FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended September 30, 1997 Commission file number 0-305
NATIONAL PROPERTIES CORPORATION
(Exact name of registrant as specified in its charter)
Iowa 42-0860581
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4500 Merle Hay Road, Des Moines, Iowa 50310
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (515) 278-1132
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirement for the past 90 days.
Yes __X__ No _____
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
COMMON STOCK (PAR VALUE $1.00)
431,761 SHARES AS OF NOVEMBER 1, 1997
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
NATIONAL PROPERTIES CORPORATION
BALANCE SHEETS
ASSETS
September 30, December 31,
1997 1996
<S> <C> <C>
CURRENT ASSETS
Cash 181,666 120,784
Mortgage loans receivable - 718
Accounts receivable 17,795 15,576
Prepaid income taxes - 244,467
Other 949 6,724
---------- ----------
Total current assets 200,410 388,269
---------- ----------
PROPERTY AND EQUIPMENT, AT COST
Land 4,367,387 4,402,210
Buildings and improvements 21,896,495 21,896,495
Furniture and equipment 63,677 62,816
---------- ----------
26,327,559 26,361,521
Less - accumulated depreciation 8,859,401 8,259,087
---------- ----------
Property and equipment - net 17,468,158 18,102,434
---------- ----------
OTHER ASSETS
Marketable securities 1,921,805 1,581,725
Deferred charges and other assets 37,377 42,723
---------- ----------
Total other assets 1,959,182 1,624,448
---------- ----------
19,627,750 20,115,151
========== ==========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable 7,438 5,699
Notes payable 125,000 225,000
Accrued liabilities 270,558 264,653
Current maturities of long-term debt 104,444 96,929
Federal and state income taxes 32,952 -
---------- ----------
Total current liabilities 540,392 592,281
---------- ----------
LONG-TERM DEBT 4,791,903 6,030,779
---------- ----------
DEFERRED INCOME TAXES 765,514 592,638
---------- ----------
STOCKHOLDERS' EQUITY
Common stock - $1 par value
Authorized - 5,000,000 shares
Issued
(1997-433,111 shares; 1996-449,245 shares) 433,111 449,245
Retained earnings 12,325,856 11,881,556
Net unrealized gain-marketable securities 770,974 568,652
---------- ----------
Total stockholders' equity 13,529,941 12,899,453
---------- ----------
19,627,750 20,115,151
========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NATIONAL PROPERTIES CORPORATION
STATEMENTS OF INCOME
Three Months Ended Nine Months Ended
Sept 30, Sept 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Income
Lease rental income 847,265 801,478 2,608,207 2,443,531
Interest income 130 80 361 148
Dividend income 17,225 20,360 54,700 60,550
Gain on sale of securities, etc. - 27,249 24,336 49,310
--------- --------- --------- ---------
Total income 864,620 849,167 2,687,604 2,553,539
--------- --------- --------- ---------
Expenses
Depreciation 200,104 192,106 600,314 576,318
Interest 112,603 116,362 359,806 378,941
Salaries and wages 60,896 58,247 195,195 182,127
Property, payroll
and misc. taxes 12,689 11,561 46,126 44,320
Other expenses 42,825 46,718 144,469 143,632
--------- --------- --------- ---------
Total expenses 429,117 424,994 1,345,910 1,325,338
--------- --------- --------- ---------
Income before income taxes 435,503 424,173 1,341,694 1,228,201
Federal and State income taxes 159,396 153,000 491,061 442,000
--------- --------- --------- ---------
Net income 276,107 271,173 850,633 786,201
========= ========= ========= =========
Per share of common stock $0.63 $0.60 $1.94 $1.73
Weighted average shares
outstanding 439,161 453,924 438,851 453,269
Cash dividend paid per share $0.10 $0.10 $0.10 $0.10
<FN>
Prepared from the books of the Company without audit. In the opinion of
management, all adjustments (none of which were other than normal recurring
accruals) necessary to present fairly the results of operations for the above
stated periods have been included.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NATIONAL PROPERTIES CORPORATION
STATEMENTS OF CASH FLOWS
Nine Months Ended
September 30,
1997 1996
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net income 850,633 786,201
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 605,660 580,629
Deferred income taxes 53,258 -
Gain on sale of assets (24,336) (49,310)
Changes in assets and liabilities:
Accounts receivable (2,219) 749
Prepaid expenses and deferred charges 5,775 6,223
Accounts payable and accrued expenses 7,655 91,095
Federal and State income taxes 277,419 28,082
-------- --------
Net cash provided by operations 1,773,845 1,443,669
-------- --------
CASH FLOW FROM INVESTING ACTIVITIES
Additions to property and equipment (861) (4,224)
Payments received on mortgage notes 718 1,719
Purchase of securities (37,368) (130,686)
Proceeds - from sale of assets 78,386 96,602
-------- --------
Net cash provided by (used in) investing activities 40,875 (36,589)
-------- -------
CASH FLOW FROM FINANCING ACTIVITIES
Borrowings on credit lines 500,049 1,057,079
Repayments - credit line borrowings (1,759,634) (1,700,079)
Principal payments on mortgage notes (71,786) (538,275)
Dividends paid (43,947) (45,379)
Purchase of treasury stock (378,520) (84,060)
-------- --------
Net cash used in financing activities (1,753,838) (1,310,714)
-------- --------
Net increase in cash 60,882 96,366
Cash at beginning of period 120,784 123,831
-------- --------
Cash at end of period 181,666 220,197
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for
Interest expense 262,700 390,942
Income tax payments 277,950 413,918
</TABLE>
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Company, an Iowa corporation, is engaged principally in the
development of commercial real estate for lease to qualified tenants under
net lease arrangements.
As detailed on the income statement, total income for the first nine
months of 1997 increased approximately $134,000 primarily due to the increase
of lease rental income. The purchase of a convenience store building in
December, 1996, accounted for approximately $112,500 of the lease rental
increase. In addition, lease rental increases on existing properties and
contingent rental increases based on sales overages amounted to approximately
$43,000 and $15,000 respectively.
Total expenses increased approximately $20,000 as shown on the Income
Statement. Net income for the first nine months increased approximately 8%
as compared to the same period for the prior year.
As of September 30, 1997, the Company's main sources of liquidity
consisted of: $181,666 in cash, marketable securities having a market value
of approximately $1,922,000 and a $7,025,000 remaining loan balance available
on three lines of credit with two local banks. In addition, the Company owns
unencumbered real estate having an aggregate cost of approximately
$11,000,000.
On October 10, 1997, the Company sold a convenience store in Lincoln,
Nebraska for $261,000. On October 15, 1997, the sale proceeds were used in a
qualified 1031 exchange to purchase a convenience store in Gainesville,
Georgia, for $1,500,000. The balance of funds to complete the purchase were
drawn on the Company's line of credit. On march 4, 1997, the Company
contracted to purchase and leaseback a convenience store for $1,500,000 in
the Atlanta, Georgia, area. Closing is expected in the first quarter of
1998.
Management believes that its cash flow from operations and other
potential sources of cash will be sufficient to finance current and projected
operations. However, future cash flows may be impaired because of financial
difficulties being experienced by the tenant of three garden center
properties, which currently generate a monthly rental income of approximately
$38,000.
PART II. OTHER INFORMATION.
No applicable items.
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.
NATIONAL PROPERTIES CORPORATION
Date __11/10/97__ By _____/S/__Raymond_Di_Paglia_________
Raymond Di Paglia, President and
Chief Executive Officer
Date __11/10/97__ By _____/S/__Robert_W._Guely___________
Robert W. Guely, Controller
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1997
<CASH> 181,666
<SECURITIES> 1,921,805
<RECEIVABLES> 17,795
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 200,410
<PP&E> 26,327,559
<DEPRECIATION> 8,859,401
<TOTAL-ASSETS> 19,627,750
<CURRENT-LIABILITIES> 540,392
<BONDS> 0
<COMMON> 433,111
0
0
<OTHER-SE> 13,529,941
<TOTAL-LIABILITY-AND-EQUITY> 19,627,750
<SALES> 0
<TOTAL-REVENUES> 2,687,604
<CGS> 0
<TOTAL-COSTS> 1,345,910
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 359,806
<INCOME-PRETAX> 1,341,694
<INCOME-TAX> 491,061
<INCOME-CONTINUING> 850,633
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 850,633
<EPS-PRIMARY> 1.94
<EPS-DILUTED> 1.94
</TABLE>
