FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the period ended January 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OR 1934
For the transition period from N/A
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Commission File Number 33-72106
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THE FORECAST GROUP "Registered Tradename", L.P.
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(Exact Name of Registrant as specified in its charter)
California 33-0582072
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(State of Organization) (IRS EmployerIdentification Number)
10670 Civic Center Drive, Rancho Cucamonga, California 91730
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(909)987-7788
Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
- ------------------- -----------------------------------------
None None
Securities Registered Pursuant to Section 12(g) of the Act:
None
Indicated by check mark whether the Registrant (1) has filed all
reports required to be filed by Sections 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___
There was no voting stock held by non-affiliates of the
Registrant at March 16, 2001.
THE FORECAST GROUP "Registered Tradename", L.P.
CONSOLIDATED BALANCE SHEETS
(Amounts in 000's)
January 31, 2001 October 31, 2000
(Unaudited)
---------------- ---------------
Assets:
- -------
Cash and Cash Equivalents $23,962 $26,607
Accounts Receivable 1,264 809
Accounts and Notes Receivable,
Related Parties 14,449 14,149
Real Estate Inventory 171,533 142,768
Property and Equipment, Net 425 435
Other Assets 1,380 1,565
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Total Assets $213,013 $186,333
======== =========
Liabilities & Partners' Equity:
- ------------------------------
Accounts Payable $31,030 $31,382
Accrued Expenses 5,862 6,498
Notes Payable:
Senior Notes at 11 3/8% due
December 2000 - 19,700
Collateralized by Real Estate
Inventory 79,716 44,028
Unsecured 6,920 -
Other Notes Payable - 3,525
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Total Notes Payable 86,636 67,253
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Total Liabilities $123,528 $105,133
Partners' Equity 89,485 81,200
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Total Liabilities &
Partners' Equity $213,013 $186,333
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[FN] See notes to consolidated financial statements.
THE FORECAST GROUP "Registered Tradename, L.P.
CONSOLIDATED STATEMENTS OF INCOME AND PARTNERS' EQUITY FOR
THE THREE MONTHS ENDED JANUARY 31, 2001 AND 2000
(Unaudited)
(Amounts in 000's)
Three Months Ended
January 31,
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2001 2000
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Homebuilding Revenues $82,471 $61,041
Cost of Homes Sold 63,819 48,782
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Gross Profit 18,652 12,259
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Land/Lot Sale Revenues 2,524 -
Cost of Land/Lot Sold 2,911 -
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Loss on Land/Lot Sales (387) -
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Operating Expenses:
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Selling & Marketing Expenses 3,919 3,834
General & Admin. Expenses 5,785 4,174
Other Operating Costs 10 1,274
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Total Operating Expenses 9,714 9,282
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Operating Income 8,551 2,977
Other Income
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Interest Income 264 183
Other Income and Expenses, net 335 182
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Total Other Income 599 365
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Net Income $9,150 $3,342
====== ======
Partners' Equity at Beginning
of Period $81,200 $53,018
Capital Distribution (865) (2,025)
Net Income this Period 9,150 3,342
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Net Partners' Equity at End
of Period $89,485 $54,335
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[FN] See notes to consolidated financial statements.
THE FORECAST GROUP "Registered Tradename, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JANUARY 31, 2001 AND 2000
(Unaudited)
(Amounts in 000's)
For the Three Months Ended
January 31,
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2001 2000
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Operating Activities:
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Net Income $9,150 $3,342
Adjustments to Reconcile Net Income to
Net Cash Used for Operating Activities
Depreciation on Property and Equipment 64 75
Loss on Sale of Property and Equipment - 1
Loss on Land/Lot Sales 387 -
Other Operating Costs 10 1,274
Equity Income of Unconsolidated
Joint Venture 191 101
(Increase)/Decrease in Accounts Rec. (455) 2,988
Increase in Real Estate Inventory (29,162) (12,558)
Increase in Other Assets (231) (52)
Increase in Accounts Payable and
Accrued Expenses (988) (8,178)
Decrease in Other Liabilities - (514)
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Net Cash Used for Operating Activities (21,034) (13,521)
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Investing Activities:
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Distribution from Joint Venture 225 127
Additions to Property and Equipment (54) 16
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Net Cash Provided by Investing Activities 171 143
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Financing Activities:
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Capital Distributions (865) (2,025)
Decrease in Capital Note Receivable
from Partner - 300
Increase in Accounts and Notes Receivable,
Related Parties (300) (1,942)
Proceeds from Notes Payable, Collateralized
by Real Estate 90,119 57,691
Proceeds from Notes Payable, Unsecured 6,587 -
Proceeds from Notes Payable, Other 3,769 80
Principal Payments on Notes Payable,
Senior Notes (19,700) -
Principal Payments on Notes Payable,
Collateralized by Real Estate (52,198) (37,504)
Principal Payments on Notes Payable,
Unsecured (1,900) -
Principal Payments on Notes Payable,
Other (7,294) (506)
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Net Cash Provided by Financing
Activities 18,218 16,094
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(Decrease)/Increase in Cash and Cash
Equivalents (2,645) 2,716
Cash and Cash Equivalents at Beginning
of Period 26,607 22,594
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Cash and Cash Equivalents at End
of Period $23,962 $25,310
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[FN] See notes to consolidated financial statements.
THE FORECAST GROUP "Registered Tradename, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally
accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted
accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation
have been included.
These consolidated financial statements should be read in
conjunction with the consolidated financial statements and
related disclosures contained in the Form 10-K for the year ended
October 31, 2000 (File No. 33-72106) as filed with the Securities
and Exchange Commission.
The results of operations for the three months ended January
31, 2001, do not necessarily indicate the results that can be
expected for the full fiscal year.
The results of operations for the three months ended January
31, 2001, and this Form 10-Q, also may be interpreted as, or
actually contain, "forward looking" information, as that term is
defined by the Securities and Exchange Commission. To the extent
such forward looking information is contained in this filing, the
Company intends to use these disclosures to take advantage of the
"Safe Harbor" provisions set out in the rules and regulations of
the Securities and Exchange Commission, and thus strongly
recommends that prior to making an investment decision a
prospective investor should carefully consider the factors
mentioned in the Form 10-K for the year ended October 31, 2000 in
relation to that "forward looking" information, as well as other
financial and business information that may be available from a
variety of sources regarding the home building industry as a
whole, including, but not limited to:
- Changes in national economic conditions such as
interest rates, consumer confidence and job loss or
formation statistics
- Changes in economic conditions in the markets in which
the Company operates
- Fluctuations in mortgage and federal funds interest rates
- Cost increases resulting from adverse weather
conditions, shortages of labor and/or construction materials
- Changes in governmental regulations which may delay new
home development or impose additional costs or fees.
2. Real Estate Held for Development and Sale and Related
Notes Payable
Real estate held for development and sale and related notes
payable consist of the following:
(Amounts in 000's)
January 31, 2001
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Real Estate
Inventory Notes Payable
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Land Held for Development $1,198 $-
Residential Projects in Process 163,097 79,716
Model Homes 7,238 -
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Total $171,533 $79,716
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October 31, 2000
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Real Estate Notes Payable
Inventory
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Land Held for Development $3,232 $-
Residential Projects in Process 132,961 44,028
Model Homes 6,575 -
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Total $142,768 $44,028
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3. Interest
The following summarizes the components of interest incurred,
capitalized, expensed and paid:
(Amounts in 000's)
For The Three Months
Ended
January 31,
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2001 2000
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Interest incurred and capitalized $2,656 $2,418
Interest incurred and expensed - -
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Total Interest Incurred $2,656 $2,418
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Capitalized interest amortized to cost
of homes sold $2,028 $1,804
Interest paid $3,509 $2,978
4. Transactions With Affiliates
During the three months ended January 31, 2001, the Company
sold land in Bullhead, Arizona to an affiliated entity in which
Mr. Previti is the 100% owner for a sales price of $1,713,361.
The Company received cash payments of $400,000 and an unsecured
note of $1,313,000. No gain or loss was recognized on the sale.
5. Receivables From Affiliates
During the three months ended January 31, 2001, accounts and
notes receivable from related parties increased $300,000. The
increase primarily relates to the addition of a $387,000
receivable from an affiliated entity in which Mr. Previti is the
100% owner, related to costs incurred by the Company, on behalf
of the affiliate, for certain development activities on real
property in Northern California.
In addition, the Company received an unsecured note receivable
of $1,313,000 related to the sale of land to an affiliated
entity in which Mr. Previti is the 100% owner. These increases
in receivables from affiliates were offset by $1,500,000 of
payments received.
6. 11 3/8% Senior Notes Due December 2000
In February 1994, the Company issued $50,000,000 in 11 3/8%
Senior Notes through a public debt offering. On December 13,
2000, the Company retired the remaining outstanding $19,700,000
of Senior Notes held in the names of investors other than the
Company.
7. Real Estate Held for Development and Sale
In accordance with FASB Statement No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of" (Statement 121), when events or circumstances
indicate that an impairment to assets to be held and used might
exist, the expected future undiscounted cash flows from the
affected asset or group of assets must be estimated and compared
to the carrying value of the asset or group of assets. If the
sum of the estimated future undiscounted cash flows, excluding
interest charges, is less than the carrying value of the assets,
an impairment loss must be recorded. The impairment loss is
measured by comparing the estimated fair value of the assets with
their carrying amount. Statement 121 also requires that long
lived assets that are held for disposal be reported at the lower
of the assets' carrying amount or fair value less costs of
disposal.
On an ongoing basis, management analyzes future undiscounted
cash flows for all real estate projects where impairment
indicators are present. Based upon such analysis, no provision
for impairment loss was recorded for the three months ended
January 31, 2001 or 2000.
THE FORECAST GROUP "Registered Tradename", L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Part I. Item 2.
Results of Operations
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The following table sets forth, for the period indicated,
certain income statement items as percentages of total home
building sales and certain other data. This table excludes
land/lot sales revenue and cost of land/lot sold.
Percent of Housing Sales
For the Three Months Ended
January 31,
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2001 2000
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Homebuilding Revenues 100.0% 100.0%
Cost of Homes Sold 77.4% 79.9%
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Gross Profit 22.6% 20.1%
Operating Expenses:
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Selling & Marketing Expenses 4.8% 6.3%
General & Admin. Expenses 7.0% 6.8%
Other Operating Costs 0.0% 2.1%
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Total Operating Expenses 11.8% 15.2%
Operating Income 10.8% 4.9%
==== ====
Number of homes closed 374 307
Number of homes sold 437 330
Number of homes in backlog 443 269
Aggregate value of backlog
(in millions) $97.7 $52.0
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Results of Operations
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For the Three Months ended January 31, 2001 and January 31, 2000
Housing revenues of $82.5 million set a first fiscal quarter Company
record. This result represents an increase of $21.4 million or 35.1%
from the three months ended January 31, 2000. The revenues for the
three months ending January 31, 2001 represent a record of 374 closings,
an increase of 67 closings or 21.8% over the three months ending
January 31, 2000. The increase reflects the continued strength of
the California housing market which resulted in increased absorption
rates and overall sales for the Company in its California submarkets.
Sales for the three months were 437 units, representing an increase of
32.4% from the three months ended January 31, 2000. The average
sales price of the homes closed during the three months ended
January 31, 2001, was $220,511 as compared to $198,831 for the
same period a year ago, representing an increase of 10.9%. The
increase in average sales price is due primarily to increasing
prices in high demand communities and a shift in closings towards
higher priced communities. The sales and closings achieved in
the first quarter ending January 31, 2001, set company records
despite weather related challenges that were overcome.
Gross profit from housing sales was $18.7 million for the
three months ended January 31, 2001, representing an increase of
$6.4 million, or 52.1%, from the three months ended January 31,
2000. During the same three month period, gross profit per home
increased to $49,872, from $39,932, representing a 24.9% increase
over the comparable period in 2000. Gross profit margin for the
three months ended January 31, 2001 rose to 22.6% versus
20.1% for the same period one year earlier. The increase in
gross profit and gross margin was due primarily to the continued
strength of the California market and increasing sales prices while
maintaining construction costs at level amounts.
During the three months ended January 31, 2001, the Company
sold two lots in Phoenix, Arizona, 28 lots in Perris, California
and one parcel of land located in Bullhead, Arizona, which
resulted in a net loss of $387,000. There were no land sales in
the comparable three month period of 2000.
The Company's interest amortized to cost of homes sold (as a
percentage of revenue) decreased to 2.5%, for the three months
ended January 31, 2001, from 3.0% for the same period a year ago.
This decrease is directly attributable to the Company's record
level of closings experienced in the first three months of fiscal
year 2001, which produced increased rates of capital turnover,
thereby resulting in lower capitalized interest costs. In
addition, the Company continuously evaluates the cost of capital
charged by each of its' lenders and manages its' debt level
relating to those lenders.
Selling and marketing expenses decreased by $85,000 or 2.2%
during the three months ended January 31, 2001, as compared to
the three months ended January 31, 2000. Selling and marketing,
as a percentage of revenue, decreased to 4.8% from 6.3% for the
comparable period in 2000. This decrease, as a percentage of
revenue, is attributable to the higher closing volume, higher
average sales prices, and lower incentives required to achieve
the desired sales absorptions.
General and administrative expenses increased 0.2% as a
percentage of revenue, to 7.0% for the three months ended January
31, 2001 as compared to the three months ended January 31, 2000.
The increase is attributable to an increase in the number of
employees of the Company which was necessary to facilitate the
Company's continued expansion and active investigation of new
land acquisition opportunities in order to achieve the Company's
Three-Year Business Plan and an increase in the bonuses paid to
the Company's employees due to the record profits realized in the
three months ended January 31, 2001.
Other operating costs for the three months ended January 31, 2001
were $10,000, as compared to $1,274,000 for the three months ended
January 31, 2000. The other operating costs of $1,274,000 during the
three months ended January 31, 2000, was due to the expensing of
carrying costs of one community in Fontana that had been held for
future development. The Company has begun developing the Fontana
community and anticipates its first deliveries in the second fiscal
quarter of 2001.
Net income increased 173% to $9.1 million during the three
months ended January 31, 2001, as compared to a net income of
$3.3 million for the three months ended January 31, 2000. Net
income, as a percentage of revenue, increased to 11.1% as
compared to 5.5% a year ago. This increase was primarily
attributable to increased closings and the overall improvement
of market conditions in those areas in which the Company
operates.
During the three months ended January 31, 2001, distributions
to partners totaled $865,000. For the three months ended January
31, 2000, distributions to partners totaled $2.0 million, of
which $300,000 was to Forecast Homes Inc., who then paid off its
note payable to the Company.
Liquidity and Capital Resources
The residential real estate development business is
inherently capital intensive. Significant cash expenditures are
typically needed to acquire and develop land, construct homes and
establish marketing programs for lengthy periods of time in
advance of revenue realization. The Company generally finances
its operations with cash flow from operations, secured borrowings
from commercial banks, financial institutions and private
investors and with unsecured borrowings in the capital markets.
The Company's financing needs depend primarily upon sales
volume, asset turnover and land acquisition. When liquidating
inventory through home closings, the Company generates cash. When
building inventory, the Company uses substantial amounts of cash
obtained through borrowings and cashflow from operations.
The Company has had adequate liquidity throughout its
operating history, despite recessionary periods, and
historically the Company's liquidity needs have been met through
the use of cash provided by a combination of closings and
financing activities. In February 1994, the Company issued $50 million
11 3/8% Senior Notes due in 2000 through a public debt offering. At
certain times during the past few years the Company has repurchased
portions of its outstanding 11 3/8% Senior Notes due in 2000, on the open
market and subsequently retired such repurchased 11 3/8% Senior Notes.
As of January 31, 2001, the Company had paid off and retired the
remaining outstanding Senior Notes.
At January 31, 2001, the Company had commitments for
$121.7 million under several revolving credit facilities with
commercial banks and financial institutions, of which $78.5
million was outstanding. In addition, at January 31, 2001, the
Company had community specific facilities capable of providing
aggregate fundings of $1.2 million, of which $1.2 million was
outstanding. Borrowings under the credit facilities are secured
by liens on specific real property owned by the Company, and
carry varying levels of recourse against the Company. The
Company also utilizes unsecured borrowing lines from time-to
time to meet its operational needs and objectives. The unsecured
borrowing lines have commitments of $6.9 million, of which $6.9
was outstanding as of January 31, 2001. On January 31, 2001, the
aggregate outstanding principal balance under all of the
Company's credit facilities was $86.6 million and the recourse to
the Company from those borrowings was 34% of the total
outstanding sums, or $29.4 million.
To date, the Company has been able to obtain acceptable land
acquisition and construction financing. Consistent with an
industry trend, certain lenders require increased amounts of cash
invested in a project by borrowers in connection with both new
loans and the extension of existing loans. The Company currently
intends to continue utilizing conventional bank financing for
land acquisition and construction financing, and use its own cash
to fund that portion of the total project costs and acquisition
costs its Lenders require be supplied (in form of equity) in
order to obtain construction or land acquisition financing.
There can be no assurance that the impact of market
conditions affecting the demand for homes or the availability of
debt financing will not adversely affect the Company's future
needs for capital. However, the Company expects that available
capital resources in the form of retained earnings and debt financing
will be sufficient to meet its normal operating requirements over the
near term.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
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(a) None
Item 2. Changes in Securities
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(a) Paid in full on December 13, 2000
Item 3. Defaults upon Senior Securities
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(a) None
Item 4. Submission of Matters to a Vote of Security Holders
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(a) None
Item 5. Other Information
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(a) None
Item 6. Exhibits and Reports on Form 8-K
---------------------------------
(a) There are no exhibits attached to this report.
(b) The Company did not file any reports on Form 8-K during the
period.
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.
THE FORECAST GROUP "Registered Tradename, L.P.
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By: FORECAST Registered Tradename" HOMES, INC.
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A California Corporation
its General Partner
March 16, 2001 By: /s/ James P. Previti
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Date James P. Previti
President
By: /s/ Richard B. Munkvold
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Richard B. Munkvold
Senior Vice President -
Financial Operations
Principal Accounting Officer