<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to _____________
Commission file number: 0-08305
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THE WRITER CORPORATION
(Exact name of registrant as specified in its charter)
Colorado 84-0510478
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.
27 Inverness Drive East, Englewood, Colorado 80112
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(Address of principal executive offices) Zip Code
(303) 790-2870
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name, former address and former fiscal year, if change 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 during the
preceding 12 months (or for such shorter period that the registrant is 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 Item 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 Form 10-K or any amendment to Form
10-K. X
----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes No
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APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. 5,959,700 shares (including
treasury stock) as of March 31, 1995
<PAGE>
THE WRITER CORPORATION
AND SUBSIDIARIES
INDEX
Page
PART I. FINANCIAL INFORMATION Number
------
Item 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets
March 31, 1995 (Unaudited) and
December 31, 1994 3
Condensed Consolidated Statements
of Operations for the three months
ended March 31, 1995 and 1994 (Unaudited) 5
Condensed Consolidated Statements of Cash Flows
for the three months ended March 31, 1995 and
1994 (Unaudited) 6
Notes to Consolidated Financial Statements (Unaudited) 7
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 8
PART II. OTHER INFORMATION 10
2
<PAGE>
THE WRITER CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
---- ----
(Unaudited)
<S> <C> <C>
ASSETS
Residential Real Estate Held for Sale and
Investment, net:
Homes under construction $18,165,000 $17,466,000
Model homes and furnishings 6,156,000 5,154,000
Land and land development 8,207,000 8,905,000
Unplatted land 7,057,000 7,040,000
--------- ---------
Total 39,585,000 38,565,000
Office Property and Equipment, less accumulated
depreciation of $929,000 and $918,000, net: 430,000 423,000
Other Assets:
Cash and cash equivalents 783,000 1,305,000
Restricted cash 244,000 286,000
Accounts receivable 222,000 192,000
Deferred tax asset 285,000 285,000
Other 641,000 795,000
------- -------
Total $42,190,000 $41,851,000
----------- -----------
----------- -----------
</TABLE>
(Continued)
3
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
---- ----
(Unaudited)
<S> <C> <C>
LIABILITIES
Notes payable (Note B) $27,237,000 $25,937,000
Accounts payable and accrued expenses 5,590,000 6,356,000
Accrued interest 409,000 442,000
------- -------
Total 33,236,000 32,735,000
STOCKHOLDERS' EQUITY
Common Stock, $.10 par value; authorized,
10,000,000 shares, issued 5,959,300 and
5,958,800 (including treasury stock) 596,000 596,000
Additional Paid-in Capital 12,153,000 12,151,000
Deficit (1,752,000) (1,588,000)
--------- ---------
Total 10,997,000 11,159,000
Less Treasury Stock, at cost, 245,000 shares 2,043,000 2,043,000
--------- ---------
Total Stockholders' Equity, net 8,954,000 9,116,000
--------- ---------
$42,190,000 $41,851,000
----------- -----------
----------- -----------
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
THE WRITER CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
1995 1994
---- ----
<S> <C> <C>
Residential Operations:
Revenue $5,780,000 $8,086,000
Cost of sales (4,783,000) (5,981,000)
Expenses (1,369,000) (1,849,000)
----------- -----------
Income (loss) from Residential Operations (372,000) 256,000
Interest and other income, net 55,000 156,000
------ -------
Net (loss) income before income taxes (317,000) 412,000
Income taxes 8,000
------ -----
Net Income (loss) before extraordinary item (317,000) 404,000
--------- -------
Extraordinary item - gain on extinguishment
of debt (Note B) 153,000 --
Net income (loss) $(164,000) $404,000
----------- -----------
----------- -----------
Earnings (loss) per Share:
Continuing operations ($0.05) $0.07
Extraordinary item 0.02
----------- -----------
($0.03) $0.07
----------- -----------
----------- -----------
Weighted Average Number of Shares Outstanding: 5,959,300 5,941,300
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
THE WRITER CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
1995 1994
---- ----
<S> <C> <C>
NET CASH USED IN OPERATING ACTIVITIES: ($1,806,000) ($1,576,000)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of office property and equipment (18,000) (20,000)
----------- -----------
Net cash used in investing activities (18,000) (20,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable 8,329,000 4,656,000
Principal payments on notes payable (7,029,000) (4,539,000)
Proceeds from the sale of common stock 2,000
----------- -----------
Net cash provided by financing activities 1,302,000 117,000
----------- -----------
NET DECREASE IN CASH AND
CASH EQUIVALENTS (522,000) (1,479,000)
CASH AND CASH EQUIVALENTS, beginning of period 1,305,000 2,736,000
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $783,000 $1,257,000
----------- -----------
----------- -----------
</TABLE>
See notes to consolidated financial statements.
6
<PAGE>
THE WRITER CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
A. ACCOUNTING POLICIES:
The consolidated balance sheet as of March 31, 1995 and the related condensed
consolidated statements of operations and cash flows for the three month period
ended March 31, 1995 and 1994 are unaudited, but in management's opinion,
include all adjustments necessary for a fair presentation of such financial
statements. Such adjustments consisted only of normal recurring items. Interim
results are not necessarily indicative of results for a full year.
The consolidated financial statements include the accounts of The Writer
Corporation and its wholly owned subsidiaries (the Company). All significant
intercompany transactions and balances have been eliminated in consolidation.
The financial statements should be read in conjunction with the audited
Consolidated Financial Statements included in the annual report on Form 10-K for
the year ended December 31, 1994. Except as described herein, the accounting
policies utilized in the preparation of these financial statements are the same
as those set forth in the Company's annual financial statements except as
modified for interim accounting treatment.
B. NOTES PAYABLE:
During the first quarter of 1995, the Company consummated a $4,100,000 loan
bearing interest at prime plus 1.5%. The proceeds of the new loan were used to
repay a $2,447,000 obligation outstanding at December 31, 1994 at a discount, on
which the Company recognized an extraordinary gain of $153,000, net of related
expenses. With the payoff the Company was also released from a 25% profit
participation held by the former lender. The remaining balance of the new
facility will be used to fund future lot development, water tap purchases, model
furnishings and interest payments.
7
<PAGE>
THE WRITER CORPORATION
AND SUBSIDIARIES
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
FINANCIAL CONDITION
At March 31, 1995 the Company's backlog was 58 units, an increase of 61% or 22
units over the December 31, 1994 backlog. The Company's backlog was 80 units at
March 31, 1994. The change in backlog as compared to the same period in the
prior year reflects the decrease in new orders that the Company experienced
during the fourth quarter of 1994. Management believes that sales were impacted
by the rise in interest rates and other market factors, including inventory
levels and some competitors willingness to offer significant profit damaging
incentives to buyers. The increase since year end is reflective of a more
aggressive marketing strategy and focused management effort on sales coupled
with the stabilization of the interest rates. The increase in sales since
December 31, 1994 has resulted in an increase in homes under construction by
approximately $700,000.
Model homes and furnishings increased from year end due to the completion and
opening of 6 models at the Company's Castle Pines North community.
The decrease in land under development from December 31, 1994 is caused by the
transfer of completed lots from the land under development into homes under
construction, net of the Company's ongoing development activities.
Cash and cash equivalents were used to reduce the Company's accounts payable and
accrued expenses. The Company's growth requires a substantial portion of its
available cash to sustain its operations with any excess used to reduce its
liabilities to subcontractors, suppliers and lenders. The year end cash balance
reflects the impact of above average closing levels which occurred at the year
end.
During February, 1995 the Company refinanced its debt related to its Castle
Pines North project. With the payoff of the previous loan, the Company obtained
a $230,000 discount and a release of the 25% profit sharing interest which the
previous lender held. The new loan also provides for development and working
capital fundings. (See additional discussion below.)
The increase in notes payable from year end is attributable to increased
inventory levels and land development activity financed through banks.
RESULTS OF OPERATIONS
The Company closed 33 units during the three month period ended March 31,
1995, compared to 50 in the first quarter in 1994. This decreased revenues by
$2,306,000 or 28% from the prior year period. These decreases reflect the
softened market demand during the last two quarters of 1994. There was an
increase in average sales price from the prior year's first quarter from
$161,700 to
8
<PAGE>
$175,100. The average increase in sales price reflects the change in the mix of
townhome, single family and cluster homes sold during the periods and an overall
increase in selling prices for all of the Company's product due primarily to
cost increases. The table below illustrates the Company's sales mix.
<TABLE>
<CAPTION>
Closings Townhomes Cluster Homes Single Family Total
- - -------- --------- ------------- ------------- -----
<S> <C> <C> <C> <C>
3 month period ended Mar. 31,1995 24 1 8 33
3 month period ended Mar. 30, 1994 38 6 6 50
</TABLE>
Commensurate with the decrease in sales revenue cost of sales decreased
$1,198,000 or 20% for the three month period ended March 31, 1995 as compared to
cost of sales for the first quarter of 1994. The lower margins reflect sales
and marketing concessions made to stimulate sales of the Company's inventory
houses which were nearly completed at year end. This resulted in a decrease in
gross margins from 26% to 17% for first quarter.
The Company's operating expenses decreased by 26% or $480,000. This positive
trend is caused by reduced selling costs tied to lower revenue levels and
continued efforts to reduce administration costs.
The decrease in interest and other income is due to a non-recurring transaction
recorded during the year ended December 31, 1994.
LIQUIDITY AND CAPITAL RESOURCES
In February 1995 the Company consummated a new $4,100,000 land loan with a
financial institution. Proceeds from the new loan were used to repay a
$2,477,000 obligation outstanding at December 31, 1994 which resulted in a gain
of $153,000, net of related costs. The balance of the loan commitment will be
used for future lot development, water and sewer tap purchases, and interest
payments. This facility is non-revolving except for the water and sewer tap
portion, bears interest at prime plus 1.5% and matures in three years. In
addition to this land loan, the lender has committed to a $5,000,000 revolving
construction facility for use at the Castle Pines North project. Both
facilities are secured by Deeds of Trust on that project.
This new loan facility coupled with existing facilities the Company has are
adequate to provide a continuing supply of lots for building within the
Company's current projects. In addition, Management believes it has adequate
construction financing for planned homebuilding operations. The Company
continues to be strained for adequate working capital. In order for the Company
to maintain consistent levels of profitability and adequate liquidity several
factors affecting operations need to be considered, some of which are outside
the Company's control. They include continued cooperation from lenders,
continued support from subcontractors and vendors with past due accounts,
continued stability in market demand, lack of dramatic interest rate increases,
and continued enhancement of sales and production levels, coupled with ongoing
cost containment programs. Improvement in operating results and some
combination of additional equity or debt will be necessary if the Company is to
maintain all of its obligations on a current basis.
9
<PAGE>
THE WRITER CORPORATION
AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
None
Item 2. CHANGES IN SECURITIES
None
Item 3. DEFAULTS UPON SENIOR SECURITIES
None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
Item 5. OTHER INFORMATION
None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(b) There were no reports on Form 8-K filed for the three months
ended March 31, 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE WRITER CORPORATION
(Registrant)
Date: May 15, 1995 By: /s/ Daniel J. Nickless
--------------------------------
Daniel J. Nickless
Sr. Vice President and
Chief Financial Officer
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 1,027,000<F1>
<SECURITIES> 0
<RECEIVABLES> 222,000
<ALLOWANCES> 0
<INVENTORY> 39,585,000<F2>
<CURRENT-ASSETS> 0
<PP&E> 1,359,000
<DEPRECIATION> 929,000
<TOTAL-ASSETS> 42,190,000<F3>
<CURRENT-LIABILITIES> 5,999,000
<BONDS> 27,237,000
<COMMON> 596,000
0
0
<OTHER-SE> 8,358,000
<TOTAL-LIABILITY-AND-EQUITY> 42,190,000
<SALES> 5,780,000
<TOTAL-REVENUES> 5,835,000<F4>
<CGS> (4,783,000)
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (1,369,000)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (317,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (317,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 153,000<F5>
<CHANGES> 0
<NET-INCOME> (164,000)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> 0
<FN>
<F1>Includes 244,000 of restricted cash
<F2>Inventory includes homes under construction of $18,165,000, model homes and
furnishings of $6,156,000, Land and Land developments of $8,207,000 and
unplatted land of $7,057,000.
<F3>Total assets includes $926,000 of Other Assets.
<F4>Total revenues includes $55,000 of interest and other income.
<F5>Extraordinary gain on the extinguishment of debt.
</FN>
</TABLE>
