<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 June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-18001
THE PRESLEY COMPANIES
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 33-0475923
(State or jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
19 Corporate Plaza 92660
Newport Beach, California (Zip Code)
(Address of principal executive offices)
(714) 640-6400
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
------ ------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Outstanding at
Class of Common Stock June 30, 1996
- --------------------- --------------
[S] [C]
Series A, par value $.01 17,838,535
Series B, restricted voting convertible, par value $.01 34,357,143
- -----------------------------------------------------------------------------
<PAGE> 2
THE PRESLEY COMPANIES
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets - June 30, 1996 and
December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Operations - Three and Six Months Ended
June 30, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statement of Stockholders' Equity - Six Months
Ended June 30, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Consolidated Statements of Cash Flows - Six Months Ended
June 30, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
PART II. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
2
<PAGE> 3
THE PRESLEY COMPANIES
CONSOLIDATED BALANCE SHEETS
(in thousands except number of shares and par value per share)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
----------- ------------
(unaudited)
<S> <C>
ASSETS
Cash and cash equivalents $ 3,095 $ 4,217
Receivables 6,953 5,304
Real estate inventories 312,465 315,535
Property and equipment, less accumulated
depreciation of $1,139 and $850 at June 30, 1996
and December 31, 1995, respectively 2,759 2,577
Deferred loan costs 4,856 5,366
Other assets 9,673 7,934
-------- --------
$339,801 $340,933
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 9,770 $ 10,551
Accrued expenses 21,147 21,887
Notes payable 36,777 34,434
12 1/2% Senior Notes due 2001 190,000 190,000
-------- --------
257,694 256,872
-------- --------
Stockholders' equity
Common stock:
Series A common stock, par value $.01 per share;
100,000,000 shares authorized; 17,838,535 issued
and outstanding at June 30, 1996 and
December 31, 1995, respectively 178 178
Series B restricted voting convertible common stock,
par value $.01 per share; 50,000,000 shares authorized;
34,357,143 shares issued and outstanding at June 30,
1996 and December 31, 1995, respectively 344 344
Additional paid-in capital 114,599 114,599
Accumulated deficit from January 1, 1994 (Note 1) (33,014) (31,060)
-------- --------
82,107 84,061
-------- --------
$339,801 $340,933
======== ========
</TABLE>
3
<PAGE> 4
THE PRESLEY COMPANIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per common share amounts)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- ------------------------
1996 1995 1996 1995
-------- -------- --------- ---------
<S> <C> <C> <C> <C>
Sales
Homes $ 81,405 $ 50,538 $ 142,017 $ 106,768
Lots, land and other 814 9,678 1,273 21,368
-------- -------- --------- ---------
82,219 60,216 143,290 128,136
-------- -------- --------- ---------
Operating costs
Cost of sales - homes (71,413) (46,535) (125,851) (99,087)
Cost of sales - lots, land and other (904) (9,748) (1,231) (21,526)
Reduction of real estate assets to
estimated net realizable value - (9,400) - (9,400)
Sales and marketing (5,839) (4,720) (10,683) (9,818)
General and administrative (3,452) (3,291) (7,154) (6,443)
-------- -------- --------- ---------
(81,608) (73,694) (144,919) (146,274)
-------- -------- --------- ---------
Operating income (loss) 611 (13,478) (1,629) (18,138)
Interest expense, net of amounts capitalized (519) (564) (1,279) (1,497)
Other income (expense), net 275 686 954 899
-------- -------- --------- ---------
Income (loss) before income taxes and
extraordinary item 367 (13,356) (1,954) (18,736)
Credit for income taxes - 2,492 - 4,698
-------- -------- --------- ---------
Net income (loss) before extraordinary item 367 (10,864) (1,954) (14,038)
Extraordinary item - gain from retirement of
debt, net of applicable income taxes of
$503 - 724 - 724
-------- -------- --------- ---------
Net income (loss) $ 367 $(10,140) $ (1,954) $ (13,314)
======== ======== ========= =========
Net income (loss) per common share - Note 1 $ 0.01 $ (0.19) $ (0.04) $ (0.26)
======== ======== ========= =========
</TABLE>
4
<PAGE> 5
THE PRESLEY COMPANIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 1996
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Common Stock
------------------------------------------ Accumulated
Series A Series B Additional Deficit from
------------------- ----------------- Paid-In January 1,
Shares Amount Shares Amount Capital 1994 Total
------ ------ ------ ------ ---------- ------------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance - December 31, 1995 17,839 $178 34,357 $344 $114,599 $(31,060) $84,061
Net loss - - - - - (1,954) (1,954)
------ ---- ------ ---- -------- -------- -------
Balance - June 30, 1996 17,839 $178 34,357 $344 $114,599 $(33,014) $82,107
====== ==== ====== ==== ======== ======== =======
</TABLE>
5
<PAGE> 6
THE PRESLEY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------------
1996 1995
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (1,954) $(13,314)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 291 219
Reduction of real estate assets to estimated net
realizable value - 9,400
Net changes in operating assets and liabilities:
Other receivables (1,693) (1,455)
Real estate inventories 3,070 14,460
Deferred loan costs 510 688
Other assets (1,739) 748
Accounts payable (781) (1,672)
Accrued expenses (740) (651)
Income taxes - (4,195)
-------- --------
Net cash provided by (used in) operating activities (3,036) 4,228
-------- --------
INVESTING ACTIVITIES
Issuance of notes receivable - (95)
Principal payments on notes receivable 44 88
Property and equipment, net (473) (478)
-------- --------
Net cash used in investing activities (429) (485)
-------- --------
FINANCING ACTIVITIES
Proceeds from borrowing on notes payable 51,639 26,869
Principal payments on notes payable (49,296) (30,942)
Retirement of debt - (10,000)
-------- ---------
Net cash provided by (used in) financing activities 2,343 (14,073)
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (1,122) (10,330)
CASH AND CASH EQUIVALENTS - beginning of period 4,217 20,643
-------- --------
CASH AND CASH EQUIVALENTS - end of period $ 3,095 $ 10,313
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for interest, net of amounts capitalized $ 1,518 $ 1,104
======== ========
Cash paid during the period for income taxes $ - $ -
======== ========
</TABLE>
6
<PAGE> 7
THE PRESLEY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and in accordance with the rules and regulations of the
Securities and Exchange Commission. Effective as of January 1, 1994, the
Company completed a capital restructuring and quasi-reorganization. The
quasi-reorganization resulted in the adjustment of assets and liabilities to
estimated fair values and the elimination of an accumulated deficit effective
January 1, 1994. The net amount of such revaluation adjustments, together with
the accumulated deficit as of the date thereof, was transferred to paid-in
capital in accordance with the accounting principles applicable to
quasi-reorganizations. The consolidated financial statements do not include
all of the information and footnotes required by generally accepted accounting
principles for complete financial statements. The consolidated financial
statements included herein should be read in conjunction with the Company's
Annual Report on Form 10-K for the year ended December 31, 1995.
The interim consolidated financial statements have been prepared in accordance
with the Company's customary accounting practices. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the six month period ended June 30, 1996 are not necessarily
indicative of the results that may be expected for the year ending December 31,
1996.
The consolidated financial statements include the accounts of the Company and
all majority-owned or controlled subsidiaries and joint ventures. All
significant intercompany accounts and transactions have been eliminated.
Investments in unconsolidated joint ventures in which the Company has less than
a controlling interest are accounted for using the equity method. The
accounting policies of the joint ventures are substantially the same as those
of the Company.
Net income (loss) per common share for the three and six months ended June 30,
1996 and 1995 is based on 52,195,678 of Series A and Series B common stock
outstanding.
NOTE 2 - SALE AND LEASEBACK OF CERTAIN MODEL HOMES
During the quarter ended March 31, 1996, the Company completed a bulk
transaction in which 57 model homes were sold and leased back to the Company,
resulting in total revenue to the Company of approximately $9,750,000. The
individual leases expire at various dates through 2001, but may be extended
under certain circumstances.
7
<PAGE> 8
THE PRESLEY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion of results of operations and financial condition
should be read in conjunction with the consolidated financial statements and
notes thereto included in Item 1, as well as the information presented in the
Annual Report on Form 10-K for the year ended December 31, 1995.
FINANCIAL CONDITION AND LIQUIDITY
The Company provides for its ongoing cash requirements from internally
generated funds from the sales of real estate and from outside borrowings. The
Company currently maintains the following major credit facilities: 12 1/2%
Senior Notes (the "Senior Notes"), a secured revolving lending facility (the
"Working Capital Facility"), construction loans relating to Horsethief Canyon
Partners, its wholly-owned joint venture partnership, a revolving line of
credit relating to Carmel Mountain Ranch, its wholly-owned joint venture
partnership (the latter two facilities collectively the "Joint Venture
Facilities"), and a revolving line of credit relating to construction on
certain real property located in Arizona and New Mexico (the "Other
Facilities"), which are summarized below.
SENIOR NOTES
The Company filed with the Securities and Exchange Commission a Registration
Statement on Form S-1 for the sale of $200,000,000 of Senior Notes which became
effective on June 23, 1994. The offering closed on June 29, 1994 and was fully
subscribed and issued. The following discussion of the Senior Notes should be
read in conjunction with the Registration Statement as filed with the
Securities and Exchange Commission.
The 12 1/2% Senior Notes due 2001 (the "Senior Notes") were offered by The
Presley Companies, a Delaware corporation ("Delaware Presley"), and are
unconditionally guaranteed on a senior basis by Presley Homes (formerly The
Presley Companies), a California corporation and a wholly-owned subsidiary of
Delaware Presley ("California Presley"). However, California Presley has
granted liens on substantially all of its assets as security for its
obligations under the Working Capital Facility and the Other Facilities.
Because the California Presley guarantee is not secured, holders are
effectively junior to borrowings under the Working Capital Facility with
respect to such assets. Delaware Presley and its consolidated subsidiaries are
referred to collectively herein as "Presley" or the "Company". Interest on the
Senior Notes is payable on January 1 and July 1 of each year.
Except as set forth in the Indenture Agreement (the "Indenture"), the Senior
Notes are not redeemable by Presley prior to July 1, 1998. Thereafter, the
Senior Notes will be redeemable at the option of Delaware Presley, in whole or
in part, at the redemption prices set forth in the Indenture.
8
<PAGE> 9
THE PRESLEY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(continued)
The Senior Notes are senior obligations of Presley and rank pari passu in right
of payment to all existing and future unsecured indebtedness of Presley, and
senior in right of payment to all future indebtedness of the Company which by
its terms is subordinated to the Senior Notes.
Upon a Change of Control as described in the Indenture, Presley must offer to
repurchase Senior Notes at a price equal to 101% of the principal amount plus
accrued and unpaid interest, if any, to the date of repurchase.
Presley is required to offer to repurchase certain Senior Notes at a price
equal to 100% of the principal amount plus any accrued and unpaid interest to
the date of repurchase if Delware Presley's Consolidated Tangible Net Worth is
less than $60,000,000 for any two consecutive fiscal quarters, and from the
proceeds of certain asset sales.
The Indenture governing the Senior Notes restricts, among other things: (i) the
payment of dividends on and redemptions of capital stock by Presley, (ii) the
incurrence of indebtedness by Presley or the issuance of preferred stock by
Delaware Presley's subsidiaries, (iii) the creation of certain liens, (iv)
Delaware Presley's ability to consolidate or merge with or into, or to transfer
all or substantially all of its assets to, another person, and (v) transactions
with affiliates. These restrictions are subject to a number of important
qualifications and exceptions.
WORKING CAPITAL FACILITY
The collateral for the loans provided by the Working Capital Facility includes
substantially all real estate and other assets of the Company (excluding assets
of partnerships, certain real estate assets of the Company in Arizona and the
portion of the partnership interests in Carmel Mountain Ranch partnership which
are currently pledged to other lenders). The borrowing base is calculated
based on specified percentages of book values of real estate assets. The
borrowing base at June 30, 1996 was approximately $201,833,000; however, the
maximum loan under the Working Capital Facility is limited to $72,000,000. The
principal outstanding under the Working Capital Facility at June 30, 1996 was
$30,000,000.
The Working Capital Facility has a termination date of May 20, 1997, with two
one-year extensions at the Company's option. Upon any extension of the
termination date, the Company would pay an extension fee of 1% of the Working
Capital Facility commitment amount (in addition to the loan fee described
below) for each year extended.
Pursuant to the terms of the Working Capital Facility, outstanding advances
bear interest at the prime rate plus 2%. An alternate option provides for
interest based on a specified overseas base rate plus 4.44%, but not less than
the prime rate option in effect at December 31, 1993 (8.00%). In addition, the
Company pays a loan fee of 1% per annum, payable quarterly, on the total
Working Capital Facility commitment amount.
9
<PAGE> 10
THE PRESLEY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(continued)
The Working Capital Facility now provides that the Company must maintain a
Tangible Effective Net Worth as of the last day of any fiscal quarter of not
less than $70,000,000. The Working Capital Facility also provides that as of
the last day of any fiscal quarter the ratio of the Company's Total Liabilities
(excluding non-recourse debt) to Tangible Effective Net Worth must not exceed
3.75 to 1 and that the ratio of Adjusted Total Liabilities (the Company's and
its unconsolidated partnerships' Total Liabilities and Letters of Credit)
(excluding non-recourse debt) to Tangible Effective Net Worth must not exceed
4.0 to 1. At June 30, 1996 the Company's Tangible Effective Net Worth was
approximately $77,251,000, the ratio of the Company's Total Liabilities
(excluding non-recourse debt) to Tangible Effective Net Worth was 3.34 to 1,
and the ratio of Adjusted Total Liabilities (excluding non-recourse debt) to
Tangible Effective Net Worth was 3.35 to 1.
The Working Capital Facility requires certain minimum cash flow and pre-tax and
pre-interest tests. The Working Capital Facility also provides for negative
covenants which, among other things, place limitations on the payment of cash
dividends, merger transactions, transactions with affiliates, the incurrence of
additional debt and the acquisition of new land as described in the following
paragraph.
Under the terms of the Working Capital Facility, the Company may acquire new
improved land for development of housing units of no more than 300 lots in any
one location without approval from the lenders if certain conditions are
satisfied. The Company may, however, acquire any new raw land or improved land
provided the Company has obtained the prior written approval of lenders holding
two-thirds of the obligations under the Working Capital Facility.
JOINT VENTURE FACILITIES
Horsethief Canyon Partners ("HCP"), the partnership that owns the Horsethief
Canyon master-planned community, is a California general partnership and is
100% owned by The Presley Companies and its wholly-owned subsidiary. The
construction of the project is currently being financed through intract loans
to prepare finished lots for the construction of homes and construction loans
to finance the construction of homes.
At June 30, 1996 a total of $1,958,000 was outstanding under the intract and
construction loans of HCP. Interest rates on the intract and construction
loans range from prime plus 1.25% to prime plus 1.50%.
Carmel Mountain Ranch ("CMR"), the partnership that owns the Carmel Mountain
Ranch master-planned community, is also a California general partnership and is
100% owned by The Presley Companies and its wholly-owned subsidiary. Effective
as of March 1995, the development and construction of the project is financed
through a revolving line of credit. The revolving line of credit consists of
several components relating to production units, models and residential lots.
At June 30, 1996, the revolving line of credit had
10
<PAGE> 11
THE PRESLEY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(continued)
an outstanding balance of $876,000. Availability under the line is subject to
a number of limitations, but in any case cannot exceed $29,000,000, and is
subject to further limitations as described in the following paragraph.
Interest on the outstanding balance is at prime plus 1.00% and the loan matures
on March 17, 1998.
OTHER FACILITIES
Effective in October 1995, the Company executed a master credit agreement with
a maximum loan commitment of $5,000,000 to finance the development of lots for
residential homes and the construction of single-family attached and detached
production homes on certain real property located in Arizona and New Mexico.
Interest on the outstanding balance is at prime plus 1.00% and the loan matures
on November 30, 1998. The outstanding balance under this facility, together
with the outstanding balance under the CMR facility described in the preceding
paragraph, may not exceed $29,000,000. As of June 30, 1996 the outstanding
balance under this agreement was $3,943,000.
ASSESSMENT DISTRICT BONDS AND SELLER FINANCING
In some locations in which the Company develops its projects, assessment
district bonds are issued by municipalities to finance major infrastructure
improvements and fees. Such financing has been an important part of financing
master-planned communities due to the long-term nature of the financing,
favorable interest rates when compared to the Company's other sources of funds
and the fact that the bonds are sold, administered and collected by the
relevant government entity. As a landowner benefited by the improvements, the
Company is responsible for the assessments on its land. When Presley's homes
or other properties are sold, the assessments are either prepaid or the buyers
assume the responsibility for the related assessments.
Another potential source of financing available to the Company is
seller-provided financing for land acquired by the Company. Although the
Company has not used this form of financing significantly in the past few
years, it is possible that such financing may be available and utilized to a
greater extent in the future.
11
<PAGE> 12
THE PRESLEY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(continued)
RESULTS OF OPERATIONS
OVERVIEW AND RECENT RESULTS
Homes sold, closed and in backlog as of and for the periods presented are as
follows:
<TABLE>
<CAPTION>
As of and for As of and for
the Three Months the Six Months
Ended June 30, Ended June 30,
----------------- ----------------
1996 1995 1996 1995
---- ---- ----- ----
<S> <C> <C> <C> <C>
Number of homes sold 478 388 1,069 744
Number of homes closed 490 320 859 664
Backlog of homes sold but not closed at end of period 526 333 526 333
</TABLE>
The increase in net new home orders and backlog in the first six months of
1996, as compared with the first six months of 1995, is the result of the
Company's return to the Arizona market from which it had been absent for
approximately three years, the result of the Company's entry into the Nevada
market, and the result of increases in the Company's Southern California,
Northern California and New Mexico markets. The increase in closings in the
first six months of 1996, as compared with the first six months of 1995, is the
result of the Company's return to the Arizona market, the result of the
Company's entry into the Nevada market, and the sale of 57 model homes
described below, offset by decreases in the Company's Northern California
markets.
Homes in backlog are generally closed within three to six months and
substantially all will be closed within six months after the end of the period
indicated. The dollar amount of backlog of homes sold but not closed as of
June 30, 1996 was $93,791,000, as compared to $53,952,000 as of June 30, 1995
and $90,494,000 as of March 31, 1996. The cancellation rate of buyers who
contracted to buy a home but did not close escrow at the Company's projects was
approximately 22% during 1995 and approximately 19% during the first six months
of 1996.
The number of homes closed in the second quarter of 1996 was up 53 percent to
490 from 320 in the second quarter of 1995. Net new home orders for the
quarter ended June 30, 1996 increased 23 percent to 478 units from 388 a year
ago. For the second quarter of 1996, net new orders decreased 19 percent to
478 from 591 units in the first quarter of 1996. The backlog of homes sold as
of June 30, 1996 was 526, up 58 percent from 333 units a year earlier, and down
2 percent from 538 units at March 31, 1996. The Company's inventory of
completed and unsold homes as of June 30, 1996 decreased to 61 units from 96
units as of March 31, 1996.
12
<PAGE> 13
THE PRESLEY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(continued)
Net new home orders and closings for the first quarter of 1996 include 57 model
homes which were sold and leased back to the Company in a bulk transaction
resulting in total revenue to the Company of approximately $9,750,000.
In general, housing demand is adversely affected by increases in interest and
housing costs. Interest rates, the length of time that assets remain in
inventory, and the proportion of inventory that is financed affect the
Company's interest cost. If the Company is unable to raise sales prices
sufficiently to compensate for higher costs, which has generally been the case
recently, or if mortgage interest rates increase significantly, affecting
prospective buyers' ability to adequately finance home purchases, the Company's
sales, gross margins and net results may be adversely impacted. To a limited
extent, the Company hedges against certain increases in interest costs by
acquiring interest rate protection that locks in or caps interest rates for
limited periods of time for mortgage financing for prospective homebuyers.
COMPARISON OF THREE MONTHS ENDED JUNE 30, 1996 TO THREE MONTHS ENDED JUNE 30,
1995
Sales (which represent recorded revenues from closings) for the three months
ended June 30, 1996 were $82.2 million, an increase of $22.0 million (36.5%),
from sales of $60.2 million for the three months ended June 30, 1995. Revenue
from sales of homes increased $30.9 million to $81.4 million in the 1996 period
from $50.5 million in the 1995 period. This increase was due primarily to an
increase in the number of homes closed to 490 in the 1996 period from 320 in
the 1995 period and an increase in the average sales prices of homes to
$166,000 in the 1996 period from $158,000 in the 1995 period. Revenue from
lots, land and other decreased $8.9 million to $0.8 million in the 1996 period
from $9.7 million in the 1995 period.
Total operating income (loss) increased from a loss of $13.5 million in the
1995 period to income of $0.6 million in the 1996 period. The excess of
revenue from sales of homes over cost of sales - homes increased by $6.0
million, to $10.0 million in the 1996 period from $4.0 million in the 1995
period. These increases were primarily due to increased sales prices and an
increase in the number of homes closed as described above and decreases in
buyer incentives. Reductions of real estate assets to estimated net realizable
value amounting to $9.4 million were recorded in the 1995 period, with no
corresponding charge in the comparable period for 1996. Sales and marketing
expenses increased by $1.1 million to $5.8 million in the 1996 period from $4.7
million in the 1995 period primarily as a result of increased advertising and
direct closings costs (directly related to increased revenue from closings) in
the 1996 period compared to the 1995 period. General and administrative
expenses increased by $0.2 million to $3.5 million in the 1996 period from $3.3
million in the 1995 period, primarily as a result of increased overhead from
start-up operations in Arizona and Nevada.
13
<PAGE> 14
THE PRESLEY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(continued)
Total interest incurred during the 1996 period decreased $0.6 million (7.6%)
from the 1995 period as a result of a reduction in debt levels and decreased
interest rates. Net interest expense decreased to $0.5 million in the 1996
period from $0.6 million for the 1995 period. This decrease was due primarily
to an increase in development activities in the 1996 period compared to the
1995 period (resulting in increased interest capitalization) and by decreases
in interest rates.
Other (income) expense, net decreased $0.4 million to a net income of $0.3
million in the 1996 period from a net income of $0.7 million in the 1995 period
primarily as a result of (i) decreased income from recreational facilities
offset by (ii) increased income from mortgage operations.
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1996 TO SIX MONTHS ENDED JUNE 30, 1995
Sales (which represent recorded revenues from closings) for the six months
ended June 30, 1996 were $143.3 million, an increase of $15.2 million (11.9%),
from sales of $128.1 million for the six months ended June 30, 1995. Revenue
from sales of homes increased $35.2 million to $142.0 million in the 1996
period (which included $9.7 million from the sale of model homes as described
above) from $106.8 million in the 1995 period. This increase was due primarily
to an increase in the number of homes closed to 859 in the 1996 period (which
included 57 model units as described above) from 664 in the 1995 period and an
increase in the average sales prices of homes to $165,000 in the 1996 period
from $161,000 in the 1995 period. Revenue from lots, land and other decreased
$20.1 million to $1.3 million in the 1996 period from $21.4 million in the 1995
period.
Total operating loss decreased from a loss of $18.1 million in the 1995 period
to a loss of $1.6 million in the 1996 period. The excess of revenue from sales
of homes over cost of sales - homes increased by $8.5 million, to $16.2 million
in the 1996 period from $7.7 million in the 1995 period. These increases were
primarily due to increased sales prices and an increase in the number of homes
closed as described above and decreases in buyer incentives. Reductions of
real estate assets to estimated net realizable value amounting to $9.4 million
were recorded in the 1995 period, with no corresponding charge in the
comparable period for 1996. Sales and marketing expenses increased by $0.9
million to $10.7 million in the 1996 period from $9.8 million in the 1995
period primarily as a result of increased closing costs (directly related to
revenue from increased closings) in the 1996 period compared to the 1995
period. General and administrative expenses increased by $0.8 million to $7.2
million in the 1996 period from $6.4 million in the 1995 period, primarily as a
result of increased overhead from start-up operations in Arizona and Nevada.
Total interest incurred during the 1996 period decreased $1.7 million (9.6%)
from the 1995 period as a result of a reduction in debt levels and decreased
interest rates. Net interest expense decreased to $1.3 million in the 1996
period from $1.5 million for the 1995 period. This decrease was due primarily
to an increase in development activities in the 1996 period compared to the
1995 period (resulting in increased interest capitalization) and by decreases
in interest rates.
14
<PAGE> 15
THE PRESLEY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(continued)
Other (income) expense, net increased $0.1 million to a net income of $1.0
million in the 1996 period from a net income of $0.9 million in the 1995 period
primarily as a result of (i) increased income from recreational facilities and
(ii) increased income from mortgage operations.
CASH FLOWS - COMPARISON OF SIX MONTHS ENDED JUNE 30, 1996 TO SIX MONTHS ENDED
JUNE 30, 1995
Net cash provided by operating activities decreased from $4.2 million in the
1995 period to net cash used of $3.0 million in the 1996 period. The change
was primarily a result of increased land acquisition and construction activity.
Net cash used in investment activities decreased from $0.5 million in the 1995
period to $0.4 million in the 1996 period. The change was primarily due to a
decrease in the notes receivable.
Net cash provided by financing activities increased to $2.3 million in the 1996
period from net cash used of $14.1 million in the 1995 period. The change was
primarily due to an increase in net borrowings activity.
15
<PAGE> 16
THE PRESLEY COMPANIES
PART II. OTHER INFORMATION
ITEMS 1, 2, 3, 4 AND 5. Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS.
Exhibit 27 - Financial Data Schedule
(B) REPORTS ON FORM 8-K.
The Company did not file any reports on Form 8-K during the
three months ended June 30, 1996.
16
<PAGE> 17
THE PRESLEY COMPANIES
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: August 13, 1996 By: /s/ DAVID M. SIEGEL
--------------------------------------
David M. Siegel
Senior Vice President, Chief Financial
Officer and Treasurer (Principal
Financial Officer)
Date: August 13, 1996 By: /s/ W. DOUGLASS HARRIS
--------------------------------------
W. Douglass Harris
Vice President, Corporate Controller
(Principal Accounting Officer)
17
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
BALANCE SHEET AND CONSOLIDATED STATEMENT OF OPERATIONS INCLUDED IN QUARTERLY
REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 3,095
<SECURITIES> 0
<RECEIVABLES> 6,953
<ALLOWANCES> 0
<INVENTORY> 312,465
<CURRENT-ASSETS> 0
<PP&E> 3,898
<DEPRECIATION> 1,139
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0
0
<COMMON> 522
<OTHER-SE> 81,585
<TOTAL-LIABILITY-AND-EQUITY> 339,801
<SALES> 143,290
<TOTAL-REVENUES> 143,290
<CGS> 127,082
<TOTAL-COSTS> 127,082
<OTHER-EXPENSES> 16,883
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,279
<INCOME-PRETAX> (1,954)
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