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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 1994 Commission File No. 1-6736
STARRETT HOUSING CORPORATION
----------------------------
(Exact Name of Registrant as specified in its charter)
NEW YORK 13-5411123
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
909 THIRD AVENUE, NEW YORK, NEW YORK 10022
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212)751-3100
NONE
(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.
6,566,585 shares of common stock.
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STARRETT HOUSING CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Consolidated Financial Statements:
Statement of Consolidated Financial Position - March 31, 1994 . . . . . . . . . . . . . . . . . . . 3
Condensed Statement of Consolidated Financial Position -
December 31, 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Statements of Common Stockholders' Equity - March 31, 1994
and December 31, 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Statements of Consolidated Operations - For the Three Months
ended March 31, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Consolidated Statements of Cash Flows - For the Three Months
ended March 31, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Management's Discussion of Financial Condition and
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-10
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Exhibit A - Computation of Primary Earnings per Share - For the
Three Months ended March 31, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
2
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STARRETT HOUSING CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED FINANCIAL POSITION
MARCH 31, 1994
(In Thousands)
(Unaudited)
<TABLE>
<S> <C>
ASSETS:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 17,029
U.S. Treasury/Certificates of Deposit . . . . . . . . . . . . . . . . . . . . . . . 305
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,646
Inventory of real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55,691
Property and Equipment-Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,313
Land Held for Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,197
Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,616
--------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $114,797
========
LIABILITIES AND EQUITY:
Liabilities:
Payable Within One Year:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10,506
Current portion of long-term obligations . . . . . . . . . . . . . . . . . . . . . 5,626
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,217
--------
Total Liabilities Payable Within One Year . . . . . . . . . . . . . . . . 29,349
Deferred Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,259
Deferred Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,795
Long-Term Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,880
--------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72,283
--------
Common Stockholders' Equity
Common stock-par value, $1.00; authorized, 18,000 shares . . . . . . . . . . . . . 6,566
Capital in excess of par value . . . . . . . . . . . . . . . . . . . . . . . . . . 23,933
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,341
Pension liability adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . (736)
Shares held in treasury-at cost . . . . . . . . . . . . . . . . . . . . . . . . . 1,590)
--------
Common Stockholders' Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,514
--------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $114,797
========
</TABLE>
See Notes to Consolidated Financial Statements
3
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STARRETT HOUSING CORPORATION AND SUBSIDIARIES
CONDENSED STATEMENT OF CONSOLIDATED FINANCIAL POSITION
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
December 31,
1993
------------
<S> <C>
ASSETS
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,171
U.S. Treasury/Certificates of Deposit . . . . . . . . . . . . . . . . . . . . . . . 7,811
Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,724
Inventory of Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,629
Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,949
--------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $120,284
========
LIABILITIES AND EQUITY
Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,853
Other Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,639
Deferred Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,940
Long-Term Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,033
Common Stockholders' Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,819
--------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $120,284
========
</TABLE>
See Notes to Consolidated Financial Statements
4
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STARRETT HOUSING CORPORATION AND SUBSIDIARIES
STATEMENTS OF COMMON STOCKHOLDERS' EQUITY
(In Thousands Except Share Data)
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1994 1993
--------- ------------
<S> <C> <C>
Common Stock - Par Value, $1.00; Authorized,
18,000,000 shares; Issued, 6,566,585 shares . . . . . . . . . . $ 6,566 $ 6,566
Capital in Excess of Par Value . . . . . . . . . . . . . . . . . 23,933 23,933
Retained Earnings . . . . . . . . . . . . . . . . . . . . . . . . 14,341 13,646
Pension Liability Adjustment . . . . . . . . . . . . . . . . . . (736) (736)
Less: Shares Held in Treasury - at cost;
1994, 305,427 and 1993, 305,427
shares . . . . . . . . . . . . . . . . . . . . . . . . . (1,590) (1,590)
-------- --------
TOTAL COMMON STOCKHOLDERS' EQUITY . . . . . . . . . . . . . . . . $ 42,514 $ 41,819
======== ========
</TABLE>
See Notes to Consolidated Financial Statements
5
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STARRETT HOUSING CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED OPERATIONS
For The Three Months Ended March 31, 1994 and 1993
(In Thousands Except Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
1994 1993
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<S> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 27,395 $ 26,931
Construction Costs . . . . . . . . . . . . . . . . . . . . . . . 15,415 15,254
-------- --------
Income from Construction Contracts and
Related Revenues . . . . . . . . . . . . . . . . . . . . . . . . 11,980 11,677
-------- --------
Expenses:
General and Administrative . . . . . . . . . . . . . . . . . . . 6,057 6,221
Security Service Labor and Other Costs . . . . . . . . . . . . . 2,186 2,092
Selling . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,097 1,383
Mortgage and Closing Costs . . . . . . . . . . . . . . . . . . . 1,175 902
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165 217
Loss from Rental Operations-Net . . . . . . . . . . . . . . . . 159
-------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,680 10,974
-------- --------
Income before Income Taxes . . . . . . . . . . . . . . . . . . . 1,300 703
Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 605 379
-------- --------
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 695 $ 324
======== ========
Earnings per Common Share:
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . $.11 $.05
==== ====
Weighted average number of shares . . . . . . . . . . . . . . . . 6,261 6,399
===== =====
Cash Dividends per Share . . . . . . . . . . . . . . . . . . . . None None
==== ====
</TABLE>
See Notes to Consolidated Financial Statements
6
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STARRETT HOUSING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Three Months Ended March 31, 1994 and 1993
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 695 $ 324
Adjustments to Reconcile Income to Net Cash
Provided by Operating Activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . 517 660
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . 151 323
Gain on sale of rental facilities . . . . . . . . . . . . . . . . 195
Changes in Operating Assets and Liabilities:
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . (922) 3,235
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . 4,977 2,301
Account payable . . . . . . . . . . . . . . . . . . . . . . . . (2,347) (2,341)
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . (1,245) 1,006
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . 2,182 (295)
Deferred revenues . . . . . . . . . . . . . . . . . . . . . . . (145) (441)
------- -------
Cash Provided by Operating Activities . . . . . . . . . . . . . . . 3,863 4,967
------- -------
INVESTING ACTIVITIES:
Investments in and Advances to Partnerships . . . . . . . . . . . . (260) (1,121)
U.S. Treasury/Certificates of Deposit . . . . . . . . . . . . . . . 7,506 2,888
Purchase of Property and Equipment . . . . . . . . . . . . . . . . (228) (124)
Proceeds (payments) relating to sale of rental
and other property and equipment, net . . . . . . . . . . . . . . (414)
------- -------
Net Cash Provided by Investing Activities . . . . . . . . . . . . . 7,018 1,229
------- -------
FINANCING ACTIVITIES:
Repayment of Notes and Mortgage Payables . . . . . . . . . . . . . (4,556) (5,902)
Payments of Promissory Notes . . . . . . . . . . . . . . . . . . . (1,467) (5,846)
Purchase of Treasury Stock . . . . . . . . . . . . . . . . . . . . (8)
------- -------
Net Cash Used In Financing Activities . . . . . . . . . . . . . . . (6,023) (11,756)
------- -------
Increase (Decrease) in Cash and Cash Equivalents . . . . . . . . . 4,858 (5,560)
Cash and Cash Equivalents Beginning of Period . . . . . . . . . . . 12,171 11,624
------- -------
Cash and Cash Equivalents End of Period . . . . . . . . . . . . . . $17,029 $ 6,064
======= =======
</TABLE>
See Notes to Consolidated Financial Statements
7
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STARRETT HOUSING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements of Starrett Housing
Corporation and its subsidiaries have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-Q and Rule 10-01 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 the management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. The consolidated financial statements as of and for the three months
ended March 31, 1994 and 1993 are unaudited and are subject to year-end audit
and adjustments. The results of operations for the interim periods are not
necessarily indicative of the results of operations for the fiscal year. For
comparability purposes, certain 1993 amounts have been reclassified to conform
with the 1994 classifications. For further information, refer to the
consolidated financial statements and footnotes included thereto in the
Company's Annual Report on Form 10-K for the year ended December 31, 1993.
8
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MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
COMPARISON OF THREE MONTHS ENDED MARCH 31, 1994 AND 1993
During the three months ended March 31, 1994 the Company had income from
operations of $1,300,000 as compared with $703,000 in 1993, and net income of
$695,000 or $.11 a share for the three months ended March 31, 1994 as compared
with $324,000 or $.05 a share for the similar period in 1993. Earnings per
share were based on average shares outstanding of 6,261,000 and 6,399,000 in
1994 and 1993, respectively.
The increase in income was primarily attributable to Levitt Corporation.
Levitt's backlog increased from $32,320,000 or 232 units at December 31, 1993
to $79,527,000 or 528 units at March 31, 1994. Levitt's sales (new contracts)
during the three months ended March 31, 1994 increased to $57,353,000 or 371
units from $32,887,000 or 224 units for the similar period in 1993. The March
31, 1994 backlog and sales for the three months ended March 31, 1994 include
$9,348,000 and 60 units relating to a joint venture in which Levitt has a 50%
interest. Levitt's sales increased in both its Puerto Rico and Florida
regions.
Levitt's gross profit margin increased in 1994 compared with 1993. The
increase is due to higher selling prices and a greater proportion of houses
delivered in the Puerto Rico region, where gross profits are higher as compared
to the domestic region. The Company anticipates that sales in Florida during
1994, which have been made at increased profit margins, will be reflected in
income during the fall of 1994.
The Company's management and development division reported a small profit
and its construction division reported a small loss for the quarter ended March
31, 1994.
The Company has three projects located on the Upper West Side of Manhattan,
in which it has a 50% residual partnership interest, with respect to which the
Company has made application for incentives under the Low Income Housing
Preservation and Resident Homeownership Act ("LIHPRHA"). On April 28, 1993,
HUD provided the Partnership with a Value Determination Letter for the first of
its projects establishing a substantial value for the project, and in August
and October 1993 HUD provided technical comments on the Plan of Action
necessary to complete the processing. HUD has notified the Company that it is
reversing its prior Value Determination and consequently will require the
Partnership to reprocess the project, using a different formula for valuation,
presently being developed by HUD. Under HUD's revised formula, the project may
have a substantially diminished value. The Company disagrees with the reversal
of HUD's prior Value Determination position, has so notified HUD and
discussions are in process regarding this matter. In light of the foregoing,
the amount of cash proceeds and profits, if any, the Company could receive for
its 50% residual interest in the project as well as the time
9
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required to complete the processing is uncertain. The revised HUD position
also affects processing under LIHPRHA for the two similar projects in which the
Company owns a 50% residual interest located on the Upper West Side of
Manhattan. If sustained, the revised HUD position will affect all New York
projects of a similar nature.
10
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
STARRETT HOUSING CORPORATION
(Registrant)
s/ Paul Milstein
----------------------------------
Paul Milstein - Chairman
s/ Lewis A. Weinfeld
-----------------------------------
Lewis A. Weinfeld - Senior Vice
President and Treasurer
(Principal Accounting Officer)
DATE: May 13, 1994
11
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EXHIBIT A
STARRETT HOUSING CORPORATION AND SUBSIDIARIES
EXHIBIT SETTING FORTH THE COMPUTATION OF PRIMARY
EARNINGS PER SHARE INFORMATION
(In Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
1994 1993
------ ------
<S> <C> <C>
Weighted average number of shares outstanding during
the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,261 6,399
===== =====
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $695 $324
==== ====
Primary earnings per share:
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . $.11 $.05
==== ====
</TABLE>
12
