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 March 31, 1998 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)
424,116 SHARES AS OF APRIL 30, 1998
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
NATIONAL PROPERTIES CORPORATION
BALANCE SHEETS
ASSETS
March 31, December 31,
1998 1997
<S> <C> <C>
CURRENT ASSETS
Cash 277,651 79,545
Accounts receivable - 12,451
Other 5,211 6,711
---------- ----------
Total current assets 282,862 98,707
---------- ----------
PROPERTY AND EQUIPMENT, AT COST
Land 4,532,615 4,380,815
Buildings and improvements 24,373,730 23,045,530
Furniture and equipment 67,319 63,677
---------- ----------
28,973,664 27,490,022
Less - accumulated depreciation 9,208,482 8,995,091
---------- ----------
Property and equipment - net 19,765,182 18,494,931
---------- ----------
OTHER ASSETS
Marketable securities 2,314,808 2,148,283
Deferred charges and other assets 33,813 35,596
---------- ----------
Total other assets 2,348,621 2,183,879
---------- ----------
22,396,665 20,777,517
========== ==========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable 1,884 3,830
Notes payable - -
Accrued liabilities 299,367 287,266
Current maturities of long-term debt 409,757 407,062
Federal and state income taxes 146,807 27,298
---------- ----------
Total current liabilities 857,815 725,456
---------- ----------
LONG-TERM DEBT 6,410,661 5,264,132
---------- ----------
DEFERRED INCOME TAXES 953,447 865,733
---------- ----------
STOCKHOLDERS' EQUITY
Common stock - $1 par value
Authorized - 5,000,000 shares
Issued
(1998-424,116 shares; 1997-431,456 shares) 424,116 431,456
Retained earnings 12,717,107 12,573,294
Accumulated other comprehensive income 1,033,519 917,446
---------- ----------
Total stockholders' equity 14,174,742 13,922,196
---------- ----------
22,396,665 20,777,517
========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NATIONAL PROPERTIES CORPORATION
STATEMENTS OF INCOME
For Quarter Ended
March 31,
1998 1997
<S> <C> <C>
Income
Lease rental income 976,609 899,992
Interest income 519 100
Dividend income 17,286 17,550
Gain on sale of securities 37,697 10,772
------- -------
Total income 1,032,111 928,414
------- -------
Expenses
Depreciation 213,391 200,105
Interest 139,011 127,358
Salaries and wages 48,426 68,497
Property, payroll
and misc. taxes 34,995 16,528
Other expenses 45,240 52,785
------- -------
Total expenses 481,063 465,273
------- -------
Income before income taxes 551,048 463,141
Federal and State income taxes 203,890 169,510
------- -------
Net income 347,158 293,631
======= =======
Other comprehensive income:
Unrealized holding gains on marketable
securities arising during the period 182,505 94,846
Less income tax expense related
to unrealized holding gains (66,432) (36,502)
------- -------
Other comprehensive income, net of tax 116,073 58,344
------- -------
Comprehensive income 463,231 351,975
======= =======
Net income per share of common stock 82 cents 66 cents
Weighted average shares
outstanding 424,581 447,387
Dividends per share None None
<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
Three Months Ended
March 31,
1998 1997
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Comprehensive income 463,231 351,975
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 215,173 201,887
Deferred income taxes 87,714 54,255
Unrealized gain on securities (182,505) (94,846)
Gain on sale of securities (37,697) (10,772)
Changes in assets and liabilities:
Accounts receivable 12,451 861
Prepaid expenses and deferred charges 1,500 1,925
Accounts payable and accrued expenses 10,155 50,966
Federal and State income taxes 119,509 152,959
-------- --------
Net cash provided by operations 689,531 709,210
-------- --------
CASH FLOW FROM INVESTING ACTIVITIES
Additions to property and equipment (1,483,641) (861)
Payments received on mortgage notes - 718
Purchase of securities - (17,293)
Proceeds - from sale of securities 53,677 21,161
-------- --------
Net cash provided by (used in) investing activities (1,429,964) 3,725
-------- -------
CASH FLOW FROM FINANCING ACTIVITIES
Borrowings on credit lines 1,580,000 175,000
Repayments - credit line borrowings (405,000) (647,585)
Principal payments on mortgage notes (25,776) (23,336)
Purchase of treasury stock (210,685) (51,600)
-------- --------
Net cash used in financing activities 938,539 (547,521)
-------- --------
Net increase in cash 198,106 165,414
Cash at beginning of period 79,545 120,784
-------- --------
Cash at end of period 277,651 286,198
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for
Interest expense 104,689 133,026
Income tax payments 63,591 -
</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.
In February 1998, the Company completed the purchase of a
convenience store property in Woodstock, Georgia (Atlanta suburb)
for $1,480,000. Bank funds were used for the purchase.
The Company's major concern over the past several years has been
Sunbelt Nursery Group Inc., the tenant of three Company owned
stores located in Texas and Arizona that generated 1997 lease
rental income of $472,000.
On April 1, 1998, Sunbelt filed for protection from its creditors
under Chapter 11 of the U.S. Bankruptcy code. Sunbelt plans to
immediately commence store closing sales in all their 45 Texas and
Arizona stores. Sunbelt's bankruptcy will result in a substantial
reduction of lease rental income for the Company, pending leasing
the Sunbelt stores.
As detailed in the Statement of Income, total income for the first
quarter of 1998 increased approximately $103,000 over the same
period in 1997, primarily due to increases in rental income and
gains from the sale of marketable securities. A convenience store
located in Gainesville, Georgia purchased in October 1997 and a
convenience store located in Woodstock, Georgia purchased in
February 1998 provided rental income of $59,000 in the first
quarter of 1998. In additional, contingent rentals based on sales
overages increased approximately $22,000 in the first quarter of
1998 over a year earlier.
Total expenses for the first quarter 1998 increased approximately
$16,000 over the same period in 1997. The Company recorded
increases in depreciation and interest of $13,000 and $12,000
respectively related to the acquisitions of the two convenience
stores referred to above. In addition, the Company accrued real
estate taxes of approximately $20,000 in connection with the
bankruptcy of the lessee referred to above. Salaries and benefits
paid by the Company in the first quarter were $29,000 less than in
1997. Net income for the first quarter of 1998 increased
approximately 18% over the same period in 1997.
As of March 31, 1998, the Company's main source of liquidity
consisted of: $277,000 in cash, marketable securities having a
market value of approximately $2,315,000, and a $7,575,000
remaining loan balance available on three lines of credit with two
local banks. In addition, the Company owns unencumbered real
estate having an aggregate depreciated cost of approximately
$12,000,000.
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 will be
impaired pending leasing the Sunbelt stores referred to above
which generated approximately $114,000 in the first quarter of
1998.
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 __5/5/97__ By _____/S/__Raymond_Di_Paglia_________
Raymond Di Paglia, President and
Chief Executive Officer
Date __5/5/97__ By _____/S/__Kristine_M. Fasano________
Kristine M. Fasano
Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1998
<CASH> 277,651
<SECURITIES> 2,314,808
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 282,862
<PP&E> 28,973,664
<DEPRECIATION> 9,208,482
<TOTAL-ASSETS> 22,396,665
<CURRENT-LIABILITIES> 857,815
<BONDS> 0
<COMMON> 424,116
0
0
<OTHER-SE> 13,750,626
<TOTAL-LIABILITY-AND-EQUITY> 22,396,665
<SALES> 0
<TOTAL-REVENUES> 1,032,111
<CGS> 0
<TOTAL-COSTS> 481,063
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 139,011
<INCOME-PRETAX> 551,048
<INCOME-TAX> 203,890
<INCOME-CONTINUING> 347,158
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 347,158
<EPS-PRIMARY> 0.82
<EPS-DILUTED> 0.82
</TABLE>
