-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DXkFKvKWv5ThuSjIU+7MfG/vw+zlg+8vRD4/wRlJvcpIM8cdqXtnlDVI0kKUNzmC cqCuAK1sdl+gPfxchTfJ0w== 0001005477-01-501994.txt : 20020410 0001005477-01-501994.hdr.sgml : 20020410 ACCESSION NUMBER: 0001005477-01-501994 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010930 FILED AS OF DATE: 20011114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CALPROP CORP CENTRAL INDEX KEY: 0000016496 STANDARD INDUSTRIAL CLASSIFICATION: OPERATIVE BUILDERS [1531] IRS NUMBER: 954044835 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-06844 FILM NUMBER: 1790032 BUSINESS ADDRESS: STREET 1: 13160 MINDANAO WAY STREET 2: STE 180 CITY: MARINA DEL REY STATE: CA ZIP: 90292 BUSINESS PHONE: 3103064314 MAIL ADDRESS: STREET 1: 13160 MINDANAO WAY STREET 2: STE 180 CITY: MARINA DEL REY STATE: CA ZIP: 90292 10-Q 1 d01-35124.txt FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 (Mark One) |X| Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended September 30, 2001 or | | Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to ------------------ ------------------- Commission File Number 1-6844 CALPROP CORPORATION (Exact name of registrant as specified in its charter) California 95-4044835 ------------------------------ ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 13160 Mindanao Way, Suite 180, Marina Del Rey, California 90292 --------------------------------------------------------- --------- (Address of principal executive offices) (Zip Code) (Registrant's telephone number, including area code) (310) 306-4314 ------------------ 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 |_| Number of shares outstanding of each of Registrant's classes of common stock, as of October 16, 2001: Number of Shares Title of Each Class Outstanding - ------------------- ---------------- Common Stock, no par value 10,267,635 CALPROP CORPORATION Part I Item I - Financial Information Set forth is the unaudited quarterly report for the quarters ended September 30, 2001 and 2000, for Calprop Corporation. The information set forth reflects all adjustments which were, in the opinion of management, necessary for a fair presentation. CALPROP CORPORATION CONSOLIDATED BALANCE SHEETS ASSETS September 30, December 31, 2001 2000 (Unaudited) ------------- ------------ Real estate under development $ 88,468,000 $ 98,544,447 Other assets: Cash and cash equivalents 4,216,860 2,394,310 Deferred tax assets (note 2) 6,535,343 6,535,343 Other assets 899,013 863,412 ------------ ------------ Total other assets 11,651,216 9,793,065 ------------ ------------ $100,119,216 $108,337,512 ============ ============ The accompanying notes are an integral part of these financial statements. 3 CALPROP CORPORATION CONSOLIDATED BALANCE SHEETS LIABILITIES AND STOCKHOLDERS' EQUITY
September 30, December 31, 2001 2000 (Unaudited) ------------- ------------- Trust deeds and notes payable $ 55,352,665 $ 66,341,488 Related-party notes 23,679,170 20,702,243 ------------- ------------- Total trust deeds, notes payable and related-party 79,031,835 87,043,731 notes Accounts payable and accrued liabilities 6,838,181 9,316,681 Warranty reserves 624,330 546,984 ------------- ------------- Total liabilities 86,494,346 96,907,396 Stockholders' equity: Common stock, no par value Authorized - 20,000,000 shares Issued and outstanding - 10,267,635 and 10,290,535 shares at September 30, 2001 and December 31, 2000, respectively 10,267,635 10,290,535 Additional paid-in capital 25,844,571 25,849,961 Deferred compensation (105,525) (105,525) Stock purchase loans (531,513) (519,733) Accumulated deficit (21,850,298) (24,085,122) ------------- ------------- Total stockholders' equity 13,624,870 11,430,116 ------------- ------------- $ 100,119,216 $ 108,337,512 ============= =============
The accompanying notes are an integral part of these financial statements. 4 CALPROP CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Nine Months Ended September 30, September 30, ------------------------------------------------------------ 2001 2000 2001 2000 ------------ ------------ ------------ ------------ Development operations: Real estate sales $ 18,880,000 $ 16,525,836 $ 69,309,686 $ 34,323,298 Cost of real estate sales 16,688,474 14,765,814 62,692,165 32,072,973 ------------ ------------ ------------ ------------ 2,191,526 1,760,022 6,617,521 2,250,325 Recognition of Impairment of real estate under development (note 1) (2,018,088) -- (2,018,088) -- ------------ ------------ ------------ ------------ Income from development operations 173,438 1,760,022 4,599,433 2,250,325 Other income 73,412 112,339 144,031 187,212 ------------ ------------ ------------ ------------ Other expenses: General and administrative 874,734 718,548 2,304,921 1,973,097 Interest -- (40,008) -- 13,518 ------------ ------------ ------------ ------------ Total other expenses 874,734 678,540 2,304,921 1,986,615 ------------ ------------ ------------ ------------ Minority interests (note 4) -- 10,000 (1,825) (216,393) (Loss) income before income tax expense (627,884) 1,183,821 2,440,368 667,315 Income tax expense (note 2) 205,544 286,181 205,544 148,104 ------------ ------------ ------------ ------------ Net (loss) income $ (833,428) $ 897,640 $ 2,234,824 $ 519,211 ============ ============ ============ ============ Basic net (loss) income per share (note 3) $ (0.08) $ 0.09 $ 0.22 $ 0.05 ============ ============ ============ ============ Diluted net (loss) income per share (note 3) $ (0.08) $ 0.09 $ 0.21 $ 0.05 ============ ============ ============ ============
The accompanying notes are an integral part of these financial statements. 5 CALPROP CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended September 30, ---------------------------- 2001 2000 ---------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 2,234,824 $ 519,211 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Minority interests (1,825) (216,393) Depreciation and amortization 35,115 47,074 Recognition of impairment of real estate under development 2,018,088 -- Provision for warrantly reserves 223,596 134,771 Change in assets and liabilities: Other assets (55,686) (64,608) Deferred tax assets -- 266,926 Prepaid expenses (9,964) (6,012) Accounts payable and accrued liabilities (2,478,500) 2,157,208 Warranty reserves (146,250) (19,532) Additions to real estate under development (54,631,981) (57,800,585) Cost of real estate sales 62,692,165 32,072,973 Accrued interest for executive stock purchase loans (11,780) (17,068) ------------ ------------ Net cash provided by (used in) operating activities 9,867,802 (22,926,035) ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES - Capital expenditures (5,066) (27,976) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings under related-party notes 7,440,000 5,650,000 Payments under related-party notes (4,463,073) (7,815,744) Borrowings under trust deeds and notes payable 53,180,517 64,207,545 Payments under trust deeds and notes payable (64,169,340) (38,441,403) Purchase of common stock (28,290) -- Distributions to joint venture partner -- (11,798) ------------ ------------ Net cash (used in) provided by financing activities (8,040,186) 23,588,600 ------------ ------------ Net increase in cash and cash equivalents 1,822,550 634,589 Cash and cash equivalents at beginning of period 2,394,310 1,405,663 ------------ ------------ Cash and cash equivalents at end of period $ 4,216,860 $ 2,040,252 ============ ============ SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid (refunded) during the period for - Interest, net of amount capitalized $ 13,518 Income taxes $ 142,741 $ (118,822)
The accompanying notes are an integral part of these financial statements. 6 CALPROP CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS PERIODS ENDED SEPTEMBER 30, 2001 AND 2000 (Unaudited) Note 1: Basis of presentation and significant accounting policies The unaudited, condensed, consolidated financial statements included herein have been prepared by the registrant pursuant to the instructions to Quarterly Report on Form 10-Q required to be filed with the Securities and Exchange Commission and do not include all information and footnote disclosure required by accounting principles generally accepted in the United States of America for complete financial statements. The accompanying financial statements have not been audited by independent auditors in accordance with auditing standards generally accepted in the United States of America, but in the opinion of management, such financial statements include all adjustments, consisting only of normal recurring adjustments necessary to present fairly the financial position of Calprop Corporation ("the Company") and its results of operations. The condensed financial statements should be read in conjunction with the financial statements and the notes thereto included in the registrant's latest Annual Report on Form 10-K, particularly with regard to disclosures relating to major accounting policies. Recent accounting pronouncements - In July 2001, The Financial Accounting Standards Board ("FASB") issued two new pronouncements: Statement of Financial Accounting Standards ("SFAS") No. 141. "Business Combinations", and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS 141 prohibits the use of the pooling-of-interest method for business combinations initiated after June 30, 2001 and also applies to all business combinations accounted for by the purchase method that are completed after June 30, 2001. There are also transition provisions that apply to business combinations completed before July 1, 2001, that were accounted for by the purchase method. SFAS 142 is effective for fiscal years beginning after December 15, 2001 and requires companies to cease amortizing goodwill that existed at June 30, 200. The amortization of existing goodwill will cease on December 31, 2001. Any goodwill resulting from acquisitions completed after June 30, 2001. SFAS No. 142 also establishes a new method of testing goodwill for impairment on an annual basis or on an interim basis if an event occurs or circumstances change that would reduce the fair value of a reporting unit below its carrying value. These new standards are not expected to have a significant impact on the Company's financial position or its results of operations. On October 3, 2001, the FASB issued SFAS No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS 144 supercedes SFAS 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." SFAS 144 applies to all long-lived assets (including discontinued operations) and consequently amends Accounting Principles Board Opinion No. 30 (APB 30), Reporting Results of Operations Reporting the Effects of Disposal of a Segment of a Business. SFAS 144 develops one accounting model for long-lived assets that are to be disposed of by sale. SFAS 144 requires that long-lived assets that are to be disposed of by sale be measured at the lower of book value or fair value less cost to sell. Additionally, SFAS 144 expands the scope of discontinued operations to include all components of an entity with operations that (1) can be distinguished from the rest of the entity and (2) will be eliminated from the ongoing operations of the entity in a disposal transaction. SFAS 144 is effective for the Company for all financial statements issued in fiscal 2002. The Company has not yet determined the impact, if any, the adoption of SFAS No. 144 will have on its financial position or its results of operations. The results of operations for the nine months ended September 30, 2001 may not be indicative of the operating results for the year ending December 31, 2001. 7 Note 2: Income taxes As of September 30, 2001, the Company had gross deferred tax assets of $7,402,585 offset by a deferred tax asset valuation allowance of $867,242. During the nine months ended September 30, 2001, the Company reduced the deferred tax asset valuation allowance by $566,415 which offsets the deferred income taxes for the period. The Company has assessed its past earnings history and trends, sales backlog, budgeted sales, and expiration dates of net operating loss carryforwards and has determined that it is more likely than not that the $6,535,343 of deferred tax assets will be realized. As of September 30, 2001, the Company had net operating loss carryforwards for federal and state income tax purposes of approximately $16,548,000 and $698,000, respectively. For federal and state tax purposes the net operating loss carryforwards expire from 2007 through 2013, and from 2001 through 2003, respectively. Income taxes in 2000 includes the net refund of $141,488 resulting from a claim filed for the carryback of losses related to certain qualifying expenses incurred in 1994. Note 3: Earnings per share The following table sets forth the computation of basic and diluted net (loss) income per share:
Three Months Ended Nine Months Ended September 30, September 30, --------------------------------------------------------- 2001 2000 2001 2000 --------------------------------------------------------- Net (loss) income $ (833,428) $ 897,640 $ 2,234,824 $ 519,211 ========================================================= Weighted average shares for basic net (loss) income per share 10,285,284 10,291,673 10,288,778 10,291,673 Effect of dilutive stock options -- 186,299 152,444 183,716 --------------------------------------------------------- Weighted average shares for dilutive net income per 10,285,284 10,477,972 10,441,222 10,475,389 share ========================================================= Basic net (loss) income per share $ (0.08) $ 0.09 $ 0.22 $ 0.05 ========================================================= Diluted net (loss) income per share $ (0.08) $ 0.09 $ 0.21 $ 0.05 =========================================================
Options to purchase 1,083,700 shares of common stock were outstanding as of September 30, 2001 and December 31, 2000. For the three months ended September 30, 2001, options were not included in the computation of diluted net loss per common share because the effect would be antidilutive to the net loss in the period. For the nine months ended September 30, 2001, 594,700 options were not included in the computation of diluted net income because their exercise prices were higher than the average market price per share of common stock. 8 Note 4: Minority interest The Company has consolidated the financial statements of the following entities:
- ----------------------------------------------------------------------------------------------------------- Entity Ownership interest at Development September 30, 2001 - ----------------------------------------------------------------------------------------------------------- Colorado Pacific Homes, Inc. ("CPH") 80% Real estate in the state of Colorado DMM Development, LLC ("DMM") 67% Cierra del Lago and Antares projects, California Montserrat II, LLC ("Mont II") 99% Montserrat Estate project, California Parkland Farms Development Co., LLC 99% 115 lots in Healdsburg, ("Parkland") California RGCCLPO Development Co., LLC 100% 382 lots in Milpitas, ("RGCCLPO") California PWA Associates, LLC ("PWA") 100% 68-unit apartment in Milpitas, California - -----------------------------------------------------------------------------------------------------------
CPH: The Company is entitled to receive eighty percent of the profits of CPH, and the other owner, an officer of the Company, is entitled to receive the remaining twenty percent of the profits. DMM: The Company is entitled to receive two-thirds of the profits of DMM, and the other owner, RGC Courthomes, Inc. ("RGC"), is entitled to receive the remaining one-third of the profits. Mont II: Pursuant to the operating agreement of Mont II, income was allocated first to PICal Housing Associates, L.P. ("PICaL") to obtain the return of its capital. Subsequent income is allocated 100% to the Company. Parkland: Pursuant to the operating agreement of Parkland, the Company is entitled to receive ninety-nine percent of the profits of Parkland, and the other member, an officer of the Company, is entitled to receive the remaining one percent of the profits. RGCCLPO: Pursuant to the operating agreement of RGCCLPO, the Company was entitled to receive fifty percent of the profits of RGCCLPO, and the other member, RGC, was entitled to receive the remaining fifty percent of the profits. During December 1999, the Company purchased all of RGC's ownership interest in RGCCLPO. PWA: Pursuant to the operating agreement of PWA, the Company was entitled to receive fifty percent of the profits of PWA, and the other member, RGC Associates, LLC ("RGC Associates"), was entitled to receive the remaining fifty percent of the profits. During May 2001, the Company purchased all of RGC Associates ownership interest in PWA. During the nine months ended September 30, 2001, $34,202 of the total loss of $36,027 incurred by the entities related to the minority interest was not allocated to the minority interest because the minority interest had a deficit interest in the Company. The Company does not reflect the deficit for the minority interest because the minority owners are not responsible for losses incurred beyond their equity. The unrecognized minority interest in deficit of the Company as of September 30, 2001 and December 31, 2000 was $93,007 and $58,805, respectively. As a result, the Company has recorded minority interest of $0 as of September 30, 2001 and December 31, 2000. 9 Note 5: Impairment of real estate under development During the third quarter, the Company recorded an impairment loss on real estate under development of $2,018,088 in the Mockingbird Canyon project. The project consisted of 31 higher priced homes in Riverside, California. The lack of demand of the higher priced homes in the area resulted in a slower absortion rate. The sales price was not sufficient to offset the increased direct construction cost, marketing and sales incentives, production overhead and interest costs and as a result the Company recorded an impairment loss on real estate under development. 10 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion relates to the consolidated financial statements of the Company and should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this report. Statements contained in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" that are not historical facts may be forward-looking statements. Such statements are subject to certain risks and uncertainties, which could cause actual results to differ materially from those projected. You are cautioned not to place undue reliance on these forward-looking statements. Liquidity and capital resources As of September 30, 2001, the Company had remaining loan commitments from financial institutions of approximately $42,280,000, which may be drawn down by the Company upon the satisfaction of certain conditions. The Company continues to seek joint venture partners and additional financing to fund its operations. As of September 30, 2001, the Company had seven residential housing projects in various stages of development, with five producing revenues from completed homes: Parc Metropolitan, High Ridge Court, Saddlerock, Creekside Estates, and Montserrat Classics. The remaining two projects, Parcwest Apartments and McGuire Luxury Apartments are in various stages of development. As of September 30, 2001, the Company has 259 homes under construction, of which 59 are in escrow to be sold, and 19 model units. Additionally, the Company has an inventory of 434 lots under development. As of September 30, 2001, the Company had 59 units in escrow ("backlog") compared with a backlog of 147 units as of September 30, 2000. The gross revenues of such backlog was $20,400,000 and $50,720,000 as of September 30, 2001 and 2000, respectively. On July 17, 2001, the Company obtained a three year working capital loan in the amount of $5,000,000 from the Curci-Turner Company to be used primarily for land acquisitions to support the Company's growth programs. Based on its agreements with its lenders, the Company believes that it will have sufficient liquidity to finance its construction projects in 2001 through funds generated from operations, funds available under its existing bank commitments, funds generated from new lending institutions, and, if necessary, funds that could be obtained by using its internally financed real estate development in process as collateral for additional loans. Management's plan, with respect to managing cash flow includes the following components: pay off debt that is coming due in 2001, minimize operating expenses, and maintain control over costs. With regard to the debt coming due in 2001, management expects to extend the maturity dates of various loans and pay the remaining loans off through cashflow from operations, prior to their maturity date. With regard to minimizing operating expenses, management plans to achieve this by continuing to closely examine overhead items. Management anticipates that the funds generated from operations, including borrowings from existing loan commitments, will be adequate to allow the Company to continue operations throughout 2001. Results of operations Real estate sales for the three months ended September 30, 2001 increased 13.8% to $18,800,000 from $16,525,836 for the three months ended September 30, 2000. For the nine months ended September 30, 2001, real estate sales increased 101.9% to $69,309,686 from $34,323,298 in the year-earlier period. The increase in real estate sales for the three and nine month periods of 2001 was primarily due to higher priced homes sold during year 2001 and the high volume of inventory of completed homes available for sale in 2001 compared to completed homes available for sale in 2000. In the third quarter of 2001, the Company sold 46 homes with an average sales price of $410,400, a 17.9% decrease in the volume of home sales compared to 56 homes with an average sales price of $295,100 for the third quarter of 2000. During the nine months of 2001, the Company sold 190 homes with an average sales price of $364,800, a 45.0% increase in the volume of home sales compared to 131 homes with an average sales price of $262,000 for the nine months of 2000. 11 Gross profit increased to $2,191,526 in the third quarter of 2001 from $1,760,022 in the third quarter of 2000. For the nine months ended September 30, 2001, gross profit increased to $6,617,521 from $2,250,325 in the corresponding period of 2000. The increase of gross profit during the third quarter of 2001 and nine months ended September 30, 2001 results from the increase in the number of home sales in the higher profit margin projects Parc Metropolitan and Parkland Farms compared to the lower profit margin projects Summertree Park and High Ridge Court primarily sold during 2000. During the third quarter, the Company recorded an impairment loss on real estate under development of $2,018,088 in the Mockingbird Canyon project. The project consisted of 31 higher priced homes in Riverside, California. The lack of demand of the higher priced homes in the area resulted in a slower absortion rate. The sales price was not sufficient to offset the increased direct construction cost, marketing and sales incentives, production overhead and interest costs and as a result the Company recorded an impairment loss on real estate under development. General and administrative expenses increased to $874,734 in the three months ended September 30, 2001 from $718,548 in the corresponding period. For the nine months ended September 30, 2001, general and administrative expenses increased to $2,304,921 from $1,973,097 in the corresponding 2000 period. The increase is due to the significant growth in the number of lots under development. Item 3 Quantitative and Qualitative Disclosure about Market Risk The Company's exposure to market risk has not materially changed from what was reported on the Company's Form 10-K for the year ended December 31, 2000. 12 Item 6 Exhibits and Reports on Form 8-K (a) Exhibits - (b) Reports on Form 8-K A Current Report on Form 8-K dated March 26, 2001 was filed with the Securities and Exchange Commission (the "Commission") and included under item 7(a) its audited consolidated financial statements for the year ended December 31, 2000 and unaudited consolidated financial statements for the quarter ended December 31, 2000, and under item 7(c) a press release announcing Calprop Corporations' 2000 annual and fourth quarter results. A Current Report on Form 8-K dated May 15, 2001 was filed with the Securities and Exchange Commission (the "Commission") and included under item 7(a) its unaudited consolidated financial statements for the quarter ended March 31, 2001, and under item 7(c) a press release announcing Calprop Corporations' first quarter results. A Current Report on Form 8-K dated July 23, 2001 was filed with the Securities and Exchange Commission (the "Commission") to announce an agreement for a new $5 million, three-year working capital loan to be used primarily for land acquisitions to support the company's growth programs. A Current Report on Form 8-K dated August 8, 2001 was filed with the Securities and Exchange Commission (the "Commission") and included under item 7(a) its unaudited consolidated financial statements for the quarter ended June 30, 2001, and under item 7(c) a press release announcing Calprop Corporations' second quarter results. 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. CALPROP CORPORATION By: /s/ Mark F. Spiro ---------------------------------------- Mark F. Spiro Vice President/Secretary/Treasurer (Chief Financial and Accounting Officer) November 14, 2001 13 -----END PRIVACY-ENHANCED MESSAGE-----