Pursuant to the provisions of the Capital Market Commission''s 3/347/12.7.2005 resolution and of par. 1, article 10 of Law 3340/2005 and the 4140/28-9-06 document of the Capital Market Commission and the 46807/28-9-06 document of the Athens Exchange, TECHNICAL OLYMPIC S.A announces the following:
On September 27, 2006 TECHNICAL OLYMPIC USA Inc. (TOUSA) issued a press release announcing that it updated the lenders of its Transeastern Joint Venture on the market conditions and the operations of the Joint Venture. TOUSA issued an additional press release on September 27, 2006 discussing the contribution of the Transeastern Joint Venture to the income of TOUSA attributable to all joint ventures in which it is a participant for the first six months of 2006 and further explaining the portion of TOUSA 2006 guidance on income from joint ventures attributable to the Transeastern Joint Venture. On September 28, 2006 TECHNICAL OLYMPIC S.A issued respective press releases informing the investors.
The Transeastern Joint Venture was established in July 2005 to acquire the homebuilding business and certain assets and liabilities of Transeastern Homes, a privately owned Florida homebuilder. The Joint Venture is owned 50% by TOUSA. The remaining 50% is owned by the former owners of Transeastern Homes.
The total exposure of TOUSA to the Joint Venture is approximately $141.0 million, consisting of the balance of TOUSA?s investment account in the Joint Venture of $92.6 million, a $31.3 million loan made to the Joint Venture and fees and interest receivable of $17.2 million.
The debt of the Joint Venture is secured solely by its assets. At July 31, 2006 the Joint Venture''s assets totalled $963.8 million and its debt was approximately $600.0 million.
The Joint Venture and its lenders are currently working together to quantify the Joint Venture''s future prospects and determine an action plan. The outcome of this is currently unknown and will likely remain unknown for some period of time.
Our Group believes that the worst case scenario will result in the loss of TOUSA''s investment in the Joint Venture of $92.6 million and introduce significant doubt regarding the eventual recoverability of $48.5 million of loans and receivables. This worst case scenario would require an after-tax charge of approximately $89.0 million (or approximately $1.50 per share) by TOUSA. Other scenarios would of course result in lower after-tax charges.
For the first six months of 2006, TOUSA reported $ 65.7 million as income from joint ventures and consolidated net tax income of $122.6 million. Only $2.5 million ($0.04 per share) of the consolidated net income of TOUSA was contributed by the Transeastern Joint Venture on an after tax basis. In addition, TOUSA has provided guidance of 2006 net income in the range of $231 to $262 million. The Transeastern Joint Venture was anticipated to provide approximately $3.8 to $5.7 million (or less than 2%) of that amount.
The estimated impact on TOUSA is quantified below (US$ in Millions):
Total Assets - Actual 6/30/2006: $2.783,4. Estimated 9/30/2006: $2.950,0. Pro-Forma 9/30/2006*: $2.809,0.
Notes Payable - Actual 6/30/2006: 1.060,5. Estimated 9/30/2006: 1.090,5. Pro-Forma 9/30/2006*: 1.090,5.
Borrowings under Revolving Credit Agreement - Actual 6/30/2006: 0. Estimated 9/30/2006: 0 (+/- $30.0). Pro-Forma 9/30/2006*: 0 (+/- $30.0).
Stockholders equity - Actual 6/30/2006: 1.098,6. Estimated 9/30/2006: 1.140,0. Pro-Forma 9/30/2006*: 1.051,0.
Net income (6 months) - Actual 6/30/2006: 122,6. Estimated 9/30/2006: --. Pro-Forma 9/30/2006*: --.
As demonstrated by the above data, TOUSA is a large and strong company with ample financial resources and liquidity. * Information for September 30, 2006 has been projected by our TOUSA subsidiary based on internal estimates. Pro-forma information for September 30 also reflects a reduction of assets$141 million and a reduction of net income of $89 million, reflecting the after tax impact of the reduction of assets in the worst case scenario. In this case the potential impact on the consolidated financial statements of TECHNICAL OLYMPIC S.A will be proportionate, based on its 67% share in TOUSA.