TECHNICAL OLYMPIC USA REPORTS THIRD QUARTER
AND NINE MONTHS FINANCIAL RESULTS
COMPANY REPORTS EARNINGS FROM CONTINUING
OPERATIONS BEFORE MERGER AND UNUSUAL CHARGES OF $22.7 MILLION
FOR IMMEDIATE RELEASE: November 12, 2002
Hollywood, Florida - Technical Olympic USA, Inc. (TOUSA) (Nasdaq: TOUS) today
reported third quarter earnings from continuing operations before merger and
unusual charges of $22.7 million, or $0.81 per share. That compared to $25.0
million, or $0.90 per share, for the corresponding quarter of the prior year.
Income from continuing operations increased to $26.3 million, or $0.95 per
share, for the quarter ended September 30, 2002 from $25.0 million, or $0.90 per
share, for the quarter ended September 30, 2001
For the nine months ended September 30, 2002, earnings from continuing
operations before merger and unusual charges totaled $61.9 million, or $2.22 per
share, compared to $67.4 million, or $2.41 per share, for the nine months ended
September 30, 2001.
On June 25, 2002, Engle Holdings Corp. was merged into Newmark Homes Corp.
(Nasdaq: NHCH) and the combined company was renamed Technical Olympic USA, Inc.
This merger was accounted for in a manner similar to a pooling of interests due
to both entities being under the common control of Technical Olympic, Inc.
(Technical Olympic). As a result of the merger, Technical Olympic increased its
ownership interest in TOUSA to 91.75%. In accordance with generally accepted
accounting principles, historical comparisons represent pooled results of the
two former companies.
HOMEBUILDING
Homebuilding revenues decreased from $360.6 million for the 2001 Quarter to
$340.2 million for the 2002 Quarter. The decline in revenues of $20.4 million,
or 5.6%, was primarily due to the decrease in home closings during the 2002
quarter as compared to the 2001 quarter. Revenue from the sale of homes
decreased $26.6 million, or 7.4%, to $330.7 million for the 2002 quarter. This
decrease primarily results from a decline in closings from 1,379 during the 2001
quarter to 1,252 during the 2002 quarter. This decrease was partially offset by
an increase in the Company's average selling price from $259,000 during the
first quarter of 2001 to $264,000 during first quarter of 2002. This increase in
average selling price was primarily due to a change in product mix and the
change in mix of homes closed between the Company's regions. This decline in
sales of homes was partially offset by an increase in the sale of land of $6.3
million for the 2002 quarter from the 2001 quarter.
Homebuilding revenues decreased from $1,029.9 million for the nine months ended
September 30, 2001 to $996.7 million for the first nine months of 2002. The
decline in revenues of $33.2 million, or 3.2%, was primarily due to a 5.9%
decline in closings from 3,947 to 3,713. This decline in closings was partially
offset by an increase in the average selling price from $257,000 during the
first nine months of 2001 to $265,000 during the 2002 nine month period.
The decline in closings in comparing the 2002 periods to the 2001 periods was
primarily a result of the decline in the number of communities that the Company
was actively marketing during the corresponding periods. At the beginning of the
third quarter of 2002, the Company was actively marketing at 132 communities
compared to 149 at the beginning of the 2001 third quarter.
Gross margins on revenues from home sales decreased slightly from 21.5% and
20.8% during the 2001 third quarter and the 2001 nine month period to 20.9% and
20.6% for the third quarter of 2002 and the 2002 nine month period. The decline
was attributed to an increase in the average lot cost per closing and an
increase in incentives at several of our divisions. This was partially offset by
an increase in our gross margin on options and upgrades.
Selling, general & administrative (SG&A) expenses decreased $2.4 million, or
5.9%, from $40.8 million for the third quarter of 2001 to $38.4 million for the
third quarter ended September 30, 2002. SG&A expenses increased $5.0 million, or
4.4%, from $113.0 million for the 2001 nine month period to $118.0 million for
the first nine months of 2002. As a percentage of revenues from home sales, SG&A
remained relatively consistent at 11.6% and 12.0% for the 2002 quarter and nine
month period as compared to 11.4% and 11.1% for the three and nine months ended
September 30, 2001. The increase as a percentage of revenues from the 2001
periods to the 2002 periods was primarily attributed to an increase in
information technology, compensation, legal and insurance expenses.
During the third quarter of 2002, the Company reached a settlement agreement
with certain former executives of the Company for an amount less than the amount
previously estimated. Accordingly, the Company recognized a reversal of
previously recorded severance expenses of $6.1 million.
FINANCIAL SERVICES
TOUSA's Financial Services businesses provide mortgage financing, title
insurance and closing services for both (our) homebuyers and others. (Our)
Financial Services revenues increased $2.4 million, or 27.3%, from $8.8 million
for the 2001 quarter to $11.2 million for the 2002 quarter. Financial Services
pretax income increased $0.4 million, or 9.7%, from $4.4 million for the 2001
quarter to $4.8 million for the 2002 quarter. For the nine months ended
September 30, 2002, Financial Services pretax income increased $3.0 million, or
29.2%, to 13.3 million. The increase in Financial Services revenues and pretax
income was primarily attributed to an increase in the capture ratio of home
closings.
* * * * *
TOUSA is a homebuilder operating throughout Florida, Texas, Northern Virginia
and in Phoenix, Denver, and Nashville. It provides financial services to its
home buyers and others through its subsidiaries, Preferred Home Mortgage Company
and Universal Land Title Corp.
This press release contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934.
Actual results could differ materially from those projected in the
forward-looking statements as a result of known and unknown risks and
uncertainties including, but not limited to: increases in interest rates;
business conditions; growth in the home-building industry; investment real
estate; the economy in general; competitive factors; the cost of building
materials; and the risk factors detailed in the Company's Registration Statement
on Form S-1 (SEC File No. 333-4221), and all other factors set forth in the
Company's most recent Form 10-K.
TECHNICAL OLYMPIC USA, INC.
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(unaudited)
<Table>
<Caption>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2001 2002 2001 2002
-------------- -------------- -------------- --------------
HOMEBUILDING:
Revenues:
Homes sales $ 357,297 $ 330,682 $ 1,015,624 $ 984,769
Land/lot sales 3,264 9,540 14,300 11,956
-------------- -------------- -------------- --------------
360,561 340,222 1,029,924 996,725
Cost of sales:
Home sales 280,568 261,623 804,524 782,177
Land/lot sales 3,110 8,494 12,867 10,785
-------------- -------------- -------------- --------------
283,678 270,117 817,391 792,962
-------------- -------------- -------------- --------------
Gross profit 76,883 70,105 212,533 203,763
Selling, general and administrative expenses 40,818 38,392 113,046 117,993
Depreciation and amortization 2,179 1,300 6,596 4,540
Severance and merger related expenses -- (5,874) 1,864 18,593
Loss on early extinguishment of debt -- -- -- 5,411
Other income, net (1,076) (1,270) (2,509) (4,138)
-------------- -------------- -------------- --------------
Homebuilding pretax income 34,962 37,557 93,536 61,364
FINANCIAL SERVICES:
Revenues 8,848 11,222 23,065 28,599
Expenses 4,488 6,439 12,737 15,254
-------------- -------------- -------------- --------------
Financial Services pretax income 4,360 4,783 10,328 13,345
-------------- -------------- -------------- --------------
Income from continuing operations before income taxes 39,322 42,340 103,864 74,709
Income tax expense 14,363 16,002 37,812 27,879
-------------- -------------- -------------- --------------
Income from continuing operations 24,959 26,338 66,052 46,830
Discontinued operations:
Income from discontinued operations, net of taxes 1,297 -- 3,074 4,963
-------------- -------------- -------------- --------------
Net income $ 26,256 $ 26,338 $ 69,126 $ 51,793
============== ============== ============== ==============
EARNINGS PER COMMON SHARE (BASIC AND DILUTED):
From continuing operations $ 0.90 $ 0.95 $ 2.37 $ 1.68
From discontinued operations 0.05 -- 0.11 0.18
-------------- -------------- -------------- --------------
Net income $ 0.95 $ 0.95 $ 2.48 $ 1.86
============== ============== ============== ==============
Weighted average shares outstanding (basic and diluted): 27,878,787 27,878,787 27,878,787 27,878,787
============== ============== ============== ==============
SELECTED FINANCIAL AND OPERATING DATA:
Earnings before interest, taxes, depreciation and
amortization (EBITDA) $ 50,545 $ 50,680 $ 137,231 $ 100,545
Gross margin on home sales 21.5% 20.9% 20.8% 20.6%
Ratio of SG&A expenses to revenues from home sales 11.4% 11.6% 11.1% 12.0%
Ratio of Homebuilding pretax income to revenues from home
sales 9.8% 11.4% 9.2% 6.2%
Total active communities at period end 144 145 -- --
Homes closed 1,379 1,252 3,947 3,713
Average sales price per home closed $ 259 $ 264 $ 257 $ 265
SELECTED FINANCIAL DATA BEFORE MERGER AND UNUSUAL CHARGES:
EBITDA $ 50,545 $ 44,806 $ 139,095 $ 124,549
Homebuilding pretax income $ 34,962 $ 31,683 $ 95,400 $ 85,368
Ratio of Homebuilding pretax income to revenues from home
sales 9.8% 9.6% 9.4% 8.7%
</Table>
TECHNICAL OLYMPIC USA, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(unaudited)
<Table>
<Caption>
DECEMBER 31, SEPTEMBER 30,
2001 2002
------------ -------------
ASSETS
HOMEBUILDING:
Cash and cash equivalents:
Unrestricted $ 67,206 $ 47,707
Restricted 7,738 27,527
Inventory 645,986 717,689
Property and equipment, net 10,694 12,500
Other assets 10,897 33,894
Goodwill, net 57,726 57,726
Westbrooke assets held for sale 117,160 --
------------ ------------
917,407 897,043
FINANCIAL SERVICES:
Cash and cash equivalents:
Unrestricted 7,930 4,977
Restricted 19,605 22,864
Mortgage loans held for sale 50,933 48,437
Other assets 3,295 3,577
------------ ------------
81,763 79,855
------------ ------------
Total assets $ 999,170 $ 976,898
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
HOMEBUILDING:
Accounts payable and other liabilities $ 56,295 $ 94,756
Customer deposits 25,674 26,202
Consolidated land bank obligations 30,022 23,540
Homebuilding borrowings 308,697 367,424
Westbrooke liabilities associated with assets held for sale 71,800 --
------------ ------------
492,488 511,922
FINANCIAL SERVICES:
Accounts payable and other liabilities 18,828 21,275
Financial services borrowings 38,689 41,694
------------ ------------
57,517 62,969
------------ ------------
Total liabilities 550,005 574,891
Minority interest 35,795 17,073
Commitments and contingencies -- --
Stockholders' equity:
Common stock -- $.01 par value; 67,000,000 shares
authorized and 27,878,787 shares issued and outstanding 279 279
Additional paid-in capital 322,400 322,400
Retained earnings 90,691 62,255
------------ ------------
Total stockholders' equity 413,370 384,934
------------ ------------
Total liabilities and stockholders' equity $ 999,170 $ 976,898
============ ============
</Table>