SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549
FORM 10-K AMENDED ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 1999
Commission file number: 0-305
Name of registrant: NATIONAL PROPERTIES CORPORATION
I.R.S. Employer Identification Number: 42-0860581
Address: 4500 Merle Hay Road, Des Moines, Iowa 50310
telephone number: (515) 278-1132
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $1.00 (Title of Class)
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 (or for such shorter period
that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes __X__ No _____
State the aggregate market value of the voting stock held by non-affiliates
of the Registrant. The aggregate market value shall be computed by the
reference to the price at which the stock was sold, or the average bid and
asked prices of such stock as of a specified date within 60 days prior to
the date of filing.
$6,679,715 as of March 1, 2000
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 - March 1, 2000 - 415,603 Shares
DOCUMENTS INCORPORATED BY REFERENCE
Proxy Statement for the 2000 annual meeting of Stockholders See Part III
PART I
Item 1. Business
(a) General Development of Business. The Registrant, (also referred to
as the "the Company") organized under the Iowa Business Corporation Act, is
engaged principally in the development of commercial real estate for lease
to tenants under net lease arrangements. The Company also derives revenues
from its portfolio of investment securities.
In July 1999, the Company sold land it had leased to Days Inn in Newton,
Iowa for $350,000.
In August 1999, the Company sold 1.3 acres of land held for development in
Ankeny, Iowa for $576,650.
In August 1999, the Company executed an agreement to sell 1.7 acres of land
held for development in Ankeny, Iowa for $795,633. The closing was
completed in November, 1999.
In December 1999, the Company completed the purchase of two convenience
stores, one in Olathe, Kansas and one in Lee's Summit, Missouri. Proceeds
from the above land sales as well as an exchange of three Des Moines, Iowa
convenience stores valued at $1,245,000 were used in a qualified IRC
section 1031 exchange to purchase the two convenience stores. The
additional funds required for the purchase were drawn on the Company's line
of credit.
(b) Financial Information About Industry Segments. The Company operates
in a single industry segment.
(c) Narrative Description of Business.
Real Estate Held For Investment
The Company seeks to acquire or develop improved real estate properties
suitable for lease to commercial tenants. It is the Company's policy to
invest in properties that are fully leased to a single tenant which is
responsible for payment of real estate taxes, insurance, utilities and
repairs. Under such circumstances, the Company has limited management
responsibilities for such properties once they are constructed and leased.
In most cases, properties are constructed by the tenant and conveyed to the
Company under a sale and leaseback arrangement. It is not the policy of
the Company to invest in multiple tenant office buildings or residential
facilities. Primary factors considered by the Company in developing a
property for lease are the use to be made of the property, its location,
the nature and credit standing of the tenant, the rental income to be
derived under the lease, and the ability of the Company to utilize the
property or dispose of it upon termination of the lease.
All of the investment properties now owned by the Company are located in
Arizona, Georgia, Iowa, Kansas, Missouri, Nebraska, Oklahoma, South Dakota,
and Texas. The Company has placed no limitations, however, on the
locations in which it is willing to develop properties in the future.
The commercial real estate acquired by the Company is normally purchased
with funds drawn on the Company's lines of credit. In most cases, the
Company gives careful consideration to the rate of return which it will
receive from an investment based on the original cost thereof to the
Company without regard to possible mortgage financing. While the rate of
return varies, it has ranged generally from 8.5% to 13%.
Real estate investments acquired or developed by the Company are not held
for resale, but are held as productive assets. The Company may, however,
dispose of properties depending upon the circumstances then existing.
Virtually all of the Company's development activity is handled by its
President, including lease negotiations, site acquisitions, construction
activities, and financing.
The real estate investment activity engaged in by the Company is highly
competitive, with numerous investors seeking to develop properties for
lease to qualified tenants. These competitors include numerous major
national financial institutions with resources and abilities to attract
tenants which are far greater than those of the Company; as well as many
other types of full-time and part-time real estate investors.
At December 31, 1999, the Company owned 40 leased properties having an
aggregate cost of $31,380,724. The rental income for 1999 on these leased
properties amounted to $4,189,262. Seven of the properties are leased to
two restaurant operators and account for 16.7% of rental income; four
telephone service center buildings and one Goodyear Tire Service Center
building account for 8.7% of rental income; eighteen QuikTrip and one Kum &
Go Convenience stores account for 49.9% of rental income; three nurseries
(garden centers) account for 8.1%; four office buildings and a supermarket
account for 14.8%; other properties held for future development account for
1.8% of rental income.
As of December, 1999, the tenants of all 40 leased properties were in
compliance with the terms of their respective leases.
Other Investments
The Company has a portion of its assets invested in marketable securities
which had a market value of $1,997,094 as of December 31, 1999.
Employees
The Company currently employs 6 persons; 3 full-time employees and 3 part-time
employees.
<TABLE>
<CAPTION>
Item 2
Properties (Dec. 31, 1999) Land Bldgs. & Accumulated Rental Lease Renewal
Mortgage Int.
Cost Improve. Depreciation Income 1999 Expires Options
Balance Rate
--------- ---------- ------------ ----------- ------- -------- ----
------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
<C>
A. RESTAURANT PROPERTIES
Perkins 'Cake & Steak Des Moines, Ia. 137,000 343,365 317,041 84,613 2001 1-5 Yr
-
Perkins 'Cake & Steak Des Moines, Ia. 140,000 341,602 314,274 91,864 2002 1-5 Yr
-
Perkins 'Cake & Steak Des Moines, Ia. 200,000 373,192 373,192 86,565 2002 1-5 Yr.
-
Perkins 'Cake & Steak Newton, Ia. 112,500 485,181 485,181 84,423 2004 1-5 Yr.
-
Perkins 'Cake & Steak Des Moines, Ia. 243,166 498,675 498,675 105,192 2005 1-5 Yr.
-
Carl's Jr. Restaurant a Chandler, AZ. 168,000 772,000 656,200 115,209 2005 3-5 Yr.
-
Carl's Jr. Restaurant a Tucson, AZ. 90,000 738,000 551,286 133,413 2005 6-5 Yr.
-
--------- ---------- ------------ ----------- ----
------
Total 1,090,666 3,552,015 3,195,849 701,279
--------- ---------- ------------ ----------- ----
------
B. SERVICE CENTERS
U.S. West Decorah, Ia. 20,000 191,102 143,327 22,965 2004 1-5 Yr.
-
U.S. West Cedar Rapids, Ia. 37,000 397,394 281,115 84,000 2001 1-5 Yr.
-
Continental Tel. Co. Chariton, Ia. 8,364 541,755 429,792 70,641 2000 - )
-
Continental Tel. Co. Fayette, Ia. 6,322 428,685 340,090 56,190 2000 - )
10,482 9.984
Goodyear Service Ctr. Wichita, KS. 100,000 978,725 327,560 132,000 2004 4-5 Yr.
-
--------- ---------- ------------ ----------- ----
------
Total 171,686 2,537,661 1,521,884 365,796
10,482
--------- ---------- ------------ ----------- ----
------
C. CONVENIENCE STORES
QuikTrip a Des Moines, Ia. 144,664 691,878 295,402 111,349 2010 2-5 Yr.
-
QuikTrip & Off. Bldg. Des Moines, Ia. 215,000 672,000 539,847 107,879 2004 1-5 Yr.
-
QuikTrip Olathe, KS. 23,120 248,798 691 18,097 2019 4-5 Yr.
-
QuikTrip Lee Summit, Mo. 36,460 408,221 1,134 11,125 2019 4-5 Yr.
-
QuikTrip Wichita, KS. 53,500 436,637 134,554 58,081 2009 4-5 Yr.
-
QuikTrip Norcross, Ga. 99,558 765,000 224,936 102,858 2014 4-5 Yr.
-
QuikTrip Wichita, KS. 60,000 514,000 155,706 67,445 2010 4-5 Yr.
-
QuikTrip Tulsa, OK. 155,000 1,340,000 398,838 175,662 2010 4-5 Yr.
-
QuikTrip a Des Moines, Ia. 84,500 557,500 158,920 75,435 2010 4-5 Yr.
-
QuikTrip a Johnston, Ia. 48,502 476,160 112,755 73,574 2012 4-5 Yr.
-
QuikTrip a St. Louis, Mo. 152,000 1,575,433 376,113 231,780 2017 4-5 Yr.
-
QuikTrip a Des Moines, Ia. 183,095 900,000 179,784 113,683 2013 4-5 Yr.
-
QuikTrip Norcross, Ga. 92,500 834,000 122,091 95,738 2009 4-5 Yr.
-
QuikTrip Norcross, Ga. 95,500 858,000 125,603 98,528 2009 4-5 Yr.
-
QuikTrip Clive, Ia. 325,605 393,814 45,868 124,570 2015 4-5 Yr
-
QuikTrip Alpharetta, Ga 148,585 1,324,000 137,921 149,474 2016 4-5 Yr
-
QuikTrip Gainesville, Ga. 122,927 1,227,923 90,388 157,500 2012 4-5 Yr.
-
QuikTrip Woodstock, Ga. 151,800 1,328,200 83,012 155,400 2013 4-5 Yr.
-
QuikTrip (3 sold 12-1-99) 131,389
-
Kum & Go Omaha, NE. 44,110 128,574 128,574 30,838 2003 -
-
--------- ---------- ------------ ----------- ----
------
Total 2,236,426 14,680,138 3,312,137 2,090,405
-
--------- ---------- ------------ ----------- ----
------
D. SUPERMARKETS
Nash Finch Sioux Falls, SD. 211,888 2,632,970 70,327 473,610 2018 10-5 Yr.
--------- ---------- ------------ ----------- ----
------
E. OFFICE BUILDINGS
American Payday Loans Des Moines, Ia. 96,455 137,954 137,954 43,717 2004 1-7 Yr.
-
Associates Financial
Serv. Des Moines, Ia. 61,692 55,812 44,510 15,600 2002
-
Corporate Headquarters b Des Moines, Ia. 25,000 418,222 361,884 40,973 2001 1-2 Yr.
-
GTech Des Moines, Ia. 16,000 174,953 141,274 43,718 2001 1-2 Yr.
-
--------- ---------- ------------ ----------- ----
------
Total 199,147 786,941 685,622 144,008
-
--------- ---------- ------------ ----------- ----
------
F. GARDEN CENTERS
Mike's Garden Center a Dallas, TX. 125,000 586,825 586,825 69,444 2009
-
Tip-Top Nursery a Glendale, AZ. 66,144 433,057 175,869 90,000 2003 1-5 Yr.
-
Mike's Garden Center a Arlington, TX. 200,000 1,700,000 362,083 179,910 2009
-
--------- ---------- ------------ ----------- ----
------
Total 391,144 2,719,882 1,124,777 339,354
-
--------- ---------- ------------ ----------- ----
------
G. OTHER PROPERTIES 66,408 103,752 103,752 74,810
-
--------- ---------- ------------ ----------- ----
------
Totals 4,367,365 27,013,359 10,014,348 4,189,262
10,482
========= ========== ============ ===========
==========
</TABLE>
a Mortgaged to Lender - See Note 4 of Notes to Financial Statements.
b 50% Used by Registrant; 50% Leased
Other Properties
The following unencumbered properties are held for future development by
the Company .
(1) Real Estate, S. E. Delaware and Oralabor Road, Ankeny, Iowa.
This commercially zoned property is located in Ankeny, Iowa, at the
Industrial Exit of Interstate 35. It contains three approximately 1.5 acre
platted lots.
(2) Real Estate, 4745 - 2nd Avenue, Des Moines, Iowa.
106,000 sq. ft. of land and a 3,000 sq. ft. building leased for $4,000 per
month, the lease expires July 1, 2002. 82,000 sq. ft. of unused land is
available for development.
(3) Real Estate, 845 Sixth Avenue, Des Moines, Iowa
This 6,000 square foot concrete block building situated on a lot of the
same size was purchased in 1974. This building is rented for $1,500 per
month, and the lease expires April 30, 2000.
Item 3. Legal Proceedings.
The Company is not engaged in any material legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders.
NOT APPLICABLE
PART II
Item 5. Market for the Company's Common Stock and Related Security Holder
Matters
The Common Stock of the Company (symbol NAPE) is traded on the over-the-
counter bulletin board; a product of the National Association of Security
Dealers, Inc., sponsored by market makers. Quotations are inter-dealer
prices, without retail mark-up, or mark-down, or commission and may not
necessarily represent actual transactions. The prices shown below are by
calendar quarters for 1999 and 1998. N/A indicates prices were not
available.
<TABLE>
<CAPTION>
Bid Asked
1999 High Low High Low
<S> <C> <C> <C> <C>
1st Quarter 33-3/4 31-1/4 N/A N/A
2nd Quarter 35 33-3/4 N/A N/A
3rd Quarter 36 36 N/A N/A
4th Quarter 36-1/4 36 N/A N/A
Bid Asked
1998 High Low High Low
<S> <C> <C> <C> <C>
1st Quarter 29-1/2 28-5/8 N/A N/A
2nd Quarter 31 29-1/2 N/A N/A
3rd Quarter 36 31 N/A N/A
4th Quarter 34 32-3/4 N/A N/A
<CAPTION>
</TABLE>
There was a cash dividend of twelve cents a share paid in 1999. Future
dividend declarations will be dependent upon the earnings of the Company, its
financial condition, its capital requirements and general business conditions.
There were approximately 675 stockholders of record as of March 1, 2000.
<TABLE>
<CAPTION>
Item 6. Selected Financial Data. (In thousands except for per
share amounts)
Year ended December 31,
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Year ended December 31,
Lease rental income 4,189 3,715 3,492 3,262 3,140
Interest income 14 21 1 - 3
Dividend income 69 68 72 80 89
Gain on sale of
securities 280 80 24 59 103
Net income 1,678 1,271 1,143 1,039 903
At December 31,
Total assets 23,701 24,291 20,778 20,115 19,118
Long-term debt 4,025 5,221 5,264 6,031 5,148
Book value-properties &
equipment 21,387 21,833 18,495 18,102 17,394
Net Unrealized Gain
Marketable Securities 829 1,003 917 569 605
Stockholders' equity 16,276 14,903 13,922 12,899 12,070
Per Common Share
Net income* 4.02 3.00 2.62 2.30 1.97
Cash dividends 0.12 0.00 0.10 0.10 0.00
Book value 39.09 35.60 32.27 28.71 26.49
</TABLE>
*Based on weighted average shares outstanding
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Liquidity and Capital Resources
At December 31, 1999, the Company's primary sources of liquidity were
$287,000 in cash; marketable securities with a market value of
approximately $1,997,000; and a $2,775,000 remaining loan balance available
on three lines of credit with a local bank. (See Note 4 of the Notes to
Financial Statements). 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.
Each year for many years the Company has reacquired a limited amount of its
common stock. During the three years ended December 31, 1999, 32,892
shares were repurchased in the open market and negotiated transactions.
The total cost of the reacquired shares amounted to $882,489; an average
per share cost of $26.83.
Results of Operations
1999 Compared to 1998
The Company recorded a net income in 1999 of $1,678,000, or $4.02 per share
compared with last year's income of $1,271,000 or $3.00 per share.
Lease revenues for the year ended December 31, 1999 was $4,189,000 up
$474,000 or 12.8% over 1998. The addition of two convenience stores in
1999 and a supermarket and convenience store in 1998 accounted for $472,000
of the increase in lease revenue for 1999. Contingent rentals based on
sales overages increased $39,000 in 1999 over 1998. The Company's three
garden centers produced $49,000 less rental income in 1999 than they did in
1998 resulting from entering less favorable leasing arrangements with new
tenants since April, 1998.
The Company earned $363,000 in investment income including gains from the
sale of marketable securities during 1999 compared to $169,000 in 1998, an
increase of $194,000.
General and administrative expenses increased $22,000 to $1,886,000 in 1999
as compared to $1,864,000 in 1998. The increase reflects an increase in
depreciation expense of $16,000 due to the addition of new properties, an
increase in other expenses totaling $27,000 led by personnel cost, and a
decrease in real estate taxes of $6,000 resulting from the bankruptcy of a
former tenant in April, 1998.
Interest expense decreased $16,000 to $532,000 in 1999 compared to $548,000
in 1998. The decrease was primarily due to a lower effective interest rate
of 7.73% in 1999 compared to 8.5% for 1998 on the Company's three lines of
credit.
The effective income tax rate was 37.0% in 1999 as compared to 37.1% in
1998.
Results of Operations
1998 Compared to 1997
The Company recorded a net income in 1998 of $1,271,000 or $3.00 per share
compared with a net income of $1,143,000 or $2.62 per share in 1997.
Lease revenues for the year ended December 31, 1998 were $3,715,000, up
$223,000 or 6.4% over 1997. The increase in rental income was primarily
due to the acquisition of three new properties and the sale of one property
in 1998 and 1997 that produced a net increase in rental income of $284,000.
The Company's three garden centers produced $83,000 less rental income in
1998 than in 1997 resulting from entering into less favorable leasing
arrangements with new tenants after the bankruptcy of Sunbelt Nursery (the
former tenant). Contingent rentals based on sales overages excluding
garden centers increased $22,000 in 1998.
The Company also realized gains of $79,800 from the sale of securities in
1998, up from $24,300 in 1997. In addition, the Company earned $21,000 in
interest income on proceeds from the sale of it Ankeny land while held in
escrow pending a qualified IRC 1031 exchange of property.
Total expenses increased $63,000 to $1,864,000 in 1998 as compared to
$1,801,000 in 1997. Interest and depreciation increased $119,000 or 9.2%
over 1997 due to the acquisition of new properties funded by drawing down
on the Company's three credit lines. In addition the Company recorded
$7,000 in additional real estate taxes during 1998 in connection with the
stores leased to Sunbelt Nursery. Remaining expenses led by personnel
cost, decreased by $63,000 or 14.1% for 1998 as compared to 1997.
The effective income tax rate was 37.1% in 1998 as compared to 36.1% in
1997. The increase was due to an increase in state income taxes in 1998.
Year 2000
The Company did not experience any material adverse issues or business
interruption arising from the date change to January 1, 2000. Based on its
efforts to date, the Company has not incurred any material costs and does
not expect to incur any future material costs in addressing the year 2000
issue related to its business.
Item 8. Financial Statements and Supplementary Data.
Financial statements filed herewith:
Balance Sheets as of December 31, 1999 and December 31, 1998.
Statements of Income and Comprehensive Income for the years ended
December 31, 1999, December 31, 1998 and December 31, 1997.
Statements of Stockholders' Equity for the years ended
December 31, 1999, December 31, 1998 and December 31, 1997
Statements of Cash Flows for the years ended
December 31, 1999, December 31, 1998 and December 31, 1997
Notes to Financial Statements.
Accountant's Report.
Item 9. Disagreements on Accounting and Financial Disclosures.
NONE
PART III
In answer to Items 10, 11, 12 and 13 of Part III, the Company incorporates
by reference the required information which is contained in its definitive
Proxy Statement. The Proxy Statement is for the 2000 annual meeting of
stockholders and will be filed with the Commission not later than 120 days
after December 31, 1999.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) List the following documents filed as part of this report.
1. All financial statements.
See Item 8 of Part II.
2. Financial statement schedules.
Schedule III as of December 31, 1999.
Note to schedule III as of December 31, 1999, 1998 and
1997.
All other Schedules are omitted because they are inapplicable or
not required.
(b) No report on Form 8-K was filed during the last quarter of 1999.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
___NATIONAL PROPERTIES CORPORATION___ (Registrant)
Date __3/17/00__ By _____/S/__Raymond_Di_Paglia_________
Raymond Di Paglia, President and Chief
Executive Officer
Date __3/17/00__ By _____/S/__Kristine_M._Fasano__________
Kristine M. Fasano, Vice President,
Secretary and Treasurer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Company and in the capacities and on the
dates indicated.
DIRECTORS OF THE COMPANY
Date __3/17/00__ By _____/S/__William_D._Buzard________
William D. Buzard
Date __3/17/00__ By _____/S/__Raymond_Di_Paglia________
Raymond Di Paglia
Date __3/17/00__ By _____/S/__Kristine_M._Fasano_______
Kristine M. Fasano
Date __3/17/00__ By _____/S/__Robert_H._Jamerson_______
Robert H. Jamerson
NORTHUP, HAINES, KADUCE, SCHMID, MACKLIN, P.C.
Certified Public Accountants
Board of Directors and Stockholders
National Properties Corporation
INDEPENDENT AUDITOR'S REPORT
We have audited the accompanying balance sheets of National Properties
Corporation as of December 31, 1999 and 1998 and the related statements of
income and comprehensive income, stockholders' equity and cash flows for
each of the three years in the period ended December 31, 1999. These
financial statements and the schedules referred to below are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and schedules based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatements. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of National Properties
Corporation as of December 31, 1999 and 1998, and the results of its
operations and its cash flows for each of the three years in the period
ended December 31, 1999, in conformity with generally accepted accounting
principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules listed in Item
14(a)(2) are presented for purposes of complying with the Securities and
Exchange Commission's rules and are not part of the basic financial
statements. These schedules have been subjected to the auditing procedures
applied in our audits of the basic financial statements and, in our
opinion, fairly state in all material respects, the financial data required
to be set forth therein in relation to the basic financial statements taken
as a whole.
/S/ NORTHUP, HAINES, KADUCE, SCHMID, MACKLIN, P.C.
NORTHUP, HAINES, KADUCE, SCHMID, MACKLIN, P.C.
February 9, 2000
West Des Moines, Iowa
1501 - 42nd Street, Suite 130, West Des Moines, IA 50266-3500, Phone (515)
223-0221 Fax: (515) 223-1030
<TABLE>
<CAPTION>
NATIONAL PROPERTIES CORPORATION BALANCE SHEETS
December 31,
1999 1998
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash 287,310 139,993
Other 16,127 16,864
---------- ----------
Total current assets 303,437 156,857
---------- ----------
PROPERTY AND EQUIPMENT, AT COST - Notes 1 and 4
Land 4,367,365 4,586,750
Buildings and improvements 27,013,359 27,006,700
Furniture and equipment 98,712 97,088
---------- ----------
31,479,436 31,690,538
Less-accumulated depreciation 10,092,823 9,857,750
---------- ----------
Property and equipment-net 21,386,613 21,832,788
---------- ----------
OTHER ASSETS
Marketable securities, at market value-Note 3 1,997,094 2,279,982
Deferred charges and other assets 13,786 20,914
---------- ----------
Total other assets 2,010,880 2,300,896
---------- ----------
23,700,930 24,290,541
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable 4,792 10,442
Notes payable - Note 4 1,900,000 2,400,000
Accrued liabilities 401,496 282,749
Current maturities of long-term debt 10,482 418,254
Federal and state income taxes 101,571 59,343
---------- ----------
Total current liabilities 2,418,341 3,170,788
---------- ----------
LONG-TERM DEBT - Notes 4 & 5 4,025,000 5,220,877
---------- ----------
DEFERRED INCOME TAXES 981,687 995,882
---------- ----------
STOCKHOLDERS' EQUITY
Common stock - $1 par value
Authorized - 5,000,000 shares
Issued - (1999-416,353 shares; 1998-418,616 shares) 416,353 418,616
Retained earnings 15,030,319 13,481,312
Accumulated other Comprehensive income 829,230 1,003,066
---------- ----------
Total stockholders' equity 16,275,902 14,902,994
---------- ----------
23,700,930 24,290,541
========== ==========
</TABLE>
See Notes to Financial Statements
<TABLE>
<CAPTION>
NATIONAL PROPERTIES CORPORATION
STATEMENTS OF INCOME AND C0MPREHENSIVE INCOME
For the years ended December 31, 1999, 1998 and 1997
STATEMENTS OF INCOME 1999 1998 1997
<S> <C> <C> <C>
REVENUES
Lease rental income 4,189,262 3,715,029 3,491,764
Dividend income 69,256 67,750 71,985
Interest income 13,627 21,441 703
Gain on sale of securities 280,051 79,798 24,336
---------- ---------- ----------
Total revenues 4,552,196 3,884,018 3,588,788
---------- ---------- ----------
EXPENSES
Depreciation 879,267 863,115 807,989
Interest 531,958 548,513 484,119
Salaries and wages 213,157 195,967 251,440
Property, payroll and misc. taxes 56,532 60,706 60,958
Other 205,147 196,002 196,605
---------- ---------- ----------
Total expenses 1,886,061 1,864,303 1,801,111
---------- ---------- ----------
Income before income taxes 2,666,135 2,019,715 1,787,677
INCOME TAXES-Note 2 987,710 748,602 644,595
---------- ---------- ----------
Net income 1,678,425 1,271,113 1,143,082
---------- ---------- ----------
Other comprehensive income:
Unrealized holding gains on
marketable securities arising during
period 6,724 214,421 572,754
Less reclassification adjustment for
gains included in net income (280,051) (79,798) (24,336)
Less income taxes applicable to unrealized
holding gains and losses 99,491 (49,003) (199,624)
---------- ---------- ----------
Other comprehensive income, net of tax (173,836) 85,620 348,794
---------- ---------- ----------
Comprehensive income 1,504,589 1,356,733 1,491,876
========== ========== ==========
Net income per share 4.02 3.00 2.62
Weighted average common shares outstanding 417,437 423,854 435,761
</TABLE>
See Notes to Financial Statements
<TABLE>
<CAPTION>
NATIONAL PROPERTIES CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY
For the three years ended December 31, 1999, 1998 and 1997
STATEMENTS OF STOCKHOLDER'S EQUITY
Accumulated
Other
Common Retained Comprehensive
Stock Earnings Income
---------- ---------- ----------
<S> <C> <C> <C>
Balances December 31, 1996 449,245 11,881,556 568,652
Net income - 1997 - 1,143,082 -
Purchase and retirement of common stock (17,789) (407,397) -
Cash dividend - 10 cents per share - (43,947) -
Change in comprehensive income - - 348,794
---------- ---------- ----------
Balances December 31, 1997 431,456 12,573,294 917,446
Net income - 1998 - 1,271,113 -
Purchase and retirement of common stock (12,840) (363,095) -
Change in comprehensive income - - 85,620
---------- ---------- ----------
Balances December 31, 1998 418,616 13,481,312 1,003,066
Net income - 1999 - 1,678,425 -
Purchase and retirement of common stock (2,263) (79,105) -
Cash dividend - 12 cents per share (50,313) -
Change in comprehensive income - - (173,836)
---------- ---------- ----------
Balances December 31, 1999 416,353 15,030,319 829,230
========== ========== ==========
</TABLE>
See Notes to Financial Statements
<TABLE>
<CAPTION>
NATIONAL PROPERTIES CORPORATION
STATEMENTS OF CASH FLOWS
For the years ended December 31, 1999, 1998 and 1997
Increase(Decrease) in Cash
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net income 1,678,425 1,271,113 1,143,082
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 886,395 870,243 815,116
Deferred income taxes 85,296 81,146 73,471
Gain on sale of securities (280,051) (79,798) (24,336)
Changes in assets and liabilities:
Accounts receivable - 12,451 3,125
Prepaid expenses and deferred charges 737 (2,600) 13
Accounts payable and accrued expenses 113,097 2,095 20,745
Federal and state income taxes 42,228 32,045 271,765
---------- ---------- ----------
Net cash provided by operations 2,526,127 2,186,695 2,302,981
---------- ---------- ----------
CASH FLOW FROM INVESTING ACTIVITIES
Additions to property and equipment (433,091) (4,200,973)(1,200,486)
Payments received on mortgage notes - - 718
Purchase of securities - (29,035) (37,368)
Proceeds sale of securities 289,611 111,758 43,563
---------- ---------- ----------
Net cash used in
investing activities (143,480) (4,118,250)(1,193,573)
---------- ---------- ----------
CASH FLOW FROM FINANCING ACTIVITIES
Borrowings on credit lines 550,000 4,280,000 3,000,000
Repayments of credit line borrowings (2,525,000) (1,805,000)(3,584,585)
Principal payments on mortgage Notes (128,649) (107,062) (96,929)
Dividends paid (50,313) - (43,947)
Purchase of treasury stock (81,368) (375,935) (425,186)
---------- ---------- ----------
Net cash provided by (used) in
financing activities (2,235,330) 1,992,003 (1,150,647)
---------- ---------- ----------
Net increase (decrease) in cash 147,317 60,448 (41,239)
Cash at beginning of year 139,993 79,545 120,784
---------- ---------- ----------
Cash at the end of year 287,310 139,993 79,545
========== ========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the year for:
Interest expense 533,117 547,354 523,320
Income tax payments 860,186 635,411 372,830
NON-CASH INVESTING TRANSACTIONS
Exchange of like kind real restate:
Basis of property received 716,599 2,844,858 1,350,850
Less cash paid 431,467 2,687,105 1,238,957
---------- ---------- ---------
Basis of property given up 285,132 157,753 111,893
========== ========== =========
</TABLE>
See Notes to Financial Statements
NOTES TO FINANCIAL STATEMENTS
SUMMARY OF ACCOUNTING POLICIES
The Company: National Properties Corporation is lessor of commercial real
estate to tenants under net lease arrangements. The Company seeks to
acquire or develop real estate for lease to commercial tenants anywhere in
the United States. The Company currently owns property located in Arizona,
Georgia, Iowa, Kansas, Missouri, Nebraska, Oklahoma, South Dakota and
Texas.
Marketable Securities: Marketable securities are classified as available-
for-sale and reported at fair market value in accordance with the Statement
of Financial Accounting Standards (SFAS) No. 115. The Company's
investments are held for an indefinite period.
Property and Equipment: Property and equipment are recorded at cost and
depreciated on a straight-line basis over the estimated useful lives of 15
to 39 years for buildings and 5 to 7 years for equipment.
Impairment of Long-Lived Assets: The Company evaluates its long-lived
assets for impairment whenever events or changes in circumstances indicate
that the carrying amount of such assets or intangibles may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows
expected to be generated by the assets. If such assets are considered to
be impaired, the impairment to be recognized is measured by the amount by
which the carrying amount of the assets exceed the fair value of the
assets. Assets to be disposed of are reported at the lower of the carrying
amount or fair value less costs to sell. During 1999 and 1998, the Company
determined that none of is long-lived assets had been impaired and
therefore the Company did not adjust the carrying amounts of such assets.
Net Earnings Per Common Share: Net earnings per share are based on the
weighted average number of shares outstanding 417,437 in 1999; 423,854 in
1998; and 435,761 in 1997.
Profit-Sharing Plan: The Company has a profit sharing plan adopted in
1965, for eligible employees, under which it contributes a portion of its
annual earnings. The plan and all of its amendments have been approved by
the Internal Revenue Service. The Company's contribution to the plan was
$31,625 in 1999; $29,344 in 1998; and $35,662 in 1997.
Lease Rentals - Commercial Real Estate: Lease rentals received on
commercial real estate are accounted for under the operating method;
rentals are included in income as earned over the term of the lease.
Estimates: The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could vary from the
estimates that were used.
Fair Value of Financial Instruments: The Company's financial instruments
are valued at their carrying amounts which are reasonable estimates of fair
value.
Recent Accounting Pronouncement: 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
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 adjustments directly to stockholders'
equity. All prior periods reported on have been restated to give effect to
FAS No. 130.
In December 1999, the staff of the Securities and Exchange Commission
("SEC") issued Staff Accounting Bulletin ("SAB") No. 101, "Revenue
Recognition in Financial Statements". SAB No. 101 summarizes the SEC
staff's view in applying generally accepted accounting principles to the
recognition of revenues. The Company has evaluated the impact of the
reporting requirements of SAB No. 101 and has determined that there will be
no material impact on its results of operation, financial position or cash
flows.
NOTE 1 - PROPERTIES UNDER LEASE
The Company is the lessor of commercial real estate under noncancelable
operating leases requiring fixed and contingent rentals through the year 2019.
Contingent rentals based on sales overages amounted to $115,479 in 1999;
$76,903 in 1998; and $71,663 in 1997. The following is a schedule of future
minimum rentals at December 31, 1999, not including renewal options and
contingent rentals.
<TABLE>
<CAPTION>
Year ended December 31, Amount
<S> <C>
2000 4,154,640
2001 4,033,093
2002 3,818,443
2003 3,664,563
2004 3,505,075
Subsequent years 28,404,274
----------
Aggregate future minimum rentals 47,580,088
==========
</TABLE>
NOTE 2 - INCOME TAXES
<TABLE>
Income tax expense for the years ended December 31, 1999, 1998 and 1997 is
comprised of the following:
<CAPTION>
<S> <C> <C> <C>
1999 1998 1997
---------- ---------- ----------
Current
Federal 764,749 553,572 498,071
States 137,665 113,884 73,053
---------- ---------- ----------
Total current 902,414 667,456 571,124
Deferred 85,296 81,146 73,471
---------- ---------- ----------
987,710 748,602 644,595
========== ========== ==========
A reconciliation of the statutory federal income tax rate of 34 percent in
1999, 1998 and 1997 to the effective tax rate is as follows:
1999 1998 1997
---------- ---------- ----------
Statutory federal income tax rate 34.0% 34.0% 34.0%
State taxes, net of federal tax benefit 3.6 4.0 3.1
Tax savings on dividends (0.6) (0.9) (1.0)
---------- ---------- ----------
Total tax provision 37.0 37.1 36.1
========== ========== ==========
Temporary differences which give rise to deferred tax liabilities in 1999 and
1998 are as follows:
1999 1998
---------- ---------
Excess of tax over book depreciation 507,096 421,800
Unrealized gain on marketable securities 474,591 574,082
---------- ---------
Total tax provision 981,687 995,882
========== =========
</TABLE>
Deferred income taxes result from the temporary differences in the
recognition of income and expenses for tax and financial statement
purposes. The source of the temporary difference was due to a change in
depreciation for income tax reporting in 1996. The Small Business Job
Protection Act of 1996 (The Act) amended the Internal Revenue Code
regarding depreciation of motor fuel retail outlets permitting the Company
to depreciate its qualifying convenience stores over a life of 20 years.
For financial statement purposes the Company depreciates its convenience
stores over an average useful life of 30 years.
NOTE 3 - MARKETABLE SECURITIES
The Company's marketable securities consist of equity securities and were
carried at fair market value. At December 31, 1999, marketable securities
available-for-sale had an aggregate market value of $1,997,094 and a cost
of $693,273 resulting in a gross unrealized gain of $1,303,821. At
December 31, 1998, marketable securities had an aggregate market value of
$2,279,982 and a cost of $702,833 for a gross unrealized gain of
$1,577,149. The increase or decrease in unrealized holding gains each year
is shown as other comprehensive income in the statement of income and
comprehensive income.
The Company had gross realized gains of $280,051, $79,798, and $24,336 on
the sale of marketable securities during 1999, 1998 and 1997 respectively
and no realized losses. Gain or loss on sales was based on the cost of the
securities using the specific identification method.
NOTE 4 - NOTES PAYABLE - BANKS
As of December 31, 1999, the registrant had a $3,000,000 unsecured working
capital line of credit with Norwest Bank Iowa, N.A. The credit line which
has been in effect for the past several years was created to facilitate the
Company's real estate acquisitions. Borrowings will bear interest at 0.25%
less than the bank's base (Prime) rate floating. No compensating balance
is required but a non-usage fee of 1/8 of 1% is payable quarterly to the
bank on the unused portion of the line. As of December 31, 1999, there was
a $1,900,000 outstanding balance on this loan, as compared to $2,400,000 at
December 31, 1998.
As of December 31, 1999, the Company had a $6,000,000 10-year, revolving
credit line with Norwest Bank Iowa, N.A. The $6,000,000 loan commitment
reduces $600,000 beginning December 31, 1997, and each year thereafter
until final maturity on December 31, 2006. Borrowings secured by first
mortgages on various properties, bear interest at 0.25% less than the
bank's base (Prime) rate floating, and no compensating balance is required.
As of December 31, 1999, the outstanding balance on this loan was
$3,125,000 as compared to $3,700,000 as of December 31, 1998.
In November, 1994, the Company established a $3,000,000 10-year revolving
loan with Brenton Bank, N.A., Des Moines, Iowa. Effective June 4, 1998,
this loan was assumed by Norwest Bank Iowa, N.A. The credit line reduces
$300,000 beginning December 31, 1995, and each year thereafter until final
maturity on December 31, 2004. Borrowings secured by first mortgages on
properties, bear interest at 0.25% less than the bank's base (Prime) rate
floating. At December 31, 1999, the outstanding balance on this loan was
$900,000 compared to $1,800,000 as of December 31, 1998.
NOTE 5 - LONG-TERM DEBT
<TABLE>
Long-term debt consists of the following:
<CAPTION>
December 31,
Rate 1999 1998
---------- ---------- ----------
<S> <C> <C> <C>
Real estate mortgage notes
Due 2000 9.984% 10,482 139,131
Norwest Bank Iowa, N.A.
Due 2006 - See Note 4 8.25% 3,125,000 3,700,000
Norwest Bank Iowa, N.A.
Due 2004 - See Note 4 8.25% 900,000 1,800,000
---------- ----------
4,035,482 5,639,131
Less-Current principal maturities 10,482 418,254
---------- ----------
4,025,000 5,220,877
========== ==========
</TABLE>
<TABLE>
Annual principal maturities over the next five years are as follows:
<CAPTION>
2000 2001 2002 2003 2004
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Mortgage Note 10,482 - - - -
Norwest Bank - 125,000 600,000 600,000 600,000
Norwest Bank - - 300,000 300,000 300,000
</TABLE>
NOTE 6 - REVENUE FROM MAJOR TENANTS
A Significant portion of the Company's lease revenues were derived from three
major tenants during 1999 and 1997 and two major tenants during 1998. The
following table shows the revenue and the percent of revenue to total lease
revenue derived from each of these major tenants for the three years ended
December 31, 1999:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Industry Revenue % Revenue % Revenue %
Convenience stores 2,059,567 49.2 2,005,143 54.0 1,737,621 49.8
Garden centers - - - - 471,775 13.5
Restaurants 452,658 10.8 420,088 11.3 403,437 11.5
Supermarket 473,610 11.3 - - - -
--------- ---- --------- ---- --------- ----
2,985,835 71.3 2,425,231 65.3 2,612,833 74.8
========= ==== ========= ==== ========= ====
</TABLE>
<TABLE>
<CAPTION>
NOTE 7 - QUARTERLY OPERATING DATA (UNAUDITED)
The following is a summary of unaudited quarterly results of operations:
Quarter
First Second Third Fourth
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
1999
Revenues 1,192,543 1,021,922 1,280,095 1,057,636
Net Income 448,062 339,732 513,023 377,608
Per share $1.07 81 cents $1.23 91 cents
1998
Revenues 1,032,111 942,310 939,312 970,285
Net Income 347,158 282,492 331,797 309,666
Per share 82 cents 67 cents 79 cents 72 cents
</TABLE>
<TABLE>
<CAPTION>
NATIONAL PROPERTIES CORPORATION
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
Description Encum- Initial costs Cost capi- Gross
Accumulated Date ac- Life on
brances to company talized amount at
depreciation quired which de-
subsequent which car-
preciation
to acquis- ried at
in latest in-
tion close of
come state-
period
is
computed
<S> <C> <C> <C> <C>
<C> <C> <C>
QuikTrip Stores
St. Louis, MO 1,381,946 1,454,000 121,433 1,575,433
376,113 02/28/92 31 1/2
Econofoods,
Sioux Falls, SD 2,632,970 -0- 2,632,970
70,327 12/01/98 39
Garden Center
Metro Garden Center
Arlington, TX 1,520,000 1,700,000 -0- 1,700,000
362,083 04/01/93 31 1/2
Other Properties 1,133,536 20,233,320 871,636 21,104,956
9,205,825 1976/1999 15/39
---------- ----------- ---------- ----------
----------
Totals $4,035,482 $26,020,290 $ 993,069 $27,013,359
$10,014,348
========== =========== ========== ===========
==========
<captions>
NOTE TO SCHEDULE III
Real Estate
1999 1998 1997
<S> <C> <C> <C>
Balance, Beginning of period $27,006,700 $23,045,531 $21,896,495
additions 657,019 3,961,169 1,227,923
----------- ----------- -----------
27,663,719 27,006,700 23,124,418
Reductions 650,360 -0- 78,887
----------- ----------- -----------
Balance, End of period $27,013,359 $27,006,700 $23,045,531
=========== =========== ===========
Accumulated Depreciation
Real Estate
1999 1998 1997
<S> <C> <C> <C>
Balance, Beginning of period $ 9,787,130 $ 8,935,995 $ 8,202,683
additions 871,411 851,135 805,296
----------- ----------- -----------
10,658,541 9,787,130 9,007,979
Reductions 644,193 -0- 71,984
----------- ----------- -----------
Balance, End of period $10,014,348 $ 9,787,130 $ 8,935,995
=========== =========== ===========
</TABLE>
