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, 2002 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)
412,823 SHARES AS OF APRIL 30, 2002
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
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NATIONAL PROPERTIES CORPORATION
BALANCE SHEETS
ASSETS
March 31, December 31,
2002 2001
<s> <c> <c>
CURRENT ASSETS
Cash 304,633 340,793
Mortgage receivable, current portion 45,037 55,978
Receivable - 14,126
Other 9,931 49,835
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Total current assets 359,601 460,732
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PROPERTY AND EQUIPMENT, AT COST
Land 5,150,932 5,150,932
Buildings and improvements 34,231,292 34,231,292
Furniture and equipment 115,747 115,747
---------- ----------
39,497,971 39,497,971
Less - accumulated depreciation 10,525,757 10,277,759
---------- ----------
Property and equipment - net 28,972,214 29,220,212
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OTHER ASSETS
Marketable securities 1,400,456 1,438,706
Mortgage receivable, long term portion 100,000 100,000
---------- ----------
Total other assets 1,500,456 1,538,706
---------- ----------
30,832,271 31,219,650
========== ==========
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LIABILITIES AND STOCKHOLDERS' EQUITY
<s> <c> <c>
CURRENT LIABILITIES
Accounts payable 20,180 2,598
Accrued liabilities 128,383 116,434
Advance rents 234,642 283,754
Federal and state income taxes 228,794 -
---------- ----------
Total current liabilities 611,999 402,786
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LONG-TERM DEBT 9,100,000 10,250,000
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DEFERRED INCOME TAXES 1,089,738 1,062,478
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STOCKHOLDERS' EQUITY
Common stock - $1 par value
Authorized - 5,000,000 shares
Issued
(2002-412,823 shares; 2001-413,073 shares) 412,823 413,073
Retained earnings 19,104,342 18,569,367
Accumulated other comprehensive income 513,369 521,946
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Total stockholders' equity 20,030,534 19,504,386
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30,832,271 31,219,650
========== ==========
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NATIONAL PROPERTIES CORPORATION
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
For Quarter Ended
March 31,
2002 2001
<s> <c> <c>
Income
Lease rental income 1,340,336 1,190,249
Dividend and interest income 10,574 19,579
Gain on sale of securities 21,424 -
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Total income 1,372,334 1,209,828
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Expenses
Depreciation 247,998 222,122
Interest 96,991 132,523
Salaries and wages 63,407 64,630
Property, payroll
and misc. taxes 24,259 20,989
Other expenses 73,409 75,145
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Total expenses 506,064 515,409
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Income before income taxes 866,270 694,419
Federal and State income taxes 320,520 256,900
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Net income 545,750 437,519
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Other comprehensive income (Losses):
Unrealized holding gains (losses) on
marketable securities arising
during the period 7,937 (248,396)
Less reclassification adjustment for
gains included in net income 21,424 -
Less income tax benefit related
to unrealized holding losses 4,910 90,370
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Other comprehensive income (losses)
net of tax (8,577) (158,026)
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Comprehensive income 537,173 279,493
======= =======
Net income per share of common stock $1.32 $1.06
Weighted average shares
outstanding 412,948 414,206
Dividends per share None None
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NATIONAL PROPERTIES CORPORATION
STATEMENTS OF CASH FLOWS
For Quarter Ended
March 31,
2002 2001
<s> <c> <c>
CASH FLOW FROM OPERATING ACTIVITIES
Net income 545,750 437,519
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 247,998 222,122
Deferred income taxes 32,170 26,529
Gain on sale of securities (21,424) -
Changes in assets and liabilities:
Accounts receivable 14,126 (5,003)
Prepaid expenses and deferred charges 4,168 16,574
Accounts payable and accrued expenses 29,531 (4,745)
Federal and State income taxes 264,530 184,146
Advance rents (49,112) 181,793
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Net cash provided by operations 1,067,737 1,058,935
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CASH FLOW FROM INVESTING ACTIVITIES
Purchase of property - (4,208,112)
Proceeds from sale of securities 46,187 -
Principal received on mortgage note 10,941 6,359
-------- --------
Net cash provided by (used in)
investing activities 57,128 (4,201,753)
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CASH FLOW FROM FINANCING ACTIVITIES
Borrowings on credit lines - 4,100,000
Payments on credit line borrowings (1,150,000) (775,000)
Purchase of treasury stock (11,025) (7,350)
-------- --------
Net cash provided by (used in)
financing activities (1,161,025) 3,317,650
-------- --------
Net change in cash (36,160) 174,832
Cash at beginning of period 340,793 95,212
-------- --------
Cash at end of period 304,633 270,044
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for
Interest expense 63,710 132,523
Income tax payments 23,820 46,225
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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, 2002 and 2001
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.
Certain prior amounts have been reclassified to conform to the
current period presentation.
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 also making monthly payments of
$4,918 which includes interest at 10.0%.
Long Term Debt
The Company has a revolving credit agreement dated February 8,
2001, with Wells Fargo Bank, N.A. The new credit facility which
replaced the three credit lines the Company had with Wells Fargo
Bank, permits the Company to borrow up to $15,000,000. At March
31, 2002, $9,100,000 was outstanding under the agreement which
was used to fund property acquisitions. The revolving period of
the agreement provides for annual extensions each April 30th
(currently extended through April 30, 2003) at the mutual
agreement of the bank and the Company. It is the Company's
intention to request an extension of the revolving period, as
provided by the agreement. Advances under the credit facility
bear interest at 0.75% below the bank's base rate. At March 31,
2002, the outstanding balance accrued interest at 4.00%. In
addition, the agreement requires the Company to pay an annual
commitment fee of 1/8 of 1% (payable quarterly) on the unused
portion of the line of credit commitment. The credit agreement
contains various covenants, including limitations of additional
borrowings and maintaining a minimum free cash flow, as defined
in the agreement, of $1,800,000 per year measured as of the end
of each fiscal quarter on an annualized basis. The line of
credit is secured by first mortgages on ten properties that had a
net book value of $6,140,000 at March 31, 2002.
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.
Operating Results
Net income increased 24.7% in the first quarter of 2002 over the
same period in 2001.
Lease revenues in the first quarter of 2002 were $1,340,000
compared to $1,190,000 in the first quarter of 2001, an increase
of $150,000. The increase in lease revenues, relative to the
first quarter of 2001, was attributable to: (1) the acquisition
of a sporting goods store property and two convenience store
properties in 2001, which in the aggregate, added $172,000 to
lease revenues for the first quarter of 2002, (2) a decrease in
lease revenues of $11,000 due to the disposition of the GTech
office building in December 2001, (3) a decrease of $21,000 in
contingent rents based on sales overages, and (4) an increase in
lease revenues of $10,000 due to scheduled rent increases
provided in the leases for several tenants.
The Company recorded gains of $21,000 from the sale of marketable
securities in the first quarter of 2002 compared to no gains or
losses for the same period in 2001.
Investment income declined by $9,000 in the first quarter of 2002
compared to 2001 as management continues to reduce its portfolio
of equity securities and a mortgage note receivable gets paid
down.
Operating expenses totaled $506,000 in the first quarter of 2002
compared to $515,000 for the same period a year ago. The
decrease in total expenses was primarily the result of a decrease
in interest expense on outstanding borrowings on the Company's
line of credit. Interest expense declined $35,000 in the first
quarter from the same period a year ago due to the decline in
interest rates. The average outstanding debt in the first
quarter of 2002 was $9,669,000 compared to $6,200,000 in 2001.
The average interest rate on borrowings in the first quarter of
2002 was 4% compared to 8.5% for the first quarter of 2001.
Depreciation expense increased $26,000 in 2002 over 2001 as a
result of the acquisition of three properties in 2001 mentioned
above.
Other general and administrative expenses for the first quarter
of 2002 totaled $161,000 and were approximately the same as in
the first quarter of 2001.
Earnings per share increased $0.26 to $1.32 per share in the
first quarter of 2002 over the $1.06 a share for 2001.
Liquidity
As of March 31, 2002, the Company's main sources of liquidity
consisted of $305,000 cash, marketable securities having a market
value of approximately $1,400,000 and $5,900,000 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 $22,800,000. 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 __5/10/02__ By _____/S/__Raymond_Di_Paglia_________
Raymond Di Paglia, President and
Chief Executive Officer
Date __5/10/02__ By _____/S/__Kristine_M. Fasano________
Kristine M. Fasano, Vice President,
Secretary, Treasurer