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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended November 30, 1993
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 0-15952
J.M. PETERS COMPANY, INC.
-------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 95-2956559
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification Number)
</TABLE>
3501 Jamboree Road, Suite 200, Newport Beach, California 92660
- ---------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(714) 854-2500
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(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) 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 XX No
-- --
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<S> <C>
Class and Title of Shares Outstanding as of
Capital Stock January 1, 1994
----------------- ------------------------
Common Stock, $.10 Par Value 14,995,000
</TABLE>
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J.M. PETERS COMPANY, INC.
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
Page
----
<S> <C>
Part I - Financial Information:
Item 1 - Financial Statements
Consolidated Balance Sheets -
November 30, 1993, and February 28, 1993 1
Consolidated Statements of Operations for the
Three Months Ended November 30, 1993, and 1992
and the Nine Months Ended November 30, 1993, and
1992 2
Consolidated Statements of Cash Flows for the
Nine Months Ended November 30, 1993, and 1992 3
Notes to Consolidated Financial Statements 4
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 5-8
Part II - Other Information
Item 1 - Legal Proceedings 9
Item 3 - Defaults upon Senior Securities 9
</TABLE>
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PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
J.M. PETERS COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
ASSETS
<TABLE>
<CAPTION>
November 30, February 28,
1993 1993
(Unaudited)
------------ ------------
<S> <C> <C>
Cash and cash equivalents $ 8,953 $ 9,454
Restricted cash 1,733 1,888
Accounts and notes receivable 1,628 1,905
Residential inventories:
Land and improvements under construction 99,852 92,251
Completed residential homes 6,370 1,430
Model homes 10,581 5,955
-------- --------
116,803 99,636
-------- --------
Property and equipment, at cost, net of accumulated depreciation
of $2,143 and $2,074 as of November 30, 1993 and February 28,
1993, respectively 173 222
Prepaid expenses and other assets 2,803 2,446
-------- --------
$132,093 $115,551
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable $ 35,726 $ 38,433
Due to Capital Pacific Homes, Inc. 413 1,702
Accounts payable 11,178 1,089
Accrued liabilities 6,494 6,665
-------- --------
Total liabilities 53,811 47,889
-------- --------
Minority Interest 25,093 19,647
Stockholders' equity (deficit):
Common stock, par value $.10 per share, 15,000,000 shares
authorized; 14,995,000 issued and outstanding 1,500 1,398
Additional paid-in capital 210,387 207,824
Accumulated deficit (158,698) (161,207)
-------- --------
Total stockholders' equity 53,189 48,015
-------- --------
$132,093 $115,551
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
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J.M. PETERS COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three months Nine months
ended November 30, ended November 30,
------------------ -------------------
1993 1992 1993 1992
------- ------- ------- --------
<S> <C> <C> <C> <C>
Revenue:
Sales of homes $33,811 $ 3,463 $40,744 $ 35,131
Sales of land and lots 2,661 8,900 7,173 30,844
Interest and other income 872 1,510 1,681 2,120
------- ------- ------- --------
37,344 13,873 49,598 68,095
------- ------- ------- --------
Costs and expenses:
Cost of homes and land 30,703 9,548 42,212 56,876
Selling, general and administrative 3,394 2,212 7,298 7,700
Adjustments to carrying value of real
estate projects - - - 75,036
Interest expense 0 1,914 418 9,895
Minority Interest 1,588 0 1,519 0
------- ------- ------- --------
35,685 13,674 51,447 149,507
------- ------- ------- --------
Income (loss) before income taxes
and extraordinary income 1,659 199 (1,849) (81,412)
Extraordinary income 4,358 0 4,358 0
------- ------- ------- --------
Income (loss) before income taxes 6,017 199 2,509 (81,412)
Income tax expense (benefit) 0 (1,792) 0 (1,792)
------- ------- ------- --------
NET INCOME (LOSS) $ 6,017 $ 1,991 $ 2,509 $(79,620)
------- ------- ------- --------
Income (loss) per common share before
extraordinary income $0.11 $0.14 ($0.13) ($5.70)
Earnings per share due to
extraordinary income 0.29 0.00 0.30 0.00
------- ------- ------- --------
Net earnings/(loss) per share $0.40 $0.14 $0.17 ($5.70)
======= ======= ======= ========
Weighted average number of common shares 14,995 13,980 14,318 13,980
======= ======= ======= ========
</TABLE>
The accompanying notes are an integral part of these statements.
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J.M. PETERS COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended November 30,
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
1993 1992
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss) $ 2,509 $(79,620)
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Deferred profit on sale of land - 1,500
Income from extraordinary item (4,358) -
Adjustments to the carrying value of real estate
projects - 75,036
(Increase) decrease in residential inventories (10,792) 44,691
Decrease (increase) in receivables, prepaid
expenses and other assets 619 (2,566)
Increase (decrease) in accounts payable 6,510 (1,906)
Decrease in accrued liabilities (321) (1,541)
-------- --------
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES (5,833) 35,594
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Durable Homes (1,300) -
(Increase) decrease in investment in partnerships (184) 17,728
-------- --------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES (1,484) 17,728
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable 9,089 6,857
Advances from San Jacinto (former parent) , net - 3,025
Repayments to Capital Pacific Homes, Inc. (1,289) (45,344)
Increase in minority interest in joint ventures 3,332 -
Principal payments of notes payable (4,471) (25,584)
-------- --------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 6,661 (61,046)
-------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS (656) (7,724)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 11,342 20,136
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 10,686 $ 12,412
======== ========
Supplemental Disclosures:
Residential inventory reduced by extraordinary item $9,890 -
Notes Payable reduced by extraordinary item 14,248 -
Purchase of Durable Homes - Residential inventory 16,265 -
Purchase of Durable Homes - Other assets 466 -
Purchase of Durable Homes - Notes Payable 6,923 -
Purchase of Durable Homes - Accounts Payable 3,579 -
Purchase of Durable Homes - Minority Interest 2,114 -
Purchase of Durable Homes - Other Liabilities 150 -
Purchase of Durable Homes - Stock issuance 2,665 -
</TABLE>
The accompanying notes are an integral part of these statements.
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J.M. PETERS COMPANY, INC., AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. The unaudited financial statements presented herein have been prepared in
accordance with the instructions to Form 10-Q and do not include all of the
information and note disclosures required by generally accepted accounting
principles. These statements should be read in conjunction with the financial
statements and notes thereto included in the J.M. Peters Company, Inc.,
("Company") Form 10-K for the fiscal year ended February 28, 1993. In the
opinion of management, the financial statements presented herein include all
adjustments (which are of a normal recurring nature) necessary to present
fairly the Company's financial position and results of operations. The results
of operations for the nine month period ended November 30, 1993, are not
necessarily indicative of the results that may be expected for the year ending
February 28, 1994.
2. Notes payable:
Notes payable at November 30, 1993, and February 28, 1993, are summarized as
follows:
<TABLE>
<CAPTION>
November 30, February 28,
1993 1993
------------ -------------
(In Thousands)
<S> <C> <C>
Construction notes matured: $10,402 $24,495
Construction notes maturing
within one year: 9,154 -0-
Construction notes maturing
over one year: 795 -0-
Promissory notes secured by
deeds of trust, bearing interest
at prime plus 1%: 13,360 13,938
Promissory note secured by
deed of trust bearing interest
at prime plus 1.5% 2,015 -0-
------- -------
$35,726 $38,433
======= =======
</TABLE>
3. Due to Capital Pacific Homes, Inc.:
Due to Capital Pacific Homes, Inc., consists of the following amounts:
<TABLE>
<CAPTION>
November 30, February 28,
1993 1993
------------ ------------
(In Thousands)
<S> <C> <C>
Loans Secured by Land: $413 $1,702
==== ======
</TABLE>
The loans and lines of credit from Capital Pacific Homes, Inc., ("CPH") bear
interest at the prime rate plus 1%.
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Item 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
FINANCIAL CONDITION
During the quarter ended November 30, 1993, the Company completed the purchase
of Durable Homes, Inc. ("Durable"), a privately held Las Vegas builder for $1.3
million in cash, a $400,000 note and 1,015,000 newly issued shares of the
Company's stock. The acquisition of Durable, an experienced Nevada homebuilder
for the first and second time homebuyer, represents a significant entry by the
Company into the Nevada market. Through November 30, 1993, Durable contributed
78 home closings and approximately $8.2 million of revenues to the Company's
operations. At November 30, 1993, Durable had 168 homes under construction and
expects to close approximately 140 homes during the fourth quarter of this
fiscal year.
Also, through a newly formed subsidiary, J.M. Peters Nevada, Inc. ("JMPN"), the
Company has further expanded operations in Nevada. JMPN was established to
serve the move-up market in Las Vegas and when coupled with Durable the Company
will offer a full range of product in this dynamic market. JMPN recently
purchased over twenty-one acres in the Summerlin planned community in Las
Vegas. This escrow closed in October and was financed by seller financing,
corporate funds and an equity partner who will receive 50% of the profits. The
seller of the land carried back a note secured by a deed of trust totalling
$2.0 million. The Company anticipates the commencement of development in
February 1994 with home closings commencing approximately nine months
thereafter.
During the Resolution Trust Corporation's ownership of the Company's majority
interest, the Company defaulted on most of its loans. At the time of the
acquisition of the Company by CPH, the Company had approximately $185.5 million
in defaulted loans. Of these, only two loans with a total principal balance of
$10.4 million remain to be resolved. All other loans have been resolved since
the new management took over the Company. Of the remaining two loans, one is
an acquisition and development loan totalling $9.5 million which is secured by
171 lots in Mission Viejo, California. The other, a construction loan
totalling approximately $900 thousand, is secured by 15 lots with foundations
in place and one completed home. The lender holding the construction loan has
filed a notice of default against the property. The lender who holds the
acquisition and development loan has commenced legal action against the Company
to collect the amount due.
In addition to the Las Vegas joint venture, the Company has four other joint
ventures in Southern California, with the California Public Employees'
Retirement System ("CalPERS") for which the Company had previously arranged
financing of approximately $66.0 million for the construction of 346 homes. At
November 30, 1993, the Company had closed 89 of those homes and had a total of
95 additional homes under construction. As of November 30, 1993, 63 of the 95
homes under construction have been sold. The Company
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expects to complete 66 of these homes during the fourth quarter of fiscal 1994.
The Company receives on an ongoing basis an overhead fee of three percent of
gross sales of homes relating to the joint ventures. The Company will not
receive additional cash flow from joint venture home closings until its venture
partner receives cash flow in accordance with the joint venture agreements.
Currently, the Company anticipates receiving cash flow from home closings under
the ventures by the end of fiscal 1995.
At November 30, 1993, the Company had 15 homes under construction at its
Redhawk project in Temecula, California. This phase of homes was financed
using a new bank loan commitment. As of November 30, 1993, the Company had
sold twelve of these homes. Delivery of these homes started in December 1993.
From these sales, the Company anticipates receiving cash flow of $3.3 million
(less closing costs and bank loan payoffs). The Company had previously started
12 homes at its La Quinta, California, project. The Company is building these
units out of available corporate funds. As of November 30, 1993, the Company
has sold 9 of the 12 homes. Closings of these homes, which began during
December of 1993, should generate cash flow of approximately $5.7 million (less
closing costs and bank loan payoffs).
The Company continues to seek additional capital to develop the balance of the
Company's lot inventory. Availability of financing in Southern California
remains constrained by local economic conditions. Many large traditional
sources of construction financing are working out existing loans rather than
lending currently. The Company is aggressively seeking alternative sources of
financing through non-traditional sources such as syndications, lines of
credit, or joint ventures.
The Company expects that cash flow generated from the Las Vegas operations, the
joint ventures and home closings within the Redhawk and La Quinta projects will
be sufficient to cover the Company's operations for the next 12 months.
BALANCE SHEET ITEMS
Residential inventories increased from $99.6 million at February 28, 1993, to
$116.8 million at November 30, 1993. The increase was due to the acquisition
of Durable, the purchase of property by JMPN and payments made for the homes
currently under construction, net of amounts for homes closed and land sold.
Accounts payable increased to $11.2 million at November 30, 1993, from $1.1
million at February 28, 1993. This increase was a result of the acquisition of
Durable and homes currently under construction. The majority of the amount
payable is funded by draws from the Company's joint venture partners and bank
financing, not out of the Company's cash.
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<PAGE> 9
Minority interest in investment in joint ventures increased to $25.1 million at
November 30, 1993, from $19.6 million at February 28, 1993. This amount
reflects the equity investments made by the Company's partners in the joint
ventures.
RESULTS OF OPERATIONS
Third Quarter of Fiscal 1994 Compared With the Third Quarter of Fiscal 1993:
Revenues from housing sales for the third quarter of fiscal 1994 and the third
quarter of fiscal 1993 were $33.8 million and $3.5 million, respectively,
reflecting an increase of $30.3 million from the corresponding period of fiscal
1993. The increase was due to increased home closings. Home closings for the
third quarter of fiscal 1994 were 165 versus 16 homes during the third quarter
of fiscal 1993. Included in this amount were 78 homes closed by Durable.
Selling, general and administrative expenses for the third quarter of fiscal
1994 of $3.4 million, increased by $1.2 million from the corresponding period
of fiscal 1993. This increase was due primarily to the consolidation of
recently acquired Durable whose selling, general and administrative expense for
the quarter was $1.1 million.
There was no interest expense for the third quarter of fiscal 1994. This
reflects a reduction of $1.9 million when compared to the corresponding period
of the prior year. This decrease was due primarily to the increase in interest
capitalization on increased construction activity.
As a result of the foregoing factors, the Company posted an operating profit of
$1.6 million for the three months ended November 30, 1993. This amount when
added to an extraordinary gain from the resolution of project financing in the
amount of $4.4 million resulted in net income for the quarter of $6.0 million.
For the third quarter of fiscal 1994 the Company recorded 162 net orders (homes
contracted for sales less cancellations) on home sales which was 140 homes
greater than in the comparable quarter ended November 30, 1992. The Company
had 294 homes in its backlog (homes under contract but not closed) at November
30, 1993, which was an increase of 266 homes over the Company's backlog at
November 30, 1992.
First Nine Months of Fiscal 1994 Compared With the First Nine Months of Fiscal
1993:
Revenues from home sales for the first nine months of fiscal 1994 and the first
nine months of fiscal 1993 were $40.7 million and $35.1 million, respectively,
reflecting an increase of $5.6 million or 16.0% from the corresponding period
of fiscal 1993. This increase was due to a greater number of home closings
during the first nine months of fiscal 1994. Home closings for the first nine
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months of fiscal 1994 were 197 versus 106 homes during the first nine months of
fiscal 1993 or an increase of 91 homes.
Selling, general and administrative expenses for the first nine months of
fiscal 1994 of $7.3 million decreased by $402 thousand from the corresponding
period of fiscal 1993. This decrease was due primarily to reduced personnel
costs and continued cost reducing measures to control overhead even though the
revenues and production have increased. The newly acquired Durable added $1.1
million in selling, general and administrative expenses for the period.
Interest expense of $418 thousand for the first nine months of fiscal 1994 was
approximately $9.5 million less than the corresponding period of the prior
year. This decrease was due primarily to the lower level of debt as a result
of the sale of San Jacinto Savings Association, F.A.'s interest in the Company
to CPH and the associated restructuring of debt. In addition, there has been
an increase in interest capitalization due to the current level of construction
activity.
The Company also recorded a one time gain of $4.4 million due to a resolution
of project financing. As a result of the foregoing factors, the Company posted
a pre-tax gain of $2.5 million for the nine months ended November 30, 1993,
versus a pre-tax loss of $81.4 million for the nine months ended November 30,
1992.
The Company's pre-tax net loss of $81.4 million during the first nine months of
fiscal 1993 was a result of additional adjustments to the realizable value of
assets resulting from the close of the CPH acquisition. No such adjustments
were made during the first nine months of fiscal 1994.
For the first nine months of fiscal 1994 the Company recorded 260 net orders
(homes contracted for sales less cancellations) on home sales which was 207
homes higher than fiscal 1993. The Company had 294 homes in its backlog (homes
under contract but not closed) at November 30, 1993, which was an increase of
266 homes over the Company's backlog at November 30, 1992.
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PART II - OTHER INFORMATION
Item 1. - LEGAL PROCEEDINGS.
On October 22, 1993, West Coast Land Fund, L.P., commenced an action in Orange
County Superior Court against the Company to collect the $9.5 million loan
balance, plus interest, owed by the Company to West Coast Land Fund, L.P.,
which loan is currently in default.
Item 3. - DEFAULTS UPON SENIOR SECURITIES.
The Company continues to be in default on two loans remaining from the period
prior to the acquisition of the Company by CPH. The event of default is the
failure to pay the loan amounts upon maturity and the failure to pay interest
when due. The principal amount of loans in default at November 30, 1993, is
approximately $10.4 million.
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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.
J.M. PETERS COMPANY, INC.
Date: January 10, 1994 BY: /S/ HADI MAKARECHIAN
------------------------------------
Hadi Makarechian, Chairman and
Chief Executive Officer
Date: January 10, 1994 BY: /S/ GREG R. PETERSEN
------------------------------------
Greg R. Petersen, Vice President
and Chief Financial Officer
(Principal Financial Officer)
10
