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, 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)
414,873 SHARES AS OF JUNE 30, 2000
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
NATIONAL PROPERTIES CORPORATION
BALANCE SHEETS
ASSETS
June 30, December 31,
2000 1999
<S> <C> <C>
CURRENT ASSETS
Cash 55,297 287,310
Accounts receivable 500 -
Other 10,835 16,127
---------- ----------
Total current assets 66,632 303,437
---------- ----------
PROPERTY AND EQUIPMENT, AT COST
Land 4,352,680 4,367,365
Buildings and improvements 26,042,919 27,013,359
Furniture and equipment 98,712 98,712
---------- ----------
30,494,311 31,479,436
Less - accumulated depreciation 9,703,090 10,092,823
---------- ----------
Property and equipment - net 20,791,221 21,386,613
---------- ----------
OTHER ASSETS
Marketable securities 1,784,491 1,997,094
Deferred charges and other assets 11,934 13,786
---------- ----------
Total other assets 1,796,425 2,010,880
---------- ----------
22,654,278 23,700,930
========== ==========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable 3,031 4,792
Notes payable 1,900,000 1,900,000
Accrued liabilities 202,900 401,496
Current maturities of long-term debt - 10,482
Federal and state income taxes 20,815 101,571
---------- ----------
Total current liabilities 2,126,746 2,418,341
---------- ----------
LONG-TERM DEBT 2,675,000 4,025,000
---------- ----------
DEFERRED INCOME TAXES 948,314 981,687
---------- ----------
STOCKHOLDERS' EQUITY
Common stock - $1 par value
Authorized - 5,000,000 shares
Issued
(2000-414,873 shares; 1999-416,353 shares) 414,873 416,353
Retained earnings 15,796,278 15,030,319
Accumulated other comprehensive income 693,067 829,230
---------- ----------
Total stockholders' equity 16,904,218 16,275,902
---------- ----------
22,654,278 23,700,930
========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NATIONAL PROPERTIES CORPORATION
STATEMENTS OF INCOME AND
COMPREHENSIVE INCOME
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Income
Lease rental income 1,038,565 1,005,465 2,243,291 2,135,077
Dividend and interest income 17,754 16,457 30,153 33,359
Gain on sale of real estate 206,896 - 299,757 -
Gain on sale of securities - - - 46,029
--------- --------- --------- ---------
Total income 1,263,215 1,021,922 2,573,201 2,214,465
--------- --------- --------- ---------
Expenses
Depreciation 191,392 219,703 390,229 439,000
Interest 108,867 134,144 231,005 278,960
Salaries and wages 55,950 53,171 114,674 105,554
Property, payroll
and misc. taxes 18,630 17,563 32,450 31,387
Other expenses 217,230 56,149 413,638 107,111
--------- --------- --------- ---------
Total expenses 592,069 480,730 1,181,996 962,012
--------- --------- --------- ---------
Income before income taxes 671,146 541,192 1,391,205 1,252,453
Federal and State income taxes 248,325 201,460 514,746 464,660
--------- --------- --------- ---------
Net income 422,821 339,732 876,459 787,793
--------- --------- --------- ---------
Other comprehensive income (losses):
Unrealized holding gains (losses)
on marketable securities arising
during the period 7,075 120,268 (214,093) 105,430
Less reclassification adjustment
for gains included in net income - - - (46,029)
Less income tax expense related
to unrealized holding gains (2,575) (43,778) 77,930 (21,622)
--------- --------- --------- ---------
Other comprehensive income,
net of tax 4,500 76,490 (136,163) 37,779
--------- --------- --------- ---------
Comprehensive income 427,321 416,222 740,296 825,572
========= ========= ========= =========
Net income per share $1.02 $0.81 $2.11 $1.88
Weighted average shares
outstanding 415,310 418,476 415,310 418,376
Cash Dividends declared per share $0.14 $0.12 $0.14 $0.12
<FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NATIONAL PROPERTIES CORPORATION
STATEMENTS OF CASH FLOWS
Six Months Ended
June 30,
2000 1999
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net income 876,459 787,793
Adjustments to reconcile comprehensive income to net
cash provided by operating activities:
Depreciation and amortization 393,222 442,564
Deferred income taxes 44,557 42,566
Charitable contributions 305,000 -
Gain on sale of real estate (299,757) -
Gain on sale of securities - (46,029)
Changes in assets and liabilities:
Accounts receivable (500) (11,301)
Prepaid expenses and deferred charges 4,151 5,654
Accounts payable and accrued expenses (258,646) (33,675)
Federal and State income taxes (80,756) 9,671
-------- --------
Net cash provided by operations 983,730 1,197,243
-------- --------
CASH FLOW FROM INVESTING ACTIVITIES
Proceeds from the sale of real estate 199,920 -
Additions to property and equipment - (1,625)
Proceeds from sale of securities - 55,589
Purchased marketable securities (1,490) -
-------- --------
Net cash provided by investing activities 198,430 53,964
-------- --------
CASH FLOW FROM FINANCING ACTIVITIES
Repayments - credit line borrowings (1,350,000) (1,100,000)
Principal payments on mortgage notes (10,482) (57,657)
Purchase of treasury stock (53,691) (23,680)
-------- --------
Net cash used in financing activities (1,414,173) (1,181,337)
-------- --------
Net increase (decrease) in cash (232,013) 69,870
Cash at beginning of period 287,310 139,993
-------- --------
Cash at end of period 55,297 209,863
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest expense 231,005 279,491
Income tax payments 550,945 412,423
Noncash investing and financing transactions:
cash dividends declared 58,289 50,152
</TABLE>
<PAGE>
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.
The balance sheets, statements of income and comprehensive income, and
statements of cash flow at June 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.
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 amounts to $58,289.
Operating Results
Lease revenue for the six month period ended June 30, 2000 amounted to
$2,243,000 compared to $2,135,000 for the same period in 1999, an increase of
$108,000 or 5.1%. The Company's convenience stores accounted for
approximately $120,000 of the increase with the addition of the Olathe,
Kansas and Lee's Summit Missouri stores in December 1999. Lease revenues
from two of the Company's three garden centers declined $20,000 in the first
six months from their six month level in 1999 after releasing them to a new
tenant in October 1999. The Company sold its two GTE Telephone Service
Centers in 2000 earning $21,000 less in lease revenues in the current period
compared to the first six months of 1999. Contingent rentals based on sales
overages increased $29,000 in the first six months over the same period in
1999.
Investment income including gains on sale of marketable securities were
approximately $30,000 in the first six months of 2000 compared to $79,000 in
the same period in 1999.
The Company recorded gains of $300,000 during the first six 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 six months of 2000 were $1,182,000 compared to
$962,000 for the same period in 1999. The increase was 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
$49,000 and $48,000 respectively, in the first six months of 2000 from the
same period in 1999. Although interest rates were higher during the first
six months of 2000 than the same period in 1999 (average rate of 8.875% for
2000 compared to 7.500% for 1999), the Company had an average of $2,205,000
less borrowed on its three credit lines and mortgage in the six months ended
June 30, 2000 then it did during the same period in 1999.
Other general and administrative expenses (excluding donations) led by
compensation expense increased $12,000 or 4.8% in the first six months of
2000 over the same period in 1999.
Net income for the six months ended June 30, 2000 was $876,000 compared to
$788,000 for the same period in 1999, a increase of $88,000 or $0.23 per
share.
Liquidity
As of June 30, 2000 the Company's main source of liquidity consisted of
$55,000 in cash, marketable securities having a market value of approximately
$1,784,000 and a $4,125,000 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 __7/28/00__ By _____/S/__Raymond_Di_Paglia_________
Raymond Di Paglia, President and
Chief Executive Officer
Date __7/28/00__ By _____/S/__Kristine_M._Fasano________
Kristine M. Fasano, Vice President,
Secretary, and Treasurer
