FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission File Number 1-6830
FPA CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 59-0874323 One Greenwood Square, #101
(State or other jurisdiction of (I.R.S. Employer 3333 Street Road
incorporation or organization) Identification No.) Bensalem, PA 19020
(Address of Principal Executive Office)
(215) 245-7500
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title Name of Each Exchange
----- on which Registered
-------------------
Common Stock, $.10 Par Value Per Share
(also formerly registered under
Section 12(g) of the Act)................ American
14 1/2% Subordinated Debentures due
September 1, 2000........................ American
Securities Registered Pursuant to Section
12(g) of the Act: None
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 twelve 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 _____
Indicate by check mark if disclosure of delinquent filers pursuant to Rule 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. __X__
The aggregate market value of voting stock held by nonaffiliates of the
registrant as of September 23, 1997 was approximately $2,400,000.
Number of shares of outstanding Common Stock as of September 23, 1997 was
11,356,018, shares (excluding 1,342,113 shares held in Treasury).
Part III (except for information included under Part I relating to executive
officers of the registrant) is incorporated by reference from the proxy
statement for the annual meeting of Stockholders scheduled to be held in
December, 1997.
TABLE OF CONTENTS
PART I
PAGE
ITEM 1. Business. 1
General 1
Residential Development 2
Operating Policies 4
Construction 4
Sales and Customer Financing 5
Land Policy 5
Joint Ventures 6
Government Regulation 6
Environmental Regulation and Litigation 7
Competition 8
Employees 8
Economic Conditions 8
ITEM 2. Properties.
Lease of Executive Offices 9
ITEM 3. Legal Proceedings 9
ITEM 4. Submission of Matters to a Vote of Security Holders 9
Executive Officers of the Registrant 10
PART II
ITEM 5. Market for Registrant's Common Stock and
Related Stockholder Matters 12
ITEM 6. Selected Financial Data 12
ITEM 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 14
ITEM 8. Financial Statements and Supplementary Data 20
ITEM 9. Changes in and Disagreements With Accountants
on Accounting and Financial Disclosure 40
PART III
ITEM 10. Directors and Executive Officers of Registrant 40
ITEM 11. Executive Compensation 40
ITEM 12. Security Ownership of Certain Beneficial Owners
and Management 40
ITEM 13. Certain Relationships and Related Transactions 40
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K 40
Item l. Business.
General
The Registrant, FPA Corporation (the "Company"), develops residential
communities in Pennsylvania and New Jersey. The Company's operations in
Pennsylvania and New Jersey are in the Philadelphia metropolitan area,
primarily in Bucks, Chester and Delaware Counties in Pennsylvania and in
Burlington, Camden and Gloucester counties in New Jersey. During fiscal 1997,
the Company commenced development of communities in Chester and Delaware
Counties in Pennsylvania and is further endeavoring to increase its scope of
operations in these counties. In addition, the Company has commenced
development in the Princeton, New Jersey area and expects to expand its
operations in Central New Jersey.
The Company operates as both a developer and builder. The Company
builds and sells condominiums, townhouses and single-family homes; and sells
land and developed homesites. During the fiscal year ended June 30, 1997, the
Company delivered 562 residential units as compared to 531 units in fiscal
1996. Revenues earned from residential property activities during fiscal 1997
were $96,104,000. During fiscal 1996, revenues earned from residential
property activities were $86,061,000. At June 30, 1997, the Company's backlog
was $38,260,000, representing 210 units, compared to $40,206,000 and 219
units, at June 30, 1996. In addition, as of June 30, 1997, there were
reservation deposits relating to 24 units at the Company's various
developments which had an aggregate sales value of $4,440,000, as compared to
32 units aggregating $5,286,000 at June 30, 1996.
The Company's predecessor, Florida Palm-Aire Corporation, was formed
in 1959 and was merged into FPA Corporation, which had been incorporated in
Delaware on September 4, 1969. In 1965, the late Marvin Orleans and Orleans
Construction Co., a general partnership substantially owned and controlled by
Marvin Orleans and his late father, A.P. Orleans, acquired the controlling
interest in the Company. In 1993, the Company acquired Orleans Construction
Corporation ("OCC") from Jeffrey P. Orleans. Unless otherwise indicated, the
terms the "Company" and "FPA" include FPA Corporation and all of its
Subsidiaries.
1
Jeffrey P. Orleans, the son of Marvin Orleans and Chairman of the
Board and Chief Executive Officer of the Company, beneficially owns, directly
or indirectly, approximately 7,091,375 shares of Common Stock, par value $.10
per share ("Common Stock"), which represents approximately 62.4% of the
outstanding shares, excluding treasury shares, as of September 23, 1997. If
Mr. Orleans were to convert his Convertible Subordinated Note (Note 9) into
common shares, he would then own 68.1% of the then outstanding shares.
Residential Development
The Company's activities in developing residential communities
include the sale of residential properties and the sale of land and developed
homesites to independent builders. The Company participates in joint ventures
in certain of these activities.
The following table sets forth certain information as of June 30,
1997 with respect to the active communities of the Company under development
and those where construction is expected to commence in fiscal 1998.
2
RESIDENTIAL DEVELOPMENTS AS OF JUNE 30, 1997
No. of Total Units Total Units Total Units Reservation Unit Price Remaining
State Communities Approved Delivered Under Contract Deposits Range(1) Approved Units(2)
- ----- ----------- -------- --------- -------------- -------- ----------- -----------------
PA 10 3,040 2,350 83 13 $ 90,990 594
$ 412,490
NJ 17 9,047 7,309 127 11 $ 93,990 1,600
------ ----- ------ --- --- -----
$ 336,990
27 12,087 9,659 210 24 2,194
====================================================================================================================================
1. Range of base prices of residential dwelling units currently being
offered for sale by the Company. In addition, the Company sells
homesites from time to time at its various developments to
unaffiliated builders at prices substantially lower than its dwelling
units.
2. Although zoning and certain preliminary master plan approvals have
been received for these units, final plans are subject to substantial
review and approval by appropriate governmental agencies. No
assurance can be given that the Company will be able to obtain the
required final approvals for the indicated units or will ultimately
elect to develop the properties in accordance with presently
anticipated development plans.
3
The following table sets forth certain detail as to residential sales
activity. The information provided is for the twelve months ended June 30,
1997, 1996 and 1995 in the case of revenues earned and new orders, and as of
June 30, 1997, 1996 and 1995 in the case of backlog.
Year Ended June 30,
-------------------------------------
1997* 1996 1995
------ ------ -----
(Dollars in Thousands)
Revenues earned $ 96,104 $ 86,061 $102,384
Units 562 531 612
Average price per unit $ 171 $ 162 $ 167
New orders $ 94,158 $ 80,438 $ 78,252
Units 553 486 489
Average price per unit $ 170 $ 166 $ 160
Backlog $ 38,260 $ 40,206 $ 45,829
Units 210 219 264
Average price per unit $ 182 $ 184 $ 174
* Included in the new order data are 31 units with a sales value of
approximately $1,800,000, to be purchased by Jeffrey P. Orleans, Chairman and
Chief Executive Officer of the Company. The selling prices for these units,
which are determined by state statute, are the same as if the units had been
sold to unaffiliated third parties. These transactions will satisfy, in part,
the Company's low income housing requirements in Mount Laurel Township, New
Jersey. Included in the June 30, 1997 backlog are 26 low income units with an
aggregate sales value of approximately $1,400,000 which are to be acquired by
Mr. Orleans.
Operating Policies
Construction
The Company has historically designed its own products with the
assistance of unaffiliated architectural firms as well as supervised the
development and building of its projects. When the Company constructs units,
it acts as a general contractor and employs subcontractors at specified prices
for the installation of site improvements and construction of its residential
units. Agreements with subcontractors provide for a fixed price for work
performed or materials supplied and are generally short-term.
The Company does not manufacture any of the materials or other items
used in the development of its projects, nor does the Company maintain
substantial inventories of materials. Standard building materials, appliances
and other components are purchased in volume. The
4
Company has not experienced significant delays in obtaining materials needed
by it to date and has long-standing relationships with many of its major
suppliers and contractors. None of the Company's suppliers accounted for more
than 10% of the Company's total purchases in the fiscal year ended June 30,
1997.
Sales and Customer Financing
The Company conducts a marketing program that is directed to
purchasers of primary residences. In Pennsylvania and New Jersey, A.P. Orleans
Inc., an affiliate of the Company controlled by Jeffrey P. Orleans, is the
exclusive sales agent. The Company believes that the compensation arrangement
with A.P. Orleans, Inc. is no less favorable to the Company than could be
obtained from an unaffiliated sales agent.
Model homes and sales centers are constructed to promote sales. A
variety of custom changes are permitted at the request of purchasers. The
Company advertises extensively using newspapers, billboards and other types of
media. The Company also uses brochures to describe each community.
The Company's customers generally require mortgage financing to
complete their purchases. During fiscal 1996, the Company established a
mortgage department to assist its home buyers in obtaining financing from
unaffiliated lenders. The Company receives a fee for its services.
The Company applies for project financing approvals from the Federal
Housing Administration, the Veterans Administration and the Federal National
Mortgage Association for many of its moderately priced communities. These
approvals assist customers in their ability to obtain competitive fixed and
adjustable rate mortgages with moderate down payments and liberal underwriting
requirements. The Company has obtained approvals for most projects and
anticipates additional approvals during fiscal 1998; however, there can be no
assurance that additional approvals will be obtained.
Land Policy
The Company acquires land in order to provide an adequate and
well-located supply for its residential building operations. In evaluating
possible opportunities to acquire land, the Company considers such factors as
the feasibility of development, proximity to developed areas,
5
population growth patterns, customer preferences, estimated cost of
development and availability and cost of financing.
As of June 30, 1997, the Company was committed to purchasing thirteen
(13) additional tracts for an aggregate purchase price of approximately
$33,600,000. The Company anticipates completing a majority of these
acquisitions during fiscal 1998 and 1999.
The Company will continue to monitor economic and market conditions
for residential units in each of its various communities in assessing the
relative desirability of constructing units or selling parcels to other
builders.
The Company engages in many phases of development activity, including
land and site planning, obtaining environmental and other regulatory
approvals, construction of roads, sewer, water and drainage facilities,
recreation facilities and other amenities.
Joint Ventures
From time to time, the Company has developed and owned projects
through joint ventures with other parties.
As discussed in Note 1 to the Consolidated Financial Statements, the
Company, through a wholly owned subsidiary, is the General Partner in
Versailles Associates, L.P., a limited partnership with private investors to
purchase and develop a 102 multi-family unit community in Cherry Hill, New
Jersey.
As also discussed in Note 1 to the Consolidated Financial Statements,
Orleans Construction Corp. ("OCC") has entered into a joint venture with
Bridlewood Associates, L.P. OCC is the managing general partner in this
limited partnership formed to develop an 85 acre parcel of land in Mount
Laurel, New Jersey.
Determinations by the Company to enter into joint ventures have
traditionally been based upon a number of factors, including principally an
alternative source for land acquisition financing. At the present time joint
venture activities do not constitute a material portion of the Company's
operations.
Government Regulation
The Company and its subcontractors are subject to continuing
compliance requirements of various federal, state and local statutes,
ordinances, rules and regulations regarding zoning,
6
plumbing, heating, air conditioning and electrical systems, building permits
and similar matters. The intensity of development in recent years in areas in
which the Company is actively developing real estate has resulted in increased
restrictive regulation and moratoriums by governments with respect to density,
sewer, water, ecological and similar matters. Further expansion and
development will require prior approval of federal, state and local
authorities and may result in delay or curtailment of development activities
and costly compliance programs.
In January 1983, the New Jersey Supreme Court rendered a decision
known as the "Mount Laurel II" decision, which has the effect of requiring
certain municipalities in New Jersey to provide housing for persons of low and
moderate income. In order to comply with such requirements, municipalities in
that state may require the Company, in connection with its future residential
communities, to contribute funds, on a per unit basis, or otherwise assist in
the achievement of a fair share of low or moderate housing in such
municipalities.
In recent years, regulation by federal and state authorities relating
to the sale and advertising of condominium interests and residential real
estate has become more restrictive and intense. In order to advertise and sell
condominiums and residential real estate in many jurisdictions, including
Pennsylvania and New Jersey, the Company has been required to prepare a
registration statement or other disclosure document and, in some cases, to
file such materials with a designated regulatory agency.
Despite the Company's past ability to obtain necessary permits and
authorizations for its projects, more stringent requirements may be imposed on
developers and home builders in the future. Although the Company cannot
predict the effect of such requirements, they could result in time-consuming
and expensive compliance programs and substantial expenditures for
environmental controls which could have a material adverse effect on the
results of operations of the Company. In addition, the continued effectiveness
of permits already granted is subject to many factors, including changes in
policies, rules and regulations and their interpretation and application,
which are beyond the Company's control.
Environmental Regulation and Litigation
Development and sale of real property creates a potential for
environmental liability on the part of the developer, owner, or any mortgage
lender for its own acts or omissions as well as
7
those of current or prior owners of the subject property or adjacent parcels.
If hazardous substances are discovered on or emanating from any of the
Company's properties, the owner or operator of the property (including the
prior owners) may be held strictly liable for all costs and liabilities
relating to such hazardous substances. Environmental studies are undertaken in
connection with property acquisitions by the Company. Further governmental
regulation on environmental matters affecting residential development could
impose substantial additional expense to the Company, which could adversely
affect the results of operations of the Company or the value of properties
owned, or under contract to purchase by the Company. (See Note 13 of Notes to
Consolidated Financial Statements for a discussion of specific environmental
litigation.)
Competition
The real estate industry is highly competitive. The Company competes
on the basis of its reputation, location, design, price, financing programs,
quality of product and related amenities, with regional and national home
builders in its areas of development, some of which have greater sales,
financial resources and geographical diversity than the Company. Numerous
local residential builders and individual resales of residential units and
homesites provide additional competition.
Employees
The Company, as of June 30, 1997, employed 165 persons, 61 of whom
were executive, administrative and clerical personnel, 41 were sales
personnel, and 63 were construction supervisory personnel and laborers.
The level of construction and sales employees varies throughout the
year in relation to the level of activities at the Company's various
developments. The Company has had no major work stoppages and considers its
relations with employees to be good.
Economic Conditions
The Company's business is affected by general economic conditions in
the United States and its related regions and particularly by the level of
interest rates. The Company cannot predict whether interest rates will be at
levels attractive to prospective home buyers or whether mortgage and
construction financing will continue to be available.
8
Item 2. Properties.
Lease of Executive Offices
Except as noted below, the Company's real property assets are
described under Item 1 - Business.
The Company is currently leasing office space comprising
approximately 12,000 square feet at One Greenwood Square at 3333 Street Road,
Bensalem, Pennsylvania. The annual rent is $199,000 with a lease expiring in
December, 2001.
Item 3. Legal Proceedings.
The Company is a plaintiff or defendant in various cases arising out
of its usual and customary business. The Company believes that it has adequate
insurance or meritorious defenses in all pending cases in which it is a
defendant and that adverse decisions in any or all of the cases would not have
a material effect upon the Company. (See Note 13 of Notes to Consolidated
Financial Statements for a discussion of specific litigation).
Item 4. Submission of Matters to a Vote of Security Holders.
There are no matters to be reported hereunder.
9
Item A. Executive Officers of the Registrant.
The following list contains certain information relative to
executive officers of the Company. There are no family relationships among any
executive officers. The term of each executive officer expires at the next
annual meeting of the Board of Directors following the annual meeting of
Stockholders scheduled to be held in December, 1997 or until their successors
are duly elected and qualified.
Position Principal occupation and offices
Name Age or office past 5 years
- ---------- --- --------- ----------------------------------
Jeffrey P. 51 Chairman of Served as Chairman of the Board
Orleans the Board and Chief Executive Officer since
and Chief September 1986. From September,
Executive 1986 to May 1992 he also served as
Officer President. In addition, Mr. Orleans
served as Chief Executive Officer
of Orleans Construction Corporation
from September 1986 until its
acquisition by the Company in
October 1993.
Benjamin D. 51 President, Elected President, Chief Operating
Goldman Chief Operating Officer and a Director of the
Officer and Company on May 27, 1992. From May,
Director 1989 to May 27, 1992 served as
Executive Vice President and
Secretary of the Company. In
addition, Mr. Goldman served as the
President of Orleans Construction
Corporation.
Michael T. 38 Executive Vice Elected Executive Vice President on
Vesey President- July 18, 1994. Since joining the
Project Company in July, 1987, he has been
Management responsible for project management
of the Company's Pennsylvania
communities.
10
Joseph A. 43 Chief Financial Elected Chief Financial
Santangelo Officer, Officer of the Company on July
Treasurer and 18, 1994. Mr. Santangelo was
Secretary elected Secretary of the
Company on May 27, 1992 and
has been Treasurer since
joining the Company in March
1987. Mr. Santangelo is a
Certified Public Accountant.
In addition, he served in an
executive capacity for Orleans
Construction Corporation.
11
PART II
Item 5. Market for Registrant's Common Stock and
Related Stockholder Matters.
The principal market on which the Company's Common Stock is traded is
the American Stock Exchange, Inc. (Symbol: FPO)
The high and low sales prices on the Exchange for the periods indicated
are as follows:
Fiscal year
ended June 30, High Low
-------------- ---- ---
1996 First Quarter $ 2.000 $ 1.000
Second Quarter 2.063 1.000
Third Quarter 1.188 .938
Fourth Quarter 1.500 .875
1997 First Quarter 1.188 1.000
Second Quarter 1.125 .875
Third Quarter 1.625 .938
Fourth Quarter 1.188 .750
The number of common stockholders of record of the Company as of
September 23, 1997 was 337.
The Company has not paid a cash dividend since December 1982. Payment
of dividends will depend upon the earnings of the Company, its funds derived
from operations, its working capital needs, its debt service requirements, its
general financial condition and other factors. No assurance can be given that
the Company will pay dividends in the future.
Item 6. Selected Financial Data.
The following table sets forth selected financial data for the
Company and should be read in conjunction with the Consolidated Financial
Statements and Notes thereto included under Item 8 of this Form 10-K.
12
(In thousands except per share data)
Year Ended June 30,
-------------------------------------------------------------------------------
Operating Data(1) 1997 1996 1995 1994(2) 1993
- ----------------- ---- ---- ---- ------- ----
Earned revenues $101,694 $ 94,359 $107,840 $ 66,618 $ 42,584
Income (loss) from
operations 1,375 1,235 1,201 (766) (8,513)
Primary income (loss) per
share from continuing
operations .12 .10 .10 (.07) (1.32)
June 30,
-------------------------------------------------------------
Balance Sheet Data 1997 1996 1995 1994(3) 1993
- ------------------ ---- ---- ---- ------- ----
Residential properties $ 35,355 $ 34,263 $ 35,757 $ 35,016 $ 12,863
Land and improvements 60,067 46,654 52,921 46,681 32,389
Total assets 107,613 92,866 102,274 97,754 57,235
Mortgage obligations
secured by real estate 53,637 42,524 40,721 36,806 25,097
Senior notes -- -- 371 664 6,376
Subordinated
debentures 601 618 2,231 2,363 3,653
Other Notes Payable 10,917 9,756 9,455 10,509 2,761
Shareholders' equity
(deficit) 16,051 13,949 12,146 10,945 (403)
- ----------
(1) The Company has not paid a cash dividend since December 1982.
(2) Includes results of operations of OCC from October 22, 1993 (date of
acquisition) through June 30, 1994.
(3) Includes balance sheet data of OCC, acquired by the Company on October 22,
1993.
13
Item 7. Management's Discussion and Analysis of Financial Condition And Results
of Operations
Liquidity and Capital Resources
The Company requires capital to purchase and develop land, to construct
units, to fund related carrying costs and overhead and to fund various
advertising and marketing programs to facilitate sales. The Company's sources of
capital include funds derived from operations, sales of assets and various
borrowings, most of which are secured. At June 30, 1997, the Company had
approximately $53,122,000 available to be drawn under existing secured revolving
and construction loans for planned development expenditures. These expenditures
include site preparation, roads, water and sewer lines, impact fees and
earthwork, as well as the construction costs of the units and amenities. The
Company believes that the funds generated from operations and financing
commitments from commercial lenders will provide the Company with sufficient
capital to meet its operating needs through fiscal 1998.
The Company has continued its ongoing land acquisition efforts during
fiscal 1997. During this period, the Company acquired eleven (11) parcels of
land with aggregate purchase prices of approximately $21,300,000. Marketing
activities had commenced on a majority of these communities as of June 30, 1997.
The remaining communities will commence marketing activities in fiscal 1998.
The Company is continuing to expand its land acquisition efforts. As of
June 30, 1997, the Company is committed to purchase thirteen additional tracts
for an aggregate purchase price of $33,600,000. These purchase agreements are
subject to due diligence review and are contingent upon the receipt of
governmental approvals. The Company expects to utilize purchase money mortgages,
secured financings and existing capital resources to finance these acquisitions.
The Company anticipates completing a majority of these acquisitions during
fiscal 1998 and 1999.
Overview of Operations
The tables included in "Item 1 - Business" summarize the Company's
revenues, new
14
orders and backlog data for the year ended June 30, 1997 with comparable data
for fiscal 1996 and 1995.
New orders for fiscal 1997 increased by 17% to $94,158,000 on 553 units
compared to $80,438,000 on 486 units during fiscal 1996. The opening of new
communities in Delaware and Chester Counties, Pennsylvania, were the primary
reasons for the increase.
Included in the new order data are 31 units with a sales value of
approximately $1,800,000, to be purchased by Jeffrey P. Orleans, Chairman and
Chief Executive Officer of the Company. The selling prices for these units,
which are determined by state statute, are the same as if the units had been
sold to unaffiliated third parties. These transactions will satisfy, in part,
the Company's low income housing requirements in Mount Laurel Township, New
Jersey. No significant gain or loss will be recognized by the Company in
relation to these sales. After excluding the affordable housing units purchased
by Mr. Orleans, the average dollar value of new order and backlog units
increased due to the change in product mix towards more townhome and single
family products. The Company expects this trend to continue.
At June 30, 1997, the Company had a backlog of 210 units with a sales
value of $38,260,000, compared to 219 units totaling $40,206,000 at June 30,
1996. The Company anticipates delivering substantially all of its backlog units
during fiscal 1998.
The slight reduction in backlog is due to the timing of the sellout of
the final units at several of the Company's mature developments coinciding with
the commencement of sales activities at many of the newly acquired communities,
as previously discussed.
Inflation
Inflation can have a significant impact on the Company's liquidity.
Rising costs of land, materials, labor, interest and administrative costs have
generally been recoverable in prior years through increased selling prices. The
Company has been able to increase prices to cover portions of these costs.
However, there is no assurance the Company will be able to continue to increase
prices to cover the effects of inflation in the future.
Joint Ventures
The Company is a general partner in two joint ventures with private
investors which are developing communities in Cherry Hill and Mt. Laurel, New
Jersey. These activities have provided additional operating funds to the Company
without the need for land acquisition funds.
15
Fiscal Years Ended June 30, 1997 and 1996
Results of Operations
Operating Revenues.
Revenues for fiscal 1997 increased by $7,335,000 compared to fiscal
1996. Revenues from the sale of residential homes included 562 homes totaling
$96,104,000 compared to 531 homes totaling $86,061,000 during fiscal 1996. This
increase in revenues is attributable to improvements in sales and home
construction activities and the trend toward more townhome and single family
homes being sold by the Company. Revenues from land sales decreased by
$3,038,000 due to the timing of these transactions.
Other income increased $330,000 primarily due to a non-recurring final
distribution in excess of basis from a joint venture partnership received by the
Company during fiscal 1997. The Company will have no future obligations or
operating activities with respect to this entity.
Costs and Expenses.
Costs and expenses for fiscal year ended June 30, 1997 increased
$6,433,000 compared to fiscal 1996. The increase in cost of residential
properties sold of $8,963,000 coupled with the decrease in cost of land sales of
$2,854,000 are the principal components of the overall increase. These amounts
are consistent with the changes in earned revenues discussed previously.
Selling, general and administrative costs increased $1,064,000 due to the
increase in homes settled and start up costs associated with the opening of six
new communities for sale.
Net interest expense decreased approximately $500,000 as a result of
the continued reduction in higher yield indebtedness, including $1,522,000 of
the Company's 14-1/2% Subordinated Debentures retired in June 1996 and the note
obligations retired in July 1996, as discussed under Extraordinary Items under
this Item.
As more fully described in Note 11 to the Company's Consolidated
Financial Statements, during 1996 the Company reduced its valuation allowance
from 100% to 50% on certain tax assets which were dependent on future taxable
income for realization. As a consequence, the Company recognized a net tax
benefit rather than a net tax expense. During fiscal 1997, the Company, as a
result of income from operations, realized many of these tax assets and,
accordingly, eliminated its valuation allowance. In future years, it is
anticipated that net tax
16
expense will approximate the effective tax rate.
Extraordinary Items
In August, 1995, the Company's former corporate offices were destroyed
by fire. These premises were previously under a long term operating lease from a
related party. During fiscal 1997, the Company received insurance proceeds in
excess of the carrying costs of the related property and recognized an
extraordinary gain of approximately $240,000, net of tax effects of
approximately $62,000.
In July, 1996, the Company completed a transaction to fully satisfy
notes payable with an outstanding balance of approximately $1,650,000 and
reacquired 183,177 shares of Common Stock in exchange for a cash payment of
approximately $1,061,000. These shares have been retained by the Company as
Treasury Stock. This transaction resulted in an extraordinary gain of $594,000,
net of income tax expense of approximately $100,000 in fiscal 1997.
In June, 1996, the Company satisfied $1,522,000 of its then outstanding
Subordinated Debentures and related accrued interest for a cash payment of
$907,000. This transaction resulted in an extraordinary gain of $523,000, net of
income tax expense of $92,000 in fiscal 1996.
During the second quarter of fiscal 1996, the Company completed a
transaction to fully satisfy a note payable with an outstanding balance of
approximately $380,000 and reacquired 116,823 shares of Common Stock in exchange
for a cash payment of $235,000. These shares have been retained by the Company
as treasury stock. This transaction resulted in an extraordinary gain of
$170,000, net of income tax expense of $30,000 in fiscal 1996.
Net Income.
Net income for fiscal 1997 was $2,209,000 ($.19 primary earnings per
share) compared to fiscal 1996 net income of $1,928,000 ($.16 primary earnings
per share). This increase is due to increases in earnings from the sale of
residential properties, other income, the extraordinary items and the reduction
in net interest expense, all previously discussed under this Item. These amounts
were somewhat offset by a reduction in earnings from land sale activity and
changes in the valuation allowance for certain tax assets, also previously
discussed.
17
Fiscal Years Ended June 30, 1996 and 1995
Results of Operations
Operating Revenues
Revenues for fiscal 1996 decreased $13,481,000 as compared to fiscal
1995. Revenues from the sale of residential units included 531 units totaling
$86,061,000 compared to 612 units totaling $102,384,000 during fiscal 1995. The
reduction in units delivered is due primarily to the severe winter weather
conditions experienced in 1996, which hampered construction activity and delayed
deliveries at all of the Company's communities. Revenues from land sales
increased by $2,799,000 primarily due to the consummation of land sale
transactions at the Company's Northampton, Pennsylvania community aggregating
$4,700,000 during fiscal 1996.
Costs and Expenses
Costs and expenses for the fiscal year ended June 30, 1996 decreased
$12,863,000 as compared to fiscal 1995. The decrease in costs and expenses is
due primarily to decreases in the cost of real estate properties sold (including
land) and selling, general and administrative expenses of $11,749,000 and
$582,000, respectively. These decreases are consistent with the decrease in
earned revenues from real estate properties discussed under operating revenues.
Overall gross profit on units sold during fiscal 1996 increased approximately 1%
compared to fiscal 1995 due to more favorable pricing obtained from contractors.
The other expense increase of $131,000 from 1995 is primarily an increase in
snow removal costs of $240,000 due to severe weather conditions in fiscal 1996
partially offset by other reductions. The fiscal 1995 accrual for environmental
litigation expenses of $750,000 also contributed to the overall decrease in
costs and expenses.
Net Income (Loss)
Net income for fiscal 1996 was $1,928,000 ($.16 primary earnings per
share) compared to fiscal 1995 net income of $1,201,000 ($.10 primary earnings
per share). This increase is due to the extraordinary items, a reduction in the
deferred tax asset valuation account of $527,000 and the fiscal 1995
environmental litigation accrual of $750,000 and were offset by the reduction in
real estate sold during fiscal 1996 compared to fiscal 1995.
18
Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the
Private Securities Litigation Reform Act of 1995.
The following important factors, among others, in some cases have affected,
and in the future could affect, FPA's actual results and could cause FPA's
actual consolidated results to differ materially from those expressed in any
forward-looking statements made by, or on behalf of FPA Corporation:
o changes in consumer confidence due to perceived uncertainty of
future employment opportunities and other factors;
o competition from national and local homebuilders in the Company's
market areas;
o building material price fluctuations;
o changes in mortgage interest rates charged to buyers of the
Company's units;
o changes in the availability and cost of financing for the
Company's operations, including land acquisition;
o revisions in federal, state and local tax laws which provide
incentives for home ownership;
o delays in obtaining land development permits as a result of (i)
federal, state and local environmental and other land development
regulations, (ii) actions taken or failed to be taken by
governmental agencies having authority to issue such permits, and
(iii) opposition from third parties; and
o increased cost of suitable development land.
19
Item 8. Financial Statements and Supplementary Data.
FPA CORPORATION AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
Page
----
Report of independent accountants 21
Consolidated balance sheets at June 30, 1997
and June 30, 1996 22
Consolidated statements of operations and retained
earnings for the years ended June 30, 1997,
1996 and 1995 23
Consolidated statements of cash flows for the
years ended June 30, 1997, 1996 and 1995 24
Notes to consolidated financial statements 25-38
Financial statement schedule:
Valuation and qualifying accounts (Schedule II) 39
All other schedules have been omitted because they are not
applicable or the required information is shown in the consolidated financial
statements or notes thereto.
The individual financial statements of the Registrant's
subsidiaries have been omitted since the Registrant is primarily an operating
company and all subsidiaries included in the consolidated financial
statements, in the aggregate, do not have minority equity interest and/or
indebtedness to any person other than the Registrant or its consolidated
subsidiaries in amounts which together exceed 5 percent of total consolidated
assets at June 30, 1997, excepting indebtedness incurred in the ordinary
course of business.
20
Report of Independent Accountants
To the Board of Directors and Shareholders
of FPA Corporation.
In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of FPA Corporation and its subsidiaries at June 30, 1997 and 1996,
and the results of their operations and their cash flows for each of the three
years in the period ended June 30, 1997, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of
the Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Philadelphia, PA
September 19, 1997
21
FPA Corporation and Subsidiaries
Consolidated Balance Sheets
June 30,
------------------------
1997 1996
------------------------
(In Thousands)
------------------------
Assets
Cash $ 1,582 $ 2,617
Receivables
Trade accounts 3,223 3,622
Mortgage and other notes 404 554
Real estate held for development and sale:
Residential properties completed or
under construction 35,355 34,263
Land held for development or sale
and improvements 60,067 46,654
Property and equipment, at cost, less
accumulated depreciation 507 468
Deferred charges and other assets 6,475 4,688
--------- ---------
$ 107,613 $ 92,866
========= =========
Liabilities and Shareholders' Equity
Liabilities
Accounts payable $ 12,759 $ 12,251
Accrued expenses 5,519 5,097
Amounts due to related parties 2,701 3,026
Customer deposits 2,155 2,591
Mortgage and other note obligations
primarily secured by real estate
held for development and sale 53,637 42,524
Subordinated debentures 601 618
Other notes payable 10,917 9,756
Deferred income taxes 2,587 2,348
Minority interests 686 706
--------- ---------
Total liabilities 91,562 78,917
--------- ---------
Commitments and contingencies
Shareholders' equity
Preferred stock, $1 par, 500,000
shares authorized
Common stock, $.10 par, 20,000,000
shares authorized, 12,698,131
shares issued at June 30, 1997 and 1996 1,270 1,270
Capital in excess of par value - common stock 17,726 17,726
Retained earnings (deficit) (1,967) (4,176)
Treasury stock, at cost (1,342,113 and
1,158,936 shares held at June 30,
1997 and 1996, respectively) (978) (871)
--------- ---------
Total Shareholders' equity 16,051 13,949
--------- ---------
$ 107,613 $ 92,866
========= =========
See notes to consolidated financial statements
22
FPA Corporation and Subsidiaries
Consolidated Statements of Operations
and Retained Earnings
For the year ended June 30,
--------------------------------------------------------
1997 1996 1995
---- ---- ----
(In Thousands, except per share data)
--------------------------------------------------------
Earned revenues
Residential properties $ 96,104 $ 86,061 $ 102,384
Land sales 3,851 6,889 4,090
Other income 1,739 1,409 1,366
- ----------------------------------------------------------------------------------------------------
101,694 94,359 107,840
- ----------------------------------------------------------------------------------------------------
Costs and expenses
Residential properties 82,509 73,546 88,435
Land sales 3,666 6,520 3,380
Other 603 798 667
Selling, general and administrative 12,380 11,316 11,898
Interest
Incurred 6,465 6,838 6,184
Less capitalized (5,664) (5,538) (5,019)
Environmental litigation expenses 750
Minority interests (20) 26 74
- ----------------------------------------------------------------------------------------------------
99,939 93,506 106,369
- ----------------------------------------------------------------------------------------------------
Income before income taxes 1,755 853 1,471
Income tax (expense) benefit (380) 382 (270)
- ----------------------------------------------------------------------------------------------------
Income from operations before
extraordinary items 1,375 1,235 1,201
- ----------------------------------------------------------------------------------------------------
Extraordinary items, net 834 693
- ----------------------------------------------------------------------------------------------------
Net income 2,209 1,928 1,201
Retained earnings (deficit) at
beginning of year (4,176) (6,104) (7,305)
- ----------------------------------------------------------------------------------------------------
Retained earnings (deficit) at
end of year $ (1,967) $ (4,176) $ (6,104)
=====================================================================================================
For the year ended June 30,
--------------------------------------------------------
1997 1996 1995
---- ---- ----
=====================================================================================================
Primary earnings per share:
Income before extraordinary items $ .12 $ .10 $ .10
Extraordinary gains .07 .06
- ----------------------------------------------------------------------------------------------------
Total $ .19 $ .16 $ .10
=====================================================================================================
See notes to consolidated financial statements
23
FPA Corporation and Subsidiaries
Consolidated Statements of Cash Flows
For the year ended June 30,
---------------------------------------------------
1997 1996 1995
---- ---- ----
(In Thousands)
- ------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $ 2,209 $ 1,928 $ 1,201
Adjustments to reconcile net
income to net cash used by
operating activities:
Extraordinary gains (834) (693)
Reduction in deferred tax asset
valuation allowance (527)
Depreciation and amortization 128 128 205
Changes in operating assets and liabilities:
Receivables 851 1,134 2,778
Real estate held for development
and sale (14,505) 7,761 (6,981)
Deferred charges and other assets (1,787) 751 (497)
Accounts payable and other liabilities 762 (10,656) 3,055
Customer deposits (436) (148) (2,172)
- ------------------------------------------------------------------------------------------------------------------
Net cash used by operating
activities (13,612) (322) (2,411)
- ------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchase of property and equipment (167) (73) (207)
- ------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (167) (73) (207)
- ------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Borrowings from loans secured by real
estate assets 83,861 78,567 81,709
Repayment of loans secured by real
estate assets (72,748) (75,345) (77,313)
Repayment of subordinated debentures and
senior notes payable (17) (1,461) (425)
Borrowings from other note obligations 10,826 5,597 1,127
Repayments of other note obligations (9,071) (6,545) (2,662)
Purchase of treasury stock (107) (125)
- ------------------------------------------------------------------------------------------------------------------
Net cash provided by financing
activities 12,744 688 2,436
- ------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash (1,035) 293 (182)
Cash at beginning of year 2,617 2,324 2,506
- ------------------------------------------------------------------------------------------------------------------
Cash at end of year $ 1,582 $ 2,617 $ 2,324
==================================================================================================================
See notes to consolidated financial statements
24
FPA Corporation and Subsidiaries
Notes to Consolidated Financial Statements
Note 1. Summary of Significant Accounting Policies
FPA Corporation and its subsidiaries (the Company) are currently engaged in
residential real estate development in Pennsylvania and New Jersey. A summary
of the significant accounting principles and practices used in the preparation
of the consolidated financial statements follows:
Principles of consolidation
The consolidated financial statements include the accounts of the Company and
its subsidiaries, all of which are wholly-owned. The financial statements
include the consolidated financial position and results of operations of
Versailles Associates, L.P., and Bridlewood Associates, L.P., joint ventures
in which a subsidiary of the Company is the sole General Partner. The outside
limited partners have been allocated their portion of the income or loss and
equity. These amounts are presented as minority interests in the financial
statements. All material intercompany transactions and accounts have been
eliminated.
Earned revenues from real estate transactions
The Company recognizes revenues from sales of residential properties at the
time of closing. The Company also sells developed and undeveloped land in bulk
and under option agreements. Revenues from sales of land and other real estate
are recognized when the Company has received an adequate cash down payment and
all other conditions necessary for profit recognition have been satisfied. To
the extent that certain sales or portions thereof do not meet all conditions
necessary for profit recognition, the Company uses other methods to recognize
profit, including cost recovery and the deposit methods. These methods of
profit recognition defer a portion or all of the profit and recognition of the
profit is dependent upon the occurrence of future events.
Real estate capitalization and cost allocation
Residential properties completed or under construction are stated at cost or
estimated net realizable value, whichever is lower. Costs include land and
land improvements, direct construction costs, construction overhead costs,
interest on indebtedness and real estate taxes. Selling and advertising costs
are expensed as incurred. Total estimated costs of multi-unit developments are
allocated to individual units based upon specific identification methods.
Land and improvement costs include land, land improvements, interest on
indebtedness and real estate taxes. Appropriate costs are allocated to
projects on the basis of acreage, dwelling units and relative sales value.
Land held for development and sale and improvements are stated at cost or
estimated net realizable value, whichever is lower.
Land and land improvements applicable to condominiums, townhomes and
single-family homes, are transferred to construction in progress when
construction commences.
25
Interest costs included in Costs and Expenses for fiscal years 1997, 1996 and
1995 were $5,617,000, $4,588,000 and $5,236,000, respectively.
Depreciation, amortization and maintenance expense
Depreciation and amortization is primarily provided on the straight-line
method at rates calculated to amortize the cost of the assets over their
estimated useful lives. Expenditures for maintenance, repairs and minor
renewals are expensed as incurred; major renewals and betterments are capital
ized. At the time depreciable assets are retired or otherwise disposed of, the
cost and the accumulated depreciation of the assets are eliminated from the
accounts and any profit or loss is recognized.
Leases
The Company's leasing arrangements as lessee include the leasing of certain
office space, residential units and equipment. These leases have been
classified as operating leases.
Income taxes
The Company and its subsidiaries file a consolidated federal income tax
return. See Note 12 for an additional discussion of income tax matters.
Earnings per share
Primary earnings per common share is computed by dividing net income by the
weighted average number of common shares outstanding and common stock
equivalents. The weighted average number of shares used to compute primary
earnings per common share was 11,504,066 shares in 1997, 11,781,425 shares in
1996 and 11,974,618 shares in 1995. The conversion of the Convertible
Subordinated Note (Note 9) into Common Stock was not assumed since the effect
would be antidilutive.
Disclosures About Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments" (SFAS 107), requires the Company to disclose
the estimated fair market value of its financial instruments. The Company
believes that the carrying value of its financial instruments (primarily
mortgages receivable and mortgage notes payable) approximate fair market value
and that any differences are not significant. This assessment is based upon
substantially all of the Company's debt obligations being based upon the prime
rate of interest which is a variable market rate.
Reclassifications
Certain amounts in the accompanying financial statements have been
reclassified for comparative purposes.
Management's Estimates and Assumptions
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the
26
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 differ from those estimates.
Consolidated Statements of Cash Flows
For purposes of reporting cash flows, short-term investments with original
maturities of ninety days or less are considered cash equivalents.
Supplemental disclosures of cash flow information:
(In thousands)
1997 1996 1995
-----------------------------------
Cash paid during the year for:
Interest (net of amounts capitalized) $ - $143 $205
Income taxes $109 $165 $297
In July, 1996, the Company completed a transaction to fully satisfy notes
payable with an outstanding balance of approximately $1,650,000 and reacquired
183,177 shares of Common Stock in exchange for a cash payment of approximately
$1,061,000. These shares have been retained by the Company as Treasury Stock.
This transaction resulted in an extraordinary gain of $594,000, net of income
tax expense of approximately $100,000.
During the second quarter of fiscal 1996, the Company completed a transaction
to fully satisfy a note payable with an outstanding balance of approximately
$380,000 and reacquired 116,823 shares of Common Stock in exchange for a cash
payment of $235,000. These shares have been retained by the Company as
treasury stock. This transaction resulted in an extraordinary gain of
approximately $170,000, net of income tax expense of approximately $30,000.
In June, 1996, the Company fully satisfied $1,522,000 of its then outstanding
Subordinated Debentures and related accrued interest for a cash payment of
$907,000. This transaction resulted in an extraordinary gain of $523,000, net
of income tax expense of $92,000.
27
Note 2. Extraordinary Items
In August, 1995, the Company's former corporate offices were destroyed by
fire. Those premises were previously under a long term operating lease from a
related party. During fiscal 1997, the Company received insurance proceeds in
excess of the carrying costs of the related property and recognized an
extraordinary gain of approximately $240,000, net of tax effects of
approximately $62,000.
In July, 1996, the Company completed a transaction to fully satisfy notes
payable with an outstanding balance of approximately $1,650,000 and reacquired
183,177 shares of Common Stock in exchange for a cash payment of approximately
$1,061,000. These shares have been retained by the Company as Treasury Stock.
This transaction resulted in an extraordinary gain of $594,000, net of income
tax expense of approximately $100,000 in fiscal 1997.
In June, 1996, the Company satisfied $1,522,000 of its then outstanding
Subordinated Debentures and related accrued interest for a cash payment of
$907,000. This transaction resulted in an extraordinary gain of $523,000, net
of income tax expense of $92,000 in fiscal 1996.
During the second quarter of fiscal 1996, the Company completed a transaction
to fully satisfy a note payable with an outstanding balance of approximately
$380,000 and reacquired 116,823 shares of Common Stock in exchange for a cash
payment of $235,000. These shares have been retained by the Company as
treasury stock. This transaction resulted in an extraordinary gain of
$170,000, net of income tax expense of $30,000 in fiscal 1996.
Note 3. Joint Ventures
During fiscal 1997, the Company received approximately $319,000 from a final
non-recurring distribution in excess of basis from a joint venture
partnership. The Company will have no future obligations or operating
activities with respect to this entity.
In October, 1992, a wholly owned subsidiary of the Company, Versailles at
Europa, Inc. was established to act as the General Partner in a newly formed
Versailles Associates, L.P. (the "Partnership"). The Partnership was formed to
purchase and develop a tract of land in Cherry Hill, New Jersey. The terms of
the Partnership Agreement provide that the General Partner be allocated 55% of
the net profits and losses of the Partnership and have exclusive management
and control over the development of the property. The financial statements of
the Partnership are included in the consolidated financial statements of the
Company. The limited partner's share of the income and capital from this
entity has been presented as minority interest in the accompanying
consolidated financial statements.
Orleans Construction Corporation ("OCC") has entered into a joint venture
agreement with Bridlewood Associates, L.P., a limited partnership formed to
develop an 85 acre parcel of land in Mount Laurel, New Jersey. OCC is the
managing general partner. OCC and the limited
28
partner share equally in the profits or losses of the entity. The financial
statements of the Partnership are included in the consolidated financial
statements of the Company. The limited partner's share of the income and
capital from this entity has been presented as minority interest in the
accompanying consolidated financial statements.
Note 4. Certain Transactions with Related Parties
Prior to October 22, 1993, the date of acquisition by the Company of Orleans
Construction Corporation, a real estate company which was wholly owned by
Jeffrey P. Orleans, Chairman and Chief Executive Officer of the Company, OCC
had advanced funds to, borrowed funds from, and paid expenses and debt
obligations on behalf of Orleans Builders and Developers ("OB&D"), a limited
partnership whose partners include Jeffrey P. Orleans and the Trust of Selma
Orleans. Mr. Orleans owns or controls approximately 62.4% and 68.1% of the
currently outstanding and potentially outstanding stock (assuming conversion
of certain convertible obligations described below), respectively, at June 30,
1997. At June 30, 1997 and 1996, amounts owed by the Company to the
partnership aggregated $2,701,000 and $3,026,000, respectively. These advances
are payable on demand and bear interest at 7%. Interest incurred on these
advances amounted to $201,000, $236,000 and $369,000 for the years ended June
30, 1997, 1996 and 1995, respectively.
In addition to the OB&D obligations described above, as more fully described
in Note 9, the Company is also indebted to Jeffrey P. Orleans for an aggregate
of $7,903,000 and $6,609,000 at June 30, 1997 and 1996, respectively, under
the Convertible Subordinated 7% Note, Variable Rate Note, the portion of
Series A and B Notes held by Mr. Orleans and certain deferred interest and
principal thereon. Further, an aggregate of $117,000 and $433,000 of the
Series A Notes were held by other directors, officers and key personnel of the
Company as of June 30, 1997 and 1996, respectively.
The Company has exercised its final option during fiscal 1997 to purchase
sections of land from OB&D under the terms of an existing option agreement.
These parcels were subsequently sold to an unaffiliated third party for a
purchase price of $763,000, $1,901,000 and $3,336,000 during fiscal 1997, 1996
and 1995, respectively. These transactions resulted in a profit to the Company
before income taxes of $178,000, $301,000 and $548,000 for these periods,
respectively.
Note 5. Receivables
Trade accounts receivable result primarily from customer escrow deposits on
residential units, township development cost escrow amounts, accrued interest
and net proceeds due from residential closings. Mortgage and other notes
receivable, which are due in varying installments through 2017, bear interest
at rates from 8% to 12%. Mortgage and other notes receivable consist of the
following:
29
June 30,
---------------------
1997 1996
- ----------------------------------------------------------------
(In thousands)
- ----------------------------------------------------------------
Mortgage subsidiary receivables $ 272 $ 290
First mortgage notes, secured by
residential and other properties 132 264
- ---------------------------------------------------------------
$ 404 $ 554
===============================================================
Due within one year $ 70 $ 147
===============================================================
Note 6. Real Estate Held for Development and Sale
Residential properties consist of the following:
June 30,
---------------------
1997 1996
- ----------------------------------------------------------------
(In thousands)
- ----------------------------------------------------------------
Condominiums and townhomes $ 19,570 $ 20,293
Single-family homes 15,785 13,970
- ----------------------------------------------------------------
$ 35,355 $ 34,263
===============================================================
Residential properties completed or under construction consist of the
following:
June 30,
---------------------
1997 1996
- ----------------------------------------------------------------
(In thousands)
- ----------------------------------------------------------------
Under contract for sale $ 21,300 $ 21,243
Unsold 14,055 13,020
- ---------------------------------------------------------------
$ 35,355 $ 34,263
===============================================================
30
Note 7. Mortgage Subsidiaries
The Company has a wholly-owned financing subsidiary which had been involved,
through unaffiliated companies, in issuing mortgage-collateralized bonds.
Condensed financial information for the finance subsidiary is as follows:
June 30,
---------------------
1997 1996
- ----------------------------------------------------------------
(In thousands)
- ----------------------------------------------------------------
Total assets, principally
mortgage notes receivable $ 324 $ 351
Total liabilities, principally
bonds payable $ 266 $ 283
- ---------------------------------------------------------------
Advances from parent company $ 58 $ 68
===============================================================
Net income for the year ended $ 6 $ 32
===============================================================
During fiscal 1996, the Company completed a transaction to sell approximately
$1,000,000 of the mortgage receivables without recourse for assumption of the
related bond liability and proceeds of approximately $100,000.
Note 8. Property and Equipment
Property and equipment consists of the following:
June 30,
---------------------
1997 1996
- ----------------------------------------------------------------
(In thousands)
- ----------------------------------------------------------------
Equipment and fixtures $ 982 $ 815
Less accumulated depreciation (475) (347)
- ----------------------------------------------------------------
$ 507 $ 468
===============================================================
Depreciation expense was $128,000, $128,000 and $205,000 during fiscal 1997,
1996 and 1995, respectively.
Note 9. Mortgage and Other Note Obligations
The maximum balance outstanding under construction and inventory loan
agreements at any month end during fiscal 1997, 1996 and 1995 was $38,178,000,
$33,473,000 and $27,998,000, respectively. The average month end balance
during fiscal 1997, 1996 and 1995 was approximately $30,608,000, $29,327,000
and $22,940,000, respectively, bearing interest at an approximate average
annual rate of 9.25%, 9.5% and 9.2%, respectively. Mortgage obligations
secured by land held for development and sale and improvements aggregating
$17,925,000 and
31
$18,292,000 at June 30, 1997 and 1996, respectively, are due in varying
installments through fiscal 2002 with interest primarily at .75% above the
prime rate.
Maturities of land and improvement mortgage obligations, other than
residential property construction loans, during the next five fiscal years
are: 1998 - $6,977,000; 1999 - $7,273,000; 2000 - $3,255,000, 2001 - $172,000;
and 2002 - $248,000. Obligations under residential property and construction
loans amounted to $35,712,000 and $24,232,000 at June 30, 1997 and 1996,
respectively, and are repaid at a predetermined percentage of the selling
price of a unit when a sale is completed.
Included in the Other Notes Payable balance of $10,917,000 at June 30, 1997 is
a $3,000,000 Convertible Subordinated 7% Note dated August 8, 1996 issued to
Jeffrey P. Orleans which matures January 1, 2002. Upon approval of the listing
of the underlying shares on the American Stock Exchange, this note will be
convertible into FPA Corporation common stock at $1.50 per share with
quarterly interest payments and principal due in annual installments of
$1,000,000 beginning January 1, 2000. The Company also issued to Mr. Orleans
for cash consideration a Variable Rate Note due September 30, 2000 in the
principal amount of $2,000,000, which bears interest at prime plus 2% payable
quarterly, with annual principal repayments of $500,000 beginning December 31,
1997.
Also included in the aggregate Other Note Payable balance are Series A and
Series B Notes Payable held by Mr. Orleans and certain other officers,
directors and key personnel of the Company of approximately $1,670,000 which
mature in fiscal 1999. Repayment of these obligations which bear interest at
prime plus 2% will be from proceeds from the sale of units at certain
residential properties. During fiscal 1996, Mr. Orleans agreed to defer up to
$1,350,000 of interest and principal payments due him pursuant to the
repayment terms of the Series A and B Notes. As of June 30, 1997, the Company
has deferred approximately $1,350,000 of these payments which are also
included in Other Notes Payable. Interest is paid quarterly on this note,
which matures April 1, 1998.
In June, 1997, the Chester County Industrial Development Authority issued
bonds in the amount of $1,855,000 and loaned the proceeds thereof to a
subsidiary of the Company. The Bonds mature November 1, 2006 and bear interest
at 7%. The Bonds will be repaid at a predetermined amount from settlement
proceeds for each home sold with minimum annual repayments of approximately
$200,000 commencing on November 1, 1998. The proceeds from this obligation
will be used to construct and operate a spray irrigation facility which will
service the Company's Quaker Farms community in Chester County, Pennsylvania.
Included in Other Assets on the Company's Consolidated Balance Sheet at June
30, 1997 is $1,786,000 of bond proceeds which is restricted for use for this
facility. The total principal amount of $1,855,000 is included in Other Notes
Payable at June 30, 1997.
In addition, the Company has various working capital and property and
equipment note obligations which require various monthly repayment terms with
maturity dates from 1997 through 2000.
32
Note 10. Subordinated Debentures
On September 8, 1980, the Company sold 25,000 Units, each consisting of a
$1,000 debenture bearing interest at 14 l/2% per annum and 5 shares of Common
Stock.
The debentures, which are unsecured obligations and are subordinated to senior
indebtedness, as defined, mature September l, 2000 and require semi-annual
interest payments each September and March with the balance due on September
1, 2000. Optional prepayments may be made at 100% of the principal amount
thereof. The debentures contain certain default provisions and imposes
restrictions on the amount of dividends or distributions to shareholders. The
debentures are presented net of unamortized debt discount, which is being
amortized as additional interest over the life of the debentures. As of June
30, 1997, a total principal amount of $573,000 of original subordinated
debentures remain outstanding.
Note 11. Income Taxes
The provision (benefit) for income taxes is summarized as follows:
For Year Ended June 30,
---------------------------
1997 1996 1995
---------------------------
(In Thousands)
---------------------------
Continuing operations
Current $ 271 $ 145 $ 270
Deferred 109 (527)
- --------------------------------------------------------------
$ 380 $ (382) $ 270
==============================================================
Extraordinary Item
Current $ 162 $ 117
Deferred
- --------------------------------------------------------------
$ 162 $ 117
==============================================================
The differences between taxes computed at federal income tax rates and amounts
provided for continuing operations are as follows:
For Year Ended June 30,
---------------------------
1997 1996 1995
---------------------------
(In Thousands)
---------------------------
Amount computed at statutory rate $ 597 $ 290 $ 500
State income taxes, net of federal
tax benefit 59 21 17
Unrealized (realized) benefits from
net operating loss carry forwards
and other tax credits net of
changes in related valuation
reserves (276) (693) (247)
- ---------------------------------------------------------------
$ 380 $ (382) $ 270
==============================================================
33
Deferred income taxes reflect the impact of "temporary differences" between
the amount of assets and liabilities for financial reporting purposes and such
amounts as measured by tax laws and regulations. These "temporary differences"
are determined in accordance with Financial Accounting Standards Board
Statement No. 109 ("SFAS 109"). The principal component of the Company's
deferred tax liability of $2,587,000 at June 30, 1997 are temporary
differences arising from interest and real estate taxes incurred prior to
commencing active construction being capitalized for book purposes while being
expensed for tax purposes. In addition, temporary differences arise from net
realizable value adjustments recognized for book purposes but not for tax
purposes. These temporary differences reverse ratably as the communities
sellout. The principal items making up the deferred income tax provisions from
continuing operations are as follows:
34
For Year Ended June 30,
---------------------------
1997 1996 1995
- ----------------------------------------------------------------
(In Thousands)
- ----------------------------------------------------------------
Interest and real estate taxes $172 $238 $424
Difference in tax accounting for
land and property sales (net) 13 (29) 7
Unrealized (realized) tax net
operating loss carryforwards
and other tax credits, net of
changes in related valuation
reserves 223 (962) (370)
Reserves for book not tax (173) 142 (144)
Gain (loss) from joint ventures (109) 2
Deferred compensation (7) 34 99
Depreciation and other (10) 48 (16)
- ----------------------------------------------------------------
$109 $(527) $ 0
- ---------------------------------------------------------------
Temporary differences represent the cumulative taxable or deductible amounts
recorded in the financial statements in different years than recognized in the
tax returns. SFAS 109 requires the Company to record a valuation allowance
when it is "more likely than not that some portion or all of the deferred tax
assets will not be realized." It further states that "forming a conclusion
that a valuation allowance is not needed is difficult when there is negative
evidence such as cumulative losses in recent years." The ultimate realization
of certain tax assets depends on the Company's ability to generate sufficient
taxable income in the future, including the effects of future anticipated
arising/reversing temporary differences and the Company had, in fact, realized
substantial losses in years prior to 1995. In 1995 and prior years, while the
Company had undergone substantial capital and operational restructurings in
recent years and management anticipated that total deferred tax assets would
be fully realized by future operating results and future tax planning
strategies, the losses in recent years prior to 1995, along with continued
volatility in the local real estate markets in which the Company operates,
made it appropriate to record a valuation allowance equal to 100% of the total
deferred income tax assets which were dependent upon future income for
realization in certain tax jurisdictions.
In fiscal 1996, as a result of the capital and operational restructurings
previously discussed, as well as improving market conditions and operating
results, the Company reduced this valuation allowance to 50%. During fiscal
1997, through continuing improved results of operations and extraordinary
gains, the Company realized a large portion of these tax assets whose
realization would have been dependent on future income and, accordingly, has
no remaining valuation allowance. As of June 30, 1997, the Company has
deferred tax assets of $1,510,000 included in its net deferred tax liability
of $2,587,000.
At June 30, 1997, the Company had alternative minimum tax credits of
approximately $315,000 which may be used to reduce or eliminate ordinary
federal income taxes. These alternate
35
minimum tax credits, which do not have an expiration date, are part of the
deferred tax assets discussed previously.
Note 12. Stock Option Plan
In December 1992, the Board of Directors adopted (i) the 1992 Stock Incentive
Option Plan relating to options for up to 560,000 shares (increased in
December, 1996 to 910,000 shares) of Common Stock of the Company and (ii) the
Non-Employee Directors Stock Option Plan relating to a maximum of 100,000
shares. During fiscal 1997, 200,000 options were granted at an exercise price
of $1.50 per share. During fiscal 1996, 80,000 options were granted at an
exercise price of $1.25 to $2.00 per share and 50,000 options were granted at
an exercise price of $1.25 or the fair market value on the date of vesting,
whichever is greater.
In February, 1995, the Board of Directors adopted the 1995 Stock Option Plan
for Non-Employee Directors which provides for options for up to 100,000
shares. On February 28, 1995, 75,000 options were granted under this plan to
three additional non-employee Directors.
The option price per share under all plans was established at the fair market
value at the dates of each grant which was $.69 to $2.81 per share. Total
outstanding options under all three plans aggregated 997,500 shares with
expiration dates between fiscal 2004 and 2006.
Effective in fiscal 1997, the Company was required to adopt the provisions of
Statement of Financial Accounting Standards 123 ("SFAS 123") Accounting for
Stock Based Compensation. As permitted, the Company has elected to continue to
utilize the intrinsic value method and not to charge the fair value of such
options as earned directly to the financial statements but to disclose the
effects of such a charge. During the fiscal years ended June 30, 1997, 1996
and 1995, the market value of such options granted and vested was not material
to the Company.
Note 13. Commitments and Contingencies
At June 30, 1997, the Company had outstanding bank letters of credit amounting
to $20,453,000 as surety for completion of improvements at various
developments of the Company.
At June 30, 1997 the Company had agreements to purchase land and approved
homesites aggregating approximately 1,200 building lots with purchase prices
totaling approximately $33,600,000 at thirteen locations. Purchase of the
properties is contingent upon obtaining all governmental approvals and
satisfaction of certain requirements by the Company and the Sellers. The
Company expects to utilize purchase money mortgages, secured financings and
existing capital resources to finance these acquisitions. The Company
anticipates completing a majority of these acquisitions in fiscal 1998 and
1999. As of June 30, 1997 and 1996, the Company had paid deposits and incurred
other costs associated with the acquisition and development of these parcels
aggregating $1,900,000 and $2,073,000, respectively, and are included in Other
Assets.
Development and sale of real property creates a potential for environmental
liability on the part of the developer, owner or any mortgage lender for its
own acts or omissions as well as those of
36
current or prior owners of the subject property or adjacent parcels. If
hazardous substances are discovered on or emanating from any of the Company's
properties, the owner or operator of the property (including the prior owners)
may be held strictly liable for all costs and liabilities relating to such
hazardous substances. Environmental studies are undertaken in connection with
property acquisitions by the Company.
Pursuant to an Order dated February 6, 1996 issued by the New Jersey
Department of Environmental Protection ("NJDEP"), the Company submitted a
Closure/Post-Closure Plan ("Plan") and Classification Exception Area ("CEA")
for certain affected portions of Colts Neck Estates, a single family
residential development built by the Company in Washington Township,
Gloucester County, New Jersey. The affected areas include those portions of
Colts Neck where solid waste allegedly was deposited. NJDEP approved the Plan
and CEA on July 22, 1996. The Plan, in part, requires the Company to (i)
perform gas monitoring for methane on a quarterly basis for a period of one
year; (ii) vegetate and cover with clean fill affected areas; and (iii) deed
restrict portions of the affected open space owned by it. NJDEP's approval of
the CEA imposes restrictions on the use of ground water within the affected
area. Neither the implementation of the Plan nor CEA is expected to have a
material adverse effect on the Company's results of operations or its
financial position although NJDEP as a standard condition of its approval of
the Plan and CEA reserves the right to amend its approval to require
additional remediation measures if warranted.
Approximately 145 homeowners at Colts Neck instituted three lawsuits against
the Company, which were separately filed in state and Federal courts between
April and November, 1993. These suits were consolidated in the United States
District Court for the District of New Jersey and were subject to
court-sponsored mediation. Asserting a variety of state and federal claims,
the plaintiffs in the consolidated action alleged that the Company and other
defendants built and sold them homes which had been constructed on and
adjacent to land which had been used as a municipal waste landfill and a pig
farm. The complaints asserted claims under the federal Comprehensive
Environmental Response, Compensation and Liability Act, the Federal Solid
Waste Disposal Act, the New Jersey Sanitary Landfill Facility Closure and
Contingency Act, the New Jersey Spill Compensation and Control Act, as well as
under theories of private nuisance, public nuisance, common law fraud, latent
defects, negligent misrepresentation, consumer fraud, negligence, strict
liability, vendor liability, and breach of warranty, among others.
The Company, in turn, asserted third-party claims against the former owners
and operators of the Colts Neck property as well as claims against the
generator of the municipal waste allegedly disposed on the property.
In September, 1993 the Company brought an action in New Jersey state court
against more than 30 of its insurance companies seeking indemnification and
reimbursement of costs of defense in connection with the three Colts Neck
actions referred to above.
As a result of the court sponsored mediation, the Company and the plaintiffs
in the consolidated litigation entered into a settlement agreement. Under that
agreement, which has been approved by the Court, a $6,000,000 Judgment was
entered against the Company in favor of a class
37
comprising most of the current and former homeowners. The Company, which has
paid $650,000 on August 28, 1996 to the class, has no liability for the
remainder of the Judgment. The remainder of the Judgment is to be paid solely
from the proceeds of the state court litigation against the Company's
insurance companies. Although, under the settlement agreement the Company is
obligated to prosecute and fund the litigation against its insurance
companies, the Company is entitled to obtain some reimbursement of those
expenses. Specifically, under the settlement agreement, the Company may obtain
reimbursement of its aggregate litigation expenses in excess of $100,000
incurred in connection with its continued prosecution of the insurance claims
to the extent that settlements are reached and to the extent that the portion
of those settlement funds designated to fund the litigation are not exhausted.
The Company's right to reimbursement may, under certain circumstances, be
limited to a total of $300,000.
The Company is currently prosecuting the litigation against its insurance
companies in state court. Prosecution of those claims was pursued in federal
court between 1994 and 1996, but has since been remanded to state court on
jurisdictional grounds. The state court insurance litigation is being actively
pursued. To date, settlements totaling $577,500 have been reached with seven
defendants, half of which have been or will be paid to the plaintiff class,
and half of which has been or will be used to fund the continued litigation.
The likelihood of a favorable judgment or additional settlements in the
litigation is uncertain.
In addition, the Company has reached a $205,000 tentative settlement of its
third party claims in the above-mentioned federal litigation. One-half of the
proceeds of any such settlement will be payable to the plaintiff class under
the 1995 settlement agreement with the class.
The Company has accrued estimated costs of environmental testing as well as
all other reasonably estimable future investigatory, engineering, legal and
litigation costs and expenses. During fiscal 1995, the Company increased its
recorded reserves to give effect to the net amounts to be paid under the
settlement agreement, and the anticipated unreimbursed costs to the Company of
the insurance litigation. The Company believes that neither the implementation
of the settlement agreement nor the resolution of the insurance claims through
further litigation will have a material effect on its results of operations or
its financial position.
The Company is not aware of any other environmental liabilities associated
with any of its other projects.
38
FPA CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
For the year ended June 30, 1997, 1996 and 1995
($000 omitted)
Column A Column B Column C Column D Column E
- -------------------------------------------------------------------------------------------------------------------
Additions
--------------------------------------
Balance at Charged to costs Charged to other Deduc- Balance at
Description beginning of period and expenses accounts - describe tions - end of period
- ------------------------------------------------------------------------------------------------------------------------
Provision for uncollectibility
of receivables:
Year ended June 30, 1997 $ - $ - $ - $ -
===== ===== ====== ======
Year ended June 30, 1996 $ 30 $ - $ 30 $ -
====== ====== ====== =====
Year ended June 30, 1995 $ 35 $ - $ 5 $ 30
====== ====== ====== ======
39
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
There are no matters required to be reported hereunder.
PART III
Item 10. Directors and Executive Officers of the Registrant.
Incorporated herein by reference from the Company's definitive proxy
statement for its annual meeting of Stockholders to be held in December, 1997.
Information concerning the executive officers is included under the separate
caption Item A. "Executive Officers of the Registrant" under Part I of this Form
10-K.
Item 11. Executive Compensation.
Incorporated herein by reference from the Company's definitive proxy
statement for its annual meeting of Stockholders to be held in December, 1997.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Incorporated herein by reference from the Company's definitive proxy
statement for its annual meeting of Stockholders to be held in December, 1997.
Item 13. Certain Relationships and Related Transactions.
Incorporated herein by reference from the Company's definitive proxy
statement for its annual meeting of Stockholders to be held in December, 1997.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) l. Financial Statements
The financial statements and schedule listed in the index on
the first page under Item 8 are
40
filed as part of this Form 10-K.
(b) Reports on Form 8-K. The Company did not file a Form 8-K for the quarter
ended June 30, 1997.
(c) Exhibits
Exhibit Number
- --------------
3.l Certificate of Incorporation of the Company dated September 4, 1969
{incorporated by reference to Exhibit 2.l of the Company's Registration
Statement on Form S-7, filed with the Securities and Exchange Commission
(S.E.C. File No. 2-68662) (herein referred to as "Form S-7")}.
3.2 Amendment to Certificate of Incorporation of the Company filed July 25,
1983 {incorporated by reference to Exhibit 3.2 of Amendment No. 2 to the
Company's Registration Statement on Form S-2 filed with the Securities and
Exchange Commission (S.E.C. File No. 2-84724)}.
3.3 Amendment to Certificate of Incorporation of the Company filed May 27, 1992
(incorporated by reference to Exhibit 3.6 of Amendment No. 2 to the
Company's Registration Statement on Form S-1 filed with the Securities and
Exchange Commission (S.E.C. File No. 33-43943) (the "Form S-1")).
3.4 Agreement and Plan of Merger dated as of October 22, 1993, by and among the
Company, FPA Merger Subsidiary, Inc. a Pennsylvania corporation; Orleans
Construction Corp. ("OCC"); and Jeffrey P. Orleans, including the
Certificate of Designation respecting the Series C Preferred Stock
incorporated by reference to Exhibit 3.5 to the Company's Form 8-K dated
October 22, 1993 filed with the Securities and Exchange Commission (the
"1993 Form 8-K").
3.5 Certificate of Designation filed by the Company on September 6, 1991 with
the Secretary of State of Delaware respecting the Series A Preferred Stock
and Series B Junior Preferred Stock (incorporated by reference to Exhibit
4.4 of the Company's Form 8-K dated September 11, 1991 ("1991 Form 8-K")).
3.6 Subsequent Certificate to Certificate of Designations, Preferences and
Rights of Series A Preferred Stock and Series B Junior Preferred Stock of
FPA Corporation adopted September 14, 1992 and filed with the Secretary of
State of Delaware. (incorporated by reference to Exhibit 4.19 to
Registrant's Form 10-K for the fiscal year ended June 30, 1994.)
3.7 Subsequent Certificate to Certificate of Designations, Preferences and
Rights of Series A Preferred Stock and Series B Junior Preferred Stock of
FPA Corporation filed on September 2, 1993 with the Secretary of State of
Delaware.
3.8 Certificate of Designations, Preferences and Rights of Series C Preferred
Stock filed by the Company on October 21, 1993 with the Secretary of State
of Delaware respecting the Series C Preferred Stock. (incorporated by
reference to Exhibit 2.1 to the Company's Form 8-K dated October 22, 1993).
3.9 By-Laws, as last amended March 16, 1990 (incorporated by reference to
Exhibit 3.1 to the Company's Form 8-K dated April 11, 1990, filed with the
Securities and Exchange Commission (the "1990 Form 8-K")).
41
4.l Form of the Company's 14 l/2% Subordinated Debentures due September l, 2000
(contained in, and beginning on page 12 of, Exhibit 4.2).
4.2 Form of Indenture dated September l, 1980, between the Company and The
Fidelity Bank (the "Debenture Indenture"), relating to the Company's
14 l/2% Subordinated Debentures due September l, 2000 (incorporated by
reference to Exhibit 2.3 of Amendment No. 2 to the Company's Form S-7).
4.3 Form of Second Supplemental Indenture dated March 30, 1990 to the Debenture
Indenture (incorporated by reference to Exhibit 4.3 to the 1990 Form 8-K).
4.4 Note Exchange Agreement, dated September 11, 1991, respecting the issuance
of $5,032,935.38 aggregate principal amount of 12 5/8% Senior Notes due
February 15, 1996, with the form of the Company's 12 5/8% Senior Notes due
February 15, 1996 attached as Exhibit A thereto (incorporated by reference
to Exhibit 4.5 to the 1991 Form 8-K).
4.5 Debenture Exchange Agreement, dated September 11, 1991, respecting the
issuance of $2,356,282.50 aggregate principal amount of 1991 14 1/2%
Subordinated Debentures due September 1, 2000 with the form of the
Company's 1991 14 1/2% Subordinated Debentures due September 1, 2000
attached as Exhibit A thereto (incorporated by reference to Exhibit 4.6 to
the 1991 Form 8-K).
4.6 Form of Note Purchase Agreement dated as of October 22, 1993, together with
form of Series A Variable Rate Notes due September 15, 1998 issued by the
Company attached thereto (incorporated by reference to Exhibit 4.2 to the
1993 Form 8-K).
4.7 Form of Note Purchase Agreement dated October 22, 1993, together with form
of Series B Variable Rate Mortgage Notes due September 15, 1998 issued by
the Company attached thereto (incorporated by reference to Exhibit 4.24 to
the 1993 Form 8-K).
42
4.8 Form of Note Purchase Agreement, dated as of August 1, 1996, together with
form of $2,000,000 Variable Rate Note due September 30, 2000 (incorporated
by reference to Exhibit 4.8 to the 1996 Form 10-K).
4.9 Form of Note Purchase Agreement, dated as of August 1, 1996, together with
form of $3,000,000 Convertible Subordinated 7% Note due January 1, 2002
(incorporated by reference to Exhibit 4.9 to the 1997 Form 10-K).
10.1 Form of Indemnity Agreement executed by the Company with Directors of the
Company (incorporated by reference to Exhibit B to the Company's Proxy
Statement respecting its 1986 Annual Meeting of Stockholders).
10.2 Employment Agreement between the Company and Jeffrey P. Orleans, dated June
26, 1987 (incorporated by reference to Exhibit 10.2 to the Form S-1.)
10.3 Mortgage dated March 17, 1992 granted by the Company to Jeffrey P. Orleans,
respecting property in Washington Township, Gloucester County, New Jersey
(incorporated by reference to Exhibit 10.3 to the 1992 Form 8-K).
22. Subsidiaries of Registrant.
25. Power of Attorney (included on Signatures page).
27. Financial Data Schedule (included in electronic filing format only).
43