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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission file number 1-6830
FPA CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 59-0874323
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3333 Street Road, Bensalem, PA 19020
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(Address of principal executive offices) (Zip Code)
(215) 947-8900
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of each
exchange on
Title which registered
----- ----------------
Common Stock, $.10 Par Value Per Share
(also formerly registered under
Section 12(g) of the Act)................ American
14 1/2% Subordinated Debentures due
September 1, 2000........................ American
Securities Registered Pursuant to Section 12(g) of the Act: None
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 twelve 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
---- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Rule 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 this Form
10-K or any amendment to this Form 10-K. X
----
The aggregate market value of voting stock held by nonaffiliates of the
registrant as of September 22, 1995 was approximately $2,900,000.
Number of shares of outstanding Common Stock as of September 22, 1995 was
11,695,618, shares (excluding 1,002,513 shares held in Treasury).
Part III (except for information included under Part I relating to executive
officers of the registrant) is incorporated by reference from the proxy
statement for the annual meeting of Stockholders scheduled to be held in
December, 1995.
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TABLE OF CONTENTS
PART I
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ITEM 1. Business.
General ............................................................................... 1
ITEM 2. Properties.
Residential Community Development ..................................................... 1
Operating Policies .................................................................... 5
Building Regulation ................................................................... 7
Environmental Regulation and Litigation ............................................... 7
Competition ........................................................................... 9
Employees ............................................................................. 9
Economic Conditions ................................................................... 9
Lease of Executive Offices ............................................................ 10
ITEM 3. Legal Proceedings. ............................................................................. 10
ITEM 4. Submission of Matters to a Vote of Security Holders. ........................................... 10
Executive Officers of the Registrant ........................................................... 10
PART II
ITEM 5. Market for Registrant's Common Stock and
Related Stockholder Matters. .............................................................. 11
ITEM 6. Selected Financial Data. ....................................................................... 11
ITEM 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations. ...................................................... 12
ITEM 8. Financial Statements and Supplementary Data. ................................................... 18
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ITEM 9. Changes in and Disagreements With Accountants
on Accounting and Financial Disclosure. .......................................................... 42
PART III
ITEM 10. Directors and Executive Officers of the Registrant. ............................................... 42
ITEM 11. Executive Compensation. ........................................................................... 42
ITEM 12. Security Ownership of Certain Beneficial
Owners and Management. ....................................................................... 42
ITEM 13. Certain Relationships and Related Transactions. ................................................... 42
PART IV
ITEM 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K. ..................................................................... 42
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Item l. Business.
General
The Registrant, FPA Corporation (the "Company"), develops residential
communities in Pennsylvania and New Jersey. The Company's operations in
Pennsylvania and New Jersey are in the Philadelphia metropolitan area, primarily
in Bucks County in Pennsylvania and in Burlington, Camden and Gloucester
counties in New Jersey.
The Company operates as both a developer and builder. The Company
builds and sells condominiums, townhouses and single-family homes; and sells
land and developed homesites. During the year ended June 30, 1995, the Company
delivered 612 residential units as compared to 378 units in fiscal 1994.
Revenues earned from residential property activities during fiscal 1995 were
$102,384,000. During fiscal 1994 revenues earned from residential property
activities were $64,452,000. At June 30, 1995, the Company's backlog was
$45,829,000, representing 264 units, compared to $69,961,000 and 387 units, at
June 30, 1994. In addition, as of June 30, 1995, there were reservation deposits
relating to 15 units at the Company's various developments which had an
aggregate sales value of $2,562,000 as compared to 46 units aggregating
$5,889,000 at June 30, 1994.
In 1965, the late Marvin Orleans and Orleans Construction Co., a
general partnership substantially owned and controlled by Marvin Orleans and his
late father, A.P. Orleans, acquired the controlling interest in the Company.
Jeffrey P. Orleans, the son of Marvin Orleans and Chairman of the Board
and Chief Executive Officer of the Company, owns, directly or indirectly,
approximately 7,886,375 shares (including 1,130,851 shares held by the Trust of
Selma Orleans, the mother of Jeffrey P. Orleans, of which Jeffrey P. Orleans, is
a trustee) of Common Stock, par value $.10 per share ("Common Stock"), which
represents approximately 67.4% of the outstanding shares, excluding treasury
shares, as of September 22, 1995.
The Company's predecessor, Florida Palm-Aire Corporation, was
formed in 1959 and was merged into FPA Corporation, which had been
incorporated in Delaware on September 4, 1969. Unless otherwise
indicated, the terms the "Company" and "FPA" include FPA
Corporation and all of its Subsidiaries.
Item 2. Properties
Residential Community Development
The Company's activities in developing residential communities include
the sale of residential properties and the sale of land and developed homesites
to independent builders. The Company participates in joint ventures in certain
of these activities.
The following table sets forth certain information as of June 30, 1995
with respect to the active projects of the Company under development at that
date.
1
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RESIDENTIAL
DEVELOPMENTS
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At June 30, 1995
Total units -------------------------------------------
Year delivered Total Dwelling
Name and construct- Total through units Reserva- unit Remaining
Location of ion units June 30, under tion price approved
development started approved 1995 contract deposits range(1) units(2)
- - - ----------- ---------- -------- ----------- -------- -------- ------- ---------
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Saddlebrook $154,990
Washington Township, NJ 1980 1,002 819 15 0 $194,740 168
Newtown Grant $142,490
Newtown Township, PA 1985 1,750 1,586 18 0 $242,190 146
Players Place $ 79,490
Gloucester Township, NJ 1987 430 401 17 0 $109,990 12
The Hills at Northampton $273,990
Northampton Township, PA 1990 397 202 18 2 $412,490 175
Versailles at Europa $142,990
Cherry Hill Township, NJ 1993 102 34 10 2 $186,990 56
Mill Ridge/Deer Run $ 90,990
Warwick Township, PA 1994 330 41 72 5 $208,990 212
Lakes at Alluvium $175,000
Voorhees Township, NJ 1994 32 4 5 0 $201,990 23
Estates at Newtown Farms $219,990
Newtown Township, PA 1995 63 4 7 1 $251,240 51
Larchmont $ 92,990
Mount Laurel Township, NJ 1974 5,981 5,297 39 3 $163,990 642
Stonegate $ 98,490
Mount Laurel Township, NJ 1989 854 473 35 1 $185,000 345
Hidden Lake $281,990
Mount Laurel Township, NJ 1995 33 -- 6 0 $327,490 27
Bridlewood $254,990
Mount Laurel Township, NJ 1991 103 84 8 1 $322,990 10
Union Mill $100,000
Mount Laurel Township, NJ 1995 240 -- 14 -- $187,490 226
Jones Farm
Lumberton Township, NJ -- 252 252
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1. Range of base prices of residential dwelling units currently being
offered for sale by the Company. In addition, the Company sells homesites
from time to time at its various developments to unaffiliated builders at
prices substantially lower than its dwelling units.
2. Although zoning and certain preliminary master plan approvals have been
received for these units, final plans are subject to substantial review
and approval by appropriate governmental agencies. No assurance can be
given that the Company will be able to obtain the required final
approvals for the indicated units or will ultimately elect to develop the
properties in accordance with presently anticipated development plans.
2
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The following table sets forth certain detail as to residential sales activity.
The FPA Corporation information provided is for the twelve months ended June 30,
1995, 1994 and 1993 in the case of revenues earned and new orders, and as of
June 30, 1995, 1994 and 1993 in the case of backlog. The Orleans Construction
Corporation ("OCC") information provided is from the date of acquisition
(October 22,1993)(see Note 2 to the Consolidated Financial Statements) through
June 30, 1995 and 1994 in the case of revenues earned and new orders, and as of
June 30, 1995 and 1994 in the case of backlog.
Year Ended June 30,
--------------------------------
1995 1994 1993
--------- -------- ----------
(Dollars in thousands)
FPA CORPORATION
REVENUES EARNED $ 61,975 $ 41,749 $40,703
Units 328 225 246
Average price per unit $ 189 $ 186 $ 165
NEW ORDERS $ 49,555 $ 52,786 $43,381
Units 293 258 259
Average price per unit $ 169 $ 205 $ 167
BACKLOG $ 28,926 $ 41,346 $30,309
Units 162 197 164
Average price per unit $ 179 $ 210 $ 185
ORLEANS CONSTRUCTION CORP.
REVENUES EARNED $ 40,409 $ 22,703 $ -
Units 284 153 -
Average price per unit $ 142 $ 148 $ -
NEW ORDERS $ 28,697 $ 51,318 $ -
Units 196 343 -
Average price per unit $ 146 $ 150 $ -
BACKLOG $ 16,903 $ 28,615 $ -
Units 102 190 -
Average price per unit $ 166 $ 151 $ -
GRAND TOTAL
(INCLUDING FPA CORPORATION
AND OCC)
REVENUES EARNED $102,384 $ 64,452 $40,703
Units 612 378 246
Average price per unit $ 167 $ 171 $ 165
NEW ORDERS* $ 78,252 $104,104 $43,381
Units 489 601 259
Average price per unit $ 160 $ 173 $ 167
BACKLOG $ 45,829 $ 69,961 $30,309
Units 264 387 164
Average price per unit $ 174 $ 181 $ 185
- - - ----------
* Included in new orders for the year ended June 30, 1994 are 192 units
totaling $28,744,000 of OCC backlog units which existed as of October 22,
1993 which were obtained as a result of the acquisition.
3
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The following table sets forth certain detail as to residential sales
activity on a proforma basis, as if the acquisition of OCC has occurred at the
beginning of the periods presented. The FPA and OCC revenues earned and new
orders are for the twelve months ended June 30, 1994 and 1993 and backlog is as
of June 30, 1994 and 1993.
Proforma
Year Ended June 30,
--------------------
1994 1993
-------- ---------
(Dollars in thousands)
FPA CORPORATION
REVENUES EARNED $ 41,749 $40,703
Units 225 246
Average price per unit $ 186 $ 165
NEW ORDERS $ 52,786 $43,381
Units 258 259
Average price per unit $ 205 $ 167
BACKLOG $ 41,346 $30,309
Units 197 164
Average price per unit $ 210 $ 185
ORLEANS CONSTRUCTION CORP.
REVENUES EARNED $ 31,803 $37,591
Units 220 251
Average price per unit $ 145 $ 150
NEW ORDERS $ 32,405 $37,972
Units 219 275
Average price per unit $ 148 $ 138
BACKLOG $ 28,615 $28,013
Units 190 191
Average price per unit $ 151 $ 147
GRAND TOTAL
(INCLUDING FPA CORPORATION
AND OCC)
REVENUES EARNED $ 73,552 $78,294
Units 445 497
Average price per unit $ 165 $ 158
NEW ORDERS $ 85,191 $81,353
Units 477 534
Average price per unit $ 179 $ 152
BACKLOG $ 69,961 $58,322
Units 387 355
Average price per unit $ 181 $ 164
4
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Operating Policies
Construction
The Company has historically designed its own products as well as
supervised the development and building of its projects. When the Company
constructs units, it acts as a general contractor and employs subcontractors at
specified prices for the installation of site improvements and construction of
its residential units. Agreements with subcontractors provide for a fixed price
for work performed or materials supplied and are generally short-term.
The Company does not manufacture any of the materials or other items
used in the development of its projects, nor does the Company maintain
substantial inventories of materials. Standard building materials, appliances
and other components are purchased in volume. The Company has not experienced
significant delays in obtaining materials needed by it to date and has
long-standing relationships with many of its major suppliers and contractors.
None of the Company's suppliers accounted for more than 10% of the Company's
total purchases in the fiscal year ended June 30, 1995.
Sales and Customer Financing
The Company conducts a marketing program that is directed to purchasers
of primary residences. In Pennsylvania and New Jersey, A.P. Orleans Inc., an
affiliate of the Company controlled by Jeffrey P. Orleans, is the exclusive
sales agent. The Company believes that the compensation arrangement with A.P.
Orleans, Inc. is no less favorable to the Company that could be obtained from an
unaffiliated sales agent. This compensation includes payment to A.P. Orleans,
Inc. of $25.00 for each house settled in its Pennsylvania and New Jersey
communities.
Model homes and sales centers are constructed to promote sales. A
variety of custom changes are permitted at the request of purchasers. The
Company advertises extensively using newspapers, billboards and other types of
media. The Company also uses brochures to describe each community.
The Company's customers generally require mortgage financing to
complete their purchases. The Company offers assistance to its customers in
obtaining mortgage financing on the basis of the credit of the purchasers. The
Company believes adequate sources of financing are available for qualified
customers.
The Company applies for project financing approvals from the Federal
Housing Administration, the Veterans Administration and the Federal National
Mortgage Association for many of its moderately priced communities. These
approvals assist customers in their ability to obtain competitive fixed and
adjustable rate mortgages with moderate down payments and liberal underwriting
requirements. The Company has obtained approvals for most projects and
anticipates additional approvals during fiscal 1996; however, there can be no
assurance that additional approvals will be obtained.
5
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Land Policy
The Company acquires land in order to provide an adequate and
well-located supply for its residential building operations. In evaluating
possible opportunities to acquire land, the Company considers such factors as
the feasibility of development, proximity to developed areas, population growth
patterns, customer preferences, estimated cost of development and availability
and cost of financing.
In conjunction with the OCC acquisition, the Company obtained the right
to acquire real estate in East Brunswick, New Jersey through an option agreement
with Orleans Builders and Developers ("OB&D"). OB&D is owned by Jeffrey P.
Orleans and the trust of Selma Orleans. The agreement, which has no stated
expiration date, provides for the purchase of 342 residential units in total.
Subsequent to June 30, 1995, the Company purchased two (2) tracts of
land in Mount Laurel, New Jersey. One tract consists of 76 lots for townhomes.
The other tract of 72 lots consists of 15 large single-family lots and 57 small
single-family lots.
The Company will continue to monitor economic and market conditions for
residential units in each of its various communities in assessing the relative
desirability of constructing units or selling parcels to other builders.
The Company engages in many phases of development activity, including
land and site planning, obtaining environmental and other regulatory approvals,
construction of roads, sewer, water and drainage facilities, recreation
facilities and other amenities.
Joint Ventures
From time to time, the Company has developed and owned projects through
joint ventures with other parties.
As discussed in Note 1 to the Consolidated Financial Statements, the
Company, through a wholly owned subsidiary, is the General Partner in Versailles
Associates, L.P., a limited partnership with private investors to purchase and
develop a 102 multi-family unit community in Cherry Hill, New Jersey.
Construction of the development began in 1993.
As also discussed in Note 1 to the Consolidated Financial Statements,
OCC has entered into a joint venture with Bridlewood Associates, L.P. OCC is the
managing general partner in this limited partnership formed to develop an 85
acre parcel of land in Mount Laurel, New Jersey.
Determinations by the Company to enter into joint ventures have
traditionally been based upon a number of factors, including principally an
alternative source for land acquisition financing. At the present time joint
venture activities do not constitute a material portion of the Company's
operations.
6
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Building Regulation
The Company and its subcontractors are subject to continuing compliance
requirements of various Federal, state and local statutes, ordinances, rules and
regulations regarding zoning, plumbing, heating, air conditioning and electrical
systems, building permits and similar matters. The intensity of development in
recent years in areas in which the Company is actively developing real estate
has resulted in increased restrictive regulation and moratoriums by governments
with respect to density, sewer, water, ecological and similar matters. Further
expansion and development will require prior approval of Federal, state and
local authorities and may result in delay or curtailment of development
activities and costly compliance programs.
In January 1983, the New Jersey Supreme Court rendered a decision known
as the "Mount Laurel II" decision, which has the effect of requiring certain
municipalities in New Jersey to provide housing for persons of low and moderate
income. In order to comply with such requirements, municipalities in that state
may require the Company, in connection with its future residential communities,
to contribute funds, on a per unit basis, or otherwise assist in the achievement
of a fair share of low or moderate housing in such municipalities.
In recent years, regulation by Federal and state authorities relating
to the sale and advertising of condominium interests and residential real estate
has become more restrictive and intense. In order to advertise and sell
condominiums and residential real estate in many jurisdictions, including
Pennsylvania and New Jersey, the Company has been required to prepare a
registration statement or other disclosure document and, in some cases, to file
such materials with a designated regulatory agency.
Despite the Company's past ability to obtain necessary permits and
authorizations for its projects, more stringent requirements may be imposed on
developers and home builders in the future. Although the Company cannot predict
the effect of such requirements, they could result in time-consuming and
expensive compliance programs and substantial expenditures for environmental
controls which could have a material adverse effect on the results of operations
of the Company. In addition, the continued effectiveness of permits already
granted is subject to many factors, including changes in policies, rules and
regulations and their interpretation and application, which are beyond the
Company's control.
Environmental Regulation and Litigation
Development and sale of real property creates a potential for
environmental liability on the part of the developer, owner or any mortgage
lender for its own acts or omissions as well as those of current or prior owners
of the subject property or adjacent parcels. If hazardous substances are
discovered on or emanating from any of the Company's properties, the owner or
operator of the property (including the prior owners) may be held strictly
liable for all costs and liabilities relating to such hazardous substances.
Environmental studies are undertaken in connection with property acquisitions by
the Company.
7
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All testing required by Phase 1A of the phased remedial investigation
("RI") to be performed at Colts Neck Estates, a single family residential
development built by the Company in Washington Township, Gloucester County, New
Jersey ("Colts Neck"), has been completed. The results of such testing have been
submitted to the New Jersey Department of Environmental Protection ("NJDEP") for
its review and comment. At NJDEP's request, James C. Anderson Associates, Inc.
("JCA"), Washington Township's consultant, submitted a proposal to NJDEP to
delineate three alleged pig manure areas on other portions of Colts Neck. The
cost of the delineation is estimated at approximately $34,000; no agreement has
been reached with NJDEP over the Company's obligation, if any, to fund this
work. The Company continues to fund the cost of the phased RI testing, which is
not expected to exceed materially the original estimate of $136,000.
Approximately 145 homeowners at Colts Neck have commenced three lawsuits against
the Company, which were separately filed in state and Federal courts between
April and November, 1993, and now have been consolidated in the United States
District Court for the District of New Jersey. The plaintiffs in the
consolidated action allege that the Company and other defendants built and sold
them homes which had been constructed on and adjacent to land which has been
used as a municipal waste landfill and a pig farm. The complaints assert claims
under the federal Comprehensive Environmental Response, Compensation and
Liability Act, the Federal Solid Waste Disposal Act, the New Jersey Sanitary
Landfill Facility Closure and Contingency Act, the New Jersey Spill Compensation
and Control Act, as well as under theories of private nuisance, public nuisance,
common law fraud, latent defects, negligent misrepresentation, consumer fraud,
negligence, strict liability, vendor liability, and breach of warranty, among
others.
In September, 1993 the Company brought a state court action against
more than 30 of its insurance companies seeking indemnification and
reimbursement of costs of defense in connection with the three Colts Neck
actions referred to above. That action has since been stayed and the Company's
claims against its insurers have also been brought as third-party claims in the
consolidated Colts Neck litigation in Federal court along with third-party
claims against the former owners and operators of the Colts Neck property as
well as claims against the generator of the waste allegedly disposed on the
property.
Although the Company has vigorously defended the claims brought by the
plaintiff homeowners, the Company and other parties in the Colts Neck litigation
agreed to mediation which resulted in a settlement agreement. The implementation
of the agreement is subject to a number of conditions, including a determination
by the court to accord class action status to the litigation. Under the
settlement agreement, if implemented, a judgment of $6,000,000 would be entered
against the Company, of which $650,000 would be paid in cash promptly. Except as
noted, the balance of the judgment would be payable solely out of the proceeds,
if any, of recoveries under the litigation against the insurance companies, and
the Company would have no liability itself for the balance of the judgment not
satisfied from such recoveries. The Company would fund the litigation against
the insurance companies, subject to reimbursement of amounts in excess of
$100,000 (subject to a limitation on reimbursement of $300,000) from recoveries,
if any, from the insurance companies, including pretrial settlements. In the
event that the insurance recoveries (whether through settlements or judgments)
are less than $500,000, the Company would pay the difference to the homeowners.
8
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The Company has accrued estimated costs of environmental testing as
well as all other reasonably estimable future investigatory, engineering, legal
and litigation costs and expenses. Since the Company has not received NJDEP's
comments on the testing results of Phase 1A of the RI, it is unable to predict
whether any further testing or remediation will be required and, if so, the cost
and allocation thereof. The Company reserves the right to opt out of the
settlement agreement if there is no satisfactory resolution with NJDEP over its
claims. The Company increased its recorded reserves to give effect to its
estimate of the net amount payable under the settlement agreement, if
implemented, and the unreimbursed costs to the Company of the insurance
litigation. The Company believes that neither the implementation of the
settlement agreement nor the resolution of this contingency through further
litigation will have a material effect on its results of operations or its
financial position, although there can be no assurance as to the ultimate
outcome of any litigation. Since there are conditions to the implementation of
the settlement agreement, there is no assurance that the litigation will not
recommence.
The Company is not aware of any other environmental liabilities
associated with any of its other projects.
Competition
The real estate industry is highly competitive. The Company competes on
the basis of its reputation, location, design, price, financing programs,
quality of product and related amenities, with regional and national home
builders in its areas of development, some of which have greater sales,
financial resources and geographical diversity than the Company. Numerous local
residential builders and individual resales of residential units and homesites
provide additional competition.
Employees
The Company, as of June 30, 1995, employed 194 persons, 63 of whom were
executive, administrative and clerical personnel, 37 were sales personnel, and
94 were construction supervisory personnel and laborers.
The level of construction and sales employees varies throughout the
year in relation to the level of activities at the Company's various
developments. The Company has had no major work stoppages and considers its
relations with employees to be good.
Economic Conditions
The Company's business is affected by general economic conditions in
the United States and its related regions and particularly by the level of
interest rates. The Company cannot predict whether interest rates will be at
levels attractive to prospective home buyers or whether mortgage and
construction financing will continue to be available. Further, the current
economic climate and lack of consumer confidence within the Company's customer
base have lessened the demand for new housing. In response to these conditions,
the Company has continued to offer incentives to increase sales activity. These
actions have reduced gross profits and cash proceeds from residential sales.
9
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Lease of Executive Offices
The Company leased executive offices at 2507 Philmont Avenue,
Huntingdon Valley, Pennsylvania. The owner of the property is Orleans Investment
Land Associates, an affiliated limited partnership controlled by the trust of
Selma Orleans and Jeffrey P. Orleans, which has leased approximately 16,400
square feet to the Company at an annual rental rate of $11.50 per square foot,
plus utilities and cleaning service. The lease would have expired on June 30,
1996. On August 20, 1995, the building was severely damaged from a fire. The
Company is currently leasing office space comprising approximately 12,000 square
feet at One Greenwood Square at 3333 Street Road, Bensalem, Pennsylvania. The
annual rent is $211,000 with a lease expiring in eighteen months.
Item 3. Legal Proceedings.
The Company is a plaintiff or defendant in various cases arising out of
its usual and customary business. Except for the litigation described under
"Item 2. Properties", the Company believes that it has adequate insurance or
meritorious defenses in all pending cases in which it is a defendant and that
adverse decisions in any or all of the cases would not have a material effect
upon the Company. (See "Item 2 Properties - Environmental Regulation and
Litigation" for a discussion of specific litigation).
Item 4. Submission of Matters to a Vote of Security Holders.
There are no matters to be reported hereunder.
Item A. Executive Officers of the Registrant.
The following list contains certain information relative to executive
officers of the Company. There are no family relationships among any executive
officers. The term of each executive officer expires at the next annual meeting
of the Board of Directors following the annual meeting of Stockholders scheduled
to be held in December, 1995 or until their successors are duly elected and
qualified.
Position Principal occupation and offices
Name Age or office past 5 years
- - - ---------- --- ---------- ------------------------------------------
Jeffrey P. 49 Chairman of Served as Chairman of the Board
Orleans the Board and Chief Executive Officer since
and Chief September 1986. From September,
Executive 1986 to May 1992 he also served as
Officer President. In addition, Mr. Orleans
served for five years as Chief Executive
Officer of Orleans Construction
Corporation.
Benjamin D. 49 President, Elected President, Chief Operating
Goldman Chief Operating Officer and a Director of the
Officer and Company on May 27, 1992. From May,
Director 1989 to May 27, 1992 served as
Executive Vice President and
Secretary of the Company. In
addition, Mr. Goldman served as the
President of Orleans Construction
Corporation.
Michael T. 36 Executive Vice Elected Executive Vice President on
Vesey President- July 18, 1994. Since joining the
Project Company in July, 1987, he was
Management responsible for project management of the
Company's Pennsylvania communities.
Joseph A. 41 Chief Financial Elected Chief Financial Officer of the
Santangelo Offficer, Company on July 18, 1994. Mr. Santangelo
Treasurer and was elected Secretary of the Company on
Secretary May 27, 1992 and has been Treasurer
since joining the Company in March 1987.
Mr. Santangelo is a Certified Public
Accountant. In addition, he served in an
executive capacity for Orleans
Construction Corporation.
10
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PART II
Item 5. Market for Registrant's Common Stock and Related Stockholder Matters.
The principal market on which the Company's Common Stock is traded is
the American Stock Exchange, Inc. (Symbol: FPO)
The high and low sales prices on the Exchange (based on reports by
National Quotation Bureau, Inc.) for the periods indicated are as follows:
Fiscal year
ended June 30, High Low
---------------------- -------- --------
1994 First Quarter $ 3.000 $ 1.750
Second Quarter 3.000 2.000
Third Quarter 3.438 2.125
Fourth Quarter 2.750 2.250
1995 First Quarter $ 2.250 $ 1.625
Second Quarter 1.812 1.250
Third Quarter 1.688 1.062
Fourth Quarter 1.625 1.000
The number of common stockholders of record of the Company as of September 22,
1995 was 374.
The Company has not paid a cash dividend since December 1982. Payment
of dividends will depend upon the earnings of the Company, its funds derived
from operations, its working capital needs, its debt service requirements, its
general financial condition and other factors, and no assurance can be given
that the Company will pay dividends in the future.
Item 6. Selected Financial Data.
The following table sets forth selected financial data for the Company
and should be read in conjunction with the Consolidated Financial Statements and
Notes thereto included under Item 8 of this Form 10-K.
(In thousands except per share data)
Year Ended June 30,
---------------------------------------------
Operating Data 1995 1994(2) 1993 1992 1991
- - - -------------- ------ ------- ------ ------ -----
Earned revenues $107,840 $66,618 $42,584 $38,346 $67,862
Income (loss) from
continuing operations 1,201 (766) (8,513) (2,634) (6,694)
Primary income (loss) per
share from continuing
operations .10 (.07) (1.32) (.55) (1.67)
Fully-diluted income (loss)
per share from continuing
operations .10 (.07) (1.27) (.34) (1.67)
11
<PAGE>
June 30,
----------------------------------------------
Balance Sheet Data(1) 1995 1994(3) 1993 1992 1991
- - - ------------------ ------ ------- ------ ------ -----
Residential properties $ 35,757 $35,016 $12,863 $11,768 $12,655
Land and improvements 52,921 46,681 32,389 42,087 48,393
Total assets 102,274 97,754 57,235 70,763 82,312
Mortgage and other
note obligations 40,721 36,806 25,097 33,425 47,226
Senior notes 371 664 6,376 5,695 4,731
Subordinated
debentures 2,231 2,363 3,653 3,251 2,917
Other Notes Payable 9,455 10,509 2,761 2,559 4,000
Shareholders' equity
(deficit) 12,146 10,945 (403) 7,931 5,036
- - - -------------------
(1) The Company has not paid a cash dividend since December 1982.
(2) Includes results of operations of OCC from October 22, 1993 (date of
acquisition) through June 30, 1994.
(3) Includes balance sheet data of OCC, acquired by the Company on October
22, 1993.
Item 7. Management's Discussion and Analysis of Financial
Condition And Results of Operations
Liquidity and Capital Resources
The Company requires capital to purchase and develop land, to construct
units, fund related carrying costs and overhead and to fund various advertising
and marketing costs to facilitate sales. The Company's sources of capital
include funds derived from operations, sales of assets and various borrowings,
most of which are secured. At June 30, 1995, the Company had approximately
$59,600,000 available to be drawn under existing secured revolving and
construction loans for planned development expenditures. These expenditures
include site preparation, roads, water and sewer lines, impact fees and
earthwork, as well as the construction costs of the units and amenities.
The Company believes that the funds generated from operations,
financing commitments from commercial lenders, and the effects of the 1993
Recapitalization Transactions, which are described below, will provide the
Company with sufficient capital to meet its operating needs through fiscal 1996.
Economic Conditions
The sluggish growth of the general economy in the Northeastern United
States, contradictory economic data, and lack of consumer confidence have
lessened the demand for new housing. During fiscal 1995, the homebuilding
industry continued to feel the effects of the increase in interest rates,
resulting in decreased customer traffic at sales offices and reduced sales. In
response to these economic conditions, the Company has continued to offer
various incentives at certain communities to increase sales velocity. These
actions have reduced gross profits and cash proceeds from residential property
sales from recent historical levels. Any significant further downturn in
economic factors affecting the real estate industry may require additional
incentives or reductions in net sales prices.
12
<PAGE>
The tables included in "Item 2 - Properties" summarize the Company's
revenues, new orders and backlog data for the year ended June 30, 1995 with
comparable data for fiscal 1994 and 1993.
New orders for fiscal 1995 were 489 units totaling $78,252,000 compared
with 601 units totaling $104,104,000 for 1994. Fiscal 1994 amounts include
existing OCC backlog acquired as of October 22, 1993 which consisted of 192
units totaling $28,744,000. At June 30, 1995, the Company had a backlog of 264
units with a sales value of $45,829,000 compared to 387 units totaling
$69,961,000 at June 30, 1994. The Company anticipates delivering substantially
all of its backlog units during fiscal 1996. The decline in both the number of
units and dollar value of the Company's new orders and backlog at June 30, 1995
as compared to fiscal 1994 amounts is due to the factors discussed previously
under economic conditions. In addition, the significant decline in backlog at
June 30, 1995 was due in part to the severe winter weather experienced during
January through March, 1994 which hampered construction activity and delayed
deliveries during fiscal 1994 at all of the Company's communities.
The reduction in the average price per unit of the fiscal 1995 new
orders and June 30, 1995 backlog is a result of a change in the mix of the units
sold. New orders and ending backlog for fiscal 1995 as compared to those for the
prior years included a significantly higher proportion of condominium and
townhome units as compared to single-family units. This increase in multi-family
units sold is primarily due to the introduction of townhome and condominium
communities at the Company's Warwick Township, Bucks County, Pennsylvania
development and the economic conditions previously discussed which limited the
sale of single-family homes.
Inflation
Inflation can have a significant impact on the Company's liquidity.
Rising costs of land, materials, labor, interest and administrative costs have
generally been recoverable in prior years through increased selling prices. The
Company has been able to increase prices to cover portions of the significant
increases in lumber and other building products in recent years. However, there
is no assurance the Company will be able to continue this practice in the future
due to the current sluggish growth in the general economy in the Northeastern
United States and the other factors discussed under economic conditions.
Joint Ventures
The Company is a general partner in two joint ventures with private
investors which are developing communities in Cherry Hill and Mt. Laurel, New
Jersey. These activities will provide additional operating funds to the Company
without the need for land acquisition funds.
Tax Matters
The Company adopted the accounting for income taxes prescribed by SFAS
109 effective July 1, 1993. The cumulative effect of this change in accounting
principles was to increase net income by $3,970,000 in fiscal 1994. (See Note 12
to the Consolidated Financial Statements.)
1993 Recapitalization Transactions
Overview
As part of its continuing efforts to restructure its operations,
eliminate high interest indebtedness, obtain new capital for operations and
improve its market share in its primary operating areas, the Company consummated
several transactions with various of its principal stockholders, creditors and
investors during fiscal 1994 (herein collectively called the "1993
Recapitalization Transactions"). The 1993 Recapitalization Transactions include:
(i) acquisition of Orleans Construction Corporation ("OCC"); (ii) issuance of
new notes by the Company and sale of Common Stock by Jeffrey P. Orleans ("Mr.
Orleans"); (iii) a corporate debt restructuring; (iv) capital transactions with
the Flora Group and (v) a mortgage debt restructuring.
13
<PAGE>
Acquisition of Orleans Construction Corporation
On October 22, 1993, the Company completed a transaction among the
Company, OCC, a Pennsylvania corporation, and Mr. Orleans, Chairman of the Board
and Chief Executive Officer of the Company and formerly the owner of all of the
outstanding stock of OCC. Mr. Orleans exchanged his OCC stock for newly-created
Series C Preferred Stock, which was subsequently converted into 6,000,000 shares
of Common Stock in September, 1994. As a result, OCC has become a wholly-owned
subsidiary of the Company. The assets acquired by the Company consist of real
estate located primarily in Mount Laurel Township, New Jersey. This acquisition
was recorded at the OCC historical cost basis at the date of the transfer, since
it was conducted with an entity deemed to be under common control. The total
assets acquired and liabilities assumed at the date of the OCC acquisition were
$35,129,000 and $34,841,000, respectively.
Issuance of Series A Notes by the Company and Sale of Common Stock by
Jeffrey P. Orleans
During the second quarter of fiscal 1994, the Company issued an
aggregate principal amount of $3,000,000 of newly-created Series A Notes to
investors in a private placement (the "Series A Investors"), including Mr.
Orleans, other executive officers, directors and key personnel of the Company
for cash consideration. The Series A Notes bear interest at 2% over the prime
rate with a maturity date of September 15, 1998.
Contemporaneously with the sale by the Company of the Series A Notes,
Mr. Orleans sold 1,674,000 shares of Common Stock of the Company owned by him to
the other Series A Investors. The shares sold by Mr. Orleans are previously
issued shares. In addition, Mr. Orleans was issued $1,000,000 in new Series B
Notes for cash consideration. The Notes have similar terms to the Series A
Notes. Series A and B notes require principal repayments as proceeds are
received by the Company from the sale of residential homes at certain
communities.
Corporate Debt Restructuring
During the second quarter of fiscal 1994, the Company issued $1,800,000
of Series B Notes in exchange for approximately $7,700,000 aggregate principal
and accrued interest of Senior Notes and Subordinated Debentures owned by Mr.
Orleans. The $1,800,000 represents the acquisition cost of Mr. Orleans for the
Senior Notes and Subordinated Debentures, together with the related carrying
costs. Mr. Orleans acquired these securities from the former institutional
holders thereof during fiscal 1993. These securities were first offered to the
Company which did not, at the time, have sufficient funds or other available
financial resources to acquire the securities. This transaction resulted in an
extraordinary gain of $3,718,000 net of income taxes of approximately
$1,989,000.
Transactions with Flora Group
On August 27, 1993, the Company consummated a Note and Stock
Acquisition Agreement with the Flora Group, a group of entities which were
formerly principal stockholders and creditors of the Company. The transactions
included the exchange of cash and certain real estate assets owned by the
Company for the retirement of subordinated notes.
14
<PAGE>
This exchange resulted in an extraordinary gain during fiscal 1994 of
approximately $616,000, which is net of income tax of $377,000. Additionally,
the Company issued new debt securities to the Flora Group in exchange for the
retirement of mandatorily redeemable Preferred Stock and the repurchase of
1,002,513 shares of Common Stock. This stock is being retained by the Company as
treasury stock.
Mortgage Debt Restructuring
On September 14, 1993, the Company consummated an agreement with the
Federal Deposit Insurance Corporation ("FDIC") (which had succeeded to the
mortgage debt ownership as a result of financial difficulties of the original
lender) under which the Company was able to fully satisfy mortgage obligations
aggregating approximately $10,700,000 in exchange for a payment of approximately
$5,700,000. The funds required to consummate this transaction were obtained
primarily from the proceeds of approximately $5,000,000 from new loans secured
by real estate assets of the Company. In addition, a portion of the proceeds of
a $1,300,000 loan from Mr. Orleans was used to consummate this transaction. The
loan was secured by a mortgage on land owned by the Company. This loan was
repaid with proceeds from the issuance of Series A and Series B Notes. This
transaction resulted in an extraordinary gain on early extinguishment of debt of
$3,185,000, net of income tax expense of $1,821,000.
During fiscal 1994, the Company entered into agreements with one of its
lenders to satisfy several mortgage obligations aggregating $4,272,000 at less
than the carrying value of the debt. An extraordinary gain on early
extinguishment of debt of $437,000 net of income tax expense has been reflected
in the fiscal 1994 financial statements.
Fiscal Years Ended June 30, 1995 and 1994
Results of Operations
Earned Revenues
The significant increase in revenues earned and units delivered from
the sale of residential properties of $37,932,000 and 234 units, respectively,
is due to the introduction of sales at the Company's Warwick Township, Bucks
County, Pennsylvania condominium community and increases in deliveries at a
majority of the Company's other communities coupled with the inclusion of OCC
operations for a full year in fiscal 1995. In addition, the severe winter
weather experienced during January through March, 1994, which hampered
construction activity, resulted in reduced deliveries during the prior year.
Revenue from land sales for the twelve months ended June 30, 1995 increased
$3,380,000 due to a second quarter fiscal 1995 land sale of $3,336,000. This
land sale, to an unaffiliated third party, related to property acquired by the
Company upon exercise of its option to purchase a section of land located in
East Brunswick, New Jersey under an Option Agreement with OB&D.
Costs and Expenses
Costs and expenses for the fiscal year ended June 30, 1995 increased
$39,089,000 compared to fiscal 1994. The increase is primarily the result of
increases in costs of residential properties sold, and selling, general and
administrative expenses of $32,930,000 and $2,739,000, respectively. The
increase in costs of residential properties is directly correlated with the
increase in units sold. Overall gross profit on units sold during fiscal 1995 is
consistent with fiscal 1994. The increases in selling, general and
administrative expenses is consistent with both the increase in revenues from
residential property sales and the inclusion of the former OCC operations for a
full year in fiscal 1995. Moreover, the Company commenced marketing at six new
communities during fiscal 1995 which also contributed to the aforementioned
increase. As of June 30, 1995, the Company was actively marketing twenty
communities.
15
<PAGE>
Extraordinary Items
As more fully discussed under liquidity and capital resources, the
Company had several extraordinary items during fiscal 1994, each of which
resulted from the early extinguishment of debt. These transactions are: (i) the
retirement of mortgage note obligations secured by real estate which resulted in
extraordinary gains of $3,622,000 net of related income tax expense of
$1,821,000, (ii) the Flora transactions which resulted in the extraordinary gain
on early extinguishment of the subordinated note payable of $616,000, net of
income tax expense of $377,000 and (iii) the extraordinary gain on the early
extinguishment of Senior Notes and Subordinated Debentures which resulted in an
extraordinary gain of $3,718,000 net of related income taxes of $1,989,000. The
combined effect of these transactions resulted in extraordinary gains
aggregating $7,956,000 net of related income taxes for the twelve months ended
June 30, 1994.
Net Income (Loss)
Net income for fiscal 1995 of $1,201,000 ($.10 primary earnings per
share; $.10 fully diluted earnings per share) is a significant decrease from the
fiscal 1994 net income of $11,160,000 ($1.08 primary income per share; $1.05
fully diluted income per share). This decrease is due largely to the previously
discussed extraordinary gains of $7,956,000 ($.77 per primary share and $.75 per
fully diluted share) and the cumulative effect of the change in accounting
principle adjustment of $3,970,000 ($.38 per primary share and $.37 per fully
diluted share). Income from operations during fiscal 1995 of $1,201,000
represents a substantial improvement over the fiscal 1994 loss from operations
of $766,000. This improvement is directly attributable to the increase in
revenues previously discussed.
Fiscal Years Ended June 30, 1994 and 1993
Earned Revenues
The overall increase in revenues earned and units delivered from the
sale of residential properties of $23,749,000 and 132 units, respectively, is
primarily attributable to the October 22, 1993 acquisition of OCC which accounts
for 153 units totaling $22,703,000. The increase in revenues from land sales for
the twelve months ended June 30,1994 of $710,000 is due to the sale of 20 lots
of a parcel of improved land. The Company purchased this parcel consisting of
approximately 90 lots in December, 1993. The remaining lots of this parcel are
under an option to be sold through fiscal 1996. The reduction in other income of
$425,000 is primarily attributable to a decrease in income from bank-owned
workout projects. Several of the workout projects, from which the Company earns
a commission for the construction and marketing of units in communities owned by
various banks, were substantially completed during fiscal 1993. A reduction in
interest income resulting from the decline in outstanding mortgage receivables
at June 30, 1994 when compared to the prior year end also contributed to the
reduction in other income.
Costs and Expenses
Costs and expenses for the fiscal year ended June 30, 1994 increased
$16,388,000 compared to fiscal 1993. The OCC acquisition resulted in an
additional $22,835,000 of expenses in fiscal 1994, including $19,423,000 and
$3,057,000, relating to costs of residential properties sold and selling,
general and administrative expenses, respectively. The expenses attributable to
the OCC acquisition discussed above were partially offset by the timing of a
$7,700,000 net realizable value adjustment made to land values during fiscal
1993. Fiscal 1994 costs and expenses include $495,000 of expenses relating to
the negotiation and completion of certain of the 1993 Recapitalization
Transactions, primarily the acquisition of OCC.
16
<PAGE>
Extraordinary Items
As more fully discussed under liquidity and capital resources, the
Company had several extraordinary items during fiscal 1994, each of which
resulted from the early extinguishment of debt. These transactions are: (i) the
retirement of mortgage note obligations secured by real estate which resulted in
extraordinary gains of $3,622,000 net of related income tax expense of
$1,821,000, (ii) the Flora transactions which resulted in the extraordinary gain
on early extinguishment of the subordinated note payable of $616,000, net of
income tax expense of $377,000 and (iii) the extraordinary gain on the early
extinguishment of Senior Notes and Subordinated Debentures which resulted in an
extraordinary gain of $3,718,000 net of related income taxes of $1,989,000. The
combined effect of these transactions resulted in extraordinary gains
aggregating $7,956,000 net of related income taxes for the twelve months ended
June 30, 1994. The extraordinary gains of $7,956,000 coupled with the cumulative
effect of change in accounting principle of $3,970,000 (as discussed more fully
below) account for substantially all of the increase in total Shareholders
Equity of $11,348,000 at June 30, 1994.
Cumulative Effect of Change in Accounting Principle
The Company adopted the principles of SFAS 109, as required, effective
July 1, 1993 on a prospective basis. The cumulative effect of adoption of SFAS
109 was approximately $3,970,000, as adjusted. This gain is primarily the result
of the effects of previously unrecognized net operating losses and other
carryforward tax benefits in excess of net deferred taxable items and net of a
valuation reserve of approximately $1,000,000. The valuation reserve reflected
the excess of the carryforwards over existing net deferred taxable items and
expected taxable gains on certain of the 1993 Recapitalization Transactions.
(See Note 1 to the Consolidated Financial Statements.)
Net Income (Loss)
The net income for fiscal 1994 of $11,160,000($1.08 primary earnings
per share; $1.05 fully diluted earnings per share) is a significant increase
from the fiscal 1993 net loss of $8,513,000 ($1.32 primary loss per share; $1.27
fully diluted loss per share). This increase is due largely to the previously
discussed extraordinary gains of $7,956,000 ($.77 per primary share and $.75 per
fully diluted share) and the cumulative effect of the change in accounting
principle adjustment of $3,970,000 ($.38 per primary share and $.37 per fully
diluted share), and the previously discussed fiscal 1993 land adjustment of
$7,700,000.
17
<PAGE>
Item 8. Financial Statements and Supplementary Data.
FPA CORPORATION AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
Page
----
Report of independent accountants 19
Consolidated balance sheets at June 30, 1995
and June 30, 1994 20
Consolidated statements of operations and retained
earnings for the years ended June 30, 1995,
1994 and 1993 21
Consolidated statements of cash flows for the
years ended June 30, 1995, 1994 and 1993 23
Notes to consolidated financial statements 24
Financial statement schedules
Indebtedness of and to related parties - not
current (Schedule IV) 39
Valuation and qualifying accounts (Schedule VIII) 40
Supplementary information to consolidated
statements of operations (Schedule X) 41
All other schedules have been omitted because they are not applicable
or the required information is shown in the consolidated financial statements or
notes thereto.
The individual financial statements of the Registrant's subsidiaries
have been omitted since the Registrant is primarily an operating company and all
subsidiaries included in the consolidated financial statements, in the
aggregate, do not have minority equity interest and/or indebtedness to any
person other than the Registrant or its consolidated subsidiaries in amounts
which together exceed 5 percent of total consolidated assets at June 30, 1995,
excepting indebtedness incurred in the ordinary course of business.
18
<PAGE>
Report of Independent Accountants
To the Board of Directors and Shareholders of FPA Corporation.
In our opinion, the consolidated financial statements listed in the accompanying
index present fairly, in all material respects, the financial position of FPA
Corporation and its subsidiaries at June 30, 1995 and 1994, and the results of
their operations and their cash flows for each of the three years in the period
ended June 30, 1995, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
Price Waterhouse LLP
Philadelphia, Pennsylvania
September 22, 1995
19
<PAGE>
FPA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30,
----------------
1995 1994
----------------
ASSETS (In thousands)
- - - ------ ----------------
Cash $ 2,324 $ 2,506
Receivables
Trade accounts 3,636 6,026
Mortgage and other notes 1,674 2,062
Real estate held for development and sale
Residential properties completed
or under construction 35,757 35,016
Land held for development or sale
and improvements 52,921 46,681
Property and equipment, at cost, less
accumulated depreciation 523 521
Deferred charges and other assets 5,439 4,942
------- ------
$102,274 $ 97,754
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
- - - ------------------------------------
Liabilities
Accounts payable $ 21,445 $ 18,188
Accrued expenses 6,292 6,851
Amounts due to related parties 3,657 3,419
Customer deposits 2,739 4,911
Mortgage and other note obligations
primarily secured by:
Mortgage notes receivable 1,419 1,900
Residential properties 27,998 19,835
Land held for development or sale
and improvements 11,304 15,071
Senior notes 371 664
Subordinated debentures 2,231 2,363
Other notes payable 9,455 10,509
Deferred income taxes 2,583 2,538
Minority interests 634 560
------- ------
Total liabilities 90,128 86,809
------- ------
Shareholders' equity
Preferred stock, $1 par, 500,000 shares
authorized, 50,000 shares of Series C
issued and outstanding in 1994(liquidation
preference of $120 per share) 50
Capital in excess of par value - preferred stock 238
Common stock, $.10 par, 20,000,000 shares
authorized, 12,698,131 shares issued at
June 30, 1995 and 6,698,131 shares
issued at June 30, 1994 1,270 670
Capital in excess of par value - common stock 17,726 18,038
Retained earnings (deficit) (6,104) (7,305)
Treasury stock, at cost (1,002,513 shares
at June 30, 1995 and 1994) (746) (746)
------- ------
Total shareholders' equity 12,146 10,945
-------- --------
Commitments and contingencies
-------- --------
$102,274 $ 97,754
======== ========
See notes to consolidated financial statements
20
<PAGE>
FPA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
AND RETAINED EARNINGS
For the year ended June 30,
------------------------------------
1995 1994 1993
- - - --------------------------------------------------------------
(In thousands, except per share data)
- - - --------------------------------------------------------------
EARNED REVENUES
Residential properties $102,384 $ 64,452 $ 40,703
Land sales 4,090 710
Other income 1,366 1,456 1,881
- - - ---------------------------------------------------------------
107,840 66,618 42,584
- - - ---------------------------------------------------------------
COSTS AND EXPENSES
Residential properties 88,435 55,505 44,208
Land sales 3,380 570
Other 667 472 460
Selling, general and
administrative 11,898 9,159 4,388
Interest
Incurred 6,184 4,511 4,274
Less capitalized (5,019) (3,503) (3,207)
Environmental litigation
expenses 750 850
Minority interests 74 71 (81)
Recapitalization expenses 495
- - - ---------------------------------------------------------------
106,369 67,280 50,892
- - - ---------------------------------------------------------------
Income (loss) before income taxes 1,471 (662) (8,308)
Income tax expense (270) (104) (205)
- - - ---------------------------------------------------------------
Income (loss)from operations
before extraordinary items and
cumulative effect of change
in accounting principle 1,201 (766) (8,513)
- - - ---------------------------------------------------------------
Extraordinary items, net 7,956
Cumulative effect of change in
accounting principle 3,970
- - - ---------------------------------------------------------------
Net income (loss) 1,201 11,160 (8,513)
Retained earnings (deficit)
at beginning of year (7,305) (18,465) (9,952)
- - - ---------------------------------------------------------------
Retained earnings (deficit) at
end of year $ (6,104) $ (7,305) $(18,465)
- - - ---------------------------------------------------------------
Continued...
21
<PAGE>
FPA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
AND RETAINED EARNINGS
For the year ended June 30,
------------------------------------
1995 1994 1993
- - - --------------------------------------------------------------
(In thousands, except per share data)
- - - --------------------------------------------------------------
Primary earnings (loss) per share:
Income (loss) before
extraordinary items and
cumulative effect of
change in accounting
principle $ .10 $ (.07) $ (1.32)
Extraordinary gains .77
Cumulative effect of change
in accounting principle .38
- - - --------------------------------------------------------------
Total $ .10 $ 1.08 $ (1.32)
- - - --------------------------------------------------------------
Fully diluted earnings (loss) per share:
Income (loss) before
extraordinary items and
cumulative effect of
change in accounting
principle $ .10 $ (.07) $ (1.27)
Extraordinary gains .75
Cumulative effect of change
in accounting principle .37
- - - --------------------------------------------------------------
Total $ .10 $ 1.05 $ (1.27)
- - - --------------------------------------------------------------
See notes to consolidated financial statements
22
<PAGE>
FPA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the year ended June 30,
----------------------------
1995 1994 1993
- - - --------------------------------------------------------------------------
(In thousands)
- - - --------------------------------------------------------------------------
Cash flows from operating activities:
Net income (loss) $ 1,201 $ 11,160 $ (8,513)
Adjustments to reconcile net income (loss)
to net cash provided (used) by
operating activities:
Extraordinary gains on early
extinguishments of debt (7,956)
Cumulative effect of change in
accounting principle (3,970)
Depreciation and amortization 205 116 152
Deferred income taxes (348)
Adjustments to land and residential
property values 7,700
Changes in operating assets and liabilities:
Receivables 2,778 1,700 1,670
Real estate held for development and
sale (6,981) (7,981) 903
Property and equipment (207) (145) (15)
Deferred charges and other assets (497) 614 (463)
Accounts payable and other liabilities 3,010 2,731 2,814
Customer deposits (2,172) 819 349
Deferred income taxes 45 (75)
- - - -------------------------------------------------------------------------
Net cash provided (used) by operating
activities (2,618) (2,987) 4,249
- - - -------------------------------------------------------------------------
Cash flows from investing activities:
Cash acquired from business combination 265
Capital contributions from minority interests 450
- - - -------------------------------------------------------------------------
Net cash provided by investing activities 265 450
- - - -------------------------------------------------------------------------
Cash flows from financing activities:
Borrowings from loans secured by real
estate assets 81,709 60,205 27,459
Repayment of loans secured by real
estate assets (77,313) (58,283) (30,678)
Proceeds from issuance of Series A and
Series B notes payable 4,000
Repayment of loans secured by mortgages
receivable (481) (3,164) (1,993)
Repayment of subordinated debentures and
senior notes payable (425) (326) (80)
Proceeds from the issuance of Common Stock 78
Borrowings from other note obligations 1,127 2,144
Repayments of other note obligations (2,181) (304) (5)
- - - -------------------------------------------------------------------------
Net cash provided by (used in)
financing activities 2,436 4,272 (5,219)
- - - -------------------------------------------------------------------------
Net increase (decrease) in cash (182) 1,550 (520)
Cash at beginning of year 2,506 956 1,476
- - - -------------------------------------------------------------------------
Cash at end of year $ 2,324 $ 2,506 $ 956
=========================================================================
See notes to consolidated financial statements
23
<PAGE>
FPA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FPA Corporation and its subsidiaries (the Company) are currently engaged in
residential real estate development in Pennsylvania and New Jersey.
A summary of the significant accounting principles and practices used in the
preparation of the consolidated financial statements follows:
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its subsidiaries, all of which are wholly-owned. The financial statements
include the consolidated financial position and results of operations of
Versailles Associates, L.P., and Bridlewood Associates, L.P., joint ventures in
which a subsidiary of the Company is the sole General Partner. The outside
limited partners have been allocated their portion of the income or loss and
equity. These amounts are presented as minority interests in the financial
statements. All material intercompany transactions and accounts have been
eliminated.
EARNED REVENUES FROM REAL ESTATE TRANSACTIONS
The Company recognizes revenues from sales of residential properties at the time
of closing except as discussed below.
The Company sells developed and undeveloped land in bulk and under option
agreements. Revenues from sales of land and other real estate are recognized
when the Company has received an adequate cash down payment and all other
conditions necessary for profit recognition have been satisfied. To the extent
that certain sales or portions thereof do not meet all conditions necessary for
profit recognition, the Company uses other methods to recognize profit,
including cost recovery and the deposit methods. These methods of profit
recognition defer a portion or all of the profit and recognition of the profit
is dependent upon the occurrence of future events.
REAL ESTATE CAPITALIZATION AND COST ALLOCATION
Residential properties completed or under construction are stated at cost or
estimated net realizable value, whichever is lower. Costs include land and land
improvements, direct construction costs, construction overhead costs, interest
on indebtedness and real estate taxes. Selling and advertising costs are
expensed as incurred. Total estimated costs of multi-unit developments are
allocated to individual units based upon specific identification methods.
Land held for development or sale and improvements are stated at cost or
estimated net realizable value, whichever is lower. During fiscal 1993 the
Company reduced its land and residential property carrying values by $7,700,000.
This adjustment was reflected in the financial statements as costs and expenses
of residential proper ties for the year ended June 30, 1993. No such adjustments
were required in fiscal 1995 and 1994.
Land and improvement costs include land, land improvements, interest on
indebtedness and real estate taxes. Appropriate costs are allocated to projects
on the basis of acreage, dwelling units and relative sales value.
Land and land improvements applicable to condominiums, townhomes, single-family
homes and other projects are transferred to construction in progress when
construction commences.
24
<PAGE>
Interest costs included in Costs and Expenses for fiscal years 1995, 1994 and
1993 were $5,236,000, $4,473,000 and $4,322,000, respectively.
DEPRECIATION, AMORTIZATION AND MAINTENANCE EXPENSE
Depreciation and amortization is primarily provided on the straight-line method
at rates calculated to amortize the cost of the assets over their estimated
useful lives. Expenditures for maintenance, repairs and minor renewals are
expensed as incurred; major renewals and betterments are capitalized. At the
time depreciable assets are retired or otherwise disposed of, the cost and the
accumulated depreciation of the assets are eliminated from the accounts and any
profit or loss is recognized.
LEASES
The Company's leasing arrangements as lessee include the leasing of certain
office space, residential units and equipment. These leases have been classified
as operating leases.
INCOME TAXES
In February, 1992, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 109 (SFAS 109), "Accounting for Income
Taxes". The Company has adopted the principles of SFAS 109, as required,
effective July 1, 1993 on a prospective basis. The cumulative effect of adoption
of SFAS 109 was approximately $3,970,000, as adjusted.
The Company and its subsidiaries file a consolidated federal income tax return.
See Note 12 for an additional discussion of income tax matters.
EARNINGS PER SHARE
Primary earnings (loss) per common share is computed by dividing net income
(loss) by the weighted average number of common shares outstanding and common
stock equivalents. The weighted average number of shares used to compute primary
earnings (loss) per common share was 11,974,618 shares in 1995, 10,355,805
shares in 1994 and 6,454,648 shares in 1993.
Fully diluted earnings per common share is computed by dividing net income
(loss) by the weighted average number of shares of common stock outstanding and
all potentially dilutive securities. There were 11,974,618 shares in 1995,
10,644,693 shares in 1994, 6,692,408 shares in 1993.
The fiscal 1994 shares for both primary and fully diluted assume the conversion
of the Series C preferred stock effective October 22, 1993 and the options (as
described in Note 13), are outstanding as of July 1, 1993.
RECLASSIFICATIONS
Certain amounts of the accompanying financial statements have been reclassified
for comparative purposes.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For purposes of reporting cash flows, short-term investments with original
maturities of ninety days or less are considered cash equivalents.
25
<PAGE>
Supplemental disclosures of cash flow information:
(In thousands)
1995 1994 1993
----------------------
Cash paid during the year for:
Interest (net of amounts capitalized) $ 205 $ 97 $ -
Income taxes 297 1,023 356
The 1993 Recapitalization Transactions (Note 2) include significant non-cash
components. The following schedule summarizes these items:
Acquisition Other 1993
of OCC Recapitalization
10/22/93 Transactions
----------- ----------------
Cash $ 265 $
Receivables 1,814 (223)
Real estate held for development
and sale 29,843 (1,379)
Property and equipment 447
Deferred charges and other assets 2,760 (10)
------ ------
$ 35,129 $ (1,612)
====== ======
Accounts payable and accrued
liabilities $ 12,768 $ (356)
Customer deposits 1,660
Mortgage and other note obligations
primarily secured by:
Mortgage receivables
Real estate held for development
or sale 18,475 (5,524)
Senior notes (5,505)
Subordinated debentures (1,192)
Other notes payable 769 1,139
Deferred taxes 1,169
------ ------
Minority interest 34,841 $(11,438)
------ ------
Mandatorily redeemable series
A preferred stock (2,000)
Series C preferred stock 50
Capital in excess of par -
preferred 238
Common stock
Capital in excess of par - common 646
Retained earnings 11,926
Treasury stock (746)
------ ------
288 9,826
------ ------
$ 35,129 $ (1,612)
====== ======
26
<PAGE>
On October 22, 1993, the Company acquired Orleans Construction Corporation as
more fully described in Note 2. The assets acquired, liabilities assumed and
other noncash effects of this transaction have not been reflected in the
Consolidated Statements of Cash Flows.
As discussed in Note 2, on October 22, 1993, a transaction was completed between
the Company and Jeffrey P. Orleans whereby the Company issued $1,800,000 of
Series B Notes in exchange for $6,331,000 aggregate principal and accrued
interest of 12 5/8% Senior Notes due August 15, 1996, and $1,371,000 aggregate
principal and accrued interest of 1991 Subordinated Debentures due September 1,
2000 owned by Mr. Orleans. This transaction resulted in an extraordinary gain of
$3,718,000, net of income taxes of $1,989,000.
The Flora transactions described in Note 2 include certain non cash items which
have not been reflected in the Consolidated Statements of Cash Flows. These
items include approximately $1,500,000 of real estate assets given in exchange
for the retirement of the Company's Subordinated Note payable with a principal
balance of $2,559,380 plus accrued interest. Further, $2,100,000 of new notes
payable were issued in exchange for 50,000 shares of Series A Preferred Stock,
which has been canceled, and the reacquisition of 1,002,513 shares of the
Company's Common Stock.
As discussed in Note 2, in September, 1993 the Company consummated an agreement
with the Federal Deposit Insurance Corporation ("FDIC") under which the Company
was able to fully satisfy mortgage obligations at less than the carrying value
of the debt. An extraordinary gain on early extinguishment of debt of $3,185,000
net of income tax expense of $1,821,000 is reflected in the fiscal 1994
financial statements.
Also discussed in Note 2, during fiscal 1994, the Company entered into an
agreement with one of its lenders to satisfy several mortgage obligations
aggregating $4,272,000 at less than the carrying value of the debt. An
extraordinary gain on early extinguishment of debt of $437,000, net of income
tax expense has been reflected in the fiscal 1994 financial statements.
In July, 1992, the Company issued 200,000 shares of Common Stock to an
unaffiliated party for services respecting the certain restructuring
transactions. The cost of such services had previously been accrued by the
Company.
In January, 1993, Flora Real Estate Management Company ("Flora") exercised its
option to acquire for a nominal consideration 400,000 shares of the Company's
common stock. This option was granted to Flora in connection with an April 1990
exchange transaction between the Company and Flora.
In February, 1993, Flora exercised its option to acquire Mortgage Notes
Receivable of the Company with an outstanding principal balance of approximately
$4,500,000. The purchase price for such notes was the then outstanding related
debt balance of approximately $3,100,000. A provision for $1,400,000 to reduce
the carrying value of the Mortgage Notes Receivable was recorded when the option
was granted in connection with the April, 1990 exchange transaction between the
Company and Flora.
During fiscal 1994 and 1993, the Company issued payment-in-kind obligations to a
majority of its Senior Note, Subordinated Debenture and Subordinated Note
holders in lieu of scheduled cash interest payments aggregating approximately
$159,000 and $1,155,000, respectively.
27
<PAGE>
Note 2. 1993 RECAPITALIZATION TRANSACTIONS
As part of its continuing efforts to restructure its operations, eliminate high
interest indebtedness, obtain new capital for operations and improve its market
share in its primary operating areas, the Company has consummated several
transactions with various of its principal stockholders, creditors and investors
during fiscal 1994 (herein collectively called the "1993 Recapitalization
Transactions"). The 1993 Recapitalization Transactions include: (i) acquisition
of Orleans Construction Corporation ("OCC"); (ii) issuance of new notes by the
Company and sale of Common Stock by Jeffrey P. Orleans ("Mr. Orleans");(iii) a
corporate debt restructuring; (iv) capital transactions with the Flora Group;
and (v) a mortgage debt restructuring.
Acquisition of Orleans Construction Corporation
On October 22, 1993, the Company completed a transaction among the Company, OCC,
a Pennsylvania corporation, and Mr. Orleans, Chairman of the Board and Chief
Executive Officer of the Company and formerly the owner of all of the
outstanding stock of OCC. Mr. Orleans exchanged his OCC stock for newly-created
Series C Preferred Stock, which was converted into 6,000,000 shares of Common
Stock in September, 1994. As a result, OCC has become a wholly-owned subsidiary
of the Company. The assets acquired consist of real estate primarily in Mount
Laurel Township, New Jersey. This acquisition by the Company was recorded at the
OCC historical cost basis at the date of the transfer, since it was conducted
with an entity deemed to be under common control. The total assets and
liabilities assumed at the date of the OCC acquisition were $35,129,000 and
$34,841,000, respectively.
Summarized below are the combined results of operations, on an unaudited
proforma basis, as if the acquisition of OCC had occurred as of the beginning of
the periods presented. The proforma financial information does not purport to be
indicative of either the results of operations that would have occurred had the
acquisition occurred at the beginning of such periods or of future results of
operations of the combined companies.
28
<PAGE>
Proforma
For the Year Ended June 30,
1994 1993
--------------------------------------
(in thousands except per share amounts)
(unaudited)
Earned Revenues $75,839 $80,662
====== ======
Loss from continuing
operations before
extraordinary items
and cumulative effect
of change in
accounting principle $(1,090) $(7,962)
====== ======
Net income (loss) $10,836 $(7,962)
====== ======
Primary earnings per
share:
Loss before extraordinary
items and cumulative
effect of change in
accounting principle $ (.22) $ (.64)
====== ======
Net income (loss) $ .75 $ (.64)
====== ======
Fully diluted earnings
(loss) per share:
Loss before extraordinary
items and cumulative
effect of change in
accounting principle $ (.22) $ (.63)
====== ======
Net Income (loss) $ .73 $ (.63)
====== ======
Issuance of Series A Notes by the Company and Sale of Common Stock by Jeffrey P.
Orleans.
During the second quarter of fiscal 1994, the Company issued an
aggregate principal amount of $3,000,000 of newly-created Series A Notes to
investors in a private placement (the "Series A Investors"), including Mr.
Orleans and other executive officers, directors and key personnel of the Company
for cash consideration. The Series A Notes bear interest at 2% over the prime
rate with a maturity date of September 15, 1998.
Contemporaneously with the sale by the Company of the Series A Notes, Mr.
Orleans sold 1,674,000 shares of Common Stock of the Company owned by him to the
other Series A Investors. The shares sold by Mr. Orleans were previously issued
shares. In addition, Mr. Orleans was issued $1,000,000 in new Series B Notes for
cash consideration. The Notes have similar terms to the Series A Notes. Series A
and Series B notes require principal repayments as proceeds are received by the
Company from the sale of residential homes at certain communities.
29
<PAGE>
Corporate Debt Restructuring.
During the second quarter of fiscal 1994, the Company issued $1,800,000 of
Series B Notes in exchange for $7,700,000 aggregate principal and accrued
interest of Senior Notes and Subordinated Debentures owned by Mr. Orleans. The
$1,800,000 represents the acquisition cost of Mr. Orleans for the Senior Notes
and Subordinated Debentures, together with the related carrying costs. Mr.
Orleans acquired these securities from the former institutional holders thereof
during fiscal 1993. These securities were first offered to the Company which, at
the time, did not have sufficient funds or other available financial resources
to acquire the securities. This transaction resulted in a second quarter fiscal
1994 extraordinary gain of $3,718,000, net of income taxes of $1,989,000.
Transactions with Flora Group.
On August 27, 1993, the Company consummated a Note and Stock Acquisition
Agreement with the Flora Group, a group of entities which were formerly
principal stockholders and creditors of the Company. The transactions included
the exchange of cash and certain real estate assets owned by the Company for the
retirement of subordinated notes, the retirement of the Series A mandatorily
redeemable Preferred Stock in exchange for new debt securities and the
repurchase of 1,002,513 shares of Common Stock in exchange for the issuance of
new debt securities.
The Company exchanged 46 lots in the Fairway Lakes at Palm Aire Country Club
community in Manatee County, Florida with a carrying value of approximately
$1,500,000 and a cash payment of $250,000 for the retirement of the Company's
Subordinated Floating Rate Notes due April 1, 1997 with an aggregate unpaid
principal balance of $2,559,380 plus accrued interest. The Subordinated Floating
Rate Note was originally issued to Flora in connection with certain transactions
which occurred in April, 1990. This transaction resulted in an extraordinary
gain of approximately $616,000, which is net of estimated tax effect of
$377,000.
The Company issued a Note to Flora in the original principal amount of
$1,100,000 due August 31, 2023, which bears interest at 5.5% per annum until
December 31, 1995 and at 10% thereafter, in exchange for 50,000 shares of Series
A Preferred Stock (representing all of the outstanding Series A Preferred Stock
of the Company) held by Flora. The Series A Preferred Stock (which required
mandatory redemption at $40 per share on September 1, 2001 and was convertible
into 1,818,000 shares of Common Stock) had been issued to Flora in connection
with certain September 1991 restructuring transactions.
Additionally, the Company issued new debt securities to the Flora Group in
exchange for the retirement of mandatorily redeemable preferred stock and the
repurchase of 1,002,513 shares of Common Stock. This stock is being retained by
the Company as treasury stock.
Mortgage Debt Restructuring.
On September 14, 1993, the Company consummated an agreement with the Federal
Deposit Insurance Corporation ("FDIC") (which had succeeded to the mortgage debt
ownership as a result of financial difficulties of the original lender) under
which the Company was able to fully satisfy mortgage obligations aggregating
approximately $10,700,000 in exchange for a payment of approximately $5,700,000.
The funds required to consummate this transaction were obtained primarily from
the proceeds of approximately $5,000,000 from new loans secured by real estate
assets of the Company. In addition, a portion of the proceeds of a $1,300,000
loan from Mr. Orleans was used to consummate this transaction. This loan was
repaid from the proceeds of the Series A and Series B notes. An extraordinary
gain on early extinguishment of debt of $3,185,000, net of income tax expense of
$1,821,000 has been reflected in the accompanying fiscal 1994 financial
statements. The Company also recognized an extraordinary gain on early
extinguishment of debt of $437,000, net of related income tax expense, during
fiscal 1994, as a result of a similar transaction with an unrelated lender.
30
<PAGE>
Note 3. JOINT VENTURES
In October, 1992, a wholly owned subsidiary of the Company, Versailles at
Europa, Inc. was established to act as the General Partner in a newly formed
Versailles Associates, L.P. (the "Partnership"). The Partnership was formed to
purchase and develop a tract of land in Cherry Hill, New Jersey. The terms of
the Partnership Agreement provide that the General Partner be allocated 55% of
the net profits and losses of the Partnership and have exclusive management and
control over the development of the property. The financial statements of the
Partnership are included in the consolidated financial statements of the
Company. The limited partner's share of the income and capital from this entity
has been presented as minority interest in the accompanying consolidated
financial statements.
Orleans Construction Corporation (OCC) has entered into a joint venture
agreement with Bridlewood Associates, L.P., a limited partnership formed to
develop an 85 acre parcel of land in Mount Laurel, New Jersey. OCC is the
managing general partner. OCC and the limited partner share equally in the
profits or losses of the entity. The financial statements of the Partnership are
included in the consolidated financial statements of the Company. The limited
partner's share of the income and capital from this entity has been presented as
minority interest in the accompanying consolidated financial statements.
Note 4. TRANSACTIONS WITH RELATED PARTIES
Prior to October 22, 1993, OCC had advanced funds to, borrowed funds from, and
paid expenses and debt obligations on behalf of Orleans Builders and Developers,
a limited partnership whose partners include Jeffrey P. Orleans and the Trust of
Selma Orleans. At June 30, 1995 amounts owed by the Company to the partnership
aggregated $3,657,000. These advances are payable on demand and bear interest at
prime plus 1%. Interest incurred on these advances amounted to $369,000 and
$168,000 for the twelve months ended June 30, 1995 and eight months ended June
30, 1994, respectively.
The Company exercised its option to purchase a section of land from OB&D under
the terms of an existing option agreement. This parcel was subsequently sold to
an unaffiliated third party for a purchase price of $3,336,000 in November,
1994. The transaction resulted in a profit before income taxes of $548,000. The
remaining real estate under the option agreement with OB&D is under an option
agreement of sale with the above referenced buyer.
Note 5. RECEIVABLES
Trade accounts receivable result primarily from escrow deposits on residential
units, accrued interest and net proceeds due from residential closings. Mortgage
and other notes receivable, which are due in varying installments through 2017,
bear interest at rates from 8% to 12%. Mortgage and other notes receivable
consist of the following:
31
<PAGE>
June 30,
-------------------
1995 1994
- - - ----------------------------------------------------------------
(In thousands)
- - - ----------------------------------------------------------------
Mortgage subsidiary receivables $ 1,438 $ 1,780
First mortgage notes, secured by
residential and other properties 266 317
- - - ----------------------------------------------------------------
1,704 2,097
Less: Deferred sales proceeds and allow-
ance for uncollectible accounts (30) (35)
- - - -----------------------------------------------------------------
$ 1,674 $ 2,062
- - - ----------------------------------------------------------------
Due within one year $ 338 $ 357
- - - ----------------------------------------------------------------
Note 6. REAL ESTATE HELD FOR DEVELOPMENT AND SALE
Residential properties consist of the following:
June 30,
------------------
1995 1994
- - - --------------------------------------------------------------
(In thousands)
- - - --------------------------------------------------------------
Condominiums and townhomes $22,368 $18,554
Single-family homes 13,389 16,462
- - - ---------------------------------------------------------------
$35,757 $35,016
Residential properties completed or under construction consist of the following:
June 30,
-----------------
1995 1994
- - - --------------------------------------------------------------
(In thousands)
- - - --------------------------------------------------------------
Under contract for sale $23,242 $22,645
Unsold 12,515 12,371
- - - ---------------------------------------------------------------
$35,757 $35,016
- - - ---------------------------------------------------------------
32
<PAGE>
Note 7. MORTGAGE SUBSIDIARIES
The Company has a wholly-owned financing subsidiary which had been involved,
through unaffiliated companies, in issuing mortgage collateralized bonds.
Condensed financial information for the finance subsidiary is as follows:
June 30,
-----------------
1995 1994
- - - ----------------------------------------------------------------
(In thousands)
- - - ----------------------------------------------------------------
Total assets, principally
mortgage notes receivable $ 1,586 $ 2,070
Total liabilities, principally
bonds payable 1,444 1,935
- - - ----------------------------------------------------------------
Advances to
parent company $ 142 $ 135
- - - ----------------------------------------------------------------
Net income for the year ended $ 27 $ 60
- - - ----------------------------------------------------------------
Note 8. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
June 30,
-------------------
1995 1994
- - - ----------------------------------------------------------------
(In thousands)
- - - ----------------------------------------------------------------
Equipment and fixtures $ 1,151 $ 4,162
Less accumulated depreciation (628) (3,641)
- - - -----------------------------------------------------------------
$ 523 $ 521
- - - ----------------------------------------------------------------
Depreciation expense was $205,000, $95,000 and $81,000 during fiscal 1995, 1994
and 1993, respectively.
Note 9. MORTGAGE AND OTHER NOTE OBLIGATIONS
The maximum balance outstanding under construction and inventory loan agreements
at any month end during fiscal 1995, 1994 and 1993 was $27,998,000, $19,835,000
and $8,267,000, respectively. The average month end balance during fiscal 1995,
1994 and 1993 was approximately $22,940,000, $12,100,000 and $6,383,000,
respectively, bearing interest at an approximate average annual rate of 9.2%,
7.2% and 7.3%, respectively. Mortgage obligations secured by land held for
development or sale and improvements are due in varying installments through
fiscal 1999 with interest primarily at 1% above the prime rate.
Maturities of land and improvement mortgage obligations, other than residential
property construction loans, during the next five fiscal years are: 1996 -
$3,501,145; 1997 - $3,122,575; 1998 - $1,740,000; 1999 - $0 and 2000 -
$2,940,000. As more fully discussed in Note 2, during fiscal 1994 the Company
consummated transactions whereby several mortgage loan obligations were fully
satisfied for less than the carrying value of the debt. These transactions
resulted in extraordinary gains of $3,622,000, net of estimated income taxes of
$1,821,000. Obligations under residential property and construction loans
amounted to $27,998,000 at June 30, 1995 and are repaid at a predetermined
percentage of the selling price of a unit when a sale is completed.
33
<PAGE>
Included in the aggregate Other Note Payable balance of $9,455,000 are Series A
and Series B Notes Payable (Note 2) of approximately $5,241,000 which mature in
fiscal 1999. Repayment of these obligations will be from proceeds from the sale
of units at certain residential properties. Promissory Notes issued in the Flora
Group Transactions aggregate $2,048,000 and $2,076,000 at June 30, 1995 and
1994, respectively and are amortized over a 30 year term with a maturity date in
fiscal 2024. In addition, the Company has various working capital and property
and equipment note obligations which require various monthly repayment terms
with maturity dates from 1995 through 1998.
Note 10. SENIOR NOTES
As part of certain restructuring transactions, the Company consum mated a Note
Exchange Agreement dated September 11, 1991 with five principal holders of its
outstanding Senior Notes. Pursuant to the Note Exchange Agreement, the Company
issued an aggregate of $5,032,935 principal amount of new Senior Notes due
February 15, 1996 ("1996 Senior Notes"), in exchange for an aggregate of
$4,453,000 principal amount of Senior Notes, plus accrued interest thereon. In
addition, the Company issued an aggregate principal amount of $318,000 in new
Interest Notes, representing the amount of the interest payment due August 15,
1991 on the exchanged Senior Notes. The exchange deferred cash interest payments
on these 1996 Senior Notes until August 15, 1993.
During fiscal 1993, Jeffrey P. Orleans purchased $5,728,000 of the 1996 Senior
Notes at a substantial discount. As more fully described in Note 2, the Company
reacquired these 1996 Senior Notes for a price equal to that paid by Mr.
Orleans, plus certain holding costs incurred by Mr. Orleans.
The Senior Notes, which are unsecured obligations, rank senior in right of
payment to the subordinated debentures (Note 11) and require semi-annual
interest payments each August and February. The Company may redeem all or any
portion of the original Senior Notes or the 1996 Senior Notes issued in certain
restructuring transactions, at any time, at 100% of the principal amount. The
indenture and the Note Exchange Agreement relating to the Senior Notes and 1996
Senior Notes contain certain default provisions and impose limitations on the
amount of dividends or distributions to shareholders. The Company is in
compliance with these provisions at June 30, 1995.
The Senior Notes are presented net of unamortized discount, which is being
amortized as additional interest over the life of the Senior Notes.
Note 11. SUBORDINATED DEBENTURES
On September 8, 1980, the Company sold 25,000 Units, each consisting of a $l,000
debenture bearing interest at 14 l/2% per annum and 5 shares of Common Stock.
The debentures, which are unsecured obligations and are subordinated to senior
indebtedness, as defined, mature September l, 2000 and require semi-annual
interest payments each September and March with the balance due on September 1,
2000. Optional prepayments may be made at 100% of the principal amount thereof.
The indenture and the Debenture Exchange Agreement, discussed below, relating to
the debentures contains certain default provisions and imposes restrictions on
the amount of dividends or distributions to shareholders. The debentures are
presented net of unamortized debt discount, which is being amortized as
additional interest over the life of the debentures.
In April, 1990, the Company retired $18,460,000 of outstanding subordinated
debentures in connection with an April 1990 exchange transaction. The debentures
retired in this transaction were used to satisfy the sinking fund obligations
until September 1, 2000.
34
<PAGE>
As part of certain restructuring transactions, the Company consummated a
Debenture Exchange Agreement, dated September 11, 1991, with the principal
holders of its outstanding subordinated debentures. Pursuant to the Debenture
Exchange Agreement, the Company issued an aggregate $2,356,000 principal amount
of new 1991 subordinated debentures in exchange for an aggregate $2,197,000
principal amount of the original subordinated debentures, plus accrued interest.
During fiscal 1993, Jeffrey P. Orleans purchased $1,323,000 of the 1991
Subordinated Debentures at a substantial discount. As more fully described in
Note 2, the Company reacquired these 1991 Subordinated Debentures during fiscal
1994 for a price equal to that paid by Mr. Orleans, plus certain holding costs
incurred by Mr. Orleans.
Following the consummation of the Debenture Exchange Agreement, a total
principal amount of $593,000 of original subordinated debentures remain
outstanding.
Note 12. INCOME TAXES
The provision (benefit) for income taxes is summarized as follows:
For Year Ended June 30,
---------------------------
1995 1994 1993
---------------------------
(In Thousands)
- - - --------------------------------------------------------------
Continuing operations
Current $ 270 $ 104 $ 553
Deferred (348)
- - - ---------------------------------------------------------------
$ 270 $ 104 $ 205
- - - --------------------------------------------------------------
Extraordinary Item
Current $ $ 4,336
Deferred (149)
- - - --------------------------------------------------------------
$ $ 4,187 $
- - - --------------------------------------------------------------
The differences between taxes computed at federal income tax rates and amounts
provided for continuing operations are as follows:
For Year Ended June 30,
---------------------------
1995 1994 1993
---------------------------
(In thousands)
- - - ---------------------------------------------------------------
Amount computed at statutory rate $ 500 $ 5,217 $(2,894)
State income taxes, net of federal
tax benefit 17 75 10
Unrealized (realized) benefits from
net operating loss carry forwards (247) (5,188) 3,089
- - - ---------------------------------------------------------------
$ 270 $ 104 $ 205
- - - ---------------------------------------------------------------
Deferred income taxes reflect the impact of "temporary differences" between the
amount of assets and liabilities for financial reporting purposes and such
amounts as measured by tax laws and regulations. These "temporary differences"
are determined in accordance with Financial Accounting Standards Board Statement
No. 109 (Note 1). Principal items making up the deferred income tax provisions
from continuing operations follows:
35
<PAGE>
For Year Ended June 30,
--------------------------
1995 1994 1993
--------------------------
(In thousands)
- - - ---------------------------------------------------------------
Interest and real estate taxes $ 424 $ 461 $ 2,234
Difference in tax accounting for
land and property sales (net) 7 46 921
Unrealized (realized) tax net
operating loss carryforwards (370) 1,430 (5,489)
Reserves for book not tax (144) (129) 230
Gain (loss) from joint ventures 17
Deferred compensation 99
Depreciation and other (16) 25 (38)
Debt redemption (1,919) 1,777
Recapitalization expenses 86
- - - ---------------------------------------------------------------
$ $ $ (348)
- - - ---------------------------------------------------------------
The Company has adopted the principles of SFAS 109, as required, effective July
1, 1993 on a prospective basis. The cumulative effect of adoption of SFAS 109
was approximately $3,970,000, as adjusted. This gain was primarily the result of
the effects of previously unrecognized net operating losses and other
carryforward tax benefits in excess of net deferred taxable items and net of a
valuation reserve of approximately $1,000,000. The valuation reserve reflected
the excess of the carryforwards over existing net deferred taxable items and
expected taxable gains on certain of the 1993 Recapitalization Transactions. As
of June 30, 1995, the Company has a deferred tax asset and an offsetting
valuation reserve of approximately $1,200,000.
At June 30, 1995, the Company has approximately $3,400,000 of net operating loss
carryforwards for tax purposes which expire in various years through fiscal
2009. In addition, the Company has alternative minimum tax credits of
approximately $835,000 which may be used to reduce or eliminate ordinary federal
income taxes. These alternate minimum tax credits do not have an expiration.
Note 13. STOCK OPTION PLAN
In December 1992, the Board of Directors adopted (i) the 1992 Stock Incentive
Option Plan relating to options for up to 560,000 shares (increased in August,
1994 to 660,000 shares) of Common Stock of the Company and (ii) the Non-Employee
Directors Stock Option Plan relating to a maximum of 100,000 shares. Prior to
fiscal 1995, the Stock Option Committee had granted options aggregating 540,000
shares to certain employees of the Company under the 1992 Incentive Stock Option
Plan and options aggregating 75,000 to three non-employee Directors.
In February, 1995, the Board of Directors adopted the 1995 Stock Option Plan for
Non-Employee Directors which allows for options for up to 100,000 shares. On
February 28, 1995, 75,000 options were granted under this plan to three
additional non-employee Directors. The Plan and the options granted thereunder
are conditional upon the receipt of stockholder approval within one year of the
adoption of the Plan.
The option price per share under all plans was established at the fair market
value at the dates of each grant which was $.69 to $2.81 per share.
36
<PAGE>
Note 14. COMMITMENTS AND CONTINGENCIES
At June 30, 1995, the Company had outstanding bank letters of credit amounting
to $15,463,725 as surety for completion of improvements at various developments
of the Company.
Development and sale of real property creates a potential for environmental
liability on the part of the developer, owner or any mortgage lender for its own
acts or omissions as well as those of current or prior owners of the subject
property or adjacent parcels. If hazardous substances are discovered on or
emanating from any of the Company's properties, the owner or operator of the
property (including the prior owners) may be held strictly liable for all costs
and liabilities relating to such hazardous substances. Environmental studies are
undertaken in connection with property acquisitions by the Company.
All testing required by Phase 1A of the phased remedial investigation ("RI") to
be performed at Colts Neck Estates, a single family residential development
built by the Company in Washington Township, Gloucester County, New Jersey
("Colts Neck"), has been completed. The results of such testing have been
submitted to the New Jersey Department of Environmental Protection ("NJDEP") for
its review and comment. At NJDEP's request, James C. Anderson Associates, Inc.
("JCA"), Washington Township's consultant, submitted a proposal to NJDEP to
delineate three alleged pig manure areas on other portions of Colts Neck. The
cost of the delineation is estimated at approximately $34,000; no agreement has
been reached with NJDEP over the Company's obligation, if any, to fund this
work. The Company continues to fund the cost of the phased RI testing, which is
not expected to exceed materially the original estimate of $136,000.
Approximately 145 homeowners at Colts Neck have commenced three lawsuits against
the Company, which were separately filed in state and Federal courts between
April and November, 1993, and now have been consolidated in the United States
District Court for the District of New Jersey. The plaintiffs in the
consolidated action allege that the Company and other defendants built and sold
them homes which had been constructed on and adjacent to land which has been
used as a municipal waste landfill and a pig farm. The complaints assert claims
under the federal Comprehensive Environmental Response, Compensation and
Liability Act, the Federal Solid Waste Disposal Act, the New Jersey Sanitary
Landfill Facility Closure and Contingency Act, the New Jersey Spill Compensation
and Control Act, as well as under theories of private nuisance, public nuisance,
common law fraud, latent defects, negligent misrepresentation, consumer fraud,
negligence, strict liability, vendor liability, and breach of warranty, among
others.
In September, 1993 the Company brought a state court action against more than 30
of its insurance companies seeking indemnification and reimbursement of costs of
defense in connection with the three Colts Neck actions referred to above. That
action has since been stayed and the Company's claims against its insurers have
also been brought as third-party claims in the consolidated Colts Neck
litigation in Federal court along with third-party claims against the former
owners and operators of the Colts Neck property as well as claims against the
generator of the waste allegedly disposed on the property.
Although the Company has vigorously defended the claims brought by the plaintiff
homeowners, the Company and other parties in the Colts Neck litigation agreed to
mediation which resulted in a settlement agreement. The implementation of the
agreement is subject to a number of conditions, including a determination by the
court to accord class action status to the litigation. Under the settlement
agreement, if implemented, a judgment of $6,000,000 would be entered against the
Company, of which $650,000 would be paid in cash promptly. Except as noted, the
balance of the judgment would be payable solely out of the proceeds, if any, of
recoveries under the litigation against the insurance companies, and the Company
would have no liability itself for the balance of the judgment not satisfied
from such recoveries. The Company would fund the litigation against the
insurance companies, subject to reimbursement of amounts in excess of $100,000
(subject to a limitation on reimbursement of $300,000) from recoveries, if any,
from the insurance companies, including pretrial settlements. In the event that
the insurance recoveries (whether through settlements or judgments) are less
than $500,000, the Company would pay the difference to the homeowners.
37
<PAGE>
The Company has accrued estimated costs of environmental testing as well as all
other reasonably estimable future investigatory, engineering, legal and
litigation costs and expenses. Since the Company has not received NJDEP's
comments on the testing results of Phase 1A of the RI, it is unable to predict
whether any further testing or remediation will be required and, if so, the cost
and allocation thereof. The Company reserves the right to opt out of the
settlement agreement if there is no satisfactory resolution with NJDEP over its
claims. The Company increased its recorded reserves to give effect to its
estimate of the net amount payable under the settlement agreement, if
implemented, and the unreimbursed costs to the Company of the insurance
litigation. The Company believes that neither the implementation of the
settlement agreement nor the resolution of this contingency through further
litigation will have a material effect on its results of operations or its
financial position, although there can be no assurance as to the ultimate
outcome of any litigation. Since there are conditions to the implementation of
the settlement agreement, there is no assurance that the litigation will not
recommence.
The Company is not aware of any other environmental liabilities associated with
any of its other projects.
38
<PAGE>
FPA CORPORATION AND SUBSIDIARIES
SCHEDULE IV - INDEBTEDNESS OF AND TO RELATED PARTIES
YEARS ENDED June 30, 1995, 1994 AND 1993
($000 omitted)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- - - ----------------------------------------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E Column F Column G Column H Column I
--Indebtedness of-- --Indebtedness to--
Name of Balance at Addi- Deduc- Balance Balance at Addi- Deduc- Balance
person beginning tions tions at end beginning tions tions at end
- - - ----------------------------------------------------------------------------------------------------------------------------------
Year Ended June 30, 1995
Jeffrey P.
Orleans $4,974 $ 259 $4,715
GFPA Limited
Partnership $ 234 $ 20 $ 214
Lewis Katz $ 167 $ 14 $ 153
Benjamin D. Goldman $ 67 $ 6 $ 61
Orleans Builders & Developers $1,044(3) $ 306 $ 738
Year Ended June 30, 1994
Jeffrey P.
Orleans $7,051 $4,974(2) $7,051 $4,974
GFPA Limited
Partnership $- $ 234(2) $- $ 234
Lewis Katz $- $ 167(2) $- $ 167
Benjamin D. Goldman $- $ 67(2) $- $ 67
Orleans Builders &
Developers $- $1,044(3) $- $1,044
Year Ended June 30, 1993
Jeffrey P.
Orleans $- $7,051(1) $- $7,051
</TABLE>
- - - ----------------
(1) This amount consists of corporate debt instruments (i.e. approximately
$5,728,000 of 12 5/8% Senior Notes and approximately $1,323,000 of
14-1/2% Subordinated Debentures) which were purchased by Mr. Orleans from
the original noteholders during fiscal 1993. The Company acquired
these instruments from Mr. Orleans during fiscal 1994. (See Note 2 to
the Consolidated Financial Statements).
(2) These amounts consist of Series A and Series B Notes issued during fiscal
1994. (See Note 2 to the Consolidated Financial Statements).
(3) This amount consists of mortgages on land purchased by OCC from
Orleans Builders and Developers. Principal payments are made on these
mortgages upon the sale and delivery of the related units. This debt
was assumed by the Company in connection with the acquisition of OCC.
39
<PAGE>
FPA CORPORATION AND SUBSIDIARIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
For the year ended June 30, 1995, 1994 and 1993
($000 omitted)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Column A Column B Column C Column D Column E
- - - -------------------------------------------------------------------------------------------------------------------
Additions
--------------------------------------
Balance at Charged to costs Charged to other Deduc- Balance at
Description beginning of period and expenses accounts - describe tions end of period
- - - ------------------------------------------------------------------------------------------------------------------------
Provision for uncollectibility
of receivables:
Year ended June 30, 1995 $ 35 $ - $ 5 $ 30
====== ====== ====== ======
Year ended June 30, 1994 $ 55 $ - $ 20(A) $ 35
====== ====== ====== ======
Year ended June 30, 1993 $1,582 $ 15 $1,542(B) $ 55
====== ====== ====== ======
</TABLE>
(A) A reduction of $20,000 represents consideration received for previously
reserved receivables.
(B) A reduction of $1,412,000 is a result of the Company's selling the related
notes receivable under an existing option agreement. The remaining $130,000
deduction represents consideration received for previously reserved
receivables.
40
<PAGE>
FPA CORPORATION AND SUBSIDIARIES
SCHEDULE X
SUPPLEMENTARY INFORMATION TO CONSOLIDATED STATEMENTS OF OPERATIONS
For the Year Ended June 30,
---------------------------
1995 1994 1993
------ ------ ------
(In thousands)
Advertising $1,618 $1,414 $ 941
------ ------ ------
41
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
There are no matters required to be reported hereunder.
PART III
Item 10. Directors and Executive Officers of the Registrant.
Incorporated herein by reference from the Company's definitive proxy
statement for its annual meeting of Stockholders to be held in December, 1995.
Information concerning the executive officers is included under the separate
caption Item A. "Executive Officers of the Registrant" under Part I of this Form
10-K.
Item 11. Executive Compensation.
Incorporated herein by reference from the Company's definitive proxy
statement for its annual meeting of Stockholders to be held in December, 1995.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Incorporated herein by reference from the Company's definitive proxy
statement for its annual meeting of Stockholders to be held in December, 1995.
Item 13. Certain Relationships and Related Transactions.
Incorporated herein by reference from the Company's definitive proxy
statement for its annual meeting of Stockholders to be held in December, 1995.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) l. Financial Statements
The financial statements and schedules listed in the index on
the first page under Item 8 are filed as part of this Form 10-K.
(b) Reports on Form 8-K. The Company did not file a Form 8-K
for the quarter ended June 30, 1995.
(c) Exhibits
42
<PAGE>
Exhibit
Number
- - - --------
3.l Certificate of Incorporation of the Company dated September 4, 1969
{incorporated by reference to Exhibit 2.l of the Company's Registration
Statement on Form S-7, filed with the Securities and Exchange
Commission (S.E.C. File No. 2-68662) (herein referred to as "Form
S-7")}.
3.2 Amendment to Certificate of Incorporation of the Company filed July
25, 1983 {incorporated by reference to Exhibit 3.2 of Amendment No. 2
to the Company's Registration Statement on Form S-2 filed with the
Securities and Exchange Commission (S.E.C. File No. 2-84724)}.
3.3 Amendment to Certificate of Incorporation of the Company filed May
27, 1992 (incorporated by reference to Exhibit 3.6 of Amendment No. 2
to the Company's Registration Statement on Form S-1 filed with the
Securities and Exchange Commission (S.E.C. File No. 33-43943) (the
"Form S-1")).
3.4 Agreement and Plan of Merger dated as of October 22, 1993, by and
among the Company, FPA Merger Subsidiary, Inc. a Pennsylvania
corporation; Orleans Construction Corp. ("OCC"); and Jeffrey P.
Orleans, including the Certificate of Designation respecting the Series
C Preferred Stock incorporated by reference to Exhibit 3.5 to the
Company's Form 8-K dated October 22, 1993 filed with the Securities and
Exchange Commission (the "1993 Form 8-K").
3.5 Certificate of Designation filed by the Company on September 6,
1991 with the Secretary of State of Delaware respecting the Series A
Preferred Stock and Series B Junior Preferred Stock (incorporated by
reference to Exhibit 4.4 of the Company's Form 8-K dated September 11,
1991 ("1991 Form 8-K")).
3.6 Subsequent Certificate to Certificate of Designations, Preferences and
Rights of Series A Preferred Stock and Series B Junior Preferred Stock
of FPA Corporation adopted September 14, 1992 and filed with the
Secretary of State of Delaware. (incorporated by reference to Exhibit
4.19 to Registrant's Form 10-K for the fiscal year ended June 30,
1994.)
3.7 Subsequent Certificate to Certificate of Designations, Preferences and
Rights of Series A Preferred Stock and Series B Junior Preferred Stock
of FPA Corporation filed on September 2, 1993 with the Secretary of
State of Delaware.
3.8 Certificate of Designations, Preferences and Rights of Series C
Preferred Stock filed by the Company on October 21, 1993 with the
Secretary of State of Delaware respecting the Series C Preferred Stock.
(incorporated by reference to Exhibit 2.1 to the Company's Form 8-K
dated October 22, 1993.)
3.9 By-Laws, as last amended March 16, 1990 (incorporated by reference to
Exhibit 3.1 to the Company's Form 8-K dated April 11, 1990, filed with
the Securities and Exchange Commission (the "1990 Form 8-K")).
4.l Form of the Company's 14 l/2% Subordinated Debentures due September l,
2000 (contained in, and beginning on page 12 of, Exhibit 4.2).
4.2 Form of Indenture dated September l, 1980, between the Company and
The Fidelity Bank (the "Debenture Indenture"), relating to the
Company's 14 l/2% Subordinated Debentures due September l, 2000
(incorporated by reference to Exhibit 2.3 of Amendment No. 2 to the
Company's Form S-7).
43
<PAGE>
4.3 Form of Second Supplemental Indenture dated March 30, 1990 to the
Debenture Indenture (incorporated by reference to Exhibit 4.3 to the
1990 Form 8-K).
4.4 Note Exchange Agreement, dated September 11, 1991, respecting the
issuance of $5,032,935.38 aggregate principal amount of 12 5/8% Senior
Notes due February 15, 1996, with the form of the Company's 12 5/8%
Senior Notes due February 15, 1996 attached as Exhibit A thereto
(incorporated by reference to Exhibit 4.5 to the 1991 Form 8-K).
4.5 Debenture Exchange Agreement, dated September 11, 1991, respecting
the issuance of $2,356,282.50 aggregate principal amount of 1991 14
1/2% Subordinated Debentures due September 1, 2000 with the form of the
Company's 1991 14 1/2% Subordinated Debentures due September 1, 2000
attached as Exhibit A thereto (incorporated by reference to Exhibit 4.6
to the 1991 Form 8-K).
4.6 Form of Note Purchase Agreement dated as of October 22, 1993, together
with form of Series A Variable Rate Notes due September 15, 1998 issued
by the Company attached thereto (incorporated by reference to Exhibit
4.2 to the 1993 Form 8- K).
4.7 Form of Note Purchase Agreement dated October 22, 1993, together with
form of Series B Variable Rate Mortgage Notes due September 15, 1998
issued by the Company attached thereto (incorporated by reference to
Exhibit 4.24 to the 1993 Form 8- K).
10.1 Form of Indemnity Agreement executed by the Company with Directors of
the Company (incorporated by reference to Exhibit B to the Company's
Proxy Statement respecting its 1986 Annual Meeting of Stockholders).
10.2 Employment Agreement between the Company and Jeffrey P. Orleans, dated
June 26, 1987 (incorporated by reference to Exhibit 10.2 to the Form
S-1.)
10.3 Mortgage dated March 17, 1992 granted by the Company to Jeffrey P.
Orleans, respecting property in Washington Township, Gloucester County,
New Jersey (incorporated by reference to Exhibit 10.3 to the 1992 Form
8-K).
22. Subsidiaries of Registrant.
25. Power of Attorney (included on Signatures page).
27 Financial Data Schedule (included in electronic filing format
only).
44
<PAGE>
EXHIBIT 3.7
CERTIFICATE OF ELIMINATION
TO
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF
SERIES A PREFERRED STOCK
OF
FPA CORPORATION
FPA CORPORATION, a corporation organized and existing under the General
Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
That, pursuant to the authority conferred upon the Board of Directors
by the Certificate of Incorporation (as amended) of said corporation, and
pursuant to the provisions of Section 151(g) of Title 8 of the Delaware Code of
1953, said Board of Directors, by unanimous consent in writing, in lieu of a
meeting, dated August 16, 1993, duly adopted resolutions providing for the
elimination from the Certificate of Incorporation of all matters with respect to
Series A Preferred Stock set forth in the Certificate of Designations,
Preferences and Rights of Series A Preferred Stock and Series B Junior Preferred
Stock filed with the Office of the Secretary of State on September 6, 1991,
which resolutions are as follows:
WHEREAS, on September 6, 1991, this Corporation filed a
Certificate of Designations, Preferences and Rights (the "Certificate
of Designations") of Series A Preferred Stock and Series B Junior
Preferred Stock (the "Series B Junior Preferred Stock"); and
WHEREAS, on September 11, 1991, in accordance with the
provisions of the Certificate of Designations, this Corporation issued
50,000 shares of Series A Preferred Stock, par value $1.00 (the "Issued
Series A") in exchange for good and valuable consideration delivered to
this Corporation; and
WHEREAS, on September 21, 1992, a Subsequent Certificate to
Certificate of Designations, Preferences and Rights of Series A
Preferred Stock and Series B Junior Preferred Stock (the "1992
Certificate of Designations") was filed by this Corporation which had
the effect of eliminating from the Certificate of Incorporation of this
Corporation all matters set forth in the Certificate of Designations
with respect to the Series B Junior Preferred Stock; and
WHEREAS, this Corporation has reacquired all of the 50,000
issued and previously outstanding shares of Series A Preferred Stock;
and
WHEREAS, none of the authorized shares of the Series A
Preferred Stock is currently outstanding.
NOW, THEREFORE, be it
RESOLVED, That none of the authorized shares of the
Series A Preferred Stock will be issued subject to the
Certificate of Designations, Preferences and Rights of Series
A Preferred Stock and Series B Junior Preferred Stock filed
with the Secretary of State of the State of Delaware on
September 6, 1991; and
45
<PAGE>
FURTHER RESOLVED, That the President, any
Vice President, the Secretary and the Treasurer, or any one of
them (the "Designated Officers") be, and each of them acting
alone or in concert is hereby, authorized and empowered,
without further action or direction from the Board of
Directors of this Corporation, to execute, deliver and
appropriately file on behalf of this Corporation a Certificate
(the "Certificate") in accordance with the provisions of
Section 151(g) of the Delaware General Corporation Law setting
forth the Resolutions adopted herein; and
FURTHER RESOLVED, That when such Certificate becomes
effective (i) it shall have the effect of eliminating from the
Certificate of Incorporation of this Corporation all matters
set forth in the Certificate of Designations with respect to
the Series A Preferred Stock, and (ii) this Corporation shall
have 500,000 shares of Preferred Stock, par value $1.00,
authorized, consisting of 500,000 shares of Preferred Stock as
to which no designation of series has been made; and
FURTHER RESOLVED, That all actions taken by any of
the Designated Officers respecting the filing of the 1992
Certificate of Designations be and are hereby ratified,
approved, confirmed and adopted.
IN WITNESS WHEREOF, FPA Corporation has caused this Certificate to be
executed by its President and attested by its Secretary this 30th day of August,
1993.
FPA CORPORATION
By: /s/ BENJAMIN D. GOLDMAN
---------------------------
Benjamin D. Goldman,
President
ATTEST:
By: /s/ JOSEPH A. SANTANGELO
---------------------------------
Joseph A. Santangelo,
Secretary
46
<PAGE>
Exhibit 22
Subsidiaries of Registrant
The Company owns all of the outstanding stock of the subsidiaries
listed below, each of which is included in the Consolidated Financial Statements
of the Company. All other former subsidiaries of the Company were either merged
with and into the Company or a subsidiary of the Company listed below.
Name State of Incorporation
---- ----------------------
Fawn Hollow, Inc. Pennsylvania
FPA Mortgage Corporation Florida
FPA Mortgage Investments, Inc. Florida
FPA Voorhees, Inc. New Jersey
Orleans Construction Corporation Pennsylvania
Orleans Corporation Pennsylvania
Orleans Corporation of New Jersey New Jersey
Orleans Property Management Services Corp. Pennsylvania
Timber Glen, Inc. New Jersey
Versailles at Europa, Inc. New Jersey
47
<PAGE>
Exhibit 25
SIGNATURES
and
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Jeffrey P. Orleans, Benjamin D. Goldman and Joseph A.
Santangelo and each of them, his true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign any and all amendments to
this Annual Report, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents or each of them, of their or his
substitutes or substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated:
/s/ JEFFREY P. ORLEANS September 18, 1995
- - - ----------------------------------
Jeffrey P. Orleans
Chairman of the Board and
Chief Executive Officer
/s/ BENJAMIN D. GOLDMAN September 18, 1995
- - - ----------------------------------
Benjamin D. Goldman
President, Chief Operating
Officer and Director
/s/ SYLVAN M. COHEN September 18, 1995
- - - ----------------------------------
Sylvan M. Cohen
Director
/s/ ROBERT N. GOODMAN September 18, 1995
- - - ----------------------------------
Robert N. Goodman,
Director
/s/ ANDREW N. HEINE September 18, 1995
- - - ----------------------------------
Andrew N. Heine
Director
/s/ DAVID KAPLAN September 18, 1995
- - - ----------------------------------
David Kaplan
Director
/s/ LEWIS KATZ September 18, 1995
- - - ----------------------------------
Lewis Katz
Director
48
<PAGE>
/s/ JOHN W. ROLLINS, SR. September 18, 1995
- - - ----------------------------------
John W. Rollins, Sr.
Director
/s/ JOSEPH A. SANTANGELO September 18, 1995
- - - ----------------------------------
Joseph A. Santangelo
Chief Financial Officer,
Treasurer and Secretary
49
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<MULTIPLIER> 1,000
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> JUN-30-1995
<CASH> 2,324
<SECURITIES> 0
<RECEIVABLES> 5,310
<ALLOWANCES> 0
<INVENTORY> 88,678
<CURRENT-ASSETS> 0
<PP&E> 523
<DEPRECIATION> 0
<TOTAL-ASSETS> 102,274
<CURRENT-LIABILITIES> 0
<BONDS> 52,778
<COMMON> 1,270
0
0
<OTHER-SE> 10,876
<TOTAL-LIABILITY-AND-EQUITY> 102,274
<SALES> 106,474
<TOTAL-REVENUES> 107,840
<CGS> 91,815
<TOTAL-COSTS> 106,369
<OTHER-EXPENSES> 1,491
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,165
<INCOME-PRETAX> 1,471
<INCOME-TAX> 270
<INCOME-CONTINUING> 1,201
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,201
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
