act"). The statute provides that indemnification pursuant to its provisions is
not exclusive of other rights of indemnification to which a person may be
entitled under any by-law, agreement, vote of stockholders of disinterested
directors, or otherwise.
The certificate of incorporation and/or bylaws of WCI Communities, Inc.,
Bay Colony-Gateway, Inc., Pelican Landing Gold Resort Ventures, Inc., First
Fidelity Title, Inc., Sun City Center Golf Properties, Inc., Watermark Realty,
Inc. and Tiburon Golf Ventures, Inc. provide for the mandatory indemnification
of their directors, officers, employees and other agents to the maximum extent
permitted by the DGCL.
As permitted by sections 102 and 145 of the DGCL, the certificate of
incorporation of WCI Communities, Inc., Bay Colony-Gateway, Inc., Pelican
Landing Golf Resort Ventures, Inc., First Fidelity Title, Inc., Sun City Center
Golf Properties, Inc., Watermark Realty, Inc. and Tiburon Golf Ventures, Inc.
eliminate a director's personal liability for monetary damages to the company
and its stockholders arising from a breach of a director's fiduciary duty, other
than for a breach of a director's duty of loyalty or for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, and except as otherwise provided under the DGCL.
The companies may purchase and maintain insurance on behalf of any director
or officer of the company against any liability asserted against such person,
whether or not the companies would have the power to indemnify such person
against such liability under the provisions of the certificate of incorporation
or otherwise. The companies have purchased and maintain insurance on behalf of
their directors and officers.
(b) Communities Finance Company, LLC and Panther Development, LLC
Communities Finance Company, LLC and Panther Development, LLC are permitted
by Section 18-108 of the Delaware Limited Liability Company Act, subject to the
procedures and limitations stated therein, to indemnify any person against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with any
threatened, pending or completed action, suit or proceeding in which such person
is made a party by reason of his being or having been a director, officer,
employee or agent of Communities Finance Company, LLC or Panther Development,
LLC, respectively. The statute provides that indemnification pursuant to its
provisions is not exclusive of other rights of indemnification to which a person
may be entitled under any agreement, vote of members or disinterested directors
or otherwise.
The Limited Liability Company agreements of Panther Development, LLC and
Communities Finance Company, LLC permit indemnification by the company for any
loss, damage, cost or expense by reason of any act or omission performed or
omitted by a manager on behalf of the company and in a manner believed to be
within the scope of his or her authority, subject to certain exceptions.
II-1
209
(c) The Colony at Pelican Landing Golf Club, Inc., Financial Resources
Group, Inc., WCI Homes, Inc., Sarasota Tower, Inc., Watermark Pools, Inc.,
Florida National Properties, Inc., WCI Golf Group, Inc., JYC Holdings, Inc.,
Communities Home Builders, Inc., Florida Lifestyle Management Company,
Livingston Naples, Inc., Livingston Road, Inc., Marbella At Pelican Bay, Inc.,
Tarpon Cove Yacht & Racquet Club, Inc., Sun City Center Realty, Inc., Watermark
Realty Referral, Inc., WCI Communities Property Management, Inc., Communities
Amenities, Inc., Gateway Communications Services, Inc., WCI Realty, Inc., Bay
Colony Realty Associates, Inc., Bay Colony of Naples, Inc., Coral Ridge
Communities, Inc., Coral Ridge Properties, Inc., Coral Ridge Realty, Inc., Coral
Ridge Realty Sales, Inc., Florida Design Communities, Inc., Gateway Communities,
Inc., Gateway Realty Sales, Inc., Heron Bay, Inc., Heron Bay Golf Course
Properties, Inc., Pelican Bay Properties, Inc., Pelican Landing Communities,
Inc., Pelican Landing Properties, Inc., Pelican Marsh Properties, Inc. and
Tarpon Cove Realty, Inc.
The companies have authority under Section 607.0850 of the Florida Business
Corporation Act (the "FBCA") to indemnify their directors and officers in
connection with actions, suits and proceedings brought against them if the
person acted in good faith and in a manner which the person reasonably believed
to be in, or not opposed to, the best interests of the corporation and, with
respect to any criminal actions, had no reasonable cause to believe the person's
conduct was unlawful. Unless pursuant to a determination by a court, the
determination of whether a director, officer or employee has acted in accordance
with the applicable standard of conduct must be made by (i) a majority vote of
directors who were not parties to the proceeding or a committee consisting
solely of two or more directors not parties to the proceedings, (ii) independent
legal counsel selected by a majority vote of the directors who were not parties
to the proceeding or committee of directors (or selected by the full board if a
quorum or committee cannot be obtained), or (iii) the affirmative vote of the
majority of the company's shareholders who were not parties to the proceeding.
The FBCA further provides that the companies may make any other or further
indemnity by resolution, bylaw, agreement, vote of shareholders or disinterested
directors or otherwise, except with respect to certain enumerated acts or
omissions of such persons. Florida law prohibits indemnification or advancement
of expenses if a judgment or other final adjudication establishes that the
actions of a director, officer or employee constitute (i) a violation of
criminal law, unless the person had reasonable cause to believe his or her
conduct was unlawful, (ii) a transaction from which such person derived an
improper personal benefit, (iii) willful misconduct or conscious disregard for
the best interests of the corporation in the case of a derivative action by a
shareholder, or (iv) in the case of a director, a circumstance under which a
director would be liable for improper distributions under Section 607.0834 of
the FBCA. The FBCA does not affect a director's responsibilities under any other
law, such as federal securities laws.
The articles of incorporation and/or the by-laws of The Colony at Pelican
Landing Golf Club, Inc., Financial Resources Group, Inc., WCI Homes, Inc.,
Sarasota Tower, Inc., Watermark Pools, Inc., Florida National Properties, Inc.,
WCI Golf Group, Inc., JYC Holdings, Inc., Communities Home Builders, Inc.,
Florida Lifestyle Management Company, Livingston Naples, Inc., Livingston Road,
Inc., Marbella At Pelican Bay, Inc., Tarpon Cove Yacht & Racquet Club, Inc., Sun
City Center Realty, Inc., Watermark Realty Referral, Inc., WCI Communities
Property Management, Inc., Communities Amenities, Inc., Florida Design
Communities, Inc., Coral Ridge Communities, Inc., Heron Bay, Inc. and Heron Bay
Golf Course Properties, Inc., provide that, to the fullest extent permitted by
the FBCA, as amended from time to time, each company will indemnify any and all
persons whom it has the power to indemnify from and against any and all of the
expenses, liabilities or other matters referred to in the FBCA.
The companies may purchase and maintain insurance on behalf of any director
or officer of the company against any liability asserted against such person.
The companies have purchased and maintain insurance on behalf of their directors
and officers.
II-2
210
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
1.1 Purchase Agreement dated February 14, 2001 by and among WCI
Communities, Inc., certain of its subsidiaries, UBS Warburg
LLC, Bear, Sterns & Co. Inc and Fleet Securities(1)
3.1 Certificate of Incorporation of WCI Communities, Inc., as
amended(1)
3.2 Restated Certificate of Incorporation of Bay Colony-Gateway,
Inc.(1)
3.3 Certificate of Formation of Communities Finance Company,
LLC(1)
3.4 Certificate of Incorporation of First Fidelity Title,
Inc.(1)
3.5 Certificate of Formation of Panther Developments, LLC(1)
3.6 Certificate of Incorporation of Pelican Landing Golf Resort
Ventures, Inc.(1)
3.7 Certificate of Incorporation of Sun City Center Golf
Properties, Inc.(1)
3.8 Certificate of Incorporation of Tiburon Golf Ventures,
Inc.(1)
3.9 Certificate of Incorporation of Watermark Realty, Inc., as
amended(1)
3.10 Certificate of Incorporation of WI Ultracorp of Florida,
Inc.(1)
3.11 Articles of Incorporation of Bay Colony of Naples, Inc.(1)
3.12 Articles of Incorporation of Bay Colony Realty Associates,
Inc.(1)
3.13 Articles of Incorporation of Communities Amenities, Inc.(1)
3.14 Articles of Incorporation of Communities Home Builders,
Inc.(1)
3.15 Articles of Incorporation of Coral Ridge Communities,
Inc.(1)
3.16 Articles of Incorporation of Coral Ridge Properties, Inc.,
as amended(1)
3.17 Articles of Incorporation of Coral Ridge Realty, Inc., as
amended(1)
3.18 Articles of Incorporation of Coral Ridge Realty Sales,
Inc.(1)
3.19 Articles of Incorporation of Financial Resources Group,
Inc.(1)
3.20 Articles of Incorporation of Florida Design Communities,
Inc., as amended(1)
3.21 Articles of Incorporation of Florida Lifestyle Management
Company, as amended(1)
3.22 Articles of Incorporation of Florida National Properties,
Inc.(1)
3.23 Articles of Incorporation of Gateway Communities, Inc.(1)
3.24 Articles of Incorporation of Gateway Communications
Services, Inc.(1)
3.25 Articles of Incorporation of Gateway Realty Sales, Inc.(1)
3.26 Articles of Incorporation of Heron Bay, Inc.(1)
3.27 Articles of Incorporation of Heron Bay Golf Course
Properties, Inc.(1)
3.28 Articles of Incorporation of JYC Holdings, Inc.(1)
3.29 Articles of Incorporation of Livingston Naples, Inc., as
amended(1)
3.30 Articles of Incorporation of Livingston Road, Inc.(1)
3.31 Articles of Incorporation of Marbella at Pelican Bay,
Inc.(1)
3.32 Articles of Incorporation of Pelican Bay Properties, Inc.(1)
3.33 Articles of Incorporation of Pelican Landing Communities,
Inc.(1)
3.34 Articles of Incorporation of Pelican Landing Properties,
Inc., as amended(1)
3.35 Articles of Incorporation of Pelican Marsh Properties,
Inc.(1)
II-3
211
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
3.36 Articles of Incorporation of Sarasota Tower, Inc.(1)
3.37 Articles of Incorporation of Sun City Center Realty, Inc.,
as amended(1)
3.38 Articles of Incorporation of The Colony At Pelican Landing
Golf Club, Inc.(1)
3.39 Articles of Incorporation of Tarpon Cove Yacht & Racquet
Club, Inc.(1)
3.40 Articles of Incorporation of Tarpon Cove Realty, Inc.(1)
3.41 Articles of Incorporation of Watermark Pools, Inc.(1)
3.42 Articles of Incorporation of Watermark Realty Referral,
Inc., as amended(1)
3.43 Articles of Incorporation of WCI Communities Property
Management, Inc.(1)
3.44 Articles of Incorporation of WCI Golf Group, Inc.(1)
3.45 Articles of Incorporation of WCI Homes, Inc.(1)
3.46 Articles of Incorporation of WCI Realty, Inc.(1)
3.47 Amended and Restated By-Laws of WCI Communities, Inc.(1)
3.48 Amended and Restated By-Laws of Bay Colony-Gateway, Inc.(1)
3.49 Limited Liability Company Agreement of Communities Finance
Company, LLC(1)
3.50 By-Laws of First Fidelity Title, Inc.(1)
3.51 Limited Liability Company Agreement of Panther Developments,
LLC(1)
3.52 By-Laws of Pelican Landing Golf Resort Ventures, Inc.(1)
3.53 By-Laws of Sun City Center Golf Properties, Inc.(1)
3.54 By-Laws of Tiburon Golf Ventures, Inc.(1)
3.55 By-Laws of Watermark Realty, Inc.(1)
3.56 By-Laws of WI Ultracorp of Florida, Inc.(1)
3.57 By-Laws of Bay Colony of Naples, Inc.(1)
3.58 By-Laws of Bay Colony Realty Associates, Inc.(1)
3.59 By-Laws of Communities Amenities, Inc.(1)
3.60 By-Laws of Communities Home Builders, Inc.(1)
3.61 By-Laws of Coral Ridge Communities, Inc.(1)
3.62 By-Laws of Coral Ridge Properties, Inc.(1)
3.63 By-Laws of Coral Ridge Realty, Inc.(1)
3.64 By-Laws of Coral Ridge Realty Sales, Inc.(1)
3.65 By-Laws of Financial Resources Group, Inc.(1)
3.66 By-Laws of Florida Design Communities, Inc.(1)
3.67 Amended and Restated By-Laws of Florida Lifestyle Management
Company(1)
3.68 By-Laws of Florida National Properties, Inc.(1)
3.69 By-Laws of Gateway Communities, Inc.(1)
3.70 By-Laws of Gateway Communications Services, Inc.(1)
3.71 By-Laws of Gateway Realty Sales, Inc.(1)
3.72 By-Laws of Heron Bay, Inc.(1)
3.73 By-Laws of Heron Bay Golf Course Properties, Inc.(1)
3.74 By-Laws of JYC Holdings, Inc.(1)
II-4
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EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
3.75 By-Laws of Livingston Naples, Inc.(1)
3.76 By-Laws of Livingston Road, Inc.(1)
3.77 By-Laws of Marbella at Pelican Bay, Inc.(1)
3.78 By-Laws of Pelican Bay Properties, Inc.(1)
3.79 By-Laws of Pelican Landing Communities, Inc.(1)
3.80 By-Laws of Pelican Landing Properties, Inc.(1)
3.81 By-Laws of Pelican Marsh Properties, Inc.(1)
3.82 By-Laws of Sarasota Tower, Inc.(1)
3.83 Amended and Restated By-Laws of Sun City Center Realty,
Inc.(1)
3.84 By-Laws of The Colony At Pelican Landing Golf Club, Inc.(1)
3.85 By-Laws of Tarpon Cove Yacht & Racquet Club, Inc.(1)
3.86 By-Laws of Tarpon Cove Realty, Inc.(1)
3.87 By-Laws of Watermark Pools, Inc.(1)
3.88 By-Laws of Watermark Realty Referral, Inc.(1)
3.89 By-Laws of WCI Communities Property Management, Inc.(1)
3.90 By-Laws of WCI Golf Group, Inc.(1)
3.91 By-Laws of WCI Homes, Inc.(1)
3.92 By-Laws of WCI Realty, Inc.(1)
4.1 Indenture, dated as of February 20, 2001, by and among WCI
Communities, Inc., certain of its subsidiaries and The Bank
of New York(1)
4.2 Form of 10 5/8% Senior Subordinated Note due 2011 (included
in Exhibit 4.1)(1)
4.3 Registration Rights Agreement, dated as of February 20, 2011
by and among WCI Communities, Inc., certain of its
subsidiaries and UBS Warburg LLC, Bear, Sterns & Co. Inc and
Fleet Securities(1)
5.1 Opinion of Simpson Thacher & Bartlett as to the legality of
the securities being registered(1)
9.1 Investors' Agreement, dated as of November 30, 1998, by and
among Watermark Communities, Inc. and certain other
parties(1)
9.2 First Amendment to Investors' Agreement, dated as of
February 23, 1999, by and among Watermark, Inc. and certain
other parties(1)
10.1 Primary Tax Allocation Agreement, dated January 1, 2001,
among Watermark Communities, Inc., WCI Communities, Inc.,
Bay Colony-Gateway, Inc. and certain other subsidiaries of
WCI Communities, Inc. and Bay Colony-Gateway Inc.(1)
10.2 Third Consolidated, Amended and Restated Senior Secured
Facilities Credit Agreement, dated as of February 2001,
among WCI Communities, Inc., Bay Colony Gateway, Inc.,
Communities Finance Company, LLC and Fleet National Bank, as
Lender and Agent(1)
10.3 Employment agreement between WCI Communities, Inc. and Don
E. Ackerman(1)
10.4 Employment agreement between WCI Communities, Inc. and
Alfred Hoffman, Jr.(1)
10.5 Non-Employee Directors' Stock Incentive Plan(2)
10.6 1998 Stock Purchase and Option Plan for Key Employees(2)
10.7 Management Incentive Compensation Plan(2)
12.1 Statement re Computation of Ratios(2)
II-5
213
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
21.1 Subsidiaries of Registrants(1)
23.1 Consent of Simpson Thacher & Bartlett (contained in Exhibit
5.1)(1)
23.2 Consent of PricewaterhouseCoopers LLP(2)
23.3 Consent of KPMG LLP(2)
24.1 Power of Attorney (contained on signature page)(1)
25.1 Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939 of The Bank of New York as Trustee(1)
99.1 Form of Letter of Transmittal(1)
99.2 Notice of Guaranteed Delivery(1)
- ---------------
(1)Previously filed.
(2)Filed herewith.
ITEM 22. UNDERTAKINGS
The undersigned registrants hereby undertake:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned registrants hereby undertake as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuers undertake that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
II-6
214
The registrants undertake that every prospectus: (i) that is filed pursuant
to paragraph (1) immediately preceding, or (ii) that purports to meet the
requirements of Section 10(a)(3) of the Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrants pursuant to the foregoing provisions, or otherwise, the registrants
have been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrants of expenses
incurred or paid by the director, officer or controlling person of the
registrants in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the registrants will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
The undersigned registrants hereby undertake to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned registrants hereby undertake to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-7
215
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT ISSUER
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BONITA SPRINGS, STATE OF
FLORIDA, ON MAY 21, 2001.
WCI COMMUNITIES, INC.
Registrant
By: /s/ JAMES P. DIETZ
------------------------------------
Name: James P. Dietz
Title: Senior Vice President
and Chief Financial
Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED ON MAY 21, 2001 BY OR ON BEHALF OF
THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED WITH THE REGISTRANT.
SIGNATURE TITLE
--------- -----
* Chief Executive Officer and Director
- -----------------------------------------------------
Alfred Hoffman, Jr.
* Chairman of the Board of Directors and Executive Vice
- ----------------------------------------------------- President
Don E. Ackerman
* Senior Vice President and Chief Financial Officer
- -----------------------------------------------------
James P. Dietz
* Senior Vice President and Treasurer
- -----------------------------------------------------
Steven C. Adelman
* President
- -----------------------------------------------------
Jerry L. Starkey
* Director
- -----------------------------------------------------
F. Philip Handy
* Director
- -----------------------------------------------------
Lawrence L. Landry
* Director
- -----------------------------------------------------
Thomas F. McWilliams
* Director
- -----------------------------------------------------
Joshua J. Mintz
* Director
- -----------------------------------------------------
Jay Sugarman
* Director
- -----------------------------------------------------
Stewart Turley
*By: /s/ JAMES P. DIETZ
------------------------------------------------
James P. Dietz
Attorney-In-Fact
II-8
216
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT
GUARANTOR HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BONITA SPRINGS,
STATE OF FLORIDA, ON MAY 21, 2001.
TIBURON GOLF VENTURES, INC.
Registrant
By: /s/ JAMES P. DIETZ
------------------------------------
Name: James P. Dietz
Title: Vice President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED ON MAY 21, 2001 BY OR ON BEHALF OF
THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED WITH THE REGISTRANT.
SIGNATURE TITLE
--------- -----
* President and Director
- -----------------------------------------------------
George R. Page
* Vice President and Director
- -----------------------------------------------------
David L. Fry
/s/ JAMES P. DIETZ Vice President
- -----------------------------------------------------
James P. Dietz
* Vice President and Treasurer
- -----------------------------------------------------
Steven C. Adelman
* Director
- -----------------------------------------------------
Michael Greenberg
*By: /s/ JAMES P. DIETZ
------------------------------------------------
James P. Dietz
Attorney-In-Fact
II-9
217
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT
GUARANTOR HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BONITA SPRINGS,
STATE OF FLORIDA, ON MAY 21, 2001.
FLORIDA LIFESTYLE MANAGEMENT COMPANY
Registrant
By: /s/ JAMES P. DIETZ
------------------------------------
Name: James P. Dietz
Title: Senior Vice President
and Treasurer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED ON MAY 21, 2001 BY OR ON BEHALF OF
THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED WITH THE REGISTRANT.
SIGNATURE TITLE
--------- -----
* Chairman and Chief Executive Officer
- -----------------------------------------------------
Alfred Hoffman, Jr.
* President and Director
- -----------------------------------------------------
Jerry L. Starkey
/s/ JAMES P. DIETZ Senior Vice President, Treasurer and Director
- -----------------------------------------------------
James P. Dietz
*By: /s/ JAMES P. DIETZ
------------------------------------------------
James P. Dietz
Attorney-In-Fact
II-10
218
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT
GUARANTOR HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BONITA SPRINGS,
STATE OF FLORIDA, ON MAY 21, 2001.
LIVINGSTON ROAD, INC.
Registrant
By: /s/ JAMES P. DIETZ
------------------------------------
Name: James P. Dietz
Title: Vice President
and Treasurer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED ON MAY 21, 2001 BY OR ON BEHALF OF
THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED WITH THE REGISTRANT.
SIGNATURE TITLE
--------- -----
* President and Director
- -----------------------------------------------------
Jerry L. Starkey
* Vice President and Director
- -----------------------------------------------------
Michael R. Greenberg
* Vice President, Treasurer and Director
- -----------------------------------------------------
James P. Dietz
*By: /s/ JAMES P. DIETZ
------------------------------------------------
James P. Dietz
Attorney-In-Fact
II-11
219
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT
GUARANTOR HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BONITA SPRINGS,
STATE OF FLORIDA, ON MAY 21, 2001.
WI ULTRACORP OF FLORIDA, INC.
Registrant
By: /s/ GEORGE R. PAGE
------------------------------------
Name: George R. Page
Title: President and Director
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED ON MAY 21, 2001 BY OR ON BEHALF OF
THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED WITH THE REGISTRANT.
SIGNATURE TITLE
--------- -----
* President and Director
- -----------------------------------------------------
George R. Page
* Secretary and Treasurer
- -----------------------------------------------------
Melanie H. Dunnuck
* Vice President and Director
- -----------------------------------------------------
Christopher J. Hanlon
* Vice President and Director
- -----------------------------------------------------
James Klecker
* Vice President and Director
- -----------------------------------------------------
John Gora
*By: /s/ JAMES P. DIETZ
-------------------------------------------------
James P. Dietz
Attorney-In-Fact
II-12
220
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT
GUARANTOR HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BONITA SPRINGS,
STATE OF FLORIDA, ON MAY 21, 2001.
WATERMARK REALTY, INC.
Registrant
By: /s/ JAMES P. DIETZ
------------------------------------
Name: James P. Dietz
Title: Senior Vice President
and Treasurer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED ON MAY 21, 2001 BY OR ON BEHALF OF
THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED WITH THE REGISTRANT.
SIGNATURE TITLE
--------- -----
* Chairman and Chief Executive Officer
- -----------------------------------------------------
Alfred Hoffman, Jr.
* President
- -----------------------------------------------------
Roger Herman
* Senior Vice President and Director
- -----------------------------------------------------
Jerry L. Starkey
* Senior Vice President and Director
- -----------------------------------------------------
David L. Fry
* Senior Vice President, Treasurer and Director
- -----------------------------------------------------
James P. Dietz
* Vice President
- -----------------------------------------------------
Steven C. Adelman
*By: /s/ JAMES P. DIETZ
------------------------------------------------
James P. Dietz
Attorney-In-Fact
II-13
221
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT
GUARANTOR HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BONITA SPRINGS,
STATE OF FLORIDA, ON MAY 21, 2001.
PELICAN LANDING GOLF RESORT VENTURES,
INC.
Registrant
By: /s/ JAMES P. DIETZ
------------------------------------
Name: James P. Dietz
Title: Vice President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED ON MAY 21, 2001 BY OR ON BEHALF OF
THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED WITH THE REGISTRANT.
SIGNATURE TITLE
--------- -----
* President and Director
- -----------------------------------------------------
David L. Fry
* Vice President and Director
- -----------------------------------------------------
Randy A. Park
* Vice President
- -----------------------------------------------------
James P. Dietz
* Vice President, Treasurer and Director
- -----------------------------------------------------
Steven C. Adelman
*By: /s/ JAMES P. DIETZ
------------------------------------------------
James P. Dietz
Attorney-In-Fact
II-14
222
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT
GUARANTOR HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BONITA SPRINGS,
STATE OF FLORIDA, ON MAY 21, 2001.
SUN CITY CENTER GOLF PROPERTIES, INC.
Registrant
By: /s/ JAMES P. DIETZ
------------------------------------
Name: James P. Dietz
Title: Senior Vice President and
Treasurer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED ON MAY 21, 2001 BY OR ON BEHALF OF
THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED WITH THE REGISTRANT.
SIGNATURE TITLE
--------- -----
* Chairman & Chief Executive Officer
- -----------------------------------------------------
Alfred Hoffman, Jr.
* President and Director
- -----------------------------------------------------
Jerry L. Starkey
* Senior Vice President, Treasurer and Director
- -----------------------------------------------------
James P. Dietz
*By: /s/ JAMES P. DIETZ
-------------------------------------------------
James P. Dietz
Attorney-In-Fact
II-15
223
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT
GUARANTOR HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BONITA SPRINGS,
STATE OF FLORIDA, ON MAY 21, 2001.
FIRST FIDELITY TITLE, INC.
Registrant
By: /s/ JERRY L. STARKEY
------------------------------------
Name: Jerry L. Starkey
Title: President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED ON MAY 21, 2001 BY OR ON BEHALF OF
THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED WITH THE REGISTRANT.
SIGNATURE TITLE
--------- -----
* Chairman and Chief Executive Officer
- -----------------------------------------------------
Alfred Hoffman, Jr.
* President and Director
- -----------------------------------------------------
Jerry L. Starkey
* Vice President
- -----------------------------------------------------
Steven C. Adelman
* Senior Vice President, Treasurer and Director
- -----------------------------------------------------
James P. Dietz
* By: /s/ JAMES P. DIETZ
------------------------------------------------
James P. Dietz
Attorney-In-Fact
II-16
224
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT
GUARANTOR HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BONITA SPRINGS,
STATE OF FLORIDA, ON MAY 21, 2001.
WCI REALTY , INC.
Registrant
By: /s/ JAMES P. DIETZ
------------------------------------
Name: James P. Dietz
Title: Vice President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED ON MAY 21, 2001 BY OR ON BEHALF OF
THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED WITH THE REGISTRANT.
SIGNATURE TITLE
--------- -----
* President
- -----------------------------------------------------
Jerry L. Starkey
* Senior Vice President and Director
- -----------------------------------------------------
Milton G. Flinn
* Senior Vice President, Broker and Director
- -----------------------------------------------------
R. Michael Curtin
* Vice President, Treasurer and Director
- -----------------------------------------------------
Steven C. Adelman
* Vice President
- -----------------------------------------------------
James P. Dietz
*By: /s/ JAMES P. DIETZ
------------------------------------------------
James P. Dietz
Attorney-In-Fact
II-17
225
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT
GUARANTOR HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BONITA SPRINGS,
STATE OF FLORIDA, ON MAY 21, 2001.
WCI HOMES, INC.
Registrant
By: /s/ ARMANDO GOENAGA
------------------------------------
Name: Armando Goenaga
Title: President and Director
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED ON MAY 21, 2001 BY OR ON BEHALF OF
THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED WITH THE REGISTRANT.
SIGNATURE TITLE
--------- -----
/s/ ARMANDO GOENAGA President and Director
- -----------------------------------------------------
Armando Goenaga
* Secretary and Treasurer
- -----------------------------------------------------
Charlie Brasington
/s/ MICHAEL R. GREENBERG Director
- -----------------------------------------------------
Michael R. Greenberg
*By: /s/ JAMES P. DIETZ
------------------------------------------------
James P. Dietz
Attorney-In-Fact
II-18
226
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT
GUARANTOR HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BONITA SPRINGS,
STATE OF FLORIDA, ON MAY 21, 2001.
WCI GOLF GROUP, INC.
Registrant
By: /s/ JAMES P. DIETZ
------------------------------------
Name: James P. Dietz
Title: Vice President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED ON MAY 21, 2001 BY OR ON BEHALF OF
THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED WITH THE REGISTRANT.
SIGNATURE TITLE
--------- -----
* President and Director
- -----------------------------------------------------
David L. Fry
* Vice President
- -----------------------------------------------------
James P. Dietz
* Vice President and Director
- -----------------------------------------------------
Steven C. Adelman
* Treasurer and Director
- -----------------------------------------------------
John Ferry
*By: /s/ JAMES P. DIETZ
-------------------------------
James P. Dietz
Attorney-In-Fact
II-19
227
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT
GUARANTOR HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BONITA SPRINGS,
STATE OF FLORIDA, ON MAY 21, 2001.
FINANCIAL RESOURCES GROUP, INC.
Registrant
By: /s/ JAMES P. DIETZ
------------------------------------
Name: James P. Dietz
Title: Senior Vice President
and Treasurer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED ON MAY 21, 2001 BY OR ON BEHALF OF
THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED WITH THE REGISTRANT.
SIGNATURE TITLE
--------- -----
* Chairman and Chief Executive Officer
- -----------------------------------------------------
Alfred Hoffman, Jr.
* President and Director
- -----------------------------------------------------
Jerry L. Starkey
* Senior Vice President, Secretary and Director
- -----------------------------------------------------
Milton G. Flinn
* Senior Vice President, Treasurer and Director
- -----------------------------------------------------
James P. Dietz
* Vice President
- -----------------------------------------------------
Steven C. Adelman
*By: /s/ JAMES P. DIETZ
-------------------------------
James P. Dietz
Attorney-In-Fact
II-20
228
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT
GUARANTOR HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BONITA SPRINGS,
STATE OF FLORIDA, ON MAY 21, 2001.
WCI COMMUNITIES PROPERTY MANAGEMENT,
INC.
Registrant
By: /s/ JAMES P. DIETZ
-------------------------------------
Name: James P. Dietz
Title: Vice President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED ON MAY 21 OR ON BEHALF OF THE
FOLLOWING PERSONS IN THE CAPACITIES INDICATED WITH THE REGISTRANT.
SIGNATURE TITLE
--------- -----
* President
- -----------------------------------------------------
Jerry L. Starkey
* Senior Vice President and Director
- -----------------------------------------------------
Milton G. Flinn
* Vice President
- -----------------------------------------------------
James P. Dietz
* Vice President
- -----------------------------------------------------
Steven C. Adelman
* Treasurer and Director
- -----------------------------------------------------
Rosa Glave
*By: /s/ JAMES P. DIETZ
-------------------------------
James P. Dietz
Attorney-In-Fact
II-21
229
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT
GUARANTOR HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BONITA SPRINGS,
STATE OF FLORIDA, ON MAY 21, 2001.
WATERMARK REALTY REFERRAL, INC.
Registrant
By: /s/ JAMES P. DIETZ
------------------------------------
Name: James P. Dietz
Title: Senior Vice President
And Treasurer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED ON MAY 21, 2001 BY OR ON BEHALF OF
THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED WITH THE REGISTRANT.
SIGNATURE TITLE
--------- -----
* Chairman and Chief Executive Officer
- -----------------------------------------------------
Alfred Hoffman, Jr.
* Director
- -----------------------------------------------------
Jerry L. Starkey
* President
- -----------------------------------------------------
Roger Herman
* Senior Vice President and Director
- -----------------------------------------------------
Milton G. Flinn
* Senior Vice President, Treasurer and Director
- -----------------------------------------------------
James P. Dietz
* Vice President
- -----------------------------------------------------
Steven C. Adelman
*By: /s/ JAMES P. DIETZ
-------------------------------
James P. Dietz
Attorney-In-Fact
II-22
230
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT
GUARANTOR HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BONITA SPRINGS,
STATE OF FLORIDA, ON MAY 21, 2001.
WATERMARK POOLS, INC.
Registrant
By: /s/ CHARLES MAFFETT
------------------------------------
Name: Charles Maffett
Title: President and Director
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED ON MAY 21, 2001 BY OR ON BEHALF OF
THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED WITH THE REGISTRANT.
SIGNATURE TITLE
--------- -----
* President and Director
- -----------------------------------------------------
Charles Maffett
* Vice President and Director
- -----------------------------------------------------
Dennis Peyton
* Secretary, Treasurer and Director
- -----------------------------------------------------
Thomas McCall
*By: /s/ JAMES P. DIETZ
------------------------------------------------
James P. Dietz
Attorney-In-Fact
II-23
231
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT
GUARANTOR HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BONITA SPRINGS,
STATE OF FLORIDA, ON MAY 21, 2001.
TARPON COVE YACHT & RACQUET, INC.
Registrant
By: /s/ JAMES P. DIETZ
------------------------------------
Name: James P. Dietz
Title: Vice President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED ON MAY 21, 2001 BY OR ON BEHALF OF
THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED WITH THE REGISTRANT.
SIGNATURE TITLE
--------- -----
* President and Director
- -----------------------------------------------------
Milton G. Flinn
* Vice President and Director
- -----------------------------------------------------
Richard Newman
* Vice President and Director
- -----------------------------------------------------
Timothy Oak
* Vice President
- -----------------------------------------------------
James P. Dietz
* Vice President and Treasurer
- -----------------------------------------------------
Steven C. Adelman
*By: /s/ JAMES P. DIETZ
------------------------------------------------
James P. Dietz
Attorney-In-Fact
II-24
232
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT
GUARANTOR HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BONITA SPRINGS,
STATE OF FLORIDA, ON MAY 21, 2001.
THE COLONY AT PELICAN LANDING GOLF CLUB,
INC.
Registrant
By: /s/ JAMES P. DIETZ
-------------------------------------
Name: James P. Dietz
Title: Senior Vice President and
Treasurer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED ON MAY 21, 2001 BY OR ON BEHALF OF
THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED WITH THE REGISTRANT.
SIGNATURE TITLE
--------- -----
* President and Director
- -----------------------------------------------------
George Page
* Vice President and Director
- -----------------------------------------------------
David L. Fry
* Vice President and Director
- -----------------------------------------------------
Stefan O. Johansson
* Senior Vice President, Treasurer and Director
- -----------------------------------------------------
James P. Dietz
* Treasurer
- -----------------------------------------------------
John Ferry
*By: /s/ JAMES P. DIETZ
------------------------------------------------
James P. Dietz
Attorney-In-Fact
II-25
233
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT
GUARANTOR HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BONITA SPRINGS,
STATE OF FLORIDA, ON MAY 21, 2001.
SUN CITY CENTER REALTY, INC.
Registrant
By: /s/ JAMES P. DIETZ
------------------------------------
Name: James P. Dietz
Title: Senior Vice President
And Treasurer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED ON MAY 21, 2001 BY OR ON BEHALF OF
THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED WITH THE REGISTRANT.
SIGNATURE TITLE
--------- -----
* Chairman and Chief Executive Officer
- -----------------------------------------------------
Alfred Hoffman, Jr.
* Senior Vice President and Director, Treasurer and
- ----------------------------------------------------- Director
Jerry L. Starkey
* Senior Vice President, Treasurer and Director
- -----------------------------------------------------
James P. Dietz
* Vice President
- -----------------------------------------------------
Steven C. Adelman
*By: /s/ JAMES P. DIETZ
------------------------------------------------
James P. Dietz
Attorney-In-Fact
II-26
234
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT
GUARANTOR HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BONITA SPRINGS,
STATE OF FLORIDA, ON MAY 21, 2001.
SARASOTA TOWER, INC.
Registrant
By: /s/ JAMES P. DIETZ
------------------------------------
Name: James P. Dietz
Title: Vice President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED ON MAY 21, 2001 BY OR ON BEHALF OF
THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED WITH THE REGISTRANT.
SIGNATURE TITLE
--------- -----
* President and Director
- -----------------------------------------------------
George R. Page
* Vice President and Director
- -----------------------------------------------------
James P. Dietz
* Vice President, Secretary and Director
- -----------------------------------------------------
Dwight D. Thomas
* Treasurer
- -----------------------------------------------------
Melanie H. Dunnuck
*By: /s/ JAMES P. DIETZ
--------------------------------------------------
James P. Dietz
Attorney-In-Fact
II-27
235
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT
GUARANTOR HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BONITA SPRINGS,
STATE OF FLORIDA, ON MAY 21, 2001.
FLORIDA DESIGN COMMUNITIES, INC.
Registrant
By: /s/ VIVIEN N. HASTINGS
------------------------------------
Name: Vivien N. Hastings
Title: Secretary
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED ON MAY 21, 2001 BY OR ON BEHALF OF
THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED WITH THE REGISTRANT.
SIGNATURE TITLE
--------- -----
* President and Director
- -----------------------------------------------------
Wanda Z. Cross
* Secretary and Director
- -----------------------------------------------------
Vivien N. Hastings
* Treasurer and Director
- -----------------------------------------------------
Steven C. Adelman
*By: /s/ JAMES P. DIETZ
------------------------------------------------
James P. Dietz
Attorney-In-Fact
II-28
236
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT
GUARANTOR HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BONITA SPRINGS,
STATE OF FLORIDA, ON MAY 21, 2001.
PELICAN MARSH PROPERTIES, INC.
Registrant
By: /s/ VIVIEN N. HASTINGS
------------------------------------
Name: Vivien N. Hastings
Title: Secretary
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED ON MAY 21, 2001 BY OR ON BEHALF OF
THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED WITH THE REGISTRANT.
SIGNATURE TITLE
--------- -----
* President and Director
- -----------------------------------------------------
Wanda Z. Cross
* Secretary and Director
- -----------------------------------------------------
Vivien N. Hastings
* Treasurer and Director
- -----------------------------------------------------
Steven C. Adelman
*By: /s/ JAMES P. DIETZ
------------------------------------------------
James P. Dietz
Attorney-In-Fact
II-29
237
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT
GUARANTOR HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BONITA SPRINGS,
STATE OF FLORIDA, ON MAY 21, 2001.
PELICAN LANDING COMMUNITIES, INC.
Registrant
By: /s/ VIVIEN N. HASTINGS
------------------------------------
Name: Vivien N. Hastings
Title: Secretary
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED ON MAY 21, 2001 BY OR ON BEHALF OF
THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED WITH THE REGISTRANT.
SIGNATURE TITLE
--------- -----
* President and Director
- -----------------------------------------------------
George R. Page
* Vice President and Director
- -----------------------------------------------------
Paul B. Drummond
* Secretary and Director
- -----------------------------------------------------
Vivien Hastings
* Treasurer
- -----------------------------------------------------
Steven C. Adelman
*By: /s/ JAMES P. DIETZ
------------------------------------------------
James P. Dietz
Attorney-In-Fact
II-30
238
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT
GUARANTOR HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BONITA SPRINGS,
STATE OF FLORIDA, ON MAY 21, 2001.
CORAL RIDGE PROPERTIES, INC.
Registrant
By: /s/ VIVIEN N. HASTINGS
------------------------------------
Name: Vivien N. Hastings
Title: Secretary
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED ON MAY 21, 2001 BY OR ON BEHALF OF
THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED WITH THE REGISTRANT.
SIGNATURE TITLE
--------- -----
* President and Director
- -----------------------------------------------------
Albert F. Moscato
* Treasurer and Director
- -----------------------------------------------------
Steven C. Adelman
*By: /s/ JAMES P. DIETZ
------------------------------------------------
James P. Dietz
Attorney-In-Fact
II-31
239
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT
GUARANTOR HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BONITA SPRINGS,
STATE OF FLORIDA, ON MAY 21, 2001.
LIVINGSTON NAPLES, INC.
Registrant
By: /s/ JAMES P. DIETZ
------------------------------------
Name: James P. Dietz
Title: Vice President
And Treasurer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED ON MAY 21, 2001 BY OR ON BEHALF OF
THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED WITH THE REGISTRANT.
SIGNATURE TITLE
--------- -----
* President and Director
- -----------------------------------------------------
Jerry L. Starkey
* Vice President and Director
- -----------------------------------------------------
Michael R. Greenberg
* Vice President, Treasurer and Director
- -----------------------------------------------------
James P. Dietz
*By: /s/ JAMES P. DIETZ
------------------------------------------------
James P. Dietz
Attorney-In-Fact
II-32
240
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT
GUARANTOR HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BONITA SPRINGS,
STATE OF FLORIDA, ON MAY 21, 2001.
MARBELLA AT PELICAN BAY, INC.
Registrant
By: /s/ JAMES P. DIETZ
------------------------------------
Name: James P. Dietz
Title: Vice President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED ON MAY 21, 2001 BY OR ON BEHALF OF
THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED WITH THE REGISTRANT.
SIGNATURE TITLE
--------- -----
* President and Director
- -----------------------------------------------------
George R. Page
* Vice President and Treasurer
- -----------------------------------------------------
Steven C. Adelman
* Vice President and Director
- -----------------------------------------------------
Christopher J. Hanlon
* Vice President and Director
- -----------------------------------------------------
Dwight D. Thomas
* Vice President
- -----------------------------------------------------
James P. Dietz
*By: /s/ JAMES P. DIETZ
------------------------------------------------
James P. Dietz
Attorney-In-Fact
II-33
241
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT
GUARANTOR HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BONITA SPRINGS,
STATE OF FLORIDA, ON MAY 21, 2001.
JYC HOLDINGS, INC.
Registrant
By: /s/ JAMES P. DIETZ
------------------------------------
Name: James P. Dietz
Title: Vice President
And Treasurer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED ON MAY 21, 2001 BY OR ON BEHALF OF
THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED WITH THE REGISTRANT.
SIGNATURE TITLE
--------- -----
* President and Director
- -----------------------------------------------------
George R. Page
* Vice President, Treasurer and Director
- -----------------------------------------------------
James P. Dietz
* Vice President and Director
- -----------------------------------------------------
John Gora
* Vice President
- -----------------------------------------------------
Steven C. Adelman
*By: /s/ JAMES P. DIETZ
------------------------------------------------
James P. Dietz
Attorney-In-Fact
II-34
242
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT
GUARANTOR HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BONITA SPRINGS,
STATE OF FLORIDA, ON MAY 21, 2001.
GATEWAY COMMUNICATIONS SERVICES, INC.
Registrant
By: /s/ JAMES P. DIETZ
------------------------------------
Name: James P. Dietz
Title: Vice President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED ON MAY 21, 2001 BY OR ON BEHALF OF
THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED WITH THE REGISTRANT.
SIGNATURE TITLE
--------- -----
* President and Director
- -----------------------------------------------------
Robert Gislason
* Vice President and Director
- -----------------------------------------------------
Milton G. Flinn
* Secretary, Vice President and Director
- -----------------------------------------------------
Vivien Hastings
* Vice President
- -----------------------------------------------------
James P. Dietz
* Vice President and Treasurer
- -----------------------------------------------------
Steven C. Adelman
*By: /s/ JAMES P. DIETZ
------------------------------------------------
James P. Dietz
Attorney-In-Fact
II-35
243
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT
GUARANTOR HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BONITA SPRINGS,
STATE OF FLORIDA, ON MAY 21, 2001.
GATEWAY COMMUNITIES, INC.
Registrant
By: /s/ ROBERT GISLASON
------------------------------------
Name: Robert Gislason
Title: President and Treasurer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED ON MAY 21, 2001 BY OR ON BEHALF OF
THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED WITH THE REGISTRANT.
SIGNATURE TITLE
--------- -----
/s/ ROBERT GISLASON President and Director
- -----------------------------------------------------
Robert Gislason
* Vice President and Director
- -----------------------------------------------------
Milton G. Flinn
* Secretary and Director
- -----------------------------------------------------
Vivien Hastings
* Treasurer
- -----------------------------------------------------
Steven C. Adelman
*By: /s/ JAMES P. DIETZ
------------------------------------------------
James P. Dietz
Attorney-In-Fact
II-36
244
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT
GUARANTOR HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BONITA SPRINGS,
STATE OF FLORIDA, ON MAY 21, 2001.
FLORIDA NATIONAL PROPERTIES, INC.
Registrant
By: /s/ STEVEN C. ADELMAN
------------------------------------
Name: Steven C. Adelman
Title: Treasurer
and Assistant Secretary
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED ON MAY 21, 2001 BY OR ON BEHALF OF
THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED WITH THE REGISTRANT.
SIGNATURE TITLE
--------- -----
* President and Director
- -----------------------------------------------------
Albert F. Moscato, Jr.
* Vice President, Secretary and Director
- -----------------------------------------------------
D.R. Dyess
* Treasurer and Assistant Secretary
- -----------------------------------------------------
Steven C. Adelman
*By: /s/ JAMES P. DIETZ
------------------------------------------------
James P. Dietz
Attorney-In-Fact
II-37
245
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT
GUARANTOR HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BONITA SPRINGS,
STATE OF FLORIDA, ON MAY 21, 2001.
BAY COLONY-GATEWAY, INC.
Registrant
By: /s/ JAMES P. DIETZ
------------------------------------
Name: James P. Dietz
Title: Senior Vice President
and Chief Financial
Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED ON MAY 21, 2001 BY OR ON BEHALF OF
THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED WITH THE REGISTRANT.
SIGNATURE TITLE
--------- -----
* Chief Executive Officer and Director
- -----------------------------------------------------
Alfred Hoffman, Jr.
* Chairman of the Board of Directors and Executive Vice
- ----------------------------------------------------- President
Don E. Ackerman
* President
- -----------------------------------------------------
Jerry L. Starkey
* Senior Vice President and Chief Financial Officer
- -----------------------------------------------------
James P. Dietz
* Senior Vice President and Treasurer
- -----------------------------------------------------
Steven C. Adelman
* Director
- -----------------------------------------------------
F. Philip Handy
* Director
- -----------------------------------------------------
Lawrence L. Landry
* Director
- -----------------------------------------------------
Thomas F. McWilliams
* Director
- -----------------------------------------------------
Joshua J. Mintz
* Director
- -----------------------------------------------------
Jay Sugarman
* Director
- -----------------------------------------------------
Stewart Turley
*By: /s/ JAMES P. DIETZ
------------------------------------------------
James P. Dietz
Attorney-In-Fact
II-38
246
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT
GUARANTOR HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BONITA SPRINGS,
STATE OF FLORIDA, ON MAY 21, 2001.
COMMUNITIES FINANCE COMPANY, LLC
Registrant
By: /s/ JAMES P. DIETZ
------------------------------------
Name: James P. Dietz
Title: Vice President
and Manager
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED ON MAY 21, 2001 BY OR ON BEHALF OF
THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED WITH THE REGISTRANT.
SIGNATURE TITLE
--------- -----
* President and Manager
- -----------------------------------------------------
Jerry L. Starkey
* Vice President and Manager
- -----------------------------------------------------
James P. Dietz
* Vice President, Treasurer and Assistant Secretary
- -----------------------------------------------------
Steven C. Adelman
*By: /s/ JAMES P. DIETZ
------------------------------------------------
James P. Dietz
Attorney-In-Fact
II-39
247
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT
GUARANTOR HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BONITA SPRINGS,
STATE OF FLORIDA, ON MAY 21, 2001.
PANTHER DEVELOPMENTS, LLC
Registrant
By: /s/ JAMES P. DIETZ
------------------------------------
Name: James P. Dietz
Title: Vice President, Treasurer
and Manager
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED ON MAY 21, 2001 BY OR ON BEHALF OF
THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED WITH THE REGISTRANT.
SIGNATURE TITLE
--------- -----
* President and Manager
- -----------------------------------------------------
Jerry L. Starkey
* Vice President, Treasurer and Manager
- -----------------------------------------------------
James P. Dietz
* Vice President and Manager
- -----------------------------------------------------
Michael R. Greenberg
*By: /s/ JAMES P. DIETZ
------------------------------------------------
James P. Dietz
Attorney-In-Fact
II-40
248
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT
GUARANTOR HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BONITA SPRINGS,
STATE OF FLORIDA, ON MAY 21, 2001.
BAY COLONY REALTY ASSOCIATES, INC.
Registrant
By: /s/ VIVIEN N.
HASTINGS
------------------------------------
Name: Vivien N. Hastings
Title: Secretary
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED ON MAY 21, 2001 BY OR ON BEHALF OF
THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED WITH THE REGISTRANT.
SIGNATURE TITLE
--------- -----
* President and Director
- -----------------------------------------------------
Wanda Z. Cross
* Secretary and Director
- -----------------------------------------------------
Vivien N. Hastings
* Treasurer and Director
- -----------------------------------------------------
Steven C. Adelman
*By: /s/ JAMES P. DIETZ
------------------------------------------------
James P. Dietz
Attorney-In-Fact
II-41
249
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT
GUARANTOR HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BONITA SPRINGS,
STATE OF FLORIDA, ON MAY 21, 2001.
PELICAN BAY PROPERTIES, INC.
Registrant
By: /s/ VIVIEN N. HASTINGS
------------------------------------
Name: Vivien N. Hastings
Title: Secretary
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED ON MAY 21, 2001 BY OR ON BEHALF OF
THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED WITH THE REGISTRANT.
SIGNATURE TITLE
- --------- -----
* President and Director
- -----------------------------------------------------
Wanda Z. Cross
* Secretary and Director
- -----------------------------------------------------
Vivien N. Hastings
* Treasurer and Director
- -----------------------------------------------------
Steven C. Adelman
*By: /s/ JAMES P. DIETZ
-------------------------------
James P. Dietz
Attorney-In-Fact
II-42
250
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT
GUARANTOR HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BONITA SPRINGS,
STATE OF FLORIDA, ON MAY 21, 2001.
GATEWAY REALTY SALES, INC.
Registrant
By /s/ VIVIEN N. HASTINGS
------------------------------------
Name: Vivien N. Hastings
Title: Secretary
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED ON MAY 21, 2001 BY OR ON BEHALF OF
THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED WITH THE REGISTRANT.
SIGNATURE TITLE
--------- -----
* President and Director
- -----------------------------------------------------
Wanda Z. Cross
* Secretary and Director
- -----------------------------------------------------
Vivien N. Hastings
* Treasurer and Director
- -----------------------------------------------------
Steven C. Adelman
*By: /s/ JAMES P. DIETZ
------------------------------------------------
James P. Dietz
Attorney-In-Fact
II-43
251
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT
GUARANTOR HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BONITA SPRINGS,
STATE OF FLORIDA, ON MAY 21, 2001.
CORAL RIDGE REALTY SALES, INC.
Registrant
By: /s/ VIVIEN N. HASTINGS
------------------------------------
Name: Vivien N. Hastings
Title: Secretary
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED ON MAY 21, 2001 BY OR ON BEHALF OF
THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED WITH THE REGISTRANT.
SIGNATURE TITLE
--------- -----
* President and Director
- -----------------------------------------------------
Albert F. Moscato
* Treasurer and Director
- -----------------------------------------------------
Steven C. Adelman
*By: /s/ JAMES P. DIETZ
-------------------------------
James P. Dietz
Attorney-In-Fact
II-44
252
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT
GUARANTOR HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BONITA SPRINGS,
STATE OF FLORIDA, ON MAY 21, 2001.
COMMUNITIES HOME BUILDERS, INC.
Registrant
By: /s/ JAMES P. DIETZ
------------------------------------
Name: James P. Dietz
Title: Vice President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED ON MAY 21, 2001 BY OR ON BEHALF OF
THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED WITH THE REGISTRANT.
SIGNATURE TITLE
--------- -----
* President and Director
- -----------------------------------------------------
Armando J. Goenaga
* Treasurer, Vice President and Director
- -----------------------------------------------------
Steven C. Adelman
* Vice President
- -----------------------------------------------------
James P. Dietz
* Director
- -----------------------------------------------------
Alfred Hoffman, Jr.
*By: /s/ JAMES P. DIETZ
------------------------------------------------
James P. Dietz
Attorney-In-Fact
II-45
253
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT
GUARANTOR HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BONITA SPRINGS,
STATE OF FLORIDA, ON MAY 21, 2001.
COMMUNITIES AMENITIES, INC.
Registrant
By: /s/ JAMES P. DIETZ
------------------------------------
Name: James P. Dietz
Title: Vice President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED ON MAY 21, 2001 BY OR ON BEHALF OF
THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED WITH THE REGISTRANT.
SIGNATURE TITLE
--------- -----
* President and Director
- -----------------------------------------------------
David L. Fry
* Treasurer, Vice President and Director
- -----------------------------------------------------
Steven C. Adelman
* Vice President
- -----------------------------------------------------
James P. Dietz
* Director
- -----------------------------------------------------
Alfred Hoffman, Jr.
*By: /s/ JAMES P. DIETZ
------------------------------------------------
James P. Dietz
Attorney-In-Fact
II-46
254
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT
GUARANTOR HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BONITA SPRINGS,
STATE OF FLORIDA, ON MAY 21, 2001.
BAY COLONY OF NAPLES, INC.
Registrant
By: /s/ VIVIEN N. HASTINGS
------------------------------------
Name: Vivien N. Hastings
Title: Secretary
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED ON MAY 21, 2001 BY OR ON BEHALF OF
THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED WITH THE REGISTRANT.
SIGNATURE TITLE
--------- -----
* President and Director
- -----------------------------------------------------
George Page
* Treasurer and Director
- -----------------------------------------------------
Steven C. Adelman
* Secretary and Director
- -----------------------------------------------------
Vivien Hastings
* By: /s/ JAMES P. DIETZ
------------------------------------------------
James P. Dietz
Attorney-In-Fact
II-47
255
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT
GUARANTOR HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BONITA SPRINGS,
STATE OF FLORIDA, ON MAY 21, 2001.
CORAL RIDGE COMMUNITIES, INC.
Registrant
By: /s/ VIVIEN N. HASTINGS
------------------------------------
Name: Vivien N. Hastings
Title: Secretary
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED ON MAY 21, 2001 BY OR ON BEHALF OF
THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED WITH THE REGISTRANT.
SIGNATURE TITLE
--------- -----
* President and Director
- -----------------------------------------------------
Albert F. Moscato, Jr.
* Vice President and Director
- -----------------------------------------------------
Paul J. Angelo
* Vice President and Treasurer
- -----------------------------------------------------
Steven C. Adelman
*By: /s/ JAMES P. DIETZ
------------------------------------------------
James P. Dietz
Attorney-In-Fact
II-48
256
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT
GUARANTOR HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BONITA SPRINGS,
STATE OF FLORIDA, ON MAY 21, 2001.
HERON BAY GOLF COURSE PROPERTIES, INC.
Registrant
By: /s/ VIVIEN N. HASTINGS
------------------------------------
Name: Vivien N. Hastings
Title: Secretary
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED ON MAY 21, 2001 BY OR ON BEHALF OF
THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED WITH THE REGISTRANT.
SIGNATURE TITLE
--------- -----
* President and Director
- -----------------------------------------------------
Albert F. Mostcato, Jr.
* Treasurer
- -----------------------------------------------------
Steven C. Adelman
* Secretary
- -----------------------------------------------------
Vivien N. Hastings
*By: /s/ JAMES P. DIETZ
------------------------------------------------
James P. Dietz
Attorney-In-Fact
II-49
257
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT
GUARANTOR HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BONITA SPRINGS,
STATE OF FLORIDA, ON MAY 21, 2001.
HERON BAY, INC.
Registrant
By: /s/ VIVIEN N. HASTINGS
------------------------------------
Name: Vivien N. Hastings
Title: Secretary
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED ON MAY 21, 2001 BY OR ON BEHALF OF
THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED WITH THE REGISTRANT.
SIGNATURE TITLE
--------- -----
* President and Director
- -----------------------------------------------------
Albert F. Mostcato, Jr.
* Treasurer
- -----------------------------------------------------
Steven C. Adelman
* Secretary
- -----------------------------------------------------
Vivien N. Hastings
*By: /s/ JAMES P. DIETZ
------------------------------------------------
James P. Dietz
Attorney-In-Fact
II-50
258
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT
GUARANTOR HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BONITA SPRINGS,
STATE OF FLORIDA, ON MAY 21, 2001.
CORAL RIDGE REALTY, INC.
Registrant
By: /s/ MARK SMIETANA
------------------------------------
Name: Mark Smietana
Title: President and Director
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED ON MAY 21, 2001 BY OR ON BEHALF OF
THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED WITH THE REGISTRANT.
SIGNATURE TITLE
--------- -----
/s/ MARK SMIETANA President and Director
- -----------------------------------------------------
Mark Smietana
* Vice President and Director
- -----------------------------------------------------
Albert F. Moscato, Jr.
* Treasurer and Director
- -----------------------------------------------------
Steven C. Adelman
*By: /s/ JAMES P. DIETZ
------------------------------------------------
James P. Dietz
Attorney-In-Fact
II-51
259
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT
GUARANTOR HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BONITA SPRINGS,
STATE OF FLORIDA, ON MAY 21, 2001.
PELICAN LANDING PROPERTIES, INC.
Registrant
By: /s/ WANDA Z. CROSS
------------------------------------
Name: Wanda Z. Cross
Title: President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED ON MAY 21, 2001 BY OR ON BEHALF OF
THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED WITH THE REGISTRANT.
SIGNATURE TITLE
--------- -----
* President and Director
- -----------------------------------------------------
Wanda Z. Cross
* Treasurer and Director
- -----------------------------------------------------
Steven C. Adelman
* Secretary and Director
- -----------------------------------------------------
Vivien Hastings
*By: /s/ JAMES P. DIETZ
------------------------------------------------
James P. Dietz
Attorney-In-Fact
II-52
260
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT
GUARANTOR HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BONITA SPRINGS,
STATE OF FLORIDA, ON MAY 21, 2001.
TARPON COVE REALTY, INC.
Registrant
By: /s/ WANDA Z. CROSS
------------------------------------
Name: Wanda Z. Cross
Title: President and Director
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED ON MAY 21, 2001 BY OR ON BEHALF OF
THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED WITH THE REGISTRANT.
SIGNATURE TITLE
--------- -----
* President and Director
- -----------------------------------------------------
Wanda Z. Cross
* Treasurer and Director
- -----------------------------------------------------
Steven C. Adelman
* Secretary and Director
- -----------------------------------------------------
Vivien Hastings
*By: /s/ JAMES P. DIETZ
------------------------------------------------
James P. Dietz
Attorney-In-Fact
II-53
261
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
1.1 Purchase Agreement dated February 14, 2001 by and among WCI
Communities, Inc., certain of its subsidiaries, UBS Warburg
LLC, Bear, Sterns & Co. Inc and Fleet Securities(1)
3.1 Certificate of Incorporation of WCI Communities, Inc., as
amended(1)
3.2 Restated Certificate of Incorporation of Bay Colony-Gateway,
Inc.(1)
3.3 Certificate of Formation of Communities Finance Company,
LLC(1)
3.4 Certificate of Incorporation of First Fidelity Title,
Inc.(1)
3.5 Certificate of Formation of Panther Developments, LLC(1)
3.6 Certificate of Incorporation of Pelican Landing Golf Resort
Ventures, Inc.(1)
3.7 Certificate of Incorporation of Sun City Center Golf
Properties, Inc.(1)
3.8 Certificate of Incorporation of Tiburon Golf Ventures,
Inc.(1)
3.9 Certificate of Incorporation of Watermark Realty, Inc., as
amended(1)
3.10 Certificate of Incorporation of WI Ultracorp of Florida,
Inc.(1)
3.11 Articles of Incorporation of Bay Colony of Naples, Inc.(1)
3.12 Articles of Incorporation of Bay Colony Realty Associates,
Inc.(1)
3.13 Articles of Incorporation of Communities Amenities, Inc.(1)
3.14 Articles of Incorporation of Communities Home Builders,
Inc.(1)
3.15 Articles of Incorporation of Coral Ridge Communities,
Inc.(1)
3.16 Articles of Incorporation of Coral Ridge Properties, Inc.,
as amended(1)
3.17 Articles of Incorporation of Coral Ridge Realty, Inc., as
amended(1)
3.18 Articles of Incorporation of Coral Ridge Realty Sales,
Inc.(1)
3.19 Articles of Incorporation of Financial Resources Group,
Inc.(1)
3.20 Articles of Incorporation of Florida Design Communities,
Inc., as amended(1)
3.21 Articles of Incorporation of Florida Lifestyle Management
Company, as amended(1)
3.22 Articles of Incorporation of Florida National Properties,
Inc.(1)
3.23 Articles of Incorporation of Gateway Communities, Inc.(1)
3.24 Articles of Incorporation of Gateway Communications
Services, Inc.(1)
3.25 Articles of Incorporation of Gateway Realty Sales, Inc.(1)
3.26 Articles of Incorporation of Heron Bay, Inc.(1)
3.27 Articles of Incorporation of Heron Bay Golf Course
Properties, Inc.(1)
3.28 Articles of Incorporation of JYC Holdings, Inc.(1)
3.29 Articles of Incorporation of Livingston Naples, Inc., as
amended(1)
3.30 Articles of Incorporation of Livingston Road, Inc.(1)
3.31 Articles of Incorporation of Marbella at Pelican Bay,
Inc.(1)
3.32 Articles of Incorporation of Pelican Bay Properties, Inc.(1)
3.33 Articles of Incorporation of Pelican Landing Communities,
Inc.(1)
3.34 Articles of Incorporation of Pelican Landing Properties,
Inc., as amended(1)
3.35 Articles of Incorporation of Pelican Marsh Properties,
Inc.(1)
3.36 Articles of Incorporation of Sarasota Tower, Inc.(1)
262
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
3.37 Articles of Incorporation of Sun City Center Realty, Inc.,
as amended(1)
3.38 Articles of Incorporation of The Colony At Pelican Landing
Golf Club, Inc.(1)
3.39 Articles of Incorporation of Tarpon Cove Yacht & Racquet
Club, Inc.(1)
3.40 Articles of Incorporation of Tarpon Cove Realty, Inc.(1)
3.41 Articles of Incorporation of Watermark Pools, Inc.(1)
3.42 Articles of Incorporation of Watermark Realty Referral,
Inc., as amended(1)
3.43 Articles of Incorporation of WCI Communities Property
Management, Inc.(1)
3.44 Articles of Incorporation of WCI Golf Group, Inc.(1)
3.45 Articles of Incorporation of WCI Homes, Inc.(1)
3.46 Articles of Incorporation of WCI Realty, Inc.(1)
3.47 Amended and Restated By-Laws of WCI Communities, Inc.(1)
3.48 Amended and Restated By-Laws of Bay Colony-Gateway, Inc.(1)
3.49 Limited Liability Company Agreement of Communities Finance
Company, LLC(1)
3.50 By-Laws of First Fidelity Title, Inc.(1)
3.51 Limited Liability Company Agreement of Panther Developments,
LLC(1)
3.52 By-Laws of Pelican Landing Golf Resort Ventures, Inc.(1)
3.53 By-Laws of Sun City Center Golf Properties, Inc.(1)
3.54 By-Laws of Tiburon Golf Ventures, Inc.(1)
3.55 By-Laws of Watermark Realty, Inc.(1)
3.56 By-Laws of WI Ultracorp of Florida, Inc.(1)
3.57 By-Laws of Bay Colony of Naples, Inc.(1)
3.58 By-Laws of Bay Colony Realty Associates, Inc.(1)
3.59 By-Laws of Communities Amenities, Inc.(1)
3.60 By-Laws of Communities Home Builders, Inc.(1)
3.61 By-Laws of Coral Ridge Communities, Inc.(1)
3.62 By-Laws of Coral Ridge Properties, Inc.(1)
3.63 By-Laws of Coral Ridge Realty, Inc.(1)
3.64 By-Laws of Coral Ridge Realty Sales, Inc.(1)
3.65 By-Laws of Financial Resources Group, Inc.(1)
3.66 By-Laws of Florida Design Communities, Inc.(1)
3.67 Amended and Restated By-Laws of Florida Lifestyle Management
Company(1)
3.68 By-Laws of Florida National Properties, Inc.(1)
3.69 By-Laws of Gateway Communities, Inc.(1)
3.70 By-Laws of Gateway Communications Services, Inc.(1)
3.71 By-Laws of Gateway Realty Sales, Inc.(1)
3.72 By-Laws of Heron Bay, Inc.(1)
3.73 By-Laws of Heron Bay Golf Course Properties, Inc.(1)
3.74 By-Laws of JYC Holdings, Inc.(1)
3.75 By-Laws of Livingston Naples, Inc.(1)
263
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
3.76 By-Laws of Livingston Road, Inc.(1)
3.77 By-Laws of Marbella at Pelican Bay, Inc.(1)
3.78 By-Laws of Pelican Bay Properties, Inc.(1)
3.79 By-Laws of Pelican Landing Communities, Inc.(1)
3.80 By-Laws of Pelican Landing Properties, Inc.(1)
3.81 By-Laws of Pelican Marsh Properties, Inc.(1)
3.82 By-Laws of Sarasota Tower, Inc.(1)
3.83 Amended and Restated By-Laws of Sun City Center Realty,
Inc.(1)
3.84 By-Laws of The Colony At Pelican Landing Golf Club, Inc.(1)
3.85 By-Laws of Tarpon Cove Yacht & Racquet Club, Inc.(1)
3.86 By-Laws of Tarpon Cove Realty, Inc.(1)
3.87 By-Laws of Watermark Pools, Inc.(1)
3.88 By-Laws of Watermark Realty Referral, Inc.(1)
3.89 By-Laws of WCI Communities Property Management, Inc.(1)
3.90 By-Laws of WCI Golf Group, Inc.(1)
3.91 By-Laws of WCI Homes, Inc.(1)
3.92 By-Laws of WCI Realty, Inc.(1)
4.1 Indenture, dated as of February 20, 2001, by and among WCI
Communities, Inc., certain of its subsidiaries and The Bank
of New York(1)
4.2 Form of 10 5/8% Senior Subordinated Note due 2011 (included
in Exhibit 4.1)(1)
4.3 Registration Rights Agreement, dated as of February 20, 2011
by and among WCI Communities, Inc., certain of its
subsidiaries and UBS Warburg LLC, Bear, Sterns & Co. Inc and
Fleet Securities(1)
5.1 Opinion of Simpson Thacher & Bartlett as to the legality of
the securities being registered(1)
9.1 Investors' Agreement, dated as of November 30, 1998, by and
among Watermark Communities, Inc. and certain other
parties(1)
9.2 First Amendment to Investors' Agreement, dated as of
February 23, 1999, by and among Watermark Communities, Inc.
and certain other parties(1)
10.1 Primary Tax Allocation Agreement, dated January 1, 2001
among Watermark Communities, Inc., WCI Communities, Inc.,
Bay Colony-Gateway, Inc. and certain other subsidiaries of
WCI Communities, Inc. and Bay Colony-Gateway Inc.(1)
10.2 Third Consolidated, Amended and Restated Senior Secured
Facilities Credit Agreement, dated as of February 20, 2001,
among WCI Communities, Inc., Bay Colony Gateway, Inc.,
Communities Finance Company, LLC and Fleet National Bank, as
Lender and Agent(1)
10.3 Employment agreement between WCI Communities Limited
Partnership and Don E. Ackerman, dated as of July 24,
1995(1)
10.4 Amended and restated employment agreement between Watermark
Communities, Inc. and Alfred Hoffman, Jr., dated as of
January 1, 1999(1)
10.5 Non-Employee Directors' Stock Incentive Plan(2)
10.6 1998 Stock Purchase and Option Plan for Key Employees(2)
10.7 Management Incentive Compensation Plan(2)
12.1 Statement re Computation of Ratios(2)
264
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
21.1 Subsidiaries of Registrants(1)
23.1 Consent of Simpson Thacher & Bartlett (contained in Exhibit
5.1)(1)
23.2 Consent of PricewaterhouseCoopers LLP(2)
23.3 Consent of KPMG LLP(2)
24.1 Power of Attorney (contained on signature page)(1)
25.1 Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939 of The Bank of New York as Trustee(1)
99.1 Form of Letter of Transmittal(1)
99.2 Notice of Guaranteed Delivery(1)
- ---------------
(1)Previously filed.
(2)Filed herewith.