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 June 30, 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)
418,616 SHARES AS OF JUNE 30, 1998
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
NATIONAL PROPERTIES CORPORATION
BALANCE SHEETS
ASSETS
June 30, December 31,
1998 1997
<S> <C> <C>
CURRENT ASSETS
Cash 230,591 79,545
Accounts receivable - 12,451
Other 3,481 6,711
---------- ----------
Total current assets 234,072 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 9,419,798 8,995,091
---------- ----------
Property and equipment - net 19,553,866 18,494,931
---------- ----------
OTHER ASSETS
Marketable securities 2,289,644 2,148,283
Deferred charges and other assets 32,031 35,596
---------- ----------
Total other assets 2,321,675 2,183,879
---------- ----------
22,109,613 20,777,517
========== ==========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable 4,340 3,830
Notes payable - -
Accrued liabilities 282,632 287,266
Current maturities of long-term debt 412,519 407,062
Federal and state income taxes 22,128 27,298
---------- ----------
Total current liabilities 721,619 725,456
---------- ----------
LONG-TERM DEBT 6,131,474 5,264,132
---------- ----------
DEFERRED INCOME TAXES 970,376 865,733
---------- ----------
STOCKHOLDERS' EQUITY
Common stock - $1 par value
Authorized - 5,000,000 shares
Issued
(1998-418,616 shares; 1997-431,456 shares) 418,616 431,456
Retained earnings 12,839,850 12,573,294
Accumulated other comprehensive income 1,027,678 917,446
---------- ----------
Total stockholders' equity 14,286,144 13,922,196
---------- ----------
22,109,613 20,777,517
========== ==========
</TABLE>
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<TABLE>
<CAPTION>
NATIONAL PROPERTIES CORPORATION
STATEMENTS OF INCOME
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Income
Lease rental income 881,451 860,950 1,858,060 1,760,942
Interest income 110 131 629 231
Dividend income 18,648 19,925 35,934 37,475
Gain on sale of securities, etc. 42,101 13,564 79,798 24,336
--------- --------- --------- ---------
Total income 942,310 894,570 1,974,421 1,822,984
--------- --------- --------- ---------
Expenses
Depreciation 211,316 200,105 424,707 400,210
Interest 144,378 119,845 283,389 247,203
Salaries and wages 48,741 65,802 97,167 134,299
Property, payroll
and misc. taxes 41,771 16,908 76,766 33,437
Other expenses 54,002 48,858 99,242 101,644
--------- --------- --------- ---------
Total expenses 500,208 451,518 981,271 916,793
--------- --------- --------- ---------
Income before income taxes 442,102 443,052 993,150 906,191
Federal and State income taxes 159,610 162,157 363,500 331,665
--------- --------- --------- ---------
Net income 282,492 280,895 629,650 574,526
========= ========= ========= =========
Other comprehensive income (losses):
Unrealized holding gains (losses)
on marketable securities arising
during the period (9,184) 122,483 173,321 217,329
Less income tax expense related
to unrealized holding gains (3,343) 44,829 63,089 81,331
--------- --------- --------- ---------
Other comprehensive income,
net of tax (5,841) 77,654 110,232 135,998
--------- --------- --------- ---------
Comprehensive income 276,651 358,549 739,882 710,524
========= ========= ========= =========
Net income per share $0.67 $0.63 $1.49 $1.30
Weighted average shares
outstanding 423,332 445,261 422,083 443,134
Dividends declared per share $0.00 $0.10 $0.00 $0.10
<FN>
</TABLE>
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<TABLE>
<CAPTION>
NATIONAL PROPERTIES CORPORATION
STATEMENTS OF CASH FLOWS
Six Months Ended
June 30,
1998 1997
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Comprehensive income 739,882 710,524
Adjustments to reconcile comprehensive income to net
cash provided by operating activities:
Depreciation and amortization 428,272 403,774
Deferred income taxes 104,643 116,836
Unrealized gain on securities (173,321) (217,329)
Gain on sale of securities (79,798) (24,336)
Changes in assets and liabilities:
Accounts receivable 12,451 2,516
Prepaid expenses and deferred charges 3,230 3,850
Accounts payable and accrued expenses (4,124) 51,950
Federal and State income taxes (5,170) 274,753
-------- --------
Net cash provided by operations 1,026,065 1,322,538
-------- --------
CASH FLOW FROM INVESTING ACTIVITIES
Additions to property and equipment (1,483,641) (1,928)
Payments received on mortgage notes - 718
Purchase of securities - (37,368)
Proceeds - from sale of securities 111,758 43,563
-------- --------
Net cash provided by (used in) investing activities (1,371,883) 4,985
-------- --------
CASH FLOW FROM FINANCING ACTIVITIES
Borrowings on credit lines 1,630,000 325,049
Repayments - credit line borrowings (705,000) (1,309,634)
Principal payments on mortgage notes (52,201) (47,260)
Purchase of treasury stock (375,935) (213,565)
-------- --------
Net cash provided by (used in) financing activities 496,864 (1,245,410)
-------- --------
Net increase (decrease) in cash 151,046 82,113
Cash at beginning of period 79,545 120,784
-------- --------
Cash at end of period 230,591 202,897
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for
Interest expense 283,389 264,206
Income tax payments 327,889 138,975
</TABLE>
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NATIONAL PROPERTIES CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
The Company has adopted effective January 1, 1998 the Statement of Financial
Accounting Standard No. 130, "Reporting Comprehensive Income," which
establishes standards for the reporting and display of comprehensive income
and its components in a full set of general purpose financial statements. The
effect of FAS No. 130 on the Company's interim financial statements is to
present in the statement of income, unrealized gains on marketable securities
net of income taxes, which in periods prior to 1998 had been reported as
annual adjustment directly to stockholders' equity. All prior periods
reported on have been restated to give effect to FAS No. 130.
The statements of income and comprehensive income, statements of cash flow
and balance sheets at June 30, 1998 and 1997 and the periods then ended are
not audited but reflect all adjustments which are of a normal recurring
nature and are, in the opinion of management, necessary to a fair statement
of the results of the periods shown.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
The Company, an Iowa corporation, is engaged principally in the development
of commercial real estate for lease to qualified tenants.
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. Annual rentals from the property will be
$155,400.
On April 1, 1998 Sunbelt Nursery, a major tenant of three company owned
stores located in Arizona and Texas, filed for bankruptcy. Sunbelt
immediately commenced store liquidation sales in all of their Texas and
Arizona stores, including those owned by the Company.
Effective June 1, the Company leased the three Sunbelt Nursery stores that
were in bankruptcy. The stores were leased at an annual rental of $348,000
which is $134,000 less than the previous Sunbelt annual rental.
In May, the Company executed a contract to sell 21.5 acres of land in Ankeny,
Iowa subject to a number of contingencies. The sale price is $2,900,000 and
the buyer has until May 26, 1999 to satisfy the contingencies.
Operating Results
Lease revenues for the first six months were $1,858,000, up $97,000 or 5.5%
over the same period in 1997. The increase was primarily due to the addition
of two convenience stores, one located in Gainsville, Georgia purchased in
October 1997 and the other located in Woodstock, Georgia purchased February
1998, which added $137,000 to rental income in the first six months of 1998.
However, due to the bankruptcy of a major tenant, the Company realized a
decrease in rentals of $39,000 from its three stores leased to Sunbelt
Nursery during the second quarter of 1998.
The Company also realized gains of $79,800 from the sale of marketable
securities during the first six months of 1998, up from $24,000 in the same
period in 1997.
Total expenses for the first six months of 1998 increased $64,000 or 7% over
the same period in 1997. Increases in depreciation and interest cost totaling
approximately $61,000 accounted for most of the increase and was related to
the acquisition of the two new convenience stores referred to above. In
addition, the Company recorded $45,000 in additional real estate taxes during
the period ended June 30, 1998 in connection with the stores leased to
Sunbelt Nursery.
Other expenses led by personnel cost, decreased $42,000 from the same six
month period in 1997.
Net income increased $55,000 over the same six month period in 1997 after
deducting income taxes at the effective rate of 36.6%.
Liquidity
As of June 30, 1998 the Company's main source of liquidity consisted of
$230,000 in cash, marketable securities having a market value of
approximately $2,390,000 and a $3,650,000 remaining loan balance available on
three lines of credit with a local bank. In addition, the Company owns
unencumbered real estate having an aggregate depreciated cost of
approximately $12,000,000.
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 __8/3/98__ By _____/S/__Raymond_Di_Paglia_________
Raymond Di Paglia, President and
Chief Executive Officer
Date __8/3/98__ By _____/S/__Kristine_M._Fasano________
Kristine M. Fasano, Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1998
<CASH> 230,591
<SECURITIES> 2,289,644
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 234,072
<PP&E> 28,973,664
<DEPRECIATION> 9,419,798
<TOTAL-ASSETS> 22,109,613
<CURRENT-LIABILITIES> 721,619
<BONDS> 0
<COMMON> 418,616
0
0
<OTHER-SE> 13,867,528
<TOTAL-LIABILITY-AND-EQUITY> 22,109,613
<SALES> 0
<TOTAL-REVENUES> 1,974,421
<CGS> 0
<TOTAL-COSTS> 981,271
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 283,389
<INCOME-PRETAX> 993,150
<INCOME-TAX> 363,500
<INCOME-CONTINUING> 629,650
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 629,650
<EPS-PRIMARY> 1.49
<EPS-DILUTED> 1.49
</TABLE>
