<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
(Mark One)
[X] Quarterly report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 1995 or
--------------------
[ ] 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 1-6844
------------
CALPROP CORPORATION
(Exact name of registrant as specified in its charter)
California 95-4044835
----------------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5456 McConnell Avenue, Los Angeles, California 90066
-------------------------------------------------- -------------
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (310) 306-4314
------------------
Not Applicable
(Former name, former address and former fiscal year, if changed 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 of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
--- ---
Number of shares outstanding of each of Registrant's classes of common stock, as
of April 28, 1995:
Number of Shares
Title of Each Class Outstanding
- ------------------------------ ----------------
Common Stock, $1.00 par value per share 4,813,641
<PAGE>
CALPROP CORPORATION
-------------------
Part I
------
ITEM I - FINANCIAL INFORMATION
------------------------------
Set forth is the unaudited quarterly report for the quarters ended March 31,
1995 and 1994, for Calprop Corporation. The information set forth reflects all
adjustments which were, in the opinion of management, necessary for a fair
presentation.
2
<PAGE>
CALPROP CORPORATION
-------------------
BALANCE SHEETS
---------------
ASSETS
------
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
------------ -------------
<S> <C> <C>
Real Estate Development $22,396,211 $22,700,482
Investment in Land 13,395,056 13,396,653
Allowance For Write Down to Net Realizable
Value (Note 5) (7,747,146) (7,747,146)
----------- -----------
Net Investment In Land 5,647,910 5,649,507
Total Investment in Real Estate 28,044,121 28,349,989
Other Assets:
Cash and cash equivalents 1,638,728 1,142,834
Prepaid Expenses 155,746 292,602
Deferred Loan Costs 387,500 458,333
Operating and Personal Properties,
Net of Accumulated Depreciation 46,002 50,130
Trust Deeds Receivable, Net 80,955 139,477
----------- -----------
Total Other Assets 2,308,931 2,083,376
----------- -----------
Total Assets $30,353,052 $30,433,365
=========== ===========
</TABLE>
The accompanying notes are an integral
part of these financial statements.
3
<PAGE>
CALPROP CORPORATION
--------------------
BALANCE SHEETS
---------------
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
------------- -------------
<S> <C> <C>
Trust Deeds and Notes Payable $ 3,073,186 $ 4,774,683
Related Party Notes 5,260,000 5,207,084
------------ ------------
Total Trust Deeds and Notes Payable 8,333,186 9,981,767
Community Facilities District Special Tax Bonds 2,381,432 2,381,432
Accounts Payable and Accrued Liabilities 2,043,986 2,031,868
Warranty Reserves 1,389,007 1,499,408
Accrued Dividends Payable on Preferred Stock (Note 6) 579,413 601,078
------------ ------------
Total Liabilities 14,727,024 16,495,553
Stockholders' Equity
Convertible Preferred Stock, No Par Value
Authorized 6,000,000 Shares
Outstanding-3,574,875 Shares at
March 31, 1995 and
December 31, 1994 (Note 6) 4,575,840 4,575,840
Common Stock, $1 Par Value -
Authorized--20,000,000 Shares
Outstanding--4,813,641 Shares at
March 31, 1995 and December 31, 1994 4,813,641 4,813,641
Additional Paid-in Capital 25,902,955 25,902,955
Accumulated Deficit (19,666,408) (21,354,624)
------------ ------------
Total Stockholders' Equity 15,626,028 13,937,812
------------ ------------
Total Liabilities and Stockholders' Equity $ 30,353,052 $ 30,433,365
============ ============
</TABLE>
The accompanying notes are an integral
part of these financial statements.
4
<PAGE>
CALPROP CORPORATION
-------------------
STATEMENTS OF INCOME
---------------------
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1995 1994
---------- ------------
<S> <C> <C>
Development Operations (Note 1):
Real Estate Sales $3,478,025 $3,614,527
Cost of Real Estate Sales 3,344,479 3,476,607
---------- ----------
Income from Development Operations 133,546 137,920
Other Income (Note 4) 2,201,704 31,869
---------- ----------
Other Expenses:
General and Administrative Expenses 522,600 517,609
Interest Expense 9,842 10,135
---------- ----------
Total Other Expenses 532,442 527,744
---------- ----------
Income (Loss) Before Provision
for Income Taxes 1,802,808 (357,955)
---------- ----------
Benefit (Provision) for Income Taxes (Note 2) --- ---
---------- ----------
Net Income (Loss) $1,802,808 $(357,955)
========== =========
Earnings (Loss) per Share (Note 3)
Primary (After Giving Effect to Preferred
Stock Dividend) $ 0.35 $(0.10)
========== =========
Fully Diluted $ 0.19
==========
</TABLE>
The accompanying notes are an integral
part of these financial statements.
5
<PAGE>
CALPROP CORPORATION
-------------------
STATEMENT OF CASH FLOWS
-----------------------
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------
1995 1994
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) 1,802,809 (357,955)
Adjustements to reconcile net income (loss) to net
cash provided by operating activities
Depreciation and amortization 4,127 35,703
Other - (4,375)
Change in assets and liabilities
(Increase) decrease in prepaid expenses 207,689 137,846
Increase (Decrease) in accounts payable and
accrued liabilities (98,283) (421,518)
Payments on trust deeds receivable 58,522 826
Additions to real estate development in process (3,038,610) (2,975,542)
Sales of real estate and investments 3,344,479 3,476,607
---------- ----------
Net cash provided by (used in) operating activities 2,280,733 (108,408)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of Preferred Dividends (136,257) -
Borrowings under construction loans 2,767,299 3,404,420
Payments under construction loans (4,415,881) (3,656,259)
---------- ----------
Net cash used in financing activities (1,784,839) (251,839)
Net increase (decrease) in cash and cash equivalents 495,894 (360,247)
Cash and cash equivalents at beginning of periods 1,142,834 1,091,573
---------- ----------
Cash and cash equivalents at end of periods 1,638,728 731,326
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the periods for:
Interest (net of amount capitalized) 9,842 10,135
NON CASH INVESTING AND FINANCING ACTIVITIES:
Amortization of allowance for write down to net
realizable value - (272,396)
Reduction of real estate for realization of previous
reserve for net realizable value - 272,396
Accrual of Preferred Dividend 114,592 114,638
Net Exercise (Cancellation) of Stock Incentive Plans - (4,375)
</TABLE>
The accompanying notes are an integral
part of these financial statements.
6
<PAGE>
CALPROP CORPORATION
-------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
PERIODS ENDED MARCH 31, 1995 and 1994
--------------------------------------
(Unaudited)
Note 1: Basis of presentation and significant accounting policies
---------------------------------------------------------
The unaudited, condensed, financial statements included herein have been
prepared by the registrant pursuant to the instructions to Quarterly Report on
Form 10-Q required to be filed with the Securities and Exchange Commission and
do not include all information and footnote disclosure required by generally
accepted accounting principles. The accompanying financial statements have not
been examined by independent accountants in accordance with generally accepted
auditing standards, but in the opinion of management, such financial statements
include all adjustments, consisting only of normal recurring adjustments
necessary to summarize fairly the Company's financial position and results of
operations. The condensed financial statements should be read in conjunction
with the financial statements and the notes thereto included in the registrant's
latest Annual Report on Form 10-K, particularly with regard to disclosures
relating to major accounting policies.
The results of operations for the three months ended March 31, 1995 may not
be indicative of the operating results for the year ending December 31, 1995.
Note 2: Income taxes
------------
No provision for income taxes for the three months ended March 31, 1995,
has been recorded as the Company applied net operating loss carryforwards
against the entire income earned. As of March 31, 1995, the Company had net
operating carryforwards for federal and state tax purposes of approximately
$6,600,000 and $12,600,000, respectively.
Note 3: Net income per share
--------------------
Net income per share has been computed based upon the weighted average
number of shares outstanding, (the dilutive effect of stock options is
immaterial).
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------
1995 1994
---------- ----------
<S> <C> <C>
Weighted average number of
common shares
Primary....................... 4,813,641 4,761,857
Fully diluted................. 9,389,481
Net income (loss)
Earnings (loss) per share (Note 3)
Primary (after giving effect to
preferred stock dividend) $ 0.35 $ (0.10)
========== ==========
Fully Diluted $ 0.19
==========
</TABLE>
7
<PAGE>
Note 4: Other Income
------------
Other income for the three months ended March 31, 1995 consists primarily
of approximately a net $2,100,000 received as a result of a settlement of the
California Department of Transportation (Caltrans) litigation. In addition to
the legal settlement, other income approximately $100,000 in miscellaneous
insurance and property tax refunds.
Note 5: Net realizable allowances on properties
---------------------------------------
The Company established net realizable reserves on its land held for
investment as of December 31, 1993, in response to market conditions and
economic events. The reserves are based on the Company's plans for development
and build out, the costs estimated to complete and sell the projects and does
not purport, for a specific project, to represent the current sales price that
the Company could obtain from third parties at their current stage of
development. The reserves may be reversed as the properties are sold or if there
is a change in the economic climate. The company had reserves of $7,747,146 at
March 31, 1995 and December 31, 1994.
Note 6: Preferred Stock
----------------
On September 15, 1993 the Company completed an offering of 3,576,301 shares
of Convertible Preferred Stock, to existing shareholders at $1.28 per share. The
sales price of the 3,576,301 shares sold was $4,577,665, of which $3,017,663 was
paid by the conversion of existing indebtedness, and $1,560,002 in cash
proceeds. Each share of Convertible Preferred Stock is convertible to 1.28
shares of Common Stock at the option of the shareholder. Each share of
Convertible Preferred Stock is entitled to receive dividends of $0.13 per annum,
payable in cash, however the Company's loan agreements had previously prohibited
the payment of dividends. On March 28,1995, the Company paid preferred stock
dividends of $136,257. As of March 31, 1995, there is $579,413 of dividends in
arrears on the Preferred Stock. The Convertible Preferred Stock is also entitled
to a liquidation preference of $1.28 per share, and may be redeemed by the
Company at a redemption price of $1.28 per share, plus accrued dividends.
Note 7: Subsequent Event
----------------
On April 5, 1995, the Company purchased 120 fully developed lots in
Sacramento County, California for $4,064,000. The Company obtained a $4,000,000
participatory mortgage from a related party to fund the purchase.
8
<PAGE>
Item 2 Management's Discussion and Analysis of Financial Condition and Results
- ------ -----------------------------------------------------------------------
of Operations
-------------
The Company first began experiencing difficulties due to the down-turn in
the California real estate market during the second quarter of 1990, and the
Company has continued to be impacted by the general economic downturn, and the
soft California housing market through the first quarter of 1995. The Company's
sales revenue decreased from $3,614,527 in the first quarter of 1994, to
$3,478,026 in the first quarter of 1995. At the same time, the Company's gross
profit decreased from $137,920 in the first quarter of 1994 to $133,546 in the
first quarter of 1995.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company's liquidity changes during the course of the year depending
upon the status of the Company's real estate projects in process. The Company's
liquidity decreases as it enters a project cycle and increases as the completed
homes are sold at the end of the cycle. In large part, the Company historically
funded its operations through the utilization of cash flow from one project to
fund the construction and development of another project. The Company began an
expansion program in 1988 and 1989 that required additional sources of
financing. In order to acquire the additional funds needed, the Company
increased its external financing through the use of land loans, lot development
loans, construction loans and the use of its unsecured credit lines.
In an effort to increase working capital, the Company has continued to
institute cost reduction programs in all areas of its operations, extended its
payables and converted other assets to liquid funds. The Company is additionally
actively seeking joint venture partners and additional financing to fund its
operations.
In September of 1994, First Interstate Bank of California extended the pre-
existing Secured Line of Credit in the amount of $3,500,000 and made three
additional loans totaling $5,920,000 to the Company in the Summertree Park
project in Windsor, California. Two of the loans are construction loans to fund
the construction of the next 46 units in the Summertree Park project. The third
loan is to finance the Summertree Park models, which were originally constructed
with Company funds. All four of these loans mature on September 23, 1995. As of
March 31, 1995, the combined balances of these four loans from First Interstate
Bank totaled $2,035,336.
In February of 1995, United Savings Bank made available a $2,185,000
construction loan to the Company for the construction of 15 units in the Cypress
Cove project in Half Moon Bay, California. The note provides for interest at the
prime rate plus 2% and a loan service charge of two points. The loan provides
for paydowns with each closing, however, all principal and interest is due no
later than March 1, 1996. Per the terms of the loan, a six month extension is
available should it be required. As of March 31, 1995, no outstanding balance
existed on this loan.
In May of 1994, the Curci-Turner Company made two loan commitments for
$1,000,000 and $1,750,000 totaling $2,750,000, to the Company for the
construction of 22 units in the Cypress Cove project in Half Moon Bay,
California. The notes provide for interest at 12%, and a loan service charge
totaling $275,000, payable in four installments. The note provides for paydowns
with each closing, however, all principal and interest is due no later than
December 31, 1995. As of March 31, 1995, the $1,000,000 loan had been paid off
in its entirety and the outstanding balance on the remaining loan totaled
$1,510,000.
During the first quarter of 1995, the $1,500,000 Curci-Turner Company
acquisition and development loan on the Cypress Cove project in Half Moon Bay,
California, was paid off in its entirety.
In the third quarter of 1994, the Company obtained a $2,000,000 loan from
Curci-Turner Company, secured by the Company's Mission Gorge land, located in
San Diego, California. This loan bears interest at 10% and contains a profit
sharing provision. The loan matures on September 30, 1997 and as of March 31,
1995, the outstanding balance on the loan totaled $2,000,000.
9
<PAGE>
During the first quarter of 1995, Mr. Zaccaglin, Chairman of the Board and
Chief Executive Officer, made loans to the Company of $500,000 and $425,000 for
working capital purposes. The loans provide for interest at prime plus 2% with
the $425,000 note maturing on April 4, 1995 and the $500,000 note due on demand.
In July of 1994, the Company obtained a construction loan of $2,200,000
from CenFed Bank. These funds are for the construction of the first ten units in
the Company's Pleasant Oaks Estates project, located in Thousand Oaks,
California. The loan provides for interest at prime plus 2% and matures on July
30, 1995 with two six month extensions available per the terms of the loan
agreement. As of March 31, 1995 the balance on this loan was $509,120.
As of March 31, 1995, the Company had three projects with a combined total
of six phases in various stages of development with each of the three projects
producing revenues from completed homes: Pleasant Oaks Estates, Cypress Cove,
and Summertree Park at Windsor. As of March 31, 1995, the Company has 34 homes
sold in escrow, all of which are under construction. The Company's unsold
inventory consists of 3 completed homes and 18 homes that are under
construction. The Company has an inventory of 55 improved lots, 7 model units
and 548 mapped but not improved lots.
The Company believes that, based on its agreements with its existing
institutional lenders, and the Curci-Turner Company, even with the continued
slowdown in certain of its marketplaces, it will have sufficient liquidity to
finance its construction projects in 1995 through funds generated from
operations and funds available under its existing loan commitments. In addition,
the Company believes that if necessary, additional funds could be obtained by
using its internally financed real estate development in process as collateral
for additional loans.
The Company, as of March 31, 1995, does have a material commitment for
capital expenditure. On April 5, 1995, the Company purchased 120 fully developed
lots in the Elk Grove area of Sacramento County, California, for approximately
$4,000,000. The funds to purchase these lots were obtained by entering into a
participatory mortgage with the Curci-Turner Company. The note provides for
interest at prime plus 1.5% and a portion of the "net proceeds," which
approximates net income before taxes. The note provides for paydowns with each
closing, however, all principal and interest is due no later than March 31,
1997.
RESULTS OF OPERATIONS
- ---------------------
Net income/loss changed from a loss of $357,955 in the first quarter of
1994 to income of $1,802,808 in the first quarter of 1995. This increase in
income is primarily due to the net cash settlement of approximately $2,100,000
in the California Department of Transportation litigation.
During the first quarters of the last two years, gross revenues decreased
from $3,614,527 in 1994 to $3,478,025 in 1995. The decrease in gross revenues
between the first quarters of 1994 and 1995 is the result of an decrease in the
number of homes sold. During the first quarter of 1995 the Company sold 19 homes
as compared to 21 homes in 1994. The average sales price of a home sold during
the first quarter of 1995 was $183,053 versus an average of $172,120 in 1994.
The increase in the average price of homes sold in the first quarter 1995 versus
1994 is primarily the result of a different product mix as the Company began
closing homes in the Pleasant Oaks Estates project in Thousand Oaks, California,
where the average sales price of a home is approximately $440,000. Gross profit
decreased from $137,926 for the first quarter of 1994 to $133,546 in the first
quarter of 1995.
10
<PAGE>
SIGNATURES
----------
Item 6 Exhibits and Reports on Form 8K
- ------ -------------------------------
(a) Exhibits-27 Financial Data Schedule
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.
CALPROP CORPORATION
By: /s/ Mark F. Spiro .
--------------------
Mark F. Spiro
Vice President/Secretary/Treasurer
(Chief Financial and Accounting Officer)
March 12, 1995
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q,
MARCH 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 1,638,728
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 28,044,121
<CURRENT-ASSETS> 1,638,728
<PP&E> 792,234
<DEPRECIATION> 749,967
<TOTAL-ASSETS> 30,353,052
<CURRENT-LIABILITIES> 4,012,406
<BONDS> 0
<COMMON> 4,813,641
4,575,840
0
<OTHER-SE> 6,236,547
<TOTAL-LIABILITY-AND-EQUITY> 30,353,052
<SALES> 3,478,025
<TOTAL-REVENUES> 5,679,729
<CGS> 3,344,478
<TOTAL-COSTS> 3,876,920
<OTHER-EXPENSES> 522,600
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,842
<INCOME-PRETAX> 1,802,808
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,802,808
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,802,808
<EPS-PRIMARY> .351
<EPS-DILUTED> .192
</TABLE>
