1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended May 31, 1996.
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from [ ] to [ ].
Commission File No. 1-9195
KAUFMAN AND BROAD HOME CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 95-3666267
(State of incorporation) (IRS employer identification number)
10990 Wilshire Boulevard
Los Angeles, California 90024
(310) 231-4000
(Address and telephone number of principal and executive offices)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS.
Yes [ X ] No [ ]
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE REGISTRANT'S CLASSES
OF COMMON STOCK AS OF THE CLOSE OF THE PERIOD COVERED BY THIS REPORT.
Common stock, par value $1.00 per share, 38,857,136 shares outstanding
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KAUFMAN AND BROAD HOME CORPORATION
FORM 10-Q
INDEX
PAGE
NUMBER(S)
---------
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Statements of Income -
Six Months and Three Months ended May 31, 1996 and 1995 3
Consolidated Balance Sheets -
May 31, 1996 and November 30, 1995 4
Consolidated Statements of Cash Flows -
Six Months ended May 31, 1996 and 1995 5
Notes to Consolidated Financial Statements 6-9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 10-16
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 17
ITEM 5. OTHER INFORMATION 17
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 18
SIGNATURES 19
INDEX OF EXHIBITS 20
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
KAUFMAN AND BROAD HOME CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands Except Per Share Amounts - Unaudited)
Six Months Ended May 31, Three Months Ended May 31,
------------------------ --------------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
TOTAL REVENUES $ 784,825 $ 545,325 $ 482,350 $ 315,493
========== ========== ========== ==========
CONSTRUCTION:
Revenues $ 769,580 $ 532,784 $ 473,765 $ 308,407
Construction and land costs (632,332) (442,601) (388,376) (255,400)
Selling, general and administrative
expenses (100,136) (73,787) (60,425) (42,115)
Non-cash charge for impairment of
long-lived assets (170,757) - (170,757) -
----------- ----------- ---------- ----------
Operating income (loss) (133,645) 16,396 (145,793) 10,892
Interest income 1,443 1,025 725 474
Interest expense, net of amounts
capitalized (18,726) (13,010) (10,624) (7,369)
Minority interests in pretax income of
consolidated joint ventures (161) (147) (96) (124)
Equity in pretax income (loss) of
unconsolidated joint ventures (1,739) (116) (1,507) 8
----------- ----------- ---------- ----------
Construction pretax income (loss) (152,828) 4,148 (157,295) 3,881
----------- ----------- ---------- ----------
MORTGAGE BANKING:
Revenues:
Interest income 7,448 8,086 3,781 3,785
Other 7,797 4,455 4,804 3,301
----------- ----------- ---------- ----------
15,245 12,541 8,585 7,086
Expenses:
Interest (6,895) (7,507) (3,426) (3,535)
General and administrative (3,018) (2,406) (1,746) (1,341)
----------- ----------- ---------- ----------
Mortgage banking pretax income 5,332 2,628 3,413 2,210
----------- ----------- ---------- ----------
TOTAL PRETAX INCOME (LOSS) (147,496) 6,776 (153,882) 6,091
Income taxes 53,100 (2,500) 55,400 (2,250)
----------- ----------- ---------- ----------
NET INCOME (LOSS) $ (94,396) $ 4,276 $ (98,482) $ 3,841
=========== =========== ========== ==========
EARNINGS (LOSS) PER SHARE $ (2.37) $ .11 $ (2.47) $ .10
=========== =========== ========== ==========
AVERAGE SHARES OUTSTANDING 39,828 39,747 39,839 39,757
=========== =========== ========== ==========
CASH DIVIDENDS PER COMMON SHARE $ .150 $ .150 $ .075 $ .075
=========== =========== ========== ==========
See accompanying notes.
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KAUFMAN AND BROAD HOME CORPORATION
CONSOLIDATED BALANCE SHEETS
(In Thousands - Unaudited)
May 31, November 30,
1996 1995
--------------- ---------------
ASSETS
CONSTRUCTION:
Cash and cash equivalents $ 15,405 $ 24,793
Trade and other receivables 106,809 111,620
Inventories 933,256 1,059,179
Investments in unconsolidated joint ventures 6,017 21,154
Goodwill 43,295 13,884
Other assets 58,176 38,578
--------------- --------------
1,162,958 1,269,208
--------------- --------------
MORTGAGE BANKING:
Cash and cash equivalents 17,606 18,589
Receivables:
First mortgages and mortgage-backed securities 87,106 97,672
First mortgages held under commitment of sale and 111,849 181,764
other receivables
Other assets 6,240 6,946
--------------- --------------
222,801 304,971
--------------- --------------
TOTAL ASSETS $ 1,385,759 $ 1,574,179
=============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CONSTRUCTION:
Accounts payable $ 124,966 $ 156,097
Accrued expenses and other liabilities 84,535 90,237
Mortgages and notes payable 679,647 639,575
--------------- --------------
889,148 885,909
--------------- --------------
MORTGAGE BANKING:
Accounts payable and accrued expenses 8,426 9,661
Notes payable 97,000 151,000
Collateralized mortgage obligations secured by
mortgage-backed securities 74,249 84,764
--------------- --------------
179,675 245,425
--------------- --------------
Deferred income taxes - 24,448
--------------- --------------
Minority interests in consolidated joint ventures 2,938 2,919
--------------- --------------
Series B convertible preferred stock - 1,300
Common stock 38,857 32,347
Paid-in capital 183,779 188,839
Retained earnings 86,072 190,749
Cumulative foreign currency translation adjustments 5,290 2,243
--------------- --------------
TOTAL STOCKHOLDERS' EQUITY 313,998 415,478
--------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,385,759 $ 1,574,179
=============== ==============
See accompanying notes.
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KAUFMAN AND BROAD HOME CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands - Unaudited)
Six Months Ended May 31,
-------------------------------------
1996 1995
--------------- ---------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (94,396) $ 4,276
Adjustments to reconcile net income (loss) to cash provided
(used) by operating activities:
Equity in pretax loss of unconsolidated joint ventures 1,739 116
Minority interests in pretax income of consolidated
joint ventures 161 147
Amortization of discounts and issuance costs 702 828
Depreciation and amortization 4,790 2,980
Provision for deferred income taxes (35,063) (2,418)
Non-cash charge for impairment of long-lived assets 170,757 -
Change in assets and liabilities net of effects from
purchase of Rayco:
Receivables 78,612 54,846
Inventories 78,337 (91,360)
Accounts payable, accrued expenses
and other liabilities (60,246) (39,924)
Other, net (802) (20,573)
--------------- ---------------
Net cash provided (used) by operating activities 144,591 (91,082)
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Rayco, net of cash acquired (80,556) -
Investments in unconsolidated joint ventures (4,940) (711)
Net originations of mortgages held for long-term investment (317) (200)
Payments received on first mortgages and mortgage-
backed securities 11,453 5,068
Other, net (5,163) (3,145)
--------------- ---------------
Net cash provided (used) by investing activities (79,523) 1,012
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from (payments on) credit agreements
and other short-term borrowings (16,308) 98,276
Payments on collateralized mortgage obligations (10,906) (5,121)
Payments on mortgages, land contracts and other loans (37,802) (17,395)
Payments to minority interests in consolidated joint ventures (142) (361)
Payments of cash dividends (10,281) (9,796)
--------------- ---------------
Net cash provided (used) by financing activities (75,439) 65,603
--------------- ---------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (10,371) (24,467)
Cash and cash equivalents at beginning of period 43,382 54,808
--------------- ---------------
Cash and cash equivalents at end of period $ 33,011 $ 30,341
=============== ===============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid, net of amounts capitalized $ 26,693 $ 19,747
=============== ===============
Income taxes paid $ 3,241 $ 4,836
=============== ===============
SUPPLEMENTAL DISCLOSURES OF NONCASH ACTIVITIES:
Cost of inventories acquired through seller financing $ 15,397 $ 23,489
=============== ===============
See accompanying notes.
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KAUFMAN AND BROAD HOME CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures
normally included in the annual financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted. These unaudited consolidated financial statements
should be read in conjunction with the consolidated financial statements
for the year ended November 30, 1995 contained in the Company's 1995
Annual Report to Stockholders.
In the opinion of the Company, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting of only normal
recurring accruals) necessary to present fairly the Company's financial
position as of May 31, 1996, the results of its consolidated operations
for the six months and three months ended May 31, 1996 and 1995, and its
consolidated cash flows for the six months ended May 31, 1996 and 1995.
The results of operations for the six months and three months ended May
31, 1996 are not necessarily indicative of the results to be expected for
the full year. The consolidated balance sheet at November 30, 1995 has
been taken from the audited financial statements as of that date.
2. Recent Accounting Pronouncement
In March 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" ("SFAS
No. 121"). The Company elected to adopt SFAS No. 121 in the second
quarter of 1996, earlier than required by this standard. SFAS No. 121
requires that long-lived assets to be held and used be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of the asset may not be recoverable and requires
impairment losses to be recorded on long-lived assets used in operations
when indicators of impairment are present and the undiscounted cash flows
estimated to be generated by those assets are less than the assets'
carrying amount. Under the new standard, when an impairment loss is
required for assets to be held and used by the Company, the related assets
are adjusted to their estimated fair value. Fair value for purposes of
SFAS No. 121 is deemed to be the amount a willing buyer would pay a
willing seller for such property in a current transaction. For
homebuilders, this is a significant change from the previous accounting
standard which required homebuilders to carry real estate assets at the
lower of cost or net realizable value. Fair value differs from net
realizable value in that, among other things, fair value assumes a cash
sale under current market conditions, considers a potential purchaser's
requirement for future profit and discounts the timing of estimated future
cash receipts. In contrast, net realizable value is the price obtainable
in the future based on the current intended use of the land, net of
disposal and holding costs, without provision for future profits or
discounting future cash flow to present value.
The Company's charge associated with the adoption of SFAS No. 121 has been
impacted by its recent decision to accelerate the disposition of certain
real estate assets, primarily those which were held for long term
development, to facilitate its pursuit of certain operating strategies,
including geographic diversification, increased emphasis on return on
investment, planned debt reduction and improved operating margins. As a
result, certain assets, primarily inventories and investments in
unconsolidated joint ventures in California and France, were identified as
being impaired. The evaluation of impaired assets considered the
depressed nature of the real estate business in certain of the Company's
California and French markets, reduced demand from prospective homebuyers,
decreased sales prices, increased sales incentives, future costs of
development and holding costs during development. Accordingly, based on
this evaluation, the Company recorded a non-cash write-down of $170.8
million ($109.3 million, net of income taxes) to state these impaired
assets at their fair values. The fair values established were based on
various methods, including discounted cash flow projections, appraisals
and evaluations of comparable market prices, as appropriate. In terms of
domestic inventories, only certain of the Company's California properties
were impacted by the adoption of the
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2. Recent Accounting Pronouncement (continued)
pronouncement while none of the non-California domestic properties were
affected. As the inventories affected by the SFAS No. 121 charge
primarily consisted of land which was not under active development, the
Company does not anticipate a material effect on its gross margins in
the future as a result of the adoption of this pronouncement.
The estimation process involved in determining if assets have been
impaired and in the determination of fair value is inherently uncertain
since it requires estimates of current market yields as well as future
events and conditions. Such future events and conditions include
economic and market conditions, as well as the availability of suitable
financing to fund development and construction activities. The
realization of the Company's real estate projects is dependent upon
future uncertain events and conditions and, accordingly, the actual
timing and amounts realized by the Company may be materially different
from the estimated fair values as described herein.
3. Acquisition
On March 1, 1996, the Company acquired San Antonio, Texas-based Rayco,
Ltd. and affiliates ("Rayco") for a total purchase price of
approximately $104.5 million, including cash to pay off the debt
assumed. Rayco is San Antonio's largest homebuilder and sells a wide
variety of homes, primarily to first-time buyers. The total purchase
price was based on the net book values of the entities purchased and
the assumption of certain debt. The acquisition was accounted for as a
purchase with the results of operations of the acquired entities
included in the Company's consolidated financial statements as of the
date of acquisition. The purchase price was allocated based on
estimated fair values at the date of acquisition. This allocation was
based on preliminary estimates and may be revised at a later date. The
excess of the purchase price over the fair value of net assets acquired
was $32.3 million and is being amortized on a straight-line basis over
a period of seven years.
In connection with the acquisition of Rayco, the Company amended its
existing domestic unsecured revolving credit agreement with various
banks by entering into a Fourth Amended and Restated Loan Agreement
dated February 28, 1996, which increased its initial borrowing capacity
thereunder to $630 million from $500 million. The additional $130
million of financing obtained by the Company consisted of a $110
million term loan facility, used to finance the acquisition and to
refinance existing indebtedness of Rayco, and a $20 million revolving
credit facility to be used for additional general working capital
requirements. The amendment to the Company's credit facility provides
for a maximum repayment term of eighteen months for the additional $130
million of borrowing capacity. On March 1, 1996, the Company borrowed
$104.5 million under this credit facility to consummate the Rayco
acquisition.
The following unaudited pro forma information presents a summary of
consolidated results of operations of the Company and Rayco as if the
acquisition had occurred as of December 1, 1994, with pro forma
adjustments to give effect to amortization of goodwill, interest
expense on acquisition debt and certain other adjustments, together
with related income tax effects.
Six Months Ended
----------------------------------------------------
May 31, 1996 May 31,1995
-------------------------------- ----------------
After SFAS Before SFAS
(In thousands except per share amounts) No. 121 charge No. 121 charge
-------------- --------------
Total revenues $843,113 $843,113 $655,763
Total pretax income (loss) (144,492) 26,265 12,432
Net income (loss) (92,492) 16,765 7,832
Earnings (loss) per share (2.32) .42 .20
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3. Acquisition (continued)
This pro forma financial information is presented for informational
purposes only and is not necessarily indicative of the operating results
that would have occurred had the Rayco acquisition been consummated as of
December 1, 1994, nor are they necessarily indicative of future operating
results.
4. Goodwill
Goodwill represents the excess of the purchase price over the fair value
of net assets acquired and is being amortized by the Company over periods
ranging from five to seven years using the straight-line method.
Accumulated amortization was $4.9 million and $1.0 million at May 31, 1996
and 1995, respectively. In the event that facts and circumstances
indicate that the carrying value of goodwill may be impaired, an
evaluation of recoverability would be performed. If an evaluation is
required, the estimated future undiscounted cash flows associated with the
goodwill would be compared to its carrying amount to determine if a
write-down to market value or discounted cash flow value is required.
5. Inventories
Inventories consist of the following (in thousands):
May 31, November 30,
1996 1995
-------- ------------
Homes, lots and improvements in production $783,590 803,926
Land under development 149,666 255,253
-------- ----------
Total inventories $933,256 $1,059,179
======== ==========
The impact of capitalizing interest costs on consolidated pretax income
is as follows (in thousands):
Six Months Ended Three Months Ended
------------------------- -------------------------
May 31, May 31, May 31, May 31,
1996 1995 1996 1995
-------- --------- -------- --------
Interest incurred $ 33,935 $ 31,516 $ 17,882 $ 17,034
Interest expensed (18,726) (13,010) (10,624) (7,369)
-------- -------- -------- --------
Interest capitalized 15,209 18,506 7,258 9,665
Interest amortized (9,461) (6,962) (5,759) (4,500)
-------- -------- -------- --------
Net impact on pretax income $ 5,748 $ 11,544 $ 1,499 $ 5,165
======== ======== ======== ========
6. Earnings Per Share
The computation of earnings per share is based on the weighted average
number of common shares, equivalent Series B convertible preferred shares
and common share equivalents outstanding during each period. The Series B
convertible preferred shares are considered common stock due to their
mandatory conversion into common stock, and the related dividends are not
deducted from net income for purposes of calculating earnings per share.
Common share equivalents include dilutive stock options using the treasury
stock method. On April 1, 1996, the mandatory conversion date, all of the
Series B convertible preferred shares were converted into shares of the
Company's common stock.
If, for purposes of calculating earnings per share, the Series B
convertible preferred shares were excluded from the weighted average
shares outstanding and the related dividends deducted from net income, the
computation
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6. Earnings Per Share (continued)
would have resulted in a loss per share of $2.80 and $.02 for the six
months ended May 31, 1996 and 1995, respectively. The same computation
would have resulted in a loss per share of $2.68 for the three months
ended May 31, 1996 and earnings per share of $.04 for the three months
ended May 31, 1995.
7. Reclassifications
Certain amounts in the consolidated financial statements of 1995 have
been reclassified to conform to the 1996 presentation.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
OVERVIEW
The Company took a major step forward in its non-California United States
expansion strategy during the second quarter of 1996, with the acquisition
of San Antonio, Texas-based Rayco. The acquisition of Rayco provides the
Company with a very substantial market position in San Antonio where, in
1995, Rayco commanded a 45% market share, delivering 2,585 units and
generating revenues of $236.2 million. San Antonio is the ninth largest
city in the United States and has ranked among the top ten cities in the
nation in both job creation and economic growth for the past several
years. The acquisition was accounted for as a purchase with the results
of operations of Rayco included in the Company's financial statements as
of March 1, 1996, the date of acquisition.
Total Company revenues, including Rayco, for the three months ended May
31, 1996 increased 52.9% to $482.4 million from $315.5 million for the
three months ended May 31, 1995. For the six months ended May 31, 1996,
total revenues increased 43.9% to $784.8 million from $545.3 million for
the first six months of 1995. Higher housing revenues primarily accounted
for the increases in total revenues for the three month and six month
periods. The Company reported a net loss of $98.5 million or $2.47 per
share for the second quarter of 1996 after reflecting an after tax
non-cash charge of $109.3 million related to its early implementation of
SFAS No. 121 in the current quarter. Excluding this non-cash charge, the
Company's operations earned $10.8 million or $.27 per share for the
current quarter compared to net income of $3.8 million or $.10 per share
for the same period a year ago. For the six months ended May 31, 1996,
the Company recorded a net loss of $94.4 million or $2.37 per share.
Excluding the non-cash SFAS No. 121 charge, earnings for the six months
ended May 31, 1996 totaled $14.9 million or $.37 per share compared with
net income of $4.3 million or $.11 per share for the six months ended May
31, 1995. The results for the three and six months ended May 31, 1996,
which included Rayco's operations after the acquisition was consummated on
March 1, 1996, reflected the record level of deliveries recorded in the
second quarter of 1996. In addition, the Company's continued progress on
its initiatives implemented throughout 1995 to improve gross margins and
contain costs, as well as an increase in pretax income from mortgage
banking operations, contributed to the improved results in 1996. Mortgage
banking pretax income increased primarily due to higher gains on the sale
of servicing rights.
CONSTRUCTION
Revenues increased by $165.4 million to $473.8 million (including revenues
from Rayco) in the second quarter of 1996 from $308.4 million in the
second quarter of 1995 primarily due to higher housing revenues.
Residential revenues for the three months ended May 31, 1996 increased by
$149.6 million, or 49.2%, to $453.7 million compared to $304.1 million in
the year-earlier period, as the Company achieved a record 2,883 unit
deliveries in the current quarter (including 683 deliveries from Rayco)
compared to 1,875 deliveries for the same quarter a year ago. Excluding
the effects of the Rayco acquisition, housing revenues for the second
quarter of 1996 increased 28.5% over the same period a year ago,
reflecting a 17.3% higher unit volume and an increase in the average
selling price. Housing revenues in the United States totaled $418.8
million on 2,718 unit deliveries in the second quarter of 1996 compared to
$280.1 million on 1,741 units in the prior year's period. Excluding
Rayco, housing revenues in the United States totaled $355.7 million on
2,035 unit deliveries in the current quarter representing an increase of
27.0% and 16.9% in housing revenues and units, respectively, from the same
quarter a year ago. California housing operations generated revenues of
$273.7 million on 1,453 units in the second quarter of 1996 compared to
$219.4 million on 1,295 units in the same quarter a year ago. Domestic
operations outside of California also experienced growth in the second
quarter of 1995. Excluding Rayco, domestic operations outside of
California generated $82.1 million of housing revenues on 582 units in the
second quarter of 1996 compared to $60.7 million on 446 units for the same
period a year ago. The March 1st acquisition of Rayco coupled with
continued growth in the Company's operations outside of California
resulted in non-California United States deliveries accounting for 46.5%
of the domestic unit total in the second quarter of 1996 compared to 25.6%
in the second quarter of 1995. Revenues from French housing operations
during the current period increased to $34.3 million on 160 units from
$21.5 million on 110 units in the prior year's second quarter.
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During the second quarter of 1996, the Company's overall average
selling price decreased to $157,300 from $162,100 in the same quarter a
year ago, reflecting the integration of Rayco into the Company's
operations. Excluding the effects of the Rayco acquisition, the
Company-wide average selling price increased 9.5% to $177,500 in the
second quarter of 1996. This increase resulted from an 8.6% increase
in the Company's domestic average selling price and a 9.8% increase in
the French average selling price compared to the year earlier period.
Excluding Rayco, the Company's average new home price in the United
States increased in the second quarter of 1996 to $174,800 from
$160,900 in the same period of 1995, reflecting an 11.2% and 3.7% rise
in the average selling prices in California and other United States
operations, respectively. Rayco's average sales price in the quarter
was $92,300. In France, the Company's average selling price for the
three months ended May 31, 1996 rose to $214,100 from $195,000 in the
year-earlier quarter. The increase in average selling prices in the
United States (excluding Rayco) occurred as a result of a change in
product mix favoring more higher priced urban in-fill locations and
first-time move-up sales, while, in France, the higher average selling
price primarily resulted from a change in the mix of deliveries.
Second quarter revenues from commercial development activities in
France totaled $7.7 million in 1996 compared to $3.9 million in 1995.
Company revenues from land sales totaled $12.4 million in the three
months ended May 31, 1996 compared to $.4 million in the same period of
1995. Generally, land sale revenues fluctuate based on the Company's
decision to maintain or decrease its land ownership position in certain
markets, the strength and number of competing developers entering
markets at given points in time, the availability of land in markets
served by the Company's housing divisions, and prevailing market
conditions. The higher level of land sale revenues in the second
quarter of 1996 was impacted by the Company's aggressive asset sale
program implemented as part of its debt reduction strategy.
For the first six months of 1996, construction revenues totaled $769.6
million, an increase of $236.8 million from $532.8 million for the same
period a year ago, primarily as a result of higher housing revenues.
The increase in housing revenues reflected higher unit volume and a
higher average selling price. Housing revenues totaled $743.4 million
on 4,566 units in the first half of 1996 compared to $520.7 million on
3,242 units for the same period a year ago. Excluding Rayco, housing
revenues for the first half of 1996 increased 30.7% from the same
period a year ago. Housing operations in the United States produced
revenues of $688.3 million on 4,300 units ($625.3 million on 3,617
units excluding Rayco) in the first six months of 1996 and $476.2
million on 3,006 units in the comparable period of 1995. Deliveries in
California increased to 2,548 units for the first six months of 1996
from 2,267 units for the first six months of 1995, while deliveries
from other United States operations (excluding Rayco) increased to
1,069 from 739 units during the same period. French housing revenues
totaled $53.7 million on 256 units in the first half of 1996 and $41.7
million on 212 units in the corresponding period of 1995.
The Company-wide average new home price increased to $162,700 in the
first six months of 1996 from $160,500 in the year-earlier period.
Excluding Rayco, the Company-wide average selling price increased to
$175,100 for the first half of 1996, reflecting a 12.4% and 3.7%
increase in the average selling prices in California and other United
States operations, respectively. Additionally, the average selling
price in France for the six month period increased to $209,900 in 1996
from $196,800 in 1995. The higher average selling prices in the United
States and France reflected higher priced urban in-fill locations and
first-time move up sales, and a change in the mix of deliveries,
respectively.
Revenues from the development of commercial buildings in France
increased to $11.4 million for the first six months of 1996 from $4.9
million in the comparable period of 1995. Company-wide revenues from
land sales totaled $14.8 million for the first half of 1996 compared to
$7.2 million for the same period a year ago.
Operating income (excluding the $170.8 million non-cash charge for
impairment of long-lived assets) increased by $14.1 million to $25.0
million in the second quarter of 1996 from $10.9 million in the second
quarter of 1995. This increase was primarily due to higher gross
profits on housing sales, reflecting higher unit volume and improved
gross margins due, in part, to the inclusion of Rayco in the Company's
operations in the second quarter. Gross profits (excluding profits
from land sales) increased by $31.2 million to $84.3 million in the
second quarter of 1996 from $53.1 million in the prior year's quarter.
Gross profits (excluding profits from land sales) as a percentage of
related revenues increased to 18.3% in the current quarter from 17.2%
in the
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year-earlier quarter. For the same period, the Company's housing gross
margin was 18.0% in 1996, up from 17.1% in 1995. This increase primarily
reflected an improvement in the other United States housing gross margin
mainly driven by continued growth in the Company's higher margin
operations in other western states combined with the inclusion of Rayco.
Land sales generated profits of $1.1 million in the second quarter of 1996
compared to a loss of $.1 million during the same quarter a year ago.
Selling, general and administrative expenses increased by $18.3 million to
$60.4 million in the second quarter of 1996 from $42.1 million in the
second quarter of 1995. This increase was primarily due to the inclusion
of Rayco's operations, which added $7.3 million of selling, general and
administrative expenses, and an increase in marketing expenses from the
Company's remaining operations due to higher unit volume. As a percentage
of housing revenues, selling, general and administrative expenses improved
.5 percentage points to 13.3% in the second quarter of 1996. This
improvement was due to higher unit volume and the impact of the Company's
cost containment initiatives, including reductions in sales incentives,
implemented during the course of 1995.
The Company elected to adopt SFAS No. 121 in the second quarter of 1996,
earlier than required by this standard. SFAS No. 121 requires that
long-lived assets to be held and used be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of
the asset may not be recoverable and requires impairment losses to be
recorded on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be
generated by those assets are less than the assets' carrying amount.
Under the new standard, when an impairment loss is required for assets to
be held and used by the Company, the related assets are adjusted to their
estimated fair value. Fair value for purposes of SFAS No. 121 is deemed
to be the amount a willing buyer would pay a willing seller for such
property in a current transaction. For homebuilders, this is a
significant change from the previous accounting standard which required
homebuilders to carry real estate assets at the lower of cost or net
realizable value. The Company's charge associated with the adoption of
SFAS No. 121 has been impacted by its recent decision to accelerate the
disposition of certain real estate assets, primarily those which were held
for long term development, to facilitate its pursuit of certain operating
strategies, including geographic diversification, increased emphasis on
return on investment, planned debt reduction and improved operating
margins. As a result, certain assets, primarily inventories and
investments in unconsolidated joint ventures in California and France,
were identified as being impaired. The evaluation of impaired assets
considered the depressed nature of the real estate business in certain of
the Company's California and French markets, reduced demand from
prospective homebuyers, decreased sales prices, increased sales
incentives, future costs of development and holding costs during
development. Accordingly, based on this evaluation, the Company recorded
a non-cash write-down of $170.8 million ($109.3 million, net of income
taxes) to state these impaired assets at their fair values. The fair
values established were based on various methods, including discounted
cash flow projections, appraisals and evaluations of comparable market
prices, as appropriate. In terms of domestic inventories, only certain of
the Company's California properties were impacted by the adoption of the
pronouncement while none of the non-California domestic properties were
affected. As the inventories affected by the SFAS No. 121 charge
primarily consisted of land which was not under active development, the
Company does not anticipate a material effect on its gross margins in the
future as a result of the adoption of this pronouncement.
For the first six months of 1996, operating income (excluding the $170.8
million non-cash charge for impairment of long-lived assets) increased by
$20.7 million to $37.1 million from $16.4 million in the corresponding
period of 1995. This increase was principally due to higher gross profits
on housing sales, reflecting both higher unit volume and an improvement in
margins. For the six-month period, gross profits (excluding profits from
land sales) increased by $48.6 million to $135.9 million in 1996 from
$87.3 million in 1995. As a percentage of related revenues, gross profits
(excluding profits from land sales) were 18.0% in the first half of 1996
compared to 16.6% in the prior year's period. This increase primarily
reflected a .5 percentage point improvement in California gross margin and
continued growth in the Company's higher margin operations in other
western states as well as the addition of Rayco. Gross profits from land
sales decreased by $1.5 million in the first half of 1996 to $1.4 million
from the $2.9 million recorded in the first half of 1995.
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Selling, general and administrative expenses increased by $26.3 million
to $100.1 million for the first six months of 1996 from $73.8 million
for the same period of 1995. However, as a percentage of housing
revenues, selling, general and administrative expenses improved .7
percentage points to 13.5% for the first six months of 1996 from 14.2%
in the corresponding period of 1995. This improvement resulted from
higher unit volume and the impact of the Company's cost containment
efforts.
Interest income totaled $.7 million in the second quarter of 1996
compared to $.5 million in the prior year's second quarter. For the
first six months, interest income totaled $1.4 million in 1996 and $1.0
million in 1995. Interest income for the second quarter and first half
of 1996 reflected little change in the interest bearing average
balances of short-term investments and mortgages receivable compared to
the same periods a year ago.
Interest expense (net of amounts capitalized), reflecting an increase
in average indebtedness and a lower percentage of interest capitalized,
increased to $10.6 million in the second quarter of 1996 from $7.4
million in the second quarter of 1995. For the six-month period,
interest expense totaled $18.7 million in 1996 compared to $13.0
million in 1995. Average debt levels grew in 1996 primarily as a
result of additional borrowings under a revision to the Company's
domestic unsecured revolving credit agreement for the acquisition of
Rayco and continued growth in the Company's western United States
operations. The lower capitalization rate reflected a higher proportion
of land in production in 1996 compared to 1995 and non-capitalization
of interest on borrowings associated with the acquisition of Rayco.
Minority interests in pretax income of consolidated joint ventures
totaled $.1 million in the three months ended May 31, 1996 and 1995.
For the first half of 1996, minority interests in pretax income of
consolidated joint ventures totaled $.2 million compared to $.1 million
for the same period a year ago. Minority interests, which primarily
relate to commercial activities in France, are expected to remain at
relatively low levels reflecting the limited opportunities currently
available in the French commercial market.
Equity in pretax income (loss) of unconsolidated joint ventures
reflected a loss of $1.5 million in the second quarter of 1996 compared
to break even results in the second quarter of 1995. Joint ventures
recorded combined revenues of $1.3 million in the current quarter
compared to $3.3 million for the corresponding period of 1995. All of
these revenues in the second quarter of 1996 and 1995 were from
residential properties. For the first half of 1996, the Company's
equity in pretax loss of unconsolidated joint ventures totaled $1.7
million, increasing from $.1 million in the same period of 1995.
Combined revenues from these joint ventures totaled $2.1 million in the
first half of 1996 compared to $16.6 million in the first half of 1995.
Of these amounts, revenues from residential properties accounted for
$2.0 million in 1996 and $13.7 million in 1995. The losses recorded in
the three and six month periods ended May 31, 1996 and 1995 primarily
related to a single French multi-family residential project. As a
result of the charge taken under SFAS No. 121 in the second quarter to
reflect the impairment in unconsolidated joint ventures, the Company
does not anticipate incurring significant additional losses from these
joint ventures in the future.
MORTGAGE BANKING
Interest income and interest expense remained relatively flat in the
second quarter of 1996 compared to the mortgage banking's performance
in the same quarter a year ago. For the first six months of 1996,
interest income from mortgage banking declined by $.6 million and
related interest expense dropped by $.6 million from the same period of
1995. The amounts for the six month period decreased primarily due to
the decline in balances of outstanding mortgage-backed securities and
related collateralized mortgage obligations from the prior year's
period, stemming from both regularly scheduled monthly principal
amortization and prepayment activity of mortgage collateral. Interest
income and expense are expected to continue to decline as the
mortgage-backed securities and related collateralized mortgage
obligations pay off at approximately the same rate.
Other mortgage banking revenues increased by $1.5 million to $4.8
million in the second quarter of 1996 from $3.3 million in the prior
year's second quarter. For the first half of 1996, other mortgage
banking revenues totaled $7.8 million, an increase of $3.3 million from
$4.5 million in the prior year's period. These increases
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were mainly the result of higher gains on the sale of servicing rights due
to a higher volume of mortgage originations and a more favorable mix of
fixed to variable rate loans.
General and administrative expenses associated with mortgage banking
increased to $1.7 million in the second quarter of 1996 from $1.3 million
in the prior year's second quarter. For the six-month period, these
expenses were $3.0 million in 1996 and $2.4 million in 1995. The increase
in general and administrative expenses in 1996 resulted from higher
mortgage production levels, due to the increase in domestic unit
deliveries, partially offset by the benefit of cost reduction programs.
INCOME TAXES
Income taxes for the quarter ended May 31, 1996 consisted of an income tax
benefit of $55.4 million compared to income tax expense of $2.3 million in
the prior year's second quarter. For the first six months of 1996, the
income tax benefit totaled $53.1 million compared to $2.5 million of
income tax expense in the same period of 1995. The tax benefits
established in the three and six month periods of 1996 reflected the
pretax losses reported by the Company as a result of the SFAS No. 121
charge recorded in the second quarter of 1996. The income tax amounts
represented effective income tax rates of approximately 36% and 37% in
1996 and 1995, respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Company assesses its liquidity in terms of its ability to generate
cash to fund its operating and investing activities. Historically, the
Company has funded its construction and mortgage banking concerns with
internally generated operating results and external sources of debt and
equity financing. For the six months ended May 31, 1996, net cash used
for operating, investing and financing activities totaled $10.4 million
compared to $24.5 million used in the first half of 1995.
The Company's operating activities for the first six months of 1996
provided cash of $144.6 million compared to $91.1 million used during the
first six months of 1995. The sources of operating cash for the six
months ended May 31, 1996, were a reduction in inventories totaling $78.3
million, excluding $15.4 million of inventories acquired through seller
financing, a reduction in receivables of $78.7 million and various
non-cash items, including a $170.8 million non-cash charge for impairment
of long-lived assets, offsetting the net loss of $94.4 million (which
included the charge associated with implementation of SFAS No. 121)
recorded for the first half of 1996. Uses of cash during the first six
months included a $35.1 million change in deferred taxes and a $60.2
million decrease in accounts payable, accrued expenses and other
liabilities. During the second quarter, excluding the acquisition of
Rayco and the charge taken in connection with the adoption of SFAS No.
121, inventories decreased primarily in the United States, as the Company
began to execute its debt reduction strategy in 1996, including an
aggressive asset sale program. The reduction in receivables mainly
related to a decrease in mortgage origination volume in the second quarter
of 1996 as compared to the fourth quarter of 1995, resulting in a lower
balance of mortgages held under commitment of sale.
Operating activities for the first six months of 1995 used cash for a net
investment of $91.4 million in inventories, excluding $23.5 million of
inventories acquired through seller financing, and to pay down $39.9
million in accounts payable, accrued expenses and other liabilities. The
use of cash was partially offset by six months' earnings of $4.3 million,
a reduction in receivables of $54.8 million and various noncash items
deducted from net income. Inventories increased in 1995 mainly due to the
Company's domestic expansion. The reduction in receivables related
primarily to a decrease in mortgage origination volume in the second
quarter of 1995 compared to the fourth quarter of 1994.
Cash used by investing activities totaled $79.5 million in the first six
months of 1996 compared to $1.0 million provided in the year-earlier
period. In the first half of 1996, $80.6 million of cash was used for the
purchase of Rayco, acquired on March 1, 1996 for a total of $104.5
million, including cash to pay off the debt assumed. In addition, cash of
$4.9 million was used for investments in unconsolidated joint ventures and
$5.2 million was used for other investing activities. Partially
offsetting these uses was $11.5 million in proceeds received from
mortgage-backed securities which were principally used to pay down the
collateralized mortgage obligations
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for which the mortgage-backed securities had served as collateral. In
the first half of 1995, proceeds of $5.1 million received from
mortgage-backed securities were partially offset by $3.1 million of
cash used for other investing activities.
Financing activities in the first half of 1996 used $75.4 million of
cash compared to $65.6 million provided in the same period of 1995. In
the first six months of 1996, cash was used for net payments on
borrowings of $54.1 million, reflecting the Company's progress on its
debt reduction strategy; payments on collateralized mortgage
obligations of $10.9 million, the funds for which were provided by
receipts on mortgage-backed securities; and cash dividend payments of
$10.3 million. The mandatory conversion of 6.5 million outstanding
depositary shares into shares of common stock was completed on April 1,
1996 and will reduce cash flow required for future dividends by
approximately $2.0 million per quarter. Financing activities for the
six months ended May 31, 1995 resulted in net cash inflows due mainly to
$80.9 million in net proceeds from borrowings, partially offset by
payments on collateralized mortgage obligations of $5.1 million; and
$9.8 million of cash dividend payments.
In connection with the acquisition of Rayco, the Company amended its
existing domestic unsecured revolving credit agreement with various
banks which increased its initial borrowing capacity thereunder to $630
million from $500 million. The additional $130 million of financing
obtained by the Company consisted of a $110 million term loan facility,
used to finance the acquisition and to refinance existing indebtedness
of Rayco, and a $20 million revolving credit facility to be used for
general working capital requirements. The amendment to the Company's
credit facility is set forth in the Fourth Amended and Restated Loan
Agreement, dated February 28, 1996, which provides for a maximum
repayment term of eighteen months for the additional $130 million of
borrowing capacity. Despite borrowings of $104.5 million in the second
quarter to acquire Rayco, the Company's debt totaled $679.6 million at
May 31, 1996, $12.3 million less than the balance at the end of the
first quarter of 1996, reflecting progress in the Company's aggressive
debt reduction program. Key elements of the Company's debt reduction
program include an increased emphasis on contracting for sales prior to
construction ("pre sales") rather than on sales of inventory or "spec"
homes, stringent control of production inventory, a focus on reducing
standing inventory, and an aggressive land asset sale program. The debt
reduction program is intended to reduce the Company's indebtedness in
order to assist in restoring financial leverage (as measured by a debt
to total capital ratio) to the Company's targeted range of 50% to 60%
over time. The Company's ratio of debt to total capital was 68.4% at
the end of the 1996 second quarter compared to 62.6% at the end of the
1996 first quarter before the added leverage in conjunction with the
acquisition of Rayco and the reduction in equity as a result of the
non-cash charge taken for the implementation of SFAS No. 121.
Under the Company's revised $630 million domestic unsecured revolving
credit facility, which contains a $200 million sublimit for the
Company's mortgage banking operations, a total of $274.5 million was
available for future use as of May 31, 1996. In addition to the $200
million sublimit, all of which was available for the mortgage banking
operation's use at May 31, 1996, the Company's mortgage banking
operations had commitments of $120 million on the asset-backed
commercial paper facility. Of the total $120 million potentially
available under this facility, $23.0 million was available at May 31,
1996. The Company's French unsecured financing agreements had in the
aggregate $28.5 million available at May 31, 1996.
The Company believes it has adequate resources and sufficient credit
line facilities to satisfy its current and reasonably anticipated
future requirements for funds to acquire capital assets and land, to
construct homes, to fund its mortgage banking operations and to meet
any other needs of its business, both on a short and long-term basis.
The Company's residential backlog as of May 31, 1996, which included
the Company's first quarter of Rayco's operations, consisted of 3,497
units, representing aggregate future revenues of approximately $497.2
million compared to 1,651 units representing $275.6 million a year
earlier. Excluding the effects of the Rayco acquisition, unit and
dollar backlog as of May 31, 1996 rose 21.0% and 30.3%, respectively,
from May 31, 1995 levels. The Company's operations in the United
States, including Rayco, accounted for approximately $419.7 million of
backlog value on 3,133 units at May 31, 1996 compared to $225.3 million
on 1,391 units at May 31, 1995. Backlog in California totaled
approximately $182.7 million on 947 units at May 31, 1996 compared to
$149.8 million on 859 units at May 31, 1995, reflecting the 12.9%
improvement in net orders in
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the second quarter of 1996 compared to 1995. The Company's other United
States operations, excluding Rayco, demonstrated year-over-year growth in
backlog levels with backlog at May 31, 1996 increasing to approximately
$99.0 million on 686 units from $75.5 million on 532 units at May 31,
1995.
In France, the residential backlog value at May 31, 1996 totaled
approximately $72.2 million on 337 units and $48.7 million on 243 units a
year earlier. Backlog levels in France were improved at May 31, 1996 as
net orders increased 79.9% to 241 in the second quarter of 1996 from 134
net orders for the same period a year ago. Backlog associated with
consolidated commercial development activities in France was valued at
approximately $.6 million at May 31, 1996 compared to $25.6 million at May
31, 1995, reflecting continued reduced opportunities in the French
commercial market.
In Mexico, the Company has yet to deliver its first homes but has recorded
its first net orders, generating 27 orders during the six months ended May
31, 1996. However, the new home market in Mexico remains seriously
hampered by the decline in the value of the peso and the economic
recession created by the devaluation. The Mexican recession has slowed an
already complex regulatory process and has heightened consumer concerns
about new home purchases. In spite of troubled conditions, demand for
housing in Mexico remains substantial with the Company expecting to record
its first deliveries in Mexico in 1996. Nevertheless, the Company
continues to closely monitor the unsettled economic environment and
remains cautious regarding these operations and continues to reassess its
level of activity in Mexico and the desirability of expanding its market
presence there.
Substantially all of the homes included in the Company's residential
backlog are expected to be delivered in 1996; however, cancellations could
occur, particularly if market conditions deteriorate or mortgage interest
rates increase, thereby decreasing backlog and related future revenues.
The Company made progress on its key business strategies during the
second quarter of 1996 and intends to maintain its focus on these
strategies during the balance of the year. Progress made in the second
quarter of 1996 included the Company's disposition of its Canadian
operations under a definitive agreement pursuant to which it sold all of
the issued and outstanding shares of its Canadian subsidiary. Proceeds of
$9.5 million received from the sale were used to reduce the Company's
debt. As the Company had been slowly winding down its operations in
Canada over the past few years, the impact of the sale on the Company's
financial position and results of operations was not significant.
Despite the progress achieved in the 1996 second quarter and the high
backlog levels, the Company is cautiously optimistic regarding the
remainder of the year. Recent order rates have weakened, with
Company-wide net orders, excluding net orders from Rayco, in the first
five weeks of the third quarter down 24.9% from the same period a year
ago. Domestic net orders, excluding Rayco, decreased 24.4% during the
first five weeks of the third quarter of 1996 compared to the same period
a year ago, reflecting a 29.7% decrease in California net orders and an
8.4% decrease in other United States net orders. In addition, net orders
in France during the first five weeks of the 1996 third quarter were down
31.3% from corresponding period last year. The recent decrease in net
orders and the potential for interest rate increases by the Federal
Reserve Board, along with other external factors, contribute to the
caution in the Company's outlook for the future.
* * * * * *
Except for the historical information contained herein, certain of the
matters discussed in this quarterly report are "forward-looking
statements" as defined in the Private Securities Litigation Reform Act of
1995, which involve certain risks and uncertainties, including but not
limited to, changes in general economic conditions, materials prices,
labor costs, interest rates, consumer confidence, competition,
environmental factors, and government regulations affecting the Company's
operations. See the Company's Annual Report on Form 10-K for the year
ended November 30, 1995 for a further discussion of these and other risks
and uncertainties applicable to the Company's business.
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PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On March 28, 1996, at the Company's 1996 Annual Meeting of Stockholders, two
matters were submitted for stockholder vote:
Election of Directors. Ms. Jane Evans and Messrs. James A. Johnson and
Sanford C. Sigoloff were re-elected as directors. Over 99% of the shares
voted were voted in favor of the director candidates. Ms. Evans received
27,537,934 affirmative votes with 125,153 votes withheld; Mr. Johnson
received 27,543,423 affirmative votes with 119,664 votes withheld; and, Mr.
Sigoloff received 27,537,394 affirmative votes with 125,693 votes withheld.
Classification of Board of Directors. At the Annual Meeting, stockholders
were also asked to vote on a stockholder proposal to eliminate the
classification of the Company's Board of Directors. The proposal was
defeated by stockholders with 53% of the shares voted on the matter voted
against (11,924,767 shares) or abstaining (478,112 shares) on the proposal
and 47% of the shares (11,129,102 shares) voted in favor.
ITEM 5. OTHER INFORMATION
The following table presents residential information in terms of unit
deliveries to home buyers and net orders taken by geographical market for
the three months and six months ended May 31, 1996 and 1995, together with
backlog data in terms of units and value by geographical market as of May
31, 1996 and 1995.
Three Months Ended May 31,
----------------------------------
Deliveries Net Orders
--------------- --------------
Market 1996 1995 1996 1995
------------------- ----- ----- ----- -----
California 1,453 1,295 1,577 1,397
Other United States 1,265 446 1,399 698
France 160 110 241 134
Canada 5 24 13 12
Mexico - - 8 -
----- ----- ----- -----
Total 2,883 1,875 3,238 2,241
===== ===== ===== =====
Six Months Ended May 31,
---------------------------------- Backlog - Value
Deliveries Net Orders Backlog - Units In Thousands
--------------- -------------- ---------------- ---------------------
Market 1996 1995 1996 1995 1996 1995 1996 1995
------------------- ----- ----- ----- ----- ----- ----- -------- --------
California 2,548 2,267 2,869 2,498 947 859 $182,718 $149,796
Other United States 1,752 739 1,939 1,072 2,186 * 532 236,970* 75,455
France 256 212 364 286 337 243 72,215 48,658
Canada 10 24 15 21 - * 17 -* 1,666
Mexico - - 27 - 27 - 5,265 -
===== ===== ===== ===== ===== ===== ======== ========
Total 4,566 3,242 5,214 3,877 3,497 * 1,651 $497,168* $275,575
===== ===== ===== ===== ===== ===== ======== ========
* Backlog amounts for the current quarter have been adjusted to reflect the
acquisition of Rayco and disposition of Canadian operations. Therefore,
prior quarter backlog amounts combined with current quarter sales and
delivery activity will not equal ending backlog for the current quarter.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
11 Statement of Computation of Per Share Earnings (Loss).
24 The consent of Ernst & Young LLP, independent auditors, filed as an
exhibit to the Company's 1995 Annual Report on Form 10-K, is incorporated
by reference herein.
27 Financial Data Schedule.
Reports on Form 8-K
On March 13, 1996, the Company filed a Current Report on Form 8-K (Items 2, 7
(a) and 7(b)) dated March 12, 1996 reporting its acquisition of Rayco, Ltd. and
affiliates. The filing included the audited balance sheets of Rayco, Ltd. as
of December 31, 1995 and 1994, and the related statements of income, partners'
equity, and cash flows for each of the three years in the period ended December
31, 1995. In addition, the Form 8-K included unaudited pro forma combined
financial statements and related notes of the Company, giving effect to the
acquisition of Rayco, Ltd. and affiliates.
On May 23, 1996, the Company filed a Current Report on Form 8-K (Item 5)
reporting its early adoption of Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of."
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
KAUFMAN AND BROAD HOME CORPORATION
Registrant
Dated July 15, 1996 /s/ BRUCE KARATZ
Bruce Karatz
Chairman, President and Chief
Executive Officer
Dated July 15, 1996 /s/ MICHAEL F. HENN
Michael F. Henn
Senior Vice President and Chief
Financial Officer
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INDEX OF EXHIBITS
Page of Sequentially
Numbered Pages
11 Statement of Computation of Per Share Earnings (Loss) 21
27 Financial Data Schedule 22
20