10-Q 1 q601.txt SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) 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 ---------------- OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ---------- ----------- For Quarter Ended Commission file number 0-19633 --------- ------- ENGLE HOMES, INC. -------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) FLORIDA 59-2214791 ------------------------------- --------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 123 N.W. 13th Street Boca Raton, Florida 33432 ------------------------------- -------------------------------- (Address of principal executive offices) (Zip code) (Registrant's telephone number, including area code) (561) 391-4012 ---------------------- NONE -------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) 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 report(s), and (2) has been subject to filing requirements for the past 90 days. YES x NO ------ ------ Number of shares of common stock outstanding as of June 30, 2001: 100 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ENGLE HOMES, INC. AND SUBSIDIARIES (A WHOLLY-OWNED SUBSIDIARY OF TECHNICAL OLYMPIC USA, INC.) Condensed Consolidated Balance Sheets (unaudited) (dollars in thousands)

~~March~~June 3130, December 31, 2001 2000 ----------- ------------ ASSETS CASH Unrestricted $ 4246,~~815~~044 $ 18,078 Restricted 69,~~930~~317 4,205 INVENTORIES ~~422~~426,~~128~~233 444,070 PROPERTY AND EQUIPMENT, net 5,~~210~~308 5,330 OTHER ASSETS 3840,~~236~~019 32,346 GOODWILL 1415,~~987~~166 15,128 MORTGAGE LOANS HELD FOR SALE 2624,~~426~~539 14,406 ----------- ----------- TOTAL ASSETS $ ~~556~~566,~~732~~626 $ 533,563 =========== =========== LIABILITIES ACCOUNTS PAYABLE AND ACCRUED LIABILITIES $ 4143,~~379~~694 $ 27,328 CUSTOMER DEPOSITS 2426,~~024~~097 21,817 BORROWINGS ~~243~~242,~~013~~938 217,532 SENIOR NOTES PAYABLE 13,097 38,065 FINANCIAL SERVICES BORROWINGS 2016,~~379~~944 9,071 ----------- ----------- TOTAL LIABILITIES $ ~~341~~342,~~892~~770 $ 313,813 ----------- ----------- SHAREHOLDER'S EQUITY COMMON STOCK, $.01 par, shares authorized 1,000; issued 100 ~~0 0~~ ADDITIONAL PAID-IN CAPITAL 215,709 215,709 ~~(DEFICIT)~~ RETAINED EARNINGS ~~(869)~~8,147 4,041 ----------- ----------- TOTAL SHAREHOLDER'S EQUITY ~~214~~223,~~840~~856 219,750 ----------- ----------- $ ~~556~~566,~~732~~626 $ 533,563 =========== =========== See accompanying notes to condensed consolidated financial statements.

2 ENGLE HOMES, INC. AND SUBSIDIARIES (A WHOLLY-OWNED SUBSIDIARY OF TECHNICAL OLYMPIC USA, INC.) Condensed Consolidated Statements of Income (Unaudited) (in thousands, except per share data)

~~THREE~~Three ~~MONTHS~~Months ~~ENDED~~Ended ~~THREE~~Six ~~MONTHS~~Months ~~ENDED~~Ended ~~MARCH~~June 3130, ~~2001~~July ~~APRIL~~31, June 30, ~~2000~~July 31, --------- --------- -------------------- 2001 2000 2001 2000 --------- --------- --------- --------- Successor Predecessor Successor Predecessor REVENUES Sales of homes $ ~~213~~239,~~581~~158 $ ~~202~~208,~~368~~282 $ 452,739 $ 410,650 Sales of land ~~688~~6,592 39,~~344~~382 7,279 12,726 Rent and other 1,~~917~~004 ~~908~~844 2,922 1,752 Financial services 67,~~395~~822 5,~~492~~800 14,217 11,292 --------- --------- --------- --------- ~~222~~254,~~581~~576 ~~212~~224,~~112~~308 477,157 436,420 --------- --------- --------- --------- COSTS AND EXPENSES Cost of sales - homes ~~172~~191,~~908~~263 ~~169~~173,~~194~~282 364,171 342,476 Cost of sales - land ~~472~~6,049 38,~~285~~012 6,521 11,297 Selling, marketing, general and administrative 23,443 20,~~970~~966 1944,~~734~~412 40,700 Depreciation and amortization 1,~~690~~555 1,~~522~~584 3,246 3,106 Financial services 34,~~986~~263 3,~~805~~844 8,249 7,649 --------- --------- --------- --------- ~~200~~226,~~026~~573 ~~197~~207,~~540~~688 426,599 405,228 --------- --------- --------- --------- Merger related charges 1,864 1,864 --------- --------- --------- --------- INCOME BEFORE INCOME TAX 2226,~~555~~139 1416,~~572~~620 48,694 31,192 Provision for income taxes 89,~~402~~737 56,~~333~~083 18,139 11,416 --------- --------- --------- --------- NET INCOME $ 1416,~~153~~402 $ 910,~~239~~537 $ 30,555 $ 19,776 ========= ========= ========= ========= Net income per share Basic $ 0.8496 $ 1.80 Diluted $ 0.8496 $ 1.80 Shares used in earnings per share calculations Basic 1110,~~040~~950 10,995 Diluted 10,962 11,~~055~~009 See accompanying notes to condensed consolidated financial statements.

3 ENGLE HOMES, INC. AND SUBSIDIARIES (A WHOLLY-OWNED SUBSIDIARY OF TECHNICAL OLYMPIC USA, INC.) Condensed Consolidated Statement of Shareholder's Equity For the Six Months Ended June 30, 2001 (Unaudited) (in thousands except number of shares)

~~COMMON~~Common ~~STOCK~~Stock ~~ADDITIONAL~~Additional ~~RETAINED~~ -------------- ~~PAID~~Paid-INIn ~~EARNINGS~~Retained ~~SHARES~~Shares ~~AMOUNT~~Amount ~~CAPITAL~~Capital ~~(DEFICIT)~~Earnings ~~TOTAL~~Total ------ ------ ---------- --------- --------- Amounts at December 31, 2000 100 - $ 215,709 $ 4,041 $ 219,750 Net Income for the ~~Three~~Six Months Ended ~~March~~June 3130, 2001 1430,~~153~~555 1430,~~153~~555 Net Dividends to Parent (1926,~~063~~449) (1926,~~063~~449) ------- ------ ---------- -------- --------- Amounts at ~~March~~June 3130, 2001 100 $ - $ 215,709 $ ~~(869)~~8,147 $~~214~~ 223,~~840~~856 ======= ====== ========== ======== ========= See accompanying notes to condensed consolidated financial statements.

4 ENGLE HOMES, INC. AND SUBSIDIARIES (A WHOLLY-OWNED SUBSIDIARY OF TECHNICAL OLYMPIC USA, INC.) Condensed Consolidated Statements of Cash Flows (Unaudited) (in thousands)

~~THREE~~Six ~~MONTHS~~Months ~~THREE~~Six ~~MONTHS~~Months ~~ENDED~~Ended ~~ENDED~~Ended ~~MARCH~~June 3130, ~~APRIL~~July 3031, 2001 2000 ---------~~---~~ ----------- Successor Predecessor NET CASH PROVIDED BY OPERATING ACTIVITIES $ 4455,~~137~~857 $ 726,~~675~~157 --------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Net acquisitions of property and equipment (~~849~~1,879) (1,~~031~~870) --------- ----------- Net cash required by investing activities (~~849~~1,879) (1,~~031~~870) --------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Increase in borrowings 27,001 Repayment of borrowings (26,~~489~~564) (1,~~460~~593) ~~Distribution~~Repurchase toof ~~shareholders~~common stock (~~663~~2,530) ~~Net~~Dividends ~~dividends~~ to ~~Parent~~shareholders (191,~~063~~326) ~~Repurchase~~Net ofDividends ~~common~~to ~~stock~~parent (4226,449) --------- ----------- Net cash required by financing activities (1826,~~551~~012) (25,~~165~~449) --------- ----------- NET INCREASE IN CASH 2427,~~737~~966 418,~~479~~838 UNRESTRICTED CASH AT BEGINNING OF PERIOD 18,078 33,848 --------- ----------- UNRESTRICTED CASH AT END OF PERIOD $ 4246,~~815~~044 $ 3852,~~327~~686 ========= =========== See accompanying notes to condensed consolidated financial statements.

5 ENGLE HOMES, INC. AND SUBSIDIARIES (A WHOLLY-OWNED SUBSIDIARY OF TECHNICAL OLYMPIC USA, INC.) Notes to Condensed Consolidated Financial Statements (Unaudited) NOTE 1 BASIS OF PRESENTATION AND BUSINESS Engle Homes, Inc. and subsidiaries are engaged principally in construction and sale of residential homes and land development in Florida; Dallas, Texas; Denver, Colorado; Atlanta, Georgia; Phoenix, Arizona and Virginia. Ancillary products and services to its residential homebuilding include land sales to other builders, origination and sale of mortgage loans, and title transfer services. The consolidated financial statements include the accounts of the Company and all subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. On November 22, 2000, the Company became a wholly-owned subsidiary of Engle Holdings Corp., in turn a wholly-owned subsidiary of Technical Olympic USA, Inc. ("Technical Olympic"), pursuant to a merger agreement dated October 12, 2000. Technical Olympic is a wholly-owned indirect subsidiary of Technical Olympic S.A., a publicly traded Greek corporation. Company stockholders received $19.10 for each share of the Company's common stock at the time of the merger. Following the merger, the common stock of the Company ceased to be publicly traded. The Company is not subject to the filing requirements of the Securities Exchange Act of 1934. This Form 10-Q is filed pursuant to contractual obligations imposed on the Company by two Indentures dated as of February 2, 1998 and June 12, 1998, respectively, under which the Company is the issuer of certain debt. For accounting purposes, the merger was accounted for as of November 22, 2000 using the purchase method of accounting. Accordingly, the condensed consolidated financial statements for periods after that date reflect the push-down of the purchase price allocations (based on preliminary estimates and subject to adjustment) made by Technical Olympic to the assets and liabilities of the Company and, therefore, are not comparable to those before the acquisition. The condensed consolidated financial statements for the period from January 1, 2001 through June 30, 2001 are labeled Successor. Statements for the six months ended July 31, 2000 are based on the historical accounts of the Company and are labeled Predecessor. Had the acquisition been effected as of January 1, 2000, net income for the three months and the six months ended June 30, 2000 would have been $10.4 million and $19.6 million, respectively. The acquisition was valued at approximately $465 million, including the assumption of approximately $250 million of debt. As a result of the push down of the purchase price, the Company recorded goodwill of approximately $15.2 million which is being amortized over 20 years. As a result of the change in control of the Company, the indentures governing the Company's Senior Notes due 2008 ("Senior Notes") required that an offer be made to purchase all such outstanding Senior Notes at a price of 101% of the principal plus accrued interest. Through the termination of the offer in January 2001, the Company repurchased approximately $237.0 million of $250 million of its Senior Notes. On March 6, 2001, Newmark Homes Corp. ("Newmark") announced it is considering the possible merger of Newmark with Engle Holdings, Corp., the parent company of the Company. All of the stock of Engle Holdings, Corp. and 80% of the stock of Newmark is owned by Technical Olympic. The Special Committee of Newmark's independent directors is reviewing the transaction and 6 will make a recommendation to Newmark's full board. There are no assurances that the Special Committee will either recommend the merger or that such a merger will be consummated. Any merger would also be subject to execution of a definitive agreement and certain regulatory and other approvals as well as the approval of various lenders of Engle Holdings, Corp., the Company, Newmark and Technical Olympic. If the merger is consummated, it is contemplated that shares of Engle Holdings, Corp. would be exchanged for shares of Newmark. These statements do not contain all information required by generally accepted accounting principles that are included in a full set of financial statements. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments necessary to present fairly the financial position of the Company at June 30, 2001 and December 31, 2000, and results of its operations for the three and six months ended and its cash flows for the six months ended June 30, 2001 and July 31, 2000. These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes contained in the Company's Annual Report on Form 10-K for the year ended October 31, 2000 and the transitional report filed on Form 10-QT for the two months ended December 31, 2000. Results of operations for these periods are not necessarily indicative of results to be expected for the full year. NOTE 2 CONSOLIDATED INCOME TAX RETURNS As a result of the merger as described in Note 1, the Company files consolidated income tax returns with Technical Olympic. For the three and six months ended June 30, 2001, income taxes are allocated to the Company based upon a "stand alone" computation. NOTE 3 INVENTORIES (dollars in thousands)

~~March~~June 3130, December 31, 2001 2000 --------- ----------- Land and improvements for residential homes under development $ ~~273~~258,~~014~~167 $ 301,426 Residential homes under construction ~~149~~168,~~114~~066 142,644 --------- --------- $ ~~422~~426,~~128~~233 $ 444,070 ========= =========

NOTE 4 CAPITALIZATION OF INTEREST (dollars in thousands) Included in inventory is the following:

For the Three Months ~~Three~~For the Six Months Ended ~~March~~Ended 31June 30, ~~2001~~July ~~Ended~~31, ~~April~~June 30, July 31, 2001 2000 2001 2000 --------- ----------- --------- ----------- Interest capitalized, beginning of period $ 21,670 $ 22,491 $ 23,019 $ 21,282 Interest incurred and capitalized 5,~~000~~019 6,~~430~~163 10,019 12,344 Amortized to cost of sales-homes (6,~~293~~835) (4,~~668~~933) (13,128) (9,601) Amortized to cost of sales-land (56503) (~~553~~581) (559) (885) 7 Reduction of capitalized interest- other (3,407) (3,407) --------- --------- --------- --------- Interest capitalized, end of period $ 2115,~~670~~944 $ 2223,~~491~~140 $ 15,944 $ 23,140 ========= ========= ========= =========

NOTE 5 - EARNINGS PER SHARE (in thousands, except per share data) Basic and diluted earnings per share are calculated as follows:

For the Three Months For the Six Months Ended ~~April~~July 3031, 2000 Ended July 31, 2000 -------------------- -------------------- Predecessor Predecessor Basic: Net Income $ 910,~~239~~537 $ 19,776 Weighted average number of shares outstanding 1110,~~040~~950 10,995 -------- -------- Basic earnings per share $ 0.8496 $ 1.80 ======== ======== Diluted: Net Income $ 910,~~239~~537 $ 19,776 Weighted average number of common shares outstanding 1110,~~040~~950 10,995 Options to acquire common stock 1512 14 -------- -------- Diluted weighted average common shares outstanding 10,962 11,~~055~~009 -------- -------- Diluted earnings per share $ 0.8496 $ 1.80 ======== ========

8 Part 1 - Item II MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General The following table sets forth for the periods indicated certain items of the Company's financial statements expressed as a percentage of the Company's total revenues:

For the Three For the ~~Three~~Six Months Ended Months Ended ~~March~~June 3130, ~~2001~~July ~~April~~31, June 30, July 31, 2001 2000 2001 2000 ------ ------~~-----~~ ------ ------~~-----~~ Total ~~revenues~~Revenues 100.0% 100.0% 100.0% 100.0% Costs of home construction and land sales 77.95 80.8 77.7 81.31 Selling, marketing, general and administrative ~~expense~~9.2 9.43 9.3 9.3 Income before taxes 10.13 67.84 10.2 7.1

Backlog Sales of the Company's homes are generally made pursuant to a standard contract which requires a down payment of up to 10% of the sales price. The contract includes a financing contingency which permits the customer to cancel in the event mortgage financing at prevailing interest rates (including financing arranged by the Company) is unobtainable within a specified period, typically four to six weeks. The Company includes an undelivered home sale in its backlog upon execution of the sales contracts and receipt of the down payment. Revenue is recognized only upon the closing and delivery of a home. The Company estimates that the average period between the execution of a purchase agreement for a home and delivery is approximately six months. The following table sets forth the Company's backlog for the periods indicated:

~~March~~June 3130, ~~April~~July 3031, 2001 2000 (dollars in thousands) ---------------- ---------------- Units Dollars Units Dollars ----- --------- ----- --------- South Florida ~~701~~853 $ ~~179~~223,~~885~~100 ~~569~~583 $ ~~136~~140,~~100~~500 Orlando ~~467~~479 ~~105~~112,~~680~~600 ~~435~~402 9587,~~600~~500 West Coast Florida ~~189~~201 3739,~~350~~300 ~~239~~229 4846,~~700~~100 Texas ~~171~~172 34,~~346~~300 ~~178~~166 3431,~~100~~900 Denver ~~260~~224 7767,~~564~~500 ~~186~~199 4853,~~700~~100 Virginia ~~280~~253 8583,~~876~~900 ~~185~~213 5763,~~600~~800 North Carolina - - 10 2,600 Atlanta, Georgia 6238 138,~~295~~600 6460 12,~~700~~300 9 Arizona ~~239~~244 6261,~~377~~600 ~~234~~255 5462,~~800~~000 ----- --------- ------ --------- TOTAL 2,~~369~~464 $ ~~596~~630,~~373~~900 2,~~100~~117 $ ~~490~~499,~~900~~800 ===== ========= ====== =========

9 The Company is marketing in 101 subdivisions at June 30, 2001, consisting of 14 subdivisions in South Florida; 25 in Central Florida; 9 in West Coast Florida; 14 in Denver, Colorado; 13 in Dallas, Texas; 9 in Virginia; 15 in Phoenix, Arizona and 2 in Atlanta, Georgia. Result of Operations: Three Months Ended June 30, 2001 compared to the Three Months Ended July 31, 2000. The Company's revenues from home sales for the quarter ended June 30, 2001 increased $30.9 million (or 14.8%) compared to the three months ended July 31, 2000. The number of homes delivered increased 6.9% (to 975 from 912) and the average selling price of homes delivered increased 7.5% (to $245,000 from $228,000). Management believes that changes in the average selling price of homes delivered from period to period are attributable to discrete factors at each of its subdivisions, including product mix and premium lot availability, and cannot be predicted for future periods with any degree of certainty. Cost of home sales increased $18.0 million (or 10.4%) compared to the quarter ended July 31, 2000 primarily due to the related increase in home sale revenues. Cost of home sales as a percentage of home sales revenue decreased to 80.0% from 83.2% as a result of the product mix of homes delivered. The Company's selling, marketing, general and administrative ("S,G&A") expenses increased approximately $2.5 million (or 11.9%) during the three months ended June 30, 2001, as compared to the three months ended July 31, 2000. S,G&A expense as a percentage of total revenues for the three months ended June 30, 2001 decreased to 9.2% compared to 9.3% for the quarter ended July 31, 2000. Primarily as a result of the increase in revenues and a decrease in cost of home sales, net income increased by $5.9 million in the three months ended June 30, 2001 as compared to the three months ended July 31, 2000. Six Months Ended June 30, 2001 compared to the Six Months Ended July 31, 2000. The Company's revenues from home sales for the six months ended June 30, 2001 increased $42.1 million (or 10.2%) compared to the six months ended July 31, 2000. The number of homes delivered increased 1.4% (to 1,872 from 1,847) and the average selling price of homes delivered increased 9.0% (to $242,000 from $222,000). The increase of revenues and homes delivered is primarily attributable to an increased level of backlog at the beginning of the current period compared with the prior year period. Management believes that changes in the average selling price of homes delivered from period to period are attributable to discrete factors at each of its subdivisions, including product mix and premium lot availability, and cannot be predicted for future periods with any degree of certainty. Cost of home sales increased $21.7 million (or 6.3%) for the six months ended June 30, 2001 compared to the six months ended July 31, 2000 primarily due to the related increase in home sale revenues. Cost of home sales as a percentage of home sales decreased to 80.4% from 83.4% as a result of the product mix of homes delivered. 10 The Company's selling, marketing, general and administrative ("S,G&A") expenses increased approximately $3.7 million (or 9.1%) during the six months ended June 30, 2001, as compared to the six months ended July 31, 2000. S,G&A expense as a percentage of total revenues for the six months ended June 30, 2001 and July 31, 2000, is 9.3%. Primarily as a result of the increase in revenues and a decrease in cost of home sales, net income increased by $10.8 million in the six months ended June 30, 2001 as compared to July 31, 2000. Liquidity and Capital Resources The Company's financing needs are provided by cash flows from operations and unsecured bank borrowings. Cash flow from operations has improved as a result of increased net income. The Credit Facility and Refinancing. In connection with the acquisition of the Company by Technical Olympic on November 22, 2000, the Company entered into a Credit Agreement (the "Credit Agreement") with a bank providing for a $100 million term loan commitment and a $275 million revolving credit facility (subject to reduction based upon periodic determinations of a borrowing base). Proceeds from these facilities provide working capital and financed the required repurchase offer made to holders of the Company's then outstanding $250 million principal amount of 9 1/4% Senior Notes due 2008 ("Senior Notes"). The term loan matures November 22, 2003. The revolving credit facility terminates on November 22, 2002 whereupon all amounts outstanding become due. The revolving credit facility also provides credit support for the issuance of letters of credit needed from time to time in the Company's business. The Company's previous bank revolving credit facility was repaid and cancelled. As a result of the change in control of the Company, the Company was required by the indentures governing its Senior Notes to offer to repurchase all of its outstanding Senior Notes at a price of 101% of the principal plus accrued interest. Upon termination of the offer in January 2001, the Company repurchased approximately $237 million of its Senior Notes. Funds to repurchase these Senior Notes were provided from the issuance of the $100 million term loan under the Credit Agreement and additional advances under the Company's revolving credit facility. Approximately $13 million of the Senior Notes were not tendered and remain outstanding as of June 30, 2001. During the six months ended June 30, 2001, the Company made distributions to its parent company of approximately $26.4 million. As of June 30, 2001, $142 million was outstanding under the revolving credit facility under the Credit Agreement, and $100 million of term notes. In addition, Preferred Home Mortgage Company (PHMC) has a warehouse line of credit in the amount of $20.0 million, which is guaranteed by the Company. At June 30, 2001 the outstanding balance was $16.9 million to service origination of mortgage loans. The Company believes the facilities are sufficient for its mortgage banking operation for the remainder of fiscal 2001. Management does not anticipate that any expansion of PHMC's operation will significantly impact liquidity because the mortgages are generally sold within a short period of time after their origination to the Federal National Mortgage Association (FNMA) or other qualified investors. PHMC has the ability to retain the servicing of loans, however, as of June 30, 2001, the Company has not retained servicing rights relating to loans sold. 11 LAND ACQUISITION. The Company is continually exploring opportunities to purchase parcels of land for its homebuilding operations and is, at any given time, in various stages of proposing, making offers for, and negotiating the acquisition of various parcels, whether outright or through options. The Company expects to pursue additional land acquisition and development opportunities in the future. During the six months ended June 30, 2001, the Company sold to an investment limited liability company ("Investment Company") certain undeveloped real estate tracts for a purchase price of $42.4 million. The Investment Company is owned by several of the executive officers or prior stockholders of the Company, including without limitation trusts of the Engelstein family. The Company entered into a number of agreements, including option contracts and construction contracts with the Investment Company to develop and buy back fully developed lots from time to time subject to the terms and conditions of such agreements. The Company believes that the terms of the purchase contract and that the terms of the related option and development contracts were comparable to those available from unaffiliated parties. Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995 The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements. Certain information included in this Report and other such Company filings (collectively, "SEC filings") under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended (as well as information communicated orally or in writing between the dates of such SEC filings) contains or may contain information that is forward looking, related to subject matter such as national and local economic conditions, the effect of governmental regulation on the Company, the competitive environment in which the Company operates, changes in interest rates, home prices, availability and cost of land for future growth, availability of working capital and the availability and cost of labor and materials. Such forward looking information involves important risks and uncertainties that could significantly affect expected results. These risks and uncertainties are addressed in this and other SEC filings. Part 1 - Item 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS The Company is exposed to market risk primarily related to potential adverse changes in interest rates as discussed below. The Company's exposure to market risks is changes to interest rates related to the Company's loans. The interest rates relative to the Company's loans fluctuate with the prime and Libor lending rates, both upwards and downwards. 12 Part II - Other Information Item 1. Legal Proceedings. The Company is involved in various claims and legal actions arising in the ordinary course of business. In the opinion of the Company's management, the ultimate disposition of these matters is not expected to have a material effect on the financial condition or results of operations of the Company. Item 2. Changes in Securities. None. No disclosure required. Item 3. Defaults Upon Senior Securities. None. No disclosure required. Item 4. Submission of Matters to a Vote of Security Holders. None. No disclosure required. Item 5. Other Information. None. No disclosure required. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits. None. (b) Reports on Form 8-K. None. 13 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. ENGLE HOMES, INC. ----------------- (Registrant) Date: JULY 27, 2001 \s\ ALEC ENGELSTEIN ------------------------ ------------------------ Alec Engelstein Chief Executive Officer Date: JULY 27, 2001 \s\ DAVID SHAPIRO ------------------------ ------------------------ David Shapiro Chief Financial Officer 14

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