SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 1996
Commission File Number: 0-19989
FM Properties Inc.
Incorporated in Delaware 72-1211572
(IRS Employer
Identification No.)
1615 Poydras Street, New Orleans, Louisiana 70112
Registrant's telephone number, including area code: (504) 582-4000
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
---
On June 30, 1996, there were issued and outstanding 14,285,770 shares
of the registrant's Common Stock, par value $0.01 per share.
FM PROPERTIES INC.
TABLE OF CONTENTS
Page
Part I. Financial Information
Financial Statements:
Condensed Balance Sheets 3
Statements of Operations 4
Statements of Cash Flow 5
Notes to Financial Statements 6
Remarks 6
Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
Part II. Other Information 9
Signature 10
Exhibit Index E-1
FM PROPERTIES INC.
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements.
FM PROPERTIES INC.
CONDENSED BALANCE SHEETS
(Unaudited)
June 30, December 31,
1996 1995
---------- ----------
(In Thousands)
ASSETS
Current assets:
Cash and short-term investments $ 1,811 $ 2,282
Accounts receivable and other 4,732 4,616
Income tax receivable 2,740 2,693
---------- ----------
Total current assets 9,283 9,591
Real estate and facilities 152,302 180,040
Other assets 7,372 5,172
---------- ----------
Total assets $ 168,957 $ 194,803
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 4,543 $ 8,100
Current portion of long-term debt 99,093 -
---------- ----------
Total current liabilities 103,636 8,100
Long-term debt, less current portion - 121,294
Other liabilities 6,192 5,886
Stockholders' equity 59,129 59,523
---------- ----------
Total liabilities and stockholders'
equity $ 168,957 $ 194,803
========== ==========
The accompanying notes are an integral part of these financial
statements.
FM PROPERTIES INC.
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Six Months
Ended June 30, Ended June 30,
------------------------ ------------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
(In Thousands, Except Per Share Amounts)
Revenues $ 23,764 $ 12,003 $ 37,593 $ 16,385
Costs and expenses:
Cost of sales, including
depreciation and
amortization 21,445 11,172 34,758 17,043
General and
administrative expenses 675 1,629 1,311 2,808
---------- ---------- ---------- ----------
Total costs and
expenses 22,120 12,801 36,069 19,851
---------- ---------- ---------- ----------
Operating income (loss) 1,644 (798) 1,524 (3,466)
Interest expense, net (1,158) (83) (1,892) (266)
Other income, net 14 (7) (26) 4
---------- ---------- ---------- ----------
Income (loss) before
income taxes 500 (888) (394) (3,728)
Income taxes - - - -
---------- ---------- ---------- ----------
Net income (loss) $ 500 $ (888) $ (394) $ (3,728)
========== ========== ========== ==========
Net income (loss) per
share $.03 $(.06) $(.03) $(.26)
==== ===== ===== =====
Average shares
outstanding 14,394 14,286 14,368 14,286
====== ====== ====== ======
The accompanying notes are an integral part of these financial
statements.
FM PROPERTIES INC.
STATEMENTS OF CASH FLOW
(Unaudited)
Six Months
Ended June 30,
------------------------
1996 1995
---------- ----------
(In Thousands)
Cash flow from operating activities:
Net loss $ (394) $ (3,728)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization 1,248 1,210
Cost of real estate sales 31,035 12,435
(Increase) decrease in working capital:
Accounts receivable and other (107) 769
Accounts payable and accrued
liabilities (3,613) (2,793)
Other (2,264) 3,423
---------- ----------
Net cash provided by operating activities 25,905 11,316
---------- ----------
Cash flow from investing activities:
Real estate and facilities (4,175) (12,611)
---------- ----------
Net cash used in investing activities (4,175) (12,611)
---------- ----------
Cash flow from financing activities:
Proceeds from (repayment of) debt, net (22,201) 1,187
---------- ----------
Net cash provided by (used in)
financing activities (22,201) 1,187
---------- ----------
Net decrease in cash and short-term
investments (471) (108)
Cash and short-term investments at
beginning of year 2,282 1,200
---------- ----------
Cash and short-term investments at
end of period $ 1,811 $ 1,092
========== ==========
The accompanying notes are an integral part of these financial
statements.
FM PROPERTIES INC.
NOTES TO FINANCIAL STATEMENTS
1. INTEREST COSTS
Interest expense excludes capitalized interest of $0.7 million and
$3.0 million in the second quarter of 1996 and 1995, respectively, and
$2.3 million and $6.2 million for the first six months of 1996 and
1995, respectively.
--------------------
Remarks
The information furnished herein should be read in conjunction with FM
Properties Inc. financial statements contained in its 1995 Annual
Report to stockholders included in its Annual Report on Form 10-K.
The information furnished herein reflects all adjustments which are,
in the opinion of management, necessary for a fair statement of the
results for the period. All such adjustments are, in the opinion of
management, of a normal recurring nature.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
OVERVIEW
FM Properties Inc. (FMPO) operates through its 99.8 percent ownership
of FM Properties Operating Co. (the Partnership), with 0.2 percent
owned by Freeport-McMoRan Inc. (FTX) which serves as the managing
general partner.
During the second quarter of 1996, FMPO continued to capitalize
on the enhanced sales opportunities at its Austin, Texas property
holdings brought about by the positive legislative and judicial
developments which occurred during 1995 (discussed in FMPO's 1995
Annual Report to Stockholders). FMPO's second-quarter 1996 revenues
from its Austin area properties totaled $10.6 million, including the
sale of an 80 acre undeveloped tract within the Barton Creek
Development for $2.9 million, its second sale under the Water Quality
Protection Zone legislation enacted in late 1995. FMPO's Austin area
activity also included a $3.7 million sale of the remaining inventory
of developed and undeveloped real estate within the Lakeside
development, which included a marina, 77 developed lots and 239 acres
of undeveloped property. Additional tracts within the Barton Creek
Development are currently under contract and are scheduled to close
during the second half of 1996. The sale of undeveloped tracts to
sub-developers is an integral part of FMPO's business strategy for the
Barton Creek Development. These transactions provide funds to reduce
debt, lower future carrying and development costs and establish values
for FMPO's remaining properties within Barton Creek.
The State Court of Appeals in Austin recently overturned the
favorable District Court ruling which invalidated the "SOS" ordinance
in Austin; however, the appeals court did uphold the lower court's
favorable holding with respect to the interpretation of certain
grandfather rights for platted land. This decision is not expected to
adversely affect any of FMPO's property holdings since the city of
Austin's regulatory authority was superseded for FMPO's properties by
legislation passed in the state legislature during 1995. A decision
will be made in the near future with respect to an appeal on the case.
The Partnership's intensified marketing efforts at its Dallas,
Houston and San Antonio properties resulted in higher second-quarter
1996 sales from these areas compared to the 1995 period. Second-
quarter 1996 revenues include the sale of three separate 19 acre
tracts, located in the Dallas area, for a total of $6.9 million. In
addition to increasing sales over the 1995 period, the marketing
efforts have generated sales contracts which are scheduled to close
throughout the remainder of 1996.
Additionally, opportunities for significant transactions
involving the Partnership's properties may arise. In the past,
permitting and development uncertainties caused valuation assessment
obstacles that kept FMPO from successfully completing negotiations
involving significant transactions. However, as the Partnership
experiences success in establishing values for its properties, FMPO
can expect opportunities to consider significant transactions
involving its properties.
RESULTS OF OPERATIONS
Second Quarter Six Months
------------- --------------
1996 1995 1996 1995
---- ---- ----- -----
(In Millions,
Except Per Share Amounts)
Revenues:
Developed properties $8.0 $7.6 $12.3 $11.4
Undeveloped properties
and other 15.8 4.4 25.3 5.0
---- --- ---- ----
Total revenues 23.8 12.0 37.6 16.4
---- ---- ---- ----
Operating income (loss) 1.6 (0.8) 1.5 (3.5)
Net income (loss) 0.5 (0.9) (0.4) (3.7)
Net income (loss)
per share .03 (.06) (.03) (.26)
Revenues from developed properties represented the sale of 206
and 282 single-family homesites during the second-quarter and six-
month periods of 1996, respectively, compared with the sale of 152 and
242 single-family homesites during the 1995 periods. Revenues from
undeveloped properties for the second-quarter and six-month periods of
1996 represented the sale of 447 and 603 undeveloped acres,
respectively, compared with the sale of 196 and 202 undeveloped acres
for the year-ago periods.
General and administrative expenses were reduced to $0.7 million
and $1.3 million for the second-quarter and six-month periods of 1996,
respectively, compared with $1.6 million and $2.8 million for the 1995
periods, continuing to reflect the benefit of steps taken in the third
quarter of 1995 to reduce costs.
Interest expense for the second-quarter and six-month 1996
periods increased because of reduced capitalized interest resulting
from FMPO's success in selling tracts without incurring further
development costs, partially offset by lower average debt levels and
interest rates.
CAPITAL RESOURCES AND LIQUIDITY
During the first six months of 1996, FMPO generated operating cash
flow of $25.9 million which, after funding capital expenditures,
enabled FMPO to reduce its debt from the beginning of the year by
$22.2 million to $99.1 million. The Partnership has the potential to
achieve further significant debt reductions prior to its 1997
principal payment requirements ($29.1 million due February 1997 and
$70.0 million due June 1997). These reductions are dependent on the
future cash flow from the Partnership's assets and the ability to
negotiate significant sales of assets, which are subject to numerous
economic and other factors, including factors beyond FMPO's control.
There can be no assurance that the Partnership will generate cash flow
or obtain funds sufficient to make required interest and principal
payments.
FMPO continues to seek a permanent financial restructuring, which
may include issuing new debt or equity investments, and believes that
the ongoing reduction of its debt will significantly improve its
alternatives. An objective in arranging new financing for FMPO will
be to eliminate the guarantees of its debt by FTX and Freeport-McMoRan
Copper & Gold Inc. These debt guarantees were extended in connection
with the extension of the Partnership's debt maturities achieved
during late 1995. While FMPO believes any new financing will be
beneficial to the long-term interests of its shareholders, an
elimination of the guarantees would be expected to increase financing
costs significantly. The extent of any refinancing, including any
need to sell properties in connection therewith, will determine the
future net cash flow available to FMPO to recover its investment in
real estate assets.
----------------------------
The results of operations reported and summarized above are not
necessarily indicative of future operating results.
PART II--OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
(a) The Annual Meeting of Stockholders of the registrant was
held on May 2, 1996 (the Annual Meeting). Proxies for the Annual
Meeting were solicited pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended.
(b) At the Annual Meeting Michael D. Madden was elected to serve
until the 1999 annual meeting of stockholders. In addition to the
director elected at the Annual Meeting, the terms of the following
directors continued after the Annual Meeting: Richard C. Adkerson and
Ernest E. Howard, III.
(c) At the Annual Meeting the stockholders voted to elect one
director. Holders of 13,448,746 shares voted for Mr. Madden and
holders of 120,334 shares withheld their votes for him. There were no
abstentions or broker non-votes with respect to the election of the
director.
At the Annual Meeting the stockholders also voted on and
approved a proposal to ratify the appointment of Arthur Andersen LLP
as the independent auditors to audit the financial statements of the
registrant and its subsidiaries for the year 1996. Holders of
13,501,733 shares voted for, holders of 50,976 shares voted against
and holders of 16,371 shares abstained from voting on, such proposal.
There were no broker non-votes with respect to such proposal.
Item 6. Exhibits and Reports on Form 8-K.
(a) The exhibits to this report are listed in the Exhibit Index
appearing on page E-1 hereof.
(b) No reports on Form 8-K have been filed during the quarter
for which this report is filed.
SIGNATURE
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.
FM PROPERTIES INC.
By: /s/ William J. Blackwell
------------------------
William J. Blackwell
Controller
(authorized signatory and
Principal Accounting Officer)
Date: August 13, 1996
FM PROPERTIES INC.
EXHIBIT INDEX
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Sequentially
Numbered
Number Description Page
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27.1 Financial Data Schedule