10-Q 1 d10q.txt PERIOD ENDING 6/30/2001 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 June 30, 2001 ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 33-89076 CENTURY BUILDERS GROUP, INC. ---------------------------- (Exact name of registrant as specified in its charter) Florida 65-0502494 --------------------------------------------------------------------- (State or other jurisdiction of (IRS Employer I.D. No.) incorporation or organization) 7270 N. W. 12/th/ Street, Suite 410, Miami, FL 33126 --------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (305) 599-8100 --------------------------------------------------------- (Registrant's telephone number, including area code) N/A ------------------------------------------------------- (Former name of the Registrant if changed from last report) Indicate by check mark whether the registrant: (1) filed all reports required to be filed by Section 13 or 15(d) of the 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. X Yes No ----- ______ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: Outstanding at Class August 14, 2001 ----- --------------- Common Stock, $.001 Par Value 41,305,445 1 PART I. FINANCIAL INFORMATION Item 1. Financial Statements CENTURY BUILDERS GROUP, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited)

The accompanying notes to the consolidated condensed financial statements are an integral part of these statements. 2 CENTURY BUILDERS GROUP, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS AND STATEMENT OF RETAINED EARNINGS (Unaudited)

The accompanying notes to the consolidated condensed financial statements are an integral part of these statements. 3 CENTURY BUILDERS GROUP, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)

The accompanying notes to the consolidated condensed financial statements are an integral part of these statements 4 CENTURY BUILDERS GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS NOTE 1 - BASIS OF PRESENTATION AND BUSINESS Century Builders Group, Inc. (the "Company"), formerly known as Weitzer Homebuilders Incorporated, incorporated under the laws of the State of Florida in June 1994, engages primarily in the design, construction and sale of single-family homes, townhouses and condominiums in South Florida. The accompanying unaudited consolidated condensed financial statements of the Company for the periods indicated herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission, in accordance with generally accepted accounting principles in the United States of America for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments necessary for a fair presentation of such financial statements have been included. Such adjustments consisted only of normal recurring items. Interim results are not necessarily indicative of results for a full year. These financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 2000. Recent Accounting Pronouncements -------------------------------- The Financial Accounting Standards Board ("FASB") issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. In June 1999, the FASB delayed the effective date of SFAS No. 133 to all years beginning after June 15, 2000. SFAS No. 133 will require the Company to recognize all derivatives on the balance sheet at fair value. Derivatives that are not hedges must be adjusted to fair value through income. If the derivative is a hedge, 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 recognized in other comprehensive income until the hedged item is recognized in earnings. The adoption of SFAS No. 133 did not have a significant impact on the company on January 1, 2001. In September 2000, the Financial Accounting Standards Board ("FASB") issued SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. SFAS No. 140 replaces SFAS No. 125, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. SFAS No. 140 revises the standards for accounting for securitizations and other transfers of financial assets and collateral and requires certain disclosures, but it carries over most of SFAS No. 125's provisions without reconsideration. SFAS No. 140 was effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after March 31, 2001. The implementation of SFAS No. 140 did not have a material impact on the Company's results of operations or financial position. 5 In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Account Standards ("SFAS") No.141. "Business Combinations", and SFAS No.142 " Goodwill and Other Intangible Assets". These standards establish accounting and reporting for business combinations. SFAS No. 141 requires all business combinations entered into subsequent to June 30, 2001 to be accounted for using the purchase method of accounting. SFAS No. 142 provides that goodwill and other intangible assets with indefinite lives will not be amortized, but will be tested for impairment on an annual basis. These standards are effective for fiscal years beginning after December 15, 2001; however early adoption is permitted. The Company has not quantified the impact resulting from the adoption of these statements. NOTE 2 - EARNINGS PER SHARE Basic earnings per share ("Basic EPS") is computed by dividing net income by the weighted average number of common shares outstanding of 41,305,445 and 37,572,112 for the six and three months ended June 30, 2001 and 2000, respectively. Diluted earnings per share ("Diluted EPS") is computed by dividing net income by the weighted average of common stock and common stock equivalents during the period presented; outstanding warrants and stock options are considered common stock equivalents and are included in the calculation using the treasury stock method, if their inclusion is considered dilutive. The effects of assumed exercise of outstanding warrants and stock options are considered antidilutive for the six and three months ended June 30, 2001 and June 30, 2000. NOTE 3 - CASH AND CASH EQUIVALENT The Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. Due to the short maturity period of the cash equivalents, the carrying amount of these instruments approximates their fair values. Restricted cash balances related to housing deposits of $1,737,846 and $266,715 as of June 30, 2001 and December 2000, respectively, will become available to the Company when the housing contracts close. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This discussion should be read in conjunction with the notes to the consolidated condensed financial statements contained herein and Management's Discussion and Analysis of Financial Condition and Results of Operations appearing in the Company's Form 10-K for the year ended December 31, 2000. Management of the Company believes that quarterly comparisons may not give a true indication of overall trends and changes in the Company's operations. The Company's sales and net income are subject to significant variability based on, among other things, the phase of development of its projects, the cyclical nature of the homebuilding industry, changes in governmental regulations, changes in prevailing interest rates, changes in product mix, changes in the costs of materials and labor and other economic factors. Certain statements discussed herein and elsewhere in this Form 10-Q constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of results to differ materially from projected results, performance or achievements, expressed or implied by 6 such forward-looking statements. Such risks, uncertainties and other important factors include, shifts in demographic trends affecting real estate development, the level of migration to the regional market areas, national and local economic conditions and events, including employment levels, interest rates, consumer confidence, the availability of mortgage financing, the demand for new and existing housing, access to future financing, competition, changes in, or the failure or inability to comply with government regulations and other factors as are described in this Form 10-Q and the Company's other filings with the Securities and Exchange Commission. Results of Operations General The following table sets forth for the periods presented herein certain items of the Company's consolidated condensed statement of operations expressed as a percentage of their respective total revenues:

Backlog of Homes, Available Lots for Sale, Lots Under Development and Available Lots Under Option or Contract. The following table sets forth the Company's backlog, the lots for sale and the lots for construction for the periods presented. The backlog consists of homes under sales contracts, homes under construction, and homes, which have been sold but not started. At June 30, 2001, approximately 55% of the homes in backlog were under construction. Lots for sale refers to the number of lots the Company has acquired on which it plans to construct homes and excludes homes under sales contracts included in backlog. There can be no assurance that settlements of homes subject to sales contracts will occur or that all of the available lots for sale will be built on, or that the available lots under option or contract will be acquired or built on. 7 Backlog of homes, lots for sale and lots for construction ---------------------------------------------------------

Comparison of the Six and Three Month Periods Ended June 30, 2001 and 2000 -------------------------------------------------------------------------- Revenues from home sales for the six and three months ended June 30, 2001 decreased $4.8 million or 13.15% from $36.2 million to $31.4 million and increased $1.8 million or 11.09% from $15.8 million to $17.6 million, respectively, when compared to the same periods of 2000. Due to unanticipated construction delays, the total number of homes delivered during the comparable period decreased 25.74% from 272 to 202 for the six months ended June 30, 2001 and increased 3.48% from 115 to 119 for the three months ended June 30, 2001. The average selling price of delivered units for the six and three months ended June 30, 2001 increased by $22,549 or 16.95% from $133,031 to $155,580 and $10,113 or 7.36% from $137,455 to $147,568, respectively, when compared to the same periods of 2000. The slightly lower average for the second quarter can be explained by an unusually high average ($174,000) for the first quarter due to the product type delivered. The six month increase is primarily attributable to the change in the Company's overall product mix between lower priced townhomes and higher priced single-family homes. Cost of homes sold for the six and three months ended June 30, 2001 decreased $4.3 million or 13.42% from $32.1 million to $27.8 million and increased $1.2 million or 8.45% from $14.2 million to $15.4 million, respectively, when compared to the same periods of 2000. The change is primarily attributable to the decrease in the number of homes sold in the first quarter partially mitigated by an increase in the second quarter. Cost of homes sold as a percentage of home sales for the six and three months ended June 30, 2001 decreased from 88.74% to 88.45% and from 89.88% to 87.65%, respectively, when compared to the same periods of 2000. Selling, general and administrative ("SG&A") expenses for the six and three months ended June 30, 2001 increased from $3.3 million to $3.4 million and from $1.6 million to $2.1 million, respectively, when compared to the same periods of 2000. The increase in the last three months is primarily attributable to selling and marketing costs associated with higher number of units sold and also an increase in salaries and professional fees. SG&A expenses as a percentage of total revenues for the six and three months ended June 30, 2001 increased from 8.88% to 10.30% and from 9.63% to 11.53%, respectively, when compared to the same periods of 2000. Net Income before taxes for the six and three months ended June 30, 2001 increased $1.6 million from $1.1 million to $2.7 million and increased $1.6 million from $0.5 million to $2.1 million, respectively, when compared to the same periods of 2000. This increase is primarily 8 due to a gain on the sale of unconsolidated partnerships, Dadeland Gardens and Towers, for $3.2 million, which resulted in a pre-tax gain of approximately $1.6 million. Liquidity and Capital Resources ------------------------------- At June 30, 2001, the Company had borrowings from banks and third parties aggregating approximately $47.4 million compared to $35.2 million at December 31, 2000. As of June 30, 2001, the Company had working capital of $6,123,619 as compared to working capital of $2,528,228 at December 31, 2000. The Company believes that it will be able to fund its ongoing operations from cash on hand, revenues generated from home sales, and draws from its available lines of credit. To the extent the Company is unable to fund its working capital needs, the Company may be required to obtain additional equity and/or debt financing on terms deemed favorable to the Company, the success of which cannot be assured. At June 30, 2001, the Company had an aggregate of $42.2 million of available credit under the Company's acquisition, development and construction loans, which the Company will use to finance the construction and development of its current and future projects. 9 PART II. OTHER INFORMATION ITEM 6. Exhibits and Reports on 8-K (a) Exhibits: The following documents are filed as a part of this report: Exhibit Number Description ------- ----------- 27 Financial Data Schedule (b) Reports on Form 8-K: No reports on Form 8-K were filed in the tree month period ended June 30, 2001 10 SIGNATURES ---------- Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Century Builders Group, Inc. Date: August 14, 2001 By: /s/ Sergio Pino --------------- Sergio Pino Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer) Date: August 14, 2001 By: /s/ Wayne O. Norris ------------------- Wayne O. Norris Senior Vice President and Chief Financial Officer (Principal Accounting Officer) 11

CENTURY BUILDERS GROUP INC 10-Q