-----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, LsGA+HJX9jqgS4xAIrhDTt83xQzyZy9kYxrOTRBUsIdEehEECCU/HAX1z/8eV9ok gB2jd6T4ZfeiCxSCvhs50w== 0001145443-02-000356.txt : 20020814 0001145443-02-000356.hdr.sgml : 20020814 20020814160517 ACCESSION NUMBER: 0001145443-02-000356 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020814 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: 02736547 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 d11239.txt 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 June 30, 2002 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 July 9, 2002: Number of Shares Title of Each Class Outstanding - -------------------------- ---------------- Common Stock, no par value 10,254,005 CALPROP CORPORATION Part I Item I - Financial Information Set forth is the unaudited quarterly report for the quarters ended June 30, 2002 and 2001, 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 (Unaudited) ASSETS June 30, December 31, 2002 2001 ----------- ------------ Real estate under development (Note 5) $51,883,653 $88,789,252 Other assets: Cash and cash equivalents 3,563,968 2,079,471 Deferred tax assets (Note 2) 4,327,262 6,535,343 Other assets 842,048 774,882 Receivable from affiliates 167,274 788,752 ----------- ----------- Total other assets 8,900,552 10,178,448 ----------- ----------- Total assets $60,784,205 $98,967,700 =========== =========== (Continued) The accompanying notes are an integral part of these financial statements. 3 CALPROP CORPORATION CONSOLIDATED BALANCE SHEETS (Unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY
June 30, December 31, 2002 2001 ----------- ------------ Trust deeds and notes payable $26,917,552 $51,990,779 Related-party notes 18,107,043 26,219,560 ----------- ----------- Total trust deeds, notes payable and related-party notes 45,024,595 78,210,339 Accounts payable and accrued liabilities 1,723,131 5,334,450 Warranty reserves 760,268 670,115 ----------- ----------- Total liabilities 47,507,994 84,214,904 Stockholders' equity: Common stock, no par value Authorized - 20,000,000 shares Issued and outstanding - 10,254,005 shares at June 30, 2002 and December 31, 2001 10,254,005 10,254,005 Additional paid-in capital 25,845,986 25,845,986 Deferred compensation (51,000) (51,000) Stock purchase loans (521,367) (537,179) Accumulated deficit (22,251,413) (20,759,016) ----------- ----------- Total stockholders' equity 13,276,211 14,752,796 ----------- ----------- $60,784,205 $98,967,700 =========== ===========
(Concluded) The accompanying notes are an integral part of these financial statements. 4 CALPROP CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Six Months Ended June 30, June 30, -------------------------- -------------------------- 2002 2001 2002 2001 ----------- ----------- ----------- ----------- Development operations: Real estate sales $43,058,399 $26,757,550 $64,350,669 $50,429,686 Cost of real estate sales 42,305,392 24,377,392 63,502,888 46,003,691 ----------- ----------- ----------- ----------- Income from development operations before recognition of impairment of real estate 753,007 2,380,158 847,781 4,425,995 Recognition of impairment of real estate development (Note 5) (1,832,225) (1,832,225) ----------- ----------- ----------- ----------- (Loss) income from development operations (1,079,218) 2,380,158 (984,444) 4,425,995 Income from investment in real estate venture (Note 5) 185,022 109,253 Other income: Interest and miscellaneous 190,251 37,436 252,299 70,619 Management fee 207,182 ----------- ----------- ----------- ----------- Total other income 190,251 37,436 459,481 70,619 Other expenses- General and administrative 521,006 695,344 1,076,452 1,430,187 Minority interests (Note 4) (1,825) 235 (1,825) ----------- ----------- ----------- ----------- (Loss) income before provision for income taxes (1,224,951) 1,724,075 (1,492,397) 3,068,252 Provision for income taxes (Note 2) ----------- ----------- ----------- ----------- Net (loss) income ($1,224,951) $1,724,075 ($1,492,397) $3,068,252 =========== =========== =========== =========== Basic net (loss) income per share (Note 3) ($0.12) $0.17 ($0.15) $0.30 ====== ===== ====== ===== Diluted net (loss) income per share (Note 3) ($0.12) $0.17 ($0.15) $0.29 ====== ===== ====== =====
The accompanying notes are an integral part of these financial statements. 5 CALPROP CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended June 30, -------------------------- 2002 2001 -------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net (loss) income ($1,492,397) $3,068,252 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Minority interests 235 (1,825) Recognition of impairment of real estate development 1,832,225 Income from investment in real estate venture (109,253) Depreciation and amortization 21,315 24,513 Provision for warrantly reserves 175,105 162,171 Deferred income taxes 2,208,081 Change in assets and liabilities: Other assets (82,999) (12,008) Receivable from affiliates 621,478 Accounts payable and accrued liabilities (3,611,319) (2,305,122) Warranty reserves (84,952) (129,227) Additions to real estate under development (28,320,496) (36,321,767) Cost of real estate sales 63.502,888 46,003,691 Accrued interest for executive stock purchase loans (10,723) (11,276) -------------------------- Net cash provided by operating activities 34,649,188 10,477,402 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (5,482) (1,788) CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings under related-party notes 1,663,977 2,200,000 Payments under related-party notes (9,776,494) (2,955,675) Borrowings under trust deeds and notes payable 24,992,491 36,597,927 Payments under trust deeds and notes payable (50,065,718) (44,892,838) Repayment of stock purchase loans 26,535 -------------------------- Net cash used in financing activities (33,159,209) (9,050,586) -------------------------- Net increase in cash and cash equivalents 1,484,497 1,425,028 Cash and cash equivalents at beginning of period 2,079,471 2,394,310 -------------------------- Cash and cash equivalents at end of period $3,563,968 $3,819,338 ========================== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for income taxes $47,351 $95,345 ==========================
The accompanying notes are an integral part of these financial statements 6 CALPROP CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS PERIODS ENDED JUNE 30, 2002 AND 2001 (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. The results of operations for the three and six months ended June 30, 2002 may not be indicative of the operating results for the year ending December 31, 2002. Note 2: Income taxes As of June 30, 2002, the Company had gross deferred tax assets of $6,325,570 offset by a deferred tax asset valuation allowance of $1,998,308. During the six months ended June 30, 2002, the Company increased the deferred tax asset allowance by $593,485 which offset the net current benefit 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 $4,327,262 of deferred tax assets will be realized. As of June 30, 2002, the Company had net operating loss carryforwards for federal income tax purposes of approximately $16,255,700. For federal tax purposes the net operating loss carryforwards expire from 2007 through 2013. 7 Note 3: Earnings per share The following table sets forth the computation of basic and diluted net (loss) income per share:
Three Months Ended Six Months Ended June 30, June 30, --------------------------------------------------- 2002 2001 2002 2001 --------------------------------------------------- Net (loss) income ($1,224,951) $1,724,075 ($1,492,397) $3,068,252 ---------------------------------------------------- Numberator for basic and diluted net (loss) income per share ($1,224,951) $1,724,075 ($1,492,397) $3,068,252 ==================================================== Denominator for basic net (loss) income per share (weighted 10,254,005 10,290,535 10,254,005 10,290,535 average outstanding shares) Effect of dilutive stock options 157,141 141,948 ---------------------------------------------------- Weighted average shares for dilutive net income per share 10,254,005 10,447,676 10,254,005 10,432,483 ==================================================== Basic net (loss) income per share ($0.12) $0.17 ($0.15) $0.30 ==================================================== Diluted net (loss) income per share ($0.12) $0.17 ($0.15) $0.29 ====================================================
Note 4: Consolidation The Company has consolidated the financial statements of the following entities:
- ------------------------------------------------------------------------------------------------------------------------------- Ownership interest at Entity March 31, 2002 Development - ------------------------------------------------------------------------------------------------------------------------------- Colorado Pacific Homes, Inc. ("CPH") 100% 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 ("Parkland") 99% 115 lots in Healdsburg, California RGCCLPO Development Co., LLC ("RGCCLPO") 100% 382 lots in Milpitas, California PWA Associates, LLC ("PWA") 100% 68-unit apartment in Milpitas, California - -------------------------------------------------------------------------------------------------------------------------------
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 99% to the Company, and the other member, an officer of the Company, is entitled to receive the remaining one percent of the profits. 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. 8 During the six months ended June 30, 2002, $1,730 of the total loss of $1,965 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 those entities. 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 June 30, 2002 and December 31, 2001 was $67,595 and $65,865, respectively. As a result, the Company has recorded minority interest of $0 as of June 30, 2002 and December 31, 2001. Note 5: Real estate under development Impairment of real estate under development-During the second quarter, the Company recorded an impairment loss on real estate under development of $271,844 in the Saddlerock project. The project consisted of 94 homes with five product lines in Aurora, Colorado. The lack of demand of the product lines resulted in a slower absortion rate. The Company introduced three new product lines and converted certain upgrades as standards during the second quarter of 2002 to increase the absorption rate. The introduction of the new product lines increased direct construction cost, marketing, production overhead and interest costs and as a result the Company recorded an impairment loss on real estate under development. Additionally, during the second quarter, the Company recorded an impairment loss on real estate under development of $1,560,381 in the Parc Metropolitan project as actual sales prices for certain units were lower than anticipated. The lack of demand for upgrades and options in the project also impacted the sales revenue for the project. Investment of real estate venture-The Company has a 25 percent interest in RGC Carmel Country, LLC, the "Joint Venture". The Joint Venture consists of 182 townhomes available for lease in San Diego. The Company's allocable share of losses, if any, from investments in real estate ventures are recognized in the financial statements until the related investment account is reduced to a zero balance. Losses incurred after the investment account is reduced to zero are not recongized. The cumulative amount of unrecognized equity in losses of unconsolidated real estate ventures was $481,507 and $0 as of June 30, 2002 and December 31, 2001, respectively. Distributions received by the Company from the real estate ventures are accounted for as a return of capital until the investment balance is reduced to zero. Subsequent distributuions received are recognized as income. 9 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 June 30, 2002, the Company had remaining loan commitments from financial institutions of approximately $13,480,000, 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 June 30, 2002, the Company had four residential housing projects in various stages of development, with four producing revenues from completed homes and townhomes: Parc Metropolitan, High Ridge Court, Saddlerock, and Montserrat Classics. As of June 30, 2002, the Company has 94 homes under construction, of which 56 are in escrow to be sold, and 17 model units. Additionally, the Company has an inventory of 121 lots under development. In addition to the construction and sale of single-family and multifamily housing, the Company is engaged in the development of apartments and townhomes available for lease. As of June 30, 2002, the Company had two projects under development (one project consists of a 25% equity interest in a real estate venture), the total projects consist of 182 units available for lease and 68 units under construction. As of June 30, 2002, the Company had 56 units in escrow ("backlog") compared with a backlog of 87 units as of June 30, 2001. The gross revenues of such backlog was $19,517,378 and $31,920,000 as of June 30, 2002 and 2001, respectively. Based on its agreements with its lenders, the Company believes that it will have sufficient liquidity to finance its construction projects in 2002 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 2002, minimize operating expenses, and maintain control over costs. With regard to the debt coming due in 2002, 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 2002. Results of operations Real estate sales for the three months ended June 30, 2002 increased 60.9% to $43,058,399 from $26,757,550 for the three months ended June 30, 2001. For the six months ended June 30, 2002, real estate sales increased 27.6% to $64,350,669 from $50,429,686 in the year-earlier period. The increase in real estate sales for the three and six month periods of 2002 was primarily due to the high volume of inventory of completed homes available for sale in 2002 compared to completed homes available for sale in 2001. In the second quarter of 2002, the Company sold 113 homes with an average sales price of $381,050, a 48.7% increase in the volume of home sales compared to 76 homes with an average sales price of $352,200 for the second quarter of 2001. During the first six months of 2002, the Company sold 171 homes with an average sales price of $376,300, a 18.8% increase in the volume of home sales compared to 144 homes with an average sales price of $350,200 for the six months of 2001. Income from development operations before recognition of impairment of real estate decreased to $753,007 in the second quarter of 2002 from $2,380,158 in the second quarter of 2001. For the six months ended 10 June 30, 2002, income from development operations before recognition of impairment of real estate decreased to $847,781 from $4,425,995. The significant decrease of income from development operations during the second quarter of 2002 and six months ended June 30, 2002 resulted from a slower absorption rate, and increased production overhead costs. The increased sales price was not sufficient to offset the increased direct construction cost, marketing and sales incentives, production overhead and interest costs. During the second quarter of 2002, the Company recorded an impairment loss on real estate under development of $271,844 in the Saddlerock project. The project consisted of 94 homes with five product lines in Aurora, Colorado. The lack of demand of the product lines resulted in a slower absortion rate. The Company introduced three new product lines and converted certain upgrades as standards during the second quarter of 2002 to increase the absorption rate. The introduction of the new product lines increased direct construction cost, marketing, production overhead and interest costs and as a result the Company recorded an impairment loss on real estate under development. Additionally, during the second quarter of 2002, the Company recorded an impairment loss on real estate under development of $1,560,381 in the Parc Metropolitan project as actual sales prices for certain units were lower than anticipated. The lack of demand for upgrades and options in the project also impacted the sales revenue for the project. General and administrative expenses decreased to $521,006 in the three months ended June 30, 2002 from $695,344 in the corresponding period. For the six months ended June 30, 2002, general and administrative expenses decreased to $1,076,452 from $1,430,187 in the corresponding 2001 period. The decrease is due to the focus efforts to decrease corporate overhead costs. 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, 2001. 11 Item 6 Exhibits and Reports on Form 8-K (a) Exhibits - 27 Financial data schedule (b) Reports on Form 8-K A Current Report on Form 8-K dated April 1, 2002 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, 2001 and unaudited consolidated financial statements for the quarter ended December 31, 2001, and under item 7(c) a press release announcing Calprop Corporations' 2001 annual and fourth quarter results. A Current Report on Form 8-K dated May 15, 2002 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, 2002, and under item 7(c) a press release announcing Calprop Corporations' first 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) August 9, 2002 12 CERTIFICATION Each of the undersigned hereby certifies in his capacity as an officer of Calprop Corporation (the "Company") that the Quarterly Report of the Company on Form 10-Q for the periods ended June 30, 2002 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that the information contained in such report fairly presents, in all material respects, the financial position of the Company at the end of such periods and the results of operations of the Company for such periods. /s/ Victor Zaccaglin ------------------------------------------- Victor Zaccaglin Chairman of the Board Chief Executive Officer August 9, 2002 /s/ Mark F. Spiro ------------------------------------------- Mark F. Spiro Vice President/Secretary/Treasurer (Chief Financial and Accounting Officer) August 9, 2002 13 -----END PRIVACY-ENHANCED MESSAGE-----