<PAGE> 1
CONFORMED COPY
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, 1994
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 0-15925
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>
<CAPTION>
Class and Title of Shares Outstanding as of
Capital Stock January 7, 1995
----------------- -------------------
<S> <C>
Common Stock, $.10 Par Value 14,995,000
</TABLE>
<PAGE> 2
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, 1994 and February 28, 1994 1
Consolidated Statements of Operations for the
Three Months Ended November 30, 1994 and 1993 and
the Nine Months Ended November 30, 1994 and 1993 2
Consolidated Statements of Cash Flows for the
Nine Months Ended November 30, 1994 and 1993 3
Notes to Consolidated Financial Statements 4-7
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-13
Part II - Other Information:
Item 1 - Legal Proceedings 14
Item 4 - Submission of Matters to a Vote of 14
Security Holders
Item 6 - Exhibits and Reports on Form 8-K 14
</TABLE>
<PAGE> 3
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
1994 1994
(Unaudited)
----------- -----------
<S> <C> <C>
Cash and cash equivalents $22,153 $10,001
Restricted cash 1,233 1,483
Accounts and notes receivable 3,419 1,650
Residential inventories 174,503 105,696
Property and equipment, at cost, net of accumulated depreciation
of $2,257 and $2,152 as of November 30, 1994 and February 28,
1994, respectively 5,157 159
Unamortized bond issuance costs 5,267 -
Costs in excess of net assets acquired, net of accumulated
amortization 3,506 -
Prepaid expenses and other assets 3,942 2,965
-------- --------
$219,180 $121,954
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $14,669 $10,808
Accrued liabilities 7,940 6,534
Notes payable 29,127 34,709
Bonds payable 100,000 -
Litigation judgment liability 2,300 350
-------- --------
Total liabilities 154,036 52,401
-------- --------
Minority Interest 4,522 13,959
Stockholders' equity (deficit):
Common stock, par value $.10 per share, 30,000,000 shares
authorized; 14,995,000 issued and outstanding 1,500 1,500
Additional paid-in capital 211,888 210,387
Accumulated deficit (152,766) (156,293)
-------- --------
Total stockholders' equity 60,622 55,594
-------- --------
$219,180 $121,954
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
- 1 -
<PAGE> 4
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,
------------------ ------------------
1994 1993 1994 1993
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Revenue:
Sales of homes $44,412 $33,811 $106,050 $40,744
Sales of land and lots 252 2,614 2,544 7,126
Interest and other income 1,243 918 3,335 1,727
------- ------- -------- -------
45,907 37,343 111,929 49,597
------- ------- -------- -------
Costs and expenses:
Cost of homes 36,132 26,904 85,846 34,030
Cost of land and lots 158 2,771 1,957 7,154
Selling, general and administrative 6,822 3,505 15,976 7,409
Minority Interest 2,012 2,308 5,445 2,239
Interest expense - - - 418
Provision for litigation judgment 1,950 - 1,950 -
------- ------- -------- -------
47,074 35,488 111,174 51,250
------- ------- -------- -------
Income (loss) before income taxes
and extraordinary gain (1,167) 1,855 755 (1,653)
Provision (benefit) for income taxes (396) - 303 -
------- ------- -------- -------
Income (loss) before extraordinary gain (771) 1,855 452 (1,653)
Extraordinary gain (net of tax effect) - 4,268 3,075 4,268
------- ------- -------- -------
NET INCOME/(LOSS) ($771) $6,123 $3,527 $2,615
======= ======= ======== =======
Net income/(loss) per common share:
Before extraordinary gain ($0.05) $0.12 $0.03 ($0.12)
Extraordinary gain 0.00 0.28 0.21 0.30
------- ------- -------- -------
Net income/(loss) ($0.05) $0.40 $0.24 $0.18
======= ======= ======== =======
Weighted average number of common shares 14,995 14,995 14,995 14,318
======= ======= ======== =======
Capitalized interest included in
cost of sales $ 2,579 $ 1,740 $ 6,723 $ 3,316
======= ======= ======== =======
Interest incurred $ 3,671 $ 1,195 $ 8,667 $ 2,597
======= ======= ======== =======
</TABLE>
The accompanying notes are an integral part of these statements.
- 2 -
<PAGE> 5
J.M. PETERS COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended November 30,
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
1994 1993
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/(loss) $ 3,527 $ 2,509
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
(Net of the effects of subsidiary purchase):
Extraordinary gain (4,713) (4,358)
Change in restricted cash 250 -
Depreciation and amortization 409 107
Increase in residential inventories (57,756) (10,792)
(Increase) decrease in receivables, prepaid
expenses and other assets 294 570
(Decrease) increase in accounts payable 1,171 6,510
Increase in accrued liabilities 3,356 (321)
------- --------
NET CASH USED IN OPERATING ACTIVITIES (53,462) (5,775)
------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (5,407) (58)
Purchase of Durable Homes - (1,300)
Purchase of Clark Wilson Homes (3,500) -
Decrease (increase) in investment in partnerships 46 (184)
------- --------
NET CASH USED IN INVESTING ACTIVITIES (8,861) (1,542)
------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Bond issue proceeds, net 94,733 -
Repayments to Capital Pacific Homes, Inc. - (1,289)
(Decrease) increase in minority interest in joint
ventures (9,437) 3,332
Principal payments of notes payable,net (10,821) 4,618
------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 74,475 6,661
------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 12,152 (656)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 10,001 11,342
------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $22,153 $10,686
======= ========
Supplemental disclosure of non-cash transactions:
Note payable reduced by debt forgiveness $ 4,713 $14,248
Inventory surrendered in exchange for debt forgiveness - 9,980
Purchase of Subsidiary - residential inventory 11,051 16,265
Purchase of Subsidiary - other assets 1,456 466
Purchase of Subsidiary - Goodwill 3,635 -
Purchase of Subsidiary - notes payable 9,952 6,923
Purchase of Subsidiary - accounts payable & other
liabilities 2,690 3,729
Purchase of Subsidiary - minority interest - 2,114
Purchase of Subsidiary - stock issuance - 2,665
</TABLE>
The accompanying notes are an integral part of these statements.
- 3 -
<PAGE> 6
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 solely 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, 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 November 30, 1994 and February 28, 1994, are
summarized as follows:
<TABLE>
<CAPTION>
November 30, February 28,
1994 1994
------------ -------------
(In Thousands)
<S> <C> <C>
Model loans collateralized by
deeds of trust, including
interest at Prime plus 3% $ -0- $ 1,940
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% 8,307 11,123
Promissory note secured by
deed of trust bearing
interest at prime plus 1.5% -0- 2,015
Non-Recourse Promissory Notes
secured by deeds of trust
bearing interest at rates
ranging from prime plus
1.25% to prime plus 1.5% 14,840 -0-
Non-Recourse Promissory Notes
secured by deeds of trust
bearing interest at rates
ranging from 8.0% to 9.5% 3,480 -0-
Non-Recourse Promissory Note
secured by Stock Pledge
Agreement bearing interest
at 8.0% 2,500 -0-
--------- ----------
$ 29,127 $ 34,709
========= ==========
</TABLE>
- 4 -
<PAGE> 7
3. Supplemental Guarantor Information (Unaudited)
In connection with the offering in fiscal 1995 of the Senior
Unsecured Notes (the Offering"), the Company and certain of its wholly-owned
subsidiaries (Guarantors) jointly, severally, fully and unconditionally
guaranteed such notes. Supplemental condensed combined financial information of
the Company, Guarantors and non-guarantors is presented as follows. As
discussed in Note 3 in Notes To Supplemental Guarantor Information, these
financial statements are prepared using the equity method of accounting for the
Company's and the Guarantors' investments in subsidiaries and partnerships.
This supplemental financial information should be read in conjuction with the
Consolidated Financial Statements.
As Of And For The Nine Months Ended November 30, 1994
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
J.M. Peters Total
Company, Inc. Guarantors(1) Non-Guarantors(2) Eliminations(4) Consolidated
------------- ------------- ----------------- --------------- ------------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET
Cash $ 6,719 $ 3,502 $11,932 $ 0 $ 22,153
Inventories 127,914 24,807 21,782 174,503
Investment in Partnerships
and subsidiaries (3) 14,552 6,011 0 (19,670) 893
Intercompany advances 31,455 0 0 (31,455) 0
Other 14,660 707 6,264 21,631
-------- ------- ------- ------- --------
Total Assets $195,300 $35,027 $39,978 ($51,125) $219,180
======== ======= ======= ======= ========
Accounts payable and
accrued liabilities $ 10,438 $ 6,697 $ 7,774 $ 0 $ 24,909
Intercompany advances 0 12,846 18,609 (31,455) 0
Notes payable 124,240 2,638 2,249 0 129,127
Minority interest 0 0 0 4,522 4,522
Shareholders' equity 60,622 12,846 11,346 (24,192) 60,622
-------- ------- ------- ------- --------
Total Liabilities
and Equity $195,300 $35,027 $39,978 ($51,125) $219,180
======== ======= ======= ======= ========
STATEMENT OF OPERATIONS
Revenues:
Sales of homes and land $ 10,811 $24,086 $73,697 $ 0 $108,594
Interest and other
income, net 728 2,103 0 (449) 2,382
Equity in income of
partnerships and
subsidiaries (3) 4,007 4,080 913 (8,047) 953
-------- ------- ------- ------- --------
Total Revenues 15,546 30,269 74,610 (8,496) 111,929
-------- ------- ------- ------- --------
Cost of homes and land 9,073 20,309 58,421 87,803
Selling, general and
administrative 7,908 4,258 6,208 (448) 17,926
Interest 0 0 0 0 0
Minority interest 0 0 0 5,445 5,445
-------- ------- ------- ------- --------
Income (loss) before
provision (benefit) for
income taxes and
extraordinary gain (1,435) 5,702 9,981 (13,493) 755
Provision (benefit) for
income taxes (1,887) 2,024 166 0 303
-------- ------- ------- ------- --------
Income (loss) before
extraordinary gain 452 3,678 9,815 (13,493) 452
Extraordinary gain, Net 3,075 0 0 0 3,075
-------- ------- ------- ------- --------
NET INCOME (LOSS) $ 3,527 $ 3,678 $ 9,815 ($13,493) $ 3,527
======== ======= ======= ======= ========
</TABLE>
- 5 -
<PAGE> 8
<TABLE>
<CAPTION>
J.M. Peters Total
Company, Inc. Guarantors(1) Non-Guarantors(2) Eliminations(4) Consolidated
------------- ------------- ----------------- --------------- ------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF CASH FLOWS
Net cash from (used in)
operating activities ($78,678) $11,405 $13,811 $0 ($53,462)
Net cash from (used in)
investment activities (8,861) 0 0 0 (8,861)
Net cash from (used in)
financing activities 88,978 (10,922) (3,581) 0 74,475
-------- ------- ------- -- -------
Net increase (decrease)
in cash 1,439 483 10,230 0 12,152
Cash - beginning of
period 5,280 3,019 1,702 0 10,001
-------- ------- ------- -- -------
Cash - end of period $ 6,719 $ 3,502 $11,932 $0 $22,153
======== ======= ======= == =======
</TABLE>
- 6 -
<PAGE> 9
NOTES TO SUPPLEMENTAL GUARANTOR INFORMATION
(1) Guarantors are Durable Homes, Inc., J.M. Peters Nevada, Inc., and
Peters Ranchland Company, Inc., all wholly-owned subsidiaries of J.M.
Peters Company, Inc.
(2) The non-guarantors are:
(a) The limited partnerships in which Peters Ranchland Company,
Inc., is General Partner:
- Ranchland Alicante Development, L.P.
- Ranchland Montilla Development, L.P.
- Ranchland Fairway Estates Development, L.P.
- Ranchland Portola Development, L.P.
(b) The limited partnerships in which Durable Homes, Inc., is
General Partner:
- Las Hadas, L.P.
- Plateau Venture, L.P.
- Portraits Venture, L.P.
- Taos Estates, L.P.
(c) Certain wholly-owned subsidiaries of J.M. Peters Company, Inc.:
- Newport Design Center, Inc.
- Capital Pacific Communities, Inc.
- Durable Homes of California, Inc.
- Capital Pacific Mortgage, Inc.
- J.M. Peters Arizona, Inc.
- Clark Wilson Homes, Inc.
(3) Investments in partnerships and subsidiaries are accounted for by the
Company and the Guarantors on the equity method for purposes of the
supplemental combining presentation. The following partnerships are
not consolidated in the financial statements and are not guarantors:
- Bayhill Escrow, In.
- P.B. Partners
- J.M.P. Canyon Estates, L.P.
(4) The elimination entries eliminate investments in subsidiaries,
partnerships and intercompany balances.
- 7 -
<PAGE> 10
Item 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
FINANCIAL CONDITION
-------------------
In May 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 and repaid
the majority of its debt. This financing also provides
the Company with the capital necessary to acquire new properties.
Also in May 1994, the Company further enhanced its liquidity by
obtaining a $25 million secured line of credit facility with Bank One, Arizona,
NA ("Bank One"). With certain restrictions, 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. At November 30, 1994 the Company had not utilized any of such financing.
In September 1994 the Company obtained an additional $25 million
non-recourse secured credit facility with Bank One. With certain restrictions,
this non-recourse facility will be utilized for property acquisition, in cases
in which the land seller is unwilling to carry back a purchase money mortgage,
and for the improvement of the property prior to the actual construction of the
homes. At November 30, 1994, the Company had utilized $13.4 million of such
financing.
During November 1994 the Company acquired Clark Wilson Homes, Inc. ("Wilson"),
a privately held Austin, Texas, based homebuilder for $3.5 million in cash and
a $2.5 million non-recourse promissory note. The acquisition of Wilson, an
experienced Texas homebuilder, represents a significant entry into the Texas
market. Wilson, at November 30, 1994, controlled 639 lots primarily through
option contracts. Wilson closed 200 homes during its calendar year ended
December 31, 1993, and 331 homes during its calendar year ended December 31,
1994.
During December 1994, as a result of the five previous joint ventures and the
Company's desire to maintain its ongoing relationship, the Company established
its sixth joint venture with the California Public Employees Retirement System
("CalPERS") for the development and construction of 92 homes in San Clemente,
California. CalPERS has committed to approximately $25.0 million for the
development and construction of this project and will share equally in profits
generated by the venture. The Company will receive its share of the venture's
profits and cash flow beginning with the first home closings.
- 8 -
<PAGE> 11
During the third quarter of fiscal 1995 the Company purchased the first
property for its operating division in Phoenix, Arizona, established in the
previous quarter. The property consists of 132 lots which will be developed
into single family homes.
In a development after the close of the quarter arising out of certain
operations of the Company occurring more than two years prior to the current
management's acquisition of the Company from the RTC, a San Diego jury rendered
verdicts against the Company totalling approximately $3.2 million in
compensatory and punitive damages. The verdicts relate to price reductions on
homes in a San Diego County development in 1990, allegedly contrary to
assurances made to earlier purchasers by Company sales agents.
On January 23, 1995, the Company and plaintiffs agreed to settle the lawsuit
for $2.3 million. The Company established a reserve totalling (including a
previously established reserve) this amount as of November 30, 1994. The
settlement will be paid in two installments of $1.0 million in January 1995 and
$1.3 million in April 1995. The Company decided to settle this matter after
analyzing the risk and cost associated with an appeal.
The Company, at November 30, 1994, had 417 homes under construction.
This construction activity is currently being financed out of Company cash,
Bank One financing and the aforementioned joint ventures with CalPERS.
In order to maintain sufficient liquidity, the Company will continue utilizing
the Bank One financing to cover anticipated needs for this level of
construction activity.
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 cash equivalents increased to $22.2 million at November 30, 1994 from
$10.0 million at February 28, 1994, due to the proceeds from the Offering, net
of the acquisition of Wilson, new land acquisitions, debt repayments and new
construction activity. As construction activity increases the Company
anticipates that the level of cash available will stabilize at a somewhat lower
level than that at November 30, 1994.
Residential inventories increased to $174.5 million at November 30, 1994 from
$105.7 million at February 28, 1994. This increase was primarily due to the
acquisition of Wilson plus new properties in California, Las Vegas, Nevada
and Phoenix, Arizona.
Property and equipment increased to $5.2 million at November 30, 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. The Company will vacate its
current 22,313 square feet of leased office space when the lease expires in
- 9 -
<PAGE> 12
February 1995. In addition, in October 1994, the Company obtained a used
airplane, originally constructed in 1968, for an acquisition price of $1.325
million. Prior to this acquisition, the Company was on a regular basis
chartering an airplane for its operations in Nevada and Palm Springs. With the
Company's recent expansion into Sacramento, Arizona and Texas, management
determined that an aircraft with greater air speed and range would better
fulfill the Company's transportation needs.
Unamortized bond issuance costs of $5.3 million at November 30, 1994 represents
the cost of the Offering, net of amortization.
Goodwill of $3.5 million represents the cost in excess of the net assets
acquired relating to the acquisition of Wilson. This goodwill is being
amortized over a five year period.
Accounts payable increased to $14.7 million at November 30, 1994, from $10.8
million at February 28, 1994. This increase represents the increased
construction activity at November 30, 1994.
Notes payable declined to $29.1 million at November 30, 1994 from $34.7 million
at February 28, 1994. The decline resulted from the payoff of notes with
proceeds of the Offering, net of increased borrowing on a non-recourse basis
with Bank One and a land seller in Las Vegas, Nevada.
Litigation judgment liability represents the additional reserve established as
the result of the previously described jury verdicts and subsequent settlement
relating to 1989 and 1990 sales activities of the Company, prior to the 1992
acquisition of the Company by current management.
Minority interest declined to $4.5 million at November 30, 1994 from $14.0
million at February 28, 1994. This decline was the result of the Company
paying off joint venture construction advances with proceeds of the Offering.
Additional paid-in-capital increased to $211.9 million at November 30, 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
---------------------
THIRD QUARTER OF FISCAL 1995 COMPARED WITH THE THIRD QUARTER OF FISCAL 1994:
Revenues from housing sales for the third quarter of fiscal 1995 and the third
quarter of fiscal 1994 were $44.4 million and $33.8 million, respectively,
reflecting an increase of $10.6 million from the corresponding period of fiscal
1994. The increase was due to increased home closings. Home closings for the
third quarter of fiscal 1995 were 252 versus 165 homes during the third quarter
of fiscal 1994. Included in the third quarter fiscal 1995 totals were 81 homes
closed by Wilson in Austin, Texas.
- 10 -
<PAGE> 13
Revenues from the sales of land for the third quarter of fiscal 1995 decreased
to $252 thousand from $2.6 million for the third quarter of the prior year.
The land sale during the third quarter of fiscal 1995 represents the sale of a
parcel in San Ramon, California. The land sales during the third quarter of
the prior year represented the sale of one parcel of land which was outside the
geographical area in which the Company planned to operate.
Cost of home sales increased to $36.1 million for the third quarter of fiscal
1995 from $26.9 million for the comparable period of the prior year. The
increase was primarily due to the increase in home closings.
Cost of land sales decreased to $158 thousand for the third quarter of fiscal
1995 from $2.8 million for the comparable period of the prior year. The
decline was due to the decline in land sales discussed above.
Selling, general and administrative expenses for the third quarter of fiscal
1995 totaled $6.8 million, an increase of $3.3 million over the corresponding
period of fiscal 1994. This increase was due primarily to the acquisition of
Durable Homes, Inc. ("Durable") and Wilson whose combined selling, general and
administrative expense for the quarter was $3.2 million, and increased activity
in California.
Minority interest expense declined to $2.0 million for the third quarter of
fiscal 1995 as compared to $2.3 million for the third quarter of the prior
year. The decrease was due to lower escrow closings in the Company's joint
venture projects.
The Company recorded a $2.0 million ($2.3 million less $350 thousand previously
accrued) provision for litigation exposure in the amount of the previously
described settlement relating to 1989 and 1990 sales activities of the Company,
prior to the 1992 acquisition of the Company by current management.
Income tax benefit of $396 thousand for the third quarter of fiscal 1995
compares to none for the third quarter of fiscal 1994. The income tax benefit
is a result of the loss recorded during the third quarter of fiscal 1995 as a
result of the litigation provision.
As a result of the foregoing factors, the Company posted a net loss of $771
thousand for the three months ended November 30, 1994 as compared to a net
income of $6.1 million for the three months ended November 30, 1993. The
Company would have posted net income of approximately $500 thousand for the
three months ended November 30, 1994, had it not been for the provision for
litigation. Included in the net income of $6.1 million for the three months
ended November 30, 1993, was an extraordinary gain of approximately $4.3
million from the retirement of a construction loan and interest due thereon at
less than the book amount of the liability thereof.
- 11 -
<PAGE> 14
For the third quarter of fiscal 1995 the Company recorded 225 net orders (homes
contracted for sales less cancellations) on home sales which was 63 homes
greater than in the comparable quarter ended November 30, 1993. The Company
had 304 homes in its backlog (homes under contract but not closed) at November
30, 1994, which was an increase of 10 homes over the Company's backlog at
November 30, 1993. Included in the Company's backlog at November 30, 1994,
were 79 homes for Wilson.
FIRST NINE MONTHS OF FISCAL 1995 COMPARED WITH THE FIRST NINE MONTHS OF FISCAL
1994:
Revenues from sales of homes for the first nine months of fiscal 1995 increased
$65.3 million to $106.0 million, from the $40.7 million reported for the first
nine months of fiscal 1994. This increase was due to 617 home closings for the
first nine months of fiscal 1995 as compared to 197 for the first nine months
of 1994. Included in the nine month fiscal 1995 totals were 81 homes closed by
Wilson in Austin, Texas.
Revenues from the sales of land for the first nine months of fiscal 1995 of
$2.5 million decreased $4.6 million from the first nine months of fiscal 1994.
The land sales during the first nine months of fiscal 1995 represented the sale
of 13 custom lots in La Quinta, California, and a parcel of land in San Ramon
(sold for $252 thousand), California. The land sales during the first nine
months of fiscal 1994 represented the sale of three parcels of land which were
outside of the geographical area in which the Company planned to operate.
Cost of home sales increased to $85.8 million for the first nine months of
fiscal 1995 from $34.0 million for the comparable period of the prior year.
This increase was the result of the increase in closings from 197 for the first
nine months of fiscal 1994 to 617 for the first nine months of fiscal 1995.
Cost of land sales decreased to $2.0 million for the first nine months of
fiscal 1995 from $7.2 million for the first nine months of fiscal 1994. This
decrease was due to closing only 13 custom lots and a small parcel of land
during fiscal 1995 versus bulk lot sales of three projects during fiscal 1994.
Selling, general and administrative expenses of $16.0 million for the first
nine months of fiscal 1995 increased $8.6 million over the first nine months of
fiscal 1994. This increase was primarily due to the acquisition of Durable and
Wilson whose selling general and administrative expenses for the first nine
months of fiscal 1995 (during Company ownership) were $6.7 million, and also to
increased activity in California.
Minority interest expense of $5.4 million for the first nine months of fiscal
1995 as compared to $2.2 million for the first nine months of fiscal 1994 was
the result of increased escrow closings for the Company's joint venture
projects.
- 12 -
<PAGE> 15
There was no interest expense for the first nine months of fiscal 1995 as
compared to $418 thousand for the first nine months of fiscal 1994. This
decline was due to the increase in interest capitalization on increased
construction activity.
The Company recorded a $2.0 million ($2.3 million settlement net of $350
thousand previously accrued) provision for litigation exposure in the amount of
the previously described settlement relating to 1989 and 1990 sales activities
of the Company, prior to the 1992 acquisition of the Company by current
management.
Income tax expense of $303 thousand for the first nine months of fiscal 1995
compares to none for the first nine months of fiscal 1994. The increase in
income tax expense is a result of the net profit recorded during the first nine
months of fiscal 1995.
The Company posted an extraordinary gain of approximately $4.7 million in
fiscal 1995 ($3.1 million net of income taxes) from the retirement of a
construction loan and interest due thereon at less than the book amount of the
liability thereof as compared to an extraordinary gain of approximately $4.3
million in fiscal 1994 for the same reason. These loans were previously in
default.
As a result of the foregoing factors, the Company posted net income of $3.5
million for the first nine months of fiscal 1995 as compared to a $2.6 million
net income for the first nine months of fiscal 1994.
For the first nine months of fiscal 1995 the Company recorded 507 net orders
(homes contracted for sales less cancellations) which was 247 homes greater
than the comparable nine month period of fiscal 1994. The Company had 304
homes in its backlog (homes under contract but not closed) at November 30,
1994, which was an increase of 10 homes over the Company's backlog at November
30, 1993. Included in the Company's backlog at November 30, 1994, were 79
homes for Wilson.
- 13 -
<PAGE> 16
PART II - OTHER INFORMATION
Item 1. - LEGAL PROCEEDINGS.
On December 17, 1994, in the Superior Court of California, San Diego County, a
jury rendered a verdict of approximately $2.2 million against the Company in
connection with certain sales activity occurring in 1989 and 1990 prior to the
1992 acquisition of the Company from the RTC. On December 22, 1994, the jury
rendered a verdict of punitive damages against the Company of $1.0 million. On
January 23, 1995, the Company and plaintiffs agreed to settle this matter for
$2.3 million, which amount will be paid in two installments of $1.0 million in
January 1995 and $1.3 million in April 1995.
Item 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On November 15, 1994, the Company solicited the consent of shareholders with
respect to an Agreement and Plan of Merger which provided for the merger with
and into the Company of Capital Pacific Homes, Inc., which owned more than 80%
of the issued and outstanding shares of stock of the Company.
In response thereto, at the close of business in December 12, 1994, 13,763,521
votes were cast for the merger. The merger was effected on December 31, 1994.
Item 6. - EXHIBITS AND REPORTS ON FORM 8-K.
(a) On December 1, 1994, the Company reported on Form 8-K the acquisition
of 100% of the outstanding capital stock of Clark Wilson Homes, Inc.,
an Austin, Texas based homebuilder. The consideration for the capital
stock was $3,500,000 in cash and a $2,500,000 non-recourse promissory
note issued to Clark Wilson, an individual.
(b) Exhibit 27 - Financial Data Schedule
- 14 -
<PAGE> 17
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 23, 1995 BY: /s/ HADI MAKARECHIAN
---------------------------------
Hadi Makarechian, Chairman and
Chief Executive Officer
Date: January 23, 1995 BY: /s/ GREG R. PETERSEN
--------------------------------
Greg R. Petersen, Vice President
and Chief Financial Officer
(Principal Financial Officer)
<PAGE> 18
EXHIBIT INDEX
<TABLE>
<S> <C> <C>
Sequential
Exhibit Number Description Page Number
- -------------- ----------- -----------
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED STATEMENTS OF INCOME, CONSOLIDATED BALANCE SHEETS AND
CONSOLIDATED STATEMENTS OF CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS CONTAINED WITHIN THE COMPANY'S FORM 10-Q
FOR THE QUARTER ENDED NOVEMBER 30, 1994
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-28-1995
<PERIOD-START> MAR-01-1994
<PERIOD-END> NOV-30-1994
<CASH> 22,153
<SECURITIES> 0
<RECEIVABLES> 3,419
<ALLOWANCES> 0
<INVENTORY> 174,503
<CURRENT-ASSETS> 0
<PP&E> 7,414
<DEPRECIATION> 2,257
<TOTAL-ASSETS> 219,180
<CURRENT-LIABILITIES> 24,909
<BONDS> 129,127
<COMMON> 1,500
0
0
<OTHER-SE> 211,888
<TOTAL-LIABILITY-AND-EQUITY> 219,180
<SALES> 108,594
<TOTAL-REVENUES> 111,929
<CGS> 87,803
<TOTAL-COSTS> 87,803
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 755
<INCOME-TAX> 303
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 3,075
<CHANGES> 0
<NET-INCOME> 3,527
<EPS-PRIMARY> .24
<EPS-DILUTED> .24
</TABLE>
