SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
(Mark One)
[X] Quarterly report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 1996 or
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[_] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _______________ to ________________
Commission File Number 1-6844
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CALPROP CORPORATION
(Exact name of registrant as specified in its charter)
California 95-4044835
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5456 McConnell Avenue, Los Angeles, California 90066
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(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (310) 306-4314
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Not Applicable
(Former name, former address and former fiscal year,
if changed since last report.)
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
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Number of shares outstanding of each of Registrant's classes of common stock, as
of April 26, 1996:
Number of Shares
Title of Each Class Outstanding
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Common Stock, $1.00 par value per share 4,899,030
CALPROP CORPORATION
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Part I
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ITEM I - FINANCIAL INFORMATION
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Set forth is the unaudited quarterly report for the three months ended March
31, 1996 and 1995, for Calprop Corporation. The information set forth reflects
all adjustments which were, in the opinion of management, necessary for a fair
presentation.
2
CALPROP CORPORATION
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BALANCE SHEETS
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ASSETS
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(Unaudited)
March 31, December 31,
1996 1995
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Real estate development 25,640,025 24,862,199
Investment in land 5,656,936 5,655,063
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Total investment in real estate 31,296,961 30,517,262
Other assets:
Cash and cash equivalents 205,838 758,323
Prepaid expenses 144,274 329,314
Deferred and other assets 356,883 288,302
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Total other assets 706,995 1,375,939
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Total assets 32,003,956 31,893,201
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The accompanying notes are an integral
part of these financial statements.
3
CALPROP CORPORATION
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BALANCE SHEETS
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LIABILITIES AND STOCKHOLDERS' EQUITY
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(Unaudited)
March 31, December 31,
1996 1995
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Trust deeds and notes payable 5,551,562 4,682,926
Related party notes 7,883,913 7,575,000
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Total trust deeds and notes payable 13,435,475 12,257,926
Community facilities district special tax bonds 2,336,544 2,336,544
Accounts payable and accrued liabilities 1,704,092 1,993,056
Warranty reserves 294,000 301,700
Accrued dividends payable on preferred
stock (Note 5) 1,045,014 929,262
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Total liabilities 18,815,125 17,818,488
Stockholders' equity:
Convertible preferred stock, no par value
Authorized - 6,000,000 shares
Issued and outstanding - 3,571,368
shares at March 31, 1996 and
December 31, 1995 4,571,351 4,571,351
Common stock, $1 par value
Authorized - 20,000,000 shares
Issued and outstanding - 4,899,030
shares at March 31, 1996 and
December 31, 1995 4,899,030 4,899,030
Additional paid-in capital 25,910,018 25,910,018
Accumulated deficit (22,191,568) (21,305,686)
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Total stockholders' equity 13,188,831 14,074,713
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Total liabilities and stockholders' equity 32,003,956 31,893,201
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The accompanying notes are an integral
part of these financial statements.
4
CALPROP CORPORATION
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STATEMENTS OF OPERATIONS
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(Unaudited)
Three Months Ended
March 31,
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1996 1995
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Development operations:
Real estate sales 1,844,278 3,478,025
Cost of real estate sales 1,903,789 3,344,479
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(Loss) income from development operations (59,511) 133,546
Other income (note 4) 9,896 2,201,704
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Other expenses:
General and administrative expenses 644,916 532,442
Investment property holding costs 75,600 --
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Total other expenses 720,516 532,442
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(Loss) income before benefit
(provision) for income taxes (770,131) 1,802,808
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Benefit (provision) for income taxes
(note 2) -- --
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Net (loss) income $(770,131) $1,802,808
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Net (loss) income per share (note 3)
Primary (after giving effect to
preferred stock dividend) $(0.18) $ 0.35
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Fully diluted $ 0.19
========
The accompanying notes are an integral
part of these financial statements.
5
CALPROP CORPORATION
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STATEMENTS OF CASH FLOWS
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(Unaudited)
THREE MONTHS ENDED
MARCH 31,
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1996 1995
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CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income $(770,131) $1,802,809
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 5,701 4,127
Change in assets and liabilities:
(Increase) decrease in deferred and other assets (23,588) 58,522
(Increase) decrease in investments in land (1,873) --
Decrease (increase) in prepaid expenses 185,040 207,689
Increase (decrease) in accounts payable and
accrued liabilities (296,664) (98,283)
Additions to real estate development in process (2,681,615) (3,038,610)
Cost of real estate sales 1,903,789 3,344,479
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Net cash (used in) provided by
operating activities (1,679,341) 2,280,733
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (50,694) --
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Net cash used in investing activities (50,694) --
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings under construction loans-related
parties 1,065,000 1,425,000
Payments under construction loans-related parties (756,087) (1,372,084)
Borrowings under construction loans 1,881,169 1,342,299
Payments under construction loans (1,012,533) (3,043,797)
Payments of preferred stock dividends -- (136,257)
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Net cash provided by (used in) financing
activities 1,177,549 (1,784,839)
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Net (decrease) increase in cash and cash
equivalents (552,486) 495,894
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Cash and cash equivalents at beginning of periods 758,324 1,142,834
Cash and cash equivalents at end of periods 205,838 1,638,728
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the periods for:
Interest (net of amount capitalized) 2,094 9,842
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Accrual of preferred dividend 115,752 114,592
The accompanying notes are an integral
part of these financial statements
6
CALPROP CORPORATION
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NOTES TO FINANCIAL STATEMENTS
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PERIODS ENDED MARCH 31, 1996 and 1995
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(Unaudited)
Note 1: Basis of presentation and significant accounting policies
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The unaudited, condensed, financial statements included herein have been
prepared by the registrant pursuant to the instructions to Quarterly Report on
Form 10-Q required to be filed with the Securities and Exchange Commission and
do not include all information and footnote disclosure required by generally
accepted accounting principles. The accompanying financial statements have not
been examined by independent accountants in accordance with generally accepted
auditing standards, but in the opinion of management, such financial statements
include all adjustments, consisting only of normal recurring adjustments
necessary to summarize fairly the Company's financial position and results of
operations. The condensed financial statements should be read in conjunction
with the financial statements and the notes thereto included in the registrant's
latest Annual Report on Form 10-K, particularly with regard to disclosures
relating to major accounting policies.
The results of operations for the three months ended March 31, 1996 may not
be indicative of the operating results for the year ending December 31, 1996.
Note 2: Income taxes
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As of March 31, 1996, the Company had net operating carryforwards for
federal and state tax purposes of approximately $9,850,000 and $15,500,000,
respectively.
Note 3: Net income per share
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Net income per share has been computed based upon the weighted average
number of shares outstanding.
Three Months Ended
March 31,
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1996 1995
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Weighted average number of common
shares and common stock equivalents
adjusted for stock dividends 4,899,030 9,389,481
Net income (loss) (770,131) $1,802,809
Earnings (loss) per share
Primary (after giving effect to
preferred stock dividend) $ (0.18) $ 0.35
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Fully Diluted $ 0.19
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Note 4: Other Income
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Other income for the three months ended March 31, 1995 consists primarily
of $2,100,000 of cash received as a result of a settlement of the California
Department of Transportation litigation. In addition to the legal settlement,
other income for the three months ended March 31, 1995 includes approximately
$100,000 in miscellaneous insurance and property tax refunds.
Note 5: Preferred Stock
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On September 15, 1993 the Company completed an offering of 3,576,301 shares
of Convertible Preferred Stock, to existing shareholders at $1.28 per share.
The sales price of the 3,576,301 shares sold was $4,577,665, of which
$3,017,663 was paid by the conversion of existing indebtedness, and $1,560,002
in cash proceeds. Each share of Convertible Preferred Stock is convertible to
1.28 shares of Common Stock at the option of the shareholder. Each share of
Convertible Preferred Stock is entitled to receive dividends of $0.13 per annum,
payable in cash. On March 28, 1995, the Company paid preferred stock dividends
of $136,257. As of March 31, 1996, there is $1,045,014 of dividends in arrears
on the Preferred Stock. The Convertible Preferred Stock is also entitled to a
liquidation preference of $1.28 per share, and may be redeemed by the Company at
a redemption price of $1.28 per share, plus accrued dividends.
8
Item 2 Management's Discussion and Analysis of Financial Condition and Results
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of Operations
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The Company has continued to be impacted by the recent general economic
downturn and soft California housing market through the first quarter of 1996.
In response to these conditions the Company began utilizing marketing programs
which included price reductions and incentives to potential buyers. The
Company's sales revenue during the first quarter of the last two years decreased
from $3,478,025 in 1995 to $1,844,278 in 1996.
LIQUIDITY AND CAPITAL RESOURCES
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The Company's liquidity changes during the course of the year depending
upon the status of the Company's real estate projects in process. The Company's
liquidity decreases as it enters a project cycle and increases as the completed
homes are sold at the end of the cycle. In large part, the Company historically
funded its operations through the utilization of cash flow from one project to
fund the construction and development of another project. The Company is
currently in an expansion program that requires additional sources of financing.
In order to acquire the additional funds needed, the Company is increasing its
external financing through the use of land loans, lot development loans,
construction loans and the use of its unsecured credit lines.
In an effort to increase working capital, the Company has continued to
institute cost reduction programs in all areas of its operations and converted
other assets to liquid funds. Additionally, the Company is actively seeking
joint venture partners and additional financing to fund its operations.
In March of 1996, Imperial Bank made a $3,465,000 construction loan to the
Company for the construction of 24 units in the Montserrat project in Murrieta,
California. The note provides for interest at the prime rate plus 1.75% and a
loan service charge of 1.5 points. The loan provides for paydowns with each
closing, however, all principal and interest is due no later than March 11,
1997. Per the terms of the loan, a six month extension is available should it
be required. As of March 31, 1996, the outstanding balance existing on the loan
totaled $505,164.
In March of 1996, the Curci-Turner Company made a $1,000,000 loan
commitment to the Company for working capital purposes. The note provides for
interest at 15% and does not include a loan service charge. The maturity date
of the loan is September 15, 1996. As of March 31, 1996, the loans balance was
$500,000.
In August of 1995, Imperial Bank made a $4,890,000 construction loan to the
Company for the construction of 53 units in the Summertree Park project in Elk
Grove, California. The note provides for interest at the prime rate plus 1.5%
and a loan service charge of 1.5 points. The loan provides for paydowns with
each closing, however, all principal and interest is due no later than November
10, 1996. Per the terms of the loan, a six month extension is available should
it be required. As of March 31, 1996, the outstanding balance existing on the
loan totaled $1,300,517.
In February of 1995, United Savings Bank made a $2,185,000 construction
loan to the Company for the construction of 15 units in the Cypress Cove project
in Half Moon Bay, California. The note provides for interest at the prime rate
plus 2% and a loan service charge of two points. The loan provides for paydowns
with each closing, however, all principal and interest is due no later than
September 1, 1996. As of March 31, 1996, the outstanding balance existing on
the loan totaled $561,318.
In the third quarter of 1994, the Company obtained a $2,000,000 loan from
the Curci-Turner Company, secured by the Company's Mission Gorge land, located
in San Diego, California. The loan provides for interest at 10%, contains a
profit sharing provision and a loan service charge of $300,000 payable in
monthly installments. The loan matures on September 30, 1997 and as of March
31, 1996, the balance of this loan was $2,000,000.
9
In April, 1995, the Company obtained a $4,000,000 loan from the Curci-
Turner Company, secured by the Company's Elk Grove land, located in Sacramento
County, California. This note bears interest at prime plus 1.5% and contains a
profit sharing provision. The note provides for paydowns with each closing,
however, all principal and interest is due no later than March 31, 1997. As of
March 31, 1996 the balance of this loan was $3,858,914.
In 1995, the Company obtained a loan from an officer of the Company. The
loan provides for interest at prime plus 2%, and matures on December 31, 1996.
As of March 31, 1995, the amount owed the officer was $1,450,000.
In December 1994, the Company obtained a construction loan of $800,000 from
Brentwood Bank. These funds are for the construction of the last 3 units in the
Company's Pleasant Oaks Estates project, located in Thousand Oaks, California.
The loan provides for interest at prime plus 4% and a loan service charge of two
points. The loan matures on June 1, 1996. As of March 31, 1996, the balance on
this loan was $558,036.
As of March 31, 1996, the Company had four projects with a combined total
of five phases in various stages of development with two of the four projects
producing revenues from completed homes: Cypress Cove, and Summertree Park at
Elk Grove. The final phase of the Pleasant Oaks Estates homes is under
construction, and the grand opening for the other project, Montserrat in
Murrieta, is planned for May of 1996. As of March 31, 1996, the Company has 7
homes completed in escrow. The Company has an additional 55 unsold homes of
which 22 are completed and 33 are under construction. The Company has remaining
inventory of 12 model units, 214 improved lots and 548 mapped unimproved lots.
The Company believes that, based on its agreements with its existing
institutional lenders, and the Curci-Turner Company, even with the continued
slowdown in certain of its marketplaces, it will have sufficient liquidity to
finance its construction projects in 1996 through funds generated from
operations and funds available under its existing loan commitments. In addition,
the Company believes that if necessary, additional funds could be obtained by
using its internally financed real estate development in process as collateral
for additional loans.
RESULTS OF OPERATIONS
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Net income/loss changed from income of $1,802,808 in the first quarter of
1995 to a loss of $770,131 in the first quarter of 1996. This decrease in
income is primarily due to the nonrecurring net cash settlement of approximately
$2,100,000 in the California Department of Transportation litigation in the
first quarter of 1995.
Gross profit decreased from $133,546 for the first quarter of 1995 to a
loss of $59,511 for the first quarter of 1996. The decrease in gross profit is
primarily a result of a decrease in sales and an increase in selling and
marketing costs.
During the first quarter of the last two years, gross revenues decreased
from $3,478,025 in 1995 to $1,844,278 in 1996. In the first quarter of 1995 the
Company sold 19 homes with an average sales price of $183,053, and in the first
quarter of 1996 the Company sold 10 homes with an average sales price of
$184,428. The decrease in gross revenue between the first quarters of 1995 and
1996, is primarily due to a change in the product mix as the company has
completely sold out the Summertree Park project in Windsor, and is in the
process building its first phase of homes in the Summertree Park project in Elk
Grove and the Montserrat project in Murrieta.
10
Item 6. Exhibits and Reports on Form 8-K
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(a) Exhibits -
10.1 Letter Dated March 6, 1996, between the Company and Gateway Advisors',
Inc. and Robert M. Wallace regarding consulting services
27 Financial data schedule
SIGNATURES
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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.
CALPROP CORPORATION
By: /s/ Mark F. Spiro.
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Mark F. Spiro
Vice President/Secretary/Treasurer
(Chief Financial and Accounting Officer)
May 13, 1996
11