<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, 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 August 9, 1996.
<PAGE>
THE WRITER CORPORATION
AND SUBSIDIARIES
INDEX
Page
PART I. FINANCIAL INFORMATION Number
------
Item 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets
June 30, 1996 (Unaudited) and
December 31, 1995 3
Condensed Consolidated Statements
of Operations for the three and six months
ended June 30, 1996 and 1995 (Unaudited) 5
Condensed Consolidated Statements of Cash Flows
for the six months ended June 30, 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 12
2
<PAGE>
THE WRITER CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1996 1995
------ ------
(Unaudited)
ASSETS
Residential real estate held for
sale, net:
Homes under construction $14,874,000 $15,279,000
Model homes and furnishings 5,149,000 4,865,000
Land and land development 10,814,000 11,978,000
Unplatted land 5,883,000 5,883,000
----------- -----------
Total 36,720,000 38,005,000
Office property and equipment, less
accumulated depreciation of $737,000
and $1,049,000: 671,000 649,000
Other assets:
Cash and cash equivalents 953,000 1,409,000
Restricted cash 578,000 40,000
Accounts receivable and other assets 811,000 967,000
----------- -----------
Total $39,733,000 $41,070,000
----------- -----------
----------- -----------
(Continued)
3
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30, December 31,
1996 1995
------ ------
(Unaudited)
LIABILITIES
Notes payable $21,079,000 $22,419,000
Accounts payable and accrued
expenses 5,367,000 5,587,000
Accrued interest 480,000 527,000
----------- -----------
Total 26,926,000 28,533,000
STOCKHOLDERS' EQUITY
Common stock, $.10 par value;
authorized, 10,000,000 shares;
7,354,600 and 7,247,100 shares
issued and outstanding (Note B) 735,000 725,000
Additional paid-in capital 12,352,000 12,279,000
Deficit (280,000) (467,000)
----------- -----------
Total Stockholders' Equity, net 12,807,000 12,537,000
Total $39,733,000 $41,070,000
----------- -----------
----------- -----------
(Concluded)
See notes to consolidated financial statements.
4
<PAGE>
THE WRITER CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Residential operations:
Revenue $10,998,000 $7,803,000 $19,930,000 $13,583,000
Cost of sales (9,158,000) (6,470,000) (16,797,000) (11,253,000)
Expenses (1,591,000) (1,876,000) (3,055,000) (3,245,000)
----------- ---------- ----------- -----------
Income (loss) from residential operations 249,000 (543,000) 78,000 (915,000)
Interest and other income (expense), net 60,000 (5,000) 109,000 50,000
----------- ---------- ----------- -----------
Net income (loss) before extraordinary item 309,000 (548,000) 187,000 (865,000)
Extraordinary item-gain on extinguishment
of debt $153,000
----------- ---------- ----------- -----------
Net income (loss) $309,000 $(548,000) $187,000 $(712,000)
----------- ---------- ----------- -----------
----------- ---------- ----------- -----------
Earnings (loss) per share:
Continuing operations $0.04 $(.10) $0.03 $(.15)
Extraordinary item - - - 0.03
----------- ---------- ----------- -----------
Net income (loss) $0.04 $(.10) $0.03 $(.12)
----------- ---------- ----------- -----------
----------- ---------- ----------- -----------
Weighted average number of shares
Outstanding 7,359,949 5,715,234 7,386,397 5,715,003
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
THE WRITER CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
For the Six Months
Ended June 30,
1996 1995
---- ----
<S> <C> <C>
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES: $ 896,000 $(1,358,000)
----------- -----------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchases of office property and equipment (95,000) (32,000)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable 11,251,000 13,100,000
Principal payments on notes payable (12,591,000) (12,201,000)
Proceeds from the sale of common stock 83,000 2,000
----------- -----------
Net cash provided by (used in) financing activities (1,257,000) 901,000
----------- -----------
NET DECREASE IN CASH AND
CASH EQUIVALENTS (456,000) (489,000)
CASH AND CASH EQUIVALENTS, beginning of period 1,409,000 1,305,000
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 953,000 $ 816,000
----------- -----------
----------- -----------
</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 June 30, 1996, the related condensed
consolidated statements of operations for the three and six month periods
ended June 30, 1996 and 1995 and the related condensed consolidated statements
cash flows for the six month periods ended June 30, 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 June 30, 1996 the Company's backlog was 96 units, a 30 unit or 45% increase
from the 66 unit backlog at December 31, 1995 and a 9 unit or 10% increase over
the 87 unit backlog at March 31, 1996. The backlog at June 30, 1995 was 81
units. These increases reflect the overall stability in the market, especially
in interest rates, and the Company's consistent marketing effort which has been
enhanced by the opening of new models at the Castle Pines North, Highlands Ranch
Settler's Village and Northpark townhome projects this year.
As discussed below the Company's average sales price continues to increase from
the prior year which, when coupled with the unit increase, has significantly
raised the dollar amount of sales backlog. The dollar backlog at June 30, 1996
was $20,773,000 an increase of $6,007,000 or 41% from the December 31, 1995
dollar backlog $14,766,000. The dollar backlog at March 31, 1996 was
$19,321,000 and at June 30, 1995 it was $17,159,000. These increases reflect
the Company's efforts to move toward a higher ratio of single family detached
units versus attached townhomes notwithstanding the Company's major position
in the townhome sector.
Although the Company's backlog continues to increase, the balance in homes
under construction decreased from year end and from March 31, 1996 by $405,000
and $1,273,000 respectively. This is attributable to the Company's ongoing
mission of effective asset utilization, focusing on quicker inventory turnover,
and concern for maintaining appropriate levels of speculative inventory.
The Company's model homes and furnishings increased by $284,000 or 6% from
year end. This increase reflects the aforementioned model openings net of
the sales of four models and furnishings at the Company's Northpark, and
Southpark projects.
The decrease in land and land development of $1,164,000 reflects the transfer
of completed lots from land under development to homes under construction,
net of new development expenditures.
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 more typical closing levels at June 30, 1996.
The Company's restricted cash balance reflects the growth of an escrow
account, established pursuant to a development loan agreement, which will be
used for future tap purchases for which the Company is obligated, under its
tap purchase agreement with the Castle Pines North Metropolitan District. This
District provides the water and sewer services to the Company's Castle Pines
North project. This fund had a $296,000 balance at June 30, 1996.
In addition the Company maintains a $300,000 restricted fund which is used
only for foundation improvements to expedite the Company's start process.
Approximately $195,000 of this fund was available for use at June 30, 1996.
8
<PAGE>
The Company's other assets category decreased by $116,000 due to amortization
of prepaid loan fees and insurance.
The decrease in notes payable from year end is attributable to reduced
inventory levels for speculative homes which were substantially complete, and
accelerated paydowns on land development debt.
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 herein represent the net
change in total Stockholders' Equity.
RESULTS OF OPERATIONS
The Company closed 52 and 93 units for the three and six month periods ended
June 30, 1996 as compared to 41 and 74 for the same periods in the prior year.
This increased revenues by $3,195,000 or 41% and $6,347,000 or 47% over the
prior year respective periods. For the second quarter the average sales
price was $211,500 as compared to $217,900 for the previous quarter and
$194,900 for the prior full year period. The average sales price for the six
month period ending June 30, 1995 was $183,600. The average increase in sales
price from the prior year 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>
Closings Townhomes Cluster Homes Single Family Total
- -------- --------- ------------- ------------- -----
<S> <C> <C> <C> <C>
3 month period ended June 30, 1996 17 3 32 52
3 month period ended June 30, 1995 26 5 10 41
6 month period ended June 30, 1996 32 7 54 93
6 month period ended June 30, 1995 50 6 18 74
</TABLE>
Cost of sales increased by $2,688,000 or 42% and $5,544,000 or 49% from the
comparable three and six months periods of the previous year respectively.
Gross profit margins increased by $507,000 and $803,000 for the three and six
month periods when compared to the prior year periods respectively.
As a percentage of sales, gross profit in the second quarter remained even at
17% with the prior year period. For the six month period ending June 30, 1996
gross profit fell by slightly more than 1% from the prior year period amount of
17%. This decrease reflects closings from the first quarter in 1996 which were
typically contracted for in late 1995. During that time frame the Company
experienced increased market pressure from competition willing to substantially
decrease their pricing and/or provide significant incentives to their buyers.
In response, some buyer incentives were offered in order to sell substantially
completed speculative inventory units or accelerate initial absorption at new
townhome projects.
Operating expenses decreased by $285,000 and $190,000 for the three and six
month periods compared to the prior year periods. As a percentage of revenue
the improvement was more significant and reflective of the ongoing cost
containment programs started in 1995, coupled with the overall increase in
revenues. Operating expenses were 14.5% and 15.3% of revenue for the three
and six month periods versus 24.0% and
9
<PAGE>
23.9% for the prior respective periods. These costs as a percentage of sales
improved by 40% and 36% respectively.
The interest expense included in operating expenses was reduced by over 50%
in both the three and six month results compared to the prior year. This
improvement is attributable to more favorable lending terms, more qualified
assets in the capitalizable pool, and the wind down of certain projects
which had profit sharing participations with various development lenders.
The aforementioned factors all contributed to the substantial improvement in
earnings resulting in net profit of $309,000 and $187,000 for the three and
six month periods ending June 30, 1996 versus losses of $548,000 and $712,000
for the comparable prior year periods respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity has improved over the last three quarters bolstered
by the completion of the private placement of common stock. This offering
which generated $2,380,000 of new working capital was completed during the
first quarter of 1996. In addition the Company generated $896,000 of cash
from its operating activities during the last six months.
In spite of these recent improvements the Company's operations continue to
utilize all of its available cash to support its growth and satisfy its
ongoing obligations to subcontractors and lenders. The Company develops many
of its own lots for building and because the Company cannot finance 100% of
these development costs, there is an ongoing need to contribute equity to
these activities. Landscaping and some other townhome development is
typically completed after the closing of homes and therefore the Company is
precluded from requesting loan funds from its lenders for these costs.
Therefore available working capital is usually re-employed into ongoing
projects. With the return to profitable operations which has generated
positive cash flows, the funding of these costs have become more manageable.
The Company has agreements to acquire finished sites for building homes from
other developers usually on quarterly acquisition schedules. The Company
cannot always obtain 100% financing to make these acquisitions and therefore
some equity is also required to meet these obligations.
The Company has modified one of its land purchase agreements to delay by five
months a scheduled June 30, 1996 purchase of certain land in an effort to
more closely match lot availability with sales absorption. In exchange for
the modification the Company will provide the Seller with an additional
$25,000 nonrefundable deposit.
Management believes there is equity in many of its land positions which
currently are fully encumbered in support of the Company's debt. This equity
is difficult to borrow against notwithstanding the fact that it represents
excess collateral value when compared to the corresponding outstanding debt.
In response to the aforementioned equity needs, the Company is investigating
the potential to obtain a working capital line which would be secured by the
excess equity or collateral value in its land and development holdings.
Further the Company is marketing certain land holdings which based on current
absorptions and projections will not be effectively utilized for three to
four years. These sales proceeds may provide the Company with additional
working capital or will further reduce debt and associated interest expense.
10
<PAGE>
In addition, the Company is scrutinizing all of its assets to insure effective
returns can be obtained. To this end the Company has entered into a sale
agreement for the corporate headquarter building. The contract is contingent
on a due diligence review period but could be finalized in the third quarter.
The Company expects to obtain lease space that will be more cost effective than
the current ownership costs and debt service. The Company may need to
supplement the sale proceeds in order to fully retire the debt for which the
office building serves as collateral.
The Company's relationship with its subcontractors and lenders has continued
to improve as operations have improved. The Company has more than adequate
construction financing facilities in place, adequate development financing
for its existing projects, and will continue to work toward better pricing
from its lenders and more streamlined administrative processes in order to
manage costs.
11
<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, 1996.
12
<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: August 9, 1996 By: /s/ Daniel J. Nickless
--------------------------------
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-31-1996
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,531,000<F1>
<SECURITIES> 0
<RECEIVABLES> 211,000
<ALLOWANCES> 0
<INVENTORY> 36,720,000<F2>
<CURRENT-ASSETS> 0
<PP&E> 1,408,000
<DEPRECIATION> 737,000
<TOTAL-ASSETS> 39,733,000<F3>
<CURRENT-LIABILITIES> 5,847,000
<BONDS> 21,079,000
0
0
<COMMON> 735,000
<OTHER-SE> 12,072,000
<TOTAL-LIABILITY-AND-EQUITY> 39,733,000
<SALES> 10,998,000
<TOTAL-REVENUES> 10,998,000
<CGS> (9,158,000)
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (1,531,000)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 309,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 309,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 309,000
<EPS-PRIMARY> .04
<EPS-DILUTED> 0
<FN>
<F1>Cash includes $578,000 of restricted cash
<F2>Inventory includes homes under construction $14,874,000, model home furnishings
$5,149,000, land & land development $10,814,000, unplatted land $5,883,000
<F3>Total assets includes other assets of $600,000
</FN>
</TABLE>
