FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended March 31, 2001 Commission file number 0-305
NATIONAL PROPERTIES CORPORATION
(Exact name of registrant as specified in its charter)
Iowa 42-0860581
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4500 Merle Hay Road, Des Moines, Iowa 50310
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (515) 278-1132
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, and (2) has been subject to such
filing requirement for the past 90 days.
Yes __X__ No _____
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
COMMON STOCK (PAR VALUE $1.00)
414,073 SHARES AS OF APRIL 30, 2001
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
NATIONAL PROPERTIES CORPORATION
BALANCE SHEETS
ASSETS
March 31, December 31,
2001 2000
CURRENT ASSETS
Cash 270,044 95,212
Mortgage receivable, current portion 131,388 137,747
Other 12,263 23,834
---------- ----------
Total current assets 413,695 256,793
---------- ----------
PROPERTY AND EQUIPMENT, AT COST
Land 4,883,180 4,424,679
Buildings and improvements 30,950,329 27,200,718
Furniture and equipment 102,184 102,184
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35,935,693 31,727,581
Less - accumulated depreciation 9,743,271 9,521,149
---------- ----------
Property and equipment - net 26,192,422 22,206,432
---------- ----------
OTHER ASSETS
Marketable securities 1,768,269 2,016,664
Mortgage receivable, long term portion 200,000 200,000
---------- ----------
Total other assets 1,968,269 2,216,664
---------- ----------
28,574,386 24,679,889
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable 24,454 2,946
Notes payable - 3,000,000
Accrued liabilities 307,005 151,464
Federal and state income taxes 218,122 33,976
---------- ----------
Total current liabilities 549,581 3,188,386
---------- ----------
LONG-TERM DEBT 8,925,000 2,600,000
---------- ----------
DEFERRED INCOME TAXES 992,433 1,056,274
---------- ----------
STOCKHOLDERS' EQUITY
Common stock - $1 par value
Authorized - 5,000,000 shares
Issued
(2001-414,173 shares; 2000-414,353 shares) 414,173 414,373
Retained earnings 17,011,897 16,581,528
Accumulated other comprehensive income 681,302 839,328
---------- ----------
Total stockholders' equity 18,107,372 17,835,229
---------- ----------
28,574,386 24,679,889
========== ==========
NATIONAL PROPERTIES CORPORATION
STATEMENTS OF INCOME
For Quarter Ended
March 31,
2001 2000
Income
Lease rental income 1,190,249 1,204,726
Dividend and interest income 19,579 12,399
Gain on sale of real estate - 92,861
------- -------
Total income 1,209,828 1,309,986
------- -------
Expenses
Depreciation 222,122 198,837
Interest 132,523 122,138
Salaries and wages 64,630 58,724
Property, payroll
and misc. taxes 20,989 13,820
Other expenses 75,145 196,408
------- -------
Total expenses 515,409 589,927
------- -------
Income before income taxes 694,419 720,059
Federal and State income taxes 256,900 266,421
------- -------
Net income 437,519 453,638
======= =======
Other comprehensive income (Losses):
Unrealized holding gains (losses) on
marketable securities arising
during the period (248,396) (221,169)
Less reclassification adjustment for
gains included in net income - -
Less income tax expense related
to unrealized holding gains 90,370 80,505
------- -------
Other comprehensive income, (losses)
net of tax (158,026) (140,664)
------- -------
Comprehensive income 279,493 312,974
======= =======
Net income per share of common stock $1.06 $1.09
Weighted average shares
outstanding 414,206 415,453
Dividends per share None None
<FN>
NATIONAL PROPERTIES CORPORATION
STATEMENTS OF CASH FLOWS
For Quarter Ended
March 31,
2001 2000
CASH FLOW FROM OPERATING ACTIVITIES
Net income 437,519 453,638
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 222,122 198,837
Charitable contributions - 135,000
Deferred income taxes 26,529 22,279
Gain on sale of real estate - (92,861)
Changes in assets and liabilities:
Accounts receivable (5,003) -
Prepaid expenses and deferred charges 16,574 2,243
Accounts payable and accrued expenses 177,048 (83,241)
Federal and State income taxes 184,146 132,217
-------- --------
Net cash provided by operations 1,058,935 768,112
-------- --------
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of property (4,208,112) -
Proceeds from sale of real estate - 49,921
Purchased marketable securities - (1,490)
Principal payments on mortgage note 6,359 -
-------- --------
Net cash provided by (used in)
investing activities (4,201,753) 48,431
-------- -------
CASH FLOW FROM FINANCING ACTIVITIES
Borrowings on credit lines 4,100,000 -
Payments on credit line borrowings (775,000) (825,000)
Principal payments on mortgage notes - (10,482)
Purchase of treasury stock (7,350) (38,062)
-------- --------
Net cash provided by (used in)
financing activities 3,317,650 (873,544)
-------- --------
Net change in cash 174,832 (57,001)
Cash at beginning of period 95,212 287,310
-------- --------
Cash at end of period 270,044 230,309
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for
Interest expense 132,523 122,138
Income tax payments 46,225 111,925
NATIONAL PROPERTIES CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
The balance sheets, statements of income and comprehensive income, and
statements of cash flow at March 31, 2001 and 2000 and the periods then
ended are not audited but reflect all adjustments which are of a normal
recurring nature and are, in the opinion of management, necessary to a
fair statement of the results of the periods shown.
The Company has adopted effective January 1, 1998 the Statement of
Financial Accounting Standard No. 130, "Reporting Comprehensive Income,"
which establishes standards for the reporting and display of
comprehensive income and its components in a full set of general purpose
financial statements. The effect of FAS No. 130 on the Company's interim
financial statements is to present in the statement of income,
unrealized gains and losses on marketable securities net of income
taxes.
Mortgage Note Receivable
In July 2000, the Company sold real estate for $500,000 receiving
$150,000 cash and a promissory note for $350,000. The note provides for
interest at 10% and is secured by the real estate. Payments under the
note are to be received as follows: $150,000 on June 30, 2001; $100,000
on June 30, 2002; and $100,000 on June 30, 2003. The mortgagor is
making monthly payments of $4,918 which includes interest at 10.0%.
Long Term Debt
Long term debt consist of a revolving credit agreement dated February 8,
2001, with Wells Fargo Bank, N.A. The new agreement, which replaces the
three credit lines the Company had with Wells Fargo Bank, permits the
Company to borrow at anytime through April 30, 2002 up to $15,000,000
under the line of credit at 0.75% below the bank's prime rate of
interest (7.25% at March 31, 2001). The Company must pay an annual
commitment fee of 1/8 of 1% (payable quarterly) on the unused portion of
the commitment. All borrowings under the credit line matures on April
30, 2002 and, is to be renewed annually for an additional one year
beginning April 30, 2001 if the Company is in compliance with the terms
of the credit line. Among other things, the agreement provides that the
Company will obtain a minimum free cash flow of one million eight
hundred thousand dollars ($1,800,000) per year measured as of the end of
each fiscal quarter on an annualized basis. "Free Cash Flow" is defined
as (a) net income plus (b) depreciation plus (c) non-cash expenses minus
(a) dividends minus (b) expenditures for purchases of the Company's
stock minus (c) gains on the sale of real estate. The outstanding
indebtedness to the bank at December 31, 2000 was rolled into and became
an advance under the new Line of Credit.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
The Company, an Iowa corporation, is engaged principally in the
development of commercial real estate for lease to qualified tenants.
On February 8, 2001, the Company entered into a new financing agreement
with Wells Fargo Bank, N.A., that permits the Company to borrow at
anytime through April 30, 2002 (amended 4/12/01 to April 30, 2003) up to
$15,000,000 under the line of credit at 0.75% below the bank's prime
rate of interest. The Company must pay an annual commitment fee of 1/8
of 1% (payable quarterly) on the unused portion of the commitment.
In March 2001, the Company completed the purchase of a property in
Franklin, (Nashville) Tennessee at a cost of $4,208,000. The property
is leased to Academy LTD. (a Texas limited partnership) a full-line
sporting goods retailer on a net lease basis for a term of twenty years,
that commenced December 1999, with four (4), five year (5) renewal
options. The lease provides for annual rents of $386,386 during the
first ten years and $425,025 during the last ten years of the lease
term. Funds required for the purchase were drawn on the Company's bank
credit line.
Operating Results
Lease revenues in the first quarter 2001 were $1,190,000 compared to
$1,205,000 recorded for the first quarter of 2000. The decrease in
lease revenues relative to the first quarter of 2000, was attributable
to : (1) a decrease in lease revenues of $44,000 resulting from the sale
of its garden center property in Dallas, Texas in July 2000, and two GTE
Telephone Services Center properties in March and May of 2000; (2) the
acquisition of a restaurant property in September 2000, and a sporting
goods store property in March 2001, which added $77,000 to lease
revenues; (3) a decrease of $51,000 in contingent rents based on
overages and, (4) other scheduled rent increases of $4,000.
Investment income in the first quarter of 2001 increased $7,000 over the
same period in 2000 primarily due to interest earned on the Company's
mortgage note.
The Company had no gains from the sale of securities or properties in
the first quarter of 2001 compared to a gain of $93,000 from the sale of
a GTE Service Center property in March 2000.
Operating expenses totaled $515,000 in the first quarter of 2001
compared to $590,000 for the same period a year ago. The decrease in
total expenses was attributable to a charitable donation of $135,000
recorded in connection with the sale of a GTE Telephone Service Center
in March 2000 as noted above. Total expenses excluding the donation
increased $60,000 over the first quarter 2000 primarily as a result of
increases in depreciation and interest expense, two key figures for the
Company. The acquisition of a restaurant property in September 2000 and
a sporting goods store property in March 2001 was the primary reason for
the increase in depreciation and interest expense. The Company used its
line of credit to fund both acquisitions. The average interest rate on
borrowings in the first quarter 2001 was 8.6% compared to 8.9% for the
first quarter 2000.
Other general and administrative expenses excluding donations increased
20% in the first quarter 2001 over the same period in 2000. The
increase came primarily in the areas of compensation cost, franchise and
property taxes and legal and accounting fees.
Net income decreased 3.6% in the first quarter 2001 from the same period
in 2000 after deducting income taxes at the effective rate of 37%.
Liquidity
As of March 31, 2001, the Company's main sources of liquidity consisted
of $270,000 cash, marketable securities having a market value of
approximately $1,768,000 and $6,075,000 remaining loan balance available
on its revolving credit line with a local bank. In addition, the
Company owns unencumbered real estate having an aggregate book value of
approximately $19,000,000. Management believes that its cash flow from
operations and these other potential sources of cash will be sufficient
to finance current and projected operations.
PART II. OTHER INFORMATION.
No applicable items.
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.
NATIONAL PROPERTIES CORPORATION
Date __5/9/01__ By _____/S/__Raymond_Di_Paglia_________
Raymond Di Paglia, President and
Chief Executive Officer
Date __5/9/01__ By _____/S/__Kristine_M. Fasano________
Kristine M. Fasano, Vice President,
Secretary, Treasurer