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INCO HOMES CORP. REPORTS SECOND QUARTER EARNINGS

 UPLAND, Calif., July 28 /PRNewswire/ -- Inco Homes Corp. (NASDAQ: INHM) today announced that sales of homes were $12.9 million for the quarter ended June 30, 1993, 30 percent lower than sales of $18.5 million during the quarter ended June 30, 1992. Operating income was $750,000 for the second quarter of 1993, 37.5 percent lower than operating income of $1.2 million during the second quarter of 1992. Pro forma net income was $495,000 for the quarter ended June 30, 1993, 34 percent lower than pro forma net income of $755,000 during the 1992 second quarter. Pro forma net income per share decreased from $0.126 during the second quarter of 1992 to $0.062 during the second quarter of 1993. The weighted average common shares outstanding increased from 5,985,000 during the second quarter of 1992 to 7,985,000 during the second quarter of 1993 as a result of the company's initial public offering in April 1993.
 For the six months ended June 30, 1993, sales of homes were $26.7 million, 19 percent lower than sales of $32.8 million during the six months ended June 30, 1992. Pro forma net income was $1.1 million during the first six months of 1993, 6 percent lower than pro forma net income of $1.2 million during the first six months of 1992.
 During the second quarter of 1993, the company recorded approximately $1.0 million of income attributable to the favorable settlement of compensation and severance arrangements with the general partner of certain of its predecessor limited partnerships. This one- time, non-cash recognition of income has been deducted from net income in determining pro forma net income for the three- and six-month period ended June 30, 1993.
 The reduction in revenues from sales of homes is primarily attributable to a 30 percent decline in the number of home sales closed during the second quarter of 1993. The company believes that the number of home sales closed in the second quarter of 1993 declined primarily because of timing differences in the opening of new home communities in the fourth quarter of 1992 and the first quarter of 1993 compared with the same periods of the prior two years. Homes sales closed in the second quarter of 1993 totaled 119 units from five subdivisions, compared to 171 units from seven subdivisions in the second quarter of 1992. Average home sales prices remained essentially constant during the second quarter of 1993 compared to the second quarter of 1992, at $108,462 and $107,912, respectively.
 Gross profit margins remained virtually constant during the second quarters of 1993 and 1992, at 23.6 percent and 23.7 percent, respectively. During the second quarter of 1993, efficiencies achieved in the company's overall construction costs through improved purchasing procedures were significantly offset by increased lumber prices. The company believes that, because of the current environment of uncertain lumber pricing, its gross margins in future periods may be significantly affected by changes in prevailing lumber prices. In particular, the company anticipates that recent lumber purchases by its subcontractors at relatively high prices will adversely affect its gross margins on home sales closed during the third and fourth quarters of 1993. The company has begun to purchase lumber directly from suppliers in an effort to mitigate the effect of continuing uncertainty in lumber pricing.
 Backlog at June 30, 1993, totaled 372 homes with an aggregate sales value of $41 million, 15 percent less than the backlog of 438 homes with an aggregate sales value of $44 million at June 30, 1992. The company does not recognize revenues on homes covered by sales contracts until the sales are closed and title passes to the buyer. Homes covered by pending sales contracts are considered by the company as its backlog. As pending sales contracts are subject to several contingencies (such as the buyer's ability to qualify for financing), no assurances can be given that homes in backlog will result in actual closings; however, the company anticipates that most of the homes in backlog at June 30, 1993, will result in sales closing during 1993.
 The company has experienced, and expects to continue to experience significant variability in sales and net income. Factors that contribute to variability of the company's results include: (1) the timing of home closings; (2) the company's ability to continue to acquire additional land on favorable terms for future development; (3) the condition of the real estate markets an economies in general in the areas in which the company operates; (4) the cyclical nature of the home building industry and changes in prevailing interest rates; (5) costs of material and labor; and (6) delays in construction schedules caused by timing of inspections and approvals by regulatory agencies and adverse weather conditions. The company's historical financial performance is not necessarily a meaningful indicator of future results and, in general, the company expects its financial results to vary from project to project.
 Inco Homes Corp. is a developer and builder of affordably priced single-family detached homes in the San Bernardino, Riverside and Los Angeles counties of Southern California. The company's homes are primarily targeted to the first-time buyer and, to a lesser extent, to the first-time move-up buyer.
 INCO HOMES CORP.
 Statement of Operations
 ($ thousands)
 (Unaudited)
 Three Months Ended Six Months Ended
 June 30, June 30,
 1993 1992 1993 1992
 Sales of homes $12,907 $18,453 $26,657 $32,819
 Costs of homes 9,857 14,071 20,521 25,810
 Gross income 3,050 4,382 6,136 7,009
 Selling and marketing
 expenses 1,538 2,173 2,874 3,278
 General and administrative
 expenses 764 1,004 1,712 1,886
 Operating income 748 1,205 1,550 1,845
 Other income 117 32 266 104
 Mortgage brokerage income (37) 12 (18) (46)
 Settlement of compensation
 for services and severance
 arrangements(a) 1,043 --- 1,043 ---
 Income before minority
 partners' share and
 provision for income taxes 1,871 1,249 2,841 1,903
 Minority partners' share
 before provision for
 income taxes 0 822 876 1,065
 Pretax income 1,871 427 1,965 838
 Income tax provision 333 171 370 326
 Net income $1,538 $256 $1,595 $512
 Pro forma statement of
 operations data (unaudited)(b)
 Income before allocation of
 profits to minority
 partners participating in
 the reorganization,
 compensation for services
 and settlement of severance
 arrangements, and provision
 for income taxes and after
 adjustments for stockholder
 compensation $828 $1,262 $1,805 $1,922
 Income tax provision 333 507 724 771
 Pro forma net income $495 $755 $1,081 $1,151
 Pro forma net income
 per share(c) $0.062 $0.126 $0.155 $0.192
 (a) Represents non-cash recognition of income attributable to the favorable settlement of compensation for services and severance arrangements with the general partner of certain of the company's predecessor limited partnerships which was expensed in the fourth quarter of 1992.
 (b) The pro forma statement of operations data reflects the effects on the historical statement of operations data for the three months and six months ended June 30, 1993 and 1992, as if (i) the reorganization (pursuant to which the company succeeded to the homebuilding business of its predecessors operating under the "Inco Homes" name through several limited partnerships and various corporations) had taken place on Jan. 1, 1992, (ii) compensation for services and settlement of severance arrangements was eliminated, and (iii) the amount of compensation paid to Ira C. Norris was limited in the year ended Dec. 31, 1992, to the $750,000 maximum compensation arrangements to be effective during 1993 and 1994. The pro forma statement of operations data also reflects provisions for federal and state income taxes (assuming a 40 percent effective tax rate).
 (c) Computed using pro forma weighted average number of shares of 5,985,000 for the three months ended June 30, 1992, and the six months ended June 30, 1992; 7,985,000 for the three months ended June 30, 1993; and 6,985,000 for the six months ended June 30, 1993.
 Three Months Ended June 30, Six Months Ended June 30,
 1993 1992 1993 1992
 Home closings: 119 171 266 301
 Homes in backlog: June 30, 1993 June 30, 1992
 Aggregate Aggregate
 Number Sales Value Number Sales Value
 372 $40,766,811 438 $43,780,104
 -0- 7/28/93
 /CONTACT: Steve Vliss, COO, or Eileen Rose, investor relations, of Inco Homes, 909-981-8989/
 (INHM)


CO: Inco Homes Corp. ST: California IN: CST SU: ERN

JB-LM -- LA019 -- 6544 07/28/93 06:01 EDT
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Date:Jul 28, 1993
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