SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549
FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 1996
Commission file number: 0-305
Name of registrant: NATIONAL PROPERTIES CORPORATION
I.R.S. Employer Identification Number: 42-0860581
Address: 4500 Merle Hay Road, Des Moines, Iowa 50310
telephone number: (515) 278-1132
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $1.00 (Title of Class)
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 reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes __X__ No _____
State the aggregate market value of the voting stock held by non-affiliates
of the Registrant. The aggregate market value shall be computed by the
reference to the price at which the stock was sold, or the average bid and
asked prices of such stock as of a specified date within 60 days prior to
the date of filing.
$3,399,105 as of March 1, 1997
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 - March 1, 1997 - 447,595 Shares
DOCUMENTS INCORPORATED BY REFERENCE
Proxy Statement for the 1997 annual meeting of Stockholders See Part III
PART I
Item 1. Business
(a) General Development of Business. The Registrant,
organized under the Iowa Business Corporation Act, is engaged
principally in the development of commercial real estate for
lease to tenants under net lease arrangements. The Registrant
also derives revenues from its portfolio of investment
securities.
On December 3, 1996, The Registrant acquired a convenience store located in
Alpharetta, Georgia, (Atlanta suburb) on a purchase and leaseback arrangement,
for $1,472,585. The entire purchase price was financed with funds drawn on the
Registrant's long-term line of credit.
(b) Financial Information About Industry Segments. The
Registrant operates in a single industry segment.
(c) Narrative Description of Business.
Real Estate Held For Investment
The Registrant seeks to acquire or develop improved real estate
properties suitable for lease to commercial tenants. It is the
Registrant's policy to invest in properties that are fully leased to a
single tenant which is responsible for payment of real estate taxes,
insurance, utilities and repairs. Under such circumstances, the
Registrant has limited management responsibilities for such properties
once they are constructed and leased. In most cases properties are
constructed by the tenant and conveyed to the Registrant under a sale
and leaseback arrangement. It is not the policy of the Registrant to
invest in multiple tenant office buildings or residential facilities.
Primary factors considered by the Registrant in developing a property
for lease are the use to be made of the property, its location, the
nature and credit standing of the tenant, the rental income to be
derived under the lease, and the ability of the Registrant to utilize
the property or dispose of it upon termination of the lease.
All of the investment properties now owned by the Registrant are located
in Arizona, Georgia, Iowa, Kansas, Missouri, Nebraska, Oklahoma, and
Texas. The Registrant has placed no limitations, however, on the
locations in which it is willing to develop properties in the future.
The commercial real estate acquired by the Registrant is normally
purchased with funds drawn on the Registrants lines of credit. In most
cases, the Registrant gives careful consideration to the rate of return
which it will receive from an investment based on the original cost
thereof to the Registrant without regard to possible mortgage financing.
While the rate of return varies, it has ranged generally from 10% to
13%.
Real estate investments acquired or developed by the Registrant are not
held for resale, but are held as long-term investments. The Registrant
may, however, dispose of properties depending upon the circumstances
then existing.
Virtually all of the Registrant's development activity is handled by its
President, including lease negotiations, site acquisitions, construction
activities, and financing.
The real estate investment activity engaged in by the Registrant is
highly competitive, with numerous investors seeking to develop
properties for lease to qualified tenants. These competitors include
numerous major national financial institutions with resources and
abilities to attract tenants which are far greater than those of the
Registrant; as well as many other types of full-time and part-time real
estate investors.
At December 31, 1996, the Registrant owned 39 leased properties having
an aggregate cost of $25,934,567. The rental income for 1996 on these
leased properties amounted to $3,216,235. Seven of the properties are
leased to two restaurant operators and account for 19.8% of rental
income; four telephone service center buildings and one Goodyear Tire
Service Center building account for 10.6% of rental income; seventeen
QuikTrip Convenience stores and one related office building account for
48.6% of rental income; three nurseries (garden centers) account for
14.6% and three 7-Eleven Convenience stores, one motel land lease and
three office buildings account for the balance of 6.4%. In addition to
the foregoing, other properties, held for future development, generated
rental income of $45,965 in 1996.
The tenants of all 39 leased properties are currently in compliance with
the terms of their respective leases. However, Sunbelt Nursery Group,
Inc., which operates approximately 75 retail nurseries (Garden Centers),
including three owned by the Registrant, has incurred substantial losses
over the last two years and has reported a loss of approximately
$4,800,000 for the first six months of the current fiscal year which
ends in June 1997. The three stores owned by the Registrant generate
annual rental income of approximately $455,000 of which $78,000 on one
of the nursery properties is guaranteed by a third party. Sunbelt has
taken significant steps to restore profitability, and has succeeded in
narrowing its losses in the current year. However, in the event Sunbelt
determines that a Chapter 11 Reorganization is necessary, the Registrant
may incur a substantial reduction in future lease rental income.
Other Investments
The Registrant has a portion of its assets invested in marketable
securities which had a market value of $1,581,725 as of December 31,
1996.
Employees
The Registrant currently employs 6 persons; 4 full-time employees and
2 part-time employees.
Item 2
Properties (Dec. 31, 1996) Land Bldgs. & Accumulated Rental Lease
Renewal Mortgage Int.
Cost Improve. Depreciation Income 1996 Expires
Options Balance Rate
--------- ---------- ------------ ----------- ------- -----
- --- ---------- ------
A. DAYS INN-LAND LEASE Newton, Ia. 82,500 - - 23,408 2006 4-10
Yr. -
--------- ---------- ------------ -----------
- ----------
B. RESTAURANT PROPERTIES
Perkins 'Cake & Steak Des Moines, Ia. 137,000 343,365 275,837 60,695 2001 1-5
Yr -
Perkins 'Cake & Steak Des Moines, Ia. 140,000 341,602 273,282 73,831 2002 1-5
Yr -
Perkins 'Cake & Steak Des Moines, Ia. 200,000 373,192 356,088 71,893 1997 2-5
Yr. -
Perkins 'Cake & Steak Newton, Ia. 112,500 485,181 412,404 84,424 1999 2-5
Yr. -
Perkins 'Cake & Steak Des Moines, Ia. 243,166 498,675 423,873 105,192 2000 2-5
Yr. -
Carl's Jr. Restaurant a Chandler, AZ. 168,000 772,000 540,400 114,778 2005 3-5
Yr. -
Carl's Jr. Restaurant a Tucson, AZ. 90,000 738,000 435,420 125,631 2005 6-5
Yr. -
--------- ---------- ------------ -----------
- ----------
Total 1,090,666 3,552,015 2,717,304 636,444 -
--------- ---------- ------------ -----------
- ----------
C. SERVICE CENTERS
Northwestern Bell Decorah, Ia. 20,000 191,102 126,127 22,966 1999 1-5
Yr. -
Northwestern Bell Cedar Rapids, Ia. 37,000 397,394 239,176 59,080 2001 1-5
Yr. -
Continental Tel. Co. Chariton, Ia. 8,364 541,755 364,782 70,641 2000 -
) -
Continental Tel. Co. Fayette, Ia. 6,322 428,685 288,648 56,190 2000 -
) 343,123 9.984
Goodyear Service Ctr. Wichita, KS. 100,000 978,725 234,346 132,000 2004 4-5
Yr. -
--------- ---------- ------------ -----------
- ----------
Total 171,686 2,537,661 1,253,079 340,877
343,123
--------- ---------- ------------ -----------
- ----------
D. CONVENIENCE STORES
QuikTrip a Des Moines, Ia. 144,664 691,878 226,193 110,845 2010 2-5
Yr. -
QuikTrip & Off. Bldg. Des Moines, Ia. 215,000 672,000 459,200 101,714 1999 2-5
Yr. -
QuikTrip Des Moines, Ia. 50,000 185,000 151,854 43,601 2000 2-5
Yr. -
QuikTrip Des Moines, Ia. 60,000 200,000 191,111 44,057 2002 1-5
Yr. -
QuikTrip Des Moines, Ia. 50,240 265,360 216,711 43,305 2004 2-5
Yr. -
QuikTrip Wichita, KS. 53,500 436,637 93,453 58,081 2009 4-5
Yr. -
QuikTrip Norcross, Ga. 103,000 765,000 153,909 102,858 2014 4-5
Yr. -
QuikTrip Wichita, KS. 60,000 514,000 106,758 67,445 2010 4-5
Yr. -
QuikTrip Tulsa, OK. 155,000 1,340,000 271,216 175,662 2010 4-5
Yr. -
QuikTrip a Des Moines, Ia. 84,500 557,500 105,824 75,435 2010 4-5
Yr. -
QuikTrip a Johnston, Ia. 48,502 476,160 67,400 73,574 2012 4-5
Yr. -
QuikTrip a St. Louis, Mo. 152,000 1,575,433 228,294 231,780 2017 4-5
Yr. -
QuikTrip a Des Moines, Ia. 183,095 900,000 94,059 108,183 2013 4-5
Yr. -
QuikTrip Norcross, Ga. 92,500 834,000 57,939 92,650 2009 4-5
Yr. -
QuikTrip Norcross, Ga. 95,500 858,000 59,605 95,350 2009 4-5
Yr. -
QuikTrip Clive, Ia. 325,605 393,814 15,575 124,570 2015 4-5
Yr -
QuikTrip Alpharetta, Ga 148,585 1,324,000 8,275 11,876 2016 4-5
Yr -
7-Eleven Des Moines, Ia. 96,455 137,954 121,285 35,875 1999 1-5
Yr. -
7-Eleven Lincoln, NE. 104,990 78,888 69,026 30,838 1999 1-5
Yr. -
7-Eleven Omaha, NE. 80,000 128,574 116,252 29,608 1998 1-5
Yr. -
--------- ---------- ------------ -----------
- ----------
Total 2,303,136 12,334,198 2,813,939 1,657,307
- -
--------- ---------- ------------ -----------
- ----------
E. OFFICE BUILDINGS
Associates Financial
Serv. Des Moines, Ia. 61,692 55,812 39,547 13,800 1997 1-3
Yr. -
Corporate Headquarters b Des Moines, Ia. 25,000 418,222 323,688 36,047 1999 2-2
Yr. -
GTech Des Moines, Ia. 16,000 174,953 125,310 39,092 2001 1-2
Yr. -
--------- ---------- ------------ -----------
- ----------
Total 102,692 648,987 488,485 88,939
- -
--------- ---------- ------------ -----------
- ----------
F. GARDEN CENTERS
Wolfe Nursery a Dallas, TX. 125,000 586,825 498,802 92,276 1999 3-5
Yr. -
Tip-Top Nursery a Glendale, AZ. 66,144 433,057 134,624 158,484 2002 3-5
Yr. -
Wolfe Nursery a Arlington, TX. 200,000 1,700,000 200,158 218,500 2010 3-5
Yr. -
--------- ---------- ------------ -----------
- ----------
Total 391,144 2,719,882 833,584 469,260
- -
--------- ---------- ------------ -----------
- ----------
G. OTHER PROPERTIES 260,386 103,752 96,292 45,965
- -
--------- ---------- ------------ -----------
- ----------
Totals 4,402,210 21,896,495 8,202,683 3,262,200
343,123
========= ========== ============ ===========
==========
a Mortgaged to Lender - See Note 4 of Notes to Financial Statements.
b 50% Used by Registrant; 50% Leased
Other Properties
The following unencumbered properties are held for future
development by the Registrant.
(1) Real Estate, S. E. Delaware and Oralabor Road, Ankeny, Iowa.
This commercially zoned property is located in Ankeny, Iowa, at the
Industrial Exit of Interstate 35. It contains approximately 33 acres
and has a cost of $221,586.
(2) Real Estate, Interstate 80 & Highway 14, Newton, Iowa.
This is a 4-acre undeveloped site adjoining the Perkins Restaurant and
Days Inn Motel.
(3) Real Estate, 4745 - 2nd Avenue, Des Moines, Iowa.
This site contains approximately 106,000 square feet of land and a 3,200
square foot concrete block building. The building is leased as a lounge
for $2,750 per month, and the lease expires December 31, 1998.
Approximately 82,000 square feet of unused land is available for
development. Total cost of the land and improvements is $52,331.
(4) Real Estate, 845 Sixth Avenue, Des Moines, Iowa
This 6,000 square foot concrete block building situated on a lot of the
same size was purchased for $75,000 in 1974. This building is rented
for $1,500 per month, and the lease expires April 30, 1997.
Item 3. Legal Proceedings.
The Registrant is not engaged in any material legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders.
NOT APPLICABLE
PART II
Item 5. Market for the Registrant's Common Stock and Related
Security Holder Matters
The Common Stock of the Registrant (symbol NAPE) is traded on
the over-the-counter bulletin board; a product of the National
Association of Security Dealers, Inc., sponsored by market
makers. Quotations are inter-dealer prices, without retail
mark-up, or mark-down, or commission and may not necessarily
represent actual transactions. The prices shown below are by
calendar quarters for 1996 and 1995. N/A indicates prices were
not available.
Bid Asked
1996 High Low High Low
1st Quarter 23-3/4 17 N/A N/A
2nd Quarter 20 20 N/A N/A
3rd Quarter 20 20 N/A N/A
4th Quarter 20-1/2 20 N/A N/A
Bid Asked
1995 High Low High Low
1st Quarter 22-1/2 21 N/A N/A
2nd Quarter 21 21 N/A N/A
3rd Quarter 22-3/4 20 N/A 25
4th Quarter 24 20 N/A 27
A cash dividend of 10 cents per share was paid in 1996. Future dividend
declarations will be dependent upon the earnings of the Registrant, its
financial condition, its capital requirements and general business
conditions.
There were 833 stockholders of record as of March 1, 1997.
Item 6. Selected Financial Data. (In thousands except for per
share amounts)
Year ended December 31,
1996 1995 1994 1993 1992
Year ended December 31,
Lease rental income 3,262 3,140 3,016 2,766 2,477
Interest income - 3 8 2 3
Dividend income 80 89 107 114 122
Gain on sale of
securities 59 103 104 1 22
Net income 1,039 903 905 792 733
At December 31,
Total assets 20,115 19,118 19,600 17,412 15,031
Long-term debt 6,031 5,148 6,758 6,220 4,409
Book value-properties &
equipment 18,102 17,394 17,682 16,352 13,996
Net Unrealized Gain
Marketable Securities 569 605 462 - -
Stockholders' equity 12,899 12,070 11,142 10,025 9,463
Per Common Share
Net income* 2.30 1.97 1.96 1.68 1.52
Cash dividends 0.10 0.00 0.18 0.17 0.16
Book value 28.71 26.49 24.15 21.38 19.86
*Based on weighted average shares outstanding
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Liquidity and Capital Resources
At December 31, 1996, the Registrant's primary source of
liquidity was $120,784 in cash; marketable securities with a
market value of approximately $1,582,000; and a $6,390,000
remaining loan balance available on three lines of credit with
two local banks. (See Note 4 of the Notes to Financial
Statements). In addition, the Registrant owns unencumbered real
estate having an aggregate cost of approximately $11,000,000. Management
believes that its cash flow from operations and other potential
sources of cash, will be sufficient to finance current and
projected operations.
Each year for many years the Registrant has reacquired a limited
amount of its common stock. During the three years ended
December 31, 1996, 19,703 shares were repurchased in the open
market and negotiated transactions. The total cost of the
reacquired shares amounted to $412,305; an average per share
cost of $20.93.
Results of Operations 1996 Compared to 1995
As detailed on the Income Statement total income for the year 1996 was
approximately $69,000 more than in 1995. The increase in rental income
of approximately $122,000 was due to property acquisitions in 1996 and
1995 that produced additional rental income of approximately $95,000.
($368,000 in 1996 versus $273,000 in 1995). In addition rent increases
on seven properties aggregated approximately $33,000 in 1996, which was
offset by a decrease of approximately $7,500 due to a sale of a rental
property in 1995.
Total expenses decreased approximately $150,000 primarily due to
decrease in interest, professional fees, and payroll costs aggregating
approximately $171,000 offset by an increase in depreciation and
maintenance costs aggregating approximately $24,000.
The effective income tax rate was 36.6% in 1996 as compared to 36.4% in
1995.
Results of Operations 1995 Compared to 1994
As detailed on the Income Statement total income for the year 1995 was
approximately $100,000 more than in 1994. The increase in rental income of
approximately $124,000 was due to property acquisitions in 1994 and 1995 that
produced additional rental income of approximately $154,000. ($377,000 in 1995
versus $223,000 in 1994). In addition, contingent rentals based on sales
overages increased approximately $10,000 in 1995. These increases were offset
by a reduction of approximately $43,000 in rental income due to the sale of two
properties; one in 1994 and one in 1995.
Total expenses increased approximately $89,000 in 1995 primarily due to
increases in interest, payroll cost and depreciation aggregating approximately
$81,000.
The effective income tax rate was 36.4% in 1995 as compared to 35.7% in 1994.
Item 8. Financial Statements and Supplementary Data.
Financial statements filed herewith:
Balance Sheets as of December 31, 1996 and December 31, 1995.
Statements of Income and Stockholders' Equity for the years ended
December 31, 1996, December 31, 1995 and December 31, 1994.
Statements of Cash Flows for the years ended December 31, 1996,
December 31, 1995 and December 31, 1994.
Notes to Financial Statements.
Accountant's Report.
Item 9. Disagreements on Accounting and Financial Disclosures.
NONE
PART III
In answer to Items 10, 11, 12 and 13 of Part III, the Registrant
incorporates by reference the required information which is
contained in its definitive Proxy Statement. The Proxy
Statement is for the 1997 annual meeting of stockholders and
will be filed with the Commission not later than 120 days after
December 31, 1996.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K.
(a) List the following documents filed as part of this report.
1. All financial statements.
See Item 8 of Part II.
2. Financial statement schedules.
Schedule 1 as of December 31, 1996.
Schedules V and VI as of December 31, 1996, December 31, 1995 and
December 31, 1994.
Schedule IX as of December 31, 1996, December 31, 1995 and December
31, 1994.
Schedule X as of December 31, 1996, December 31, 1995 and December
31, 1994.
All other Schedules are omitted because they are inapplicable or
not required.
(b) No report on Form 8-K was filed during the last quarter of 1996.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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___ (Registrant)
Date __3/21/97__ By _____/S/__Raymond_Di_Paglia_________
Raymond Di Paglia, President and Chief
Executive Officer
Date __3/21/97__ By _____/S/__Robert_W._Guely__________
Robert W. Guely, Vice President
and Controller
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the
dates indicated.
DIRECTORS OF THE REGISTRANT
Date __3/21/97__ By _____/S/__William_D._Buzard________
William D. Buzard
Date __3/21/97__ By _____/S/__Robert_E._Combs__________
Robert E. Combs
Date __3/21/97__ By _____/S/__Raymond_Di_Paglia________
Raymond Di Paglia
Date __3/21/97__ By _____/S/__Kristine_M._Fasano_______
Kristine M. Fasano
Date __3/21/97__ By _____/S/__Robert_H._Jamerson_______
Robert H. Jamerson
NATIONAL PROPERTIES CORPORATION BALANCE SHEETS
December 31,
1996 1995
ASSETS
CURRENT ASSETS
Cash 120,784 123,831
Mortgage loans receivable 718 3,304
Accounts receivable 15,576 17,734
Prepaid income taxes 244,467 -
Other 6,724 6,767
---------- ----------
Total current assets 388,269 151,636
---------- ----------
PROPERTY AND EQUIPMENT, AT COST - Notes 1 and 5
Land 4,402,210 4,245,625
Buildings and improvements 21,896,495 20,572,495
Furniture and equipment 62,816 63,512
---------- ----------
26,361,521 24,881,632
Less-accumulated depreciation 8,259,087 7,487,308
---------- ----------
Property and equipment-net 18,102,434 17,394,324
---------- ----------
OTHER ASSETS
Marketable securities, at market value-Note 3 1,581,725 1,537,475
Deferred charges and other assets 42,723 34,160
---------- ----------
Total other assets 1,624,448 1,571,635
---------- ----------
20,115,151 19,117,595
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable 5,699 19,022
Notes payable - Note 4 225,000 800,000
Accrued liabilities 264,653 176,064
Current maturities of long-term debt 96,929 564,704
Federal and state income taxes - 3,333
---------- ----------
Total current liabilities 592,281 1,563,123
---------- ----------
LONG-TERM DEBT - Notes 4 & 5 6,030,779 5,148,123
---------- ----------
DEFERRED INCOME TAXES 592,638 335,906
---------- ----------
STOCKHOLDERS' EQUITY
Common stock - $1 par value
Authorized - 5,000,000 shares
Issued - (1996-449,245 shares; 1995-455,655 shares) 449,245 455,655
Retained earnings 11,881,556 11,009,782
Net unrealized gain on marketable securities 568,652 605,006
---------- ----------
Total stockholders' equity 12,899,453 12,070,443
---------- ----------
20,115,151 19,117,595
========== ==========
NATIONAL PROPERTIES CORPORATION
STATEMENTS OF INCOME AND STOCKHOLDERS' EQUITY
For the years ended December 31, 1996, 1995 and 1994
STATEMENTS OF INCOME 1996 1995 1994
.
REVENUES
Lease rental income 3,262,200 3,139,978 3,015,945
Interest income 235 2,975 8,463
Dividend income 79,870 89,168 106,518
Gain on sale of assets 61,819 102,823 103,674
---------- ---------- ----------
Total revenues 3,404,124 3,334,944 3,234,600
---------- ---------- ----------
EXPENSES
Salaries and wages 245,874 269,964 246,773
Depreciation 776,699 767,455 751,419
Property, payroll and misc. taxes 56,776 57,586 55,896
Interest 497,161 638,821 597,172
Other 188,560 181,603 174,894
---------- ---------- ----------
Total expenses 1,765,070 1,915,429 1,826,154
---------- ---------- ----------
Income before income taxes 1,639,054 1,419,515 1,408,446
INCOME TAXES-Note 2 599,951 516,822 503,240
---------- ---------- ----------
Net income 1,039,103 902,693 905,206
========== ========== ==========
Net income per share 2.30 1.97 1.96
Weighted average common shares outstanding 451,876 457,720 462,946
STATEMENTS OF STOCKHOLDERS' EQUITY
Net
Unrealized
gain on
Common Retained marketable
Stock Earnings securities
---------- ---------- ----------
Balances December 31, 1993 468,948 9,556,142 -
Net income - 1994 - 905,206 -
Purchase and retirement of common stock (7,635) (158,423) -
Cash dividend - 18 cents per share - (83,607) -
Change in unrealized gains, net of tax - - 461,579
---------- ---------- ----------
Balances December 31, 1994 461,313 10,219,318 461,579
Net income - 1995 - 902,693 -
Purchase and retirement of common stock (5,658) (112,229) -
Change in unrealized gains, net of tax - - 143,427
---------- ---------- ----------
Balances December 31, 1995 455,655 11,009,782 605,006
Net income - 1996 - 1,039,103 -
Purchase and retirement of common stock (6,410) (121,950) -
Cash dividend - 10 cents per share - (45,379) -
Change in unrealized gains, net of tax - - (36,354)
---------- ---------- ----------
Balances December 31, 1996 449,245 11,881,556 568,652
========== ========== ==========
NATIONAL PROPERTIES CORPORATION
STATEMENTS OF CASH FLOWS
For the years ended December 31, 1996, 1995 and 1994
Increase(Decrease) in Cash
1996 1995 1994
---------- ---------- ----------
CASH FLOW FROM OPERATING ACTIVITIES
Net income 1,039,103 902,693 905,206
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 782,712 774,075 761,518
Deferred income taxes 267,183 - -
Gain on sale of assets (61,819) (102,823) (103,674)
Changes in assets and liabilities:
Accounts receivable 2,158 161 (4,546)
Prepaid expenses and deferred charges (14,532) (20) (6,754)
Accounts payable and accrued expenses 75,266 (141,275) 40,945
Federal and state income taxes (247,800) (65,729) 37,105
---------- ---------- ----------
Net cash provided by operations 1,842,271 1,367,082 1,629,800
---------- ---------- ----------
CASH FLOW FROM INVESTING ACTIVITIES
Additions to property and equipment (1,484,811) (479,928) (2,081,563)
Payments received on mortgage notes 2,586 8,713 12,808
Purchase of securities (148,736) (128,962) (329,127)
Proceeds - sale of assets 119,501 518,793 365,724
---------- ---------- ----------
Net cash used in
investing activities (1,511,460) (81,384) (2,032,158)
---------- ---------- ----------
CASH FLOW FROM FINANCING ACTIVITIES
Principal payments on mortgage Notes (564,704) (262,640) (238,701)
Dividends paid (45,379) - (83,607)
Purchase of treasury stock (128,360) (117,887) (166,058)
Net borrowings (payments) on
credit lines 404,585 (1,020,000) 975,000
---------- ---------- ----------
Net cash provided by (used) in
financing activities (333,858) (1,400,527) 486,634
---------- ---------- ----------
Net increase (decrease) in cash (3,047) (114,829) 84,276
Cash at beginning of year 123,831 238,660 154,384
---------- ---------- ----------
Cash at the end of year 120,784 123,831 238,660
========== ========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the year for:
Interest expense 503,527 657,366 591,351
Income tax payments 580,568 582,551 466,135
NON-CASH INVESTING TRANSACTIONS
Exchange of like kind real restate:
Basis of property received - 535,247 325,605
Less cash paid - 335,247 56,449
---------- ---------- ---------
Basis of property given up - 200,000 269,156
========== ========== =========
NOTES TO FINANCIAL STATEMENTS
SUMMARY OF ACCOUNTING POLICIES
Marketable Securities: Marketable securities are classified as available-for
- -sale and reported at fair market value in accordance with the Statement of
Financial Accounting Standards (SFAS) No. 115. The Registrant's investments
are held for an indefinite period.
Property and Equipment: Property and equipment are recorded at
cost and depreciated on a straight-line basis over the estimated
useful lives of 15 to 39 years for buildings and 5 to 7 years
for equipment.
Net Earnings Per Common Share: Net earnings per share are based
on the weighted average number of shares outstanding 451,876 in
1996; 457,720 in 1995 and 462,946 in 1994.
Profit-Sharing Plan: The Registrant has a profit sharing plan adopted in 1965,
for eligible employees, under which it contributes a portion of its annual
earnings. The plan and all of its amendments have been approved by the
Internal Revenue Service. The Registrant's contribution to the plan was
$36,166 in 1996; $39,142 in 1995 and $33,875 in 1994.
Lease Rentals - Commercial Real Estate: Lease rentals received
on commercial real estate are accounted for under the operating
method; rentals are included in income as earned over the term
of the lease.
Estimates: The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could vary from the estimates that were used.
Fair Value of Financial Instruments: The Registrant's financial instruments
are valued at their carrying amounts which are reasonable estimates of fair
value.
NOTE 1 - PROPERTIES UNDER LEASE
The Registrant is the lessor of commercial real estate under
non cancelable operating leases requiring fixed and contingent
rentals through the year 2017. Contingent rentals based on
sales overages amounted to $56,294 in 1996; $54,701 in 1995 and $44,251 in
1994. The following is a schedule of future minimum
rentals at December 31, 1996, not including renewal options and
contingent rentals.
Year ended December 31, Amount
1997 3,347,852
1998 3,299,385
1999 3,144,616
2000 2,681,924
2001 2,575,321
Subsequent years 20,956,899
-----------
Aggregate future minimum rentals 36,005,997
==========
NOTE 2 - INCOME TAXES
Income tax expense for the years ended December 31, 1996, 1995 and 1994 is
comprised of the following:
1996 1995 1994
---------- ---------- ----------
Current
Federal 273,807 433,406 428,464
State 58,961 83,416 74,776
---------- ---------- ----------
Total current 332,768 516,822 503,240
Deferred 267,183 - -
---------- ---------- ----------
599,951 516,822 503,240
========== ========== ==========
A reconciliation of the statutory federal income tax rate of 34 percent in
1996, 1995 and 1994 to the effective tax rate is as follows:
1996 1995 1994
Statutory federal income tax rate 34.0% 34.0% 34.0%
State taxes, net of federal tax benefit 3.8 3.5 3.4
Tax savings on dividends (1.2) (1.1) (1.7)
---------- ---------- ----------
Total tax provision 36.6 36.4 35.7
========== ========== ==========
Temporary differences which give rise to deferred tax liabilities in 1996 and
1995 are as follows:
1996 1995
Excess of tax over book depreciation 267,183 -
Unrealized gain on marketable securities 325,455 335,906
---------- ---------
Total tax provision 592,638 335,906
========== =========
Deferred income taxes result from the temporary differences in the
recognition of income and expenses for tax and financial statement
purposes. The source of the temporary difference for 1996 was due to a
change in depreciation. The Small Business Job Protection Act of 1996
(The Act) amended the Internal Revenue Code regarding depreciation of
motor fuel retail outlets permitting the Registrant to depreciate its
qualifying convenience stores over a life of 15 or 20 years. The Act
further provided that this change could be applied retroactively to all
such properties placed in service after 1986. Using a depreciable life
of 20 years, which approximates the lease terms for the qualifying
properties, decreased the Registrant's federal and state income taxes
for the year 1996 by $267,183. This amount was recorded as a deferred
tax liability as of December 31, 1996. For financial statement purposes
the Registrant used a 20-year life for the convenience store acquired in
1996, and will use the same life for qualified property acquired in the
future.
NOTE 3 - MARKETABLE SECURITIES
As of December 31, 1996, marketable securities available-for-sale
had an aggregate market value of $1,581,725, and a cost of
$687,617. resulting in gross unrealized gains of $894,108. The unrealized
holding gains, net or related income taxes, added $568,652 to shareholders
equity at December 31, 1996. As of December 1995, the marketable securities
available-for-sale had an aggregate market value of $1,537,475 and a cost of
$596,563. Gross unrealized gains and losses amounted to $945,596 and $4,684
respectively. The unrealized holding gain net of related income taxes, added
$605,006 to shareholders equity at December 1995. Gross realized gains
included in the determination of income for 1996 amounted to $59,144. Gross
realized gains and losses included in the determination of income for 1995
amounted to $124,730 and $21,907 respectively. Realized gains included in
income amounted to $103,674 in 1994. Gain or loss on sales was based on the
cost of the securities using the specific identification method.
NOTE 4 - NOTES PAYABLE - BANKS
As of December 31, 1996, the registrant had a $4,000,000 unsecured
working capital line of credit with Norwest Bank Iowa, N.A. The credit
line which has been in effect for the past several years was created to
facilitate the Registrant's real estate acquisitions.
Borrowings will bear interest at the bank's base (Prime) rate floating.
No compensating balance is required but a non-usage fee of 1/8 of 1% is
payable quarterly to the bank on the unused portion of the line. As of
December 31, 1996, there was an outstanding balance on this loan of
$225,000, as compared to $800,000 as of December 31, 1995.
As of December 31, 1996, the Registrant had a $6,000,000 10-year,
revolving credit line with Norwest Bank Iowa, N.A. The $6,000,000 loan
commitment reduces $600,000 beginning December 31, 1997, and each year
thereafter until final maturity on December 31, 2006. Borrowings
secured by first mortgages on various properties, bear interest at the
bank's base (Prime) rate floating, and no compensating balance is
required. As of December 31, 1996, the outstanding balance on this loan
was $4,322,585 as compared to $3,500,000 as of December 31, 1995.
In November, 1994, the Registrant established a $3,000,000 10-year
revolving loan with Brenton Bank, N.A., Des Moines, Iowa. The credit
line reduces $300,000 beginning December 31, 1995, and each year
thereafter until final maturity on December 31, 2004. Borrowings
secured by first mortgages on properties, bear interest at the bank's
base (Prime) rate floating. At December 31, 1996, the outstanding
balance on this loan was $1,462,000 compared to $1,305,000 as of
December 31, 1995.
NOTE 5 - LONG-TERM DEBT
Long-term debt consists of the following:
December 31,
Rate 1996 1995
---------- ---------- ----------
Real estate mortgage notes
Due 1997-2000 7.5 to 10% 343,123 907,827
Norwest Bank Iowa, N.A.
Due 2006 - See Note 4 8.25% 4,322,585 3,500,000
Brenton Bank, N.A.
Due 2004 - See Note 4 8.25% 1,462,000 1,305,000
---------- ----------
6,127,708 5,712,827
Less-Current principal maturities 96,929 564,704
---------- ----------
6,030,779 5,148,123
========== ==========
Annual principal maturities over the next five years are as follows:
1997 1998 1999 2000 2001
------- ------- ------- ------- -------
Mortgage Note 96,929 107,062 118,254 20,878 -
Norwest Bank - - 122,585 600,000 600,000
Brenton Bank - - - 262,000 300,000
NOTE 6 - SUBSEQUENT EVENT
On March 4, 1997, the Registrant executed contracts to purchase and
leaseback two convenience stores located in the Atlanta, Georgia area.
The lease term for both stores will be fifteen (15) years. One store,
now under construction, is scheduled for closing on September 1, 1997.
The second store, not presently under construction, is expected to be
ready for closing in the last quarter of 1997 or the first quarter of
1998. Each store will cost approximately $1,500,000 and will be totally
financed with funds drawn on the Registrant's credit lines with two
local banks.
NOTE 7 - QUARTERLY OPERATING DATA (UNAUDITED)
The following is a summary of unaudited quarterly results of operations:
Quarter
First Second Third Fourth
---------- ---------- ---------- ----------
1996
Revenues 855,170 846,519 849,167 853,268
Net Income 259,543 236,485 271,173 271,902
Per share 57 cents 52 cents 60 cents 60 cents
1995
Revenues 837,924 841,794 851,453 803,773
Net Income 228,686 223,577 241,844 208,586
Per share 50 cents 49 cents 53 cents 46 cents
SCHEDULE I
NATIONAL PROPERTIES CORPORATION
MARKETABLE SECURITIES
December 31, 1996
MARKET
SHARES COST VALUE
---------- ---------- ----------
Casey's General Stores 3,000 53,520 56,250
Drake Park Restr. Association 25,000 5,100 5,100
Edison International 17,000 98,107 337,875
Enova Corporation 4,000 16,484 91,000
Ford Motor 5,000 157,649 161,250
Houston Industries, Inc. 2,000 18,225 45,250
MDU Resources, Inc. 6,000 33,370 138,000
Pacific Gas & Electric 7,000 72,724 147,000
Pacificorp 10,000 75,784 205,000
Transamerica Corporation 5,000 156,654 395,000
---------- ---------- ----------
84,000 687,617 1,581,725
========== ========== ==========
Annualized Dividends 70,100
Current Yield - Based on market 4.43%
NATIONAL PROPERTIES CORPORATION SCHEDULES V & VI
SCHEDULE V - PROPERTY AND EQUIPMENT
Balance at Disposals Balance at
Beginning Additions or End of
Classification of Period at Cost Retirements Period
-------------- ----------- ----------- ----------- -----------
Year ended December 31, 1996*
Land 4,245,625 156,585 - 4,402,210
Buildings & improvements 20,572,495 1,324,000 - 21,896,495
Furnishings & equipment 63,512 4,224 4,920 62,816
----------- ----------- ----------- -----------
24,881,632 1,484,809 4,920 26,361,521
=========== =========== =========== ===========
*See Item 2 for details
Year ended December 31, 1995
Land 4,289,975 152,650 197,000 4,245,625
Buildings & improvements 20,105,570 515,247 48,322 20,572,495
Furnishings & equipment 51,481 12,031 - 63,512
----------- ----------- ----------- -----------
24,447,026 679,928 245,322 24,881,632
=========== =========== =========== ===========
Year ended December 31, 1994
Land 3,929,536 548,104 187,665 4,289,975
Buildings & improvements 18,616,751 1,818,637 329,818 20,105,570
Furnishings & equipment 50,598 883 - 51,481
----------- ----------- ----------- -----------
22,596,885 2,367,624 517,483 24,447,026
=========== =========== =========== ===========
SCHEDULE VI - ACCUMULATED DEPRECIATION OF PROPERTY AND EQUIPMENT
Balance at Additions Disposals Balance at
Beginning Charged to or End of
Classification of Period Expense Retirements Period
-------------- ----------- ----------- ----------- -----------
Year ended December 31, 1996
Buildings & improvements 7,432,040 770,643 - 8,202,683
Furnishings & equipment 55,268 6,056 4,920 56,404
----------- ----------- ----------- -----------
7,487,308 776,699 4,920 8,259,087
=========== =========== =========== ===========
Year ended December 31, 1995
Buildings & improvements 6,713,694 763,668 45,322 7,432,040
Furnishings & equipment 51,481 3,787 - 55,268
----------- ----------- ----------- -----------
6,765,175 767,455 45,322 7,487,308
=========== =========== =========== ===========
Year ended December 31, 1994
Buildings & improvements 6,194,580 750,536 231,422 6,713,694
Furnishings & equipment 50,598 883 - 51,481
----------- ----------- ----------- -----------
6,245,178 751,419 231,422 6,765,175
=========== =========== =========== ===========
NATIONAL PROPERTIES CORPORATION SCHEDULES IX & X
SCHEDULE IX - SHORT TERM BORROWINGS
Norwest Bank (1)
Year Ended December 31,
1996 1995 1994
-------- -------- --------
Balance at End of Period 225,000 800,000 425,000
Interest Rate at End of Period 8.4% 8.6% 8.6%
Maximum Amount Outstanding During Period 800,000 800,000 1,900,000
Average Amount Outstanding During Period 405,769 463,046 1,431,154
Average Interest Rate During Period (2) 8.5% 8.6% 6.1%
(1) See Note 4 of the Notes to Financial Statements.
(2) Based on actual interest expense for each year divided
by the average monthly amount outstanding.
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
Charged to Costs and Expenses
1996 1995 1994
-------- -------- --------
Maintenance & repairs 27,299 12,245 14,889
Taxes - other than income
Property 29,570 28,051 29,846
Payroll 16,368 18,418 16,868