<PAGE> 1
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, 1995
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)
<TABLE>
<S> <C>
Delaware 95-2956559
- -----------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification Number)
</TABLE>
4100 MacArthur Blvd., Suite 200, Newport Beach, CA 92660
- -----------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(714) 622-8400
- -----------------------------------------------------------------
(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 July 10, 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 -
May 31, 1995 and February 28, 1995 1
Consolidated Statements of Operations for the
Three Months Ended May 31, 1995 and 1994 2
Consolidated Statements of Cash Flows for the
Three Months Ended May 31, 1995 and 1994 3
Notes to Consolidated Financial Statements 4-7
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-10
Part II - Other Information:
Item 5 - Other Information: 11
</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>
May 31, February 28,
1995 1995
(Unaudited)
----------- ------------
<S> <C> <C>
Cash and cash equivalents $12,199 $22,401
Restricted cash 1,421 1,421
Accounts and notes receivable 3,275 3,818
Residential inventories 167,330 167,807
Plant, property and equipment 6,261 5,891
Prepaid expenses and other assets 13,562 13,837
-------- --------
$204,048 $215,175
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued liabilities $17,681 $21,516
Notes payable 24,046 29,391
Bonds payable 100,000 100,000
-------- --------
Total liabilities 141,727 150,907
-------- --------
Minority Interest 1,850 3,524
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 211,888 211,888
Accumulated deficit (152,917) (152,644)
-------- --------
Total stockholders' equity 60,471 60,744
-------- --------
$204,048 $215,175
======== ========
</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
ended May 31,
--------------------
1995 1994
------- -------
<S> <C> <C>
Revenue:
Sales of homes $31,703 $30,588
Sales of land and lots 733 1,152
Interest and other income 704 1,030
------- -------
33,140 32,770
------- -------
Costs and expenses:
Cost of homes 26,568 24,473
Cost of land and lots 442 892
Selling, general and administrative 6,470 4,545
Minority Interest 83 1,531
------- -------
33,563 31,441
------- -------
Income/(loss) before income taxes and extraordinary gain (423) 1,329
Provision for (benefit from) income taxes (150) 462
------- -------
Income/(loss) before extraordinary gain (273) 867
Extraordinary gain (net of tax effect) - 3,075
------- -------
NET INCOME/(LOSS) ($273) $3,942
======= =======
Net income/(loss) per common share:
Before extraordinary gain ($0.02) $0.06
Extraordinary gain - 0.20
------- -------
Net income/(loss) ($0.02) $0.26
======= =======
Weighted average number of common shares 14,995 14,995
======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
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<PAGE> 5
J.M. PETERS COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended May 31,
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/(loss) ($273) $3,942
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Extraordinary gain - (4,713)
Depreciation and amortization 308 16
Decrease in residential inventories 477 1,398
Decrease in receivables, prepaid
expenses and other assets 470 341
Decrease in accounts payable and
accrued liabilities (3,835) (36)
------- -------
NET CASH USED IN OPERATING ACTIVITIES (2,853) 948
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of plant, property and equipment, net (474) (3,216)
Decrease (increase) in investment in partnerships 144 (14)
------- -------
NET CASH USED IN INVESTING ACTIVITIES (330) (3,230)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Bond issue proceeds, net - 96,539
Decrease in minority interest in joint ventures (1,674) (11,135)
Principal payments on notes payable, net (5,345) (20,040)
------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES (7,019) 65,364
------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (10,202) 63,082
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 22,401 10,001
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $12,199 $73,083
======= =======
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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<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, 1995. 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 three month period ended May 31, 1995, are not
necessarily indicative of the results that may be expected for the year ending
February 28, 1996.
2. Notes payable:
Notes payable at May 31, 1995 and February 28, 1995, are summarized as
follows (in thousands):
<TABLE>
<CAPTION>
May 31, February 28,
1995 1995
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<S> <C> <C>
Promissory note collateralized by
deeds of trust, including
interest varying from 8% to
prime plus 1.5% $ 4,049 $ 4,878
Notes payable to banks, including
interest varying from prime plus
one percent to prime plus one and
one-quarter percent, maturing before
October 1, 1996 secured by certain
real estate inventories on a
non-recourse basis 12,923 17,011
Notes payable to banks, including interest
at prime plus one percent maturing March
31, 1998 secured by certain real estate
inventories on a recourse basis 4,574 5,002
Promissory note payable to previous owner
of Clark Wilson secured by Stock Pledge
Agreement on a non-recourse basis,
interest at 8% payable based on
performance of the entity acquired 2,500 2,500
------- -------
$24,046 $29,391
======= =======
</TABLE>
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<PAGE> 7
3. Supplemental Guarantor Information
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 Three Months Ended May 31, 1995
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
J.M. Peters Non- Total
Company, Inc. Guarantors(1) Guarantors(2) Eliminations(4) Consolidated
------------- ------------- ------------- --------------- ------------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET
Cash $6,113 $2,190 $3,896 $0 $12,199
Inventories 118,239 24,259 24,832 0 167,330
Investment in Partnerships
and subsidiaries (3) 24,176 1,152 0 (23,476) 1,852
Intercompany advances 16,785 0 0 (16,785) 0
Other 16,957 708 5,326 (324) 22,667
-------- ------- ------- -------- --------
Total Assets $182,270 $28,309 $34,054 ($40,585) $204,048
======== ======= ======= ======== ========
Accounts payable and
accrued liabilities $7,115 $6,302 $4,588 ($324) $17,681
Intercompany advances 0 5,891 10,894 (16,785) 0
Notes payable 114,684 2,200 7,162 0 124,046
Minority interest 0 0 0 1,850 1,850
Shareholders' equity 60,471 13,916 11,410 (25,326) 60,471
-------- ------- ------- -------- --------
Total Liabilities
and Equity $182,270 $28,309 $34,054 ($40,585) $204,048
======== ======= ======= ======== ========
STATEMENT OF OPERATIONS
Revenues:
Sales of homes and land $7,481 $13,104 $11,851 $0 $32,436
Interest and other
income, net 237 113 183 533
Equity in income of
partnerships and
subsidiaries (3) 482 81 0 (392) 171
-------- ------- ------- -------- --------
Total Revenues 8,200 13,298 12,034 (392) 33,140
-------- ------- ------- -------- --------
Cost of homes and land 6,315 10,756 9,939 27,010
Selling, general and
administrative 2,479 1,845 2,146 6,470
Minority interest 0 0 0 83 83
-------- ------- ------- -------- --------
Income (loss) before
provision (benefit) for
income taxes (594) 697 (51) (475) (423)
Provision (benefit) for
income taxes (321) 248 (77) (150)
-------- ------- ------- -------- --------
NET INCOME (LOSS) ($273) $449 $26 ($475) ($273)
======== ======= ======= ======== ========
</TABLE>
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<PAGE> 8
<TABLE>
<CAPTION>
J.M. Peters Non- Total
Company, Inc. Guarantors(1) Guarantors(2) Eliminations(4) Consolidated
------------- ------------- ------------- --------------- ------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF CASH FLOWS
Net cash from (used in)
operating activities $4,440 $187 ($9,154) $1,674 ($2,853)
Net cash from (used in)
investment activities (330) 0 0 0 (330)
Net cash from (used in)
financing activities (3,109) (1,409) (827) (1,674) (7,019)
------ ------ -------- ------ -------
Net increase (decrease)
in cash 1,001 (1,222) (9,981) 0 (10,202)
Cash - beginning of
period 5,112 3,412 13,877 0 22,401
------ ------ ------- ------ -------
Cash - end of period $6,113 $2,190 $3,896 $0 $12,199
====== ====== ======= ====== =======
</TABLE>
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<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 partnership in which J.M. Peters Nevada, Inc., is
General Partner:
- 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. (will become a guarantor in fiscal
year 1996)
- Fairway Financial Corporation
(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, Inc.
- J.M.P. Harbor View, L.P.
- 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
The Company's principal cash requirements are for the acquisition, development,
construction and marketing of its residential projects. The need to stage the
acquisition and use of raw materials (ie. land) and the need to construct
community facilities prior to the start of home construction requires
homebuilders such as the Company to commit working capital for longer periods
than many traditional manufacturing companies. The Company uses substantial
amounts of cash during the construction of homes. This cash is generally
obtained from bank borrowings, available cash flow from operations and
partners' contributions to joint ventures.
To date, the Company has principally used secured recourse and non-recourse
bank financing and financing provided by CalPERS for acquistion, development
and construction, with borrowings for individual projects or phases of projects
secured by such projects. CalPERS has committed to providing construction
financing for two projects (with 150 planned units). The Company is not
currently discussing any further projects with CalPERS.
The Company's principal source of bank financing is with Bank One, Arizona, NA
("Bank One"). Currently, the Company has in place a $25 million recourse
secured line of credit facility (obtained in May of 1994) with Bank One. At
May 31, 1995, the Company had utilized $4.5 million of this facility.
Additionally, the Company has in place a $25 million non-recourse secured line
of credit facility (obtained in September of 1994) with Bank One. At May 31,
1995, the Company had utilized $12.9 million of this facility. The Company is
currently negotiating increases in their credit facilities with Bank One.
These negotiations, if successful, would increase the Company's total
contingent availability under all credit facilities with Bank One to $90
million. The Company and/or its subsidiaries also have similar bank financing
facilities in place.
For the three months ended May 31, 1995, the Company closed the sale of 245
homes and 3 land lots. The Company, at May 31, 1995, had 466 homes under
construction. This construction activity is currently being financed out of
Company cash, including proceeds from the sale in May, 1994 of $100 million of
12 3/4% Senior Notes and Warrants (the "Offering"), bank financing and the
existing joint ventures with CalPERS. In order to maintain sufficient
liquidity, the Company will continue utilizing the bank financing to cover
anticipated needs in excess of Company cash 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.
In June of 1995, the Company named Mr. Anthony M. Laughlin as Vice President
and Chief Financial Officer of the Company. Mr. Laughlin headed the Company's
internal audit function from 1994 until assuming his current position in June
of 1995. Prior to joining the Company in 1994, Mr. Laughlin had provided
accounting and consulting services to the Company.
-8-
<PAGE> 11
Mr. Gregory R. Petersen served as the Company's Vice President, Secretary,
Treasurer and Chief Financial Officer from 1990 until leaving the Company in
June, 1995.
BALANCE SHEET ITEMS
Cash and cash equivalents decreased to $12.2 million at May 31, 1995 from $22.4
million at February 28, 1995, due to new land acquisitions, new construction
activity and the bond interest payment made May 1, 1995.
Property and equipment increased to $6.3 million at May 31, 1995 from $5.9
million at February 28, 1995 due to the Company's improvements of a 45,389
square foot building in Newport Beach, California, which serves as the
Company's corporate headquarters.
Accounts payable and other liabilities decreased to $17.7 million at May 31,
1995, from $21.5 million at February 28, 1995. This decrease principally
represents the payment of accrued bond interest on May 1, 1995.
Notes payable declined to $24.0 million at May 31, 1995 from $29.4 million at
February 28, 1995. The decline resulted from the payoff of notes with proceeds
from home closings.
Minority interest declined to $1.9 million at May 31, 1995 from $3.5 million at
February 28, 1995. This decline was the result of distributions made from
joint ventures which were substantially complete at May 31, 1995.
RESULTS OF OPERATIONS
FIRST QUARTER OF FISCAL 1996 COMPARED WITH THE FIRST QUARTER OF FISCAL 1995:
Revenues from housing sales for the first quarter of fiscal 1996 and the first
quarter of fiscal 1995 were $31.7 million and $30.6 million, respectively,
reflecting an increase of $1.1 million from the corresponding period of fiscal
1995. This 3.6% increase was due to increased home closings. Home closings
for the first quarter of fiscal 1996 were 245 versus 193 homes during the first
quarter of fiscal 1995. The difference between the magnitude of the increase in
home closings and the increase in revenues is the result of a lower average
sales price per unit.
Revenues from the sales of land lots for the first quarter of fiscal 1996
decreased to $733 thousand from $1.2 million for the first quarter of the prior
year. The land lot sales during the first quarter of fiscal 1996 represents
the sale of a parcel in Tarzana, California, as well the sale of 2 land lots in
La Quinta, California.
Cost of home sales increased to $26.6 million for the first quarter of fiscal
1996 from $24.5 million for the comparable period of the prior year. The
increase was primarily due to the increase in home closings.
-9-
<PAGE> 12
Selling, general and administrative expenses for the first quarter of fiscal
1996 totaled $6.5 million, an increase of $1.9 million over the corresponding
period of fiscal 1995. This increase was due primarily to the acquisition of
Clark Wilson Homes, Inc. ("Wilson") whose selling, general and administrative
expense for the first quarter of fiscal 1996 was $1.7 million.
Minority interest expense declined to $83 thousand for the first quarter of
fiscal 1996 as compared to $1.5 million for the first quarter of the prior
year. The decrease was due to reduced activity in the Company's joint venture
projects.
As a result of the foregoing factors, the Company posted a net loss of $273
thousand for the three months ended May 31, 1995 as compared to a net income of
$3.9 million for the three months ended May 31, 1994. The net income of $3.9
million for the first quarter of fiscal 1995 included $3.1 million of
extraordinary income from the retirement of debt at less than its face value.
For the first quarter of fiscal 1996 the Company recorded 324 net orders (homes
contracted for sales less cancellations) on home sales which was 164 homes
greater than in the comparable quarter ended May 31, 1994. The Company had 511
homes in its backlog (homes under contract but not closed) at May 31, 1995,
which was an increase of 239 homes over the Company's backlog at May 31, 1994.
The increase is due to increased construction starts and the acquisition of
Clark Wilson Homes, Inc.
-10-
<PAGE> 13
PART II - OTHER INFORMATION
Item 5. - OTHER INFORMATION
Effective June 16, 1995, Anthony Laughlin, Certified Public Accountant assumed
the office of Vice President, Chief Financial Officer and Secretary of the
Company. Mr. Laughlin served as the head of the Company's internal audit
department prior to assuming his current position. Mr. Laughlin replaces
Gregory R. Petersen, who served as Vice President, Chief Financial Officer,
Secretary and Treasurer from 1990 until leaving the Company in June of 1995.
Mr. James Cederquist has replaced Mr. Petersen as the Treasurer of the Company.
-11-
<PAGE> 14
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.
<TABLE>
<S> <C> <C>
Date: July 14, 1995 BY: /S/ HADI MAKARECHIAN
----------------------------
Hadi Makarechian, Chairman and
Chief Executive Officer
</TABLE>
<TABLE>
<S> <C> <C>
Date: July 14, 1995 BY:/S/ANTHONY M. LAUGHLIN
---------------------------------
Anthony M. Laughlin, Vice
President and Chief Financial
Officer
(Principal Financial Officer)
</TABLE>
<PAGE> 15
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequential
Exhibit Number Description Page Number
- -------------- ----------- -----------
<S> <C> <C>
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 MAY 31, 1995.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1996
<PERIOD-START> MAR-01-1995
<PERIOD-END> MAY-31-1995
<CASH> 13,620
<SECURITIES> 0
<RECEIVABLES> 3,275
<ALLOWANCES> 0
<INVENTORY> 167,330
<CURRENT-ASSETS> 0
<PP&E> 8,678
<DEPRECIATION> 2,417
<TOTAL-ASSETS> 204,048
<CURRENT-LIABILITIES> 17,681
<BONDS> 124,046
<COMMON> 1,500
0
0
<OTHER-SE> 211,888
<TOTAL-LIABILITY-AND-EQUITY> 204,048
<SALES> 32,436
<TOTAL-REVENUES> 33,140
<CGS> 27,010
<TOTAL-COSTS> 27,010
<OTHER-EXPENSES> 6,553
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (423)
<INCOME-TAX> (150)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (273)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
