U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the quarterly period ended March 31, 2000
Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the transition period from to
Commission file number 1-8631
DOVER INVESTMENTS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 94-1712121
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
100 Spear Street, Suite 520, San Francisco, CA 94105
(Address of Principal Executive Offices) (Zip Code)
(415) 777-0414
(Registrant's telephone number)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act during the
past 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes x No
The number of shares outstanding of each of the registrant's classes of
Common Stock as of March 31, 2000, were as follows:
Title Shares Outstanding
Class A Common Stock, $.01 par value............ 828,689
Class B Common Stock, $.01 par value............ 313,851
DOVER INVESTMENTS CORPORATION
INDEX
Page
Number
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 2000 and
December 31, 1999. . . . . . .. . . . . . . . . . . . . . . . . . .3
Consolidated Statements of Earnings for the Three Months
Ended March 31, 2000 and 1999 . . . . . . . . . . . . . . . . . . .4
Consolidated Statement of Stockholders' Equity for the
Three Months Ended March 31, 2000 . . . . . . . . . . . . . . . . 5
Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 2000 and 1999. . . . . . . . . . . . 6
Notes to Consolidated Financial Statements. . . . . . . . . . . . . 7
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS. . . . . . . . . . . . . . . . . . . . .7
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
PART II - OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . 11
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
INDEX OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . .13
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DOVER INVESTMENTS CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
03-31-00 12-31-99
ASSETS
Cash and Cash Equivalents $15,773 $15,449
Restricted Cash 414 409
Homes Held for Sale 1,792 1,753
Property Held for Development 17,475 21,632
Notes Receivable 5,244 3,540
Other Assets 1,443 1,335
Total Assets $42,141 $44,118
LIABILITIES AND STOCKHOLDERS' EQUITY
Accrued Interest and Other Liabilities 1,112 3,824
Notes Payable 5,742 8,299
Minority Interest in Joint Venture 2,735 2,059
Total Liabilities 9,589 14,182
Stockholders' Equity
Class A Common Stock, Par Value $.01
Per Share -- Authorized 2,000,000 Shares;
Issued 828,689 Shares at 3/31/00 and
832,180 at 12/31/99 8 8
Class B Common Stock, Par Value $.01
Per Share -- Authorized 1,000,000 Shares;
Issued 313,851 Shares at 3/31/00 and
319,920 at 12/31/99 3 3
Additional Paid-In Capital 23,647 22,963
Retained Earnings from January 1, 1993 8,919 6,987
Treasury Stock (0 at 3/31/00 and 12/31/99
of Class A Shares and 4,560 of Class B
Shares at 3/31/00 and 12/31/99 (25) (25)
Total Stockholders' Equity 32,552 29,936
Total Liabilities and Stockholders' Equity $42,141 $44,118
See accompanying Notes to Consolidated Financial Statements.
DOVER INVESTMENTS CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except share amounts)
Three Months Ended
March 31,
2000 1999
Home Sales $14,352 $15,860
Lot Sales 1,129 1,107
Total Sales 15,481 16,967
Cost of Homes Sold 9,820 12,120
Cost of Lot Sales 480 864
Total Cost of Sales 10,300 12,984
Minority Interest in Joint Ventures 1,384 1,021
GROSS PROFIT 3,797 2,962
Selling Expenses 864 706
General and Administrative Expenses 341 216
1,205 922
Operating Income 2,592 2,040
Other Income:
Interest 338 158
Fees 11 -
Total Other Income 349 158
Income before Income Taxes 2,941 2,198
Provision for Income Taxes 1,009 811
NET INCOME $1,932 $1,387
Basic Earnings per Share $1.69 $1.30
Diluted Earnings per Share $1.62 $1.28
Weighted Average Number of
Shares Outstanding:
Basic: 1,142,540 1,063,575
Diluted: 1,189,794 1,087,349
See accompanying Notes to Consolidated Financial Statements.
<TABLE>
DOVER INVESTMENTS CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the Three Months Ended March 31, 2000
(in thousands)
<CAPTION>
Additional Treasury
Common Stock Paid -In Retained Stock
Class A Class B Capital Earnings at Cost Total
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 2000 $ 8 $ 3 $22,963 $6,987 $(25) $29,936
Re-issuance of Treasury
Stock - - - - - -
Realization of Prequasi-
reorganization Net Operating
Loss Tax Benefits - - 684 - - 684
Net Income - - - 1,932 - 1,932
Balance at March 31, 2000 $ 8 $ 3 $23,647 $8,919 $(25) $32,552
<FN>
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
DOVER INVESTMENTS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Three Months Ended
March 31,
2000 1999
Cash Flows from Operating Activities:
Net Income $1,932 $1,387
Reconciliation of Net Income to Net Cash
Provided by Operating Activities:
Income Accruing to Minority Interest 1,384 1,021
Deferred Taxes - 163
Tax Benefit of Utilizing Prequasi-
reorganization Net Operating Losses 684 456
Changes in Assets and Liabilities:
Restricted Cash (5) (4)
Property Held for Development 4,157 3,579
Homes Held for Sale (39) -
Other Assets (108) (231)
Notes Receivable (1,704) 250
Accrued Interest and Other Liabilities, Net (2,712) 651
Net Cash Provided by Operating Activities 3,589 7,272
Cash Flows from Financing Activities:
(Repayment to) Proceeds from
Minority Interest (708) -
Proceeds from Notes Payable 44 815
Repayment of Notes Payable (2,601) (5,326)
Reissuance of Treasury Stock - 4
Net Cash (Used in) Financing Activities (3,265) (4,507)
Net Increase in Cash and Cash Equivalents 324 2,765
Cash and Cash Equivalents at Beginning of Period 15,449 8,622
Cash and Cash Equivalents at End of Period $15,773 $11,387
Supplemental Cash Flow Activity:
Cash Paid for Interest $193 $182
Cash Paid for Taxes $325 $ 50
See accompanying Notes to Consolidated Financial Statements.
DOVER INVESTMENTS CORPORATION
Notes to Consolidated Financial Statements
March 31, 2000
1. Basis of Presentation
The accompanying consolidated financial statements have been prepared
from the records of Dover Investments Corporation without audit. Accordingly,
they do not include all of the information and notes required by generally
accepted accounting principles for annual financial statements. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three months ended March 31, 2000 are not necessarily indicative
of the results that may be expected for the year ending December 31, 2000.
For further information, refer to the consolidated financial statements and
notes thereto included in the Company's 1999 Annual Report to Stockholders.
2. Net Earnings per Share
Basic earnings per share is computed, on a combined basis, for the two
classes of common stock, Class A and Class B. Computations are based upon
the weighted average number of common shares outstanding. The weighted
average number of Class A and Class B shares used to compute basic income
per share was 1,142,540 at March 31, 2000, and 1,063,575 at March 31, 1999.
Diluted income per share took into consideration the outstanding stock
options.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The information set forth below and elsewhere in this document contains
forward-looking statements, which reflect the Company's current views with
respect to future events and financial performance. The words "expects",
"intends", "believes", "anticipates", "likely" and "will" and similar
expressions generally identify forward-looking statements. These forward-
looking statements are subject to certain risks and uncertainties, including,
among others, the risks discussed herein, that could cause actual results and
events to differ materially from historical results or those anticipated in
the forward-looking statements.
General
Dover Investments Corporation (the "Company") engages primarily in
residential real estate development. Westco Community Builders, Inc., a
California corporation ("WCB"), is primarily responsible for the construction
and the development of real estate.
In March 2000, the Company's Board of Directors voted to take no action
with respect to an unsolicited proposal, set forth in a February 18, 2000
letter from Leeward Investments, LLC, the general partner of Leeward Capital,
L.P., a stockholder of the Company, to enter into discussions with the Company
regarding a possible acquisition of the outstanding shares of the Company's
stock. The Board concluded that any such discussions with Leeward Investments,
LLC would be futile and a waste of corporate resources, since Mr. Lawrence
Weissberg, as the Company's majority stockholder, had informed the Board that
he has no interest in selling his shares of the Company's stock.
Real Estate Development
Below is a summary of the Company's major real estate development
activities during the quarter ended March 31, 2000.
Marina Vista
During the quarter ended March 31, 2000, the Company completed development
of its Marina Vista project in San Leandro, California. On February 8, 2000,
the sale of the last home at Marina Vista closed.
Glenbriar Estates
The Company, through joint ventures with WCB, continued to develop the
Glenbriar Estates project in Tracy, California. All of the land owned by the
joint ventures is covered by either vesting tentative subdivision maps or
final subdivision maps. The joint ventures are currently building two
product types of homes at Glenbriar Estates, the Glenbrook Subdivision and
the Meadowbrook Subdivision. The market for homes at Glenbriar Estates
remained strong during the first quarter of 2000. Future development in Tracy
is subject to the availability of residential growth allocations issued by
the City of Tracy, which could be negatively affected by the passage of a
citizens initiative during the year 2000, reduced availability of water or
waste water capacity, and the state of the economy generally in the Bay Area.
Higher Priced Homes
In September of 1999, the Company entered into a joint venture with WCB
to develop a higher priced home. The property is located in Atherton,
California, and construction is scheduled for completion in approximately
January 2001.
South Tracy Industrial Park
In 1999 the Company, through a joint venture with WCB, entered into an
agreement to purchase and develop for industrial use approximately fifty
acres of industrial property in the southern part of the City of Tracy.
The South Tracy property currently is zoned industrial. A tentative
subdivision map has been approved by the City of Tracy, and approval of a
final subdivision map is pending. The Company expects that site improvements
will commence in the spring of 2000 and that development will continue
for several years.
Coram Plaza Shopping Center, Coram, New York
In 1999 a limited liability company formed by the Company and three other
parties entered into an agreement to purchase property, with buildings and
improvements, located in the Coram Plaza Shopping Center, in Coram, New York.
The property is intended to be developed for commercial use.
Liquidity and Capital Resources
During the three months ended March 31, 2000, the Company needed liquid
assets primarily to fund expenditures in connection with the Marina Vista
project, the Glenbriar Estates project, the higher priced home debt service
and its general and administrative expenses. The Company met its funding
requirements primarily from cash reserves and from revenues from home and lot
sales. The Company also obtained construction financing from private sources
secured by the homes under construction.
The Company's primary sources of liquidity in the future will continue
to be cash reserves and revenues generated from the development projects, and
construction financing when appropriate.
At March 31, 2000, the Company had an aggregate outstanding balance of
$5,742,000 under its construction loans. These loans will be repaid from the
proceeds of home and lot sales. The loans bear interest at the rate of prime
plus 0.75% through 1.25% per annum and have various maturity dates.
Results of Operations
For the quarter ended March 31, 2000, the Company had net income of
$1,932,000, compared to $1,387,000 for the same period in 1999.
For the quarter ended March 31, 2000, the Company closed the sale of the
last 8 homes at the Marina Vista project, compared to 13 homes for the same
period in 1999. At the Glenbriar Estates project, the Company closed the
sale of 27 homes and 27 lots for the period ended March 31, 2000, compared
to 32 homes and 32 lots for the same period in 1999.
Total sales for the quarter ended March 31, 2000 were $15,481,000,
resulting in a gross profit of $3,797,000 and a gross profit margin of 24.52%,
compared to total sales of $16,967,000, resulting in a gross profit of
$2,962,000 and a gross profit margin of 17.46%, for the same period in 1999.
The increase in gross profit resulted primarily from an increase in sales
prices and the strong California real estate market in general.
Minority interest in joint ventures for the first quarter of 2000
increased to $1,384,000, compared to $1,021,000 for the same period in 1999.
The increase in minority interest is attributable to the sale of homes and
lots at the Glenbriar Estates project.
Selling expenses for the quarter ended March 31, 2000 were $864,000,
which represents 5.58% of revenues for that quarter, compared to $706,000,
which represents 4.16% of revenues for the same period in 1999. The increase
in selling expenses was primarily due to increased staffing at the development
projects and increased marketing and related commission expenses.
General and administrative expenses for the quarter ended March 31, 2000
were $341,000, compared to $216,000 for the same period in 1999, an increase
of 57.87%. The increase was primarily due to increased staffing, salary
increases, and increased professional and legal fees.
Interest income for the quarter ended March 31, 2000 increased to
$338,000, compared to $158,000 for the same period in 1999. The increase
is attributable to higher cash balances, increases in interest rates and
increased interest income from notes receivable.
The Company expects that the development projects will continue to
generate profits. Factors such as interest rates and general economic
conditions influence the prices at which the Company is able to sell homes
and lots and other developed properties.
Year 2000 Disclosure
The Company has taken steps to become year 2000 compliant and has
experienced no problems with the year 2000 issue. The expense, to become
Year 2000 compliant had no material effect on the Company's financial
position or results of operation. The Company believes that its subsidiaries
and major suppliers are year 2000 compliant.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's exposure to market risk for changes in interest rates
relates primarily to the Company's investment in high credit quality
securities maintained with three financial institutions and the Company's
notes payable. The Company's objective in managing its exposure to interest
rate changes is to limit the impact of changes on earnings and cash flow and
to lower its overall borrowing costs. The Company believes the financial
risks associated with these investments and notes are minimal.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The exhibits listed below are filed with this report.
Exhibit No. Description
27.1 Financial Data Schedule for the Quarter Ended
March 31, 2000.
(b) Reports on Form 8-K
On March 23, 2000, the Company filed a report on Form 8-K
dated March 23, 2000, disclosing under Item 5 that the
Company had issued a press release announcing the vote by
the Board of Directors to take no action with respect to
an unsolicited proposal from Leeward Investments, LLC
regarding a possible acquisition of the outstanding
shares of the Company's stock.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DOVER INVESTMENTS CORPORATION
Date: May 10, 2000 By: /s/Lawrence Weissberg
Lawrence Weissberg
Chairman of the Board, President
and Chief Executive Officer
EXHIBIT INDEX
Exhibit Number Description
27.1 Financial Data Schedule for the Quarter Ended
March 31, 2000.
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 16,187
<SECURITIES> 0
<RECEIVABLES> 5,244
<ALLOWANCES> 0
<INVENTORY> 19,267
<CURRENT-ASSETS> 40,698
<PP&E> 1,443
<DEPRECIATION> 0
<TOTAL-ASSETS> 42,141
<CURRENT-LIABILITIES> 3,847
<BONDS> 5,742
0
0
<COMMON> 11
<OTHER-SE> 32,541
<TOTAL-LIABILITY-AND-EQUITY> 42,141
<SALES> 2,933
<TOTAL-REVENUES> 15,830
<CGS> 12,548
<TOTAL-COSTS> 12,548
<OTHER-EXPENSES> 341
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,941
<INCOME-TAX> 1,009
<INCOME-CONTINUING> 1,932
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,932
<EPS-BASIC> 1.69
<EPS-DILUTED> 1.62
</TABLE>
