FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR5(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the period ended July 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OR 1934
For the transition period from N/A
Commission File Number 33-72106
THE FORECAST GROUP "Registered Tradename", L.P.
FORECAST "Registered Tradename" CAPITAL CORPORATION
(Exact Name of Registrant as specified in its charter)
California 33-0582072
California 33-0582077
(State of Organization) (IRS Employer Identification Number)
10670 Civic Center Drive, Rancho Cucamonga, California 91730
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(909) 9877788
Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
11 3/8% Senior Notes Due 2000 None
Securities Registered Pursuant to Section 12(g) of the Act:
None
Indicated by check mark whether the Registrant (1) has filed
all reports required to be filed by Sections 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___
There was no voting stock held by non-affiliates of the
Registrant at September 12, 1997.
At September 12, 1997, Forecast "Registered Tradename""
Capital Corporation had 2,500 shares of Common stock outstanding.
<PAGE>
<TABLE>
THE FORECAST GROUP "Registered Tradename", L.P.
CONSOLIDATED BALANCE SHEETS
(Amounts in 000's)
July 31,1997 October 31, 1996
(unaudited)
------------ --------------
<S> <C> <C>
Assets:
- -------
Cash and Cash Equivalents $11,425 $12,350
Accounts Receivable 708 466
Accounts and Notes Receivable,
Related Parties 4,131 5,239
Real Estate Inventory 69,083 80,760
Property and Equipment, Net 1,018 1,171
Other Assets 1,794 2,200
------- --------
Total Assets $88,159 $102,186
======= ========
Liabilities & Partners' Equity:
- -------------------------------
Accounts Payable $13,071 $11,443
Accrued Expenses 1,518 3,624
Notes Payable:
Senior Notes at 11 3/8% due
December 2000 29,075 34,475
Collateralized by Real Estate
Inventory 23,567 25,720
------- -------
Total Notes Payable 52,642 60,195
------- -------
Total Liabilities 67,231 75,262
Partners' Equity 21,692 27,688
Less: Capital Notes Receivable from
Partners (764) (764)
------- --------
Net Partners' Equity 20,928 26,924
------- --------
Total Liabilities & Partners' Equity $88,159 $102,186
======= ========
</TABLE>
[FN] See notes to consolidated financial statements.
<TABLE>
THE FORECAST GROUP "Registered Tradename", L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS AND PARTNERS' EQUITY
FOR THE NINE AND THREE MONTHS ENDED JULY 31, 1997 AND 1996
(Unaudited)
(Amount in 000's)
Nine Months Ended Three Months Ended
July 31 July 31,
----------------- ------------------
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Homebuilding Revenues $95,481 $97,006 $41,750 $38,903
Cost of Homes Sold 81,028 80,623 35,492 32,308
------ ------ ------- -----
Gross Profit 14,453 16,383 6,258 6,595
------- ----- ------- ------
Operating Expenses:
- --------------------
Selling & Marketing EX. 10,267 10,382 3,730 3,802
General & Admin. Ex. 5,588 5,291 1,850 1,866
Non-Cash Charge for
Impairment of Real
Estate Inventory 6,635 - - -
Loss on Abandoned Land
Options - 3 - 3
------ ------- ------ -----
Total Operating Ex. 22,490 15,676 5,580 5,671
------ ------- ------ -----
Operating Income (Loss) (8,037) 707 678 924
Other Income (Expenses):
- ------------------------
Interest Income 279 187 83 56
Other Income and Ex. 128 66 45 (49)
------ ------ ----- -----
Total Other Income
(Expenses) 407 253 128 7
------ ------ ----- -----
Income (Loss) before
Extraordinary Gain (7,630) 960 806 931
Extraordinary Gain on
Extinguishment of
Senior Notes 1,634 1,876 - -
------ ------ ------ -----
Net Income (Loss) ($5,996) $2,836 $806 $931
------ ------ ------ -----
Partners' Equity at
Beginning Of Period $27,688 $23,998 20,886 $25,903
Capital Contribution/
(Distribution) - ($200) - ($200)
Net Income(Loss)
this Period (5,996) 2,836 806 931
------ ------ ------ ------
Subtotal 21,692 26,634 21,692 26,634
Less: Capital Notes
Receivable from Partners (764) (764) (764) (764)
------ ------ ------ -------
Net Partners' Equity at
End of Period $20,928 $25,870 $20,928 $25,870
======= ======= ======= =======
</TABLE>
[FN] See notes to consolidated financial statements.
<TABLE>
THE FORECAST GROUP "Registered Tradename" L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JULY 31, 1997 AND 1996
(Unaudited)
(AMOUNT IN 000's)
1997 1996
----- -----
<S> <C> <C>
Operating Activities:
- ---------------------
Net Income (Loss) ($5,996) $2,836
Adjustments to Reconcile Net Income (Loss) to
Net Cash Generated from (Used for)
Operating Activities
Non-Cash Charge for Impairment of
Real Estate Inventory 6,635 -
Extraordinary Gain on Extinguishment
of Senior Notes (1,634) (1,876)
Depreciation and Amortization on
Property and Equipment 222 202
Loss (Gain) on Sale of Property
and Equipment - 5
Decrease (Increase) in Accounts
Receivable (242) 54
Decrease (Increase) in Real Estate
Inventory 5,042 (3,175)
Decrease (Increase) in Other Assets 252 (505)
Increase (Decrease) in Accounts
Payable and Accrued Expenses (478) 1,304
------ ------
Net Cash Generated from(Used for)
Operating Activities 3,801 (1,155)
------ ------
Investing Activities:
- ---------------------
Additions to Property and Equipment (69) (154)
Proceeds from sale of property and equipment - 3
------ ------
Net Cash Generated from(Used for)
Investing Activities (69) (151)
------ ------
Financing Activities:
- ---------------------
Retirement of Senior Notes at 11 3/8% due
December 2000 (3,612) (3,251)
Decrease(Increase)in Accounts and Notes
Receivable, Related Parties 1,108 (1,958)
Proceeds from Notes Payable 49,377 51,932
Proceeds from Notes Payable, Other 1,700 2,221
Principal Payments on Notes Payable (51,530) (46,527)
Principal Payments on Notes Payable (1,700) (2,221)
------ -------
Net Cash Generated from(Used for)
Financing Activities (4,657) 196
------ ------
Increase (Decrease) in Cash and Cash
Equivalents (925) (1,110)
Cash and Cash Equivalents at Beginning of
Period 12,350 8,090
------ ------
Cash and Cash Equivalents at End of Period $11,425 $6,980
====== ======
</TABLE>
[FN] See notes to consolidated financial statements.
<PAGE>
THE FORECAST GROUP "Registered Tradename", L.P. NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally
accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted
accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation
have been included.
These consolidated financial statements should be read
in conjunction with the consolidated financial statements and
related disclosures contained in the Form 10-K for the year
ended October 31, 1996 (File No. 33-72106) as filed with the
Securities and Exchange Commission.
The results of operations for the nine months ended July
31, 1997 do not necessarily indicate the results that can be
expected for the full fiscal year.
The results of operations for the nine months ended July
31, 1997, and this Form 10-Q, also may be interpreted as, or
actually contain, "forward looking" information, as that term is
defined by the Securities and Exchange Commission. To the
extent such forward looking information is contained in this
filing, the company intends to use these disclosures to take
advantage of the "Safe Harbor" provisions set out in the
rules and regulations of the Securities and Exchange
Commission, and thus strongly recommends that prior to making
an investment decision a prospective investor should carefully
consider the factors mentioned in Form 10-K for the year
ended October 31, 1996 in relation to that "forward looking"
information, as well as other financial and business
information that may be available from a variety of
sources regarding the home building industry as a whole,
including, but not limited to:
- - Changes in national economic conditions such as interest
rates, consumer confidence and job loss or formation
statistics
- - Change in economic conditions in the markets in which the
Company operates
- - Fluctuations in mortgage interest rates
- - Cost increases resulting from adverse weather conditions,
shortages of labor and/or construction materials -
Changes in governmental regulations which may delay new home
development or impose additional costs or fees.
2. Real Estate Held for Development and Sale and Related
Notes Payable
Real estate held for development and sale and related
notes payable consist of the following:
<TABLE>
(Amounts in 000's) July 31, 1997
---------------------------
Real Estate Notes Payable
Inventory
----------- -------------
<S> <C> <C>
Land Held for Development $15,341 $0
Residential Projects in Process 47,294 19,156
Model Homes 6,448,00 4,411
---------- ----------
Total $69,083 $23,567
========== ==========
October 31, 1996
---------------------------
Real Estate Notes Payable
Inventory
----------- -------------
Land Held for Development $15,067 $0
Residential Projects in Process 57,442 20,449
Model Homes 8,251 5,271
----------- ------------
Total $80,760 $25,720
=========== ============
</TABLE>
3. Interest Expense
The following summarizes the components of interest
expense incurred, capitalized, expensed and paid:
<TABLE>
(Amount in 000's) For the Nine Months For the Three Months
Ended Ended
July 31, July 31,
------------------ -------------------
1997 1996 1997 1996
------------------- ------------------
<S> <C> <C> <C> <C>
Interest incurred and
Capitalized $5,393 $5,591 $1,709 $1,831
Capitalized interest
amortized to cost
of homes sold $6,183 $4,802 $2,821 $1,977
Interest paid $6,488 $6,798 $2,575 $2,829
</TABLE>
4. Transactions With Affiliates
In December of 1994, Mr. Previti did, on his own
account, purchase $550,000 of the Company's Senior Notes at a
favorable discount from their face value. In January 1995,
the Board of Directors of Forecast "Registered Tradename"
Homes, Inc., resolved that it would be in the Company's best
long-term interests to seek the assistance of Mr. James Previti,
the Company's President and Chief Executive Officer, in
acquiring the Company's Senior Notes on the open market, if he
could acquire them at a favorable discount from their stated
face value. At the same time, the Board of Directors agreed
that the Company would repurchase the notes from Mr. Previti at
his cost basis, plus interest, at such time as the Company had
sufficient financial resources. Acting upon this
authorization, Mr. Previti did acquire another $19,800,000
of Senior Notes of which $14,950,000 were repurchased and
retired prior to October 31, 1996. In January 1997, Mr.
Previti assigned his interest in the aggregate remaining
$5,400,000 of Senior Notes to the Company, in exchange for the
Company's assumption of margin debt of $1,700,000 owing by Mr.
Previti, and forgiveness of two notes held by and owing to
the Company in the total amount of $1,699,000 that were
secured by Mr. Previti's interest in the Senior Notes. This
transaction resulted in the Company repaying the margin debt of
$1,700,000, plus accrued interest, which created an
extraordinary gain of $1,634,000 in the first quarter of fiscal
1997.
The Company believes that the transactions discussed
above were on terms at least as favorable to the Company as a
comparable transaction made on an arms length basis between
unaffiliated parties.
5. 11 3/8% Senior Notes Due December 2000
In February 1994, the Company issued $50,000,000 in 11
3/8% Senior Notes through a public debt offering. The notes are
joint and several obligations of the Company and Forecast
"Registered Tradename" Capital Corporation, with interest only
payments due semi-annually on June 15 and December 15 of each
year. The notes are unsecured obligations of the Company and
rank pari passu in right of payment with all senior
indebtedness of the Company. As of July 31, 1997, the Company had
retired a total of $20,925,000 of the Senior Notes, leaving
$29,075,000 of Senior Notes still outstanding.
The Indenture governing the Senior Notes requires the
Company to maintain a minimum net worth of $25 million. If the
Company's net worth at the end of any two consecutive fiscal
quarters (the last day of such second consecutive fiscal
quarter being referred to as the "Trigger Date") is less than
$25 million , then the Company is required to make an offer to
all Senior Note holders to acquire, on a pro rata basis, Senior
Notes in the aggregate principal amount of $5 million (the
"Net Worth Offer") at a purchase price equal to 100% of the
principal amount thereof, plus accrued interest to the date of
repurchase. Notwithstanding this requirement, to offer to and
then repurchase Senior Notes, the Indenture allows the Company
to credit against the Net Worth Offer, the principal amount of
any Senior Notes acquired by the Company prior to the Trigger
Date, through repurchase or optional redemption. The Company may
not, however, use any specific Senior Note repurchase in any
more than one Net Worth Offer. In no event shall the failure to
meet the minimum net worth requirement at the end of any fiscal
quarter be counted toward the making of more than one Net Worth
Offer.
For the fiscal quarters ended October 31, 1995 and January
31, 1996, the Company was not in compliance with the minimum net
worth requirement. Therefore, under the terms of the
Company's Indenture, January 31, 1996 became a Trigger Date for
the Company, requiring a Net Worth Offer. However, despite
this event, the Company had already repurchased or redeemed a
sufficient amount of Senior Notes to meet any repurchase
obligations resulting from the first Trigger Date. From April
30, 1996 through January 30, 1997, the Company's net worth was
again above the $25 million threshold, thereby preventing the
occurrence of a second Trigger Date. As a result of the
company's decision to record a non-cash charge for the
impairment of real estate inventory at the end of the first
quarter of 1997, for the fiscal quarters ended January 31,
1997, April 30, 1997 and July 31, 1997, the Company was again
not in compliance with the minimum net worth requirement, which
resulted in the occurrence of a Trigger Date on April 30,
1997. Notwithstanding the occurrence of this Trigger Date,
the company's acquisition and retirement of over $15 million in
Senior Notes not previously used in a Net Worth Offer, once
again prevented the need to make a Net Worth Offer. Using the
to date amount of retired Senior Notes, management believes it
can prevent the occurrence of any Net Worth Offer up through
October 30, 1998.
6. Real Estate Held for Development and Sale
In March 1995, The Financial Accounting Standards Board
(FASB) issued Statement No. 121, "Accounting for the Impairment
of LongLived Assets and for Long-Lived Assets to Be
Disposed Of" (Statement 121). Under Statement 121, when events
or circumstances indicate that an impairment to an assets to be
held and used might exist, the expected future undiscounted
cash flows from the affected asset or group of assets must be
estimated and compared to the carrying value of the asset or
group of assets. If the sum of the estimated undiscounted
cash flows is less than the carrying value of the assets, an
impairment loss must be recorded. The impairment loss is
measured by comparing the estimated fair value of the assets
with their carrying amount. Statement 121 also requires that
long-lived assets that are held for disposal be reported at
the lower of the assets' carrying amount or fair value less
costs of disposal.
Management performs regular evaluations of its real
estate inventory and analyzes future undiscounted cash flows for
all real estate projects where impairment indicators are
present. The evaluations consider the competitive nature
of homebuilding operations in the Company's principal markets,
including changes in sales prices, increases in sales
incentives and future costs of development and holding costs
during development based on current absorption estimates.
Based on these evaluations, a non-cash charge for the
impairment of certain real estate assets amounting to
$6,635,000 was recorded in the three months ending January 31,
1997.
<PAGE>
FORECAST "Registered Tradename" CAPITAL CORPORATION
BALANCE SHEET
<TABLE>
July 31, 1997 October 31, 1996
(unaudited)
------------- -----------------
<S> <C> <C>
------------ ----------------
Assets:
- -------
Cash $500 $300
----------- --------------
Total Assets $500 $300
=========== ===============
Liabilities & Shareholders'
Deficit:
- ---------------------------
Accounts Payable $400 $400
Accounts Payable, Related Parties 3,300 2,300
----------- --------------
Total Liabilities 3,700 2,700
Common Stock, $1.00 par value:
Authorized 10,000 shares
Issued and Outstanding
2,500 shares 2,500 2,500
Accumulated Deficit (5,700) (4,900)
----------- -------------
Total Shareholders' Deficit (3,200) (2,400)
----------- -------------
Total Liabilities
& Shareholders' Deficit $500 $300
========== =============
</TABLE>
[FN] See notes to consolidated financial statements.
FORECAST "Registered Tradename" CAPITAL CORPORATION
STATEMENTS OF OPERATIONS AND SHAREHOLDERS' EQUITY
FOR THE NINE AND THREE MONTHS ENDED JULY 31, 1997 AND 1996
(Unaudited)
<TABLE>
Nine Months Ended Three Months Ended
July 31, July 31,
----------------- -----------------
1997 1996 1997 1996
----------------- ----------------
<S> <C> <C> <C> <C>
General & Admin. Ex. $0 $700 $0 $700
Income Tax Expense 800 800 0 0
------ ------- ------- -------
Net Income (Loss) $800) ($1,500) $0 ($700)
====== ======= ======= ======
Shareholders' Equity at
Beginning of Period (2,400) (600) (3,200) (1,400)
Net Income(Loss)
this Period (800) (1,500) 0 (700)
------ ------- ------- -------
Shareholders' Equity at
End of Period ($3,200) ($2,100) ($3,200) ($2,100)
======== ======= ======= =======
</TABLE>
[FN] See notes to consolidated financial statements.
<PAGE>
FORECAST "Registered Tradename" CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
Forecast "Registered Tradename" Capital Corporation was
incorporated in California on September 20, 1993. The Company is
a wholly-owned subsidiary of The Forecast Group "Registered
Tradename" L.P., a California limited partnership that is
engaged in the residential real estate development business.
The accompanying unaudited financial statements have
been prepared in accordance with generally accepted accounting
principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S
X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been
included.
These consolidated financial statements should be read
in conjunction with the consolidated financial statements and
related disclosures contained in the Form 10K for the year
ended October 31, 1996 (File No. 33-72106) as filed with the
Securities and Exchange Commission.
The results of operations for the nine months ended July
31, 1997 do not necessarily indicate the results that can
be expected for the full fiscal year.
2. Income Taxes
The Company is a "C" Corporation for federal and state
income tax reporting purposes and accounts for income taxes in
accordance with Financial Accounting Standards Board
Statement No.109 "Accounting for Income Taxes".
<PAGE>
THE FORECAST GROUP "Registered Tradename", L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Part I. Item 2.
Results of Operations
- ---------------------
The following table sets forth, for the period
indicated, certain income statement items as percentages of
total home building sales and certain other data:
<TABLE>
Percent of Percent of
Housing Sales Housing Sales
For the Nine For the Three
Months Ended Months Ended
July 31, July 31,
------------------ ------------------
1997 1996 1997 1996
------------------- ------------------
<S> <C> <C> <C> <C>
Homebuilding Revenues 100.00% 100.00% 100.00% 100.00%
Cost of Homes Sold 84.86% 83.11% 85.01% 83.05%
------- ------- ------- -------
Gross Profit 15.14% 16.89% 14.99% 6.95%
Operating Expenses:
Selling & Marketing
Expense 10.75% 10.70% 8.93% 9.77%
General & Admin.
Expense 5.85% 5.45% 4.43% 4.80%
Non-Cash Charge for
Impairment of Real
Estate Inventory 6.95% 0.00% 0.00% 0.00%
Loss on Abandoned
Land Options 0.00% 0.00% 0.00% 0.00%
------ ------ ------ ------
Total Operating Ex. 23.55% 16.16% 13.37% 14.58%
Operating Income (Loss) (8.42%) 0.73% 1.62% 2.38%
Number of homes closed 657 701 288 276
Number of homes sold 719 751 300 247
Number of homes in backlog 227 248
Aggregate value of
backlog in millions $34,186 $33,707
======== ========
</TABLE>
Results of Operations for the Three Months ended July 31, 1997
and July 31, 1996
Housing revenues for the three months ended July 31, 1997
were $41.8 million, representing an increase of $2.8 million
or 7.3% from the three months ended July 31, 1996. The revenues
in fiscal 1997 represent 288 closings, an increase of 4.4% from
the three months ended July 31, 1996. This increase in
revenues is also attributable to a 2.9% increase in the average
sales price for the same period a year ago. In addition, the
Company had new home sales, net of cancellations, of 300
homes for the three months ended July 31, 1997, representing
an increase of 21.5% from the comparable prior year period, and
a 1.4% increase in the aggregate value of homes in backlog as
of July 31, 1997 as compared to July 31, 1996.
Gross profit from housing sales were $6.3 million for
the three months ended July 31, 1997, a decrease of $337,000, or
5.1%, from the three months ended July 31, 1996. The decrease
in gross profit margin is attributable to increasing
warranty reserves during the quarter, mainly in the Arizona
Division, and amortizing a higher percentage of capitalized
interest when comparing period to period.
Selling and marketing expenses decreased by $72,000 or
1.9% during the three months ended July 31, 1997, as compared
to the three months ended July 31, 1996. This decrease is
attributable to the Company being able to reduce the level of
incentives it had to offer to its homebuyers without adversely
affecting its historical sales absorption rates.
General and administrative expenses decreased $16,000 or
0.9% during the three months ended July 31, 1997, as compared
to the three months ended July 31, 1996. This reduction is
primarily attributable to Senior Management's restructuring of
the division level reporting and responsibility lines, which
resulted in greater efficiencies at all division levels.
Income before extraordinary gain was $806,000 during the
three months ended July 31, 1997, representing a decrease of
$125,000 as compared to the three months ended July 31, 1996.
This decrease is attributable to an increase in warranty
costs and capitalized interest amortized through the cost of
sales.
Results of Operations for the Nine Months ended July 31, 1997 and
July 31, 1996
Housing revenues for the nine months ended July 31, 1997
were $95.5 million, representing a decrease of $1.5 million or
1.6% from the nine months ended July 31, 1996. The decrease in
revenue is a result of a 6.3% decrease in closings from the
comparable prior year period. The decrease in closings is
attributable to the delay in opening new communities in Northern
California and fewer homes in backlog in the Company's
Phoenix and Southern California markets. In addition, the
Company had new home sales, net of cancellations, of 719
homes for the nine months ended July 31, 1997, a decrease of
4.3% from the comparable prior year period. This reduction in
sales is also attributable primarily to the delay in opening new
communities.
Gross profit from housing sales were $14.5 million for
the nine months ended July 31, 1997, which represents a
decrease of $1.9 million or 11.8%, from the nine months ended
July 31, 1996. This decrease is primarily as a result of the
decreased number of home closings in this reporting period
as compared to the comparable prior year period and an increase
in warranty reserves during the current fiscal year, primarily
in the Arizona Division. Allowing for the warranty adjustment,
gross profit margin per unit is still slightly lower for
this reporting period, due to amortizing a higher
percentage of capitalized interest when comparing period to
period.
Selling and marketing expenses for the nine months ended
July 31, 1997 were $10.3 million, reflecting a decrease of
$115,000 or 1.1% from the nine months ended July 31, 1996.
The decrease is primarily attributable to a decrease in house
closings over the entire nine month period ending July 31,
1997.
General and administrative expenses were $5.6 million for
the nine months ended July 31, 1997, an increase of $297,000 or
5.6% from the nine months ended July 31, 1996, resulting from a
onetime extraordinary cost incurred in the Company's first
fiscal quarter of 1997. Senior Management continually analyzes
the general and administrative costs and has recently
restructured the division level reporting and responsibility
lines, which has resulted in greater efficiencies at all
division levels.
Loss before extraordinary gain was $7.6 million for the
nine months ended July 31, 1997, as compared to $960,000 of
income before extraordinary gain for the nine months ended July
31, 1996. The decrease in income is primarily attributable to
the Company evaluating it's inventory in relation to future
undiscounted cash flows and recording a non-cash charge of
$6,635,000 during the first fiscal quarter of 1997.
Liquidity and Capital Resources
The residential real estate development business is
inherently capital intensive. Significant cash expenditures
are typically needed to acquire and develop land, construct
homes and establish marketing programs for lengthy periods of
time in advance of revenue realization. The Company generally
finances its operations with secured borrowings from
commercial banks, financial institutions and private
investors, unsecured borrowings in the public market, and with
available cash flow from operations.
At July 31, 1997, the Company had commitments for $53.2
million under several revolving credit facilities with
commercial banks and financial institutions, of which $16.3
million was outstanding. In addition, at July 31, 1997, the
Company had community specific facilities capable of
providing aggregate fundings of $3.8 million, against
which $2.8 million was outstanding at that time. The Company
also benefits from a line of credit which is secured by some of
its model homes for an amount not to exceed $5.8 million of
which $4.4 million was outstanding as of July 31, 1997.
Borrowings under the credit facilities are secured by liens on
specific real property owned by the Company, and carry limited
recourse against the Company. As a result, on July 31, 1997,
the aggregate outstanding principal balance under the Company's
credit facilities was $23.6 million and the recourse to the
Company from those borrowings was $4.7 million.
Cash and cash equivalents at July 31, 1997, were
abnormally high as a direct result of the Company's
aggressive land acquisition program, which itself is
designed to support the Company's plan of controlled expansion
and growth.
For the nine months ended July 31, 1997, the
Company's interest incurred and capitalized decreased 3.5% as
compared to the nine months ended July 31, 1996. This
decrease represents the continual negotiations with lenders
to reduce financing rates, which will enable the Company to
improve gross margins in future reporting periods.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
- --------------------------
(a) None
Item 2. Changes in Securities
- ------------------------------
(a) None
Item 3. Defaults upon Senior Securities
- ----------------------------------------
(a) Refer to note 5 of Notes to Consolidated Financial Statements.
-------------------------------------------
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
(a) None
Item 5. Other Information
-----------------
(a) None
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) There are no exhibits attached to this report.
(b) The Company did not file any reports on Form 8-K during
the period.
<PAGE>
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.
THE FORECAST GROUP "Registered Tradename", L.P.
----------------------------------------------
By: FORECAST "Registered Tradename" HOMES, INC.
-----------------------------------------------
A California Corporation
its General Partner
September 12, 1997 By: /s/ James P. Previti
- ------------------ --------------------
Date James P. Previti
President
By: /s/ Larry R. Day
----------------
Larry R. Day
Principal Accounting Officer
By: FORECAST "Registered Tradename" CAPITAL CORPORATION
------------------------------------------------------
September 12, 1997 By: /s/ James P. Previti
- ------------------ --------------------
Date James P. Previti
President
By: /s/ Larry R. Day
----------------
Larry R. Day
Principal Accounting Officer
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