<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, 1999
---------------
[ ] 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.
6061 S. WILLOW DR., #232, ENGLEWOOD, COLORADO 80111
- -------------------------------------------------------------------------------
(Address of principal executive offices) Zip Code
(303) 779-4100
--------------
(Registrant's telephone number, including area code)
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 _____
The number of shares outstanding of the registrant's common stock, as of
August 6, 1999 was 7,432,590.
<PAGE>
THE WRITER CORPORATION
AND SUBSIDIARIES
INDEX
<TABLE>
<S> <C>
Page
PART I. FINANCIAL INFORMATION Number
------
Item 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets June 30, 1999 and
December 31, 1998 (Unaudited) 3
Condensed Consolidated Statements
of Operations for the three and six months
ended June 30, 1999 and 1998 (Unaudited) 5
Condensed Consolidated Statements of Cash Flows
for the six months ended June 30, 1999 and
1998 (Unaudited) 6
Notes to Consolidated Financial Statements (Unaudited) 7
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 9
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 14
PART II. OTHER INFORMATION 15
</TABLE>
2
<PAGE>
THE WRITER CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
-------------- ---------------
<S> <C> <C>
ASSETS
Residential real estate held for sale, net:
Homes under construction $27,774,000 $17,632,000
Model homes and furnishings 4,254,000 4,190,000
Land and land development 9,622,000 15,216,000
Raw land 1,325,000 817,000
-------------- ---------------
Subtotal 42,975,000 37,855,000
Office property and equipment, less accumulated
depreciation of $707,000 and $586,000 521,000 597,000
Other assets:
Cash and cash equivalents 3,243,000 3,363,000
Restricted cash 657,000 541,000
Accounts receivable 408,000 374,000
Deferred tax asset 935,000 1,166,000
Investment in mortgage company 40,000 --
Other 2,522,000 582,000
-------------- ---------------
Total Assets $51,301,000 $44,478,000
-------------- ---------------
-------------- ---------------
</TABLE>
(Continued)
See notes to consolidated financial statements
3
<PAGE>
THE WRITER CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
-------------- --------------
<S> <C> <C>
LIABILITIES
Notes payable $22,215,000 $17,936,000
Accounts payable and accrued expenses 8,473,000 6,716,000
Accrued interest 167,000 177,000
-------------- --------------
Subtotal 30,855,000 24,829,000
STOCKHOLDERS' EQUITY
Common stock, $.10 par value; authorized,
10,000,000 shares; 7,432,600 and 7,432,600
shares issued and outstanding 743,000 743,000
Additional paid-in capital 12,430,000 12,430,000
Retained earnings 7,273,000 6,476,000
-------------- --------------
Total Stockholders' Equity, net 20,446,000 19,649,000
-------------- --------------
$51,301,000 $44,478,000
-------------- --------------
-------------- --------------
</TABLE>
(Concluded)
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 For the Six Months
Ended June 30, Ended June 30,
----------------------------- ------------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Residential operations:
Revenue $ 19,699,000 $15,323,000 $ 31,912,000 $ 27,032,000
Cost of sales (15,930,000) (12,262,000) (25,882,000) (21,423,000)
Expenses (2,504,000) (2,442,000) (4,780,000) (4,846,000)
------------ ------------ ------------ ------------
Income from residential operations 1,265,000 619,000 1,250,000 763,000
Interest and other income, net 64,000 79,000 94,000 124,000
------------ ------------ ------------ ------------
Net income before income taxes 1,329,000 698,000 1,344,000 887,000
Income tax (expense) benefit (547,000) 49,000 (547,000) (23,000)
------------ ------------ ------------ ------------
Net income $ 782,000 $ 747,000 $ 797,000 $ 864,000
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Earnings per share:
Basic $ 0.11 $ 0.10 $ 0.11 $ 0.12
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Diluted $ 0.10 $ 0.10 $ 0.11 $ 0.11
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Weighted average number of shares Outstanding:
Basic 7,433,000 7,430,000 7,433,000 7,392,000
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Diluted 7,530,000 7,568,000 7,528,000 7,525,000
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</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 Six Months
Ended June 30,
-----------------------------------
1999 1998
-------------- ---------------
<S> <C> <C>
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES: ($4,314,000) $ 2,296,000
-------------- ---------------
CASH FLOWS FROM IN INVESTING ACTIVITIES:
Purchases of office property and equipment (45,000) (238,000)
Investment in mortgage company (40,000)
-------------- ---------------
Net cash used in investing activity (85,000) (238,000)
-------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable 24,478,000 17,421,000
Principal payments on notes payable (20,199,000) (18,829,000)
Proceeds from the sale of common stock 84,000
-------------- ---------------
Net cash provided by (used in) financing activities 4,279,000 (1,324,000)
-------------- ---------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (120,000) 734,000
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 3,363,000 1,015,000
-------------- ---------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 3,243,000 $ 1,749,000
-------------- ---------------
-------------- ---------------
</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, 1999 and the related condensed
consolidated statements of operations and cash flows for the three and six
month period ended June 30, 1999 and 1998 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). Investment in
mortgage company is a 50% owned joint venture and is accounted for using the
equity method. 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, 1998. 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.
Adoption of SFAS 130 and SFAS 131 had no effect on the Company's financial
statements. The Company has no derivative instruments and does not engage in
hedging activities, therefore, the adoption of SFAS 133 will not impact its
financial statements.
Certain items in 1998 have been reclassified to conform with the 1999
presentation.
7
<PAGE>
EARNINGS PER SHARE
The following table reconciles income and the number of shares outstanding used
in the calculation of basic and diluted earnings per share.
<TABLE>
<CAPTION>
INCOME SHARES PER SHARE
-------- --------- ---------
<S> <C> <C> <C>
For the Six Months Ended June 30, 1999:
Net Income $797,000 7,433,000 $0.11
Effect of options 0 95,000
-------- ---------
Net income per share - assuming dilution $797,000 7,528,000 $0.11
-------- --------- -----
-------- --------- -----
For the Quarter Ended June 30, 1999:
Net Income $782,000 7,433,000 $0.11
Effect of options 0 97,000
-------- ---------
Net income per share - assuming dilution $782,000 7,530,000 $0.10
-------- --------- -----
-------- --------- -----
For the Six Months Ended June 30, 1998:
Net Income $864,000 7,392,000 $0.12
Effect of options 0 133,000
-------- ---------
Net income per share - assuming dilution $864,000 7,525,000 $0.11
-------- --------- -----
-------- --------- -----
For the Quarter Ended June 30, 1998:
Net Income $747,000 7,430,000 $0.10
Effect of options 0 138,000
-------- ---------
Net income per share - assuming dilution $747,000 7,568,000 $0.10
-------- --------- -----
-------- --------- -----
</TABLE>
8
<PAGE>
THE WRITER CORPORATION
AND SUBSIDIARIES
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
FORWARD LOOKING STATEMENT
In connection with, and because it desires to take advantage of, the "safe
harbor" provisions of the Private Securities Litigation Reform Act of 1995,
the Company cautions readers regarding certain forward looking statements
contained in the following discussion and elsewhere in this report and in any
other statements made by or on behalf of the Company whether or not in future
filings with the Securities and Exchange Commission. Forward looking
statements are statements not based on historical information and which
relate to the future operations, strategies, financial results, or other
developments. In particular, statements using verbs such as, "expected",
"anticipate", "believe", or words of similar import generally involve forward
looking statements. Without limiting the foregoing, forward looking
statements include statements which represent the Company's beliefs
concerning future, or projected levels of sales of the Company's homes,
investments in land or other assets, projected absorption rates, or the
company's ability to attract needed financing, or the continued earnings or
profitability of the Company's activities. Forward looking statements are
necessarily based upon estimates and assumptions that are inherently subject
to significant business, economic, and competitive uncertainties and
contingencies, many of which are beyond the Company's control and many of
which, with respect to future business decisions, are subject to change.
These uncertainties and contingencies can affect actual results and could
cause actual results to differ materially from those expressed in any forward
looking statements made by or on behalf of the Company. Whether or not actual
results differ materially from forward looking statements may depend on
numerous foreseeable and unforeseeable events or developments, some of which
may be national in scope, such as general economic conditions and interest
rates; some of which may be related to the homebuilding industry generally,
such as price, competition, regulatory developments and industry
consolidation; and others of which may relate to the Company specifically,
such as credit availability and the liquidity necessary to provide equity
into land acquisition and development transactions and other factors.
FINANCIAL CONDITION
The following presents the Company's financial condition at June 30, 1999,
except where stated otherwise, comparisons are to December 31, 1998.
During the first six months of 1999 the Company increased its backlog of
homes under contract 39% to 231 units from 166 units at year end. This
backlog represents potential revenue of $46,100,000 at June 30, 1999 versus
$31,600,000 at December 31, 1998, a 46% increase.
The Company's work in process inventory of homes under construction increased
by $10,142,000 or 58% from the year end balance. This increase is primarily
attributable to the previously mentioned increased backlog.
Model homes and furnishings increased by $64,000 or 2% reflecting the
furnishing of one previously unfurnished model at the Company's Greenbrook
Townhome community and the continuing construction and furnishing of three
models at the Company's new Canterbury Park Townhome community at Castle
Pines North. In addition, the Company's two models at its Summerhill
community in Highlands Ranch have been made ready for sale and one of those
models has been sold.
9
<PAGE>
Land and land development decreased by $5,594,000 or 37% which reflects the
ongoing construction of lots netted with the significant movement of finished
lots into home production.
Raw land increased by $508,000 or 62% reflecting the costs incurred to plat
and begin development on a 90 unit townhome parcel at the Company's Sunrise
Ridge community in Arvada, Colorado. The Company finalized a plat for 102
townhomes in Ft. Collins, Colorado in May 1999 and the costs incurred to date
were moved to land and land development.
Cash balances have decreased by $120,000 or 4% reflecting the Company's
effort to accelerate payments to subcontractors and vendors and the need to
provide equity contributions in recent acquisitions of land. Restricted cash
has increased by $116,000 or 21% reflecting the pledge of cash for additional
letters of credit that secure the Company's development work.
The Company capitalized its new mortgage banking subsidiary with $40,000 in
June 1999. The Company is a 50% limited partner in WRT Financial, Limited
Partnership (WRT). WRT began operations in July 1999 in office space adjacent
to the Company's headquarters. See additional discussion at new joint venture
below.
Other assets have increased by $1,940,000 or 333%, which primarily represents
the cost to purchase a contract that entitles the Company to purchase
approximately 106 acres in southeast Ft. Collins, Colorado and the associated
earnest money deposit that was required by the contract. The Company is
currently platting the site, which is zoned for no less than 481 units, these
costs are also recorded on this line. The Company is currently planning and
engineering the product lines to be marketed at this traditional neighborhood
development. In addition the Company has closed on two additional pieces of
ground that required earnest money deposits. The first is a 63 acre golf
course parcel in Westminster, Colorado that will be developed as 175 detached
single family lots. The second is a 19 acre parcel for two luxury attached
lifestyle communities in the golf course area at Highlands Ranch, Colorado.
The site that will be developed as 145 attached single family lots. See
additional discussion under the heading "Recent Land Acquisitions".
Notes payable has increased $4,279,000 or 24%, which reflects the increase in
the homes under construction inventory mentioned above, and also reflects the
use of working capital lines employed for equity in recent land deals. The
Company's note balance increased an additional $1,840,000 on July 15, 1999
when it acquired the aforementioned Ft. Collins property.
Accounts payable and accrued expense increased $1,757,000 or 26% which
reflects the increased activity levels of the Company.
LIQUIDITY AND CAPITAL RESOURCES
During the first six months of 1999 the Company used $4,314,000 of cash in
operating activities. These expenditures were primarily related to business
expansion and increase in inventory levels. The Company provided most of
this cash by increasing its debt by $4,279,000.
With the improved operating performance that the Company has shown over the
last several quarters, its relationships with its lenders continues to remain
strong. This has provided the Company with more financing opportunities and
more favorable rates and terms. Currently rates from lenders range from LIBOR
plus 225 basis points to prime plus 1%. The Company also has relationships
with lenders who will provide working capital facilities to supplement the
Company's capital resources.
10
<PAGE>
The Company finalized, in April 1999, the renewal and modification of a loan
facility with one of its primary lenders. The acquisition, development and
construction facility was increased to $15,000,000. The maturity was extended
to April 1, 2000 and a LIBOR interest rate option was added. The Company
began using the LIBOR interest rate option May 1, 1999 which is currently
approximately one-half percent lower than the option tied to the prime rate.
The facility also provides a $1,000,000 revolving working capital loan, which
is subject to certain conditions as defined in the loan agreement, including
a full repayment for a minimum of 30 days each year.
The Company intends to use these working capital facilities for project
acquisition and development. The facilities have available commitments of
$2,924,250, with $1,850,000 outstanding at June 30, 1999. During July 1999
the combined outstanding balance was reduced by $850,000 to $1,000,000.
Because of strong buyer demand for both improved and undeveloped land,
sellers in the Company's market area are requesting more stringent purchase
terms which include; cash at closing, closings prior to final plat, specific
performance contracts and shorter due diligence periods. The Company weighs
all of these associated risks against perceived opportunity as new projects
are analyzed. Land acquisition costs and risk continue to increase because of
demand generated by competing builders. The Company's recent acquisitions or
agreements to acquire provide sufficient lots to continue the Company's
planned expansion over the next two to three years.
RECENT LAND ACQUISITIONS
The Company has executed sales contracts for all of its homes in its
Summerhill community. Further, the Company expects to execute contracts in
1999 for all of its remaining homes in the Park Square, Greenbrook, Northpark
and Settler's Village communities. Some of the contracts will close in 1999
and the balance will close in fiscal year 2000. The Company has been actively
seeking replacement opportunities and to that end has recently completed
seven land acquisitions.
In December 1998, the Company purchased a 140 unit single family parcel in
Arvada, Colorado. The sites were zoned and platted. The Company is currently
re-platting a portion for its townhome product. Financing was provided by a
$1,500,000 unsecured line of credit. In April 1999, $500,000 of the line was
repaid and the same lender provided a $3,650,000 development facility. The
Company is currently structuring financing for construction from the same
lender.
In January 1999, the Company purchased a 102 unit single family attached
parcel in Ft. Collins, Colorado. This is a continuation of the Company's
Stetson Creek project. Financing was provided through an existing $15,000,000
acquisition, development and construction facility. Platting was completed in
May 1999 and development is in process.
In July 1999, the Company closed on its purchase of 106 acres in Ft. Collins
which is currently being entitled under the Ft. Collins City Plan. The site
is planned for approximately 480 single family units with three single family
detached products and two attached products. As part of the acquisition the
Company acquired 240 acre feet of water. Development is anticipated in early
2000.
The Company executed a purchase agreement for two luxury attached lifestyle
communities in Highlands Ranch, Colorado planned for 81 and 64 sites,
respectively.
11
<PAGE>
The Company has executed a contract for a 39 acre parcel in Castle Rock,
Colorado. The parcel is planned for approximately 180 townhomes, but must be
platted through the City of Castle Rock. The contract calls for a three phase
take down beginning in 2000, and annually thereafter.
On July 20, 1999 the Company executed a purchase agreement to acquire 86
finished single family sites in south Aurora. The sites are part of a 2400
lot master planned community currently under development. The lots will be
acquired over a two year period, on a quarterly basis.
In June 1999 the Company consummated its purchase of approximately 63 acres
in three parcels of partially developed land. The project is located in the
City of Westminster. The Company is currently platting the site and
anticipates approximately 175 lots for a newly designed single family
product. The agreement provides for a three phase take down beginning at
final plat approval, but in no event later than March 1, 2000.
Both executed and potential acquisitions will require equity investment from
the Company which management expects to obtain from working capital
generation and through additional borrowing from the Company's working
capital facilities. The balance will be financed through traditional lending
relationships.
NEW JOINT VENTURE
In June 1999 the Company entered into a joint venture agreement to form a
mortgage subsidiary, WRT Financial, Limited Partnership (WRT) with an
affiliate of Sterling Bancshares, Inc., (Sterling). Sterling is a Houston
based bank holding company with assets of over $1,000,000,000. The joint
venture was capitalized with $80,000, to provide for estimated start up costs
of which half was provided by the Company.
The Company is a limited partner, and owns fifty percent of the limited
partnership. Sterling is the general partner and manages the day to day
operations through a locally staffed office. WRT sub-leases approximately
2,200 square feet from the Company adjacent to the Company's primary office.
WRT is a full service mortgage brokerage operation and will fund loans with a
warehouse financing facility provided by Sterling. All loans closed will
simultaneously be sold into the secondary markets, primarily through
Sterling's mortgage banking operation. Under this process, WRT will not be
exposed to interest rate risks.
WRT will provide a variety of mortgage products to Writer's home buyers. The
Company's buyers' will receive an incentive to finance their home purchase
with WRT. WRT's primary marketing goal is to enhance customer satisfaction by
facilitating the mortgage process.
12
<PAGE>
RESULTS OF OPERATIONS
The Company closed 91 and 150 units for the three and six month periods
ending June 30, 1999 compared to 72 and 122 units for the same periods in the
prior year. Both periods reflect increases of 26% and 23%, respectively. The
average sales price was $202,367 for the first six months of 1999 compared to
$219,048 for the full year of 1998. This decrease of $16,681 reflects the
close out of the Company's Peninsula (Cluster Homes) community in December
1998. The average sales price for Peninsula was $385,000. The mix of products
sold during the two time periods is illustrated below.
<TABLE>
<CAPTION>
CLOSINGS TOWNHOMES CLUSTER HOMES SINGLE FAMILY TOTAL
- -------- --------- ------------- ------------- -----
<S> <C> <C> <C> <C>
3 month period ended June 30, 1999 56 N/A 35 91
3 month period ended June 30, 1998 34 4 34 72
6 month period ended June 30, 1999 97 N/A 53 150
6 month period ended June 30, 1998 54 13 55 122
</TABLE>
Revenues for the three and six month periods ending June 30, 1999 was
$19,699,000 and $31,912,000 respectively, as compared to $15,323,000 and
$27,032,000 for the same periods in 1998. This reflects increases of
$4,376,000 or 29% and $4,880,000 or 18%, which is the result of additional
unit closings and lot and tap sales for the three and six month periods
ending June 30, 1999.
Gross profit related to home sales increased $636,000 or 21% and $239,000 or
4% for the three and six month periods ending June 30, 1999. As a percentage
of revenue gross profit from home sales was 19.5% and 19% for the three and
six month periods ending June 30, 1999 as compared to 20% and 21% for the
same periods in 1998. This slight decrease in gross profit reflects material
and labor price increases and lengthened construction cycles. During the
three and six month periods ending June 30, 1999 revenue from lot and tap
sales was $688,000 and $1,557,000 contributing $72,000 and $182,000 to gross
profit respectively. There were no lot or tap sales for the same periods in
1998. These sales were pursuant to a purchase agreement negotiated in 1998.
Operating expenses have increased by $62,000 or 3% for the three month period
ending June 30, 1999 and have decreased by $66,000 or 1% for the six month
period ending June 30, 1999 when compared with the prior year periods. For
the three month period ending June 30, 1999 the increase is due to an
increase in sales and marketing expense of $147,000 or 11% from $1,332,000 to
$1,479,000, an increase in general and administrative expense of $75,000 or
8% from $916,000 to $991,000 and a decrease in interest expense, net of
capitalization, of $160,000 or 82% from $194,000 to $34,000. For the six
month period ending June 30, 1999 the decrease is due to an increase in sales
and marketing expense of $323,000 or 13% from $2,469,000 to $2,792,000, an
increase in general and administrative expense of $170,000 or 10% from
$1,777,000 to $1,947,000 and a decrease in interest expense, net of
capitalization, of $559,000 or 93% from $600,000 to $41,000. The decrease in
interest expense is due to the close out of the Peninsula community where a
profit sharing arrangement provided for development interest to be paid to
the lenders on the project and more favorable interest rates on the Company's
loan facilities. Sales and marketing expenses have increased reflecting the
Company's advertising campaign and increased sales and closing volume.
General and administrative expense has increased primarily due to higher
compensation levels reflecting the addition of staff to support greater
volume and by additional costs related to new product development.
13
<PAGE>
As a result of the aforementioned factors, the Company posted net income of
$782,000 and $797,000 for the three and six month periods ending June 30,
1999 as compared to $747,000 and $864,000 for the same periods in 1998.
INFORMATION SYSTEMS AND YEAR 2000 ISSUES
The inability of computer software and other equipment utilizing
microprocessors to recognize and properly process data fields containing a
two digit year is commonly referred to as the Year 2000 compliance issue.
Once the year 2000 is here, such systems may be unable to accurately process
certain date-based information.
The Company has identified all significant applications in its software and
equipment that require modification to ensure year 2000 compliance. The
Company has completed testing of its internal hardware and has determined
that it is compliant with regard to the year 2000 issue. None of the
Company's equipment that may contain embedded computer chips is critical to
the Company's operations. The Company has contacted all significant vendors
and others upon whom it relies to assure that their systems will be converted
in a timely fashion. A majority have responded affirming year 2000 compliance
at this time. Any vendors that remain non-compliant will be reviewed during
the third quarter of 1999 and appropriate action will be taken after the
review. The Company utilizes software to process its management information,
which has been developed by an outside vendor. The Company has recently
installed the year 2000 compliant upgrade. Other application software (such
as spreadsheets, word processing and other personal and work group
applications), will be upgraded when the year 2000 compliant software is
available. The Company believes it is year 2000 compliant as of June 30,
1999, but will continue to monitor the situation as changes occur.
The total costs to the Company of these year 2000 compliance issues is not
anticipated to be material, and has not been material to date. All costs to
date have been expensed.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The primary market risk facing the Company is interest rate risk on debt
obligations. The Company primarily enters into debt obligations to finance
the development and acquisition of land, and to support its homebuilding and
general corporate operations. All of the Company's debt has variable interest
rates, which exposes the Company to interest rate risk. The Company's
business strategy has been to accept the interest rate risk associated with
variable rate debt. The Company does not have fixed rate alternatives at this
time for acquisition, development and construction lending. The Company
attempts to pass interest rate increases on to its customers when it can,
however, there is no assurance that the Company can do that.
Under its current policies, the Company does not use interest rate derivative
instruments to manage its exposure to interest rate changes. At June 30,
1999, the Company had variable rate debt outstanding of approximately
$22,000,000. The annual projected change in cash requirements for interest at
this level of borrowing should the market rates increase or (decrease) by 10%
compared to the interest rates in effect at June 30, 1999 would be an
increase or (decrease) of approximately $176,000 or ($176,000), respectively.
14
<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
(a) and (c). The Company held its annual meeting of
stockholders on June 10, 1999, and the matters voted on at
that meeting were the following:
1) The election of the following directors who will serve
until their successors are elected and qualified, or their
earlier death or resignation:
<TABLE>
<CAPTION>
Director For Withheld Broker Non-Votes
-------- --- -------- ----------------
<S> <C> <C> <C>
George S. Writer, Jr. 6,675,241 72,941 12,730
Roland Seidler, Jr. 6,675,261 72,921 12,730
Louis P. Bansbach, III 6,675,261 72,921 12,730
Ronald S. Loser 6,717,870 30,312 12,730
William J Gillilan, III 6,717,870 30,312 12,730
Deane J. Writer, Jr. 6,717,870 30,312 12,730
Robert G. Tointon 6,717,870 30,312 12,730
</TABLE>
2) The election of Deloitte & Touche as independent public
accountants for the Company.
<TABLE>
<CAPTION>
FOR WITHHELD BROKER NON-VOTES
--- -------- ----------------
<S> <C> <C> <C>
Deloitte & Touch 6,718,246 29,936 11,730
</TABLE>
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, 1999.
15
<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 11, 1999 /s/ Daniel J. Nickless
-------------------------------------
By: Daniel J. Nickless
Executive Vice President,
Chief Operating and Chief Financial Officer
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 3,900,000<F1>
<SECURITIES> 0
<RECEIVABLES> 408,000
<ALLOWANCES> 0
<INVENTORY> 42,975,000<F2>
<CURRENT-ASSETS> 0
<PP&E> 1,228,000
<DEPRECIATION> 707,000
<TOTAL-ASSETS> 51,301,000<F3>
<CURRENT-LIABILITIES> 8,640,000
<BONDS> 22,215,000
0
0
<COMMON> 743,000
<OTHER-SE> 19,703,000
<TOTAL-LIABILITY-AND-EQUITY> 51,301,000
<SALES> 31,912,000
<TOTAL-REVENUES> 31,912,000
<CGS> 25,882,000
<TOTAL-COSTS> 25,882,000
<OTHER-EXPENSES> 4,686,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,344,000
<INCOME-TAX> 547,000
<INCOME-CONTINUING> 797,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 797,000
<EPS-BASIC> .11
<EPS-DILUTED> .11
<FN>
<F1>CASH INCLUDES $657,000 OF RESTRICTED CASH
<F2>INVENTORY INCLUDES HOMES UNDER CONSTRUCTION $27,774,000, MODEL HOMES &
FURNISHINGS $4,254,000, LAND & LAND DEVELOPMENT $9,622,000, UNPLOTTED LAND
$1,325,000
<F3>TOTAL ASSETS INCLUDES OTHER ASSETS OF $3,497,000
</FN>
</TABLE>
