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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 May 31, 1994
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)
Delaware 95-2956559
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification Number)
3501 Jamboree Road, Suite 200, Newport Beach, California 92660
(Address of principal executive offices) (Zip Code)
(714) 854-2500
(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 July 11, 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
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<S> <C>
Part I - Financial Information:
Item 1 - Financial Statements
Consolidated Balance Sheets -
May 31, 1994 and February 28, 1994 1
Consolidated Statements of Operations for the
Three Months Ended May 31, 1994 and 1993 2
Consolidated Statements of Cash Flows for the
Three Months Ended May 31, 1994 and 1993 3
Notes to Consolidated Financial Statements 4
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 5-8
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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>
May 31, February 28,
1994 1994
(Unaudited)
----------- ------------
<S> <C> <C>
Cash and cash equivalents $ 71,679 $ 10,001
Restricted cash 1,404 1,483
Accounts and notes receivable 2,078 1,650
Residential inventories 104,298 105,696
Property and equipment, at cost, net of accumulated
depreciation of $2,165 and $2,152 as of May 31,
1994 and February 28, 1994, respectively 3,359 159
Unamortized bond issuance costs 5,392 -
Prepaid expenses and other assets 3,693 2,965
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$191,903 $121,954
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable $ 9,956 $ 34,709
Bonds Payable 100,000 -
Accounts payable 12,366 10,808
Accrued liabilities 5,720 6,884
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Total liabilities 128,042 52,401
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Minority Interest 2,824 13,959
Stockholders' equity (deficit):
Common stock, par value $.10 per share,
15,000,000 shares authorized;
14,995,000 issued and outstanding 1,500 1,500
Additional paid-in capital 211,888 210,387
Accumulated deficit (152,351) (156,293)
-------- --------
Total stockholders' equity 61,037 55,594
-------- --------
$191,903 $121,954
======== ========
</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
ended May 31,
-----------------------
1994 1993
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<S> <C> <C>
Revenue:
Sales of homes $30,588 $ 3,604
Sales of land and lots 1,152 0
Interest and other income 1,030 400
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32,770 4,004
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Costs and expenses:
Cost of homes and land 25,365 3,761
Selling, general and administrative 4,545 1,918
Minority Interest 1,531 0
Interest expense 0 276
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31,441 5,955
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Income/(loss) before income
taxes and extraordinary gain 1,329 (1,951)
Provision for income taxes 462 0
------- -------
Income/(loss) before extraordinary gain 867 (1,951)
Extraordinary gain (net of tax effect) 3,075 0
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NET INCOME/(LOSS) $3,942 ($1,951)
======= ========
Net income/(loss) per common share:
Before extraordinary gain $0.06 ($0.14)
Extraordinary gain 0.20 0.00
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Net income/(loss) $0.26 ($0.14)
======= =======
Weighted average number of common shares 14,995 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 three months ended May 31,
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
1994 1993
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/(loss) $ 3,942 ($1,951)
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Extraordinary gain (4,713) -
Depreciation on construction
and office equipment 16 44
Decrease (increase) in residential inventories 1,398 (4,938)
(Increase) decrease in receivables,
prepaid expenses and other assets (1,142) 215
Increase in accounts payable 1,128 3,562
Decrease in accrued liabilities (1,164) (342)
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NET CASH USED IN OPERATING ACTIVITIES (535) (3,410)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (3,216) (15)
Increase in investment in partnerships (14) (66)
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NET CASH USED IN INVESTING ACTIVITIES (3,230) (81)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Bond issue proceeds, net 96,539 -
Repayments to Capital Pacific Homes, Inc. - (421)
(Decrease) increase in minority
interest in joint ventures (11,135) 2,081
Principal payments of notes payable (20,040) (1,514)
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NET CASH PROVIDED BY FINANCING ACTIVITIES 65,364 146
------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 61,599 (3,345)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 11,484 11,342
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $73,083 $ 7,997
======= =======
Supplemental disclosure of non-cash transactions:
Note payable reduced by debt forgiveness $4,713 -
</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, 1994. 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 three month period ended May 31, 1994, are not
necessarily indicative of the results that may be expected for the year ending
February 28, 1995.
2. Notes payable:
Notes payable at May 31, 1994 and February 28, 1994, are summarized as
follows:
<TABLE>
<CAPTION>
May 31, February 28,
1994 1994
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(In Thousands)
<S> <C> <C>
Model loans collateralized by $ -0- $ 1,940
deeds of trust, including
interest at Prime plus 3%:
Construction notes matured: -0- 10,402
Construction notes maturing in
one or two years: -0- 9,229
Promissory notes secured by
deeds of trust, bearing interest
at prime plus 1%: 9,956 11,123
Promissory note secured by
deed of trust bearing interest
at prime plus 1.5% -0- 2,015
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$ 9,956 $ 34,709
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</TABLE>
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Item 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
FINANCIAL CONDITION
During the quarter ended May 31, 1994, the Company completed the private
placement of $100 million of unsecured senior notes with warrants for five
percent of the Company's common stock (the "Offering"). The notes are due and
payable in eight years and carry a coupon rate of 12.75% payable semi-annually
in May and November.
With the proceeds of the Offering, the Company improved its liquidity, repaid
the majority of its debt, including resolving the last of the defaulted loans
from the period of RTC control of the Company and obtained a vehicle for the
rapid acceleration of construction activity in both the California and Nevada
markets. This financing also provides the Company with the capital necessary
to acquire new properties.
In addition to the Offering, the Company further enhanced its liquidity by
obtaining a new $25 million secured line of credit facility with Bank One,
Arizona, NA. This line of credit can be utilized in both California and
Nevada. The Company has the option to use this facility should it require
additional resources to fund the Company's growth in the near term.
The Company at May 31, 1994 had construction underway on 362 homes. This level
of activity is expected to increase as the Company brings projects previously
on hold into production. In addition, projects that were being funded on a
more conservative cash management basis will now be accelerated with this new
source of financing.
The Company expects that cash flow generated from operations will be sufficient
to cover the debt service on the Offering for the foreseeable future.
BALANCE SHEET ITEMS
Cash and equivalents increased to $71.7 million at May 31, 1994 from $10.0
million at February 28, 1994 due to the proceeds from the Offering, net of debt
repayments.
Property and equipment increased to $3.4 million at May 31, 1994 from $159
thousand at February 28, 1994 due to the Company's acquisition of a 45,389
square foot building in Newport Beach, California, which will serve as its new
corporate headquarters. The Company plans to occupy approximately 20,000
square feet with the balance leased to tenants.
Unamortized bond issuance costs of $5.4 million at May 31, 1994 represents the
cost of the Offering, net of amortization.
5
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Notes payable declined to $10.0 million at May 31, 1994 from $34.7 million at
February 28, 1994. The decline resulted from the payoff of notes with proceeds
of the Offering. The remaining notes are secured by the La Quinta, California,
project and will be paid off on their maturity date which is January 8, 1995.
Minority interest declined to $2.8 million at May 31, 1994 from $14.0 million
at February 28, 1994. This decline was the result of the Company paying off
joint venture construction and equity advances with proceeds of the Offering.
Additional paid-in-capital increased to $211.9 million at May 31, 1994 from
$210.4 million at February 28, 1994. This increase represents the value of the
warrants issued in connection with the Offering.
RESULTS OF OPERATIONS
First Quarter of Fiscal 1995 Compared With the First Quarter of Fiscal 1994:
Revenues from housing sales for the first quarter of fiscal 1995 and the first
quarter of fiscal 1994 were $30.6 million and $3.6 million, respectively,
reflecting an increase of $27.0 million from the corresponding period of fiscal
1994. The increase was due to increased home closings. Home closings for the
first quarter of fiscal 1995 were 193 versus 17 homes during the first quarter
of fiscal 1994. Included in this amount were 137 homes closed by Durable
Homes, Inc. ("Durable") in Las Vegas, Nevada.
Selling, general and administrative expenses for the first quarter of fiscal
1995 totaled $4.5 million, an increase of $2.6 million from the corresponding
period of fiscal 1994. This increase was due primarily to the acquisition of
Durable, whose selling, general and administrative expense for the quarter was
$1.9 million, and increased Company activity in California.
There was no interest expense for the first quarter of fiscal 1995. This
reflects a reduction of $276 thousand 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.
The Company posted an extraordinary gain from the retirement of a construction
loan and interest due thereon below book value. The loan, which was previously
in default, was retired at a book gain of $4.7 million. This gain translates
to an extraordinary gain of $3.1 million net of the tax effect.
As a result of the foregoing factors, the Company posted an after tax operating
profit of $867 thousand for the three months ended May 31, 1994. This amount,
when added to the $3.1 million extraordinary gain from the resolution of
project financing, resulted in net income for the quarter of $3.9 million.
6
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For the first quarter of fiscal 1995 the Company recorded 160 net orders (homes
contracted for sales less cancellations) on home sales which was 114 homes
greater than in the comparable quarter ended May 31, 1993. The Company had 272
homes in its backlog (homes under contract but not closed) at May 31, 1994,
which was an increase of 151 homes over the Company's backlog at May 31, 1993.
7
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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: July 11, 1994 BY: /S/ HADI MAKARECHIAN
-------------------------------------
Hadi Makarechian, Chairman and
Chief Executive Officer
Date: July 11, 1994 BY: /S/ GREG R. PETERSEN
------------------------------------
Greg R. Petersen, Vice President
and Chief Financial Officer
(Principal Financial Officer)
4
