-----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, FIHgdNaUgXiylu2rJrEv8djV5zpLVZPGM4AGQAY8DMBL0Mxkw1X6OjKCvFb+Ovm0 +O6NMy8Q0ytJATQWbf4jHQ== 0000892569-97-001424.txt : 19970520 0000892569-97-001424.hdr.sgml : 19970520 ACCESSION NUMBER: 0000892569-97-001424 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970515 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRESLEY COMPANIES /DE CENTRAL INDEX KEY: 0000878093 STANDARD INDUSTRIAL CLASSIFICATION: OPERATIVE BUILDERS [1531] IRS NUMBER: 330475923 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10830 FILM NUMBER: 97607861 BUSINESS ADDRESS: STREET 1: 19 CORPORATE PLAZA CITY: NEWPORT BEACH STATE: CA ZIP: 92660 BUSINESS PHONE: 7146406400 MAIL ADDRESS: STREET 2: 19 CORP PLAZA CITY: NEWPORT BEACH STATE: CA ZIP: 92660 10-Q 1 FORM 10-Q FOR PERIOD ENDED MARCH 31, 1997 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ------------------------------------------ [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 0-18001 THE PRESLEY COMPANIES (Exact name of registrant as specified in its charter) Delaware 33-0475923 (State or jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 19 Corporate Plaza 92660 Newport Beach, California (Zip Code) (Address of principal executive offices) (714) 640-6400 (Registrant's telephone number, including area code) Not Applicable (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO ----- ----- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
Outstanding at Cass of Common Stock March 31, 1997 - --------------------- -------------- Series A, par value $.01 17,838,535 Series B, restricted voting convertible, par value $.01 34,357,143
- ------------------------------------------------------------------------------- 2 THE PRESLEY COMPANIES INDEX
Page No. ------- PART I. FINANCIAL INFORMATION Item 1. Financial Statements: Consolidated Balance Sheets - March 31, 1997 and December 31, 1996........................................................ 3 Consolidated Statements of Operations - Three Months Ended March 31, 1997 and 1996.................................................. 4 Consolidated Statement of Stockholders' Equity - Three Months Ended March 31, 1997..................................................... 5 Consolidated Statements of Cash Flows - Three Months Ended March 31, 1997 and 1996.................................................. 6 Notes to Consolidated Financial Statements................................... 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.................................................. 8 PART II. OTHER INFORMATION............................................................ 15 SIGNATURES ............................................................................. 16
2 3 THE PRESLEY COMPANIES CONSOLIDATED BALANCE SHEETS (in thousands except number of shares and par value per share)
March 31, December 31, 1997 1996 --------- ------------ (unaudited) ASSETS Cash and cash equivalents $ 3,226 $ 4,550 Receivables 4,325 4,225 Real estate inventories 320,924 304,126 Property and equipment, less accumulated depreciation of $1,427 and $1,432 at March 31, 1997 and December 31, 1996, respectively 3,042 3,047 Deferred loan costs 4,022 4,347 Other assets 7,902 11,320 --------- --------- $ 343,441 $ 331,615 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable $ 18,420 $ 18,428 Accrued expenses 14,621 20,450 Notes payable 39,761 18,524 12 1/2% Senior Notes due 2001 190,000 190,000 --------- --------- 262,802 247,402 --------- --------- Stockholders' equity Common stock: Series A common stock, par value $.01 per share; 100,000,000 shares authorized; 17,838,535 issued and outstanding at March 31, 1997 and December 31, 1996, respectively 178 178 Series B restricted voting convertible common stock, par value $.01 per share; 50,000,000 shares authorized; 34,357,143 shares issued and outstanding at March 31, 1997 and December 31, 1996, respectively 344 344 Additional paid-in capital 114,599 114,599 Accumulated deficit from January 1, 1994 (34,482) (30,908) --------- --------- 80,639 84,213 --------- --------- $ 343,441 $ 331,615 ========= =========
3 4 THE PRESLEY COMPANIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands except per common share amounts) (unaudited)
Three Months Ended March 31, ------------------------- 1997 1996 -------- -------- Sales Homes $ 67,157 $ 60,612 Lots, land and other 638 459 -------- -------- 67,795 61,071 -------- -------- Operating costs Cost of sales - homes (60,678) (54,438) Cost of sales - lots, land and other (647) (327) Sales and marketing (5,507) (4,844) General and administrative (3,932) (3,702) -------- -------- (70,764) (63,311) -------- -------- Operating loss (2,969) (2,240) Interest expense, net of amounts capitalized (1,201) (760) Other income, net 596 679 -------- -------- Net loss $ (3,574) $ (2,321) ======== ======== Net loss per common share (Note 1) $ (0.07) $ (0.04) ======== ========
4 5 THE PRESLEY COMPANIES CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY Three Months Ended March 31, 1997 (in thousands) (unaudited)
Common Stock Accumulated ----------------------------------------------- Deficit Series A Series B Additional from ------------------- ------------------- Paid-In January 1, Shares Amount Shares Amount Capital 1994 Total ------ ------ ------ ------ ---------- ----------- -------- Balance - December 31, 1996 17,839 $178 34,357 $344 $114,599 $(30,908) $ 84,213 Net loss for the three months ended March 31, 1997 -- -- -- -- -- (3,574) (3,574) ----------------------------------------------------------------------------------------------- Balance - March 31, 1997 17,839 $178 34,357 $344 $114,599 $(34,482) $ 80,639 ===============================================================================================
5 6 THE PRESLEY COMPANIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited)
Three Months Ended March 31, ------------------------- 1997 1996 -------- -------- OPERATING ACTIVITIES Net loss $ (3,574) $ (2,321) Adjustments to reconcile net loss to net cash used in operating activities Depreciation and amortization 154 136 Net changes in operating assets and liabilities: Other receivables (500) (619) Real estate inventories (16,798) (1,050) Deferred loan costs 325 255 Other assets 3,418 (956) Accounts payable (8) 633 Accrued expenses (5,829) (6,631) -------- -------- Net cash used in operating activities (22,812) (10,553) -------- -------- INVESTING ACTIVITIES Principal collections on notes receivable 400 31 Property and equipment, net (149) (141) -------- -------- Net cash provided by (used in) investing activities 251 (110) -------- -------- FINANCING ACTIVITIES Proceeds from borrowing on notes payable 45,259 33,835 Principal payments on notes payable (24,022) (24,307) -------- -------- Net cash provided by financing activities 21,237 9,528 -------- -------- NET DECREASE IN CASH AND CASH EQUIVALENTS (1,324) (1,135) CASH AND CASH EQUIVALENTS - beginning of period 4,550 4,217 -------- -------- CASH AND CASH EQUIVALENTS - end of period $ 3,226 $ 3,082 ======== ======== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the period for interest, net of amounts capitalized $ 964 $ 984 ======== ======== Cash paid during the period for income taxes $ -- $ -- ======== ========
6 7 THE PRESLEY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1 - BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and in accordance with the rules and regulations of the Securities and Exchange Commission. Effective as of January 1, 1994, the Company completed a capital restructuring and quasi-reorganization. The quasi-reorganiztion resulted in the adjustment of assets and liabilities to estimated fair values and the elimination of an accumulated deficit effective January 1, 1994. The consolidated financial statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The consolidated financial statements included herein should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 1996. The interim consolidated financial statements have been prepared in accordance with the Company's customary accounting practices. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a presentation in accordance with generally accepted accounting principles have been included. Operating results for the three month period ended March 31, 1997 are not necessarily indicative of the results that may be expected for the year ending December 31, 1997. The consolidated financial statements include the accounts of the Company and all majority-owned or controlled subsidiaries and joint ventures. All significant intercompany accounts and transactions have been eliminated. Investments in unconsolidated joint ventures in which the Company has less than a controlling interest are accounted for using the equity method. The accounting policies of the joint ventures are substantially the same as those of the Company. Net loss per common share for the three months ended March 31, 1997 and 1996 is based on 52,195,678 of Series A and Series B common stock outstanding. NOTE 2 - SALE AND LEASEBACK OF CERTAIN MODEL HOMES During the quarter ended March 31, 1996, the Company completed a bulk transaction in which 57 model homes were sold and leased back to the Company, resulting in total revenue to the Company of approximately $9,750,000. The individual leases expire at various dates through 2001, but may be extended under certain circumstances. 7 8 THE PRESLEY COMPANIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion of results of operations and financial condition should be read in conjunction with the consolidated financial statements and notes thereto included in Item 1, as well as the information presented in the Annual Report on Form 10-K for the year ended December 31, 1996. FINANCIAL CONDITION AND LIQUIDITY The Company provides for its ongoing cash requirements from internally generated funds from the sales of real estate and from outside borrowings. The Company currently maintains the following major credit facilities: 12 1/2% Senior Notes (the "Senior Notes"), a secured revolving lending facility (the "Working Capital Facility"), a revolving line of credit relating to Horsethief Canyon Partners, its wholly-owned joint venture partnership, a revolving line of credit relating to Carmel Mountain Ranch, its wholly-owned joint venture partnership (the latter two facilities collectively the "Joint Venture Facilities"), and a revolving line of credit relating to construction on certain real property located in Arizona and New Mexico (the "Other Facility"), which are summarized below. SENIOR NOTES The Company filed with the Securities and Exchange Commission a Registration Statement on Form S-1 for the sale of $200,000,000 of Senior Notes which became effective on June 23, 1994. The offering closed on June 29, 1994 and was fully subscribed and issued. The following discussion of the Senior Notes should be read in conjunction with the Registration Statement as filed with the Securities and Exchange Commission. The 12 1/2% Senior Notes due 2001 (the "Senior Notes") were offered by The Presley Companies, a Delaware corporation ("Delaware Presley"), and are unconditionally guaranteed on a senior basis by Presley Homes (formerly The Presley Companies), a California corporation and a wholly-owned subsidiary of Delaware Presley ("California Presley"). However, California Presley has granted liens on substantially all of its assets as security for its obligations under the Working Capital Facility and the Other Facility. Because the California Presley guarantee is not secured, holders of the Senior Notes are effectively junior to borrowings under the Working Capital Facility and the Other Facility with respect to such assets. Delaware Presley and its consolidated subsidiaries are referred to collectively herein as "Presley" or the "Company". Interest on the Senior Notes is payable on January 1 and July 1 of each year. Except as set forth in the Indenture Agreement (the "Indenture"), the Senior Notes are not redeemable by Presley prior to July 1, 1998. Thereafter, the Senior Notes will be redeemable at the option of Delaware Presley, in whole or in part, at the redemption prices set forth in the Indenture. 8 9 THE PRESLEY COMPANIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) The Senior Notes are senior obligations of Presley and rank pari passu in right of payment to all existing and future unsecured indebtedness of Presley, and senior in right of payment to all future indebtedness of the Company which by its terms is subordinated to the Senior Notes. Upon a Change of Control as described in the Indenture, Presley must offer to repurchase Senior Notes at a price equal to 101% of the principal amount plus accrued and unpaid interest, if any, to the date of repurchase. Presley is required to offer to repurchase certain Senior Notes at a price equal to 100% of the principal amount plus any accrued and unpaid interest to the date of repurchase if Delaware Presley's Consolidated Tangible Net Worth is less than $60,000,000 for any two consecutive fiscal quarters, and from the proceeds of certain asset sales. The Indenture governing the Senior Notes restricts, among other things: (i) the payment of dividends on and redemptions of capital stock by Presley, (ii) the incurrence of indebtedness by Presley or the issuance of preferred stock by Delaware Presley's subsidiaries, (iii) the creation of certain liens, (iv) Delaware Presley's ability to consolidate or merge with or into, or to transfer all or substantially all of its assets to, another person, and (v) transactions with affiliates. These restrictions are subject to a number of important qualifications and exceptions. WORKING CAPITAL FACILITY The collateral for the loans provided by the Working Capital Facility includes substantially all real estate and other assets of the Company (excluding assets of partnerships and the portion of the partnership interests in Carmel Mountain Ranch partnership which are currently pledged to other lenders). The borrowing base is calculated based on specified percentages of book values of real estate assets. The borrowing base at March 31, 1997 was approximately $210,000,000; however, the maximum loan under the Working Capital Facility is limited to $72,000,000. The principal outstanding under the Working Capital Facility at March 31, 1997 was $31,000,000. The Working Capital Facility has a termination date of May 20, 1997, with two one-year extensions at the Company's option. Upon any extension of the termination date, the Company would pay an extension fee of 1% of the Working Capital Facility commitment amount (in addition to the loan fee described below) for each year extended. On April 18, 1997, the Company exercised its option to extend the termination date of the Working Capital Facility for one period of twelve months from May 20, 1997 to May 20, 1998. Pursuant to the terms of the Working Capital Facility, outstanding advances bear interest at the prime rate plus 2%. An alternate option provides for interest based on a specified overseas base rate plus 4.44%, but not less than the prime rate option in effect at December 31, 1993 (8.00%). In addition, the Company pays a loan fee of 1% per annum, payable quarterly, on the total Working Capital Facility commitment amount. 9 10 THE PRESLEY COMPANIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) The Working Capital Facility now provides that the Company must maintain a Tangible Effective Net Worth as of the last day of any fiscal quarter of not less than $70,000,000. The Working Capital Facility also provides that as of the last day of any fiscal quarter the ratio of the Company's Total Liabilities (excluding non-recourse debt) to Tangible Effective Net Worth must not exceed 3.75 to 1 and that the ratio of Adjusted Total Liabilities (the Company's and its unconsolidated partnerships' Total Liabilities and Letters of Credit) (excluding non-recourse debt) to Tangible Effective Net Worth must not exceed 4.0 to 1. At March 31, 1997 the Company's Tangible Effective Net Worth was approximately $76,617,000, the ratio of the Company's Total Liabilities (excluding non-recourse debt) to Tangible Effective Net Worth was 3.43 to 1, and the ratio of Adjusted Total Liabilities (excluding non-recourse debt) to Tangible Effective Net Worth was 3.43 to 1. The Working Capital Facility requires certain minimum cash flow and pre-tax and pre-interest tests. The Working Capital Facility also provides for negative covenants which, among other things, place limitations on the payment of cash dividends, merger transactions, transactions with affiliates, the incurrence of additional debt and the acquisition of new land as described in the following paragraph. Under the terms of the Working Capital Facility, the Company may acquire new improved land for development of housing units of no more than 300 lots in any one location without approval from the lenders if certain conditions are satisfied. The Company may, however, acquire any new raw land or improved land provided the Company has obtained the prior written approval of lenders holding two-thirds of the obligations under the Working Capital Facility. JOINT VENTURE FACILITIES Horsethief Canyon Partners ("HCP"), the partnership that owns the Horsethief Canyon master-planned community, is a California general partnership and is 100% owned by The Presley Companies and its wholly-owned subsidiary. Effective on October 4, 1996, HCP executed a master credit agreement with a maximum loan commitment of $10,000,000 to finance the development of lots for residential homes and the construction of single-family attached and detached production homes. At March 31, 1997, the revolving line of credit had an outstanding balance of $2,581,000. Interest on the outstanding balance is at prime plus 1.00% and the loan matures on March 17, 1998. Availability under the line is subject to a number of limitations. The outstanding balance under this facility, together with the outstanding balances under the CMR facility and the Other facility described below, may not exceed $29,000,000. Carmel Mountain Ranch ("CMR"), the partnership that owns the Carmel Mountain Ranch master-planned community, is also a California general partnership and is 100% owned by The Presley Companies and its wholly-owned subsidiary. Effective in March 1995, the development and construction of the project has been financed through a revolving line of credit. The revolving line of credit consists of several components relating to production units, models and residential lots. At March 31, 1997, the revolving 10 11 THE PRESLEY COMPANIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) line of credit had an outstanding balance of $1,169,000. Availability under the line is subject to a number of limitations, but in any case cannot exceed $29,000,000, and is subject to further limitations, as described in the preceding and following paragraphs. Interest on the outstanding balance is at prime plus 1.00% and the loan matures on March 17, 1998. OTHER FACILITY Effective in October 1995, the Company executed a master credit agreement with a maximum loan commitment of $5,000,000 to finance the development of lots for residential homes and the construction of single-family attached and detached production homes on certain real property located in Arizona and New Mexico. Interest on the outstanding balance is at prime plus 1.00% and the loan matures on November 30, 1998. The outstanding balance under this facility, together with the outstanding balance under the HCP facility and the CMR facility described in the preceding paragraphs, may not exceed $29,000,000. As of March 31, 1997 the outstanding balance under this agreement was $3,275,000. ASSESSMENT DISTRICT BONDS AND SELLER FINANCING In some locations in which the Company develops its projects, assessment district bonds are issued by municipalities to finance major infrastructure improvements and fees. Such financing has been an important part of financing master-planned communities due to the long-term nature of the financing, favorable interest rates when compared to the Company's other sources of funds and the fact that the bonds are sold, administered and collected by the relevant government entity. As a landowner benefited by the improvements, the Company is responsible for the assessments on its land. When Presley's homes or other properties are sold, the assessments are either prepaid or the buyers assume the responsibility for the related assessments. Another potential source of financing available to the Company is seller-provided financing for land acquired by the Company. Although the Company has not used this form of financing significantly in the past few years, it is possible that such financing may be available and utilized to a greater extent in the future. 11 12 THE PRESLEY COMPANIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) RESULTS OF OPERATIONS OVERVIEW AND RECENT RESULTS Homes sold, closed and in backlog as of and for the periods presented are as follows:
As of and for the Three Months Ended March 31, ----------------- 1997 1996 ---- ---- Number of homes sold 449 591 Number of homes closed 362 369 Backlog of homes sold but not closed at end of period 369 538
The decrease in net new home orders and backlog in the first three months of 1997, as compared with the first three months of 1996, is the result of decreases in the Company's Southern California, Northern California and Arizona markets, offset by increases in the Company's Nevada market. However, the number of net new home orders in the first quarter of 1997 was the second highest of all first quarter results since the first quarter of 1989. The slight decrease in closings in the first three months of 1997, as compared with the first three months of 1996, is the result of decreases in the Company's Southern California and Arizona markets, offset by increases in the Company's Northern California and Nevada markets. The number of homes sold and closed for the three months ended March 31, 1996 includes the sale of 57 model homes as described below. Closings of homes in backlog generally occur within six months of the date indicated. The dollar amount of backlog of homes sold but not closed as of March 31, 1997 was $73,360,000, as compared to $90,494,000 as of March 31, 1996 and $52,660,000 as of December 31, 1996. The cancellation rate of buyers who contracted to buy a home but did not close escrow at the Company's projects was approximately 22% during 1996 and approximately 17% during the first three months of 1997. The number of homes closed in the first quarter of 1997 was down 2 percent to 362 from 369 in the first quarter of 1996. Net new home orders for the quarter ended March 31, 1997 decreased 24 percent to 449 units from 591 a year ago. For the first quarter of 1997, net new orders increased 47 percent to 449 from 306 units in the fourth quarter of 1996. The backlog of homes sold as of March 31, 1997 was 369, down 31 percent from 538 units a year earlier, and up 31 percent from 282 units at December 31, 1996. The Company's inventory of completed and unsold homes as of March 31, 1997 increased to 126 units from 122 units as of December 31, 1996. 12 13 THE PRESLEY COMPANIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Net new home orders and closings for the first quarter of 1996 include 57 model homes which were sold and leased back to the Company in a bulk transaction resulting in total revenue to the Company of approximately $9,750,000. In general, housing demand is adversely affected by increases in interest and housing costs. Interest rates, the length of time that assets remain in inventory, and the proportion of inventory that is financed affect the Company's interest cost. If the Company is unable to raise sales prices sufficiently to compensate for higher costs, which has generally been the case recently, or if mortgage interest rates increase significantly, affecting prospective buyers' ability to adequately finance home purchases, the Company's sales, gross margins and net results may be adversely impacted. To a limited extent, the Company hedges against increases in interest costs by acquiring interest rate protection that locks in or caps interest rates for limited periods of time for mortgage financing for prospective homebuyers. COMPARISON OF THREE MONTHS ENDED MARCH 31, 1997 TO THREE MONTHS ENDED MARCH 31, 1996 Sales (which represent recorded revenues from closings) for the three months ended March 31, 1997 were $67.8 million, an increase of $6.7 million (11%) from sales of $61.1 million for the three months ended March 31, 1996. Revenue from sales of homes increased $6.6 million to $67.2 million in the 1997 period from $60.6 million in the 1996 period. This increase was due primarily to an increase in the average sales prices of homes to $186,000 in the 1997 period from $164,000 in the 1996 period, primarily as a result of changes in the mix of product and, to a lesser extent, some price increases in certain markets. Total operating loss increased from a loss of $2.2 million in the 1996 period to $3.0 million in the 1997 period. The excess of revenue from sales of homes over the related cost of sales increased by $0.3 million, to $6.5 million in the 1997 period from $6.2 million in the 1996 period. This increase was primarily due to increased sales prices and decreases in buyer incentives. Sales and marketing expenses increased by $0.7 million to $5.5 million in the 1997 period from $4.8 million in the 1996 period primarily as a result of increased advertising and direct closings costs (directly related to increased revenue from closings) in the 1997 period compared to the 1996 period. General and administrative expenses increased by $0.2 million to $3.9 million in the 1997 period from $3.7 million in the 1996 period, primarily as a result of start-up operations in Nevada. Total interest incurred during the 1997 period increased $0.4 million (5.0%) from the 1996 period as a result of an increase in debt levels and increased interest rates. Net interest expense increased to $1.2 million in the 1997 period from $0.8 million for the 1996 period. This increase was due primarily to a reduction in real estate assets which qualify for interest capitalization. 13 14 THE PRESLEY COMPANIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Other (income) expense, net decreased to $0.6 million in the 1997 period from $0.7 million in the 1996 period primarily as a result of decreased income from mortgage operations. CASH FLOWS - COMPARISON OF THREE MONTHS ENDED MARCH 31, 1997 TO THREE MONTHS ENDED MARCH 31, 1996 Net cash used in operating activities increased from $10.6 million in the 1996 period to $22.8 million in the 1997 period. This change was primarily as a result of increased land acquisition and construction activity. Net cash provided by investing activities increased by $0.4 million in the 1997 period as compared to the 1996 period primarily as a result of increased principal collections on notes receivable. Net cash provided by financing activities increased by $11.7 million in the 1997 period as compared to the 1996 period as a result of an increase in net borrowings activity. 14 15 THE PRESLEY COMPANIES PART II. OTHER INFORMATION ITEMS 1, 2, 3, 4 AND 5. Not applicable. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (A) EXHIBITS. 10.1 Notice of Exercise of Option for Extension of Termination Date dated as of April 18, 1997 under that certain Fourth Amended and Restated Loan Agreement dated as of March 25, 1994 between The Presley Companies, a California corporation, as the Borrower, Foothill Capital Corporation, Mellon Bank, N.A. as Trustee of First Plaza Group Trust, a New York trust, Pearl Street L.P. (c/o Goldman, Sachs & Co.), Internationale Nederlanden (U.S.) Capital Corporation, and Continental Stock & Trust Company, as Trustee for the Whippoorwill/Presley Obligations Trust-1994, as the Lenders, and Foothill Capital Corporation, as the Agent and Lead Bank. 27 Financial Data Schedule (B) REPORTS ON FORM 8-K. The Company did not file any reports on Form 8-K during the three months ended March 31, 1997. 15 16 THE PRESLEY COMPANIES SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: May 15, 1997 By: /s/ DAVID M. SIEGEL ------------------------- David M. Siegel Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer) Date: May 15, 1997 By: /s/ W. DOUGLASS HARRIS -------------------------- W. Douglass Harris Vice President, Corporate Controller (Principal Accounting Officer) 16 EX-10.1 2 EXERCISE OPTION FOR EXTENSION OF TERMINATION DATE 1 EXHIBIT 10.1 NOTICE OF EXERCISE OF OPTION FOR EXTENSION OF TERMINATION DATE April 18, 1997 Foothill Capital Corporation, as Agent for the Lenders under that certain Fourth Amended and Restated Loan Agreement dated as of March 25, 1994, (as amended, the "Loan Agreement") between The Presley Companies, a California corporation, as the Borrower, Foothill Capital Corporation, Mellon Bank, N.A. as Trustee of First Plaza Group Trust, a New York trust, Pearl Street L.P. (c/o Goldman, Sachs & Co.), Internationale Nederlanden (U.S.) Capital Corporation, and Continental Stock & Trust Company, as Trustee for the Whippoorwill/Presley Obligations Trust-1994, as the Lenders, and Foothill Capital Corporation as the Agent and the Lead Bank 11111 Santa Monica Blvd., Ste. 1500 Los Angeles, CA 90025 Ladies and Gentlemen: The undersigned in their capacities as Responsible Officials of, and on behalf of, The Presley Companies ("Borrower") hereby exercise the option (the "Extension Option") to extend the Termination Date of the Loan Agreement for one period of 12 months from May 20, 1997 to May 20, 1998 (such period being the Extension Period). In connection with the exercise of the Extension Option, the undersigned in their capacities as Responsible Officials of, and on behalf of the Borrower hereby certify: (i) The Agent will have received from the Borrower, at least 30 days but not more than 90 days prior to the first day of the Extension Period and in form and substance satisfactory to the Agent, a written request to extend the Termination Date for such Extension Period (copies of which shall be promptly delivered by the Agent to each Lender). (ii) All representations and warranties made by the Borrower in any of the Loan Documents, other than the representations and warranties contained in Sections 6.1(c), 6.1(e), 6.4 and 6.5, the last sentence of Section 6.6, and Sections 6.9, 6.12(a) and 6.20, shall be correct in all material respects on and as of the first day of the Extension Period as though made on and as of that day. 2 -2- (iii) No default shall have occurred and be continuing as of the first day of the Extension Period. (iv) The Agent will have received (for the ratable account of the Revolving Lenders in accordance with their respective percentages of the Revolving Commitments outstanding as of the first day of the Extension Period), on or before the first day of the Extension Period, an extension fee in an amount equal to 1% of the Revolving Commitments outstanding as of the first day of the Extension Period. (v) There shall be no actions, suits or proceedings pending against or affecting the Borrower, any of its Subsidiaries or Presley Delaware or any Property of the Borrower, any of its Subsidiaries or Presley Delaware in any court of Law or before any Governmental Agency which might reasonably be expected to materially and adversely affect the business, operations or condition (financial or otherwise) of the Borrower. THE PRESLEY COMPANIES /s/ DAVID M. SIEGEL /s/ W. DOUGLASS HARRIS - ------------------------- ----------------------- David M. Siegel W. Douglass Harris Senior Vice President and Vice President and Chief Financial Officer Corporate Controller EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL STATEMENTS FOR THE QUARTER ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997 1,000 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 3,226 0 4,325 0 320,924 0 4,469 1,427 343,441 0 229,761 0 0 522 80,117 343,441 67,795 67,795 61,325 61,325 9,439 0 1,201 (3,574) 0 0 0 0 0 (3,574) (0.07) 0
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