<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 June 30, 1995
[ ] 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
THE WRITER CORPORATION
----------------------
(Exact name of registrant as specified in its charter)
Colorado 84-0510478
--------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
27 Inverness Drive East, Englewood, Colorado 80112
-------------------------------------------- -------
(Address of principal executive offices) Zip Code
(303) 790-2870
--------------
(Registrant's telephone number, including area code)
Not Applicable
--------------
(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
------ -------
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. 5,962,060 shares (including
treasury stock) as of August 8, 1995.
<PAGE>
THE WRITER CORPORATION
AND SUBSIDIARIES
INDEX
Page
PART I. FINANCIAL INFORMATION Number
-------
Item 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets
June 30, 1995 (Unaudited) and
December 31, 1994 3
Condensed Consolidated Statements
of Operations for the three and six months
ended June 30, 1995 and 1994 (Unaudited) 5
Condensed Consolidated Statements of Cash Flows
for the six months ended June 30, 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 9
PART II. OTHER INFORMATION 13
2
<PAGE>
THE WRITER CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
---- ----
(Unaudited)
<S> <C> <C>
ASSETS
Residential real estate held for sale and investment, net:
Homes under construction $17,711,000 $17,466,000
Model homes and furnishings 4,903,000 5,154,000
Land and land development 8,561,000 8,905,000
Unplatted land 6,999,000 7,040,000
------------ -----------
Total 38,174,000 38,565,000
Office property and equipment, less accumulated
depreciation of $937,000 and $918,000, net: 436,000 423,000
Other assets:
Cash and cash equivalents 816,000 1,305,000
Restricted cash 160,000 286,000
Accounts receivable 294,000 192,000
Deferred tax asset 285,000 285,000
Other 558,000 795,000
------------ -----------
Total $40,723,000 $41,851,000
------------ -----------
------------ -----------
<FN>
(Continued)
</TABLE>
3
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
---- ----
(Unaudited)
<S> <C> <C>
LIABILITIES
Notes payable (Note B) $26,836,000 $25,937,000
Accounts payable and accrued expenses 4,890,000 6,356,000
Accrued interest 591,000 442,000
------------ -----------
Total 32,317,000 32,735,000
STOCKHOLDERS' EQUITY
Common stock, $.10 par value; authorized,
10,000,000 shares, issued 5,960,220 and
5,958,832 (including treasury stock) 596,000 596,000
Additional paid-in capital 12,153,000 12,151,000
Deficit (2,300,000) (1,588,000)
------------ -----------
Total 10,449,000 11,159,000
Less treasury stock, at cost, 244,986 shares 2,043,000 2,043,000
------------ -----------
Total Stockholders' Equity, net 8,406,000 9,116,000
------------ -----------
Total $40,723,000 $41,851,000
------------ -----------
------------ -----------
<FN>
See notes to consolidated financial statements.
</TABLE>
4
<PAGE>
THE WRITER CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Residential operations:
Revenue $7,803,000 $9,734,000 $13,583,000 $17,820,000
Cost of sales (6,470,000) (7,722,000) (11,253,000) (13,703,000)
Expenses (1,876,000) (1,856,000) (3,245,000) (3,705,000)
----------- ----------- ----------- -----------
Income (loss) from residential operations (543,000) 156,000 (915,000) 412,000
Interest and other income (expense), net (5,000) 78,000 50,000 234,000
----------- ----------- ----------- -----------
Net income (loss) before income taxes (548,000) 234,000 (865,000) 646,000
Income taxes 5,000 13,000
----------- ----------- ----------- -----------
Net income (loss) before extraordinary item (548,000) 229,000 (865,000) 633,000
Extraordinary item-gain on extinguishment
of debt (Note B) 153,000
----------- ----------- ----------- -----------
Net income (loss) $(548,000) $229,000 $(712,000) $633,000
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Earnings (loss) per share:
Primary
Continuing operations $(.10) $.04 $(.15) $.10
Extraordinary item -- -- .03 --
------ ------ ------ -----
Net income $(.10) $.04 $(.12) $.10
------ ------ ------ -----
------ ------ ------ -----
Fully diluted
Continuing operations $(.10) $.04 $(.15) $.10
Extraordinary item -- -- .03 --
------ ------ ------ -----
Net income $(.10) $.04 $(.12) $.10
------ ------ ------ -----
------ ------ ------ -----
Weighted average number of shares
Outstanding
Primary 5,715,234 6,123,400 5,715,003 6,137,600
Fully diluted 5,715,234 6,465,100 5,715,003 6,479,300
<FN>
See notes to consolidated financial statements.
</TABLE>
5
<PAGE>
THE WRITER CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
1995 1994
---- ----
<S> <C> <C>
NET CASH USED IN OPERATING ACTIVITIES: $(1,358,000) $(3,260,000)
------------ -----------
CASH FLOWS USED IN INVESTING ACTIVITIES-
Purchases of office property and equipment (32,000) (28,000)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable 13,100,000 12,026,000
Principal payments on notes payable (12,201,000) (10,441,000)
Proceeds from the sale of common stock 2,000
----------- -----------
Net cash provided by financing activities 901,000 1,585,000
NET DECREASE IN CASH AND
CASH EQUIVALENTS (489,000) (1,703,000)
CASH AND CASH EQUIVALENTS, beginning of period 1,305,000 2,736,000
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 816,000 $ 1,033,000
----------- -----------
<FN>
See notes to consolidated financial statements.
</TABLE>
6
<PAGE>
THE WRITER CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
A. ACCOUNTING POLICIES:
The consolidated balance sheet as of June 30, 1995, the related
condensed consolidated statements of operations for the three and six
month periods ended June 30, 1995 and 1994 and the related condensed
consolidated statements cash flows for the six month periods ended June
30, 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.
C. SUBSEQUENT EVENTS:
PRIVATE PLACEMENT OF COMMON STOCK
During the second quarter, the Company initiated a private placement of
its common stock. The "best efforts" offering is for the sale of a
minimum of 1,333,333 shares and a maximum of 2,000,000 shares issued at
$1.50 per share, with a gross sales price of $2,000,000 up to a maximum
of $3,000,000. In conjunction with the offering, the Company has
entered into an arrangement with an investment banking firm. Under the
terms of this arrangement the Company agreed to provide "accredited
investors" which would collectively purchase no less than $1.4 million
of the offering and the underwriter has agreed to provide purchasers of
no less than $1.1 million of the offering. The underwriter will be
compensated at 6% of the total gross proceeds in excess of $1 million,
of which 3% will be paid in the form of Company stock issued at $1.50
per share and 3% will be paid in cash. The minimum offering of
$2,000,000 was subscribed to and accepted as of July 31, 1995.
7
<PAGE>
THE WRITER CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
C. SUBSEQUENT EVENTS:(Continued)
Three of the Company's directors, George S. Writer, Jr. ($300,000),
Robert G. Tointon, through his affiliated company, Phelps-Tointon, Inc.
($200,000) and Louis P. Bansbach, III ($100,000) invested in this
private placement. The balance of the $2,000,000 minimum was purchased
by "accredited investors" which were unaffiliated with the Company.
Because this placement is a "best efforts" offering, the Company is
uncertain at this point whether sales will exceed 1,333,333 shares at an
offering price of $2,000,000. All sales pursuant to this placement will
be concluded prior to August 31, 1995.
RESTRUCTURING OF EXISTING DEBT
On June 22, 1995 the Company entered into an agreement with one of its
lenders by which approximately $2,756,000 in outstanding unsecured debt
may be satisfied for $750,000 cash payment which will result in an
extraordinary gain after tax of approximately $1,960,000. The terms of
this agreement required the Company to make a $200,000 payment on July
31, 1995, which has been made, and an additional $550,000 payment on
August 30, 1995 which the Company expects to make from the proceeds of
the aforementioned common stock offering. In addition, under the terms
of a previous restructuring agreement, the Company was obligated to this
lender for stock appreciation rights on 500,000 shares of the Company's
common stock which are also being satisfied in full upon such final
payment to the lender.
8
<PAGE>
THE WRITER CORPORATION
AND SUBSIDIARIES
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
FINANCIAL CONDITION
At June 30, 1995 the Company's backlog was 81 units, an increase of 23
units or 39% over the backlog at March 31, 1995. The Company's backlog
at December 31, 1994 was 36 units. These increases reflect the re-
opening and re-marketing of the Company's Castle Pines North project, as
well as the results gained from the enhanced marketing and sales effort
which the Company has been focusing on during the last twelve months.
The Company's backlog at the end of 1994 was negatively impacted by the
rising interest rates and other market factors, including inventory
levels and some competitors willingness to offer significant incentives
to buyers which the Company was not willing to match during the fourth
quarter of 1994. Additionally, the continued stabilization of interest
rates has favorably impacted the Company in its sales and marketing
efforts over the last two quarters.
During the first and second quarters of 1995 the Company consciously
focused on reducing its speculatory inventory. Although its contract
backlog is up significantly, as previously mentioned, the overall homes
under construction increased slightly by $245,000 or less than 2%, which
reflects the efforts to transfer speculatory inventories into contract
backlog.
The Company's model homes and furnishings have decreased by $251,000,
which includes the completion of the six furnished model homes for the
Company's Castle Pines North project and reflects the sale of the
previous Castle Pines North models (five homes) and three models at the
Company's SouthPark project.
The Company's land and land development inventories have decreased by
approximately $344,000 as finished lot inventories have been
transferred to homes under construction. The Company acquired
approximately one third of a 27 acre parcel of land for townhome
development in Highlands Ranch. The Company's unplatted land decreased
slightly from the year end balance due to the transfer of costs
associated with the June acquisition of the Company's new townhome
project being reflected as land and land development.
The Company's office properties and equipment increased slightly due to
partial upgrading of the computer equipment in an effort to improve
financial and operational reporting capabilities.
The Company's cash balances at June 30, 1995 have decreased from the
year end balance due to reduction in accounts payable and accrued
expenses, as well as from the cash used in operations. The Company's
restricted cash balances have decreased as the funds restricted for land
development have been employed for that purpose. The other assets of
the Company decreased by approximately $237,000 due primarily to the
application of a $200,000 earnest deposit to the closing of the note
repayment discussed in Note B to the Consolidated Financial Statements
of the Company contained herein.
The Company's financial condition will be significantly enhanced
subsequent to the June 30, 1995 balance sheet date by two transactions,
one of which involved the sale of the Company's common stock through a
private placement and the second of which involved the full satisfaction
of a $2,756,000 unsecured note payable obligation for a cash payment of
$750,000. (See discussion at Note C to the Consolidated Financial
Statements of the Company contained herein.)
9
<PAGE>
RESULTS OF OPERATIONS
The Company closed 41 and 74 units for the three and six month periods
ended June 30, 1995 as compared to 56 and 106 for the same periods in
the prior year. This decreased revenues by $1,931,000 or 20% and
$4,237,000 or 24% over the prior year respective periods. For the
second quarter the average sales price was $190,300 as compared to
$175,200 for the previous quarter and $168,100 for the prior year six
month period. The average increase in sales price is due to 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. The table below illustrates this mix.
<TABLE>
<CAPTION>
Closings Townhomes Cluster Homes Single Family Total
-------- --------- ------------- ------------- -----
<S> <C> <C> <C> <C>
3 month period ended June 30, 1995 26 5 10 41
3 month period ended June 30, 1994 31 3 22 56
6 month period ended June 30, 1995 50 6 18 74
6 month period ended June 30, 1994 69 9 28 106
</TABLE>
Cost of sales decreased $1,252,000 or 16% for the three month period and
$2,450,000 or 18% for the six month period ended June 30, 1995 as
compared to the same periods in 1994. Cost of sales did not decrease in
the same proportion as revenue due to increased market pressure from
competition willing to substantially decrease their pricing and/or
provide significant incentives to their buyers. Although the Company
does not typically follow this "discount to move" marketing strategy,
some discounting in certain projects has taken place in order to sell
speculative inventory units and/or maintain market share.
These market factors have negatively effected the Company's gross
profits. Gross profit for the three and six month periods ended June
30, 1995 were $1,333,000 and $2,330,000 respectively versus $2,012,000
and $4,117,000 for the prior year periods. As a percentage of revenue,
gross profit dropped 3.6% and 5.9% for the three and six month periods
when compared with the prior year.
Operating expenses in the six month period ended June 30, 1995 decreased
by $460,000. This decrease is attributable to overhead reductions
netted with increased marketing costs, as well as a reduction of
approximately $535,000 in interest expense from profit sharing
participations paid to development lenders on certain selected projects
which are nearing completion. As a percentage of revenue these
operating expenses increased 3% reflective of the aforementioned revenue
decrease. During the second quarter operating expenses increased
$507,000 and $20,000 when compared to the prior quarter and previous
years' second quarter. This second quarter increase was primarily
attributable to increased interest costs and sales and marketing
expenses. During the first and second quarter the Company executed a
marketing campaign which included television, radio and billboard
advertising, a departure from the traditional newsprint advertising the
Company has used. Although the campaign was relatively expensive, the
costs were shared through vendor cooperation. Management believes the
campaign was effective, evidenced by the increasing backlog and buyer
traffic which has taken place. All of these factors, when combined,
lead to the results presented on the Statement of Operations.
10
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
In the Company's most recent Form 10-Q for the period ended March 31,
1995, as well as the Company's annual form 10-K filed for the year ended
December 31, 1994, it was noted that, "the Company's liquidity and
capital resources continue to be strained by the recovery from prior
years activities, inventory growth and the increase and development
activities which were undertaken during the last three years."
Management has addressed this problem partly by refocusing attention on
cost control and operational efficiencies which led to some increased
cash flow from the Company's operations. However, notwithstanding the
progress that the Company has made in terms of its financial
restructuring and certain profitable operational periods, management
felt in was necessary to accelerate the generation of new working
capital in order to expand the operations which should allow for
improvement in operating results.
Therefore, in the second quarter the Company initiated a private
placement of common stock. The offering, under a "best efforts", is for
the sale of a minimum of 1,333,000 shares and a maximum of 2,000,000
shares issued at $1.50 per share with total proceeds generated of
$2,000,000 up to a maximum of $3,000,000. See discussion at Note C to
the Consolidated Financial Statements of the Company contained herein.
The Company has used a portion of the proceeds from such private
placement to fund the purchase of raw land for the Company's new
townhome project in Highlands Ranch and for the repayment of an
unsecured note payable at a substantial discount. The balance of the
proceeds are earmarked for working capital purposes including the
reduction in trade payables and accrued interest. Management believes
that the completion of the offering will allow the Company to continue
to focus on operational areas which should enhance the Company's ability
to improve operating results.
On June 22, 1995 the Company entered into an agreement with one of its
lenders by which approximately $2,756,000 of outstanding unsecured debt
will be repaid for $750,000 which will result in a gain after tax of
approximately $1,960,000. The terms of this restructuring agreement
required the Company to make a $200,000 payment on July 31, 1995, which
has been made, and an additional $550,000 payment on August 30, 1995,
which the Company expects to make from the proceeds of the
aforementioned common stock offering. In addition, under the terms of a
previous restructuring agreement, the Company was obligated to this
lender for stock appreciation rights on 500,000 shares of the Company's
common stock which are also being satisfied in full upon the final
payment to the lender in August. The gain on this transaction will be
recorded in August of 1995 when the final payment is made to the lender.
In February of 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 at a
discount which resulted in a gain of $153,000, net of related costs.
The balance of the loan commitment is being used for 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 Company's Castle Pines North project. Both
facilities are secured by Deeds of Trust on that project.
11
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
In July of 1995 the Company renewed its $12 million credit facility with
a national lender which was originally earmarked for its Castle Pines
North development. The renewal will allow the Company to use the
facility in several of its other projects, as well as Castle Pines
North. With this renewal, and coupled with the new development
facilities and other existing credit facilities, management believes
that it has adequate funds to provide a continuing supply of lots for
building as well as construction financing for the currently
contemplated inventory levels.
12
<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 six
months ended June 30, 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: August 9, 1995 By:
----------------------
Daniel J. Nickless
Sr. Vice President and
Chief Financial Officer
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> APR-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 976,000<F1>
<SECURITIES> 0
<RECEIVABLES> 294,000
<ALLOWANCES> 0
<INVENTORY> 38,174,000<F2>
<CURRENT-ASSETS> 0
<PP&E> 1,373,000
<DEPRECIATION> 937,000
<TOTAL-ASSETS> 40,723,000<F3>
<CURRENT-LIABILITIES> 5,481,000
<BONDS> 26,836,000
<COMMON> 596,000
0
0
<OTHER-SE> 7,810,000
<TOTAL-LIABILITY-AND-EQUITY> 40,723,000
<SALES> 7,803,000
<TOTAL-REVENUES> 7,803,000
<CGS> (6,470,000)
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (1,881,000)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (548,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (548,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (548,000)
<EPS-PRIMARY> (.10)
<EPS-DILUTED> (.10)
<FN>
<F1>Includes $160,000 of restricted cash
<F2>Inventory includes homes under construction of $17,711,000, model homes and
furnishings of $4,903,000, landlord land development of $8,561,000, and
unplatted land of $6,999,000
<F3>Total assets includes $843,000 of other assets
</FN>
</TABLE>
