<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, 1996
[ ] 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. 7,354,600 shares as of
March 31, 1996
<PAGE>
THE WRITER CORPORATION
AND SUBSIDIARIES
INDEX
PAGE
PART I. FINANCIAL INFORMATION NUMBER
------
Item 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets
March 31, 1996 (Unaudited) and
December 31, 1995 3
Condensed Consolidated Statements
of Operations for the three months
ended March 31, 1996 and 1995 (Unaudited) 5
Condensed Consolidated Statements of Cash Flows
for the three months ended March 31, 1996 and
1995 (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 11
<PAGE>
THE WRITER CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
-------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Residential Real Estate Held for Sale and
Investment, net:
Homes under construction $16,147,000 $15,279,000
Model homes and furnishings 5,279,000 4,865,000
Land and land development 10,064,000 11,978,000
Unplatted land 5,883,000 5,883,000
----------- -----------
Total 37,373,000 38,005,000
Office Property and Equipment, less
accumulated depreciation of $716,000 and
$1,049,000: 657,000 649,000
Other Assets:
Cash and cash equivalents 1,175,000 1,409,000
Restricted cash 215,000 40,000
Accounts receivable 256,000 251,000
Deferred tax asset 317,000 317,000
Other 349,000 399,000
----------- -----------
Total $40,342,000 $41,070,000
----------- -----------
----------- -----------
</TABLE>
(Continued)
3
<PAGE>
THE WRITER CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
--------- ------------
(Unaudited)
<S> <C> <C>
LIABILITIES
Notes payable $21,632,000 $22,419,000
Accounts payable and accrued expenses 5,686,000 5,587,000
Accrued interest 526,000 527,000
----------- -----------
Total 27,844,000 28,533,000
STOCKHOLDERS' EQUITY (Note B)
Common stock, $.10 par value; authorized,
10,000,000 shares; 7,354,600 and 7,247,100
shares issued and outstanding 735,000 725,000
Additional paid-in capital 12,352,000 12,279,000
Deficit (589,000) (467,000)
----------- -----------
Total Stockholders' Equity, net 12,498,000 12,537,000
----------- -----------
$40,342,000 $41,070,000
----------- -----------
----------- -----------
(Concluded)
See notes to consolidated financial statements.
4
<PAGE>
THE WRITER CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
FOR THE THREE MONTHS
ENDED MARCH 31,
1996 1995
---- ----
Residential operations:
Revenue $ 8,932,000 $ 5,780,000
Cost of sales (7,639,000) (4,783,000)
Expenses (1,464,000) (1,369,000)
------------ ------------
Loss from residential operations (171,000) (372,000)
Interest and other income, net 49,000 55,000
Net loss before extraordinary item (122,000) (317,000)
Extraordinary item - gain on
extinguishment of debt 153,000
------------ ------------
Net loss $ (122,000) $(164,000)
------------ ------------
------------ ------------
Earnings (loss) per share:
Continuing operations ($0.02) ($0.05)
Extraordinary item 0.00 0 .02
------------ ------------
Net loss ($0.02) ($0.03)
------------ ------------
------------ ------------
Weighted average number of shares
outstanding: 7,298,900 5,959,300
</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,
1996 1995
---- ----
<S> <C> <C>
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES: $ 514,000 $(1,806,000)
---------- ------------
CASH FLOWS USED IN INVESTING ACTIVITIES-
Purchases of office property and equipment (44,000) (18,000)
---------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable 4,929,000 8,329,000
Principal payments on notes payable (5,716,000) (7,029,000)
Proceeds from the sale of common stock 83,000 2,000
---------- ------------
Net cash (used in) provided by financing
activities (704,000) 1,302,000
---------- ------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (234,000) (522,000)
---------- ------------
CASH AND CASH EQUIVALENTS, beginning of period 1,409,000 1,305,000
---------- ------------
CASH AND CASH EQUIVALENTS, end of period $1,175,000 $ 783,000
---------- ------------
---------- ------------
</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, 1996 and the related condensed
consolidated statements of operations and cash flows for the three month
period ended March 31, 1996 and 1995 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, 1995. 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. STOCKHOLDERS' EQUITY:
The Company finalized its private placement of its common stock during the
first quarter of 1996. In total 1,637,516 shares of common stock were issued
under the placement. In 1996, 107,513 shares of stock were issued, including
51,180 shares issued as compensation to the underwriter.
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, 1996 the Company's backlog was 87 units, an increase of 32% or
21 units over the December 31, 1995 backlog. The Company's backlog was 58
units at March 31, 1995. The change in backlog as compared to the same
period in the prior year reflects the increase in new orders that the Company
experienced during the fourth quarter of 1995 and the first quarter of 1996.
Management believes that sales were positively impacted by the stabilization
in interest rates and other market factors, including a reduction in
speculative inventory levels. The increase since year end is reflective of a
continued aggressive marketing strategy, market stability and the opening of
new models at the Company's Castle Pines North project. Although the
increase in backlog since year end is significant, the balance of homes under
construction remained relatively stable increasing by 6% or $868,000. This
change reflects the Company's continuing effort to reduce speculative
inventory balances, and their associated debt.
Model homes and furnishings increased from year end due to the completion and
opening of 2 models at the Company's Castle Pines North community, and
construction in process of three models at each of two townhome projects;
Settler's Village and Northpark.
The decrease in land under development from December 31, 1995 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.
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, as
compared to closing levels at March 31, 1996.
The decrease in notes payable from year end is attributable to reduced
inventory levels for speculative homes which were substantially complete.
The Company finalized its private placement of its common stock during the
first quarter of 1996. In total 1,637,516 shares of common stock were issued
under the placement. In 1996, 107,513 shares of stock were issued, including
51,180 shares issued as compensation to the underwriter. The net proceeds
coupled with the Results of Operations reflected here-in represent the net
change in total Stockholders' Equity.
8
<PAGE>
RESULTS OF OPERATIONS
The Company closed 41 units during the three month period ended March 31,
1996, compared to 33 in the first quarter in 1995. This increased revenues
by $3,152,000 or 55% from the prior year period. There was an increase in
average sales price from the prior year's first quarter from $175,100 to
$217,900. The Company's average sales price for all of 1995 was $194,900.
The increase in average 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.
CLOSINGS TOWNHOMES CLUSTER HOMES SINGLE FAMILY TOTAL
- -------- --------- ------------- ------------- -----
3 month period ended
Mar. 31, 1996 15 4 22 41
3 month period ended
Mar. 31, 1995 24 1 8 33
Cost of sales increased by approximately $2,856,000 or by 60% from the prior
year period. This resulted in a gross profit of approximately $1,293,000, an
increase of $296,000 from the prior year period. As a percentage of sales,
gross profit was 14.5% and 17.2%, respectively for the three months ending
March 31, 1996 and 1995. The lower gross profit percentage reflects the
incentives and concessions which were given to buyers to help market selected
speculative inventory homes. In addition, because some unsold units remained
in inventory for a longer than average time frame, (i.e., longer than presold
units), more construction overhead was added to their cost and expensed at
the time of sale.
Management believes that many competitors in the Company's primary marketing
area have been overly aggressive in their marketing strategy in attempts to
gain or simply maintain market share. This has negatively impacted margins,
in all ranges of the merchant built market.
Although the Company's margins have been impacted by these market pressures
as speculative inventory units were sold, management believes it can mitigate
some of the margin pressure by limiting the number of new speculative
inventory starts, and has done so since the second half of 1995. This is
evidenced by current backlog and presold to speculative unit mixes.
As a percentage of revenue the Company's operating expenses for the
comparative first quarters decreased by 8% from 24% to 16%. This improvement
reflects the efficiencies garnered by higher revenues with no appreciable
difference in overhead levels. Also contributing were decreases in fixed
marketing costs; primarily advertising, promotion and model costs, as well as
a decrease in interest expensed commensurate with the decrease in speculative
inventory levels.
9
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
With the finalization of the Company's private placement of common stock in
the first quarter of 1996 and the non recurring gain on early extinguishment
of debt recorded in 1995, the Company's current stockholders' equity is
approximately $12,500,000. This results in a favorable debt to equity ratio.
Notwithstanding these debt and equity levels, management is committed to its
continuing cost containment program for fixed costs and intends to reduce
asset levels which will assist in returning to sustained operational
profitability.
In April 1996, the Company modified and increased by $2,000,000 its
construction facility for the Castle Pines North project. This was necessary
in order to finance the level of presold units currently in process.
In June 1996, the Company is committed, under previous agreements, to
purchase the second of three parcels which will become part of its new
townhome project, Settler's Village. The Company intends to finance the
purchase and subsequent development thereof with one of its existing lenders,
although to date has not finalized this arrangement. Based on the current
activity at the project, management is optimistic but cannot guaranty that
the financing will be obtained prior to the purchase date. Without separate
financing, this purchase would strain the liquidity of the Company.
This proposed 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 excess
construction financing for planned homebuilding operations. In order for the
Company to maintain consistent levels of profitability and adequate
liquidity, fixed costs and all assets will continued to be scrutinized to
insure they are productive. In addition, several factors affecting
operations need to be considered, some of which are outside the Company's
control. They include continued stability in market demand, lack of dramatic
interest rate increases, and continued enhancement of sales and production
levels.
10
<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
In February 1996, the Company's Board of Directors elected Mr.
Ronald J. Benkert as President and Chief Operating Officer to
fill the vacancy created by the resignation of George S. Writer,
Jr. Mr. Writer will continue serving with the Company in his
other capacities of Chairman and Chief Executive Officer,
positions he has held since 1964. Mr. Benkert brings over 16
years of homebuilding experience to the Company. He served as
President of Williamsburg Properties, Inc., a residential
homebuilder based in Cincinnati, Ohio from January 1995 to
January 1996. From November 1979 to October 1994, Mr. Benkert
worked for Zaring Homes Inc., a publicly traded regional
developer and homebuilder based in Cincinnati, Ohio. Mr.
Benkert served as President of Zaring from December 1989 to
October 1994.
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, 1996.
11
<PAGE>
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 9, 1996 /s/ Daniel J. Nickless
---------------------------
By: Daniel J. Nickless
Sr. Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,390,000<F1>
<SECURITIES> 0
<RECEIVABLES> 256,000
<ALLOWANCES> 0
<INVENTORY> 37,373,000<F2>
<CURRENT-ASSETS> 0
<PP&E> 1,373,000
<DEPRECIATION> 716,000
<TOTAL-ASSETS> 40,342,000<F3>
<CURRENT-LIABILITIES> 6,212,000
<BONDS> 21,632,000
0
0
<COMMON> 735,000
<OTHER-SE> 11,763,000
<TOTAL-LIABILITY-AND-EQUITY> 40,342,000
<SALES> 8,932,000
<TOTAL-REVENUES> 8,932,000
<CGS> (7,639,000)
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (1,415,000)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (122,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (122,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (122,000)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
<FN>
<F1>Cash includes $215,000 of restricted cash
<F2>Inventory includes homes under const. - $16,147,000, model homes and furnishing
- - $5,279,000, land & land development $10,064,000, unplotted land $5,883,000
<F3>Total assets includes other assets of $666,000
</FN>
</TABLE>
