SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
(Mark One)
|X| Quarterly report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 2001 or
|_| Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ____________________ to __________________
Commission File Number 1-6844
CALPROP CORPORATION
(Exact name of registrant as specified in its charter)
California 95-4044835
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
13160 Mindanao Way, Suite 180, Marina Del Rey, California 90292
- --------------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (310) 306-4314
Not Applicable
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES |X| NO |_|
Number of shares outstanding of each of Registrant's classes of common stock, as
of July 6, 2001:
Number of Shares
Title of Each Class Outstanding
- ------------------------------ ----------------
Common Stock, no par value 10,290,535
CALPROP CORPORATION
Part I
Item I - Financial Information
Set forth is the unaudited quarterly report for the quarters ended June
30, 2001 and 2000, for Calprop Corporation. The information set forth reflects
all adjustments which were, in the opinion of management, necessary for a fair
presentation.
CALPROP CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, December 31,
2001 2000
(Unaudited)
------------ ------------
Real estate under development $ 88,864,348 $ 98,544,447
Other assets:
Cash and cash equivalents 3,819,338 2,394,310
Deferred tax assets (note 2) 6,535,343 6,535,343
Other assets 852,695 863,412
------------ ------------
Total other assets 11,207,376 9,793,065
------------ ------------
$100,071,724 $108,337,512
============ ============
The accompanying notes are an integral
part of these financial statements.
3
CALPROP CORPORATION
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30, December 31,
2001 2000
(Unaudited)
------------- -------------
Trust deeds and notes payable $ 58,046,577 $ 66,341,488
Related-party notes 19,946,568 20,702,243
------------- -------------
Total trust deeds, notes payable and 77,993,145 87,043,731
related-party notes
Accounts payable and accrued liabilities 7,011,559 9,316,681
Warranty reserves 579,928 546,984
------------- -------------
Total liabilities 85,584,632 96,907,396
Stockholders' equity:
Common stock, no par value
Authorized - 20,000,000 shares
Issued and outstanding - 10,290,535 shares
at June 30, 2001 and December 31, 2000 10,290,535 10,290,535
Additional paid-in capital 25,849,961 25,849,961
Deferred compensation (105,525) (105,525)
Stock purchase loans (531,009) (519,733)
Accumulated deficit (21,016,870) (24,085,122)
------------- -------------
Total stockholders' equity 14,487,092 11,430,116
------------- -------------
$ 100,071,724 $ 108,337,512
============= =============
The accompanying notes are an integral
part of these financial statements.
4
CALPROP CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
-----------------------------------------------------------
2001 2000 2001 2000
------------- ------------ ------------- -------------
Development operations:
Real estate sales $26,757,550 $10,214,099 $50,429,686 $17,797,462
Cost of real estate sales 24,377,392 9,400,957 46,003,691 17,307,159
------------ ------------------------------------------
Income from development operations 2,380,158 813,142 4,425,995 490,303
------------ ------------------------------------------
Other income 37,436 36,822 70,619 74,873
------------ ------------------------------------------
Other expenses:
General and administrative 695,344 618,544 1,430,187 1,254,549
Interest -- 36,764 -- 53,526
------------ ------------------------------------------
Total other expenses 695,344 655,308 1,430,187 1,308,075
------------ ------------------------------------------
Minority interests (note 4) (1,825) -- (1,825) (226,393)
Income (loss) before benefit for income taxes 1,724,075 194,656 3,068,252 (516,506)
Benefit for income taxes (note 2) -- -- -- 138,077
------------ ------------ ------------- ------------
Net income (loss) $ 1,724,075 $ 194,656 $ 3,068,252 ($378,429)
============ ============ ============= ============
Basic and diluted net income (loss) per share (note 3) $0.17 $0.02 $0.30 ($0.04)
===== ====== ====== ======
Basic and diluted net income (loss) per share (note 3) $0.17 $0.02 $0.29 $(0.04)
===== ====== ====== ======
The accompanying notes are an integral
part of these financial statements.
5
CALPROP CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30,
-----------------------------
2001 2000
------------ -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 3,068,252 $ (378,429)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Minority interests (1,825) (226,393)
Depreciation and amortization 24,513 31,620
Provision for warrantly reserves 162,171 375,530
Change in assets and liabilities:
Other assets (40,564) (273,935)
Prepaid expenses 28,556 29,530
Accounts payable and accrued liabilities (2,305,122) 1,181,764
Warranty reserves (129,227) (224,836)
Additions to real estate under development (36,321,767) (34,109,546)
Cost of real estate sales 46,003,691 17,307,159
Accrued interest for executive stock purchase loans (11,276) (11,338)
-----------------------------
Net cash provided by (used in) operating activities 10,477,402 (16,298,874)
CASH FLOWS FROM INVESTING ACTIVITIES -
Capital expenditures (1,788) (17,793)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under related-party notes 2,200,000 3,850,000
Payments under related-party notes (2,955,675) (6,354,340)
Borrowings under trust deeds and notes payable 36,597,927 39,712,222
Payments under trust deeds and notes payable (44,892,838) (21,328,469)
Distributions to joint venture partner -- (1,798)
-----------------------------
Net cash (used in) provided by financing activities (9,050,586) 15,877,615
-----------------------------
Net increase (decrease) in cash and cash equivalents 1,425,028 (439,052)
Cash and cash equivalents at beginning of period 2,394,310 1,405,663
-----------------------------
Cash and cash equivalents at end of period $ 3,819,338 $ 966,611
=============================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for -
Interest (net of amount capitalized) $53,526
Income taxes $95,345 $3,395
The accompanying notes are an integral
part of these financial statements.
6
CALPROP CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PERIODS ENDED JUNE 30, 2001 AND 2000
(Unaudited)
Note 1: Basis of presentation and significant accounting policies
The unaudited, condensed, consolidated financial statements included
herein have been prepared by the registrant pursuant to the
instructions to Quarterly Report on Form 10-Q required to be filed
with the Securities and Exchange Commission and do not include all
information and footnote disclosure required by accounting
principles generally accepted in the United States of America for
complete financial statements. The accompanying financial statements
have not been audited by independent auditors in accordance with
auditing standards generally accepted in the United States of
America, but in the opinion of management, such financial statements
include all adjustments, consisting only of normal recurring
adjustments necessary to present fairly the financial position of
Calprop Corporation ("the Company") and results of operations. The
condensed financial statements should be read in conjunction with
the financial statements and the notes thereto included in the
registrant's latest Annual Report on Form 10-K, particularly with
regard to disclosures relating to major accounting policies.
Recent accounting pronouncements - The Financial Accounting
Standards Board issued Statement of Financial Accounting Standards
("SFAS") No. 133 "Accounting for Derivative Instruments and Hedging
Activities" and No. 138 "Accounting for Certain Derivative
Instruments and Certain Hedging Activities", an Amendment of FASB
Statement No. 133 in June 1998 and June 2000, respectively. SFAS 133
and 138 are effective for fiscal years beginning after June 15, 2000
and require all derivatives to be recorded on the balance sheet at
fair value. If the derivative instrument qualifies as a hedge,
depending on the nature of the hedge, changes in fair value of the
derivative will either be offset against the change in fair value of
the hedged assets, liabilities, or firm commitments through earnings
or recognized in other comprehensive income until the hedge item is
recognized in earnings. The ineffective portion of a derivative's
change in fair value will be immediately recognized in earnings. The
adoption of SFAS 133 and 138 did not have any impact on the
Company's financial position or results of operations.
In July 2001, the Financial Accounting Standards Board issued SFAS
No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and
Other Intangible Assets." SFAS No. 141 is effective immediately and
SFAS 142 will be effective January 2002. These new standards are not
expected to have a significant impact on the Company's financial
position or results of operations.
The results of operations for the six months ended June 30, 2001 may
not be indicative of the operating results for the year ending
December 31, 2001.
Note 2: Income taxes
As of June 30, 2001, the Company had gross deferred tax assets of
$6,741,699 offset by a deferred tax asset valuation allowance of
$206,356. During the six months ended June 30, 2001, the Company
reduced the deferred tax asset valuation allowance by $1,227,301
which fully offset the provision for income taxes. The Company has
assessed its past earnings history and trends, sales backlog,
budgeted sales, and expiration dates of net operating loss
carryforwards and has determined that it is more likely than not
that the $6,535,343 of deferred tax assets will be realized.
As of June 30, 2001, the Company had net operating loss
carryforwards for federal and state income tax purposes of
approximately $17,600,000 and $830,000, respectively. For federal
and state tax purposes
7
the net operating loss carryforwards expire from 2007 through 2013,
and from 2001 through 2003, respectively.
Income taxes in 2000 includes the net refund of $141,488 resulting
from a claim filed for the carryback of losses related to certain
qualifying expenses incurred in 1994.
Note 3: Earnings per share
The following table sets forth the computation of basic and diluted
net income (loss) per share:
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------------------------------------
2001 2000 2001 2000
-------------------------------------------------------
Net income (loss) $ 1,724,075 $ 194,656 $ 3,068,252 $ (378,429)
=======================================================
Weighted average shares for basic net income (loss) per share 10,290,535 10,291,673 10,290,535 10,291,673
Effect of dilutive stock options 157,141 175,105 141,948 --
-------------------------------------------------------
Weighted average shares for dilutive net income per share 10,447,676 10,466,778 10,432,483 10,291,673
=========== =========== =========== ============
Basic net income (loss) per share $0.17 $0.02 $0.30 $(0.04)
=========== =========== =========== ============
Diluted net income (loss) per share $0.17 $0.02 $0.29 $(0.04)
=========== =========== =========== ============
Options to purchase 1,083,700 shares of common stock were
outstanding as of June 30, 2001 and December 31, 2000. For the three
months and six months ended June 30, 2001, 594,700 options were not
included in the computation of diluted net income because their
exercise prices were higher than the average market price per share
of common stock.
Note 4: Minority interest
The Company has consolidated the financial statements of the
following entities:
------------------------------------------------------------------------------------------------------------
Entity Ownership interest at Development
June 30, 2001
------------------------------------------------------------------------------------------------------------
Colorado Pacific Homes, Inc. ("CPH") 80% Real estate in the state of Colorado
DMM Development, LLC ("DMM") 67% Cierra del Lago and Antares projects,
California
Montserrat II, LLC ("Mont II") 99% Montserrat Estate project, California
Parkland Farms Development Co., LLC
("Parkland") 99% 115 lots in Healdsburg, California
RGCCLPO Development Co., LLC ("RGCCLPO") 100% 382 lots in Milpitas, California
PWA Associates, LLC ("PWA") 100% 68-unit apartment in Milpitas, California
------------------------------------------------------------------------------------------------------------
DMM: The Company is entitled to receive two-thirds of the profits of
DMM, and the other owner, RGC Courthomes, Inc. ("RGC"), is entitled
to receive the remaining one-third of the profits.
8
Mont II: Pursuant to the operating agreement of Mont II, income was
allocated first to PICal Housing Associates, L.P. ("PICaL") to
obtain the return of its capital. Subsequent income is allocated
100% to the Company.
Parkland: Pursuant to the operating agreement of Parkland, the
Company is entitled to receive ninety-nine percent of the profits of
Parkland, and the other member, an officer of the Company, is
entitled to receive the remaining one percent of the profits.
RGCCLPO: Pursuant to the operating agreement of RGCCLPO, the Company
was entitled to receive fifty percent of the profits of RGCCLPO, and
the other member, RGC, was entitled to receive the remaining fifty
percent of the profits. During December 1999, the Company purchased
all of RGC's ownership interest in RGCCLPO.
PWA: Pursuant to the operating agreement of PWA, the Company was
entitled to receive fifty percent of the profits of PWA, and the
other member, RGC Associates, LLC ("RGC Associates"), was entitled
to receive the remaining fifty percent of the profits. During May
2001, the Company purchased all of RGC Associates ownership interest
in PWA.
During the six months ended June 30, 2001, $44,513 of the total loss
of $46,338 incurred by the entities related to the minority interest
was not allocated to the minority interest because the minority
interest had a deficit interest in the Company. The Company does not
reflect the deficit for the minority interest because the minority
owners are not responsible for losses incurred beyond their equity.
The unrecognized minority interest in deficit of the Company as of
June 30, 2001 and December 31, 2000 was $103,318 and $58,805,
respectively. As a result, the Company has recorded minority
interest of $0 as of June 30, 2001 and December 31, 2000.
9
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion relates to the consolidated financial
statements of the Company and should be read in conjunction with the financial
statements and notes thereto appearing elsewhere in this report. Statements
contained in this "Management's Discussion and Analysis of Financial Condition
and Results of Operations" that are not historical facts may be forward-looking
statements. Such statements are subject to certain risks and uncertainties,
which could cause actual results to differ materially from those projected. You
are cautioned not to place undue reliance on these forward-looking statements.
Liquidity and capital resources
As of June 30, 2001, the Company had remaining loan commitments from
financial institutions of approximately $43,900,000, which may be drawn down by
the Company upon the satisfaction of certain conditions. The Company continues
to seek joint venture partners and additional financing to fund its operations.
As of June 30, 2001, the Company had seven residential housing
projects in various stages of development, with five producing revenues from
completed homes: Parc Metropolitan, High Ridge Court, Saddlerock, Creekside
Estates, and Montserrat Classics. The remaining two projects, Parcwest
Apartments and McGuire Luxury Apartments are in various stages of development.
As of June 30, 2001, the Company has 285 homes under construction, of which 87
are in escrow to be sold, and 19 model units. Additionally, the Company has an
inventory of 454 lots under development.
As of June 30, 2001, the Company had 87 units in escrow ("backlog")
compared with a backlog of 182 units as of June 30, 2000. The gross revenues of
such backlog was $31,920,000 and $57,440,000 as of June 30, 2001 and 2000,
respectively.
On July 17, 2001, the Company obtained a three year working capital loan
in the amount of $5,000,000 from the Curci-Turner Company to be used primarily
for land acquisitions to support the company's growth programs.
Based on its agreements with its lenders, the Company believes that
it will have sufficient liquidity to finance its construction projects in 2001
through funds generated from operations, funds available under its existing bank
commitments, funds generated from new lending institutions, and, if necessary,
funds that could be obtained by using its internally financed real estate
development in process as collateral for additional loans.
Management's plan, with respect to managing cash flow includes the
following components: pay off debt that is coming due in 2001, minimize
operating expenses, and maintain control over costs. With regard to the debt
coming due in 2001, management expects to extend the maturity dates of various
loans and pay the remaining loans off through cashflow from operations, prior to
their maturity date. With regard to minimizing operating expenses, management
plans to achieve this by continuing to closely examine overhead items.
Management anticipates that the funds generated from operations, including
borrowings from existing loan commitments, will be adequate to allow the Company
to continue operations throughout 2001.
Results of operations
Real estate sales for the three months ended June 30, 2001 increased
162.0% to $26,757,550 from $10,214,099 for the three months ended June 30, 2000.
For the six months ended June 30, 2001, real estate sales increased 183.4% to
$50,429,686 from $17,797,462 in the year-earlier period. The increase in real
estate sales for the three and six month periods of 2001 was primarily due to
the high volume of inventory of completed homes available for sale in 2001
compared to completed homes available for sale in 2000. In the second quarter of
2001, the Company sold 76 homes with an average sales price of $352,200, a 81.0%
increase in the volume of home sales compared to 42 homes with an average sales
price of $243,200 for the second quarter of 2000. During the first six months of
2001, the Company sold 144 homes with an average sales price of $350,200, a
92.0% increase in the volume of home sales compared to 75 homes with an average
sales price of $237,300 for the six months of 2000.
10
Gross profit increased to $2,380,158 in the second quarter of 2001
from $813,142 in the second quarter of 2000. For the six months ended June 30,
2001, gross profit increased to $4,425,995 from $490,303 in the corresponding
period of 2000. The significant increase of gross profit during the second
quarter of 2001 and six months ended June 30, 2001 results from the increase in
the number of home sales in the higher profit margin projects Parc Metropolitan
and Parkland Farms compared to the lower profit margin projects Summertree Park
and High Ridge Court primarily sold during 2000.
General and administrative expenses increased to $695,344 in the
three months ended June 30, 2001 from $618,544 in the corresponding period. For
the six months ended June 30, 2001, general and administrative expenses
increased to $1,430,187 from $1,254,549 in the corresponding 2000 period. The
increase is due to the significant growth in the number of lots under
development.
11
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits -
27 Financial data schedule
(b) Reports on Form 8-K
A Current Report on Form 8-K dated March 26, 2001 was filed with the
Securities and Exchange Commission (the "Commission") and included under item
7(a) its audited consolidated financial statements for the year ended December
31, 2000 and unaudited consolidated financial statements for the quarter ended
December 31, 2000, and under item 7(c) a press release announcing Calprop
Corporations' 2000 annual and fourth quarter results.
A Current Report on Form 8-K dated May 15, 2001 was filed with the
Securities and Exchange Commission (the "Commission") and included under item
7(a) its unaudited consolidated financial statements for the quarter ended March
31, 2001, and under item 7(c) a press release announcing Calprop Corporations'
first quarter results.
A Current Report on Form 8-K dated July 23, 2001 was filed with the
Securities and Exchange Commission (the "Commission") to announce an agreement
for a new $5 million, three-year working capital loan to be used primarily for
land acquisitions to support the company's growth programs.
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.
CALPROP CORPORATION
By: /s/ Mark F. Spiro .
----------------------------------------
Mark F. Spiro
Vice President/Secretary/Treasurer
(Chief Financial and Accounting Officer)
August 14, 2001
12