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, 2000 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)
414,573 SHARES AS OF OCTOBER 25, 2000
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
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NATIONAL PROPERTIES CORPORATION
BALANCE SHEETS
ASSETS
September 30, December 31,
2000 1999
<S> <C> <C>
CURRENT ASSETS
Cash 67,586 287,310
Current portion, note receivable 143,950 -
Other 7,016 16,127
---------- ----------
Total current assets 218,552 303,437
---------- ----------
PROPERTY AND EQUIPMENT, AT COST
Land 4,424,679 4,367,365
Buildings and improvements 27,200,718 27,013,359
Furniture and equipment 102,184 98,712
---------- ----------
31,727,581 31,479,436
Less - accumulated depreciation 9,322,368 10,092,823
---------- ----------
Property and equipment - net 22,405,213 21,386,613
---------- ----------
OTHER ASSETS
Marketable securities 1,989,559 1,997,094
Long tern portion, note receivable 200,000 -
Deferred charges and other assets 11,832 13,786
---------- ----------
Total other assets 2,201,391 2,010,880
---------- ----------
24,825,156 23,700,930
========== ==========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable 6,198 4,792
Notes payable 3,000,000 1,900,000
Accrued liabilities 134,127 401,496
Current maturities of long-term debt - 10,482
Federal and state income taxes 6,168 101,571
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Total current liabilities 3,146,493 2,418,341
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LONG-TERM DEBT 3,225,000 4,025,000
---------- ----------
DEFERRED INCOME TAXES 1,043,087 981,687
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STOCKHOLDERS' EQUITY
Common stock - $1 par value
Authorized - 5,000,000 shares
Issued
(2000-414,673 shares; 1999-416,353 shares) 414,673 416,353
Retained earnings 16,177,057 15,030,319
Accumulated other comprehensive income 818,846 829,230
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Total stockholders' equity 17,410,576 16,275,902
---------- ----------
24,825,156 23,700,930
========== ==========
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<CAPTION>
NATIONAL PROPERTIES CORPORATION
STATEMENTS OF INCOME
Three Months Ended Nine Months Ended
Sept 30, Sept 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Income
Lease rental income 1,023,747 1,024,580 3,267,038 3,159,657
Dividend and interest income 26,662 21,515 56,815 54,874
Gain on sale of securities, etc. - 234,000 - 280,029
Gain on sale of real estate - - 299,757 -
--------- --------- --------- ---------
Total income 1,050,409 1,280,095 3,623,610 3,494,560
--------- --------- --------- ---------
Expenses
Depreciation 206,103 219,703 596,332 658,703
Interest 102,554 129,920 333,559 408,880
Salaries and wages 58,434 52,627 173,108 158,181
Property, payroll
and misc. taxes 17,323 12,614 49,773 44,001
Other expenses 50,724 49,614 464,362 156,725
--------- --------- --------- ---------
Total expenses 435,138 464,478 1,617,134 1,426,490
--------- --------- --------- ---------
Income before income taxes 615,271 815,617 2,006,476 2,068,070
Federal and State income taxes 227,650 302,594 742,396 767,254
--------- --------- --------- ---------
Net income 387,621 513,023 1,264,080 1,300,816
--------- --------- --------- ---------
Other comprehensive income (losses):
Unrealized holding gains (losses)
on marketable securities arising
during the period 197,764 (257,632) (16,329) (198,231)
Less income tax expense related
to unrealized holding gains (71,986) 93,778 5,944 72,156
--------- --------- --------- ---------
Other comprehensive income,
net of tax 125,778 (163,854) (10,385) (126,075)
--------- --------- --------- ---------
Comprehensive income 513,399 349,169 1,253,695 1,174,741
========= ========= ========= =========
Net income per share $0.93 $01.23 $3.05 $3.11
Weighted average shares
outstanding 415,069 418,224 414,970 418,072
Cash dividend paid per share $0.00 $0.00 $0.14 $0.12
<FN>
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<CAPTION>
NATIONAL PROPERTIES CORPORATION
STATEMENTS OF CASH FLOWS
Nine Months Ended
September 30,
2000 1999
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net income 1,264,080 1,300,816
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 600,822 664,049
Deferred income taxes 67,344 63,849
Gain on sale of securities - (280,029)
Gain on sale of real estate (299,757) -
Charitable contributions 305,000) -
Changes in assets and liabilities:
Prepaid expenses and deferred charges 6,575 4,472
Accounts payable and accrued liabilities (265,963) (30,737)
Federal and State income taxes (95,403) 67,012
-------- --------
Net cash provided by operations 1,582,698 1,789,432
-------- --------
CASH FLOW FROM INVESTING ACTIVITIES
Additions to property and equipment (2,170,094) (1,624)
Purchase of securities (8,794) -
Proceeds from sale of securities - 289,589
Proceeds from sale of real estate 199,921 -
Payments received on note receivable 6,050 -
-------- --------
Net cash provided by (used in) investing activities (1,972,917) 287,965
-------- -------
CASH FLOW FROM FINANCING ACTIVITIES
Borrowings on credit lines 1,150,000 -
Payments on credit line borrowings (850,000) (1,800,000)
Principal payments on mortgage notes (10,482) (87,579)
Dividends paid (58,082) (50,313)
Purchase of treasury stock (60,941) (30,268)
-------- --------
Net cash provided by (used in) financing activities 170,495 (1,968,160)
-------- --------
Net increase (decrease) in cash (219,724) 109,237
Cash at beginning of period 287,310 139,993
-------- --------
Cash at end of period 67,586 249,230
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for
Interest expense 333,559 368,486
Income tax payments 770,455 636,393
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NATIONAL PROPERTIES CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
The balance sheets, statements of income and comprehensive income and
statements of cash flows at September 30, 2000 and 1999 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.
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.
Note Receivable
In July 2000, the Company sold real estate for $500,000 receiving $150,000
cash and a promissory note for $350,000. The note provides for interest at
10% and is secured by the real estate. Payments under the note are to be
received as follows: $150,000 on June 30, 2001; $100,000 on June 30, 2002;
and $100,000 on June 30, 2003.
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.
On March 20, 2000 the Company sold its Fayette, Iowa GTE Telephone Service
Center Building to Upper Iowa University. The GTE lease expired April 30,
2000 and the Company retained the monthly rental through lease expiration.
The property's fair market value of $185,000 was determined by MAI appraisal
dated March 1, 2000. The property was sold for $50,000 cash, and the
remaining $135,000 fair market value was gifted to the University.
On May 1, 2000 the Company sold its Chariton, Iowa GTE Telephone Service
Center Building to Chariton Community School District. The GTE lease expired
April 30, 2000. The property's fair market value of $320,000 was determined
by MAI appraisal dated March 27, 2000. The property was sold for $150,000
cash, and the remaining $170,000 fair market value was gifted to the School
District.
At the Company's annual meeting of stockholders held May 19, 2000, the
Company declared a $0.14 per share dividend to be paid July 28, 2000 to
stockholders of record June 30, 2000. The dividend amounted to $58,289.
Effective July 1, 2000, the Tenant of the Company's garden center located in
Dallas, Texas exercised its option to purchase the property for $500,000. At
closing the Company received $150,000 cash and the buyer's promissory note
for the balance of $350,000. The note is secured by the property and matures
June 30, 2003.
In September, 2000, the Company completed the purchase and leaseback of a
restaurant in Aurora, Colorado at a cost of $2,350,000. Proceeds from the
Dallas, Texas garden center were used in a qualified I.R.C. section 1031
exchange to purchase the restaurant. The additional funds required for the
purchase were drawn on the Company's lines of credit.
Operating Results
Lease revenues for the nine months ended September 30, 2000, were $3,267,000,
an increase of $107,000 or 3.4% as compared with lease revenues of $3,160,000
for the same period in 1999. The increase, relative to 1999, was attributed
to the Company's convenience stores which increased $179,000 during the nine
month period due to the addition of the Olathe, Kansas and Lee's Summit,
Missouri stores in December 1999. Contingent rentals based on sales overages
also increased by $29,000 during the first nine months of 2000 over the same
period on 1999. The Company experienced declines in lease revenue in two
areas during the nine months ended September 30, 2000 compared to 1999.
First, lease revenues from two of the Company's three garden centers declined
$43,000 due to releasing to a new tenant in October, 1999. In addition, the
new tenant exercised its option to buy the Dallas, Texas garden center on
July 1, 2000. Secondly, the Company sold its two GTE Telephone Service
Centers in 2000 earning $52,000 less in lease revenues in the current period
as compared to the first nine months of 1999.
For the nine months ended September 30, 2000, the Company recorded no gain
from the sale of securities as compared to gains of $280,000 from the sale of
securities during the same period in 1999.
The Company recorded gains of $300,000 during the first nine months of 2000
from the sale of its two GTE Telephone Service Centers. The gains were based
on fair market values totaling $505,000 for the two buildings as determined
by MAI appraisals. The properties were sold for $200,000 cash with the
remaining fair market value of $305,000 gifted to the purchasers. See
Management's Discussion and Analysis above.
Total expenses for the first nine months of 2000 were $1,617,000 compared to
$1,426,000 for the same period in 1999. The increases were primarily due to
donations of $305,000 recorded in connection with the sale of the Company's
two GTE Telephone Service Centers noted above.
Depreciation and interest expense, two key figures, for the Company, declined
$62,000 and $75,000 respectively, in the first nine months of 2000 from the
same period in 1999. Although interest rates were higher during the first
nine months of 2000 than the same period in 1999 (average rate of 8.72% for
2000 compared to 7.75% for 1999), the Company had an average of $1,931,000
less borrowed on its three credit lines and mortgage in the nine months ended
September 30, 2000 than it did during the same period in 1999.
Other general and administrative expenses (excluding donations) led by
compensation expense increased $23,000 or 6.5% in the first nine months of
2000 over the same period in 1999.
Net income for the nine months ended September 30, 2000 was $1,264,000
compared to $1,301,000 for the same period in 1999, a decrease of $37,000 or
$0.06 per share.
Liquidity
As of September 30, 2000 the Company's main source of liquidity consisted of
$67,000 in cash, marketable securities having a market value of approximately
$1,990,000 and a $2,475,000 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 $14,000,000.
Management believes that its cash flow from operations and other potential
sources of cash will be sufficient to finance current and projected
operations.
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 __11/1/00__ By _____/S/__Raymond_Di_Paglia_________
Raymond Di Paglia, President and
Chief Executive Officer
Date __11/1/00__ By _____/S/__Kristine_M._Fasano________
Kristine M. Fasano, Vice President,
Secretary, and Treasurer
