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, 2000 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.)
13160 Mindanao Way, Suite 180, Marina Del Rey, California 90292
- --------------------------------------------------------- ----------
(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 13, 2000:
Number of Shares
Title of Each Class Outstanding
- ------------------- ----------------
Common Stock, no par value 10,290,535
<PAGE>
CALPROP CORPORATION
Part I
Item I - Financial Information
Set forth is the unaudited quarterly report for the quarters ended March
31, 2000 and 1999, 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
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, December 31,
2000 1999
(Unaudited)
----------- ------------
Real estate under development $86,005,858 $79,070,791
Other assets:
Cash and cash equivalents 953,862 1,405,663
Prepaid expenses 69,454 84,219
Deferred tax asset (note 2) 6,500,000 6,500,000
Other assets 798,227 756,970
----------- -----------
Total other assets 8,321,543 8,746,852
----------- -----------
$94,327,401 $87,817,643
=========== ===========
The accompanying notes are an integral
part of these financial statements.
3
<PAGE>
CALPROP CORPORATION
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, December 31,
2000 1999
(Unaudited)
----------- -----------
Trust deeds and notes payable $55,106,332 $48,216,139
Related party notes 24,194,797 24,860,032
----------- -----------
Total trust deeds, notes payable and related 79,301,129 73,076,171
party notes
Accounts payable and accrued liabilities 7,368,062 6,391,621
Warranty reserves 473,591 358,287
----------- -----------
Total liabilities 87,142,782 79,826,079
Minority interests (note 4) 228,191
Stockholders' equity:
Common stock, no par value
Authorized - 20,000,000 shares
Issued and outstanding - 10,290,535 and
10,293,735 shares at March 31, 2000 and 10,290,535 10,293,735
December 31, 1999, respectively
Additional paid-in capital 25,849,961 25,849,961
Deferred compensation (167,127) (170,327)
Stock purchase loans (502,603) (496,934)
Accumulated deficit (28,286,147) (27,713,062)
----------- -----------
Total stockholders' equity 7,184,619 7,763,373
----------- -----------
$94,327,401 $87,817,643
=========== ===========
The accompanying notes are an integral
part of these financial statements.
4
<PAGE>
CALPROP CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------
2000 1999
----------- -----------
<S> <C> <C>
Development operations:
Real estate sales $7,583,363 $7,782,859
Cost of real estate sales 7,906,202 7,046,406
---------- ----------
(Loss) income from development operations (322,839) 736,453
Other income 38,051 25,203
Other expenses:
General and administrative 636,005 359,560
Interest 16,762 8,016
---------- ----------
Total other expenses 652,767 367,576
Minority interests (note 4) (226,393) 65,887
(Loss) income before benefit for income taxes (711,162) 328,193
Benefit for income taxes (note 2) 138,077
---------- ----------
Net (loss) income ($573,085) $328,193
========== ==========
Basic and diluted net (loss) income per share (note 3) ($0.06) $0.03
======= =====
</TABLE>
The accompanying notes are an integral
part of these financial statements.
5
<PAGE>
CALPROP CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------
2000 1999
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $(573,085) $328,193
Adjustments to reconcile net (loss) income to net cash
used in operating activities:
Minority interests (226,393) 65,887
Depreciation and amortization 15,486 13,762
Provision for warranty reserves (27,595) 66,006
Change in assets and liabilities:
(Increase) decrease in other assets (49,501) 95,682
Decrease in prepaid expenses 14,765 13,397
Increase (decrease) in accounts payable and 976,441 (1,160,845)
accrued liabilities
Increase in warranty reserve 142,899 36,404
Additions to real estate under development (14,841,270) (14,031,077)
Cost of real estate sales 7,906,203 7,046,406
Accrued interest for executive stock purchase loans (5,669) (5,607)
------------ ------------
Net cash used in operating activities (6,667,719) (7,531,792)
CASH FLOWS FROM INVESTING ACTIVITIES -
Capital expenditures (7,242) (13,766)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under related party notes 2,000,000 1,595,119
Payments under related party notes (2,665,235) (627,114)
Borrowings under trust deeds and notes payable 13,705,226 12,405,592
Payments under trust deeds and notes payable (6,815,033) (6,206,157)
Distributions to joint venture partner (1,798) --
------------ ------------
Net cash provided by financing activities 6,223,160 7,167,440
------------ ------------
Net decrease in cash and cash equivalents (451,801) (378,118)
Cash and cash equivalents at beginning of periods 1,405,663 1,590,403
------------ ------------
Cash and cash equivalents at end of periods $953,862 $1,212,285
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the periods for -
Interest (net of amount capitalized) $16,762 $8,016
Income taxes $3,411
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Cancellation of non-vested shares under 1989 stock
incentive plan $3,200
</TABLE>
The accompanying notes are an integral
part of these financial statements
6
<PAGE>
CALPROP CORPORATION
NOTES TO FINANCIAL STATEMENTS
PERIODS ENDED MARCH 31, 2000 AND 1999
(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 financial position of Calprop Corporation ("the Company") 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, 2000 may
not be indicative of the operating results for the year ending December
31, 2000.
Note 2: Income taxes
As of March 31, 2000, the Company had net operating loss carryforwards for
federal and state income tax purposes of approximately $24,000,000 and
$6,400,000, respectively. For federal and state tax purposes the net
operating loss carryforwards expire from 2007 through 2013, and from 2000
through 2003, respectively.
Benefit for income taxes in 2000 represents the net refund resulting from
a claim filed for the carryback of losses related to certain qualifying
expenses incurred in 1994 of $141,488.
Note 3: Earnings per share
The following table sets forth the computation of basic and diluted net
(loss) income per share:
Three Months Ended
March 31,
-------------------------
2000 1999
---------- -----------
Net (loss) income $(573,085) $328,193
========== ===========
Weighted average shares for basic net
(loss) income per share 10,291,673 10,281,447
Effect of dilutive stock options -- 301,298
---------- -----------
Weighted average shares for dilutive net
income per share 10,291,673 10,582,745
========== ===========
Basic net (loss) income per share $(0.06) $0.03
========== ===========
Diluted net (loss) income per share $(0.06) $0.03
========== ===========
Options to purchase 1,104,300 and 859,250 shares of common stock were
outstanding as of March 31, 2000 and 1999, respectively. For the three
months ended March 31, 2000, options were not included in
7
<PAGE>
the computation of diluted net loss per common share because the effect
would be antidilutive to the net loss in the period. However, for the
three months ended March 31, 1999, 320,650 options were not included in
the computation of diluted net income because their exercise prices were
higher than the average market price per share of common stock.
Note 4: Minority interest
The Company has consolidated the financial statements of the following
entities:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
Entity Ownership interest at Development
March 31, 2000
------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Colorado Pacific Homes, Inc. ("CPH") 80% Real estate in the state of Colorado
DMM Development, LLC ("DMM") 50% Cierra del Lago and Antares projects,
California
Montserrat II, LLC ("Mont II") 99% Montserrat Estate project, California
Parkland Farms Development Co., LLC 99% 115 lots in Healdsburg, California
("Parkland")
RGCCLPO Development Co., LLC ("RGCCLPO") 100% 382 lots in Milpitas, California
PWA Associates, LLC ("PWA") 50% 68 unit apartment in Milpitas, California
------------------------------------------------------------------------------------------------------------
</TABLE>
DMM: The Company is entitled to receive two-thirds of the profits of DMM,
and the other owner, RGC Courthomes, Inc. ("RGC"), is entitled to receive
the remaining one-third of the profits.
Mont II: Pursuant to the operating agreement of Mont II, income was
allocated first to PICal Housing Associates, L.P. ("PICaL") to obtain the
return of its capital. Subsequent income is allocated 100% to the Company.
Parkland: Pursuant to the operating agreement of Parkland, the Company is
entitled to receive ninety-nine percent of the profits of Parkland, and
the other member, an officer of the Company, is entitled to receive the
remaining one percent of the profits.
RGCCLPO: Pursuant to the operating agreement of RGCCLPO, the Company was
entitled to receive fifty percent of the profits of RGCCLPO, and the other
member, RGC, was entitled to receive the remaining fifty percent of the
profits. During December 1999, the Company purchased all of RGC's
ownership interest in RGCCLPO.
As a result of the consolidations, the Company has recorded minority
interest of $228,191 as of December 31, 1999.
8
<PAGE>
Item 2 Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion relates to the consolidated financial statements
of the Company and should be read in conjunction with the financial statements
and notes thereto appearing elsewhere in this report. Statements contained in
this "Management's Discussion and Analysis of Financial Condition and Results of
Operations" that are not historical facts may be forward-looking statements.
Such statements are subject to certain risks and uncertainties, which could
cause actual results to differ materially from those projected. You are
cautioned not to place undue reliance on these forward-looking statements.
Liquidity and capital resources
As of March 31, 2000, the Company had remaining loan commitments from
financial institutions of approximately $32,700,000, which may be drawn down by
the Company upon the satisfaction of certain conditions. The Company continues
to seek joint venture partners and additional financing to fund its operations.
As of March 31, 2000, the Company had nine residential housing projects in
various stages of development, with three producing revenues from completed
homes: Summertree Park, Parkland Farms, and High Ridge Court. The remaining six
projects, Creekside Estates, Montserrat Classics, Parc Metropolitan, Parcwest
Apartments, Saddlerock, and McGuire Luxury Apartments are in the initial stages
of development. As of March 31, 2000, the Company has 368 homes under
construction, of which 158 are sold, and 12 model units. Additionally, the
Company has an inventory of 708 lots under development.
As of March 31, 2000, the Company had 158 units in escrow ("backlog")
compared with a backlog of 145 units as of March 31, 1999. The gross revenues of
such backlog was $46,350,000 and $32,750,000 as of March 31, 2000 and 1999,
respectively.
Based on its agreements with its lenders, the Company believes that it
will have sufficient liquidity to finance its construction projects in 2000
through funds generated from operations, funds available under its existing bank
commitments, funds generated from new lending institutions, and, if necessary,
funds that could be obtained by using its internally financed real estate
development in process as collateral for additional loans.
Management's plan, with respect to managing cash flow includes the
following components: pay off debt that is coming due in 2000, minimize
operating expenses, and maintain control over costs. With regard to the debt
coming due in 2000, management expects to extend the maturity dates of various
loans and pay the remaining loans off through cashflow from operations, prior to
their maturity date. With regard to minimizing operating expenses, management
plans to achieve this by continuing to closely examine overhead items.
Management anticipates that the funds generated from operations, including
borrowings from existing loan commitments, will be adequate to allow the Company
to continue operations throughout 2000.
Results of operations
Gross revenues decreased to $7,583,363 in the first quarter of 2000 from
$7,782,859 in the first quarter of 1999. In the first quarter of 2000, the
Company sold 33 homes with an average sales price of $209,000 and in the first
quarter of 1999, the Company sold 33 homes with an average sales price of
$235,900. The higher average sales price for the first quarter in 1999 is due to
16 homes sold in the higher priced Montserrat Estates project compared to 23
homes sold in the lower priced Summertree Park and High Ridge Court project in
2000.
Gross (loss) profit decreased to $(322,839) in the first quarter of 2000
from $736,453 in the first quarter of 1999. The significant decrease of gross
profit during the first quarter of 2000 results from the increase in the number
of home sales in the lower profit margin projects Summertree Park and High Ridge
Court compared to the higher profit margin project Montserrat Estates primarily
sold during 1999. In addition, the Antares project which completed construction
in 1999 and the last unit sold in January 2000 had incurred warranty costs of
approximately $500,000 recognized in the first quarter of 2000. The Company does
not expect to incur significant additional construction costs related to this
project.
9
<PAGE>
During the first quarter of 2000, the Company sold all 25 lots in the
Templeton Heights Project in Colorado for a loss on sale of land of $153,935.
General and administrative expenses increased to $636,005 in the first
quarter of 2000 from $359,560 in the corresponding 1999 period. The increase is
due to the significant growth in the number of projects under development.
10
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits -
27 Financial data schedule
(b) Reports on Form 8-K
A Current Report on Form 8-K dated April 19, 2000 was filed with the
Securities and Exchange Commission (the "Commission") and included under item
7(a) its audited consolidated financial statements for the year ended December
31, 1999 and unaudited consolidated financial statements for the quarter ended
December 31, 1999, and under item 7(c) a press release announcing Calprop
Corporations' 1999 annual and fourth quarter results.
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.
CALPROP CORPORATION
By: /s/ Mark F. Spiro .
----------------------------------------
Mark F. Spiro
Vice President/Secretary/Treasurer
(Chief Financial and Accounting Officer)
May 12, 2000
11
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Calprop
Corporation and is qualified in it's entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 953,862
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 86,005,858
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 94,327,401
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 10,290,535
<OTHER-SE> 7,184,619
<TOTAL-LIABILITY-AND-EQUITY> 94,327,401
<SALES> 7,583,363
<TOTAL-REVENUES> 7,583,363
<CGS> 7,906,202
<TOTAL-COSTS> 7,906,202
<OTHER-EXPENSES> 636,005
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,762
<INCOME-PRETAX> (711,162)
<INCOME-TAX> (138,077)
<INCOME-CONTINUING> (573,085)
<DISCONTINUED> O
<EXTRAORDINARY> O
<CHANGES> 0
<NET-INCOME> (573,085)
<EPS-BASIC> (0.06)
<EPS-DILUTED> 0
</TABLE>
